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Table“Revenue Growth” means the Company’s year-over-year percent change in revenue as calculated under GAAP. Revenue is calculated on a constant currency basis, eliminating the effects of Contents
Executive Compensation
IV. Annual Compensation
A. 2020 Base Salary Decisions
Neither Mr. Pessina nor Mr. Skinner receivedvariance to the Company’s three-year plan currency in a base salarymanner consistent with internal management reporting. Further, revenue is calculated on a basis that normalizes for changes in fiscal 2020. Foraverage wholesale price and generic utilization within the other NEOs and our other senior executives, base salaryU.S. reporting segment relative to the corresponding three-year plan assumption, so as to eliminate the effects of these variables which may skew revenue in a way that is inconsistent with underlying business performance. As with adjusted EPS growth, the CLP Committee reserves the right to adjust revenue to help ensure that certain items that are non-operating or otherwise out of management’s control do not impact payouts in either a key component of compensation, both on its own and because annual incentive awards are calculated based on salary.
In October 2019, the Compensation and Leadership Performance Committee completed its annual review of market data and individual performance in connection with its consideration of fiscal 2020 base salary adjustments for the NEOs (other than Messrs. Pessina and Skinner). At the conclusion of the review, the Compensation and Leadership Performance Committee approved the following base salary increases for these NEOs for fiscal 2020positive or negative manner in order to bring those NEOs closer to median pay for their respective roles:incent operational performance.
| Name | | 2020 Annual
Base Salary* ($) | | % Increase
from 2019** | | Ornella Barra | | 1,014,935 | | 2.50% | | Alexander W. Gourlay | | 1,014,935 | | 2.50% | | James Kehoe | | 945,563 | | 2.50% |
* | Amounts for Ms. Barra and Mr. Gourlay were determined and paid in British Pounds Sterling and converted to U.S. dollars at an exchange rate of approximately £1=1.270598 (the average exchange rate during fiscal 2020 used by the Compensation and Leadership Performance Committee for purposes of executive compensation decisions). | ** | Percentage increase for Ms. Barra and Mr. Gourlay were calculated on a constant currency basis. |
For the participating NEOs, results will be based on our consolidated Company performance, which the CLP Committee believes reinforces the need for collaboration among the executive leadership team. The 2022-2024 plan targets were set in relation to our Board approved three-year financial plan for the period and were approved by the CLP Committee in October 2021. The CLP Committee believed that the targets it established were rigorous yet achievable in light of our internal forecast as well as the macroeconomic and industry environments at the time the goals were established in October 2021. | 74 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation The following table illustrates the range of performance shares that can be earned under these awards depending on our performance during the fiscal 2022-2024 performance period. We do not disclose specific forward-looking performance targets for our performance share awards as the disclosure could result in competitive harm and be detrimental to our operating performance. However, following the completion of the performance period, we retrospectively disclose the performance goals and payouts for our completed performance cycles (such as for the 2020-2022 cycle, as described in more detail below). | Performance Measure | | Company Performance
(as a % of weighted target) | | Performance Shares Earned(1)
(as a % of weighted target grant) | | Adjusted EPS Growth | | | | | | Below Threshold | | <10 percentage points below growth target | | 0% | | Threshold | | 10 percentage points below growth target | | 50% | | Target | | at growth target | | 100% | | Maximum | | ≥10 percentage points above growth target | | 150% | | Revenue Growth | | | | | | Below Threshold | | <5 percentage points below growth target | | 0% | | Threshold | | 5 percentage points below growth target | | 50% | | Target | | at growth target | | 100% | | Maximum | | ≥5 percentage points above growth target | | 150% |
| (1) | B. 2020 Annual Cash Incentive Payments
For fiscal 2020, substantially all of our senior executives (including Ms. Barra and Messrs. Kehoe and Gourlay) were eligible to receive an annual cash incentive payment through the MIP. The MIP rewards executives for achieving key financial and non-financial goals at both the Company and individual levels and is intended to align our senior executives’ interests directly with our financial goals and leadership behaviors. For fiscal 2020, the target cash incentive opportunity for each of the NEOs who participated in the MIP (Ms. Barra and Messrs. Kehoe and Gourlay) was set considering market practices for each specific role, among other factors,Performance between threshold and target, percentages were unchanged from 2019, as follows:
Name | | 2020 Target Bonus (% of Salary) | Ornella Barra | | 125% | Alexander W. Gourlay | | 125% | James Kehoe | | 125% |
As noted elsewhere in this “Compensation Discussionor between target and Analysis” section, during fiscal 2020, neither Mr. Pessina nor Mr. Skinner was eligible to receive cash incentive payments under the MIP in fiscal 2020. For the other senior executives (including the other NEOs), annual cash incentive payments were calculated as follows:
Base Salary | x | Target Short-Term
Incentive
Opportunity % | x | Company
Performance
Against Annual Goals | = | Preliminary Cash
Incentive Award
Amount | Determined by reviewing:
●Internal and market-based peer group benchmarks
●Individual performance
| | Established using:
●Market-based peer group benchmarks
●Internal calibration
| | Adjusted Operating Income | | ▼ | | | | Individual
Performance
Adjustment | | | | ▼ | | | | Final Cash Incentive
Award Amount |
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Company Performance and Impact of COVID-19. As described further in “—III. Target Setting for Incentive Compensation—A. 2020 Annual Cash Incentive Target” above, the Compensation and Leadership Performance Committee approved the use of adjusted operating income as the sole, absolute metric for measuring Companymaximum, will earn performance for purposes of payment of annual cash incentive awards in fiscal 2020.
The Compensation and Leadership Performance Committee retains the right under the MIP to adjust the results of adjusted operating income to exclude charges or items, such as those resulting from unusual or unpredictable events, from the measurement of performance.
For fiscal 2020, the Compensation and Leadership Performance Committee used the same adjustments for purposes of reconciling adjusted operating income (which is a non-GAAP financial measure) to our operating income as determined in accordance with GAAP as those we disclosed in our full year fiscal 2020 earnings release and related presentation on October 15, 2020. These consisted of adjustments to exclude impairment of goodwill and intangible assets, costs related to the Transformational Cost Management and store optimization programs, acquisition-related amortization, acquisition-related costs, adjustments to equity earnings in AmerisourceBergen Corporation, the LIFO (last-in, first-out) inventory provision, store damage and inventory losses. Additionally, the Compensation and Leadership Performance Committee adjusted for the effect of foreign currency rate fluctuations on adjusted operating income by translating current period adjusted operating income results for entities reporting in currencies other than U.S. dollars using the same exchange rates used for the Board-approved budget for fiscal 2020, from which the adjusted operating income target for fiscal 2020 was derived.
The Compensation and Leadership Performance Committee’s approach to making these adjustments was unchanged from fiscal 2019.
For fiscal 2020, the adjusted operating income target was set at $6,627 million, and the formulaic payout could range from 0% to 200% of target opportunity based on actual results. As noted above, the targets were set in October 2019, which was prior to the time the Compensation and Leadership Performance Committee could have known or anticipated the impacts of the COVID-19 pandemic. While the Company did not face significant disruptions during the first six months of fiscal 2020, the second six months of fiscal 2020 were significantly impacted by COVID-19. To assess performance, the Compensation and Leadership Performance Committee reviewed the Company’s unaudited results through the end of February 2020 (the first six months of the fiscal year, or “pre-COVID”) and then reviewed the performance for the last six months of fiscal 2020, that included the impact of COVID-19, and considered, in particular, the extraordinary efforts of our executives and broader team members during this unprecedented time and the overall economic impacts of the pandemic. The Company’s performance pre-COVID would have resulted in a MIP payout at target based on projected performance at the time for the remainder of fiscal 2020, while Company performance for full year fiscal 2020 would have resulted in no MIP payout due to the impact of COVID-19 during the last six months of fiscal 2020.
Following the conclusion of fiscal 2020, the Compensation and Leadership Performance Committee re-evaluated the fiscal 2020 MIP design, considering the impact of the COVID-19 pandemic as well as the Company's executive compensation objectives of attracting and retaining key talent and rewarding performance. The Compensation and Leadership Performance Committee determined that the motivational aspects of the MIP established at the beginning of fiscal 2020 were significantly diminished. To evaluate the performance of our teams during the last six months of the performance year, the Compensation and Leadership Performance Committee reviewed a balanced scorecard considering four key criteria for growth areas of the business, including:
● | management of overhead costs; | ● | continued generation of free cash flow; | ● | delivery of operating profits; and | ● | success in maintaining or growing sales. |
To recognize the extraordinary efforts of our teams during fiscal 2020, the Compensation and Leadership Performance Committee reviewed the Company’s overall results and, after consultation with Mercer, decided to consider an average of the pre-COVID results for the first six months of fiscal 2020 and the results of the balanced scorecard for the final six months of fiscal 2020, resulting in a payment of 84% of target. The Compensation and Leadership Performance Committee believes this bonus approach and the payouts are reflective of both pre-COVID actual Company performance and the extraordinary efforts of our executives and broader team members during the fiscal year, as well as the unanticipated financial and operational impact of COVID-19.
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Individual Performance. In order to improve our ability to link pay and performance for our senior executives, including each of the NEOs who participated in the MIP (Ms. Barra and Messrs. Kehoe and Gourlay), when the fiscal 2020 MIP performance design components were approved in October 2019 the Compensation and Leadership Performance Committee authorized Mr. Skinner (with respect to Ms. Barra) and Mr. Pessina (with respect to all other senior executives, including Messrs. Kehoe and Gourlay) to recommend to the Compensation and Leadership Performance Committee, for its consideration and approval, adjustments to cash incentive award payments of up to 120% of the formula-driven MIP payout levels (subject to an aggregate maximum of 200% of target) or down to 0% of target. Following this review, in October 2020, the Compensation and Leadership Performance Committee reviewed individual performance and did not adjust the formula-driven MIP payout levels for Ms. Barra or Messrs. Gourlay and Kehoe.
Payouts for Fiscal 2020 Performance. Fiscal 2020 cash incentive payments to our NEOs were as follows:
| Name | | 2020 Cash
MIP
Award
Eligible
Salary* ($) | | 2020
Target Cash
MIP
Award
(%
of Salary) | | 2020
Target Cash
MIP
Awards*
($) | | MIP Formulaic
Payout ($)** | | Balanced
Framework
Payout ($)*** | | 2020 Cash
Incentive
Award
Payment
(% of MIP
Target) | | 2020 Cash
Incentive
Award
Payment* ($) | | James Kehoe | | $941,719 | | 125% | | $1,177,149 | | $467,179 | | $521,626 | | 84.0% | | $988,805 | | Ornella Barra | | $1,010,809 | | 125% | | $1,263,511 | | $501,454 | | $559,894 | | 84.0% | | $1,061,348 | | Alexander W. Gourlay | | $1,010,809 | | 125% | | $1,263,511 | | $501,454 | | $559,894 | | 84.0% | | $1,061,348 |
* | Amounts for Ms. Barra and Mr. Gourlay were determined and paid in British Pounds Sterling and converted to U.S. Dollars at an exchange rate of approximately £1=$1.270598 (the average exchange rate during fiscal 2020 used by the Compensation Leadership and Performance Committee for purposes of executive compensation decisions). | ** | Represents the formulaic payout under the MIP based on performance through the first half of fiscal year 2020. The amounts are reported in the "Non-Equity Incentive Plan Compensation" column in the 2020 Summary Compensation Table. | *** | Represents bonuses paid based on the Compensation and Leadership Performance Committee's assessment of performance against the balanced framework described above. These amounts are reported in the "Bonus" column in the 2020 Summary Compensation Table. |
V. Long-Term Incentive Compensation
The Company maintains a long-term incentive compensation program that is intended to further align our executives’ interests with those of our stockholders. Long-term incentive compensation is granted annually under the Omnibus Incentive Plan.
A. 2020 Grants of Long-Term, Performance-Based Incentives
The Compensation and Leadership Performance Committee granted to substantially all of our senior executives, including our NEOs (other than Mr. Skinner), long-term incentives with the following targeted mix and targeted grant values:
| NEO | | Stock Options | | RSUs | | Performance Shares | | Target Value ($) | | Stefano Pessina | | 25% | | 25% | | 50% | | See Section VI for details | | James Kehoe | | 25% | | 25% | | 50% | | $4,500,000 | | Ornella Barra | | 25% | | 25% | | 50% | | $4,500,000 | | Alexander W. Gourlay | | 25% | | 25% | | 50% | | $4,500,000 | | James A. Skinner | | 0% | | 100% | | 0% | | See Section VI for details |
The targeted equity mix used for fiscal 2020 was chosen in order to further align the Company’s long-term incentive design with market practices and our business objectives, while continuing to align our leaders’ interest with those of the stockholders. In addition, beginning in fiscal 2020, the long-term incentive awards performance threshold goal was adjusted from 95% of target to 90% of target. This change in the threshold was made to further align the Company’s long-term incentive compensation program with the competitive market.
For fiscal 2020, the Compensation and Leadership Performance Committee approved a fixed dollar target amount for each long-term incentive award. This fixed dollar target amount was determined basedshares on a review of market data for each NEO’s positionstraight line interpolated basis between 50% and was set at $4.5 million for Ms. Barra100% or between 100% and Messrs. Gourlay and Kehoe. Ms. Barra’s and Mr. Gourlay’s long-term incentive award targets did not change as compared to fiscal 2019, while Mr. Kehoe’s long-term incentive award target was increased from his fiscal 2019 target of $3.5 million. The increase to Mr. Kehoe’s award target was made to align Mr. Kehoe’s equity grant values with those of our Co-COOs, similar to the approach taken for the Company’s prior Global Chief Financial Officer. We believe aligning the compensation of Mr. Kehoe, Ms. Barra and Mr. Gourlay further strengthens the team approach to the leadership of the Company.150%, respectively.
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B. 2020 Performance Share Award Grants
In October 2019, the Compensation and Leadership Performance Committee authorized the grant of 50% of the target dollar amount of the fiscal 2020 total long-term, performance-based incentive award for eligible senior executives in the form of Performance Shares.
For the fiscal 2020 Performance Share awards, the Compensation and Leadership Performance Committee decided that the sole performance metric would be cumulative adjusted EPS over the fiscal 2020-2022 performance period. The payout can range from 0% to 150% of target for the fiscal 2020-2022 performance period based on actual results. See “—III. Target Setting for Incentive Compensation—B. 2020 Long-Term Incentive Compensation Target” above for more information regarding the performance goal.
The table below shows information regarding the Performance Shares granted to each of our NEOs (other than Mr. Pessina) who received Performance Share awards in fiscal 2020.
| Name | | Total Target
Performance
Share Award | | Number of
Performance
Shares | | Aggregate Grant
Date Fair Value
of Performance
Share Award* | | Ornella Barra | | $2,250,000 | | 43,070 | | $2,471,357 | | Alexander W. Gourlay | | $2,250,000 | | 43,070 | | $2,471,357 | | James Kehoe | | $2,250,000 | | 43,070 | | $2,471,357 |
* | Calculated based on the probable satisfaction of the performance conditions for such awards as of the date of grant. This value is greater than the target economic value approved by the Compensation and Leadership Performance Committee due to the difference in the average share price used to determine the number of shares ($52.24) and the stock price on the date of grant ($57.38). |
A description of Mr. Pessina’s fiscal 2020 Performance Share award is set forth in “—VI. CEO and Executive Chairman Compensation—A. 2020 CEO Compensation” below. Mr. Skinner did not receive Performance Share awards in fiscal 2020.
C. 2020 Stock Option Grants
In October 2019, the Compensation and Leadership Performance Committee authorized the grant of 25% of the target dollar amount of the fiscal 2020 total long-term, performance-based incentive award for eligible senior executives in the form of Stock Options.
Stock Options are granted at an exercise price of no less than fair market value of a share of our common stock on the grant date and vest in one-third annual increments commencing on the one-year anniversary of the grant date. Accordingly, Stock Options only provide value to the recipients if our share price increases following the grant date, and provide no realizable value to recipients if our share price does not increase.
As in prior years, the Compensation and Leadership Performance Committee recognized individual performance through the application of an individual performance factor. The individual performance factor is based on such individual’s performance during the prior year, which could result in an incremental increase or decrease in the target economic value of the Stock Options granted to such individual.
At the end of fiscal 2019, each of Messrs. Pessina and Skinner conducted an evaluation of the contribution of each member of his respective management team in the areas of strategy, leadership and operating performance as it relates to our long-term goals. Based in part on their assessment of each such executive’s contribution, for fiscal 2020, Mr. Pessina (with respect to Messrs. Kehoe and Gourlay) and Mr. Skinner (with respect to Ms. Barra) recommended to the Compensation and Leadership Performance Committee individual increases of 20% over the target number of Stock Options
|
2022 Stock option grants Stock options are viewed as performance-based incentive compensation by the CLP Committee as they provide no realizable value to recipients if our share price does not increase from the grant date. As in prior years, the CLP Committee recognized individual performance through the application of an individual performance factor. The individual performance factor is based on such individual’s performance during the prior year, which could result in an incremental increase or decrease in the target economic value of the stock options granted to such individual. At the end of fiscal 2021, Ms. Brewer conducted an evaluation of the contribution of each member of the management team in the areas of strategy, leadership and operating performance as it relates to our long-term goals. Based on such assessment, Ms. Brewer recommended to the CLP Committee individual increases of 10% over the target number of stock options to be granted in November 2019 prior to the start of the COVID-19 pandemic. These adjustments were reviewed and approved by the Compensation and Leadership Performance Committee and were made, in part, to recognize the future potential of each of these senior executives. The table below shows information regarding the Stock Options granted to each of our NEOs (other than Mr. Pessina) who received Stock Options in November 2021 to each of Messrs. Kehoe and Standley.
Our 2022 stock options vest in approximately one-third increments on each of the first, second and third anniversaries of the November 1, 2021 grant date, and have a ten-year term. 2022 Restricted stock unit grants Given the volatile nature of the stock market, RSUs are included as a component of the Company’s executive compensation program as the CLP Committee believes that it is important for retention to have a portion of long-term incentives that is not tied to the achievement of performance goals or future stock price appreciation but still at-risk with the value fluctuating based on changes in stockholder value. RSUs also assist in attracting and retaining talented executives. Our 2022 RSUs vest in approximately one-third increments on each of the first, second and third anniversaries of the November 1, 2021 grant date. Payout of 2020-2022 performance shares In November 2019, performance shares were granted to our then-serving senior executives for the fiscal 2020-2022 performance period. The performance shares had a performance period of September 1, 2019 through August 31, 2022 and were contingent on the Company achieving its three-year cumulative adjusted EPS goals. The fiscal 2020-2022 target was set in relation to our Board approved three-year financial plan for the period and was approved by the CLP Committee in October 2019. The Company used a Black-Scholes valuation model, based on the average closing price of a share of our common stock over the last 30 trading days of fiscal 2019, to determine the number of shares subject to the Stock Options granted. | Name | | Total Target Dollar
Value of Stock
Option Award | | Individual
Performance
Adjustment | | Number of Stock
Options | | Aggregate
Grant Date Fair
Value of Stock
Option Award* | | Ornella Barra | | $1,125,000 | | 120% | | 141,806 | | $1,435,077 | | Alexander W. Gourlay | | $1,125,000 | | 120% | | 141,806 | | $1,435,077 | | James Kehoe | | $1,125,000 | | 120% | | 141,806 | | $1,435,077 |
* | This value is greater than the target economic value approved by the Compensation and Leadership Performance Committee due to the difference in the average share price used to determine the number of shares subject to the Stock Options granted ($52.24) and the stock price on the date of grant ($57.38). |
A description of Mr. Pessina’s fiscal 2020 Stock Option award is set forth in “—VI. CEO and Executive Chairman Compensation—A. 2020 CEO Compensation” below. Mr. Skinner did not receive Stock Option awards in fiscal 2020.
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D. 2020 Restricted Stock Unit Grants
In October 2019, the Compensation and Leadership Performance Committee authorized the grant of the remaining 25% of the target dollar amount of the fiscal 2020 total long-term incentive awards for eligible senior executives in the form of RSUs. Given the volatile nature of the stock market, the Compensation and Leadership Performance Committee believes that it is important for retention to have a portion of long-term incentives that is not tied to the achievement of performance goals or future stock price appreciation but still at-risk with the value fluctuating based on changes in stockholder value. RSUs also assist in attracting talented executives. The Compensation and Leadership Performance Committee believes that RSUs are designed to complement Stock Options, and therefore the timing and structure of RSU grants are aligned with Stock Option grants in various ways. Similar to the annual Stock Option grants, the annual RSU grants vest one-third each year for three years, assuming continued employment through the applicable vesting date. Dividend equivalents with respect to RSUs are credited as additional RSUs, subject to the same vesting conditions as the underlying RSUs. Following vesting, each RSU is converted to one share of the Company’s common stock.
The table below shows information regarding the RSUs granted to each of our NEOs (other than Messrs. Pessina and Skinner) who received RSUs in fiscal 2020.
| Name | | Total Target
RSU Award | | Number of
RSUs | | Aggregate Grant Date
Fair Value of RSU Award* | | Ornella Barra | | $1,125,000 | | 21,535 | | $1,235,678 | | Alexander W. Gourlay | | $1,125,000 | | 21,535 | | $1,235,678 | | James Kehoe | | $1,125,000 | | 21,535 | | $1,235,678 |
* | This value is greater than the target economic value approved by the Compensation and Leadership Performance Committee due to the difference in the average share price used to determine the number of shares subject to the RSUs granted ($52.24) and the stock price on the date of grant ($57.38). |
E. Transformational Cost Management Program Awards
On December 9, 2019, the Compensation and Leadership Performance Committee approved Transformational Cost Management Program awards under the Omnibus Incentive Plan for roles that are deemed to be key to the success of the Company’s Transformational Cost Management Program, which program is expected to deliver in excess of $2 billion of annual cost savings by fiscal 2022. These awards are intended to provide an incentive to certain individuals, including Ms. Barra and Messrs. Gourlay and Kehoe, to drive the performance and success of the Company’s Transformational Cost Management Program over a multi-year period. The program was offered to certain high performing operational leaders who have critical roles in driving improved performance through this change, and driving delivery of the Company’s transformational cost management targets. The awards to Ms. Barra and Messrs. Gourlay and Kehoe were granted on December 10, 2019 in the form of RSUs that vested one half on September 1, 2020 and will vest one half on September 1, 2021, to align with the timeline for key milestones in the Transformational Cost Management Program. There is no acceleration of vesting, except in the event of a qualifying termination of employment within one year following a change in control of the Company. Dividend equivalents with respect to RSUs are credited as additional RSUs, subject to the same vesting conditions as the underlying RSUs. Following vesting, each RSU is converted to one share of the Company’s common stock. The RSUs granted to Ms. Barra and Messrs. Gourlay and Kehoe had a grant date fair value equal to $1.5 million each, with the number of RSUs subject to the award determined by dividing $1.5 million by the closing price per share of the Company’s common stock on the grant date ($58.41).
The table below shows information regarding the Transformational Cost Management Program awards granted to each of our NEOs who received such awards in fiscal 2020.
| Name | | Number of RSUs | | Grant Date Fair
Value of RSU Award | | Ornella Barra | | 25,681 | | $1,500,027 | | Alexander W. Gourlay | | 25,681 | | $1,500,027 | | James Kehoe | | 25,681 | | $1,500,027 |
F. Payout of 2018-2020 Long-Term Incentive Awards
In October 2017, Performance Shares were granted to our then-serving senior executives for the fiscal 2018-2020 performance period. The Performance Shares had a performance period of September 1, 2017 through August 31, 2020 and were contingent on the Company achieving its three-year cumulative adjusted EPS goals. The fiscal 2018-2020 target was set in relation to our Board approved three-year financial plan for the period and was approved by the Compensation and Leadership Performance Committee in October 2017. The goals were designed to be challenging but achievable for the three-year performance period in light of our internal forecast as well as the macroeconomic and industry environments at the time.
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Table of Contents Executive compensation The following chart sets forth the financial performance measure, performance period, performance goals and corresponding payouts as a percentage of the target performance share opportunity for the fiscal 2020-2022 performance share cycle: | Performance Measure | | Performance Level | | Fiscal 2020-2022
Goal(1)
($) | | Performance
(as a % of Target) | | % of Performance
Shares Earned(2) | | Cumulative Adjusted EPS | | Below Threshold: | | <14.19 | | <90% | | 0% of target grant | | | Threshold: | | 14.19 | | 90% | | 50% of target grant | | | Target: | | 15.77 | | 100% | | 100% of target grant | | | Maximum: | | 17.35 | | 110% | | 150% of target grant |
| (1) | As discussed in our fiscal 2020 and fiscal 2021 proxy statements and supplemental filings, the goal for the three-year performance period was adjusted in 2020 to reflect the impacts of COVID-19 on the three-year plan. | | (2) | Performance between threshold and target, or between target and maximum, will earn performance goalsshares on a straight line interpolated basis between 50% and corresponding payouts as a percentage100% or between 100% and 150%, respectively. |
The achievement over the three-year period was $16.83, or 106.7% of the goal resulting in a formulaic payout of 133.5% of target. These results reflect permitted adjustments under the plan relating to mergers, acquisitions and other transactions during the cycle that were not contemplated in the originally approved targets. Consequently, the CLP Committee approved the resulting performance share vesting levels for the NEOs who received such performance shares as follows: Mr. Pessina, 204,441 shares; Mr. Kehoe, 57,498 shares; and Ms. Barra, 57,498 shares. Kehoe CEO transition RSUs As previously disclosed, in May 2021, Mr. Kehoe was granted a special performance-based RSU award as his role was deemed critical to the organization during the fiscal 2021 CEO transition (the “CEO Transition RSUs”). This award was intended to provide an incentive to Mr. Kehoe to drive the performance and success of our business during this transitional period. The CEO Transition RSUs were scheduled to vest 50% on each of May 1, 2022 and 2023, subject to Mr. Kehoe’s achievement of the following performance goals over the course of 2022 and 2023: | ● | Successful launch of the target Performance Share opportunityhealthcare business model, in partnership with the healthcare leadership team; | | ● | Achievement of publicly disclosed cost transformation goals; | | ● | Successful completion of the Finance for the fiscal 2018-2020 Performance Share cycle:Future transformation program; and | Performance Measure | | Performance Level | | Fiscal 2017-2020 Goal
($) | | Performance
(as a % of Target) | | % of Performance
Shares Earned* | | Cumulative Adjusted EPS | | Below Threshold: | | <16.99 | | <95% | | 0% of target grant | | Threshold: | | 16.99 | | 95% | | 50% of target grant | | Target: | | 17.88 | | 100% | | 100% of target grant | | Maximum: | | 19.67 | | 110% | | 150% of target grant |
* | Performance between threshold and target, or between target and maximum, will earn Performance Shares on a straight line interpolated basis between 50% and 100% or between 100% and 150%, respectively. |
| | ● | PayoutsIncreasing the diversity of global finance leadership team (VP and Impact of COVID-19above). Similar to the annual cash incentive plan, the Compensation and Leadership Performance Committee reviewed progress against the performance goals considering performance through the pre-COVID period through the end of February 2020 (the first thirty months of the thirty-six-month performance period or “Pre-COVID”) as well as the performance in the last six months of the performance period that was impacted by COVID-19, considering the extraordinary efforts of our executives and broader team members during this unprecedented time and the overall economic impacts of the pandemic. Projected performance based on the Company’s performance pre-COVID would have resulted in a Performance Share payout at 101.7%, while Company performance for the full performance period would have resulted in no Performance Share payout due to the impact of COVID-19. Using its discretion under the program design and in accordance with the adjustment provisions applicable to the awards, after consultation with Mercer, the Compensation and Leadership Performance Committee determined that the fiscal 2018-2020 Performance Shares were earned at 101.7% of target, which the Compensation and Leadership Performance Committee determined was reflective of the pre-COVID projected full year Company performance and the extraordinary efforts of the teams, as well as the unanticipated financial and operational impact during the COVID-19 pandemic. Consequently, the Compensation and Leadership Performance Committee approved the resulting Performance Share vesting levels for the NEOs who had received such Performance Shares, as follows: Mr. Pessina, 94,539 shares; Ms. Barra, 25,210 shares; and Mr. Gourlay, 25,210 shares.
VI. CEO and Executive Chairman Compensation
As noted elsewhere in this “Compensation Discussion and Analysis” section, unlike the other NEOs, substantially all of the compensation paid to Messrs. Pessina and Skinner in fiscal 2020 was
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In April 2022, the CLP Committee certified the achievement of the performance goals applicable to the first 50% portion of the CEO Transition RSUs, and this portion subsequently vested on May 1, 2022. The remaining 50% portion of the CEO Transition RSUs that is scheduled to vest in May 2023 is subject to Mr. Kehoe’s continued employment and the achievement of the aforementioned performance goals, with the ultimate value of the award fluctuating based on stock price performance. Executive chairman compensation The CLP Committee believes (after consulting with our independent compensation consultant) that providing Mr. Pessina with substantially all of his compensation (other than certain limited perquisites, as described elsewhere in this CD&A) in the form of equity-based awards, which was designed to align their compensation with stockholder value. Neither Mr. Pessina nor Mr. Skinner received a base salary in fiscal 2020 or was eligible to receive a cash incentive award for fiscal 2020. A. 2020 CEO Compensation
Mr. Pessina is, through an affiliated entity, our largest stockholder. Consequently, the Compensation and Leadership Performance Committee believes (after consultation with Mercer) that providing Mr. Pessina with substantially all of his compensation in the form of equity-based awards, using the same split of Performance Shares, Stock Options and RSUs as provided to our other senior executives, is appropriate and consistent with current market practice for similarly-situated executives, and closely aligns his compensation with the interests of our stockholders. The CLP Committee also believes (after consulting with our independent compensation consultant) that the total amount of Mr. Pessina’s compensation package is competitive with median market practices for executive chairs of general industry companies with a similar size and complexity (as measured by revenue and market capitalization), and is appropriate given his impact on the Company and in light of his performance in the role.
For fiscal 2022, in consideration for his service as Executive Chairman, the CLP Committee granted Mr. Pessina an RSU award equal in total economic value to $8 million. The number of RSUs granted was determined by dividing the grant value by the average closing price for our common stock over the last 30 trading days of fiscal 2021, which was $47.95. This award will vest on third anniversary of the grant date and is subject to forfeiture or full or pro-rated accelerated vesting in certain circumstances, including if Mr. Pessina ceases to serve on the Board (subject to certain exceptions). In addition to the three-year vesting period, this RSU award also included a fiscal 2022 adjusted operating income performance goal, the achievement of | 76 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation which was certified by the CLP Committee in October 2022. For a discussion of the circumstances related to forfeiture or to full or pro-rated accelerated vesting of Mr. Pessina’s outstanding awards, see “Executive Compensation Tables and Supporting Information—2022 Potential Payments Upon Termination or Change in Control” below. | Name | | Total Dollar Value of RSU Award | | Number of RSUs | | Aggregate Grant Date Fair
Value of RSU Award* | | Stefano Pessina | | $8,000,000 | | 166,840 | | $7,894,869 |
| * | This value is less than the target economic value approved by the CLP Committee due to the difference in the average share price used to determine the number of shares ($47.95) and the stock price on the date of grant ($47.32). |
Retirement and other benefits Retirement plans and program The primary retirement program applicable to our U.S. employees is a tax-qualified 401(k) Retirement Savings Plan (the “401(k) Plan”). The retirement benefits available for the Company’s executive officers under the tax-qualified 401(k) Plan are the same as those available for other eligible employees. The Company also has a non-qualified supplemental retirement plan, the Walgreens Boots Alliance, Inc. Executive Retirement Savings Plan (“Executive Deferred Plan”), pursuant to which participants receive Company contribution credits that cannot be made due to tax law limitations and may elect to defer portions of their annual base salary and/or short-term incentive awards. Additional information regarding the Executive Deferred Plan is provided under “—Executive Compensation Tables and Supporting Information—2022 Nonqualified Deferred Compensation.” In lieu of further participation in any defined contribution plan, Ms. Barra receives a pension supplement of 40% of base salary, consistent with relevant market practice at the time of implementation. Perquisites We provide our NEOs and other senior executives with perquisites and other personal benefits that we believe are non-excessive and competitive with those offered by companies comparable to us. In April 2022, in consultation with our independent compensation consultant, the CLP Committee conducted a review of these perquisites and other personal benefits and determined that they remained generally consistent with relevant market practice. The aggregate reported value of our CEO Ms. Brewer’s perquisites and other personal benefits were higher in fiscal 2022 than in fiscal 2021. This increase was primarily due to certain security-related services that were provided to Ms. Brewer in fiscal 2022. A third-party security provider recommended these benefits, noting that these security services were appropriate and necessary to protect Ms. Brewer in line with her risk exposure. For additional details, see the discussion below and the “—Executive Compensation Tables and Supporting Information” section of this Proxy Statement. Aircraft Usage. Pursuant to our guidelines for aircraft usage, we permit the personal use of our aircraft by each of Ms. Brewer and Mr. Pessina. We also allow the partner or spouse of each, as applicable, to accompany the executive on such personal trips (in addition to accompanying him or her on business trips). In limited circumstances, pre-approved personal use of our aircraft by other senior executives is also permitted. During fiscal 2021, the Company hired an outside security provider to perform a comprehensive security assessment with respect to Ms. Brewer. Based on its security assessment, the outside security provider recommended certain home security services be provided to Ms. Brewer and that Ms. Brewer use corporate aircraft for all business and personal travel. Accordingly, the Company pays for certain security services for Ms. Brewer and her use of corporate aircraft for all personal travel. Because the Company believes it is in the best interests of the Company and its stockholders to protect Ms. Brewer against possible security threats to her and her family members, the Company requires that Ms. Brewer accept such personal security protection. The Company also believes that the costs of this security are appropriate and necessary. Although the Company does not consider Ms. Brewer’s required use of corporate aircraft for security purposes to be a perquisite or other personal benefit for the reasons described above, the Company has reported the costs related to the use of the corporate aircraft for personal travel in the “2022 All Other Compensation Table” under “—Executive Compensation Tables and Supporting Information” below.
Table of Contents Executive compensation The CLP Committee has authorized Mr. Pessina during the time he serves as Executive Chairman to use corporate aircraft without requiring reimbursement for up to 20 flight hours per year for personal travel. To the extent Mr. Pessina’s use of corporate aircraft for personal travel exceeds the number of hours per year allowed by the CLP Committee without reimbursement, Mr. Pessina is required to reimburse the Company, pursuant to an aircraft time-sharing agreement consistent with Federal Aviation Administration regulations, an amount intended to approximate the Company’s incremental cost of such travel. Occasionally, an executive’s spouse or other guests may accompany the executive on corporate aircraft when the aircraft is already scheduled for business purposes and can accommodate additional passengers. In those cases, there is no additional aggregate incremental cost to the Company and, as a result, no amount associated with such use is reflected in the “2022 All Other Compensation Table” under “—Executive Compensation Tables and Supporting Information” below. Relocation and Related Benefits. Executive officers are eligible for certain relocation and related benefits if they are assigned to work in a country that is not their “home country” or are otherwise requested to relocate for their role (as defined in the applicable policies). Ms. Brewer received relocation benefits in fiscal 2022 in connection with these policies. Other. We provide limited additional perquisites and other personal benefits to our NEOs and other senior executives, including an annual medical examination, limited reimbursement of health club dues, long-term disability, life insurance and personal accident insurance, preferred flight status with certain airline programs, and tax preparation services for executives with tax obligations in multiple countries. During fiscal 2022, following a review of our perquisites and other benefits and after consulting with our independent compensation consultant, in order to align with the competitive market, the CLP Committee approved a financial planning and tax preparation benefit for our Section 16 executive officers (excluding the Global Controller and Chief Accounting Officer), including our NEOs. The benefit provides reimbursement of up to $20,000 for Ms. Brewer and $16,000 for our other NEOs of the costs incurred for qualifying financial planning and tax preparation services. The perquisites and other benefits we provided to our NEOs during fiscal 2022 are further quantified in the footnotes in the “2022 Summary Compensation Table” under “—Executive Compensation Tables and Supporting Information” below. Employment and separation arrangements For U.S.-based executives, we generally execute an offer of employment before an executive joins the Company. This offer describes the basic terms of the executive’s employment, including his or her start date, starting salary, annual incentive target, long-term incentive award target and perquisites. The terms of the executive’s employment are based thereafter on sustained good performance rather than contractual terms, and the Company’s policies, such as the Executive Severance and Change in Control Plan, will apply as applicable. Under certain circumstances, the Company also recognizes that special arrangements with respect to an executive’s employment may be necessary or desirable. Ms. Barra, who was employed by Alliance Boots or one of its subsidiaries prior to the closing of Walgreen Co.’s acquisition of the remaining 55% interest of Alliance Boots on December 31, 2014, has an employment agreement from such time. Formal employment agreements are a competitive market practice in Monaco, where Ms. Barra was a resident when she entered into her employment agreement. Ms. Barra’s agreement provides for a 12-month notice period prior to termination of employment by either Ms. Barra or us, subject to certain exceptions set forth in the agreement. We also provide, at our expense, annual tax advice from external tax advisors relating to U.S. and UK tax returns in relation to Ms. Barra’s employment with us. Severance and change in control plan Severance Benefits. We maintain the Walgreens Boots Alliance, Inc. Executive Severance and Change in Control Plan (the “Severance and CIC Plan”). The CLP Committee believes it is appropriate to provide executives with the rewards and protections afforded by the Severance and CIC Plan. The Severance and CIC Plan reduces the need to negotiate individual severance arrangements with departing executives and protects our executives from termination for circumstances not of their doing. The CLP Committee also believes the policy promotes management independence and helps retain, stabilize and focus the executive officers in the event of a change in control. | 78 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation The Severance and CIC Plan provides eligible executives certain severance benefits (a) upon an involuntary termination by us at any time (other than for cause or upon death or disability, as those terms are defined in the Severance and CIC Plan) or (b) within one year following a “change in control,” upon an involuntary termination not for cause, death or disability, or upon a voluntary termination for “good reason” (as those terms are defined in the Severance and CIC Plan). The Severance and CIC Plan also contains a double-trigger feature with respect to a change in control, meaning that the Severance and CIC Plan requires both a change in control and a qualifying termination of employment within one year following the change in control in order to receive severance benefits. If the payments and benefits to a participant under the Severance and CIC Plan would subject the participant to an excise tax, then such payments will be reduced by the minimum amount necessary to avoid such excise tax, but only if such reduction will result in the participant receiving a higher net after-tax amount. Ms. Brewer and Mr. Kehoe are the only continuing NEOs who are currently eligible for benefits under the Severance and CIC Plan, as Mr. Pessina, as Executive Chairman, is not eligible for participation in the Severance and CIC Plan, and Ms. Barra would receive benefits pursuant to her employment agreement in lieu of benefits under the Severance and CIC Plan. Mr. Standley ceased serving as Executive Vice President and President, Walgreen Co. as of November 1, 2022 and will receive severance benefits pursuant to the terms of the Severance and CIC Plan. Ms. Brewer’s and Mr. Kehoe’s potential benefits under the Severance and CIC Plan, Ms. Barra’s potential benefits under her employment arrangements and the severance benefits to be received by Mr. Standley in connection with his separation in November 2022 are described under “—Executive Compensation Tables and Supporting Information—2022 Potential Payments upon Termination or Change in Control.” Cash Severance Policy. After considering stockholder feedback, in October 2022, the CLP Committee adopted a policy requiring the Company to seek stockholder approval of any future severance arrangements that provide for cash severance payments to any senior executive that in the aggregate exceed 2.99 times the sum of such executive’s annual base salary and target annual bonus. Executive compensation corporate governance Our executive compensation philosophy Our CLP Committee believes that our executive compensation program should reward actions and behaviors that support our cultural transformation and business strategy. In conjunction with the launch of its new consumer-centric healthcare strategy, in fiscal 2022, the Company reassessed its compensation philosophy and executive compensation program to evaluate whether it was aligned with the cultural transformation that the Company has undertaken and reflective of the Company’s business strategy to focus on becoming a leader in U.S. healthcare. In fiscal 2022, our CLP Committee approved the following compensation philosophy to inspire, drive and retain the talent needed to support our new strategy, as supported by the guiding principles below, to reimagine our core business, develop our healthcare business and drive growth for the Company for years to come.
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| | | | | | | | OUR
WHY | Our
Purpose
Why we exist–
our enduring North Star. | | More joyful lives
through better health. | | | | | | | | | | OUR
WHAT | Our
Vision
Our tangible, company-wide aspiration
for the near-term. | | To be the leading partner in
reimagining local healthcare and
wellbeing for all. | | | | | | | | | OUR
HOW | Our
Values
Our shared beliefs and principles that guide
our decisions and how we will show up in
our day-to-day work. | | Courageous | Connected | Committed | Curious | | | | | | | | | | |
Compensation decision-making As illustrated in the table below, our CEO Ms. Brewer reviews annually the performance and pay level of each of our “senior executives” (i.e., certain Senior Vice President level executives and above), develops recommendations concerning the compensation of each senior executive and presents those recommendations to the CLP Committee. The CEO does not make any recommendation concerning her own compensation. While the CLP Committee considers the input of our CEO and management in the compensation decision-making process, the CLP Committee is responsible for overseeing our executive compensation program, which includes our annual cash incentive and long-term equity compensation programs as well as our retirement and other benefit programs and practices. The CLP Committee considers all elements of the program in total, as well as individual performance, Company-wide performance and internal equity and market compensation considerations, when making executive compensation-related decisions. | 80 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation | | Market Review | | | Internal Review | | | Pay Decisions |  | | | ●Performed by independent compensation consultant ●Considers peer pay practices ●Influences program design ●Provides benchmarking for senior executive roles | | | ●CEO evaluates performance ●CEO and management review market data and internal comparable roles ●CEO recommends to the CLP Committee program changes and any pay adjustments | | | ●CEO and management recommend to the CLP Committee any program changes to align with business objectives ●CEO recommends pay adjustments ●CLP Committee carefully considers: ●Historical and current market practices, ●Internal equity issues, and ●Established market trends ●CLP Committee approves any program and pay changes | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Competitive market review The CLP Committee considers market pay practices from the peer group below when setting executive compensation to assess the overall competitiveness and reasonableness of the Company’s executive compensation program. The CLP Committee generally sets target total direct compensation at rates that result in median market levels when compared to our peer group. The actual positioning of target total direct compensation relative to the median varies based on each senior executive’s experience and skill set. The composition of our peer group used to assess the competitiveness of our executive compensation program is reviewed annually by the CLP Committee and is updated as deemed appropriate by the CLP Committee in consultation with our independent compensation consultant. In evaluating companies for inclusion in our peer group, the CLP Committee considers, among other factors, revenue size, industry and the peer groups of our closest competitors. The CLP Committee believes that our peer group appropriately reflects the industries and markets in which we compete for executive talent, and it includes companies in both the retail and healthcare industries. The CLP Committee also considers companies of similar global size, while balancing the need to have a peer group comprised of a sufficiently large number of companies so as to be able to derive meaningful insights and observations. Set forth below is our fiscal 2022 peer group, which was the same peer group used for fiscal 2021 compensation decisions: | Cardinal Health | | CVS Health | | Kroger | | Mondelez | | Target | | Cigna | | Elevance Health(1) | | McDonald’s | | PepsiCo | | United Health | | Coca-Cola | | Humana | | McKesson | | Pfizer | | Wal-Mart | | Costco | | Johnson & Johnson | | Medtronic | | Procter & Gamble | | |
| (1) | In June 2022, peer company Anthem Inc. was formally rebranded as Elevance Health. |
For the respective companies’ most recently completed fiscal year for which data was available prior to the setting of fiscal 2022 compensation in October 2021, we were at the 64th percentile of our peer group in terms of revenue reported and the 13th percentile of our peer group in terms of market value. After the review of peer group data, the CLP Committee establishes base salary adjustments, annual cash incentive awards and long-term incentive awards, as applicable, for the NEOs and our other senior executives.
Table of Contents Executive compensation Role of the compensation consultant As noted above, the CLP Committee has engaged Mercer as its independent compensation consultant. Among other matters, the CLP Committee uses Mercer to provide information regarding market compensation practices and trends and to advise the CLP Committee on Non-Employee Director and executive compensation decisions, particularly with respect to our CEO and Executive Chairman. A representative of Mercer meets regularly with the CLP Committee and, as needed, has access to the CLP Committee and its Chair during and between regularly-scheduled meetings. We also engage Mercer to serve as the executive compensation consultant to our management team. The CLP Committee has reviewed and considered the relevant factors specified under SEC and Nasdaq rules regarding our relationship with Mercer and, based upon this review, has concluded that the advice it receives from Mercer is and was objective and is and was not influenced by any relationships Mercer or its affiliates may otherwise have with our management team, the Board, the Company or its subsidiaries. See “Corporate Governance—Board Committees and Meetings—Independent Compensation Advisor” above for more information regarding our relationship with Mercer and its affiliates. Compensation risk oversight In October 2022, the CLP Committee retained our independent compensation consultant to conduct a risk review of our compensation programs and assess whether any of our incentive compensation plans, either individually or in the aggregate, would encourage our executives or employees to undertake unnecessary or inappropriate risks that were reasonably likely to have a material adverse impact on us. The CLP Committee reviewed this external risk assessment of our incentive compensation plans and considered several factors, including the various design elements of our incentive plans, the impact of our leadership and culture and the presence of risk—mitigating controls. As part of these assessments, our management and the CLP Committee, as well as our independent compensation consultant, evaluated those plans that were identified as having the potential to deliver a significant amount of compensation, which included the short-term and long-term incentive programs described elsewhere in this CD&A. In agreement with the overall findings of the 2022 risk assessment conducted by our independent compensation consultant, the CLP Committee thereafter concluded that it was not reasonably likely that risks arising from our compensation policies and practices would have a material adverse effect on us due to a variety of factors. In reaching this conclusion, the CLP Committee considered the following: | ● | Our compensation programs are designed to provide a mix of both fixed and variable incentive compensation; | | ● | Our compensation programs are balanced between a variety of different measures, and both short-term and long-term incentives are designed to reward execution of our Executive Vice Chairmanshort-term and Chief Executive Officer, the Compensationlong-term corporate strategies; | | ● | We allocate compensation among base salary, annual cash incentives, and Leadership Performance Committee awarded Mr. Pessina a combination of Performance Shares, Stock Optionslong-term incentives, such as performance shares and RSUs, equal in total economic valuethat include both time of service and performance-based criteria; | | ● | The annual cash incentive component involves cash-based plan awards with payouts tied to $16 million. There was no increase in the target valueachievement of Mr. Pessina’s fiscal 2020 equity award as compared to his fiscal 2019 equity awards.Thepre-established Company-wide financial and individual performance objectives;
| | ● | Long-term incentive compensation includes components that are paid based on results averaged out over a number of Performance Shares, Stock Optionsyears and RSUs grantedthat vest over an extended period; | | ● | Executives are required to Mr. Pessina was determined using the same methodology used for other senior executives as describedown a specified level of shares in “—V. Long-Term Incentive Compensation” above.2021 Proxy Statement 67
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The Performance Shares, Stock Options and RSUs awarded to Mr. Pessina are generally subject to the same terms and conditions described in “—V. Long-Term Incentive Compensation” above, including the three-year performance period and vesting schedules. The Performance Shares, Stock Options and RSUs granted to Mr. Pessina are subject to forfeiture in certain circumstances, or full or pro-rated accelerated vesting in certain circumstances, including if Mr. Pessina ceases to serve on the Board (subject to certain exceptions). For a discussion of the circumstances related to forfeiture or to full or pro-rated accelerated vesting of Mr. Pessina’s outstanding awards, see “—Executive Compensation Tables and Supporting Information—2020 Potential Payments Upon Termination or Change in Control” below.
| Long-Term Incentive Grant: Stefano Pessina | | Vehicle | | Number | | Aggregate Target
Award | | Aggregate Grant
Date Fair Value* | | Performance Shares | | 153,139 | | $8,000,000 | | $8,787,116 | | Stock Options | | 420,168 | | $4,000,000 | | $4,252,100 | | RSUs | | 76,570 | | $4,000,000 | | $4,393,587 | | Total Dollar Value | | — | | $16,000,000 | | $17,432,803 |
* | With respect to the Performance Shares, aggregate grant date fair value is calculated based on the probable satisfaction of the performance conditions for such award as of the date of grant. The grant date fair value for the Performance Shares, Stock Options and RSUs is greater than the target economic value approved by the Compensation and Leadership Performance Committee due to the difference in the average share price used to determine the number of shares ($52.24) and the stock price on the date of grant ($57.38). |
B. 2020 Executive Chairman Compensation
Similarly, the Compensation and Leadership Performance Committee believes (after consultation with Mercer) that providing Mr. Skinner with substantially all of his compensation in the form of time-based RSUs is appropriate, and closely aligns his compensation with the interests of our stockholders. The Compensation and Leadership Performance Committee also believes (after consultation with Mercer) that the amount of Mr. Skinner’s compensation package is consistent with current market practice for the compensation of executive chairs. The fiscal 2020 RSUs also included an adjusted operating income performance goal originally designedorder to comply with the legacy performance-based compensation rules under Section 162(m) of the Code prior to U.S. tax reform.
For fiscal 2020,stock ownership guidelines described in consideration of his service as our Executive Chairman, the Compensation and Leadership Performance Committee granted Mr. Skinner an RSU award equal in total economic“Stock Ownership Guidelines” below, which encourages focusing on enhancing long-term stockholder value to $8 million. The number of RSUs granted was determined by dividing the grant value by the average closing price for our common stock over the last 30 trading days of fiscal 2019, which was $52.24. Given the satisfaction of the adjusted operating income performance criteria for such award as determined by the Compensation and Leadership Performance Committee on October 28, 2020, this award will vest on the third anniversary of the grant date and is subject to forfeiture or full or pro-rated accelerated vesting in certain circumstances, including if Mr. Skinner ceases to serve on the Board (subject to certain exceptions). For a discussion of the circumstances related to forfeiture or to full or pro-rated accelerated vesting of Mr. Skinner’s outstanding awards, see “—Executive Compensation Tables and Supporting Information—2020 Potential Payments Upon Termination or Change in Control” below.
| Name | | Total Dollar Value
of RSU Award | | Number of
RSUs | | Aggregate Grant Date Fair
Value of RSU Award* | | James A. Skinner | | $8,000,000 | | 153,139 | | $8,787,116 |
* | This value is greater than the target economic value approved by the Compensation and Leadership Performance Committee due to the difference in the average share price used to determine the number of shares ($52.24) and the stock price on the date of grant ($57.38). |
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VII. Executive Compensation Program Updates
In light of the impact of COVID-19 on our business, and the uncertainty of its future impact, our Executive Vice Chairman and CEO, Mr. Pessina, requested that the Compensation and Leadership Performance Committee not grant him any long-term equity incentive awards (or any other direct compensation) in fiscal 2021. Mr. Pessina has never drawn a salary or received a short-term incentive award for his service as Executive Vice Chairman and CEO of the Company and, with respect to fiscal 2021, Mr. Pessina did not participate in the November 2021 long-term equity incentive grants. Further, Ms. Barra and Messrs. Gourlay and Kehoe have declined to receive base salary increases for fiscal 2021.
In addition, in light of the impact of COVID-19 and in response to stockholder feedback, the Compensation and Leadership Performance Committee approved certain changes to our executive compensation program, as described below.
| | Fiscal 2020 Program | | Fiscal 2021 Program | | Rationale for Change | MIP - Performance Metric and Performance Curve
| | ●Adjusted Operating Income
●90% of target goal pays at 50% of target
●110% of target goal pays at 200% of target
●Individual Performance Modifier (0 – 120%)
| | ●Adjusted Operating Income, weighted 65%
●85% of target goal pays at 50% of target
●115% of target goal pays at 200% of target
●Free Cash Flow, weighted 25%
●70% of target goal pays at 50% of target
●130% of target goal pays at 200% of target
●Diversity, weighted 10%
●85% of target goal pays at 50% of target
●115% of target goal pays at 200% of target
●Individual Performance Modifier (0 – 120%) – no change
| | ●Recognizes the continued focus on Adjusted Operating Income
●Increases focus on managing capital and generating cash flow to fund critical business priorities such as digitization of the Company, evolution of pharmacy, evolution of retail, innovation and cost transformation
●Reinforces our commitment to diversity goals throughout the Company with goals designed to support driving tangible results in this critical area
| LTI – Performance Share Performance Metrics
| | ●Cumulative adjusted EPS over a three-year performance period
●90% of target goal pays at 50% of target
●110% of target goal pays at 150% of target
| | ●Adjusted EPS Growth, weighted 70%, measured based on three one-year growth targets with a simple average of the three years
●-10% of growth goal pays at 50% of target
●+10% of growth goal pays at 150% of target
●Revenue Growth, weighted 30%, measured based on three one-year growth targets with a simple average of the three years
●-5% of growth goal pays at 50% of target
●+5% of growth goal pays at 150% of target
| | ●Recognizes the difficulty in setting three-year goals during the uncertainty of COVID-19
●Recognizes the importance of revenue growth to the long-term future of the Company
|
VIII. Retirement and Other Benefits
A. Retirement Plans and Programs
U.S. Plans. The primary retirement program applicable to our U.S. employees is a tax-qualified 401(k) Retirement Savings Plan (the “401(k) Plan”). The 401(k) Plan is a defined contribution plan designed to accumulate retirement funds for participating employees, including participating executive officers of the Company, via individual contributions and employer matching contributions. The retirement benefits available for the Company’s executive officers under the tax-qualified 401(k) Plan are the same as those available for other eligible employees.
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The Company also has a non-qualified supplemental retirement plan, the Walgreens Boots Alliance, Inc. Executive Retirement Savings Plan (“Executive Deferred Plan”). The Executive Deferred Plan replaces the contributions the Company is unable to provide under the 401(k) Plan as a result of various tax law limitations that restrict contributions made for highly-compensated participants under the 401(k) Plan. The amounts credited to the Executive Deferred Plan are unfunded, unsecured promises to pay a benefit in the future. The Executive Deferred Plan includes two features. First, participants receive Company contribution credits equal to the matching contributions that cannot be made to the 401(k) Plan due to the tax law limitations described above (“Company Contributions”). Second, participants may also elect to defer, on a pre-tax basis, up to (i) 50% of their annual base salary and/or (ii) 85% of their short-term incentive awards (“Participant Contributions”). A participant’s account under the Executive Deferred Plan is credited with investment gains and/or losses based on the investment fund elections of the participant. Executive Deferred Plan accounts are paid following termination of employment. Company Contribution accounts are paid in a lump sum or installments, depending on the size of the account balance and the participant’s age at the time of employment termination. Participant Contribution accounts are paid in a lump sum or installments over a selected number of years, based on the participant’s advance election at the time of deferral.
Mr. Kehoe is the only NEO who currently participates in these plans.
UK Plans. Mr. Gourlay has accrued benefits in the Boots Pension Plan, which covers certain employees in the United Kingdom, as well as in two smaller defined benefits plans, the Boots Supplementary Pension Plan and the Boots Additional Pension Arrangement. The Boots Pension Plan is a funded final salary defined benefit plan providing a retirement pension and a dependent’s pension on the death of the participant. The Boots Pension Plan was closed to future accruals effective June 30, 2010, with benefits calculated by reference to pensionable salaries as of that date. The plan is subject to an actuarial funding valuation on a triennial basis. The Boots Supplementary Pension Plan and the Boots Additional Pension Arrangement were also closed to future accruals effective June 30, 2010.
In lieu of further participation in any defined contribution plan, Ms. Barra and Mr. Gourlay receive a pension supplement of 40% of base salary, consistent with relevant market practice at the time of implementation.
B. Perquisites
We provide our NEOs and other senior executives with perquisites and other personal benefits that we believe are non-excessive and competitive with those offered by companies comparable to us. In April 2020, in consultation with Mercer, the Compensation and Leadership Performance Committee conducted a review of these perquisites and other personal benefits and determined that they remained generally consistent with relevant market practice.
Aircraft Usage. Pursuant to our guidelines for aircraft usage, we permit the personal use of our aircraft by each of Messrs. Pessina and Skinner. We also allow the partner or spouse of each, as applicable, to accompany him on such personal trips (in addition to accompanying him on business trips). In limited circumstances, pre-approved personal use of our aircraft by other senior executives is also permitted.
The Compensation and Leadership Performance Committee has authorized each of Mr. Pessina and Mr. Skinner, during the time they serve as Chief Executive Officer and Executive Chairman, respectively, to use our aircraft without requiring reimbursement for up to 20 flight hours per year for personal travel. During fiscal 2020, Messrs. Pessina and Skinner did not exceed that limit. Apart from the allocated hours, and from time to time, Mr. Pessina and Ms. Barra may charter our aircraft for his or her personal use, which they did not do during fiscal 2020. In such cases, they do so through a third-party chartering service on an arm’s-length basis, and in doing so pay us market rates for his or her personal use of such aircraft.
Each of Mr. Pessina and Mr. Skinner, to the extent his use of our aircraft for personal travel exceeds the number of hours per year allowed by the Compensation and Leadership Performance Committee without reimbursement, and our other senior executives who use our aircraft for personal travel, are required to reimburse us, pursuant to an aircraft time-sharing agreement consistent with Federal Aviation Administration regulations, an amount intended to approximate our incremental cost of such travel. To the extent either Mr. Pessina’s or Mr. Skinner’s use of our aircraft for personal travel without the need to reimburse us constitutes taxable income to himsustainable manner;
| | ● | As described below under applicable tax laws, then he pays the taxes on such income without gross-ups.Relocation and Related Benefits. Executive officers are eligible for certain relocation and related benefits if they are assigned to work in a country that is not their “home country” (as defined in the applicable policy). In addition to certain other benefits described in the paragraph below, Mr. Gourlay is entitled to a company car; payment of certain costs associated with his life and other insurance policies (including, in some cases, coverage for his spouse and dependent children); long-term disability coverage; and a guaranteed death-in-service benefit of five times base salary. If Mr. Gourlay declines a particular benefit (other than the death-in-service benefit), then he may receive a cash payment in lieu thereof. Mr. Gourlay also receives certain tax equalization benefits and tax assistance (as described further below in “—C. Employment Arrangements”) consistent with his expatriate assignment.
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Other. We provide limited additional perquisites and other personal benefits to our NEOs and other senior executives, including an annual medical examination, limited reimbursement of health club dues, long-term disability and personal accident insurance, preferred flight status within certain airline programs, and tax preparation services for executives with tax obligations in multiple countries. The perquisites and other benefits we provided to our NEOs during fiscal 2020 are further quantified in the footnotes in the “2020 Summary Compensation Table” under “—Executive Compensation Tables and Supporting Information” below.
C. Employment Arrangements
We generally execute an offer of employment before an executive joins the Company. This offer describes the basic terms of the executive’s employment, including his or her start date, starting salary, annual incentive target, long-term incentive award target and perquisites. The terms of the executive’s employment are based thereafter on sustained good performance rather than contractual terms, and the Company’s policies, such as the Executive Severance and Change in Control Plan, will apply as applicable.
John Standley joined the Company as Executive Vice President, President of Walgreen Co. and has served as an executive officer since August 31, 2020. Mr. Standley, age 57, previously served Rite Aid Corporation in a range of senior leadership roles, including as Chief Executive Officer from June 2010 to August 2019 and as Chairman from June 2012 to October 2018. Mr. Standley's offer letter sets forth key elements of his compensation, including salary, sign-on incentives, relocation benefits in accordance with Company policy and other employee benefits consistent with those received by the Company’s other U.S.-based senior executives. In fiscal 2021, Mr. Standley will be a participant in the Company’s MIP and its stock-based incentive program providing for annual Stock Option, RSU and Performance Share grants.
Under certain circumstances, the Company recognizes that special arrangements with respect to an executive’s employment may be necessary or desirable.
Ms. Barra and Mr. Gourlay, each of whom was employed by Alliance Boots or its subsidiaries prior to the closing of Walgreen Co.’s acquisition of the remaining 55% interest of Alliance Boots on December 31, 2014 (the “Second Step Transaction”), have employment agreements from such time that continue to be in effect until terminated. Formal employment agreements are a competitive market practice in the United Kingdom, where Mr. Gourlay was a resident when he entered into his employment agreement; and in Monaco, where Ms. Barra was a resident when she entered into her employment agreement.
Benefits provided to Ms. Barra pursuant to her agreement are described above in “—B. Perquisites” and in the “2020 Summary Compensation Table” under “—Executive Compensation Tables and Supporting Information” below. Ms. Barra’s agreement provides for a 12-month notice period prior to termination of employment by either Ms. Barra or us, subject to certain exceptions set forth in the agreement. We also provide, at our expense, annual tax advice from external tax advisors relating to U.S. and UK tax returns in relation to Ms. Barra’s employment with us.
In September 2013, Walgreens entered into a Secondment Agreement (the “Secondment Agreement”) with Alliance Boots Management Services Limited, an affiliate of Alliance Boots, pursuant to which Alliance Boots may second certain of its employees to Walgreens for particular assignments. Since 2013, Mr. Gourlay has been seconded to Walgreens pursuant to the Secondment Agreement and an assignment letter, which was most recently extended in July 2020.
Benefits provided to Mr. Gourlay pursuant to his employment agreement are described above in “—B. Perquisites” and in the “2020 Summary Compensation Table” under “—Executive Compensation Tables and Supporting Information” below, and include cost of living and housing allowances, expenses associated with annual tax advice from external tax advisors related to Mr. Gourlay’s employment with us, tax equalization benefits, and reimbursement of the difference between his real estate liability in the United States and his liability in the United Kingdom. Mr. Gourlay’s agreement provides for a 12-month notice period prior to termination of employment by either Mr. Gourlay or us, subject to certain exceptions set forth in the agreement, and also provides for the payment of redundancy payments in certain circumstances.
D. Severance and Change in Control Plan
We maintain the Walgreens Boots Alliance, Inc. Executive Severance and Change in Control Plan (the “CIC Plan”). The CIC Plan provides eligible executives certain severance benefits (a) upon an involuntary termination by us at any time (other than for cause or upon death or disability, as those terms are defined in the CIC Plan) or (b) within one year following a “change in control,” upon an involuntary termination not for cause, death or disability, or upon a voluntary termination for “good reason” (as those terms are defined in the CIC Plan).
The CIC Plan contains a double-trigger feature with respect to a change in control, meaning that the CIC Plan requires both a change in control and a qualifying termination of employment within one year following the change in control in order to receive severance benefits. If the payments and benefits to a participant under the CIC Plan would subject the participant to an excise tax, then such payments will be reduced by the minimum amount necessary to avoid such excise tax, but only if such reduction will result in the participant receiving a higher net after-tax amount.
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None of the NEOs except Mr. Kehoe is currently eligible for benefits under the CIC Plan, as (1) Mr. Pessina does not receive any salary or annual incentive payments and therefore would receive no severance benefits under the CIC Plan, (2) Mr. Skinner, as Executive Chairman, is not currently eligible for participation in the CIC Plan, and (3) the other NEOs (except Mr. Kehoe) would receive benefits pursuant to their individual employment agreements in lieu of benefits under the CIC Plan.
Mr. Kehoe’s benefits under the CIC Plan and the other NEOs’ benefits under their individual employment arrangements are described under “—Executive Compensation Tables and Supporting Information—2020 Potential Payments upon Termination or Change in Control.”
IX. Executive Compensation Corporate Governance
A. Compensation Risk Oversight
In 2016, the Compensation and Leadership Performance Committee retained Mercer to conduct a risk review of our compensation programs and assess whether any of our incentive compensation plans, either individually or in the aggregate, would encourage our executives or employees to undertake unnecessary or inappropriate risks that were reasonably likely to have a material adverse impact on us. The Compensation and Leadership Performance Committee reviewed this external risk assessment of our variable pay plans and considered several factors, including the type of plan; the number of participants in each plan; the participants’ levels within the organization; the target and maximum payout potential; performance criteria under each plan; and risk mitigating controls in place for each plan.
As part of these assessments, our management and the Compensation and Leadership Performance Committee, as well as Mercer, evaluated those plans that were identified as having the potential to deliver a significant amount of compensation, which included the short-term and long-term incentive programs described elsewhere in this “Compensation Discussion and Analysis” section.
The Compensation and Leadership Performance Committee thereafter concluded that it was not reasonably likely that risks arising from our compensation policies and practices would have a material adverse effect on us due to a variety of factors. In reaching this conclusion, the Compensation and Leadership Performance Committee considered the following:
● | Our compensation programs are designed to provide a mix of both fixed and variable incentive compensation; | ● | Our compensation programs are balanced between a variety of different measures, and both short-term and long-term incentives are designed to reward execution of our short-term and long-term corporate strategies; | ● | We allocate compensation among base salary, annual cash incentives, and long-term incentives, such as Stock Options, Performance Shares and RSUs, that include both time of service and performance-based criteria; | ● | The annual cash incentive component involves cash-based plan awards with payouts tied to the achievement of pre-established Company-wide financial and individual performance objectives; | ● | Long-term incentive compensation includes components that are paid based on results averaged out over a number of years and that vest over an extended period; | ● | Executives are required to own a specified level of shares in order to comply with the stock ownership guidelines described in “—B. Stock Ownership Guidelines” below, which encourages focusing on enhancing long-term stockholder value in a sustainable manner; | ● | As described below under “—C. Compensation Recovery (Clawback) Policy,” we have adopted a clawback policy applicable to all officers that is designed to allow us to recover incentive compensation paid if there is a restatement of financial results or misconduct, including fraud; | ● | As described below under “—D. Anti-Hedging and Anti-Pledging Policies,” we have a policy that prohibits directors, executives and senior employees from participating in transactions designed to hedge or speculate on any change in our stock price ensuring that, as designed, directors, executives and senior employees bear the full risk of their ownership of our securities and have the same objectives as the Company’s other stockholders; and | ● | We have incentive programs that provide the Compensation and Leadership Performance Committee with discretion to make downward adjustments to certain payments or awards under the component programs. |
In light of the absence of any significant changes in our executive compensation program between fiscal 2017 and fiscal 2020, the Compensation and Leadership Performance Committee continues to believe that it is not reasonably likely that risks arising from our compensation policies and practices would have a material adverse effect on us, primarily for the same reasons set forth above.
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B. Stock Ownership Guidelines
The Board first adopted executive stock ownership guidelines in 2008. Under the current guidelines, each senior executive has five years from the date of election or appointment to his or her position to achieve the lesser of the fixed or variable ownership level associated with his or her position. The minimum stock ownership guidelines for our Chief Executive Officer and other senior executives are as follows:
Executive Level | | Fixed Number of Shares | | Variable Number of Shares* | Executive Chairman | | 230,000 | | 5x Salary | Chief Executive Officer | | 230,000 | | 5x Salary | Chief Operating Officer | | 130,000 | | 4x Salary | Executive Vice President | | 60,000 | | 3x Salary | Senior Vice President | | 30,000 | | 2x Salary |
* | Variable number of shares equals stated salary multiple divided by share price as of the measurement date. |
The following are included in determining stock ownership for purposes of these guidelines (to the extent applicable):
● | restricted stock and RSUs, discounted by an assumed tax rate of 35% and only up to 50% of the applicable ownership target; | ● | shares held by minor dependents and spouses; and | ● | shares owned outright, such as shares acquired upon the vesting of Performance Shares and the exercise of Stock Options. |
The Compensation and Leadership Performance Committee reviewed our executives’ progress towards meeting these guidelines in October 2020. The Compensation and Leadership Performance Committee concluded that each of the NEOs has either met the stock ownership requirement applicable to him or her or is within the five-year transition period.
More information about the stock ownership guidelines applicable to Non-Employee Directors can be found in “Governance—Director Compensation—Non-Employee Director Stock Ownership Guidelines” above.
C. Compensation Recovery (Clawback) Policy
The Board has adopted a compensation recovery, or “clawback,” policy for cash and equity incentive awards paid to executive officers. If there is a restatement of financial results or misconduct, including fraud;
| | ● | As described below under “Anti-Hedging and Anti-Pledging Policies,” we have a policy that prohibits directors, executives and senior employees from participating in transactions designed to hedge or speculate on any change in our stock price ensuring that, as designed, directors, executives and senior employees bear the full risk of their ownership of our securities and have the same objectives as the Company’s other misconduct (including fraud), thenstockholders; and | | ● | We have incentive programs that provide the policy allowsCLP Committee with discretion to make downward adjustments to certain payments or awards under the Compensation and Leadership Performance Committee to seek reimbursementcomponent programs. |
| 82 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation Stock ownership guidelines The Board first adopted executive stock ownership guidelines in 2008. Under the current guidelines, each senior executive has five years from the date of election or appointment to his or her position to achieve the lesser of the fixed or variable ownership level associated with his or her position. The minimum stock ownership guidelines for our CEO and other senior executives are as follows: | Executive Level | | Fixed Number of Shares | | Variable Number of Shares(1) | | Executive Chairman | | 230,000 | | 5x Salary | | Chief Executive Officer | | 230,000 | | 5x Salary | | Chief Operating Officer | | 130,000 | | 4x Salary | | Executive Vice President | | 60,000 | | 3x Salary | | Senior Vice President | | 30,000 | | 2x Salary |
| (1) | Variable number of shares equals stated salary multiple divided by share price as of the incremental portionmeasurement date. |
The following are included in determining stock ownership for purposes of these guidelines (to the extent applicable): | ● | restricted stock and RSUs, discounted by an assumed tax rate of incentive compensation paid35% and only up to executive officers in excess50% of the awards that would have been paid based onapplicable ownership target; | | ● | shares held by minor dependents and spouses; and | | ● | shares owned outright, such as shares acquired upon the restated financial results or investing of performance shares and the absence of such misconduct. The Compensation and Leadership Performance Committee may look back over the three-year period prior to the restatement or other misconduct for the recoupment, and may also look to both current and former executive officers.The policy provides the Compensation and Leadership Performance Committee with the discretion to recoup amounts of excess incentive compensation paid to an officer in conjunction with any materially incorrect results (even if not resulting in a restatement), or misconduct on the part of the executive officer, including fraud or other conduct that would lead to a “for cause” termination (as defined in the Company’s clawback policy). The clawback policy requires disclosure of any exercise of the clawback policy for any Section 16 officer, unless the Board or Compensation and Leadership Performance Committee concludes that legal or privacy concerns would prevent such disclosure.
In addition to the clawback policy, our Chief Executive Officer and Global Chief Financial Officer are subject to any clawbacks that may be required under the Sarbanes-Oxley Act of 2002.
D. Anti-Hedging and Anti-Pledging Policiesstock options.
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In October 2022, the CLP Committee reviewed our executives’ progress towards meeting these guidelines. The CLP Committee concluded that each of the continuing NEOs has either met the stock ownership requirement applicable to him or her or is within the five-year transition period. More information about the stock ownership guidelines applicable to Non-Employee Directors can be found in “Corporate Governance—Director Compensation—Non-Employee Director Stock Ownership Guidelines” above. Compensation recovery (clawback) policy The Board has adopted a compensation recovery, or “clawback,” policy for cash and equity incentive awards paid to executive officers. If there is a restatement of financial results or other misconduct (including fraud), then the policy allows the CLP Committee to seek reimbursement of the incremental portion of incentive compensation paid to executive officers in excess of the awards that would have been paid based on the restated financial results or in the absence of such misconduct. The CLP Committee may look back over the three-year period prior to the restatement or other misconduct for the recoupment, and may also look to both current and former executive officers. The policy provides the CLP Committee with the discretion to recoup amounts of excess incentive compensation paid to an officer in conjunction with any materially incorrect results (even if not resulting in a restatement), or misconduct on the part of the executive officer, including fraud or other conduct that would lead to a “for cause” termination (as defined in the Company’s clawback policy). The clawback policy requires disclosure of any exercise of the clawback policy for any Section 16 officer, unless the Board or CLP Committee concludes that legal or privacy concerns would prevent such disclosure. The Company will review and revise the policy to comply with Dodd-Frank following finalization of the Nasdaq listing standards relating to the recoupment of erroneously paid compensation. In addition to the clawback policy, our CEO and Global Chief Financial Officer are subject to any clawbacks that may be required under the Sarbanes-Oxley Act of 2002. Anti-hedging and anti-pledging policies We have adopted, as part of our insider trading policy, prohibitions on the short sale of our common stock and other securities and transactions in publicly-traded options relating to Company securities, as well as the purchase or sale of financial instruments that are designed to hedge or offset any decrease in the market value of our common stock or other securities. These policies prohibit our directors, officers and senior employees, including each of the NEOs, from hedging the risk of their ownership of our common stock through the use of financial mechanisms, such as exchange funds, prepaid variable forward contracts, equity swaps, puts, calls, collars and other derivative instruments. This policy also prohibits our directors, officers and senior employees, including each of the NEOs, from pledging our common stock or other securities as collateral for a loan without the prior written approval of our Global Chief Administrative Officer and General Counsel and our Corporate Secretary where specified criteria are met.
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Compensation Committee Report
The following Compensation Committee Report shall not be deemed to be incorporated by reference into any filing we may make under the Securities Act or the Exchange Act, notwithstanding any general statement contained in any such filing incorporating this Proxy Statement by reference, except to the extent we incorporate such report by specific reference.
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Table of Contents Executive compensation This policy also prohibits our directors, officers and senior employees, including each of the NEOs, from pledging our common stock or other securities as collateral for a loan without the prior written approval of our Global Chief Legal Officer and our Corporate Secretary where specified criteria are met. Compensation committee report The following Compensation Committee Report shall not be deemed to be incorporated by reference into any filing we may make under the Securities Act or the Exchange Act, notwithstanding any general statement contained in any such filing incorporating this Proxy Statement by reference, except to the extent we incorporate such report by specific reference. The Compensation and Leadership Performance Committee reviews the Company’s Compensation Discussion and Analysis on behalf of the Board. The Compensation and Leadership Performance Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation and Leadership Performance Committee recommended to the Board that the Compensation Discussion and Analysis above be included in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022. Compensation and Leadership Performance Committee Nancy M. Schlichting, Chair
Ginger L. Graham
Valerie B. Jarrett
John A. Lederer | 84 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation Executive compensation tables and supporting information 2022 Summary compensation table The following table shows information regarding the compensation of each Named Executive Officer (“NEO”) for fiscal 2022, 2021 and 2020. The values shown represent each NEO’s compensation during the fiscal year, including the grant date fair value of equity awards that were granted during a fiscal year that vest in a future year or years, subject to the terms and conditions of each award. Certain amounts paid to or earned by certain NEOs were paid or accrued in British Pounds Sterling. In the tables below, amounts for fiscal 2022 (other than the pension value calculations, as noted in footnote 6 below) were converted to U.S. dollars at an exchange rate of approximately £1=$1.30062 (the average exchange rate during fiscal 2022 used by the CLP Committee for purposes of executive compensation decisions). Name and Principal
Position(1) | Fiscal
Year | | Salary
($) | | Bonus
($)(2) | | Stock
Awards
($)(3) | | Option
Awards
($)(4) | | Non-Equity
Incentive Plan
Compensation
($)(5) | | Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings ($) | | All Other
Compensation
($)(6) | | Total
Compensation
($) | Stefano Pessina
Executive Chairman | 2022 | | — | | — | | 7,894,869 | | — | | — | | — | | 111,252 | | 8,006,121 | | 2021 | | — | | — | | — | | — | | — | | — | | 131,064 | | 131,064 | | 2020 | | — | | — | | 13,180,703 | | 4,252,100 | | — | | — | | 50,384 | | 17,483,187 | Rosalind G. Brewer
Chief Executive Officer | 2022 | | 1,500,000 | | — | | 8,511,685 | | 2,885,690 | | 3,570,000 | | — | | 820,114 | | 17,287,489 | | 2021 | | 695,652 | | 4,500,000 | | 20,200,048 | | — | | 2,404,875 | | — | | 532,923 | | 28,333,498 | James Kehoe
Executive Vice
President and Global
Chief Financial Officer | 2022 | | 969,202 | | — | | 3,330,666 | | 1,242,103 | | 1,441,689 | | — | | 128,526 | | 7,112,186 | | 2021 | | 945,563 | | — | | 4,836,701 | | 1,015,009 | | 1,879,306 | | — | | 76,998 | | 8,753,577 | | 2020 | | 941,719 | | 521,626 | | 5,207,062 | | 1,435,077 | | 467,179 | | — | | 83,756 | | 8,656,419 | Ornella Barra
Chief Operating Officer,
International | 2022 | | 1,056,231 | | — | | 3,330,666 | | 1,129,181 | | 1,571,144 | | — | | 484,512 | | 7,571,734 | | 2021 | | 1,088,116 | | — | | 2,836,689 | | 1,015,009 | | 2,162,631 | | — | | 493,086 | | 7,595,531 | | 2020 | | 1,010,809 | | 559,894 | | 5,207,062 | | 1,435,077 | | 501,454 | | — | | 497,545 | | 9,211,841 | John Standley
Former Executive Vice
President, Walgreens
Boots Alliance, Inc. and
President, Walgreens | 2022 | | 1,059,592 | | — | | 2,960,576 | | 1,104,095 | | 1,404,632 | | — | | 137,425 | | 6,666,320 | | 2021 | | 950,000 | | — | | 4,521,481 | | 902,225 | | 1,311,000 | | — | | 50,142 | | 7,734,848 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Mr. Standley ceased to serve as an executive officer as of November 1, 2022. | | (2) | The amount reported in this column for Ms. Brewer for 2021 represents her cash sign-on award, which was paid following her March 15, 2021 hire date, and is subject to repayment if Ms. Brewer resigns (except for good reason) or is terminated for cause prior to the two-year anniversary of her hire date. | | (3) | Represents the aggregate grant date fair value, determined in accordance with FASB ASC Topic 718, of RSUs and performance shares (for all NEOs other than Mr. Pessina) granted under the 2021 Omnibus Incentive Plan during the fiscal year. These values do not represent amounts paid to or realized by the applicable NEO. The amounts included for the performance shares granted during fiscal 2022 are calculated based on the probable satisfaction of the performance conditions for such awards and the price of our common stock as of the date of grant. Assuming the highest level of performance is achieved for the annual performance shares granted during fiscal 2022, the maximum value at the grant date would be as follows: Ms. Brewer: $8,511,709; Ms. Barra: $3,330,666; Mr. Kehoe: $3,330,666; and Mr. Standley $2,960,576. See “—Compensation Discussion and Analysis—2022 Long-Term Incentive Compensation—2022 Performance Share Awards” above for further information regarding these awards. For additional information regarding our stock compensation plans, see Note 13 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2020.2022 (the “2022 Annual Report”). Stock awards that remained outstanding as of August 31, 2022 are reflected in the “2022 Outstanding Equity Awards at Fiscal Year-End” table below. |
Table of Contents Executive compensation Compensation and Leadership Performance Committee(4)Nancy M. Schlichting, Chair
José E. Almeida
William C. Foote
Valerie B. Jarrett*
John A. Lederer
*As of October 29, 2020
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Executive Compensation Tables and Supporting Information
2020 Summary Compensation Table
The following table shows information regarding the compensation of each NEO for fiscal 2020, 2019 and 2018. The values shown represent each NEO’s compensation during the fiscal year, including
| Represents the grant date fair value, determined in accordance with FASB ASC Topic 718, of equity awards that were granted during a fiscal year that vest in a future year or years, subject to the terms and conditions of each award.Certain amounts paid to or earned by certainstock options (for all NEOs were paid or accrued in British Pounds Sterling. In the tables below, amounts for fiscal 2020 (otherother than the pension value calculations, as noted in footnote 5 below) were converted to U.S. dollars at an exchange rate of approximately £1=$1.270598 (the average exchange rate during fiscal 2020 used by the Compensation and Leadership Performance Committee for purposes of executive compensation decisions).
Name and Principal
Position | | Fiscal
Year | | Salary
($) | | Bonus
($)(1) | | Stock
Awards
($)(2) | | Option
Awards
($)(3) | | Non-Equity
Incentive Plan
Compensation
($)(4) | | Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
($)(5) | | All Other
Compensation
($)(6) | | Total
Compensation
($) | Stefano Pessina
Executive Vice
Chairman and Chief
Executive Officer | | 2020 | | — | | — | | 13,180,703 | | 4,252,100 | | — | | — | | 50,384 | | 17,483,187 | | 2019 | | — | | — | | 13,158,012 | | 5,969,372 | | — | | — | | 28,818 | | 19,156,202 | | 2018 | | — | | — | | 6,229,183 | | 7,202,212 | | — | | — | | 71,545 | | 13,502,940 | | | | | | | | | | | | | | | | | | | James Kehoe
Executive Vice
President and Global
Chief Financial Officer | | 2020 | | 941,719 | | 521,626 | | 5,207,062 | | 1,435,077 | | 467,179 | | — | | 83,756 | | 8,656,419 | | 2019 | | 918,750 | | 1,250,000 | | 2,878,318 | | 1,566,937 | | — | | — | | 70,710 | | 6,684,715 | | 2018 | | 225,000 | | 1,250,000 | | 4,499,959 | | — | | 288,183 | | — | | 269,065 | | 6,532,207 | | | | | | | | | | | | | | | | | | | Ornella Barra
Co-Chief
Operating Officer | | 2020 | | 1,010,809 | | 559,894 | | 5,207,062 | | 1,435,077 | | 497,545 | | — | | 501,221 | | 9,211,841 | | 2019 | | 986,173 | | — | | 3,700,648 | | 2,014,662 | | — | | — | | 433,059 | | 7,134,542 | | 2018 | | 964,803 | | — | | 1,661,111 | | 2,304,691 | | 1,293,687 | | — | | 423,927 | | 6,648,219 | Alexander W. Gourlay
Co-Chief
Operating Officer | | 2020 | | 1,010,809 | | 559,894 | | 5,207,062 | | 1,435,077 | | 501,454 | | 1,643,925 | | 641,289 | | 10,999,510 | | 2019 | | 986,926 | | — | | 3,700,648 | | 2,014,662 | | — | | 878,167 | | 645,092 | | 8,225,495 | | 2018 | | 968,756 | | — | | 1,661,111 | | 2,304,691 | | 1,294,743 | | — | | 645,861 | | 6,875,162 | James A. Skinner
Executive Chairman | | 2020 | | — | | — | | 8,787,116 | | — | | — | | — | | 10,597 | | 8,797,713 | | 2019 | | — | | — | | 9,398,557 | | — | | — | | — | | — | | 9,398,557 | | 2018 | | — | | — | | 6,229,183 | | — | | — | | — | | — | | 6,229,183 |
(1) | Amounts reported in this column represent Mr. Kehoe’s $2,500,000 sign-on bonus, which was paid in two equal installments of $1,250,000 within 30 days following Mr. Kehoe’s first day of employment in 2018 and within 30 days following the one-year anniversary of his first day of employment. The amounts reported for fiscal 2020 represents the post-Covid portion of the annual incentive compensation, as detailed in the 2020 Annual Cash Incentive Payments section.
| (2) | Represents the aggregate grant date fair value, determined in accordance with FASB ASC Topic 718, of RSUs (for all NEOs) and Performance Shares (for all NEOs other than Mr. Skinner)Mr. Pessina) granted under the 2021 Omnibus Incentive Plan during the applicable fiscal year. These values do not represent amounts paid to or realized by the applicable NEO. The amounts included for the Performance Shares granted during fiscal 2020 are calculated based on the probable satisfaction of the performance conditions for such awards and the price of our common stock as of the date of grant. Assuming the highest level of performance is achieved for the Performance Shares granted during fiscal 2020, the maximum value at the grant date would be as follows: Mr. Pessina: $13,180,674; Ms. Barra: $3,707,035; Mr. Gourlay: $3,707,035; and Mr. Kehoe: $3,707,035. See “—Compensation Discussion and Analysis—V. Long-Term Incentive Compensation—B. 2020 Performance Share Award Grants” above for further information regarding these awards. For additional information regarding our stock compensation plans, see Note 12 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2020 (the “2020 Annual Report”). Stock awards that remained outstanding as of August 31, 2020 are reflected in the “2020 Outstanding Equity Awards at Fiscal Year-End” table below.
| (3) | Represents the grant date fair value, determined in accordance with FASB ASC Topic 718, of Stock Options granted under the Omnibus Incentive Plan during the applicable fiscal year. These values do not represent amounts paid to or realized by the applicable NEO. See “—Compensation Discussion and Analysis” above for further information regarding these awards. The grant date fair value of each option granted in fiscal 2020 was determined using the Black-Scholes option pricing model, with weighted-average assumptions of: risk-free interest rate (U.S. Treasury security rates for the expected term of the option), 1.59%; average expected life of options, 6.18 years; volatility (based on historical and implied volatility of the Company’s common stock), 26.09%; dividend yield (the Company’s cash dividend for the expected term),2.91%; and weighted average grant date fair value (granted at market price), $10.12. For additional information regarding our stock compensation plans, see Note 12 to the consolidated financial statements included in the 2020 Annual Report. Stock options that remained outstanding as of August 31, 2020 are reflected in the “2020 Outstanding Equity Awards at Fiscal Year-End” table below.
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(4) | Includes the annual incentive compensation, if any, earned for each fiscal year (or portion thereof) pursuant to the MIP.
| (5) | For Mr. Gourlay, reflects changes in pension value. The fiscal 2020 amount represents the pension value in U.S. dollars as of the end of fiscal 2020, using the exchange rate at that time (£1=$1.3300), minus the pension value in U.S. dollars as of the end of fiscal 2019, using the exchange rate at that time (£1=$1.2214). Year-over-year changes in pension value are driven in large part due to changes in actuarial pension assumptions. See the “2020 Pension Benefits” table below and the “—Compensation Discussion and Analysis—VIII. Retirement and Other Benefits” section above for further information.
| (6) | Detail of the amounts reported in the “All Other Compensation” column for fiscal 2020 is provided in the table below.
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| | Item | | Stefano Pessina
($) | | James Kehoe
($) | | Ornella Barra
($) | | Alexander W. Gourlay
($) | | James A. Skinner
($) | | Life Insurance | | — | | 6,825 | | 4,643 | | 4,643 | | — | | Expatriate Allowances(A) | | — | | — | | — | | 198,532 | | — | | Pension Supplements(B) | | — | | — | | 404,324 | | 404,324 | | — | | Executive Deferred Retirement Savings Plan(C) | | — | | 25,008 | | — | | — | | — | | Perquisites Personal Benefits and Relocation(D) | | 50,384 | | 51,923 | | 88,578 | | 33,790 | | 10,597 | | Total | | 50,384 | | 83,756 | | 497,545 | | 641,289 | | 10,597 |
(A) | For Mr. Gourlay, includes amounts paid pursuant to his secondment agreement and assignment letter, including cost of living allowances ($33,901), tax equalization payments ($10,139), reimbursement of the difference between his real estate tax liability in the United Kingdom and his real estate tax liability in the United States ($119,236), and expenses associated with annual tax advice from external tax advisors ($35,256) relating to his remuneration. See “—Compensation Discussion and Analysis—VIII. Retirement and Other Benefits—C. Employment Arrangements” above. These allowances were valued on the basis of the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service provider or the executive, as applicable.
| (B) | Consists of a cash payment in lieu of participation in a defined contribution plan.
| (C) | Includes Company match in the Executive Deferred Retirement Savings Plan.
| (D) | For Mr. Gourlay, includes a car allowance ($22,235) (or cash payment in lieu thereof) and reflects his personal use of the Company aircraft.
| | For Mr. Kehoe, includes the Company’s incremental costs relating to long-term disability benefits ($21,279), personal accident insurance benefits, legal and administrative fees for green cards ($26,413) and an annual executive health screening. The legal and administrative fees were valued on the basis of the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service provider or the executive, as applicable.
| | For Ms. Barra, includes commuting costs of ($23,030) and expenses associated with annual tax advice from external tax advisors ($65,548). The expenses associated with annual tax advice were valued on the basis of the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service provider or the executive, as applicable.
| | The amount for Mr. Skinner reflects his personal use of the Company’s aircraft.
| | The amount for Mr. Pessina reflects his personal use of the Company’s aircraft, using the average exchange rate at that time (€1=$1.113713).
| | For executives with personal use of the Company’s aircraft,the Company determines the amount associated with personal use of its aircraft by calculating the incremental cost to it by multiplying the aircraft’s hourly variable operating cost by a trip’s flight time, which includes any flight time of an empty return flight. Variable operating costs include: (1) landing, parking, passenger ground transportation, crew travel and flight planning services expenses; (2) supplies, catering and crew traveling expenses; (3) aircraft fuel and oil expenses; (4) maintenance, parts and external labor (inspections and repairs); and (5) any customs, foreign permit and similar fees. Fixed costs that do not vary based upon usage are not included in the calculation of direct operating cost.
|
76 Walgreens Boots Alliance
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Executive Compensation
2020 Grants of Plan-Based Awards
The following table shows information regarding the incentive awards granted to the NEOs for fiscal 2020.
| | | | | | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(2) | |
Estimated Future Payouts
Under Equity Incentive
Plan Awards(3) | | All Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)(4) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(5) | | Exercise
or Base
Price of
Option
Awards
($/Sh)(6) | | Grant
Date Fair
Value of
Stock and
Option
Awards
($)(7) | | Name | | Award
Type(1) | | Grant
Date | | Approval
Date | | Threshold
($) | | Target
($) | | Maximum
($) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | Stefano
Pessina | | SO | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | | | 420,168 | | 57.38 | | 4,252,100 | | RSU | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | 76,570 | | | | | | 4,393,587 | | PS | | 11/1/2019 | | 10/28/2019 | | | | | | | | 76,570 | | 153,139 | | 229,709 | | | | | | | | 8,787,116 | James
Kehoe | | SO | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | | | 141,806 | | 57.38 | | 1,435,077 | | RSU | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | 21,535 | | | | | | 1,235,678 | | RSU | | 12/10/2019 | | 12/10/2019 | | | | | | | | | | | | | | 25,681 | | | | | | 1,500,027 | | PS | | 11/1/2019 | | 10/28/2019 | | | | | | | | 21,535 | | 43,070 | | 64,605 | | | | | | | | 2,471,357 | | MIP | | | | | | 588,575 | | 1,177,149 | | 2,354,298 | | | | | | | | | | | | | | | Ornella
Barra | | SO | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | | | 141,806 | | 57.38 | | 1,435,077 | | RSU | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | 21,535 | | | | | | 1,235,678 | | RSU | | 12/10/2019 | | 12/10/2019 | | | | | | | | | | | | | | 25,681 | | | | | | 1,500,027 | | PS | | 11/1/2019 | | 10/28/2019 | | | | | | | | 21,535 | | 43,070 | | 64,605 | | | | | | | | 2,471,357 | | MIP | | | | | | 631,756 | | 1,263,511 | | 2,527,023 | | | | | | | | | | | | | | | Alexander
W. Gourlay | | SO | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | | | 141,806 | | 57.38 | | 1,435,077 | | RSU | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | 21,535 | | | | | | 1,235,678 | | RSU | | 12/10/2019 | | 12/10/2019 | | | | | | | | | | | | | | 25,681 | | | | | | 1,500,027 | | PS | | 11/1/2019 | | 10/28/2019 | | | | | | | | 21,535 | | 43,070 | | 64,605 | | | | | | | | 2,471,357 | | MIP | | | | | | 631,756 | | 1,263,511 | | 2,527,023 | | | | | | | | | | | | | | | James A.
Skinner | | RSU | | 11/1/2019 | | 10/28/2019 | | | | | | | | | | | | | | 153,139 | | | | | | 8,787,116 |
(1) | Includes Stock Options (SO), Performance Shares (PS), and Restricted Stock Units (RSU) issued under the Omnibus Incentive Plan and annual cash incentives payable under the MIP.
| (2) | These amounts represent the threshold, target, and maximum annual incentives under the MIP for fiscal 2020. The related performance targets and results are described above in “—Compensation Discussion and Analysis.” For the MIP, the threshold award was set at 50% of the target award, and the maximum award was set at 200% of the target award.
| (3) | These share numbers represent the threshold, target, and maximum Performance Share awards for the fiscal 2020-2022 performance period. The threshold award was set at 50% of the target Performance Share award, and the maximum award was set at 150% of the target Performance Share award. The Performance Share awards are subject to pro-rated or accelerated vesting in certain circumstances, including, as a result of retirement and, with respect to Mr. Pessina, if he ceases to serve on the Board in certain circumstances.
| (4) | Represents the number of RSUs granted in fiscal 2020. For the RSUs granted to all of the individuals other than Mr. Skinner: (a) the annual RSUs granted on November 1, 2019 vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the final one-third on the third anniversary of the grant date, subject to forfeiture in certain circumstances and full or pro-rated accelerated vesting in certain circumstances (including, as a result of retirement and, with respect to Mr. Pessina’s award, if he ceases to serve on the Board in certain circumstances); and (b) the Transformational Cost Management Program awards granted on December 10, 2019 vested one-half on September 1, 2020 and will vest one-half on September 1, 2021, subject to forfeiture in certain circumstances and full accelerated vesting upon a qualifying termination within one year following a change in control of the Company. The RSUs granted to Mr. Skinner vest on the third anniversary of the grant date, subject to the satisfaction of performance criteria originally designed to comply with the legacy performance-based rules under Section 162(m) of the Code prior to U.S. tax reform and forfeiture in certain circumstances and full or pro-rated accelerated vesting in certain circumstances, including if Mr. Skinner ceases to serve on the Board in certain circumstances.
| (5) | The Stock Option awards vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the final one-third on the third anniversary of the grant date, subject to forfeiture in certain circumstances and full or pro-rated accelerated vesting in certain circumstances (including, as a result of retirement and, with respect to Mr. Pessina’s award, if he ceases to serve on the Board in certain circumstances). The Stock Options expire on the tenth anniversary of the grant date.
| (6) | The exercise price for Stock Option awards is the per-share closing price of the Company’s common stock on the grant date.
| (7) | Represents the aggregate grant date fair value, determined in accordance with FASB ASC Topic 718 of all equity awards granted to the NEOs during fiscal 2020, with the amounts included for the Performance Shares calculated based on the probable satisfaction of the performance conditions for such awards at the time of the grant. For additional information regarding our stock compensation plans, see Note 12 to the consolidated financial statements included in our 2020 Annual Report.
|
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2020 Outstanding Equity Awards at Fiscal Year-End
The following table shows information regarding the outstanding equity awards held by each of the NEOs as of August 31, 2020.
| Option Awards(1) | | Stock Awards | | Name | Grant Date | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | Option
Exercise
Price ($) | Option
Expiration
Date | | Number
of Shares
or Units of
Stock That
Have Not
Vested (#)(2) | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(2) | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Awards That
Have Not
Vested (#)(3) | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)(3) | | Stefano Pessina | 2/12/2016 | 263,273 | — | 77.08 | 2/12/2026 | | | | | | | 11/1/2016 | 410,798 | — | 82.46 | 11/1/2026 | | | | | | | 11/1/2017 | 336,136 | 168,574 | 67.01 | 11/1/2027 | | | | | | | 11/1/2018 | 131,555 | 263,506 | 79.90 | 11/1/2028 | | | | | | | 11/1/2019 | — | 420,168 | 57.38 | 11/1/2029 | | | | | | | 11/1/2019 | | | | | | 79,614 | 3,026,935 | | | | 11/1/2017 | | | | | | | | 94,539 | 3,594,373 | | 11/1/2018 | | | | | | | | 164,681 | 6,261,172 | | 11/1/2019 | | | | | | | | 153,139 | 5,822,345 | | James Kehoe | 6/1/2018 | | | | | | 25,747 | 978,888 | | | | 11/1/2018 | 34,532 | 69,170 | 79.90 | 11/1/2028 | | | | | | | 11/1/2019 | — | 141,806 | 57.38 | 11/1/2029 | | | | | | | 11/1/2019 | | | | | | 22,391 | 851,313 | | | | 12/10/2019 | | | | | | 26,506 | 1,007,768 | | | | 11/1/2018 | | | | | | | | 36,024 | 1,369,632 | | 11/1/2019 | | | | | | | | 43,070 | 1,637,521 | | Ornella Barra | 11/1/2015 | 84,466 | — | 84.68 | 11/1/2025 | | | | | | | 11/1/2016 | 140,844 | — | 82.46 | 11/1/2026 | | | | | | | 11/1/2017 | 107,562 | 53,944 | 67.01 | 11/1/2027 | | | | | | | 11/1/2018 | 44,399 | 88,934 | 79.90 | 11/1/2028 | | | | | | | 11/1/2019 | — | 141,806 | 57.38 | 11/1/2029 | | | | | | | 11/1/2019 | | | | | | 22,391 | 851,313 | | | | 12/10/2019 | | | | | | 26,506 | 1,007,768 | | | | 11/1/2017 | | | | | | | | 25,210 | 958,484 | | 11/1/2018 | | | | | | | | 46,316 | 1,760,934 | | 11/1/2019 | | | | | | | | 43,070 | 1,637,521 | | Alexander W.Gourlay | 11/1/2015 | 84,466 | — | 84.68 | 11/1/2025 | | | | | | | 11/1/2016 | 140,844 | — | 82.46 | 11/1/2026 | | | | | | | 11/1/2017 | 107,562 | 53,944 | 67.01 | 11/1/2027 | | | | | | | 11/1/2018 | 44,399 | 88,934 | 79.90 | 11/1/2028 | | | | | | | 11/1/2019 | — | 141,806 | 57.38 | 11/1/2029 | | | | | | | 11/1/2019 | | | | | | 22,391 | 851,313 | | | | 12/10/2019 | | | | | | 26,506 | 1,007,768 | | | | 11/1/2017 | | | | | | | | 25,210 | 958,484 | | 11/1/2018 | | | | | | | | 46,316 | 1,760,934 | | 11/1/2019 | | | | | | | | 43,070 | 1,637,521 | | James A. Skinner | 11/1/2017 | | | | | | 101,871 | 3,873,131 | | | | 11/1/2018 | | | | | | 125,868 | 4,785,505 | | | | 11/1/2019 | | | | | | 159,228 | 6,053,830 | | | | Various | | | | | | 84,832 | 3,225,294 | | |
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(1) | For each of the unvested Stock Option awards, one-third of the award vests on each of the first, second and third anniversary of the grant date. All unvested Stock Options are subject to forfeiture in certain circumstances and full or pro-rated accelerated vesting in certain circumstances, including, upon retirement and, with respect to the awards to Mr. Pessina, if he ceases to serve on the Board in certain circumstances.
| (2) | Includes the number and value of the unvested RSUs awarded under the Omnibus Incentive Plan, and includes dividend equivalents through, August 31, 2020. The RSUs granted to Mr. Kehoe on June 1, 2018 vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the remainder on the third anniversary of the grant date. The RSUs granted to Mr. Skinner on November 1, 2017, November 1, 2018 and November 1, 2019 vest on the third anniversary of the grant date. The RSUs granted on December 10, 2019 vested one half on September 1, 2020 and vest one half on September 1, 2021. The RSUs granted on November 1, 2019 vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the remainder on the third anniversary of the grant date. All RSUs are subject to forfeiture in certain circumstances or full or pro-rated accelerated vesting in certain circumstances, including, with respect to the awards to Mr. Skinner, if he ceases to serve on the Board in certain circumstances. See footnote (4) to the Grants of Plan-Based Awards table above for a description of the terms of RSUs granted during fiscal 2020. For Mr. Skinner, this column also includes 84,832 DSUs, which includes DSUs acquired as a result of dividend equivalents, outstanding as of August 31, 2020. These DSUs will be settled in stock following Mr. Skinner’s termination of service as a director in accordance with the terms and conditions of the Omnibus Incentive Plan, subject to his election options relating to the timing and form of payment.
| (3) | Except as described below, represents the number and value of Performance Shares based on the target performance level. As described in the “—Compensation Discussion and Analysis” section, the Performance Shares granted in November 2018 and November 2019 vest, if at all, based on the Company’s cumulative adjusted EPS performance over the fiscal 2019-2021 performance period and the fiscal 2020-2022 performance period, respectively. In October 2020, the Compensation and Leadership Performance Committee certified the performance achievement and released the Performance Shares granted in November 2017 relating to the fiscal 2018-2020 performance period. With respect to the November 2017 Performance Shares, the number of units reported in this table represent the actual number of shares that vested, with the market value determined based on the August 31, 2020 closing stock price. The Performance Share awards are subject to pro-rated or accelerated vesting in certain circumstances, including upon retirement and, with respect to the awards to Mr. Pessina, if he ceases to serve on the Board in certain circumstances.
|
2020 Option Exercises and Stock Vested
The following table shows information regarding stock vested by each of the NEOs during fiscal 2020. No options were exercised during fiscal 2020.
| | Option awards | | Stock awards | | Name | | Number of
shares acquired
on exercise
(#) | | Value realized
on exercise
($) | | Number of
shares acquired
on vesting
(#) | | Value realized
on vesting
($) | | Stefano Pessina(1) | | — | | — | | 92,102 | | 5,139,302 | | James Kehoe(2) | | — | | — | | 25,373 | | 1,098,665 | | Ornella Barra(1) | | — | | — | | 26,314 | | 1,468,346 | | Alexander W. Gourlay(1) | | — | | — | | 26,314 | | 1,468,346 | | James A. Skinner(3) | | — | | — | | 92,587 | | 5,312,626 |
(1) | Award represents Performance Shares vested on August 31, 2019, with performance certified and Performance Shares released in October 2019.
| (2) | Awards represent RSUs granted on June 1, 2018 including related dividend equivalents, which vested on June 1, 2020.
| (3) | Awards represent RSUs granted on November 1, 2016 including related dividend equivalents, which vested on November 1, 2019 (and upon certification of performance achievement).
|
2020 Pension Benefits
The following table shows information regarding the estimated present value of accumulated pension benefits for Mr. Gourlay.
In connection with the Second Step Transaction, the Company assumed certain of Alliance Boots’ defined benefit pension plans. The principal defined benefit pension plan is the Boots Pension Plan, which covers certain employees in the United Kingdom. The Boots Pension Plan is a funded final salary defined benefit plan providing a retirement pension and a dependent’s pension on the death of the participant. The Boots Pension Plan was closed to future accruals effective June 30, 2010, with benefits calculated by reference to pensionable salaries as of that date. The plan is subject to an actuarial funding valuation on a triennial basis.
The Company also assumed two smaller defined benefit plans in the United Kingdom, the Boots Supplementary Pension Plan and the Boots Additional Pension Arrangement, both of which were also closed to future accruals effective June 30, 2010. These plans were intended to supplement the benefits provided under the Boots Pension Plan for eligible senior employees of Alliance Boots.
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Benefits under these plans are payable upon retirement (age 60 under all plans) or death or, in certain cases, upon early retirement. Participants in the Boots Pension Plan and Boots Supplementary Pension Plan have the option of receiving a portion of their pension as a tax-free cash sum upon retirement. Participants in the Boots Additional Pension Arrangement are paid their benefit as a single lump sum. Even though these plans are closed to future accruals, the present value of accumulated benefits can fluctuate significantly from year to year based on changes in the underlying actuarial pension assumptions. Other than Mr. Gourlay, no other NEO is currently a participant in these plans or any other defined benefit plan of the Company.
| Name | | Plan Name | | Number of Years of
Service Credit
(# of years) | | Present Value of
Accumulated
Benefits ($)(1) | | Payments During
Last Year ($) | | Alexander W. Gourlay | | Boots Pension Plan | | 25.5 | | 5,562,060 | | — | | | Boots Supplementary Pension Plan | | 5.7 | | 146,300 | | — | | | Boots Additional Pension Arrangement | | 1.7 | | 5,973,030 | | — |
(1) | These values were converted from British Pounds Sterling to U.S. dollars using the exchange rate (£1=$1.3300) as of August 31, 2020, the last day of our fiscal year. Prior to such conversion, these values in British Pounds Sterling were £4,182,000, £110,000, and £4,491,000, respectively.
|
2020 Nonqualified Deferred Compensation
The following table reflects fiscal 2020 contributions, earnings, withdrawals and end-of-year balances for participating NEOs under the Walgreens Boots Alliance, Inc. Executive Deferred Retirement Savings Plan, which is referred to below as the “Executive Deferred Plan”. See “Compensation Discussion and Analysis” above for further information regarding these awards. The grant date fair value of each option granted in fiscal 2022 was determined using the Executive Deferred Plan.
| Name | | Plan Name | | Executive
Contributions in
Last Fiscal Year
($) | | Company
Contributions in
Last Fiscal Year
($)(1) | | Aggregate
Earnings in
Last Fiscal Year
($) | | Aggregate
Withdrawals/
Distributions
($) | | Aggregate
Balance at Last
Fiscal Year End
(8/31/20)
($)(2) | | James Kehoe | | Executive Deferred Plan | | 31,519 | | 25,008 | | 11,835 | | — | | 127,983 |
(1) | The amount shown in this column reflects company contributions under the Executive Deferred Plan, which are also reported as “All Other Compensation” in the “2020 Summary Compensation Table” above.
| (2) | This column includes $59,225 that was previously reported in the Summary Compensation Table as compensationBlack-Scholes option pricing model, with weighted-average assumptions of: risk-free interest rate (U.S. Treasury security rates for fiscal 2019 for Mr. Kehoe.
|
2020 Potential Payments Upon Termination or Change in Control
The information below describes the compensation and benefits payable to eachexpected term of the NEOsoption), 1.35%; average expected life of options, 6.15 years; volatility (based on historical and implied volatility of the Company’s common stock), 29.49%; dividend yield (the Company’s cash dividend for the expected term), 4.04%; and weighted average grant date fair value (granted at market price), $8.10. For additional information regarding our stock compensation plans, see Note 13 to the consolidated financial statements included in the event of termination of his or her employment2022 Annual Report. Stock options that remained outstanding as of August 31, 2020. The actual amounts to be paid under any of the scenarios can only be determined at the time of such NEO’s separation from the Company. Furthermore, the Compensation and Leadership Performance Committee retains discretion to provide additional benefits to senior executives upon termination or resignation if it believes the circumstances so warrant.
Upon termination of employment for any reason, each NEO will be entitled to receive amounts earned during his or her employment. These amounts may include:
● | Any earned awards that2022 are not yet paid, including unpaid approved awards under the MIP for the completed fiscal year and unpaid vested Performance Share awards under the Omnibus Incentive Plan for the completed fiscal year; | ● | Vested Stock Options; | ● | Accrued benefits under certain legacy Alliance Boots pension plans (applies to Mr. Gourlay); | ● | Earned but unused vacation pay and paid time off; and | ● | Base salary earned through the date of termination. |
Under the terms of certain of the Company’s compensation arrangements, if the payments and benefits to a participating NEO under such compensation arrangement would subject the NEO to the excise tax imposed by Section 4999 of the Code, then such payments will be reduced by the minimum amount necessary to avoid such excise tax or, if provided in the applicable compensation arrangements for an NEO, paid in full with the NEO responsible for any associated excise tax or reduced by the minimum amount necessary to avoid such excise tax, based on whether such payment or reduction would result in the NEO receiving a higher net after-tax amount. The amounts described in this section do not reflect the application of any reduction in compensation or benefits pursuant to the terms of the applicable compensation arrangements.
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Unless otherwise noted, the information below also does not include amounts earned for fiscal 2020 that are shown in the “2020 Summary Compensation Table” above.
Mr. Pessina. Mr. Pessina’s sole compensation in fiscal 2018, 2019 and 2020 consisted of the Performance Share and Stock Option awards issued in fiscal 2018, 2019 and 2020, and RSUs issued in fiscal 2020, in each case as reflected in the “2020 Summary Compensation Table” and the “2020“2022 Outstanding Equity Awards at Fiscal Year-End”Year-End�� table above. Upon terminationbelow.
| | (5) | Includes the annual incentive compensation, if any, earned for each fiscal year (or portion thereof) pursuant to the MIP. | | (6) | Detail of his employmentthe amounts reported in the “All Other Compensation” column for fiscal 2022 is provided in the table below. |
| | Item | | Stefano
Pessina
($) | | Rosalind G.
Brewer
($) | | James
Kehoe
($) | | Ornella
Barra
($) | | John
Standley
($) | | Life Insurance | | — | | 25,900 | | 9,583 | | 4,875 | | 13,323 | | Pension Supplements(A) | | — | | — | | — | | 422,493 | | — | | 401(k) Plan(B) | | — | | — | | 12,200 | | — | | 11,194 | | Executive Deferred Plan(B) | | — | | 27,800 | | 82,947 | | — | | 82,624 | | Perquisites, Personal Benefits and Relocation(C) | | 111,252 | | 766,414 | | 23,796 | | 57,144 | | 30,284 | | Total | | 111,252 | | 820,114 | | 128,526 | | 484,512 | | 137,425 |
| (A) | Consists of a cash payment in lieu of participation in a defined contribution plan. | | (B) | Consists of Company matching contribution credits under the 401(k) Plan and Executive Deferred Plan, as applicable. | | (C) | For Mr. Pessina, consists of August 31, 2020,personal use of the exclusiveCompany’s aircraft ($73,862) and expenses associated with annual tax advice from external tax advisors ($37,390). Other than the personal aircraft usage described below, the benefits providedwere valued on the basis of the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service provider or the executive, as applicable. For Ms. Brewer, consists of expenses related to her relocation to Illinois, including moving expenses ($69,886) and tax gross ups ($55,761), the Company’s incremental costs relating to long-term disability and personal accident benefits ($45,430), the personal use of the Company’s aircraft ($346,519), additional security services including professional driver services, privacy integrity services and executive security ($246,729), personal use of Company car ($1,863) and Walgreens loyalty points ($225). Other than the personal aircraft usage described below, the benefits were valued on the basis of the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service provider or the executive, as applicable. For Mr. Kehoe, consists of the Company’s incremental costs relating to long-term disability and personal accident insurance benefits ($22,343), tax gross ups ($179), personal use of the Company car ($1,049) and Walgreens loyalty points ($225). For Ms. Barra, consists of commuting costs ($31,169) and expenses associated with annual tax advice from external tax advisors ($25,975). The expenses were valued on the basis of the aggregate incremental cost to the Company and represent the amount accrued for payment or paid to the service provider or the executive, as applicable. For Mr. Standley, consists of the Company’s incremental costs relating to long-term disability and personal accident insurance benefits ($25,180), an annual executive healthcare screening ($4,700), tax gross ups ($179) and Walgreens loyalty points ($225). For executives with personal use of the Company’s aircraft, the Company determines the amount associated with personal use of its aircraft by calculating the incremental cost to it by multiplying the aircraft’s hourly variable operating cost by a trip’s flight time, which includes any flight time of an empty return flight. Variable operating costs include: (1) landing, parking, passenger ground transportation, crew travel and flight planning services expenses; (2) supplies, catering and crew traveling expenses; (3) aircraft fuel and oil expenses; (4) maintenance, parts and external labor (inspections and repairs); and (5) any customs, foreign permit and similar fees. Fixed costs that do not vary based upon usage are not included in the calculation of direct operating cost. |
| 86 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation 2022 Grants of plan-based awards The following table shows information regarding the incentive awards granted to the NEOs for fiscal 2022. | | | | | | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(2) | | Estimated Future Payouts
Under Equity Incentive
Plan Awards(3) | | All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)(4) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(5) | | Exercise
or Base
Price of
Option
Awards
($/Sh)(6) | | Grant
Date Fair
Value of
Stock and
Option
Awards
($)(7) | | Name | | Award
Type(1) | | Grant
Date | | Approval
Date | | Threshold
($) | | Target
($) | | Maximum
($) | | Threshold
(#) | | Target
(#) | | Maximum
(#) | Stefano
Pessina | | RSU | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | 166,840 | | | | | | 7,894,869 | Rosalind
Brewer | | SO | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | | | 356,258 | | 47.32 | | 2,885,690 | | RSU | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | 59,958 | | | | | | 2,837,213 | | PS | | 11/1/2021 | | 10/19/2021 | | | | | | | | 59,959 | | 119,917 | | 179,876 | | | | | | | | 5,674,472 | | MIP | | | | | | 1,500,000 | | 3,000,000 | | 6,000,000 | | | | | | | | | | | | | | | James
Kehoe | | SO | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | | | 153,346 | | 47.32 | | 1,242,103 | | RSU | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | 23,462 | | | | | | 1,110,222 | | PS | | 11/1/2021 | | 10/19/2021 | | | | | | | | 23,462 | | 46,924 | | 70,386 | | | | | | | | 2,220,444 | | MIP | | | | | | 605,751 | | 1,211,503 | | 2,423,005 | | | | | | | | | | | | | | | Ornella
Barra | | SO | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | | | 139,405 | | 47.32 | | 1,129,181 | | RSU | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | 23,462 | | | | | | 1,110,222 | | PS | | 11/1/2021 | | 10/19/2021 | | | | | | | | 23,462 | | 46,924 | | 70,386 | | | | | | | | 2,220,444 | | MIP | | | | | | 660,144 | | 1,320,289 | | 2,640,578 | | | | | | | | | | | | | | | John
Standley | | SO | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | | | 136,308 | | 47.32 | | 1,104,095 | | RSU | | 11/1/2021 | | 10/19/2021 | | | | | | | | | | | | | | 20,855 | | | | | | 986,859 | | PS | | 11/1/2021 | | 10/19/2021 | | | | | | | | 20,855 | | 41,710 | | 62,565 | | | | | | | | 1,973,717 | | MIP | | | | | | 623,173 | | 1,246,346 | | 2,492,692 | | | | | | | | | | | | | | |
| (1) | Includes stock options (SO), performance shares (PS), and Restricted Stock Units (RSU) issued under the 2021 Omnibus Incentive Plan and annual cash incentives payable under the MIP. | | (2) | These amounts represent the threshold, target, and maximum annual incentives under the MIP for fiscal 2022. The related performance targets and results are described above in “—Compensation Discussion and Analysis.” For the MIP, the threshold award was set at 50% of the target award, and the maximum award was set at 200% of the target award. | | (3) | These share numbers represent the threshold, target, and maximum performance share awards for the fiscal 2022-2024 performance period. The threshold award was set at 50% of the target performance share award, and the maximum award was set at 150% of the target performance share award. The performance share awards are subject to pro-rated or accelerated vesting in certain circumstances, including as a result of retirement. | | (4) | Represents the number of RSUs granted in fiscal 2022, as follows: (a) except for the award to Mr. Pessina, the annual RSUs granted on November 1, 2021 vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the final one-third on the third anniversary of the grant date, subject to forfeiture in certain circumstances and full or pro-rated accelerated vesting in certain circumstances; and (b) the RSUs granted to Mr. Pessina vest on the third anniversary of the grant date, subject to forfeiture in certain circumstances and full or pro-rated accelerated vesting in certain circumstances, including if Mr. Pessina ceases to serve on the Board in certain circumstances. | | (5) | The stock option awards vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the final one-third on the third anniversary of the grant date, subject to forfeiture in certain circumstances and full or pro-rated accelerated vesting in certain circumstances (including, as a result of retirement). The stock options expire on the tenth anniversary of the grant date. | | (6) | The exercise price for stock option awards is the per-share closing price of the Company’s common stock on the grant date. | | (7) | Represents the aggregate grant date fair value, determined in accordance with FASB ASC Topic 718 of all equity awards granted to the NEOs during fiscal 2022, with the amounts included for the performance shares calculated based on the probable satisfaction of the performance conditions for such awards at the time of the grant. For additional information regarding our stock compensation plans, see Note 13 to the consolidated financial statements included in our 2022 Annual Report. |
Table of Contents Executive compensation 2022 Outstanding equity awards at fiscal year-end The following table shows information regarding the outstanding equity awards held by each of the NEOs as of August 31, 2022. | | Option Awards(1) | | Stock Awards | | Name | | Grant
Date | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Option
Exercise
Price ($) | | Option
Expiration
Date | | Number
of Shares
or Units of
Stock That
Have Not
Vested
(#)(2) | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(2) | | Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Awards
That Have Not
Vested (#)(3) | | Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units
or Other Rights
That Have Not
Vested ($)(3) | Stefano
Pessina | | 2/12/2016 | | 263,273 | | — | | 77.08 | | 2/12/2026 | | — | | — | | — | | — | | 11/1/2016 | | 410,798 | | — | | 82.46 | | 11/1/2026 | | — | | — | | — | | — | | 11/1/2017 | | 504,710 | | — | | 67.01 | | 11/1/2027 | | — | | — | | — | | — | | 11/1/2018 | | 395,061 | | — | | 79.90 | | 11/1/2028 | | — | | — | | — | | — | | 11/1/2019 | | 279,832 | | 140,336 | | 57.38 | | 11/1/2029 | | — | | — | | — | | — | | 11/1/2019 | | — | | — | | — | | — | | 28,923 | | 1,014,043 | | — | | — | | 11/1/2021 | | — | | — | | — | | — | | 174,331 | | 6,112,029 | | — | | — | | 11/1/2019 | | — | | — | | — | | — | | — | | — | | 204,441 | | 7,167,686 | Rosalind
Brewer | | 11/1/2021 | | — | | 356,258 | | 47.32 | | 11/1/2031 | | — | | — | | — | | — | | 3/15/2021 | | — | | — | | — | | — | | 130,233 | | 4,565,983 | | — | | — | | 11/1/2021 | | — | | — | | — | | — | | 62,650 | | 2,196,506 | | — | | — | | 3/15/2021 | | — | | — | | — | | — | | — | | — | | 183,470 | | 6,432,458 | | 11/1/2021 | | — | | — | | — | | — | | — | | — | | 119,917 | | 4,204,290 | | James Kehoe | | 11/1/2018 | | 103,702 | | — | | 79.90 | | 11/1/2028 | | — | | — | | — | | — | | 11/1/2019 | | 94,442 | | 47,364 | | 57.38 | | 11/1/2029 | | — | | — | | — | | — | | 11/1/2020 | | 46,364 | | 92,869 | | 34.04 | | 11/1/2030 | | — | | — | | — | | — | | 11/1/2021 | | — | | 153,346 | | 47.32 | | 11/1/2031 | | — | | — | | — | | — | | 11/1/2019 | | — | | — | | — | | — | | 8,135 | | 285,201 | | — | | — | | 11/1/2020 | | — | | — | | — | | — | | 20,152 | | 706,540 | | — | | — | | 5/1/2021 | | — | | — | | — | | — | | — | | — | | 20,042 | | 702,686 | | 11/1/2021 | | — | | — | | — | | — | | 24,515 | | 859,509 | | — | | — | | 11/1/2019 | | — | | — | | — | | — | | — | | — | | 57,498 | | 2,015,896 | | 11/1/2020 | | — | | — | | — | | — | | — | | — | | 55,556 | | 1,947,793 | | 11/1/2021 | | — | | — | | — | | — | | — | | — | | 46,924 | | 1,645,155 | | Ornella Barra | | 11/1/2015 | | 84,466 | | — | | 84.68 | | 11/1/2025 | | — | | — | | — | | — | | 11/1/2016 | | 140,844 | | — | | 82.46 | | 11/1/2026 | | — | | — | | — | | — | | 11/1/2017 | | 161,506 | | — | | 67.01 | | 11/1/2027 | | — | | — | | — | | — | | 11/1/2018 | | 133,333 | | — | | 79.90 | | 11/1/2028 | | — | | — | | — | | — | | 11/1/2019 | | 94,442 | | 47,364 | | 57.38 | | 11/1/2029 | | — | | — | | — | | — | | 11/1/2020 | | 46,364 | | 92,869 | | 34.04 | | 11/1/2030 | | — | | — | | — | | — | | 11/1/2021 | | — | | 139,405 | | 47.32 | | 11/1/2031 | | — | | — | | — | | — | | 11/1/2019 | | — | | — | | — | | — | | 8,135 | | 285,201 | | — | | — | | 11/1/2020 | | — | | — | | — | | — | | 20,152 | | 706,540 | | — | | — | | 11/1/2021 | | — | | — | | — | | — | | 24,515 | | 859,509 | | — | | — | | 11/1/2019 | | — | | — | | — | | — | | — | | — | | 57,498 | | 2,015,896 | | 11/1/2020 | | — | | — | | — | | — | | — | | — | | 55,556 | | 1,947,793 | | 11/1/2021 | | — | | — | | — | | — | | — | | — | | 46,924 | | 1,645,155 | John
Standley | | 11/1/2020 | | 41,212 | | 82,550 | | 34.04 | | 11/1/2030 | | — | | — | | — | | — | | 11/1/2021 | | — | | 136,308 | | 47.32 | | 11/1/2031 | | — | | — | | — | | — | | 9/1/2020 | | — | | — | | — | | — | | 29,603 | | 1,037,884 | | — | | — | | 11/1/2020 | | — | | — | | — | | — | | 17,913 | | 628,023 | | — | | — | | 11/1/2021 | | — | | — | | — | | — | | 21,791 | | 764,004 | | — | | — | | 11/1/2020 | | — | | — | | — | | — | | — | | — | | 49,383 | | 1,731,368 | | 11/1/2021 | | — | | — | | — | | — | | — | | — | | 41,710 | | 1,462,353 |
| 88 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation | (1) | For each of the unvested stock option awards, one-third of the award vests on each of the first, second and third anniversary of the grant date. All unvested stock options are subject to forfeiture in certain circumstances and full or pro-rated accelerated vesting in certain circumstances, including, upon retirement and, with respect to the awards to Mr. Pessina, if he ceases to serve on the Board in certain circumstances. | | (2) | Includes the number and value of the unvested RSUs awarded under the 2021 Omnibus Incentive Plan, and includes dividend equivalents through August 31, 2022. The RSUs granted on November 1, 2019, 2020 and 2021 (excluding the RSUs granted to Mr. Pessina on November 1, 2021), the RSUs granted to Mr. Standley on September 1, 2020, and the RSUs granted to Ms. Brewer on March 15, 2021 vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and the remainder on the third anniversary of the grant date. The RSUs granted to Mr. Pessina on November 1, 2021 vest on the third anniversary of the grant date. All RSUs are subject to forfeiture in certain circumstances or full or pro-rated accelerated vesting in certain circumstances, including, with respect to the awards to Mr. Pessina, if he ceases to serve on the Board in certain circumstances. Also see footnote (4) to the 2022 Grants of Plan-Based Awards table above for a description of the terms of RSUs granted during fiscal 2022. | | (3) | Except as described below, represents the number and value of performance shares based on the target performance level. As described in the “—Compensation Discussion and Analysis” section, the performance shares granted in November 2020 and 2021 vest, if at all, based on the Company’s adjusted EPS growth and revenue growth performance over each of the component fiscal years in the fiscal 2021-2023 and fiscal 2022-2024 performance periods, respectively. In October 2022, the CLP Committee certified the performance achievement and released the performance shares granted in November 2019 relating to the fiscal 2020-2022 performance period. With respect to the November 2019 performance shares, the number of units reported in this table represent the actual number of shares that vested, with the market value determined based on the August 31, 2022 closing stock price. These performance share awards are subject to prorated or accelerated vesting in certain circumstances, including upon retirement. In addition, the award granted on May 1, 2021 to Mr. Kehoe represents the CEO Transition RSUs granted on that date. Under the terms of the award agreement, the performance conditions applicable to the first half of the vesting period were certified as achieved in April 2022, and as a result the award vested one-half on the first anniversary of the grant date. The remaining one-half of the award is shown in this table and is scheduled to vest on the second anniversary of the grant date, subject to satisfaction of the applicable performance conditions, and subject to forfeiture in certain circumstances and full accelerated vesting upon a qualifying termination within one year following a change in control of the Company. |
2022 Option exercises and stock vested The following table shows information regarding stock vested by each of the NEOs during fiscal 2022. No options were exercised during fiscal 2022. | | Option Awards | | Stock Awards | | Name | | Number of
shares acquired
on exercise
(#) | | Value
realized
on exercise
($) | | Number
of shares
acquired
on vesting
(#) | | Value
realized
on vesting
($) | | Stefano Pessina(1)(2) | | — | | — | | 192,278 | | 9,212,224 | | Rosalind Brewer(2) | | — | | — | | 63,472 | | 3,057,441 | | James Kehoe(1)(2) | | — | | — | | 86,775 | | 4,075,755 | | Ornella Barra(1)(2) | | — | | — | | 77,502 | | 3,740,333 | | John Standley(2) | | — | | — | | 36,862 | | 1,828,349 |
| (1) | Awards include performance shares vested on August 31, 2021, with performance certified and performance shares released in October 2021. For Mr. Kehoe, also includes performance-based RSUs granted May 1, 2021, including related dividend equivalents, which vested one-half on May 1, 2022. | | (2) | Awards include RSUs granted on November 1, 2019 (in the cases of Messrs. Pessina and Kehoe and Ms. Barra), and RSUs granted on November 1, 2020 (in the cases of Messrs. Kehoe and Standley and Ms. Barra), in all cases including related dividend equivalents, all of which vested one-third on November 1, 2021. Also includes RSUs granted on December 10, 2019 to Mr. Kehoe and Ms. Barra, including related dividend equivalents, which vested one-half on September 1, 2021, two separate RSUs granted to Mr. Standley on September 1, 2020, including related dividend equivalents, one of which vested in full on September 1, 2021, and one of which vested one-third on that date, and RSUs granted to Ms. Brewer on March 15, 2021, including related dividend equivalents, which vested one-third on March 15, 2022. |
Table of Contents Executive compensation 2022 Nonqualified deferred compensation The Executive Deferred Plan replaces the contributions the Company is unable to provide under the 401(k) Plan as a result of various tax law limitations that restrict contributions made for highly-compensated participants under the 401(k) Plan. The Executive Deferred Plan includes two features. First, participants receive Company contribution credits equal to the matching contributions that cannot be made to the 401(k) Plan due to the tax law limitations described above (“Company Contributions”). Second, participants may also elect to defer, on a pre-tax basis, up to (i) 50% of their annual base salary and/or (ii) 85% of their short-term incentive awards (“Participant Contributions”). A participant’s account under the Executive Deferred Plan is credited with investment gains and/or losses based on the investment fund elections of the participant. Executive Deferred Plan accounts are paid following termination of employment. Company Contribution accounts are paid in a lump sum or installments, depending on the size of the account balance and the participant’s age at the time of employment termination. Participant Contribution accounts are paid in a lump sum or installments over a selected number of years, based on the participant’s advance election at the time of deferral. The following table reflects fiscal 2022 contributions, earnings, withdrawals and end-of-year balances for participating NEOs under the Executive Deferred Plan. | Name | | Plan Name | | Executive
Contributions in
Last Fiscal Year
($) | | Company
Contributions in
Last Fiscal Year
($)(1) | | Aggregate
Earnings in
Last Fiscal Year
($) | | Aggregate
Withdrawals/
Distributions
($) | | Aggregate
Balance at Last
Fiscal Year End
(8/31/22)
($)(2) | | Rosalind Brewer | | Executive Deferred Plan | | — | | 27,800 | | (943) | | — | | 26,857 | | James Kehoe | | Executive Deferred Plan | | 469,827 | | 82,947 | | (252,801) | | — | | 1,130,441 | | John Standley | | Executive Deferred Plan | | — | | 82,624 | | (10,483) | | — | | 72,141 |
| (1) | The amount shown in this column reflects company contributions under the Executive Deferred Plan, which are also reported as “All Other Compensation” in the “2022 Summary Compensation Table” above. | | (2) | For Mr. Kehoe, this column includes the following amounts that were previously reported in the Summary Compensation Table as compensation for fiscal years 2020 and 2021: 2020 = $56,527; and 2021 = $555,530. |
2022 Potential payments upon termination or change in control The information below describes the compensation and benefits payable to each of the NEOs in the event of termination of his or her employment as of August 31, 2022, and as of the later indicated separation date in the case of Mr. Standley. The actual amounts to be paid under any of the scenarios can only be determined at the time of such NEO’s separation from the Company. Furthermore, the CLP Committee retains discretion to provide additional benefits to senior executives upon termination or resignation if it believes the circumstances so warrant. Upon termination of employment for any reason, each NEO will be entitled to receive amounts earned during his or her employment. These amounts may include: | ● | Any earned awards that are not yet paid, including unpaid approved awards under the MIP for the completed fiscal year and unpaid vested performance share awards under the applicable omnibus incentive plan for the completed fiscal year; | | ● | Vested stock options; | | ● | Earned but unused vacation pay and paid time off; and | | ● | Base salary earned through the date of termination. |
Under the terms of certain of the Company’s compensation arrangements, if the payments and benefits to a participating NEO under such compensation arrangement would subject the NEO to the excise tax imposed by Section 4999 of the Code, then such payments will be reduced by the minimum amount necessary to avoid such excise tax or, if provided in the applicable compensation arrangements for an NEO, paid in full with the NEO responsible for any associated excise tax or reduced by the minimum amount necessary to avoid such excise tax, based on whether such payment or reduction would result in the NEO receiving a higher net after-tax amount. The amounts described in this section do not reflect the application of any reduction in compensation or benefits pursuant to the terms of the applicable compensation arrangements. Unless otherwise noted, the information below also does not include amounts earned for fiscal 2022 that are shown in the “2022 Summary Compensation Table” above. | 90 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation Mr. Pessina. Mr. Pessina’s sole compensation in fiscal 2020 consisted of the performance share, RSU and stock option awards issued in that year. Mr. Pessina elected to receive no compensation for fiscal 2021, other than limited perquisites. As described above, Mr. Pessina’s compensation for fiscal 2022 as Executive Chairman consisted of RSUs. Upon termination of his employment as of August 31, 2022, the exclusive benefits provided to Mr. Pessina would be: | ● | In the event of Mr. Pessina’s disability or death, he would be:● | In the event of Mr. Pessina’s disability or death, he would receive full accelerated vesting of all of these Performance Share, RSU and Stock Optionreceive full accelerated vesting of all unvested performance share, RSU and stock option awards; | | ● | In the event Mr. Pessina’s employment is terminated within one year after a change in control of the Company (other than for cause), he would receive full accelerated vesting of the fiscal 2018, 2019 and 2020 Stock Option awards, the fiscal 2020 RSUs, and pro-rated vesting of the fiscal 2018, 2019 and 2020 Performance Share awards; and | ● | In the event Mr. Pessina resigns from the Board, he would receive full vesting of the fiscal 2018 Performance Share award, full vesting of the fiscal 2018, 2019 and 2020 Stock Option awards, and pro-rata vesting of the fiscal 2019 and 2020 Performance Share awards and the fiscal 2020 RSUs (subject to “retirement” approval by the Compensation and Leadership Performance Committee, in the case of all fiscal 2019 and 2020 awards). |
In each case except for termination following a change in control, the actual Performance Shares earned will be based on the Company’s performance and settled at the end of the performance period. In the event of termination within one year following a change in control, the pro-rated Performance Shares are payable at target and settled within 45 days of termination of service.
Mr. Pessina is also technically eligible to participate in the CIC Plan; however, because he has no annual salary and does not participate in the MIP, he would not be entitled to benefits under the plan in the event of termination of his employment upon a change in control of the Company.
Mr. Skinner. As Executive Chairman, Mr. Skinner’s sole compensation in fiscal 2018, 2019 and 2020 consisted of the RSU awards issued in those years, in each case as reflected in the “2020 Summary Compensation Table” and the “2020 Outstanding Equity Awards at Fiscal Year-End” table above. Mr. Skinner does not participate in any of the Company’s employee benefit plans, including the CIC Plan.
As a result, upon termination of his employment as of August 31, 2020 due to disability, death, retirement from the Board, or termination of employment within one year after a change in control of the Company (other than for cause), he would receive full accelerated vesting of the exclusive benefit provided to Mr. Skinnerfiscal 2020 stock option award and the fiscal 2020 and 2022 RSUs, and he would bereceive full vesting of his RSU awards; provided, however, that the RSU award grantedfiscal 2020 performance share award; and
| | ● | In the event Mr. Pessina resigns from the Board, and subject to “retirement” approval by the CLP Committee in November 2019all cases, he would vest on a pro-rated basis if retirement occurs within twelve monthsreceive full vesting of the grant date,fiscal 2020 performance share award, the fiscal 2020 stock option award, and the fiscal 2020 RSUs, and he would receive pro-rated vesting of the fiscal 2022 RSUs, subject to satisfaction of the applicable performance conditions.goal. |
In each case except for termination following a change in control, the actual performance shares earned will be based on the Company’s performance and settled at the end of the performance period. In the event of termination within one year following a change in control, the pro-rated performance shares are payable at target and settled within 45 days of termination of service. As Executive Chairman, Mr. Pessina does not participate in any of the Company’s employee benefit plans, including the Severance and CIC Plan. Ms. Brewer. Ms. Brewer is eligible to participate in the Company’s employment benefit plans, including the Severance and CIC Plan. Upon termination of her employment as of August 31, 2022, she would receive severance benefits (a) of $9,000,000 in cash severance (two times annual salary and target annual bonus) and $13,539 in subsidized COBRA premiums upon an involuntary termination by us at any time (other than for cause or upon death or disability, as those terms are defined in the Severance and CIC Plan); or (b) of $11,250,000 in cash severance (two and one-half times annual salary and target annual bonus) and $13,539 in subsidized COBRA premiums upon an involuntary termination without cause or a voluntary termination for “good reason” (as those terms are defined in the Severance and CIC Plan) within one year following a “change in control”. See below for the treatment of Ms. Brewer’s stock option, RSU and performance share awards upon the various termination of employment scenarios, and note that voluntary termination of employment for good reason is treated the same as involuntary termination without cause for purposes of certain new hire awards and for all awards following a change in control. If Ms. Brewer resigned (not for good reason) or was terminated for cause prior to the two-year anniversary of her start date, she would be required to pay to the Company the $4,500,000 cash sign-on award received in connection with her hire. Mr. Kehoe. Mr. Kehoe is eligible to participate in the Company’s employment benefit plans, including the Severance and CIC Plan. Upon termination of his employment as of August 31, 2022, he would receive severance benefits (a) of $4,382,685 in cash severance (two times annual salary and target annual bonus) and $26,889 in subsidized COBRA premiums upon an involuntary termination by us at any time (other than for cause or upon death or disability, as those terms are defined in the Severance and CIC Plan); or (b) of $5,478,356 in cash severance (two and one-half times annual salary and target annual bonus) and $26,889 in subsidized COBRA premiums upon an involuntary termination without cause or a voluntary termination for “good reason” (as those terms are defined in the Severance and CIC Plan) within one year following a “change in control”. See below for the treatment of Mr. Kehoe’s outstanding long-term incentive awards upon the various termination of employment scenarios, including the CEO Transition RSUs granted to Mr. Kehoe on May 1, 2021. Mr. Standley. As of November 1, 2022, Mr. Standley’s employment was terminated without cause, as defined in the Severance and CIC Plan. As such, he is entitled to receive the following benefits under that Plan: (a) $4,950,000 in cash severance (two times annual salary and target annual bonus); (b) $12,522 in subsidized COBRA premiums; and (c) a pro-rated annual bonus under the MIP for fiscal 2023 covering the portion of that fiscal year through his separation date ($229,169 estimate, based on target performance). Pursuant to their terms and based on his continued service through the applicable vesting date: one-third of Mr. Standley’s RSUs granted on September 1, 2020 vested on September 1, 2022; one-third of each of Mr. Standley’s stock options and RSUs granted on November 1, 2020 and 2021 vested on November 1, 2022; and all remaining unvested stock options, RSUs and performance shares were forfeited, and vested stock options remain exercisable for 90 days following Mr. Standley’s separation date.
Table of Contents Executive compensation Ms. Barra. Ms. Barra has an employment agreement that sets forth potential payments to be made upon qualifying termination events, and as such she is not eligible for benefits under the Severance and CIC Plan. Certain amounts described herein would be paid in British Pounds Sterling; amounts shown in U.S. dollars are based on the average exchange rate during fiscal 2022 used by the CLP Committee for purposes of executive compensation decisions of £1=$1.30062. Ms. Barra may be terminated for cause (as specified in her employment agreement) and would receive no payments. Termination by the Company not for cause or resignation by Ms. Barra requires 12 months’ notice; accordingly, Ms. Barra would be entitled to her base salary and all other compensation and benefits during this notice period; provided, however, that the Company may terminate Ms. Barra’s employment immediately and pay in monthly installments through the end of the notice period a total of £1,140,665 ($1,483,572), which represents base salary and cash payments in lieu of participation in a defined contribution plan (i.e., pension supplement). No additional payments would be made to Ms. Barra should her termination occur in connection with a change in control. In the event of a termination due to permanent disability or death as a result of an accident, Ms. Barra would receive three times her base salary pursuant to a personal accident insurance policy paid by the Company, which equals £2,444,282 ($3,179,082). Upon death while employed, a lump sum death benefit of £4,073,804 ($5,298,471) would be payable pursuant to a life insurance policy paid for by the Company, which represents five times Ms. Barra’s base salary. Equity awards In addition to the benefits described above, the NEOs other than Messrs. Pessina and Standley (which are described above) hold stock options, performance share awards, and RSUs issued in fiscal 2020, 2021 and/or 2022 (and in certain cases stock options issued in prior fiscal years), all as reflected above in the “2022 Summary Compensation Table”, the “2022 Grants of Plan-Based Awards” table and the “2022 Outstanding Equity Awards at Fiscal Year-End” table. Upon termination of employment of any of these NEOs as of August 31, 2022, these equity awards would be forfeited, except in the following circumstances: | ● | In the event of death while employed or termination due to disability, then he or she receives the following benefits with respect to these equity awards: |
| ● | Vesting of the stock options is accelerated, and the vested option remains exercisable until one year from the date of death or disability; | | ● | Full vesting of performance shares, calculated based on performance through the end of the performance period, and distributed at the same time performance shares are distributed to other participants; and | | ● | Full vesting of RSUs, other than the remaining unvested CEO Transition RSUs granted to Mr. Kehoe is eligiblein fiscal 2021, which are forfeited. |
| ● | In the event of retirement (defined as age 55 or older with at least 10 years of service and subject to participate inCLP Committee approval with respect to fiscal 2019, 2020, 2021 and 2022 awards), then he or she receives the Company’s employment benefit plans, includingfollowing benefits with respect to these equity awards: |
| ● | For fiscal 2018 and prior years’ stock options, all vested stock options remain exercisable until one year from the CIC Plan, under which he would receive severance benefits (a)retirement date; | | ● | For fiscal 2019, 2020, 2021 and 2022 stock options, full accelerated vesting of $4,255,033 in cash severanceany unvested stock options, and $16,415 in subsidized COBRA premiums upon anall vested stock options remain exercisable for the remainder of the 10-year term of such stock options; | | ● | For fiscal 2020, 2021 and 2022 performance shares, pro-rated vesting based on the portion of the performance period completed through the retirement date, and vested performance shares will settle based on actual Company performance at the end of the performance period; and | | ● | For fiscal 2020, 2021 and 2022 RSUs, pro-rated vesting. |
| ● | In the event of involuntary termination by us at any time (other than forwithout cause or upon death or disability, as those terms are defined in the CIC Plan) or (b) of $5,318,792 in cash severance and $16,415 in subsidized COBRA premiums upon an involuntary termination or a voluntary termination for “good reason” (as those terms are definedgood reason, in the CIC Plan)each case, within one year following a “changechange in control”. In addition, uponcontrol, then he or she receives the following benefits with respect to these equity awards: |
| ● | Vesting of the stock options is accelerated, and, in the case of the fiscal 2018 and prior year stock options, the vested stock options remain exercisable until 90 days from the date of termination, and, in the case of the fiscal 2019, 2020, 2021 and 2022 stock options, for the remainder of the 10-year term of such stock options; | | ● | Pro-rated vesting of the target level of performance shares (or full vesting in the case of Ms. Brewer’s fiscal 2021 performance shares), with the value of such target performance shares distributed in cash following such termination of his employment asemployment; and | | ● | Vesting of August 31, 2020 duethe RSUs is accelerated, with the May 1, 2022 - April 30, 2023 performance goals associated with the CEO Transition RSUs granted to disability, death,Mr. Kehoe in fiscal 2021 deemed attained. |
| ● | For Ms. Brewer’s fiscal 2021 RSUs and performance shares, in the event of involuntary termination without cause or voluntary termination for good reason, vesting of these awards is accelerated, and the vested performance shares will settle based on actual Company performance at the end of the performance period. |
| 92 | | Walgreens Boots Alliance, Inc. |
Table of Contents Executive compensation Outstanding Equity Awards. The table below shows the value of the equity awards held by each of the NEOs under each of the scenarios listed (except Mr. Standley, whose actual separation benefits are described above). The amounts shown assume that each such NEO’s last day worked was August 31, 2022. For termination following a change in control, it is assumed that the change in control and termination of employment occurred simultaneously as of August 31, 2022, the last day of fiscal 2022. | Name | | Stock
Options
($)(1) | | Performance
Shares
($)(2) | | Restricted Stock
Units
($)(3) | | Stefano Pessina | | | | | | | | Involuntary Termination for Cause | | — | | — | | — | | Involuntary Termination Not for Cause | | — | | — | | — | | Retirement from the Board | | — | | 5,369,053 | | 2,711,829 | | Other Voluntary Termination | | — | | — | | — | | Change in Control | | — | | 5,369,053 | | 7,126,072 | | Termination due to Disability | | — | | 5,369,053 | | 7,126,072 | | Termination due to Death | | — | | 5,369,053 | | 7,126,072 | | Rosalind Brewer | | | | | | | | Involuntary Termination for Cause | | — | | — | | — | | Involuntary Termination Not for Cause | | — | | 6,432,458 | | 4,565,983 | | Other Voluntary Termination | | — | | — | | — | | Change in Control | | — | | 7,833,888 | | 6,762,489 | | Termination due to Disability | | — | | 10,636,748 | | 6,762,489 | | Termination due to Death | | — | | 10,636,748 | | 6,762,489 | | James Kehoe | | | | | | | | Involuntary Termination for Cause | | — | | — | | — | | Involuntary Termination Not for Cause | | — | | — | | — | | Voluntary Termination/Retirement | | — | | — | | — | | Change in Control | | 94,726 | | 3,356,948 | | 2,553,936 | | Termination due to Disability | | 94,726 | | 5,102,982 | | 1,851,250 | | Termination due to Death | | 94,726 | | 5,102,982 | | 1,851,250 | | Ornella Barra | | | | | | | | Involuntary Termination for Cause | | — | | — | | — | | Involuntary Termination Not for Cause | | — | | — | | — | | Voluntary Termination/Retirement | | 94,726 | | 3,356,948 | | 770,812 | | Change in Control | | 94,726 | | 3,356,948 | | 1,851,250 | | Termination due to Disability | | 94,726 | | 5,102,982 | | 1,851,250 | | Termination due to Death | | 94,726 | | 5,102,982 | | 1,851,250 |
| (1) | The amounts shown in this column reflect the value of unvested stock options that become vested in full or in part upon the various termination of employment within one year after a change in control of the Company (other than for cause), Mr. Kehoe’s new hire RSU award reflectedscenarios. All such stock options are included in the “2020“2022 Outstanding Equity Awards at Fiscal Year-End” table above would become fully vested. Underabove. For each applicable stock option, there is value included only if accelerated vesting of all other scenarios, these RSUs would be forfeited.Other NEOs. Each of Ms. Barra and Mr. Gourlay has an employment agreement that sets forth potential payments to be made upon qualifying termination events. Becauseor some portion of the existence of these employment agreements, neither of these NEOsaward would occur and the applicable stock option exercise price is eligible for benefits underhigher than the CIC Plan. Certain amounts described herein would be paid in British Pounds Sterling;Company’s closing stock price on August 31, 2022 ($35.06).
| | (2) | The amounts shown in U.S. dollars arethis column reflect the value of performance shares at target performance for the fiscal 2020, 2021 and 2022 grants in each of the scenarios listed based on the average exchange rate duringextent to which such performance shares become vested as of termination of employment. All such performance shares are included in the “2022 Outstanding Equity Awards at Fiscal Year-End” table above. | | (3) | The amounts shown in this column reflect the value of RSUs granted in fiscal 2020, used by2021 and 2022 (including dividend equivalents) in each of the Compensation and Leadership Performance Committee for purposesscenarios listed based on the extent to which such RSUs become vested as of executive compensation decisionstermination of £1=$1.270598.employment. All such RSUs are included in the “2022 Outstanding Equity Awards at Fiscal Year-End” table above. |
Other. In addition to the compensation and benefits described above, (1) if any NEO retires after reaching the age of 55 and achieves at least 10 years of service with the Company or its subsidiaries, (2) in the event of the death of an NEO while employed, or the termination of an NEO due to disability, or (3) in the case of Ms. Brewer and Messrs. Kehoe and Standley, as part of benefits under the Severance and CIC Plan, such NEO would receive a pro-rated award under the MIP for the final partial year of participation. Because the MIP amounts are deemed earned as of the last day of the fiscal year, such amounts have been excluded from this section, except as described above within the context of the fiscal 2022 employment separation of Mr. Standley. 20212023 Proxy Statement 81 | | 93 |
Table of Contents | Executive CompensationCEO pay ratioMs. Barra may be terminated for cause (as specified in her employment agreement) and would receive no payments. Termination by the Company not for cause or resignation by Ms. Barra requires twelve months’ notice; accordingly, Ms. Barra would be entitled to her base salary and all other compensation and benefits during this notice period; provided, however, that the Company may terminate Ms. Barra’s employment immediately and pay in monthly installments through the end of the notice period a total of £1,118,299 ($1,420,909), which represents base salary and cash payments in lieu of participation in a defined contribution plan (i.e., pension supplement). No additional payments would be made to Ms. Barra should her termination occur in connection with a change in control. In the event of a termination due to permanent disability or death as a result of an accident, Ms. Barra would receive three times her base salary pursuant to a personal accident insurance policy paid by the Company, which equals £2,396,355 ($3,044,805). Upon death while employed, a lump sum death benefit of £3,993,925 ($5,074,675) would be payable (pursuant to a life insurance policy paid for by the Company), which represents five times Ms. Barra’s base salary.
Mr. Gourlay may be terminated for cause (as specified in his employment agreement) or upon his 65th birthday and would receive no payments. Termination by the Company not for cause or resignation by Mr. Gourlay requires twelve months’ notice; accordingly, Mr. Gourlay would be entitled to his base salary and all other compensation and benefits during this notice period; provided, however, that the Company may terminate Mr. Gourlay’s employment immediately and pay his base salary in monthly installments through the earlier of the end of the notice period or until Mr. Gourlay were to find alternative employment. The maximum amount of base salary paid upon termination would be £798,785 ($1,014,935) for the full 12-month notice period, subject to reduction based on the actual remaining notice period at the time of employment termination and whether Mr. Gourlay obtains other employment prior to the end of such period. No additional payments would be made to Mr. Gourlay were his termination to occur in connection with a change in control. In the event of a termination due to permanent disability or death as a result of an accident, Mr. Gourlay would receive three times his base salary pursuant to a personal accident insurance policy paid by the Company, which equals £2,396,355 ($3,044,805). Upon death while employed, a lump sum death benefit of £3,993,925 ($5,074,675) would be payable (pursuant to a life insurance policy paid for by the Company), which represents five times Mr. Gourlay’s base salary.
The information above (and in the table below) does not include benefits to be paid to Mr. Gourlay pursuant to the Boots Pension Plan, Boots Supplementary Pension Plan, and Boots Additional Pension Arrangement, as these account balances are earned and payable, and the aggregate payment amounts will not vary based on the reason for termination of employment. The current actuarial value of accumulated benefits under these plans as of August 31, 2020 are included in “2020 Pension Benefits” above.
In addition to the benefits described above, each of Ms. Barra and Mr. Gourlay hold Stock Options issued in fiscal 2018, 2019 and 2020, Performance Share awards issued in fiscal 2018, 2019 and 2020, and RSUs issued in fiscal 2020, and Mr. Kehoe holds the above awards issued in fiscal 2019 and 2020, all as reflected in the “2020 Summary Compensation Table” and the “2020 Outstanding Equity Awards at Fiscal Year-End” table above. Upon termination of employment of any of these NEOs as of August 31, 2020, these equity awards would be forfeited, except in the following circumstances:
● | In the event of death while employed, or termination due to disability, then he or she receives the following benefits with respect to these equity awards: |
●As required by the SEC rules, we are providing the following information comparing the annual total compensation of our CEO, Ms. Brewer, to the median of the annual total compensation of all of our employees other than our CEO. As permitted by SEC rules, we used the same median employee for our pay ratio calculation this year as we used for the calculation included in last year’s proxy. We believe it is reasonable to use the same median employee for purposes of the pay ratio calculation because there was no material change in our employee population or in the median employee’s compensation arrangement or other material change that would significantly affect our pay ratio calculation. We identified our median employee for the fiscal 2021 pay ratio analysis using the methodology and the material assumptions, adjustments, and estimates described below. Identification of Median Employee. The Company has a presence in nine countries. In determining the median employee last year, we used our active employee population on July 1, 2021, consisting of 307,250 employees. The pay ratio disclosure rules provide an exemption for companies to exclude non-U.S. employees from the median employee calculation if non-U.S. employees in a particular jurisdiction account for 5% or less of the company’s total number of employees. We applied this de minimis exemption when identifying the median employee by excluding 4,356 employees in Germany. After taking into account the de minimis exemption, 242,772 employees in the U.S. and 64,478 employees located outside of the United States were considered for identifying the median employee. The total of these excluded employees represented approximately 1% of our workforce. To identify the median employee, we considered the total actual cash earnings (base salary, overtime, and bonus) for the period of July 1, 2020 through June 30, 2021 for all active employees including full-time, part-time, seasonal and employees on leave. Of the 307,250 employees taken into consideration, the employee identified for calculating the CEO pay ratio resides in the U.S. 2022 CEO Pay Ratio Calculation. For purposes of reporting annual total compensation and the ratio of annual total compensation of our CEO to our median employee for fiscal 2022, both the CEO and median employee’s annual total compensation were calculated consistent with the Summary Compensation Table executive compensation disclosure requirements, plus the value of employer-paid health insurance contributions. Ms. Brewer had total annual compensation of $17,296,189 in fiscal 2022. Our median employee had compensation of $24,530 in fiscal 2022. As a result, we estimate that the ratio of our CEO’s compensation to that of our median employee was approximately 705 to 1. | 94 | | Vesting of the Stock Options is accelerated, and the vested option remains exercisable until one year from the date of death or disability; | ● | Full vesting of Performance Shares, calculated based on performance through the end of the performance period, and distributed at the same time Performance Shares are distributed to other participants; and | ● | Full vesting of RSUs, other than the Transformational Cost Management Program awards granted in fiscal 2020 which are forfeited. |
● | In the event of retirement (defined as age 55 or older with at least 10 years of service and subject to Compensation and Leadership Performance Committee approval with respect to fiscal 2019 and 2020 awards), then he or she receives the following benefits with respect to these equity awards: |
● | For fiscal 2018 Stock Options, accelerated vesting of any Stock Options scheduled to vest within one year of the retirement date, and all vested Stock Options remain exercisable until one year from the retirement date; | ● | For fiscal 2019 and 2020 Stock Options, full accelerated vesting, and all vested Stock Options remain exercisable for the remainder of the 10-year term of such Stock Options; | ● | For fiscal 2018 Performance Shares, full vesting of any Performance Shares scheduled to vest within one year of the retirement date, which will settle based on actual Company performance at the end of the performance period; |
82 Walgreens Boots Alliance,
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Table of Contents Executive Compensation
● | For fiscal 2019 and 2020 Performance Shares, pro-rated vesting based on the portion of the performance period completed through the retirement date, and vested Performance Shares will settle based on actual Company performance at the end of the performance period; and | ● | For fiscal 2020 RSUs, full vesting, other than the Transformational Cost Management Program awards granted in fiscal 2020 which are forfeited. |
● | In the event of involuntary termination without cause within one year following a change in control, then he or she receives the following benefits with respect to these equity awards: |
● | Vesting of the Stock Options is accelerated, and, in the case of the fiscal 2018 Stock Options, the vested Stock Options remain exercisable until 90 days from the date of termination, and, in the case of the fiscal 2019 and 2020 Stock Options, for the remainder of the 10-year term of such Stock Options; | ● | Pro-rated vesting of the target level of Performance Shares, with the value of such target Performance Shares distributed in cash following such termination of employment; and | ● | Vesting of the RSUs is accelerated. |
Outstanding Equity Awards. The table below shows the value of the equity awards held by each of the NEOs under each of the scenarios listed. The amounts shown in the table assume that each such NEO’s last day worked was August 31, 2020. For termination following a change in control, it is assumed that the change in control and termination of employment occurred simultaneously as of August 31, 2020, the last day of fiscal 2020.
| | Stock
Options
($)(1) | | Performance
Shares
($)(2) | | Restricted Stock
Units
($)(3) | | Stefano Pessina | | | | | | | | Involuntary Termination for Cause | | — | | — | | — | | Involuntary Termination Not for Cause | | — | | — | | — | | Retirement from the Board | | — | | 11,796,327 | | 840,815 | | Other Voluntary Termination | | — | | — | | — | | Change in Control | | — | | 9,709,269 | | 3,026,935 | | Termination due to Disability | | — | | 15,677,890 | | 3,026,935 | | Termination due to Death | | — | | 15,677,890 | | 3,026,935 | | James A. Skinner | | | | | | | | Involuntary Termination for Cause | | — | | — | | — | | Involuntary Termination Not for Cause | | — | | — | | — | | Retirement from the Board | | — | | — | | 10,340,255 | | Other Voluntary Termination | | — | | — | | — | | Change in Control | | — | | — | | 14,712,466 | | Termination due to Disability | | — | | — | | 14,712,466 | | Termination due to Death | | — | | — | | 14,712,466 | | Ornella Barra and Alexander W. Gourlay | | | | | | | | Involuntary Termination for Cause | | — | | — | | — | | Involuntary Termination Not for Cause | | — | | — | | — | | Voluntary Termination/Retirement | | — | | 2,678,280 | | 236,476 | | Change in Control | | — | | 2,678,280 | | 1,859,081 | | Termination due to Disability | | — | | 4,356,939 | | 851,313 | | Termination due to Death | | — | | 4,356,939 | | 851,313 | | James Kehoe | | | | | | | | Involuntary Termination for Cause | | — | | — | | — | | Involuntary Termination Not for Cause | | — | | — | | — | | Voluntary Termination/Retirement | | — | | — | | — | | Change in Control | | — | | 1,458,928 | | 2,837,969 | | Termination due to Disability | | — | | 3,007,153 | | 1,830,201 | | Termination due to Death | | — | | 3,007,153 | | 1,830,201 |
(1) | The amounts shown in this column reflect the value of unvested Stock Options that become vested in full or in part upon the various termination of employment scenarios. All such Stock Options are included in the “2020 Outstanding Equity Awards at Fiscal Year-End” table above. For each applicable Stock Option, there is value included only if accelerated vesting of all or some portion of the award would occur and the applicable Stock Option exercise price is higher than the Company’s closing stock price on August 31, 2020 ($51.19). Because the exercise price for each of the outstanding options exceeded the Company’s closing stock price on August 31, 2020, no amounts are included in this table for outstanding Stock Option awards. |
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(2) | The amounts shown in this column reflect the value of Performance Shares at target performance for the fiscal 2018, 2019 and 2020 grants in each of the scenarios listed based on the extent to which such Performance Shares become vested as of termination of employment. All such Performance shares are included in the “2020 Outstanding Equity Awards at Fiscal Year-End” table. | (3) | The amounts shown in this column reflect the value of RSUs granted in fiscal 2018, 2019 and 2020 in each of the scenarios listed based on the extent to which such RSUs become vested as of termination of employment. All such RSUs are included in the “2020 Outstanding Equity Awards at Fiscal Year-End” table. |
Other. In addition to the compensation and benefits described above, (1) if any NEO retires after reaching the age of 55 and achieves at least 10 years of service with the Company or its subsidiaries, (2) in the event of the death of an NEO while employed, or the termination of an NEO due to disability, or (3) in the case of Mr. Kehoe, as part of benefits under the Executive Severance and Change in Control Plan, such NEO would receive a pro-rated award under the MIP for the final partial year of participation, to the extent such NEO participates in the MIP. Because the MIP amounts are deemed earned as of the last day of the fiscal year, such amounts have been excluded from this section.
CEO Pay Ratio
As required by the SEC rules, we are providing the following information comparing the annual total compensation of our CEO and Executive Vice Chairman, Stefano Pessina, to the median of the annual total compensation of all of our employees other than our CEO. As permitted by SEC rules, we used the same median employee for our pay ratio calculation this year as we used for the calculation included in the proxy statement for each of fiscal 2019 and 2018. We believe it is reasonable to use the same median employee for purposes of the pay ratio calculation because there was no change in our employee population or in the median employee’s compensation arrangement or other material change that would significantly affect our pay ratio calculation. We identified our median employee for the fiscal 2018 pay ratio analysis using the methodology and the material assumptions, adjustments, and estimates described below.
Identification of Median Employee. The Company has a presence in 25 countries. In determining the median employee for fiscal 2018, we used our active employee population on June 1, 2018, consisting of 320,484 employees. The pay ratio disclosure rules provide an exemption for companies to exclude non-U.S. employees from the median employee calculation if non-U.S. employees in a particular jurisdiction account for five percent (5%) or less of the company’s total number of employees. We applied this de minimis exemption when identifying the median employee by excluding 2,403 employees in Germany. After taking into account the de minimis exemption, 222,235 employees in the United States and 95,846 employees located outside of the United States were considered for identifying the median employee. The total of these excluded employees represented less than 1% of our workforce.
To identify the median employee, we considered the total actual cash earnings (base salary, overtime, and bonus) for the period of June 1, 2017 through May 31, 2018 for all active employees including full-time, part-time, seasonal and employees on leave. As noted above, we are using the same median employee identified in fiscal 2018 for the fiscal 2020 pay ratio calculation.
As disclosed in the “2020 Summary Compensation Table”, our CEO had total annual compensation of $17,483,187 and our median employee had compensation of $33,396, as calculated in accordance with the summary compensation table disclosure rules but including employer provided healthcare benefits. As a result, we estimate that the ratio of our CEO’s compensation to that of our median employee was approximately 524 to 1.
84 Walgreens Boots Alliance
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Equity Compensation Plan Informationcompensation
plan information |
The following table summarizes information about our common stock that may be issued upon the exercise of options, warrants, and rights under our equity compensation plans as of August 31, 2022. | Plan Category | | Number of
Securities to
be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a) | | | Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights(1)
(b) | | Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans Excluding
Securities Reflected in
Column (a)
(c) | | Equity compensation plans approved by security holders(2) | | 25,415,293 | | | 60.08 | | 68,723,283 | Equity compensation plans not approved by
security holders(3) | | — | | | 0.00 | | — | | Total | | 25,415,293 | (4) | | 60.88 | | 68,723,283 |
| (1) | Weighted average exercise price of outstanding options warrants,only. RSUs and rights under our equity compensation plans as of August 31, 2020.| Plan Category | | Number of
Securities to
be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
(a) | | Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants and
Rights(1)
(b) | | Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans Excluding
Securities Reflected in
Column (a)
(c) | | Equity compensation plans approved by security holders(2) | | 18,785,518 | | | 67.77 | | 25,204,352 | | Equity compensation plans not approved by security holders(3) | | 88,161 | | | 33.65 | | — | | Total | | 18,873,679 | (4) | | 67.61 | | 25,204,352 |
(1) | Weighted average exercise price of outstanding options only. RSUs and Performance Sharesperformance shares do not have an exercise price and, accordingly, are not included in this calculation. | | (2) | We have two active equity incentive plans, both of which have been approved by our stockholders: the 2021 Omnibus Incentive Plan and the Walgreens Boots Alliance, Inc. Employee Stock Purchase Plan (formerly known as the 1982 Employees Stock Purchase Plan) (the “ESPP”). As of August 31, 2020, we also had outstanding equity awards that may be settled for shares of our common stock under two other plans approved by our stockholders: the Walgreen Co. Executive Stock Option Plan (as assumed by Walgreens Boots Alliance, Inc.) (the “Former Option Plan”) and the Walgreen Co. Long-Term Performance Incentive Plan (as assumed by Walgreens Boots Alliance, Inc.) (the “Former Incentive Plan”).The Omnibus Incentive Plan provides for incentive compensation to Non-Employee Directors and our officers and employees, and permits various stock-based awards. These include, but are not limited to, Stock Options, restricted stock, RSUs, Performance Shares, performance units and SARs. Pursuant to the Omnibus Incentive Plan, the number of authorized shares under the plan is reduced at two different rates depending on the type of award. Each share of common stock issuable upon the exercise of Stock Options or SARs reduces the number of shares available for future delivery under the Omnibus Incentive Plan by one share, while each share of common stock issued pursuant to “full value awards” reduces the number of shares available for future delivery by three shares. “Full value awards” are awards, other than Stock Options, SARs and awards where the participant has directly or indirectly paid the intrinsic value of the award, that are settled by the issuance of shares of common stock, including RSUs and Performance Shares. Awards that do not entitle the holder to receive or purchase shares, awards that are settled in cash, and awards that are granted in substitution for awards under a plan of an acquired entity are not counted against the aggregate number of shares available for issuance under the Omnibus Incentive Plan. As of August 31, 2020, 15,572,117 shares were available for future issuance under this plan.
The ESPP is a tax-qualified Code Section 423 stock purchase plan under which eligible employees are permitted to purchase shares of our common stock at a 10% discount. As of August 31, 2020, 9,632,235 shares were available for future issuance under this plan.
Former Plans: The Omnibus Incentive Plan consolidated into a single plan several previously existing equity compensation plans: the Former Option Plan, the Former Incentive Plan, the Walgreen Co. Broad Based Employee Stock Option Plan and the Walgreen Co. Nonemployee Director Stock Plan (collectively, the “Former Plans”). Following stockholder approval on January 9, 2013, the effective date of the Omnibus Incentive Plan, no further grants may be made under the Former Plans and shares that were available for issuance under the Former Plans and not subject to outstanding awards became available for issuance (in addition to newly authorized shares) under the Omnibus Incentive Plan. Pursuant to the Omnibus Incentive Plan, shares that are subject to outstanding awards under the Omnibus Incentive Plan, the Former Plans and the former Share Walgreens Walgreen Co. Stock Purchase/Option Plan (the “Former Share Walgreens Plan”) that subsequently are cancelled, forfeited, lapsed, or are otherwise terminated or settled without a distribution of shares become available for awards under the Omnibus Incentive Plan. The Former Option Plan was an incentive compensation plan that permitted the grant of incentive Stock Options and nonqualified Stock Options to eligible employees. The Former Incentive Plan was an incentive compensation plan that permitted the grant of restricted stock, RSUs, performance units and Performance Shares. For additional information about our equity compensation plans, see Notes 1 and 12 to the Consolidated Financial Statements included in the 2020 Annual Report.
| (3) | We have equity awards that may be settled for shares of our common stock outstanding under the Former Share Walgreens Plan. The Former Share Walgreens Plan expired on September 30, 2012. As a result, no further awards may be granted under that plan.The Former Share Walgreens Plan was a stock purchase and stock option incentive compensation plan that allowed eligible non-executive employees to buy stock (up to a specified percentage of base annual salary) during specific periods. For each share of common stock an employee purchased through the plan, the employee received from one to three options to purchase additional shares at a fixed price. The determination of the number of options was a function of the degree to which we attained pre-established performance goals. For options granted on or after October 1, 2005, the option price is the closing price of a share of common stock on the grant date. With respect to shares issued or granted under the Former Share Walgreens Plan, the applicable holding periods have been met and all outstanding options are vested and exercisable. Unexercised options expire 10 years after the date of the grant, subject to earlier termination if the optionee’s employment ends. The outstanding options under this plan as of August 31, 2020 are reflected in the table.
| (4) | Comprised of options to acquire 18,873,679 shares, 1,675,216 shares subject to outstanding RSU awards and 3,236,157 shares subject to outstanding Performance Share awards. The number of Performance Shares indicated reflects the target amount awarded for awards outstanding as of August 31, 2020; the actual number of shares issued will range between 0% and 150% of the target amount for awards granted in fiscal 2018, 2019 and 2020 based upon our performance relative to the applicable goals as determined by the Compensation and Leadership Performance Committee following the end of the applicable performance period. |
2021 Proxy Statement 85
Table of Contents
Proposal 4:
Approval of the new 2021 Omnibus Incentive Plan
| What am I voting on?
To approve the new 2021 Omnibus Incentive Plan to replace the existing 2013 Omnibus Incentive Plan.
| | | What is the Board’s voting recommendation?
| | |  | Vote FOR | | | The Board recommends a vote “FOR” Proposal 4. Valid proxies solicited by the Board will be so voted unless stockholders specify a contrary choice in their voting instructions. | | | What is the required vote?
Approval of Proposal 4 requires the affirmative vote of a majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on the matter. If you elect to abstain, the abstention will have the same effect as an “AGAINST” vote on Proposal 4.
| |
The following proposal is being submitted on behalf of management.
Proposal 4 – Approval of the new 2021 Omnibus Incentive Plan
The Board is requesting that our stockholders approve a new equity plan called the Walgreens Boots Alliance, Inc. Employee Stock Purchase Plan (formerly known as the 1982 Employees Stock Purchase Plan) (the “ESPP”). As of August 31, 2022, we also had outstanding equity awards that may be settled for shares of our common stock under three other plans approved by our stockholders: the 2013 Omnibus Incentive Plan (as assumed by Walgreens Boots Alliance, Inc.), the Walgreen Co. Executive Stock Option Plan (as assumed by Walgreens Boots Alliance, Inc.) (the “Former Option Plan”) and the Walgreen Co. Long-Term Performance Incentive Plan (as assumed by Walgreens Boots Alliance, Inc.) (the “Former Incentive Plan”).
| | The 2021 Omnibus Incentive Plan (the “Plan”)provides for incentive compensation to replacenon-employee directors and our officers and employees, and permits various stock-based awards. These include, but are not limited to, stock options, restricted stock, RSUs, performance shares, performance units and stock appreciation rights (“SARs”). Pursuant to the existing equity plan called the Walgreens Boots Alliance, Inc. 20132021 Omnibus Incentive Plan, (the “Former Plan”). If the Plannumber of authorized shares under the plan is adopted,reduced at two different rates depending on the Former Plan will betype of no further effect with respect to future grants andaward. Each share of common stock issuable upon the exercise of stock options or SARs reduces the number of shares available to be issuedfor future delivery under the Former Plan will cease to be available for grant under the Former Plan and will become available for grant under the new Plan.The Former Plan was adopted by stockholders on January 9, 2013 and was the consolidation of several legacy Walgreen Co. equity plans. In conjunction with the strategic combination of Walgreen Co. and Alliance Boots on December 31, 2014, the Former Plan was assumed by Walgreens Boots Alliance, Inc. The 60,426,181 shares authorized for issuance under the Former Plan have allowed us to provide equity awards for the last six years, including the annual grant in November 2020.
In order to continue this valuable program and to update the Company’s equity plan terms, on October 29, 2020 the Board approved the Plan, as presented, and authorized the request for 65 million shares of common stock for issuance under the Plan, subject to approval by our stockholders. We are therefore requesting that our stockholders approve the Plan, which will result in 65 million shares of common stock, plus any remaining shares under the Former Plan, as being available for issuance under the Plan. The Plan will permit the Company to continue to grant awards under the Plan, which we believe is critical for attracting, motivating, rewarding and retaining a talented team who will contribute to our success and the creation of value for our stockholders.
The Board recommends a vote of “YES” for the following reasons.
The adoption of the new 2021 Omnibus Incentive Plan will allow Walgreens Boots Alliance, Inc. to continue to award equity, which we believe is critical for attracting, motivating, rewarding and retaining a talented management team who will contribute to our success and the creation of stockholder value.
The Company’s compensation philosophy seeks to align executive compensation with the interests of our stockholders. The key to that alignment is in the ability to provide a significant portion of total compensation in the form of equity awards. The mechanism for delivering stock compensation has been through the Former Plan. Key points that we believe demonstrate the effectiveness of our compensation philosophy are:
1. | Nearly 100% of the total direct compensation delivered to our current CEO and Executive Chairman is in the form of equity (although our current CEO chose to forego any compensation for 2021).
| 2. | On average, 67% of the total direct compensation delivered to all other NEOs is in the form of equity.
| 3. | The Company has established stock ownership guidelines for all Senior Vice Presidents and above, which are described in the Executive Compensation section of this Proxy Statement, and directors, which are described in the Director Compensation section of this Proxy Statement.
| 4. | A significant portion of the Company’s director compensation program is in the form of equity.
|
86 Walgreens Boots Alliance
Table of Contents
Proposal 4
The Plan drives Company performance by linking pay and performance.
Approximately 75% of the targeted equity value for our NEOs other than our Executive Chairman is in the form of performance-based awards (Stock Options and Performance Shares). We believe that this provides a strong link between the value received by the executives and the value that our stockholders receive and provides higher compensation to executives in periods that are more successful for the Company and lower compensation to executives during periods that are less successful for the Company. The remaining targeted equity value (including 100% of the targeted equity value for our Executive Chairman) is delivered in the form of RSUs, the value of which fluctuates based on our stock price performance. Executives and stockholders are therefore aligned in driving the success of the Company by linking the majority of the awards to Company performance.
WBA relies on equity awards as a tool for recruiting and retaining key talent.
The success of our Company relies heavily on our ability to recruit, motivate and retain key talent. The long-term equity program is a key competitive element of our total compensation package, without which WBA would be challenged to recruit top talent from the marketplace. Therefore, we provide equity awards with multi-year vesting and/or performance periods as a retentive tool in order to strengthen our ability to retain top talent.
It is customary for companies to request approval from stockholders for additional shares every three to five years.
The Company has not requested additional shares from stockholders since 2014, and the shares currently available may not be sufficient for awards to be granted in fiscal 2022. If our stockholders do not approve the proposed Plan at the Annual Meeting, the shares that remain available for issuance under the Former Plan at the date of the Annual Meeting will remain available for future grants and we will continue to use the Former Plan in accordance with its terms.
Available Shares
The Board adopted the Plan to provide a tool for us to, among other things, attract, retain, motivate, and reward our executives and other employees, our Non-Employee Directors, and other persons who provide substantial services to us and our affiliates; to provide for equitable and competitive compensation opportunities, including deferral opportunities; to encourage long-term service; to recognize individual contributions and reward achievement of Company goals; and to promote the creation of long-term stockholder value by closely aligning the interests of participants with those of our stockholders. If the Plan is not approved, then we may continue to make awards under the Former Plan until such time no shares reserved under the Former Plan remain available. At that point, we will be unable to grant long-term incentive awards under the Former Plan. As of the Record Date, approximately 3,816,029 shares remained available for future awards under the Former Plan. As of the Record Date, the closing sales price perone share, while each share of our common stock as reported on NASDAQ was $38.01 per share.
Dilution and Equity Usage
We attempt to manage the levels of equity dilution and annual share usage when granting equity-based compensation. The following table provides information regarding our share usage (“burn rate”) for our most recent three fiscal years:
| | Fiscal 2020 | | Fiscal 2019 | | Fiscal 2018 | | Stock Options/Stock Appreciation Rights ("SARs") Granted | | 4,264,963 | | 3,836,793 | | 5,070,652 | | Time-based Restricted Stock/Units Granted | | 1,307,929 | | 221,766 | | 207,411 | | Performance-based Stock/Units Granted | | 1,523,720 | | 1,728,677 | | 882,008 | | Performance-based Stock/Units Vested/Earned | | 630,314 | | 668,873 | | 172,223 | | Weighted Average Basic Common Shares Outstanding (in millions) | | 879.4 | | 921.5 | | 991.0 | | Annual Burn Rate (1) | | 0.7% | | 0.5% | | 0.5% |
(1) | Defined as: Stock Options/SARs granted + time-based restricted stock/units granted + performance-based stock/units vested/earned divided by the weighted average basic common shares outstanding.
|
We anticipate that our annual burn rate will continue to be within what we believe to be market norms.
Overhang information as of the end of our most recent fiscal year (August 31, 2020) is provided in the table below:
| | As of August 31, 2020 | Stock Options/SARs Outstanding | | 18,873,679 | Weighted Average Exercise Price of Stock Options/SARs Outstanding | | $67.61 | Weighted Average Remaining Term of Stock Options/SARs Outstanding | | 6.42 years | Time-based Restricted Stock/Units Unvested & Outstanding | | 1,675,216 | Performance-based Stock/Units Unvested & Outstanding | | 3,236,157 | Overhang (1) | | 2.7% |
(1) | Defined as: Stock Options/SARs outstanding + time-based restricted stock/units unvested and outstanding + performance-based stock/units unvested and outstanding divided by common shares outstanding as of the end of the fiscal year (August 31, 2020) of 865.6 million.
|
In addition, as of August 31, 2020, 15,572,117 shares were still available for issuance under the Former Plan. As described further below, the Plan includes a fungible share pool whereby full value awards reduce shares available under the Plan by three shares as compared to Stock Options, which reduce shares available under the Plan on a one-for-one basis.
2021 Proxy Statement 87
Table of Contents
Proposal 4
Summary of the Plan
The principal features of the Plan are summarized below. This summary is qualified by reference to the complete text of the Plan set forth in Exhibit A to this Proxy Statement.
Features of the Plan
The following features of the Plan are designed to reinforce alignment between the equity compensation arrangements awardedissued pursuant to the Plan and our stockholders’ interests:
● | No discounting of Stock Options or stock appreciation rights (“SARs”);
| ● | No repricing of options or SARs without stockholder approval;
| ● | No dividends or dividend equivalents will be payable, credited or accrued with respect to options or SARs;
| ● | No dividend or dividend equivalents will be payable with respect to unearned awards;
| ● | Awards granted under the Plan are subject to our policy on recoveries of overpaid compensation and such other terms and conditions as the Committee (as defined below) may impose;
| ● | The Plan imposes a one-year minimum vesting requirement for all types of equity awards available under the Plan, other than with respect to equity awards that result in the issuance of an aggregate of up to 5% of the aggregate share reserve and Committee (as defined below) discretion to provide for accelerated or continued vesting upon a termination of employment or a change in control;
| ● | No liberal share recycling; and
| ● | No liberal definition of “Change in Control.”
|
Plan Shares
Subject to the adjustment provisions of the Plan,“full value awards” reduces the number of shares of our common stock that shall be available for issuance under the Plan shall be equal to 65,000,000, plus the number of shares of our common stock (i) available for issuance under the Former Plan as of the date on which the Plan is approvedfuture delivery by our stockholders and (ii) subject to outstanding awards under the Plan or the Former Plan and whichthree shares. “Full value awards” are canceled, expired, forfeited, settled in cash or otherwise terminated or settled without delivery of the full number of shares subject to such award. Shares granted under Stock Options or SARs will be counted against the share limit on a one-for-one basis. Full value awards are considered to be awards, other than Stock Options,stock options, SARs and awards where the participant has directly or indirectly paid the intrinsic value of the award. Any full valueaward, that are settled by the issuance of shares of common stock, including RSUs and performance shares. Awards that do not entitle the holder to receive or purchase shares, awards will be counted against the share limit as three shares for every one share subject to that award. Sharesare settled in cash, and awards that are granted in substitution for awards under a plan of an acquired company willentity are not be chargedcounted against the Plan’s share limit. Shares will not be added back to the Plan’s share limit if (i) they were not issued or delivered under a Stock Option or SAR because of a net settlement of the award, (ii) they were delivered to or withheld by us to pay the exercise price or withholding taxes on an award, or (iii) they were repurchased by us on the open market with proceeds from the payment of the exercise price of a Stock Option.
Specific limits apply to certain types of awards or the per-person value of an award. The totalaggregate number of shares available for which incentive stock options ("ISOs") may be granted may not exceed 15,000,000 shares. The overall share limit, the ISO limit, and the number and type of shares underlying any award and the exercise price of outstanding awards will be adjusted, where necessary, to reflect a corporate transaction or change in capitalization, or to prevent dilution or enlargement of participants’ rights in accordance with the terms of the Plan.
Administration
The Plan will be administered by the Compensation and Leadership Performance Committee (the “Committee”). The Committee is currently comprised of five outside non-employee directors who are intended to be independent under applicable securities laws and stock exchange rules. Committee members are appointed by the Board upon the recommendation of the Nominating and Governance Committee and the Chairman of the Board.
The Committee is authorized to select participants; issue awards and grantsissuance under the Plan in amounts and forms as they determine; impose restrictions, terms, and conditions upon an award as they deem appropriate; amend award agreements; and construe and interpret the Plan and the award agreements. The Committee may, subject to the Company’s by-laws and applicable law, delegate responsibility to any other committee of the Board or to one or more members of the Board. The Committee’s decisions are final and binding on all persons. Notwithstanding the foregoing, to the extent required by our by-laws, the Board will perform the functions of the Committee for purposes of granting awards under the Plan to Non-Employee Directors, and will have all of the powers of the Committee with respect thereto. We indemnify the Board, the Committee, and their members and delegates (including any of our employees) to the extent legally permitted.
Eligibility
All employees of WBA or any affiliate, as well as Non-Employee Directors are eligible for awards under the Plan. The Committee determines in its discretion which eligible persons will be granted awards under the2021 Omnibus Incentive Plan. As of August 31, 2020, approximately 331,0002022, 68,723,283 shares were available for future issuance under the 2021 Omnibus Incentive Plan.
| | The ESPP is a tax-qualified Code Section 423 stock purchase plan under which eligible employees are permitted to purchase shares of our common stock at a 10% discount. As of August 31, 2022, 7,454,716 shares were available for future issuance under this plan. | | Former Plans: Following stockholder approval on January 28, 2021, the effective date of the 2021 Omnibus Incentive Plan, no further grants may be made under the 2013 Omnibus incentive Plan and eight Non-Employee Directors would be eligibleshares that were available for issuance under the 2013 Omnibus Plan and not subject to participate inoutstanding awards became available for issuance (in addition to newly authorized shares) under the 2021 Omnibus Incentive Plan. Pursuant to the 2021 Omnibus Incentive Plan, if selected by the Committee, although based upon current grant practices, approximately 440 individualsshares that are eligiblesubject to receive equity-basedoutstanding awards under the 2021 Omnibus Incentive Plan, the 2013 Omnibus Incentive Plan, the Former Plans and the former Share Walgreens Walgreen Co. Stock Purchase/Option Plan (the “Former Share Walgreens Plan”) that subsequently are cancelled, forfeited, lapsed, or are otherwise terminated or settled without a distribution of shares become available for awards under the 2021 Omnibus Incentive Plan. The 2013 Omnibus Incentive Plan was an incentive compensation plan that permitted the grant of incentive stock options, nonqualified stock options, restricted stock, RSUs, performance units and performance shares. The Former Option Plan was an incentive compensation plan that permitted the grant of incentive stock options and nonqualified stock options to eligible employees. The Former Incentive Plan was an incentive compensation plan that permitted the grant of restricted stock, RSUs, performance units and performance shares. For additional information about our equity compensation plans, see Notes 1 and 13 to the Consolidated Financial Statements included in the 2022 Annual Report. |
| 2023 Proxy Statement | | 88 95 |
Table of Contents Equity compensation plan information | (3) | We have equity awards that may be settled for shares of our common stock outstanding under the Former Share Walgreens Plan. The Former Share Walgreens Plan expired on September 30, 2012. As a result, no further awards may be granted under that plan. | | The Former Share Walgreens Plan was a stock purchase and stock option incentive compensation plan that allowed eligible non-executive employees to buy stock (up to a specified percentage of base annual salary) during specific periods. For each share of common stock an employee purchased through the plan, the employee received from one to three options to purchase additional shares at a fixed price. The determination of the number of options was a function of the degree to which we attained pre-established performance goals. For options granted on or after October 1, 2005, the option price is the closing price of a share of common stock on the grant date. With respect to shares issued or granted under the Former Share Walgreens Plan, the applicable holding periods have been met and all outstanding options are vested and exercisable. Unexercised options expire 10 years after the date of the grant, subject to earlier termination if the optionee’s employment ends. The outstanding options under this plan as of August 31, 2022 are reflected in the table. | | (4) | Comprised of options to acquire 20,039,338 shares, 1,864,349 shares subject to outstanding RSU awards and 3,511,606 shares subject to outstanding performance share awards. The number of performance shares indicated reflects the target amount awarded for awards outstanding as of August 31, 2022; the actual number of shares issued will range between 0% and 150% of the target amount for awards granted in fiscal 2020, 2021 and 2022 based upon our performance relative to the applicable goals as determined by the CLP Committee following the end of the applicable performance period. |
| 96 | | Walgreens Boots Alliance, Inc. |
Table of Contents Ratification of appointment of independent registered public accounting firm | Proposal 3 | | | | | | Ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for fiscal year 2023 | |  | Vote
FOR |
What am I
voting on? | | Stockholders are being asked to ratify the appointment of Deloitte to serve as our independent registered public accounting firm for fiscal 2023. | | | | What is the Audit
Committee and
Board’s voting
recommendation? | | The Board and the Audit Committee recommend a vote “FOR” Proposal 3. Valid proxies solicited by the Board will be so voted unless stockholders specify a contrary choice in their voting instructions. | | | | What is the
required vote? | | Approval of Proposal 3 requires the affirmative vote of a majority of the shares represented in person or by proxy at the Annual Meeting. |
The Board has delegated to the Audit Committee the responsibility to hire, evaluate and, if appropriate, replace our independent registered public accounting firm. The Audit Committee has re-appointed Deloitte to serve as our independent registered public accounting firm and as auditors of our consolidated financial statements for fiscal 2023. Deloitte has served as our independent registered public accounting firm since 2002. The Audit Committee annually evaluates the performance of our independent registered public accounting firm and the senior audit engagement team, and determines whether to re-engage the current firm or consider other audit firms. Further information regarding the factors considered in this evaluation are described in “Audit Committee Report” below. At the Annual Meeting, stockholders are being asked to ratify the appointment of Deloitte as our independent registered public accounting firm for fiscal 2023. In the event of a negative vote on this proposal, the Audit Committee will reconsider its selection. Even if this appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and our stockholders. One or more representatives of Deloitte are expected to be present at the Annual Meeting. The representatives will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. Independent registered public accounting firm fees and services Pre-approval of audit and permissible non-audit services of independent auditors The Audit Committee is responsible for appointing, setting compensation for, and overseeing the work of our independent registered public accounting firm. In addition, it has established a policy concerning the pre-approval of services performed by our independent registered public accounting firm. Each proposed engagement not specifically identified by the SEC as impairing independence is evaluated for independence implications prior to our entering into a contract with the independent registered public accounting firm for such services. The Audit Committee has approved in advance certain permitted services, the scope of which is consistent with auditor independence. These services are: (i) audits or reviews of subsidiaries that are filed with government and regulatory bodies and similar reports; (ii) services associated with SEC registration statements, other documents filed with the SEC or other documents issued in connection with securities offerings (for example, comfort letters or consents), and assistance in responding to SEC comment letters; (iii) consultations with management as to the accounting or disclosure of transactions or events and/or the
Table of Contents Ratification of appointment of independent registered public accounting firm actual or potential impact of final or proposed rules, standards, or interpretations by the SEC, the FASB, the International Accounting Standards Board, the Public Company Accounting Oversight Board (the “PCAOB”) or other regulatory or standard-setting bodies; (iv) audits of employee benefit and pension plans; and (v) annual revenue certifications prepared for regulatory or commercial purposes. If the project is in a permitted category, then it is considered pre-approved by the Audit Committee. All other services require specific pre-approval by the Audit Committee. Such engagements with total fees up to and including $500,000 require the approval of the Audit Committee Chair. Such engagements with total fees greater than $500,000 require the approval of the full Audit Committee. On a quarterly basis, the Audit Committee reviews a summary listing of service fees and a description of the nature of the engagement. All audit, audit-related, and tax services performed by Deloitte for the Company and its consolidated subsidiaries in fiscal 2022 were pre-approved by the Audit Committee in accordance with the regulations of the SEC. The Audit Committee considered and determined that such provision of non-audit services during fiscal 2022 was compatible with maintaining auditor independence. Audit fees and all other fees The following table shows the fees for audit and other services provided by Deloitte for fiscal 2022 and 2021. | 2022
($ in thousands) | | 2021
($ in thousands) | | Audit Fees(1) | $14,078 | | $11,869 | | Audit-Related Fees(2) | 3,158 | | 3,609 | | Tax Fees:(3) | | | | | Compliance(4) | 1,984 | | 1,441 | | Planning and Advice(5) | 1,903 | | 2,980 | | All Other Fees(6) | 705 | | 816 | | Total: (7) | $21,828 | | $20,715 |
| (1) | Audit fees relate to professional services rendered in connection with the audit of our annual financial statements and internal control over financial reporting, review of our quarterly financial statements, and audit services provided in connection with other statutory and regulatory filings. | | (2) | Audit-related fees relate to professional services that are reasonably related to the performance of the audit or review of our financial statements. | | (3) | Tax fees relate to professional services rendered in connection with assistance with tax return preparation, tax audits, tax compliance, and tax consulting and planning services. Total tax fees were $3,887,000 in fiscal 2022 and $4,421,000 in fiscal 2021. | | (4) | Includes assistance with tax return preparation and related compliance matters, including accounting methods and tax credits. | | (5) | Includes tax planning advice and assistance with tax audits. | | (6) | All other fees relate to professional services not included in the categories above, including those related to strategic advisory services. | | (7) | The increase in fees from 2021 to 2022 reflects increased service needs due to merger and acquisition activities and information system modifications. |
| 98 | | Walgreens Boots Alliance, Inc. |
Table of Contents | Proposal 4Audit committee report |
The following Audit Committee Report shall not be deemed to be incorporated by reference into any filing we may make under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, notwithstanding any general statement contained in any such filing incorporating this Proxy Statement by reference, except to the extent we incorporate such report by specific reference. As of October 13, 2022 (the date the Company filed its Annual Report on Form 10-K for fiscal 2022), the Audit Committee was comprised of the four members named below. The Board has determined that each current member satisfies the independence, financial literacy and other requirements in the Nasdaq listing standards and applicable securities laws. Each current member is also an “audit committee financial expert” as defined by the SEC. The Audit Committee Chair has comprehensive information, technology risk and cybersecurity experience and formal qualifications as well as extensive ESG experience, including with regard to climate change and sustainability reporting. As described above under “Corporate Governance—Board Committees and Meetings,” the Audit Committee operates under a written charter adopted by the Board. The purpose of the Audit Committee includes assisting the Board in the oversight and monitoring of the Company’s: Awards
| ● | financial statements and other financial information; | | ● | independent registered public accounting firm; | | ● | internal audit department; | | ● | compliance department; | | ● | systems of internal controls (including those specific to technology and cybersecurity) and accounting policies established by the Company’s management and the Board; and | | ● | enterprise risk management. |
During fiscal 2022, the Audit Committee’s oversight responsibilities also included timely, explicit and continuing consideration of how COVID-19 impacted each of the areas above and its oversight of Deloitte discussed below. At least annually, the Audit Committee reviews the Company’s independent registered public accounting firm to decide whether to retain such firm on behalf of the Company. Deloitte has been the independent registered public accounting firm of the Company (including its predecessor, Walgreens) since May 2002. When conducting its latest review of Deloitte, the Audit Committee actively engaged with Deloitte’s engagement partners and senior leadership where appropriate and considered, among other factors: Subject
| ● | the professional qualifications of Deloitte and that of the lead audit partner and other key engagement partners relative to the termscurrent and ongoing needs of the Plan,Company; | | ● | Deloitte’s historical and recent performance on the selectionCompany’s audits, including the extent and quality of personsDeloitte’s communications with the Audit Committee related thereto; | | ● | the appropriateness of Deloitte’s fees relative to receive awards;both efficiency and audit quality; | | ● | Deloitte’s independence policies and processes for maintaining its independence; | | ● | Deloitte’s tenure as the sizeCompany’s independent registered public accounting firm and typethe potential for higher quality audit work and operational efficiencies given its depth of awards; the times at which each award will be granted, exercisable or settled; the purchase price, exercise price, or base price of an award; whether vesting will be based on performance or continued service; the manner of settlement of any award; the treatmentunderstanding of the award on terminationCompany’s businesses, operations and systems, accounting policies and practices, and internal controls; | | ● | Deloitte’s capability, expertise, and efficiency in handling the breadth and complexity of employment under various circumstances; whether vesting or settlement will be acceleratedthe Company’s operations across the globe; | | ● | Deloitte’s demonstrated professional integrity and under what conditions; and certain other terms and conditions are all setobjectivity, which is furthered by the Committee in its discretion.UnderAudit Committee-led process to rotate and select the terms of the Plan, no award granted under the plan will become exercisable or vested prior to the one-year anniversary of the date of grant; provided, however, that such restriction will not apply to awards granted under the plan with respect to the number of shares which, in the aggregate, does not exceedlead audit partner and other key engagement partners at least every five percent (5%) of the total number of shares available for awards under the Plan. This minimum vesting provision will not restrict the Committee’s ability to provide for accelerated or continued vesting upon a termination of employment or change in control.
Stock Options and Stock Appreciation Rights. The Committee is authorized to grant both incentive stock options ("ISOs"), which may give participants potentially favorable tax treatment, and non-qualified stock options. ISOs may only be granted to employees. The Committee may also grant SARs, which entitle participants to receive the excess (if any) of the fair market value to a share on the date of exercise over the SAR’s designated base price. The maximum term of each option or SAR is ten years.
The term of the award, the exercise price of an option and the base price of a SAR are determined by the Committee, but the per-share exercise price of an option and the base price of a SAR may not be less than the fair market value of a share on the date of grant. Fair market value is based on the trading price on a U.S. national securities exchange, and may, as determined by the Committee, be the last sale before or the first sale after the date the award is granted, the closing sale price on either such date, the mean of high and low prices on such date, or the average price over a 30-day period. The Committee may use different methods of determining fair market value for different purposes. No option or SAR may be repriced without stockholder approval (except in connection with a change in control or change in our capitalization, including a stock split). Repricing includes lowering the grant price of outstanding Stock Options and SARs, and cancelling outstanding Stock Options and SARs in exchange for cash, other awards, or replacement options and SARs with grant prices that are less than the grant prices of the cancelled Stock Options or SARs.
The Committee also determines and sets out in the award agreement the term of the award, when the award becomes vested, the time and form of settlement of the award, and how, in the case of an option, the participant may pay the exercise price, for an option, which may include payment in cash, in stock, surrender of other awards, and “net exercise” or “cashless exercise” to the extent permitted by law.
Restricted Stock and Restricted Stock Units ("RSUs"). The Committee may grant restricted stock and RSUs, subject to such restrictions, including risks of forfeiture and transfer restrictions, as the Committee determines. Restricted stock is issued on the date of the award and, except to the extent restricted under the terms of the Plan or any applicable award agreement, the participant will have all the rights of a stockholder with respect to the restricted stock, including the right to vote and the right to receive dividends, but dividends will be reinvested in additional restricted stock subject to the same restrictions as the underlying restricted stock. Generally the Company will hold restricted stock as long as the restrictions are in place. RSUs, in contrast, are denominated in shares but no shares are issued until the RSUs vest, and then only if the Committee has determined that the RSUs will be settled in shares rather than cash. Dividend equivalents will be paid on RSUs except as restricted under the terms of the Plan or any applicable award agreement, but are deemed reinvested in additional RSUs subject to the same restrictions.
Dividends and Dividend Equivalents. The Committee may grant dividend equivalents either on a stand-alone basis or in conjunction with another award, except that dividend equivalents may not be granted with respect to Stock Options.
Performance Shares and Performance Units. The Committee may grant Performance Shares (which are denominated in shares) and Performance Units (which are denominated in dollars but may be settled in shares), which will be subject to the achievement of performance goals over a designated performance period, and which will be subject to such other terms and conditions as the Committee may set. The Committee will establish a schedule setting forth the portion of the Performance Shares or performance units underlying an award that will be earned or forfeited based on the degree of achievement, or lack thereof, of the performance goals as of the end of the performance period. Unless settlement is deferred as provided or permitted in the award agreement, Performance Shares and Performance Units are paid out as soon as practicable after performance and any other vesting conditions are met.
Performance-Based Awards. Any award may be granted as a performance-based award, which requires satisfaction of pre-established performance goals. These consist of one or more business criteria and achievement of a targeted performance level for those criteria, as determined by the Committee. Performance may be measured over a period of any length specified by the Committee. Performance shares and performance units are examples of performance-based awards. The performance-based award may also have threshold, target and maximum levels of performance. The targeted level or levels of performance with respect to such business criteria may be established at such levels and in such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods,years or as otherwise required by applicable law or regulation; and
| | ● | the relative costs, benefits, challenges, overall advisability and potential impact of selecting a goal compared to the performance of one or more comparable companies or an index covering multiple companies. A performance award may be an award of a percentage of a performance-based bonus pool.2021different independent public accounting firm.
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2023 Proxy Statement 89 | | 99 |
Table of Contents Audit committee report Deloitte provided the Audit Committee with the written disclosures and the letter required by the applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed and confirmed with Deloitte its independence. As a result of this evaluation, the Audit Committee approved the appointment of Deloitte as the Company’s independent registered public accounting firm for the fiscal year ending August 31, 2023, subject to stockholder ratification. In addition to its appointment, the Audit Committee is directly responsible for the oversight, compensation (including negotiation of audit fees), and retention of the Company’s independent registered public accounting firm. The Audit Committee regularly monitors the audit, audit-related, tax, and other non-audit services provided by the Company’s independent registered public accounting firm, specifically considering any potential challenges to auditor independence in the short term and long term. The applicable Company policy requires the Audit Committee to approve, in advance, certain audit and permissible non-audit services to be performed by the Company’s independent registered public accounting firm in excess of certain amounts. Changes in audit and other permissible fees between years generally reflect significant acquisitions and divestitures, macroeconomic factors, changes in systems and business prospects, or other factors that create efficiencies or disruptions for the Company. The Company’s management is responsible for the Company’s internal control over financial reporting, the financial reporting process, and the preparation of the Company’s financial statements. Deloitte is responsible for performing an independent audit of the Company’s financial statements and of the effectiveness of the Company’s internal control over financial reporting, in accordance with auditing standards promulgated by the PCAOB, and expressing opinions on the conformity of the financial statements with accounting principles generally accepted in the U.S. and the Company’s effectiveness of internal control over financial reporting. The Audit Committee does not itself prepare the Company’s financial statements or perform audits, and its members are not auditors or certifiers of such financial statements. In performing its monitoring and oversight function, the Audit Committee has established procedures to receive and track the handling of complaints regarding accounting, internal control, and auditing matters. The Audit Committee regularly meets with the Company’s management, including its General Auditor, and has regular private sessions with the General Auditor without other members of management present. The Audit Committee also regularly meets with Deloitte, with and without members of the Company’s management present. The Audit Committee reviewed and discussed the Company’s financial statements with management, including its General Auditor, as well as with Deloitte. The Audit Committee discussed with Deloitte the quality of the Company’s accounting principles; the reasonableness of its critical accounting estimates and judgments; and the disclosures in its financial statements, including disclosures relating to significant accounting policies. The Audit Committee discussed with Deloitte the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. The Audit Committee also discussed with Deloitte significant disputes with management, if any. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by the Company’s management, including its General Auditor, as well as by Deloitte. Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022. Audit Committee Janice M. Babiak, Chair
Ginger L. Graham
Valerie B. Jarrett
Nancy M. Schlichting | 100 | | Walgreens Boots Alliance, Inc. |
Table of Contents Proposal 44-5 After the end of the performance period, the Committee determines the level of achievement of performance goals, and the amount actually payable under the award, and has the discretion to reduce or increase the amount payable to any participant. The Committee will specify the circumstances in which such performance awards will be paid or forfeited in the event of termination of service by the grantee or other event (including a change in control) prior to the end of a performance period or otherwise prior to settlement of such performance awards. Settlement of performance awards will be in cash, shares, other awards, or other property as provided in the award agreement and in the discretion of the Committee.
A performance award may be subject to any performance criteria selected by the Committee, including without limitation the following: (1) sales, on a corporate, divisional, or unit basis, including (i) net sales, (ii) unit sales volume, (iii) aggregate product price, (iv) same store sales, or (v) comparable store sales; (2) share price, including (i) market price per share, and (ii) share price appreciation; (3) earnings, on a corporate, divisional, or unit basis, including (i) earnings per share, reflecting dilution of shares; (ii) gross or pre-tax profits; (iii) post-tax profits; (iv) operating profit; (v) earnings net of or including dividends; (vi) earnings net of or including the after-tax cost of capital; (vii) earnings before (or after) interest and taxes (EBIT); (viii) earnings per share from continuing operations, diluted or basic; (ix) earnings before (or after) interest, taxes, depreciation, and amortization (EBITDA); (x) pre-tax operating earnings after interest and before incentives, service fees, and extraordinary or special items; (xi) operating earnings; (xii) growth in earnings or growth in earnings per share; and (xiii) total earnings; (4) return on equity, on a corporate, divisional, or unit basis, including (i) return on equity, (ii) return on invested capital, (iii) return or net return on assets, (iv) return on net assets, (v) return on gross sales, (vi) return on investment, (vii) return on capital, (viii) return on invested capital, (ix) return on committed capital, (x) financial return ratios, (xi) value of assets, and (xii) change in assets; (5) cash flow(s) on a corporate, divisional, or unit basis, including (i) operating cash flow, (ii) net cash flow, (iii) free cash flow, and (iv) cash flow on investment; (6) revenue, on a corporate, divisional, or unit basis, including (i) gross or net revenue and (ii) changes in annual revenues; (7) margins, on a corporate, divisional, or unit basis, including (i) adjusted pre-tax margin and (ii) operating margins; (8) income, on a corporate, divisional, or unit basis, including (i) net income and (ii) consolidated net income; (9) economic value added; (10) costs, on a corporate, divisional, or unit basis, including (i) operating or administrative expenses; (ii) operating expenses as a percentage of revenue; (iii) expense or cost levels; (iv) reduction of losses, loss ratios, or expense ratios; (v) reduction in fixed costs; (vi) expense reduction levels; (vii) operating cost management; and (viii) cost of capital; (11) financial ratings, on a corporate, divisional, or unit basis, including (i) credit rating, (ii) capital expenditures, (iii) debt, (iv) debt reduction, (v) working capital, (vi) average invested capital, and (vii) attainment of balance sheet or income statement objectives; (12) market or category share, on a corporate, divisional, or unit basis, including (i) market share, (ii) volume, (iii) unit sales volume, and (iv) market share or market penetration with respect to specific designated products or product groups and/or specific geographic areas; (13) stockholder return, including (i) total stockholder return, stockholder return based on growth measures or the attainment of a specified share price for a specified period of time; and (ii) dividends; and (14) objective nonfinancial performance criteria on a corporate, divisional, or unit basis, including (i) attainment of strategic and business goals; (ii) regulatory compliance; (iii) productivity and productivity improvements; (iv) inventory turnover, average inventory turnover or inventory controls; (v) net asset turnover; (vi) customer satisfaction based on specified objective goals or company-sponsored customer surveys; (vii) employee satisfaction based on specified objective goals or company-sponsored employee surveys; (viii) objective employee diversity goals; (ix) employee turnover; (x) specified objective environmental goals; (xi) specified objective social goals; (xii) specified objective goals in corporate ethics and integrity; (xiii) specified objective safety goals; (xiv) specified objective business integration goals; (xv) specified objective business expansion goals or goals relating to acquisitions or divestitures; and (xvi) succession plan development and implementation.
In establishing a performance award or determining the achievement of a performance measure, the Committee may provide that achievement of a performance measure may be amended or adjusted to include or exclude components of such performance measure, including, without limitation, foreign exchange gains and losses, asset write-downs, litigation or claim judgments or settlements, acquisitions and divestitures, changes in fiscal year, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, annual incentive payments or other bonuses, capital charges, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Company or its financial statements or changes in law or accounting principles.
Bonus Stock and Other Awards. Under the terms of the Plan, the Committee is authorized, subject to limitations under applicable law, to grant other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares or factors that may influence the value of shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares, purchase rights for shares, awards with value and payment contingent upon the performance of the Company or business units thereof or any other factors designated by the Committee, and awards valued by reference to the book value of shares or the value of securities of or the performance of specified subsidiaries, affiliates, or other business units. The Committee is authorized to grant shares as a bonus, or to grant shares of stock or other awards in lieu of obligations of the Company or an affiliate thereof to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee.
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| Table of Contents | Proposal 4Non-Director Annual Equity Grants
The Plan provides for the annual grant (on a date determined by the Board) of fully vested shares to Non-Employee Directors, unless the Board sets a different equity grant policy with respect to the Company. The number of shares is determined by dividing a dollar amount by the fair market value of a share. The dollar amount is $200,000 for fiscal 2021 but may be increased or decreased by the Committee from time to time as part of its periodic evaluation of Non-Employee Director compensation. A Non-Employee Director who joins the Board during a fiscal year receives pro-rated amounts for all elements of his or her compensation for such fiscal year. A Non-Employee Director who leaves the Board during a fiscal year is entitled to retain any portion of his or her cash retainer already received for his or her service during such fiscal year, but is not entitled to receive a pro-rated equity award on the following November 1 for such pro-rated service. Directors may elect to defer payment of the award or of cash director fees to an interest-bearing account or a deferred stock account. The Board may set a different equity award policy for Non-Employee Directors. Non-Employee Directors are also subject to a $750,000 aggregate limit on the cash and equity compensation awarded to any Non-Employee Director in a single fiscal year.
Change in Control
Unless otherwise provided in an award agreement, upon a change in control of the Company as defined in the Plan, the Committee may, without the consent of the grantee, provide for the assumption or substitution of, or adjustment to, any outstanding award, the acceleration of the vesting of the award and termination of any restrictions or performance conditions on the award (either immediately upon the change in control or upon a termination of service within a fixed time following the change in control, as determined by the Committee), or the cancellation of the award or agreement for payment to the grantee in cash or other property.
Under the terms of the Plan, a “change of control” is generally defined as: (i) certain acquisitions of 30% or more of the total fair market value or total voting power of the stock of the Company; (ii) certain acquisitions of assets that have a fair market value equal to 40% or more of the total gross fair market value of all assets of the Company; or (iii) a change in our Board resulting in the incumbent directors ceasing to constitute at least a majority of our Board over a 12-month period.
Repayment Obligation
Awards are subject to the Company’s policy as in effect from time to time on recoveries of compensation and such other terms and conditions as the Committee may impose.
Amendment and Termination
Subject to the terms of the Plan, the Board or the Committee, may amend or terminate the Plan without stockholder approval, unless such approval is required to enable the Plan to satisfy any applicable federal or state statutory or regulatory requirements. However, except as otherwise provided in the Plan, no such Board or Committee action may materially and adversely affect an outstanding award without the consent of the participant. An amendment that changes federal income taxation of a participant is not deemed materially adverse unless it results in a tax penalty on the participant.
Unless earlier terminated, the Plan will terminate at such time that no shares reserved under the Plan remain available and the Company has no further obligation with respect to any outstanding award, except no ISOs may be granted more than ten years after Board approval of the Plan or such later date as determined pursuant to a subsequent amendment of the Plan requiring stockholder approval of such plan.
The Committee will adjust the shares underlying awards and the share limits, exercise price, grant price, or purchase price of shares where appropriate to reflect any extraordinary dividend or distribution, or a recapitalization, merger, or other corporate transaction or event affecting the shares, or to prevent dilution or enlargement of the rights of a grantee.
U.S. Federal Income Tax Implications of the Plan
The following discussion of U.S. federal income tax consequences of the Plan is intended to be a summary of applicable federal law as currently in effect. It should not be taken as tax advice by participants, who are urged to consult their individual tax advisors. The following discussion does not address non-U.S., state or local taxes that might apply to awards under the Plan.
Stock options and SARs will generally have the following tax consequences: The grant of an option or SAR will create no federal income tax consequences for the grantee or the Company. A grantee will not recognize taxable income upon exercising a Stock Option that is an ISO, except for purposes of the alternative minimum tax. Upon exercising a non-qualified Stock Option, the grantee generally must recognize ordinary income equal to the amount by which the fair market value of the freely transferable and non-forfeitable shares acquired on the date of exercise exceeds the exercise price (and subject to income tax withholding in respect of an employee), and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) apply (as described below). Upon exercising a SAR, the grantee must generally recognize ordinary income equal to the cash or the fair market value of the shares received (and subject to income tax withholding in respect of an employee), and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) apply (as described below).
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Proposal 4
Upon a disposition of shares acquired from the exercise of an ISO before the end of the applicable ISO holding period, the grantee must generally recognize ordinary income equal to the lesser of (i) the fair market value of the ISO shares at the date of exercise minus the exercise price or (ii) the amount realized upon the disposition of the ISO shares minus the exercise price. Otherwise, a grantee’s sale of shares acquired by exercise of an option or SAR generally will result in a short-term or a long-term (depending on the holding period since exercise) capital gain or loss measured by the difference between the sale price and the grantee’s tax basis in such shares. The tax basis normally is the exercise price plus any other amount recognized as ordinary income in connection with the exercise of a non-qualified stock option or a SAR. We will not be entitled to any tax deduction with respect to an ISO if the grantee holds the shares for the applicable ISO holding period before selling the shares.
A grantee will not recognize taxable income at the time restricted stock is granted, and the Company will not be entitled to a tax deduction at that time, unless the grantee makes an election to be taxed at that time. If such election is made, the grantee will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of the grant in an amount equal to the excess of the fair market value for the shares at such time over the amount, if any, paid for those shares. If such election is not made, the grantee will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time the restrictions constituting a substantial risk of forfeiture lapse in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for those shares. The amount of ordinary income recognized by making the above-described election or upon the lapse of restrictions constituting a substantial risk of forfeiture is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) apply (as described below).
A grantee will not recognize taxable income at the time an RSU is granted and the Company will not be entitled to a tax deduction at that time. Upon settlement of RSUs, the grantee will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) in an amount equal to the fair market value of any shares delivered and the amount of any cash paid by the Company, and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) apply.
Section 162(m) generally limits to $1 million the amount that a publicly held corporation is allowed each year to deduct for compensation paid to the corporation’s (i) chief executive officer, (ii) chief financial officer, (iii) three most highly compensated executive officers other than the chief executive officer or chief financial officer and (iv) any employee of the corporation who was an individual described in clauses (i), (ii) or (iii) in any preceding taxable year beginning after December 31, 2016.
The foregoing is only a summary of the U.S. federal income taxation of grantees and the Company as to the grant and exercise or settlement of certain awards under the Plan. This discussion is not intended to be exhaustive, and does not provide tax guidance to participants in the Plan, as the consequences may vary with the types of awards made, the identity of the recipients, and the method of payment or settlement. The summary does not address the effects of other federal taxes (including employment taxes or excise taxes, or taxability under Section 409A) or taxes imposed under state, local, or non-U.S. tax laws. The summary is not intended or written to be used, and cannot be used, for the purposes of avoiding tax penalties.
New Plan Benefits
The benefits under the Plan that will be received by or allocated to participants are not currently determinable. Such awards are within the discretion of the Committee and the Board. As noted above, unless the Board sets a different equity grant policy with respect to the Company, the Plan provides for the annual grant (on a date determined by the Board) of fully vested shares to Non-Employee Directors. The number of shares is determined by dividing a dollar amount by the fair market value of a share. The dollar amount is $200,000 for fiscal 2021 but may be increased or decreased by the Committee from time to time as part of its periodic evaluation of Non-Employee Director compensation. A Non-Employee Director who joins the Board during a fiscal year receives prorated amounts for all elements of his or her compensation for such fiscal year.
92 Walgreens Boots Alliance
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Proposals 5-6:
| Stockholder Proposalsproposals | |  | Vote
AGAINST |
What am I
voting on? | | What am I voting on?
The following two proposals were submitted by stockholders.
| | | What is the Board’s voting recommendation?
The Board recommends a vote “AGAINST” each of the following stockholder proposals. Valid proxies solicited by the Board will be so voted on each proposal unless stockholders specify a contrary choice in their voting instructions.
| | | What is the required vote?
Approval of each of the following stockholder proposals requires the affirmative vote of a majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on such proposal. If you elect to abstain from voting on any of the following stockholder proposals, the abstention will have the same effect as an “AGAINST” vote on such proposal.
| |
The following two proposals were submitted by stockholders. If | | | | What is the stockholder proponent, or a representative who is qualified under state law, properly presents such proposal for
Board’s voting
recommendation? | | The Board recommends a vote then“AGAINST” each of the proposalfollowing stockholder proposals. Valid proxies solicited by the Board will be so voted on each proposal unless stockholders specify a contrary choice in their voting instructions. | | | | What is the
required vote? | | Approval of each of the following stockholder proposals requires the affirmative vote of a majority of the shares represented in person or by proxy at the Annual Meeting.In accordance with federal securities regulations, we have included each stockholder proposal plusMeeting and entitled to vote on such proposal. If you elect to abstain from voting on any supporting statement as submitted by the proponent. We accept no responsibility for the accuracy of any stockholder proposal or any supporting statement.
Proposal 5 – Stockholder Proposal Requesting an Independent Board Chairman
We have been advised that Kenneth Steiner, 14 Stoner Avenue, 2M, Great Neck, NY 11021, who has indicated he is a beneficial owner of at least $2,000 in market value of our common stock, intends to submit the following proposal atstockholder proposals, the Annual Meeting.
Proposal 5 – Independent Board Chairman
Shareholders request that our Board of Directors adopt a policy, and amend our governing documents as necessary to require that the Chairman of the Board of Directors to be an independent member of the Board whenever possible. Although it would be better to have an immediate transition to an independent Board Chairman, the Board wouldabstention will have the discretion to phase in this policy for the next Chief Executive Officer transition.
If the Board determines that a Chairman who was independent when selected is no longer independent, the Board shall select a new Chairman who satisfies the requirements of the policy within a reasonable amount of time.
Boeing issame effect as an example of a company changing course and naming an independent board chairman in October 2019. Boeing did not wait for the next“AGAINST” vote on such proposal.
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The following two proposals were submitted by stockholders. If the stockholder proponent, or a representative who is qualified under state law, properly presents such proposal for a vote, then the proposal will be voted on at the Annual Meeting. In accordance with federal securities regulations, we have included each stockholder proposal plus any supporting statement as submitted by the proponent. We accept no responsibility for the accuracy of any stockholder proposal or any supporting statement. Proposal 4 – Stockholder proposal requesting report on public health costs due to tobacco product sales and the impact on overall market returns We have been advised that the Sisters of St. Francis of Philadelphia, 609 South Convent Road, Aston, PA 19014, which has indicated it is a beneficial owner of at least $2,000 in market value of our common stock, along with co-filers, intends to submit the following proposal at the Annual Meeting. We will promptly provide the name, address and share ownership information of the co-filers upon a stockholder’s request. Walgreens Boots Alliance
Public Health Costs Created by the Sale of Tobacco Products
2023 RESOLVED, shareholders ask that the board commission and disclose a report on the external public health costs created by the sale of tobacco products by our company (the “Company”) and the manner in which such costs affect the vast majority of its shareholders who rely on overall market returns. The negative health and productivity impacts from consumption of tobacco products impose $1.2 trillion in social damage; tobacco’s unpriced social burden amounts to almost 3 percent of global GDP annually.1 Yet, in spite of the Company’s positioning as a “true health care company”2 and public pronouncements regarding its commitment to health and wellness3 as well as the overwhelming evidence that tobacco - a known carcinogen that impairs respiratory function - significantly prejudices the health outcomes of smokers, and particularly smokers infected with COVID-19, the Company continues to sell tobacco products in its stores. These public health costs, year after year, are devastating to economic growth and further compound the financial devastation wrought by the COVID-19 pandemic. Yet the Company does not disclose any methodology to address the public health costs of its tobacco sales. Thus, shareholders have no guidance as to costs the Company is externalizing and consequent economic harm. This information is essential to shareholders, the majority of whom are beneficial owners with broadly diversified interests. | 1 | https://www.cdc.gov/tobacco/data_statistics/fact_sheets/economics/econ_facts/index.htm | | 2 | Walgreens CEO succession.Support for proposals to appoint an independent board chair received 17% higher support at U.S. companies in 2020. Two such proposals received majority support due to management oversight failings. These two companies were Baxter International, which had to restate its financial results in March 2019, and Boeing, which experienced two fatal crashes of its Boeing 737 MAX airliners which in turn grounded the entire worldwide fleet of 737 MAX airliners for more than 18 months.
Since management performance setbacks often result in higher support for this proposal topic, the mere submission of this proposal will be an incentiveStefano Pessina on comparing strategy with CVS (cnbc.com)
| | 3 | https://www.walgreensbootsalliance.com/about-us/living-our-values-vision-and-purpose |
Table of Contents Stockholder proposals Our company has signed the Business Roundtable Statement on the Purpose of a Corporation, which reads, “we share a fundamental commitment to all of our stakeholders ... We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” But the Company undermines that commitment and ultimately the interests of its diversified shareholders by not disclosing the social and environmental costs and risks imposed on stakeholders, even when these costs and risks threaten society, the economy and the performance of other companies. All stakeholders are unalterably harmed when companies impose costs on the economy that lower GDP, which reduces equity value. While the Company may profit by ignoring costs it externalizes, diversified shareholders will ultimately pay these costs, and they have a right to ask what they are. The Company’s prior disclosures do not address this issue, because they do not address the public health costs that the company’s tobacco sales impose on shareholders as diversified investors who must fund retirement, education, public goods and other critical social needs. This is a separate social issue of great importance. A report would help shareholders determine whether these externalized costs and the economic harm they may create ultimately serve their interests. The board’s statement in opposition to proposal 4 The Board has carefully considered this stockholder proposal and recommends that stockholders vote AGAINST the proposal because, as described below, the Board believes that the requested report is not necessary or in our stockholders’ best interests. Commissioning a report to extrapolate the Company’s impact on public health costs and overall market returns is not practicable and not an appropriate use of Company resources. We believe the requested report is not practical and would require a variety of assumptions and considerable external experts in order to accurately implement the proponents’ request that the Company quantify the impact of a singular aspect of the Company’s operations (i.e., the sale of one type of product) on the global economy or on stockholders worldwide who hold diversified portfolios. Further, we disagree with the proponents’ assertion that this information is essential to stockholders; when the Company received a nearly identical proposal at last year’s annual meeting, the proposal received support from less than 12% of the votes cast at the annual meeting. We also disagree that the Company’s commitment to its stockholders is diluted in any way by not disclosing the Company’s impact on external public health costs generally, and we do not believe the requested report would meaningfully add to the wealth of information and expertise otherwise available to globally diversified investors. The Company already limits sales of tobacco products and is committed to helping people quit tobacco. The Company touches millions of lives around the world every day, through the medicines we dispense and distribute, our convenient retail stores, and our health and beauty products. We deliver healthcare and support communities through both our day-to-day operations and our business values. The Company continually reviews and assesses its product assortment, including tobacco. We value the opinions of stakeholders on this topic and have engaged with a number of stockholders and other stakeholders in recent years on this topic. Outside of North America, the Company’s pharmacy businesses do not sell tobacco products. In February 2020, Walgreens stores ceased selling e-cigarette products, a decision that was taken as health officials examined the issue and as a number of U.S. states and municipalities developed regulations regarding the sale of these products. In the U.S., Walgreens has de-emphasized tobacco products. We have a zero-tolerance policy that prohibits the sale of tobacco products to those under 21, and any employee violating the policy is subject to immediate termination. We require age verification from anyone purchasing these products, regardless of age, in all of our U.S. stores. Store employees are trained on this policy and signs notify customers of the identification requirements. In addition to these measures, Walgreens has developed a compliance monitoring program that employs data analytics to review all tobacco sales transactions for compliance with our policies on sales of age-restricted products. Walgreens is also committed to having pharmacy play a role in helping people quit tobacco. Walgreens pharmacists and technicians are trained to support a patient’s attempt to quit. Walgreens also offers digital support tools, prescription and over-the-counter products and an incentive program through the myWalgreens Health Goals platform to encourage and support our customers’ choices regarding their use of tobacco products. In fiscal 2022 we saw an increase in our sales of smoking cessation products in our stores, compared with fiscal 2021, and in the same period sales of cigarettes and e-tobacco products decreased | 102 | | Walgreens management to perform better leading up to the 2021 annual meeting.Now is an ideal time to transition to an independent board chairman. Walgreens stock has lost 50% of its value since November 2018. Plus our Lead Director, William Foote, had more than 23-years long tenure at Walgreens. Long-tenure can impair the independence of a director — and Mr. Foote again received the highest number of against-votes at the 2020 annual meeting — 52 million against-votes. Nancy Schlichting, who chaired the Walgreens Executive Pay Committee, was a close second — 51 million against-votes.
It was thus not a surprise that Walgreens executive pay received more than 2-times as many against votes as Ms. Schlichting in 2020.
Please vote yes:
Independent Board Chairman—Proposal 5Boots Alliance, Inc.
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Table of Contents Stockholder proposals by 16 percent. In 2021, the Company decided to terminate all promotional programs with regard to tobacco products in an effort to reduce the engagement of tobacco with our customers. Since its inception in October 2015 and as of August 31, 2022, the “Walgreens Quit Smoking” page on the Company’s website, which features expert tips and treatments and provides tools to help individuals stop smoking has received more than 460,000 visits. In addition, during fiscal 2022, more than 500 team members completed a stop smoking program, which included a personalized plan, discussion with a trained pharmacist and free nicotine replacement therapy patches or gum. The Company is committed to advancing public health, as demonstrated by the material impact we have had in promoting health and wellness in communities we serve around the world. We deliver healthcare and support communities through both our day-today operations and our business values. These essential roles are central to fulfilling our purpose to help people live more joyful lives through better health. Healthcare is at the center of our strategy, reflecting our operations and our corporate vision to be the leading partner in reimagining local healthcare and well-being for all. Our public health efforts are embedded in our business strategy, which includes commitments to serve the needs of each neighborhood and create greater access for every person in every community addressing all dimensions of physical, emotional and mental health. Through our business activities, advocacy work and ESG initiatives, we engage with local communities to improve societal health and well-being, especially in markets with large populations of uninsured and underinsured people. Each year we lead multiple programs across our Company to promote our purpose. For example, we have programs and campaigns to improve access to affordable, quality healthcare and awareness about critical health issues, with a specific focus on health equity, and have invested significant resources in our efforts to combat opioid abuse and prevent overdose-related deaths. We also have active partnerships to help support people living with cancer, empower young people and combat hygiene poverty. Just in fiscal 2021, the Company helped provide a total of 70 million immunizations for children in developing countries, raised over $20 million for the Susan G. Komen and The Leukemia & Lymphoma Society, and raised more than $21 million for Red Nose Day, which supports programs to end child poverty and ensure a healthy future for all children, which brings the total raised by the Company for Red Nose Day since 2016 to $240 million. Many of our efforts as a Company are focused on striving to ensure healthcare is accessible and equitable for everyone, no matter their race, ethnicity or location. We believe that disparities in care lead to disparities in health and that communities and patients experiencing health disparities face more barriers to health and wellness services and poorer health outcomes. We established our Walgreens Chicago Health Equity Incubator pilot in Chicago in August 2020 with one store. The purpose of the incubator is to address health disparities through pharmacist provided patient – and community-centered healthcare services. Three months later, it expanded to 15 more stores on the South and West sides of Chicago. We have also increased collaborations with healthcare service providers covered on our Walgreens app, which helps to increase access. As of the end of fiscal 2021, 34 million consumers had participated in health education initiatives through our website. Finally, we have also continued our efforts on the front lines of combating the COVID-19 pandemic. The Company has invested considerable resources in providing support in our communities throughout the pandemic. The global pandemic has validated the role of pharmacy in local communities, as we have administered millions of vaccines, completed millions of COVID-19 tests and fulfilled millions of same-day orders. Our pharmacists are trusted, expert voices to help people stay safe and healthy from the virus. * * * We remain dedicated to our purpose: more joyful lives through better health through our contributions to healthy communities, a healthy planet, a sustainable marketplace and an inclusive workplace. In spite of the challenging times, we remain committed to serving our communities and driving our efforts to care for our team members, customers, business partners and other stakeholders. We believe that the Company’s focus and resources would be better spent on furthering these goals, which clearly support public health, instead of commissioning the requested report, which we do not believe would provide meaningful new information to stockholders. The Board recommends that stockholders vote AGAINST Proposal 4. Valid proxies solicited by the Board will be so voted unless stockholders specify a contrary choice in their voting instructions.
20212023 Proxy Statement 93 | | 103 |
Table of Contents Stockholder proposals Proposal 5 – Stockholder proposal requesting an independent board chairman We have been advised that Kenneth Steiner, 14 Stoner Avenue, 2M, Great Neck, NY 11021, who has indicated he is a beneficial owner of at least $2,000 in market value of our common stock, intends to submit the following proposal at the Annual Meeting. Proposal 5 – independent board chairman Shareholders request that the Board of Directors adopt an enduring policy, and amend the governing documents as necessary in order that 2 separate people hold the office of the Chairman and the office of the CEO as follows: Whenever possible, the Chairman of the Board shall be an Independent Director. The Board has the discretion to select a Temporary Chairman of the Board who is not an Independent Director to serve while the Board is seeking an Independent Chairman of the Board on an accelerated basis. The Chairman shall not be a former employee of the company. The roles of Chairman and CEO are fundamentally different and should be held by 2 directors, a CEO and a Chairman who is completely independent of the CEO and our company. The job of the CEO is to manage the company. The job of the Chairman is to oversee the CEO and management. Management said that the Boards current leadership structure provides effective oversight. The objective of this proposal is to improve the effectiveness of Board oversight. Better is not the enemy of good. There are too many challenges in today’s business environment for one person to hold the 2 most important jobs at a company with 315,000 employees. Plus in a recent 5-year period Walgreens stock fell from $77 to $39. Please vote yes: 
Independent Board Chairman – Proposal 5 The board’s statement in opposition to proposal 5 The Board has carefully considered this stockholder proposal and recommends that stockholders vote AGAINST the proposal for the following reasons: The Company’s Board leadership structure should be tailored to the Company’s evolving needs and not limited to the stockholder proposal’s “one-size-fits-all” approach. Decisions regarding the Board’s leadership structure are of critical importance to the functioning of the Board and the Company. The Company’s directors have a fiduciary duty to regularly consider the most appropriate Board leadership structure in light of the Company’s specific and evolving circumstances. The Board believes that it should not be constrained by a policy mandate when making decisions related to the leadership structure of the Company and that these decisions must be based on the application of business judgment and consideration of relevant circumstances to meet the unique business needs of the Company. Accordingly, as discussed above under “Corporate Governance—Board Structure—Board Leadership Structure,” our governing documents provide the Board with the flexibility to select the most appropriate Board leadership structure for the Company, including selecting a Lead Independent Director to help promote robust independent leadership on the Board when our Chairman is also our Chief Executive Officer or another director who does not qualify as independent. Our Board believes that the Company and its stockholders benefit from this flexibility, and that the Board is best positioned to make this determination given our directors’ knowledge of Contents
Proposals 5-6
The Board’s Statement in Opposition to Proposal 5
The Board has carefully considered this stockholder proposal and recommends that stockholders vote AGAINST the proposal for the following reasons:
The Company’s Board leadership structure should be tailored to the Company’s evolving needs and not limited to the stockholder proposal’s “one-size-fits-all” approach.
The Company’s directors have a fiduciary duty to regularly consider the most appropriate Board leadership structure in light of the Company’s specific and evolving circumstances. Accordingly, as discussed above under “Governance—Board Structure—Board Leadership Structure,” the Company’s by-laws provide the Board with the flexibility to select the most appropriate Board leadership structure. This flexibility benefits the Company and its stockholders because the Board is best positioned to evaluate the optimal leadership structure for the Company based upon the Company’s leadership team, strategy, challenges and opportunities over time. Arbitrarily limiting the ability of the Board to determine the most effective leadership structure for the Company on a case-by-case basis restricts the Board from protecting and enhancing long-term stockholder value. The Board believes that it is in the best interests of our stockholders for the Board to continue to determine on a case-by-case basis the most effective leadership structure for the Company, rather than take the stockholder proposal’s rigid, “one-size-fits-all” approach to Board leadership.
The Board’s current leadership structure provides effective, independent Board oversight.104Our current Board leadership structure is designed to meet the unique business needs of the Company and to build on the strengths of our Board. Each year the Nominating and Governance Committee reviews and makes recommendations on the appropriate governance framework for our Board leadership. The Nominating and Governance Committee takes into consideration governance best practices, feedback from stockholders and the facts and circumstances of the Company and Board. As described in more detail in “Governance—Board Structure—Board Leadership Structure,” the Board believes that its current leadership structure of a Lead Independent Director, an Executive Chairman and an Executive Vice Chairman allows it to provide effective, independent oversight of the Company. The appointment of an executive chairman who is not the CEO is an accepted practice in the United Kingdom,
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Table of Contents Stockholder proposals The Board’s current leadership structure provides effective, independent Board oversight. Our current Board leadership structure is designed to meet the unique business needs of the Company and to build on the strengths of our Board. Each year the Nominating and Governance Committee reviews and makes recommendations on the appropriate governance framework for our Board leadership. The Nominating and Governance Committee takes into consideration governance best practices, feedback from stockholders and the facts and circumstances of the Company and Board. The Company has had a separate Chairman and Chief Executive Officer since 2009. Our current Board leadership structure includes Stefano Pessina serving as Executive Chairman of the Board, Rosalind Brewer serving as CEO, and Ginger Graham serving as Lead Independent Director. As described in more detail in “Corporate Governance—Board Structure—Strong Independent Board Leadership,” this structure provides for leadership of the Board that consists of a strong independent director with substantial structural influence, a non-independent member who has extensive experience in the Company’s industry and a unique understanding of the Company’s operations, and a CEO who has unfettered access to both the Lead Independent Director and Executive Chairman as resources in developing and executing the Company’s strategy. We believe our Board leadership structure has served the Company well since its adoption, with the election of a strong lead independent director being critical to provide robust independent leadership on the Board. Since the Chairman of the Board currently is not an independent director, the Corporate Governance Guidelines require the independent directors to select a Lead Independent Director who is vested with significant responsibilities. Our Lead Independent Director is elected annually by the independent directors in executive session with no non-independent directors or management present. Ms. Graham was appointed as our Lead Independent Director in October 2022 as the successor to Bill Foote, who had served as Lead Independent Director since 2015. Ms. Graham was selected by her fellow independent directors in recognition of her extensive understanding of the Company’s governance framework and ability to effectively oversee and enhance it, as well as her effective leadership capabilities and communication skills and demonstrated ability to serve as a judicious resource for other directors and facilitator of conversations among the Board and with management. As Lead Independent Director, Ms. Graham’s responsibilities include: | ● | Presiding at all meetings of the independent directors and all meetings of the Board at which the Chairman of the Board currently is not an independent director,present; | | ● | Encouraging and facilitating the Corporate Governance Guidelines require the independent directors to select a Lead Independent Director who is vested with significant responsibilities.The Board believes that this structure is optimal at this time because it allows our CEO to focus on leading our business and operations, which is particularly critical given the ongoing COVID-19 global pandemic. At the same time, the Executive Chairman can focus on leadership of the Board, including calling and presiding over its meetings and preparing meeting agendas in collaboration with our CEO and the Lead Independent Director, while working collaboratively with senior management. Similarly, the Lead Independent Director can provide leadership for independent oversight of executive management by encouraging active participation of all directors, servingdirectors;
| | ● | Serving as a liaisoncommunication facilitator between the CEO and supplemental channelother members of senior management on the one hand and the independent and non-management directors on the other hand (without inhibiting direct communication between independentsenior management and other directors), and between individual directors and the Board, including by: |
| ● | Providing the CEO and other members of senior management with feedback as determined in executive sessions; | | ● | Being available to discuss with independent and non-management directors any concerns they may have and, as appropriate, relaying any concerns to the full Board and/or the CEO or other members of senior management; and | | ● | Being a sounding board and advisor to the CEO and/or other members of senior management regarding her concerns and those of the independent directors; |
| ● | Approving, in consultation with the Executive Chairman of the Board and other members of senior management to the extent practicable, the information to be provided to the Board in preparation for and at Board meetings, and consulting with directors as to their information needs; | | ● | Approving Board meeting agendas after conferring with the Executive Chairman of the Board, as appropriate, including adding agenda items in her discretion; | | ● | Approving Board meeting schedules to provide sufficient time for discussion of all agenda items; | | ● | Calling meetings of the independent directors in her sole discretion, as and leadingwhen required; | | ● | Leading the Board’s annual evaluation of the Executive Chairman and the CEO. The current Lead Independent Director, Mr. Foote, was selected by his fellow independent directors in recognition of his skills in overseeing the Company’s strong governance policies and practices and his overall leadership abilities. Moreover, the independent directors of the Board meet regularlyand CEO; | | ● | Making herself available to advise the Committee chairs in executive sessionsfulfilling their designated roles and responsibilities to the Board; | | ● | Upon the reasonable request of a major stockholder, making herself available for consultation and direct communication with such stockholder where appropriate; and | | ● | Performing such other functions as the Board or other directors may request. |
Table of Contents Stockholder proposals The Board believes that this structure is optimal at this time because it allows our CEO to focus on leading our business and operations, which is particularly critical given the Company’s transformation into healthcare and need to execute on its strategic plan. At the same time, the Executive Chairman can focus on leadership of the Board, including calling and presiding over its meetings and preparing meeting agendas in collaboration with our CEO and the Lead Independent Director, while working collaboratively with senior management. Similarly, the Lead Independent Director can provide leadership for independent oversight of executive management by (i) encouraging active participation of all directors, (ii) leading discussions of sensitive matters with independent directors and serving as a liaison and supplemental channel of communication between independent directors and the management directors and (iii) serving as a sounding board and advisor to the management directors. The Company’s corporate governance policies and practices promote effective, independent Board oversight. The Board believes that a commitment to strong corporate governance standards is an essential element of enhancing long-term stockholder value in a sustainable manner. The Board believes that its commitment to good governance that provides independent oversight is demonstrated in part by the continuous implementation of best governance practices, including: | ● | Annual Board Elections — Directors are elected annually and by a majority of the votes cast in uncontested director elections; | | ● | Stockholder Rights — Our stockholders have cumulative voting rights, the right to call special meetings and a market-standard proxy access right; | | ● | Majority Independent Board — Eight out of 10 of our Board nominees are independent; Ms. Brewer, our CEO, and Mr. Pessina, our Executive Chairman, are the only director nominees who are not independent. The Company’s Corporate Governance Guidelines require that the Board consist of a substantial majority (at least two-thirds) of independent directors; | | ● | Active and Experienced Board — Our directors are presided overhighly-qualified and engaged with the relevant business experience and skills to oversee management; | | ● | Director Succession Planning and Board Refreshment — Our Nominating and Governance Committee oversees succession planning for Board and Committee membership and allows the Board to plan for replacement of departing director skill sets and committee leadership and membership. Mr. Foote, in his prior role as Chair of the Nominating and Governance Committee, led a robust succession planning program for the Board, which, excluding Ms. Brewer’s addition to the Board, has resulted in the addition of four new directors since October 2020. As our new Nominating and Governance Committee Chair, Ms. Graham will continue the robust program; | | ● | Stockholder Engagement Program — We value an open dialogue with our stockholders, and we believe that regular communication with our stockholders and other stakeholders is a critical part of enabling our long-term success. We engage with our stockholders through a continuous engagement program which is management-led and overseen by the Board. More information regarding our robust stockholder engagement program can be found on pages 8, 31 and 61; | | ● | Robust Board Evaluation and Director Peer Review Process — The Nominating and Governance Committee oversees an annual evaluation process led by the Lead Independent Director and each director completes an annual self-evaluation of the Board and the committee(s) on which he or she serves. The results of this annual self-evaluation are discussed by the full Board and each committee, as applicable, and changes to the Board’s and its committees’ practices are implemented as appropriate. In addition, the Lead Independent Director typically conducts a confidential director peer review process to obtain candid feedback with no membersregard to contributions of other directors and the Board as a whole. The Executive Chairman in turn performs this peer review process with regard to the Lead Independent Director; | | ● | Third-Party Board Evaluations — In order to enhance our Board effectiveness and continually improve our governance practices, in 2022, the Nominating and Governance Committee introduced periodic third-party director evaluations as a new component of its Board evaluation program. The Nominating and Governance Committee believes that third-party evaluations will strengthen Board effectiveness as the third party will bring broad market insight and an objective, candid perspective on a wide range of governance matters, including board dynamics, structure and composition, information practices, meeting schedules and agendas, decision-making and overall effectiveness. In years that third-party evaluations are utilized, currently anticipated to be at least every three years, the evaluations will be conducted along with our standard self-evaluations and in lieu of the Company’s standard confidential peer review process; | | ● | Independent Standing Board Committees — The Board’s Audit Committee, Compensation and Leadership Performance Committee, Finance and Technology Committee and Nominating and Governance Committee are each composed entirely of independent directors. Each committee is led by an independent director that the Board believes has the specific skills and attributes to effectively lead the respective committee. This vests the independent directors with oversight of critical matters, such as the integrity of the Company’s financial statements, the Company’s enterprise risk management function, the compensation of executive officers, the annual self-evaluation of the Board and its committee, and the Company’s material financing and capital expenditure transactions and technology strategy; and |
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Table of Contents Stockholder proposals | ● | Executive Sessions of the Independent Directors — Our independent directors hold regularly scheduled executive sessions without our management present. These executive sessions of independent directors are chaired by our Lead Independent Director. During these executive sessions, the independent directors discuss matters of concern as well as any matter they deem appropriate, including evaluations of the Executive Chairman and the CEO, Board meeting matters and Board effectiveness. The Company’s corporate governance policies and practices promote effective, independent Board oversight.
In addition, the Board has adopted corporate governance policies and practices that promote a strong and effective Board that provides independent oversight. For example:
● | Directors are elected annually and by a majority of the votes cast in uncontested elections; | ● | Stockholders have meaningful proxy access and special meeting rights and cumulative voting; | ● | The Company’s Corporate Governance Guidelines require that the Board consist of a substantial majority (at least two-thirds) of independent directors. Currently, nine of the Company’s eleven directors qualify as independent; | ● | The Audit Committee, the Compensation and Leadership Performance Committee, the Nominating and Governance Committee and the Finance Committee are comprised entirely of independent directors. This vests the independent directors with oversight of critical matters, such as the integrity of the Company’s financial statements, the Company’s enterprise risk management function, the compensation of executive officers, the annual self-evaluation of the Board and its committees, and the Company’s material financing and capital expenditure transactions; | ● | The Company has demonstrated a strong commitment to Board refreshment and to having highly qualified, independent voices on the Board. Of the Board’s nine independent directors, five have joined the Board since January 1, 2012; and | ● | The Nominating and Governance Committee annually evaluates each director and recommends to the Board whether each should be nominated for election to a one-year term. |
* * * As a result of the above information, the Board believes that the rigid approach to the Company’s leadership structure requested by the proposal is not necessary and not in the best interest of our stockholders. The Board believes it is best positioned to determine the most effective leadership structure for the Company based on the application of business judgment and consideration of the relevant circumstances currently facing the Company. The Board recommends that stockholders vote AGAINST Proposal 5. Valid proxies solicited by the Board will be so voted unless stockholders specify a contrary choice in their voting instructions. | 2023 Proxy Statement | | 94 Walgreens Boots Alliance107 |
Table of Contents | Proposals 5-6Questions and answers about
the proxy materials and the
annual meeting |
Proposal 6 – Stockholder Proposal Requesting ReportQ: | | If I received a Notice of Internet Availability, how may I receive proxy materials? | | A: | | We use the “e-proxy” rules of the SEC, which allow companies to furnish their proxy materials over the Internet instead of mailing printed copies of the proxy materials to each stockholder. As a result, we are mailing to most of our stockholders a notice about the Internet availability of the proxy materials (the “Notice of Internet Availability”), which contains instructions on how Health Risks from COVID-19 impactto access this Proxy Statement, the Company's Tobacco Sales Decision-Makingaccompanying Notice of 2023 Annual Meeting of Stockholders, and the 2022 Annual Report online. | | | If you received the Notice of Internet Availability by mail, you will not automatically receive a printed copy of the proxy materials in the mail. Instead, the Notice of Internet Availability instructs you on how to access and review all of the important information contained in the proxy materials and how you may submit your proxy. The Notice of Internet Availability also contains information about how stockholders may, if desired, request a printed copy of these proxy materials. | | | Stockholders who do not receive the Notice of Internet Availability will receive a printed copy of these proxy materials by mail unless they have previously requested electronic delivery. We are providing notice of the availability of those materials by email to those stockholders who have previously elected to receive the proxy materials electronically. The email contains a link to the website where those materials are available, as well as a link to the proxy voting website. | | Q: We have been advised that the Sisters
| | How many shares are entitled to vote? How many votes per share may I cast? | | A: | | Stockholders of St. Francis of Philadelphia, 609 South Convent Road, Aston, PA 19014, along with co-filers, which has indicated it is a beneficial owner of at least $2,000 in market valuerecord of our common stock intendsas of the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date, 862,334,230 shares of our common stock were outstanding. | | | Our stockholders have cumulative voting rights in the election of directors (Proposal 1) and one vote per share on all other matters. Cumulative voting allows a stockholder to multiply the number of shares owned by the number of directors to be elected and to cast an equal number of votes for each of the 10 nominees to the Board, distribute their votes among as many nominees as they choose, or cast all their votes for one nominee. | | Q: | | What is the difference between holding shares as a stockholder of record and as a beneficial owner? | | A: | | Most of our stockholders hold their shares beneficially through a broker, bank, or other nominee rather than directly in their own name. There are some distinctions between shares held of record and shares owned beneficially, specifically: | | | Shares held of record: If your shares are registered directly in your name with our transfer agent, EQ Shareowner Services, then you are considered the stockholder of record with respect to those shares, and we are sending these proxy materials directly to you. As a stockholder of record, you have the right to grant your voting proxy directly to us or to vote at the Annual Meeting. If you received your proxy materials by mail, we have enclosed an accompanying proxy card for you to use. You may also submit voting instructions via the Internet or by telephone by following the instructions on the accompanying proxy card or Notice of Internet Availability, as described below under “How can I vote my shares without attending the Annual Meeting?” If you are a stockholder of record and choose to cumulate your votes in the election of directors, you must notify us in writing at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary or at WBABoard@wba.com and such notice must be received by the Company prior to the Annual Meeting or, if you vote in person at the Annual Meeting, notify the chair of the Annual Meeting prior to the commencement of voting. | | | Shares owned beneficially: If your shares are held in a brokerage account or by a broker, bank or other nominee, you are considered the beneficial owner of shares held in street name. Consequently, these proxy materials are being forwarded to you by your broker, bank, or other nominee, which is considered the stockholder of record with respect to those shares. | | | As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account, and you are also invited to attend and vote your shares at the Annual Meeting. However, because you are not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you request and receive |
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Table of Contents Questions and answers about the proxy materials and the annual meeting | | a valid legal proxy from your broker, bank, or other nominee. Your broker, bank, or other nominee has provided a voting instruction form for you to use to direct them regarding how to vote your shares. Please instruct your broker, bank, or other nominee how to vote your shares using the voting instruction form you received from them or vote at the Annual Meeting. If you hold shares through a broker, bank, or other nominee and choose to cumulate your votes in the election of directors, you should contact them. | | Q: | | Can I attend the Annual Meeting? How do I pre-register? | | A: | | In addition to our personnel and guests, only the following persons may attend the Annual Meeting: | | | ●A Company stockholder as of the Record Date, or one named representative in lieu thereof; and ●One guest of such stockholder or named representative. | | | Any stockholder, its named representative and/or guest who attends the Annual Meeting must be pre-registered and obtain an admission ticket in advance. Stockholders will need the 16-digit control number printed on the Notice of Internet Availability, voter instruction form or proxy card and, if applicable, will need to pre-register their named representative and any guest thereof. You should follow the instructions under “Additional Information—Attending the Annual Meeting” below to pre-register and obtain an admission ticket for yourself, your named representative, or any guest. Attendees must be pre-registered by no later than 11:59 p.m., Eastern Time, on Thursday, January 19, 2023. | | | For admission to the Annual Meeting, each attendee must present (i) a valid, government-issued photo identification and (ii) the above-referenced admission ticket in the attendee’s name. Whether or not you attend the Annual Meeting, the event will be made available via webcast on our website at https://investor.walgreensbootsalliance.com. Since seating will be limited, admission to the Annual Meeting will be on a first come, first served basis. | | | A webcast replay of the entire meeting will be posted to our Investor Relations website at https://investor.walgreensbootsalliance.com following the Annual Meeting. | | Q: | | How can I vote my shares at the Annual Meeting? | | A: | | Shares held directly in your name as the stockholder of record may be voted in person at the Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that you vote in advance, as described below under “How can I vote my shares without attending the Annual Meeting?” so that your vote will be counted if you later decide not to attend the Annual Meeting. | | | Shares held in street name through a brokerage account or by a broker, bank or other nominee may be voted in person at the Annual Meeting by you only if you obtain a valid legal proxy from your broker, bank or other nominee giving you the right to vote your shares. | | Q: | | How can I vote my shares without attending the Annual Meeting? | | A: | | Whether you hold shares directly as the stockholder of record or beneficially in street name, you may vote by proxy or by submitting a voting instruction form without attending the Annual Meeting. | | | Shares held of record: If you hold your shares directly as the stockholder of record and you received a printed copy of the proxy materials by mail, you may vote without attending the Annual Meeting by one of the following methods: | | | ●By Mail: Complete, sign and date the enclosed proxy card and return it in the prepaid envelope provided; ●By Telephone: Call the toll-free telephone number set forth on the proxy card and follow the recorded instructions; or ●By Internet: Go to https://www.proxyvote.com and follow the instructions on the website. | | | Please refer to the specific instructions set forth on the proxy card you received. | | | If you are a stockholder of record and you received a Notice of Internet Availability, you may vote without attending the Annual Meeting by accessing the secure Internet website registration page identified on the Notice of Internet Availability and following the instructions. Alternatively, you may vote by mail or telephone if you request a printed copy of the proxy materials by calling the toll-free telephone number set forth on the Notice of Internet Availability. Please refer to the specific instructions set forth in the Notice of Internet Availability you received. | | | Please note that the Internet and telephone voting facilities for stockholders of record will close at 11:59 p.m., Eastern Time, on January 25, 2023. | | | Shares held beneficially: If you hold your shares in street name through a brokerage account or by a broker, bank or other nominee, you should have received instructions on how to vote your shares or how to instruct your broker, bank or other nominee to vote your shares. Please follow their instructions carefully. If you give the broker voting instructions, your shares will be voted as you direct. Please note that brokers, banks and other nominees may not vote your shares on non-routine matters in the absence of specific instructions from you, so please provide your voting instructions so your vote can |
Table of Contents Questions and answers about the proxy materials and the annual meeting | | be counted. The determination of whether a proposal is “routine” or “non-routine” will be made by the NYSE or by Broadridge Financial Solutions, our independent agent to receive and tabulate stockholder votes, based on NYSE rules that regulate member brokerage firms. If a proposal is deemed “routine” and you do not give instructions to your broker or nominee, they may, but are not required to, vote your shares with respect to the proposal. If the proposal is deemed “non-routine” and you do not give instructions to your broker or nominee, they may not vote your shares with respect to the proposal and the shares will be treated as broker non-votes. | | | If you hold your shares in street name through a brokerage account or by a broker, bank or other nominee, then you generally may vote without attending the Annual Meeting by one of the following methods: | | | ●By Mail: If you received a printed copy of the proxy materials, you may vote by signing, dating and returning the voting instruction card sent to you by your broker, bank, or other nominee in the pre-addressed envelope provided; or ●By Methods Listed on Voting Instruction Card: Please refer to your voting instruction card or other information provided by your broker, bank or other nominee to determine whether you may provide voting instructions by telephone or electronically on the Internet, and follow the instructions on the voting instruction card or other information provided by the broker, bank or other nominee. | | Q: | | Can I change my vote or revoke my proxy? | | A: | | If you are the stockholder of record, you may change your proxy instructions or revoke your proxy at any time before your proxy is voted at the Annual Meeting. Proxies may be revoked by any of the following actions: | | | ●Filing a timely written notice of revocation with us at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary; ●Submitting a new proxy at a later date via the Internet, by telephone or by mail to Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary; or ●Attending the Annual Meeting and voting in person (attendance at the Annual Meeting will not, by itself, revoke a proxy). | | | If your shares are held in a brokerage account or by a broker, bank or other nominee, you should follow the instructions provided by them to revoke a proxy. | | | Only the latest validly executed proxy that you submit will be counted. | | Q: | | How will my shares be voted if I sign, date and return a proxy card without giving specific voting instructions? | | A: | | You may vote “For,” “Against” or “Abstain” with respect to each of the proposals. | | | If you sign and return your accompanying proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board and, with respect to any other matters to be voted upon at the Annual Meeting, in accordance with the discretion of the persons named on the accompanying proxy card. Furthermore, if you sign and return your accompanying proxy card without giving specific voting instructions regarding the election of directors, then the persons named on the accompanying proxy card will have discretionary authority to cumulate votes and to allocate such votes among some or all of the nominees recommended by the Board. | | Q: | | Who will count the votes? | | A: | | A representative of Broadridge Financial Solutions, Inc. will tabulate the votes, and a representative of CT Hagberg LLC will act as the inspector of election. Each firm is independent of the Company. | | Q: | | Is my vote confidential? | | A: | | Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed to us or to third parties, except to allow for the tabulation and certification of votes and as necessary to meet applicable legal requirements, or to assert or defend claims for or against us. If you write comments on your proxy card or ballot, the proxy card or ballot may be forwarded to our management or to the Board for their review. | | Q: | | What is the quorum requirement for the Annual Meeting? | | A: | | The quorum requirement for holding the Annual Meeting and transacting business is a majority of the outstanding shares entitled to be voted at the Annual Meeting. The shares may be present in person or represented by proxy at the Annual Meeting. Abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. Once a share is represented for any purpose at the Annual Meeting, it will be deemed present for the purpose of the quorum requirement for the remainder of the meeting (including any meeting resulting from an adjournment of the Annual Meeting, unless a new record date is set). |
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Table of Contents Questions and answers about the proxy materials and the annual meeting | Q: | What is the voting requirement to approve each of the proposals? What effect will abstentions and broker non-votes have? | | A: | Proposal 1 (Election of Directors). The election of directors at the Annual Meeting is an uncontested election. This means, with respect to the election of directors, the number of votes “FOR” a director’s election must be a majority of the votes cast by the holders of the shares of our common stock voting in person or by proxy at the Annual Meeting with respect to that director’s election. Abstentions with respect to a director will have the same effect as a vote “AGAINST” him or her. | | Other Proposals. The affirmative vote of a majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on the matter is required to approve each of the other proposals to be voted on at the Annual Meeting. For each of these proposals, abstentions have the same effect as a vote “AGAINST” approval of that proposal. | | Broker Non-Votes. If you are a beneficial holder and do not provide specific voting instructions to your broker, then the organization that holds your shares will not be authorized to vote your shares on “non-routine” matters, which would result in “broker non-votes”. Accordingly, we encourage you to vote promptly, even if you plan to attend the Annual Meeting. Broker non-votes will not have an effect on any of the proposals presented at the Annual Meeting. | Q: | What does it mean if I receive more than one Notice of Internet Availability, proxy card or voting instruction form? | | A: | It generally means your shares are registered differently or are in more than one account. Please provide voting instructions for each proxy card or, if you vote via the Internet or by telephone, vote once for each Notice of Internet Availability or proxy card you receive so as to ensure that all of your shares are voted. | | Q: | Where can I find the voting results of the Annual Meeting? | A: | We expect to announce preliminary voting results at the Annual Meeting. We will promptly providepublish the name, addressvoting results in a Current Report on Form 8-K filed with the SEC subsequent to the Annual Meeting. | | Q: | Who will bear the cost of soliciting votes for the Annual Meeting? | | A: | We will pay the entire cost of preparing, assembling, printing, mailing, and share ownership informationdistributing these proxy materials. We will also bear the cost of soliciting proxies on behalf of the co-filersBoard. We will also provide copies of these proxy materials to banks, brokerage firms, fiduciaries and custodians holding in their names shares of our common stock beneficially owned by others, so that they may forward these proxy materials to the beneficial owners. We will, upon a stockholder’s request. Walgreens Boots Alliance
Health Risksrequest, reimburse brokerage firms and other persons representing beneficial owners of Continued In-Store Tobacco Salesshares for their reasonable expenses in forwarding solicitation materials to such beneficial owners.
| | We have retained the services of Alliance Advisors LLC to aid in the Agesolicitation of COVID
2021proxies. We expect that we will pay Alliance Advisors LLC fees of approximately $11,000 in the aggregate, plus reasonable out-of-pocket expenses, for soliciting proxies. We have agreed to indemnify Alliance Advisors LLC against certain liabilities relating to or arising out of their engagement. | | Solicitations may also be made by personal interview, mail, telephone, email, other electronic channels of communication, or otherwise by certain of our directors, officers and other employees, but we will not reimburse or provide additional compensation to these persons for these services. | | Q: | Where can I find additional copies of the proxy materials? | RESOLVED: A:Shareholders | The Notice of Internet Availability, this Proxy Statement and the 2022 Annual Report are available at https://www.proxyvote.com. We have also made available on our website at https://investor.walgreensbootsalliance.com the 2022 Annual Report, including the financial statements and schedules. | | We will furnish, on written request and without charge, a printed copy of this Proxy Statement and the Board2022 Annual Report to each person whose proxy is solicited and to each person representing that, as of Directorsthe Record Date, he or she was a beneficial owner of shares entitled to be voted at the Annual Meeting. Such written request should be addressed to us at Walgreens Boots Alliance, (WBA) issueInc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary. | | Q: | How do I obtain a report within twelve monthsseparate set of the 2021 annual meeting, at reasonable expense and excluding proprietary information, assessing how the increased health risks of severe COVID-19 infections to customers that smoke impact our company’s evaluation of risks associatedproxy materials if I share an address with selling tobacco products. SUPPORTING STATEMENT:other stockholders?
The COVID-19 global pandemic has destroyed the health of individuals, devastated families, and shut down communities. The United States has been particularly hard hit by the virus.
The COVID-19 pandemic has imposed a new reality, in which responsible behavior on the part of individuals, communities, and corporations is needed to prevent the spread of the disease and the resulting hospitalizations, suffering and death.
According to the Center for Disease Control and Prevention (CDC), “Being a current or former cigarette smoker may increase your risk of severe illness from COVID-19.” https://www.cdc.gov/coronavirus/2019-ncov/need-extra-precautions/people-with-medical-conditions.html#smoking
A meta-analysis of peer-reviewed papers from 19 research teams, including CDC’s COVID Response Team, found that “smoking is a risk factor for progression of COVID-19, with smokers having higher odds of COVID-19 progress than never smokers.” Tobacco use nearly doubles the risk that someone who tests positive for the virus will end up hospitalized or dying of COVID-19.
https://academic.oup.com/ntr/article/doi/10.1093/ntr/ntaa082/5835834
JAMA(i) reported that research on smoker behavior reveals that reducing the number of tobacco sales outlets reduces smoking among young people.
Leading national retail chains with pharmacies such as Wegmans, CVS and Target have stopped selling tobacco products arguing that it undermines the health and well-being of their customers and presents reputational risks;
A CVS-commissioned study(ii) found a significant decrease in cigarette consumption in states where cigarette sales were discontinued in their stores;
The perception of pharmacies, reinforced by their marketing, is that they are associated with good health. WBA lists as its purpose: We help people around the world lead healthier and happier lives;
On October 7, 2019, WBA announced it would discontinue the sale of e-cigarettes after approximately 1,080 people became ill and 18 people died in connection with vaping certain black market marijuana products, but WBA has continued to sell traditional tobacco products as COVID-19 infections surge past 4 million and deaths surpass 150,000 in the U.S. alone (as of July 30, 2020).
| SUMMARY:A:Reputable public health organizations throughout the world are in consensus around the contradictions of health care companies such as pharmacies continuing to sell tobacco, which seriously undermines health. Smoking damages lungs, which can exacerbate the effects of COVID-19 on patients. Health care retailers cannot honor their commitment to improve health while serving the interests of the tobacco industry.
For these reasons we urge you to vote FOR this proposal.
(i) | http://bit.ly/1bqDC6v
| (ii) | http://bit.ly/2axbyJx
|
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Proposals 5-6
The Board’s Statement in Opposition to Proposal 6
The Board has carefully considered this stockholder proposal and recommends that stockholders vote AGAINST the proposal because, as described below, the Company already publicly discloses specific actions that the Company takes to manage risks related to its sale of tobacco, which actions remain relevant during the COVID-19 pandemic.
The Company already limits sales of tobacco products.
The Company touches millions of lives around the world every day, through the medicines we dispense and distribute, our convenient retail stores, and our health and beauty products. We deliver healthcare and support communities through both our day-to-day operations and our business values. The Company continually reviews and assesses its product assortment, including tobacco, which includes a review of potential risks, as well as how these risks may be evolving, including, for example, as a result of the COVID-19 pandemic. We value the opinions of stakeholders on this topic and have engaged with a number of stockholders and other stakeholders in recent years on this topic.
Outside of North America, the Company’s pharmacy businesses do not sell tobacco products. As of February 2020, Walgreens stores ceased selling e-cigarette products, a decision that was taken as health officials examined the issue and as a number of U.S. states and municipalities developed regulations regarding the sale of these products.
In the U.S., Walgreens has a zero-tolerance policy that prohibits the sale of tobacco products to those under 21 and any employee violating the policy is subject to immediate termination. We require age verification from anyone purchasing these products, regardless of age, in all of our U.S. stores. Since the policy went into effect in September 2019, we implemented additional training for store employees and added signs to notify customers of the policy. In addition to these measures, Walgreens has also developed a compliance monitoring program that employs data analytics to review all tobacco sales transactions for compliance with our policies on sales of age-restricted products.
As part of a pharmacy-led health, well-being and beauty company, Walgreens promotes health lifestyle choices.
Walgreens is committed to having pharmacy play a role in helping people quit tobacco. Walgreens pharmacists and technicians are trained to support a patient’s attempt to quit. Walgreens also offers digital support tools, prescription and over-the-counter products and an incentive program through the Balance Rewards for healthy choices platform to encourage and support our customers’ choices regarding their use of tobacco products. In fiscal 2020 we saw an increase in our sales of smoking cessation products in our stores, compared with fiscal 2019, and in the same period sales of cigarettes and e-tobacco products decreased by 16 percent.
Since its inception in October 2015 and as of August 31, 2020, the "Walgreens Quit Smoking" page on the Company’s website, which features expert tips and treatments and provides tools to help individuals stop smoking has received more than 350,000 visits.
The Company has implemented robust governance measures and other controls to effectively monitor and manage significant risks associated with the Company’s business.
As discussed in this Proxy Statement under “Governance—Board Responsibilities—Board Oversight Responsibilities,” the Company has implemented a strong enterprise risk management (“ERM”) program, led by the Global Chief Compliance and Ethics Officer. The ERM program reviews on a regular basis the top current and emerging enterprise risks facing the Company, including health and safety risks, legal and regulatory risks and risks related to the COVID-19 pandemic. In addition, pursuant to its charter, the Audit Committee reviews our policies and processes with respect to enterprise risk assessment and risk management and discusses with management the key risks identified in the ERM process and our risk mitigation strategies on an ongoing basis. In fulfilling these important risk oversight responsibilities, the Audit Committee receives and reviews quarterly reports from the Company’s Global Chief Compliance and Ethics Officer (who has a dotted reporting line to the Audit Committee) and the Company’s General Counsel and the General Counsel of the Company’s Retail Pharmacy USA, which include regulatory matters such as tobacco sales. The Audit Committee also has executive sessions with the Company’s Global Chief Compliance and Ethics Officer, among other members of management, at each regular meeting. The information exchange facilitates a robust dialogue between senior leaders and the Audit Committee with respect to key areas of Audit Committee oversight. In addition, the other standing committees of the Board review and oversee management of risks related to their respective areas of responsibility, including the Nominating & Governance Committee which has received reports on tobacco sales as part of its oversight of the Company’s CSR activities. The committees regularly report to the full Board regarding identified risks and risk management.
The Board continually reviews and improves the Company’s risk management processes, including through its annual review of Company strategic plans and its oversight of the ERM program. The role of the Board and its committees in enterprise risk management is described in our Corporate Governance Guidelines, which are available on the Company’s website at https:// investor.walgreensbootsalliance.com/governance. The Board regularly reviews and updates the Corporate Governance Guidelines and committee charters. The Corporate Governance Guidelines and committee charters were most recently updated in January 2020.
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Proposals 5-6
Further, since March 2020, the Board and its committees have received regular updates regarding the impact of, and the Company’s response to, the COVID-19 pandemic, including matters relating to team member and customer risks. Accordingly, the Company believes it already effectively manages and assess risks associated with the sale of tobacco products, and further disclosure of the Company’s risk management process would not provide meaningful new information to stockholders.
The Company actively engages with stockholders and responds to stockholder feedback to strengthen our governance program and enhance disclosure of our existing practices.
The Company maintains an open dialogue with stockholders, including regarding key areas of our governance programs, such as risk management. In response to stockholder feedback, we have taken a number of actions to enhance our existing practices. Please refer to the information contained under the heading “Proxy Statement Summary—Stockholder Engagement and Board Responsiveness” in this Proxy Statement for more information. In recent years, we have engaged with stockholders and other stakeholders on multiple occasions regarding the Company’s sale of tobacco and expect to continue to do so in the future.
The Board recommends that stockholders vote AGAINST Proposal 6. Valid proxies solicited by the Board will be so voted unless stockholders specify a contrary choice in their voting instructions.
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Questions and Answers About the Proxy Materials and the Annual Meeting
Q: | How will the Annual Meeting be conducted? | A: | The Annual Meeting will be held entirely online via live audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and wellness of our stockholders, directors, team members, and guests. The virtual Annual Meeting will also allow for greater participation by all of our stockholders, regardless of their geographic location. We are excited to embrace the latest technology to provide expanded access, improved communication and cost savings for our stockholders. To attend the Annual Meeting, examine our list of stockholders, vote and submit your questions during the Annual Meeting, go to www.virtualshareholdermeeting.com/WBA2021.
| Q: | If I received a Notice of Internet Availability, how may I receive proxy materials?
| A: | We use the “e-proxy” rules of the SEC, which allow companies to furnish their proxy materials over the Internet instead of mailing printed copies of the proxy materials to each stockholder. As a result, we are mailing to most of our stockholders a notice about the Internet availability of the proxy materials (the “Notice of Internet Availability”), which contains instructions on how to access this Proxy Statement, the accompanying Notice of 2021 Annual Meeting of Stockholders, and the 2020 Annual Report online.
| | If you received the Notice of Internet Availability by mail, you will not automatically receive a printed copy of the proxy materials in the mail. Instead, the Notice of Internet Availability instructs you on how to access and review all of the important information contained in the proxy materials and how you may submit your proxy. The Notice of Internet Availability also contains information about how stockholders may, if desired, request a printed copy of these proxy materials.
| | Stockholders who do not receive the Notice of Internet Availability will receive a printed copy of these proxy materials by mail unless they have previously requested electronic delivery. We are providing notice of the availability of those materials by e-mail to those stockholders who have previously elected to receive the proxy materials electronically. The e-mail contains a link to the website where those materials are available as well as a link to the proxy voting website.
| Q: | How many shares are entitled to vote? How many votes per share may I cast?
| A: | Stockholders of record of our common stock as of the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date, 863,901,817 shares of our common stock were outstanding.
| | Our stockholders have cumulative voting rights in the election of directors (Proposal 1) and one vote per share on all other matters. Cumulative voting allows a stockholder to multiply the number of shares owned by the number of directors to be elected and to cast an equal number of votes for each of the 11 nominees to the Board, distribute their votes among as many nominees as they choose, or cast all their votes for one nominee.
| Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner?
| A: | Most of our stockholders hold their shares beneficially through a broker, bank, or other nominee rather than directly in their own name. There are some distinctions between shares held of record and shares owned beneficially, specifically:
| | Shares held of record: If your shares are registered directly in your name with our transfer agent, EQ Shareowner Services, then you are considered the stockholder of record with respect to those shares, and we are sending these proxy materials directly to you. As a stockholder of record, you have the right to grant your voting proxy directly to us or to vote at the Annual Meeting. If you received your proxy materials by mail, we have enclosed an accompanying proxy card for you to use. You may also submit voting instructions via the Internet or by telephone by following the instructions on the accompanying proxy card or Notice of Internet Availability, as described below under “How can I vote my shares without attending the Annual Meeting?” If you are a stockholder of record and choose to cumulate your votes in the election of directors, you must notify us in writing at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary or at WBABoard@wba.com and such notice must be received by the Company no later than January 25, 2021.
| | Shares owned beneficially: If your shares are held in a brokerage account or by a broker, bank or other nominee, you are considered the beneficial owner of shares held in street name. Consequently, these proxy materials are being forwarded to you by your broker, bank, or other nominee, which is considered the stockholder of record with respect to those shares.
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Questions and Answers About the Proxy Materials and the Annual Meeting
| As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account, and you are also invited to attend and vote your shares at the Annual Meeting. Your broker, bank, or other nominee has provided a voting instruction form for you to use to direct them regarding how to vote your shares. Please instruct your broker, bank, or other nominee how to vote your shares using the voting instruction form you received from them or vote at the Annual Meeting. If you hold shares through a broker, bank, or other nominee and choose to cumulate your votes in the election of directors, you should contact them.
| Q: | How do I attend the Annual Meeting? What if I have technical difficulties or trouble accessing the Annual Meeting?
| A: | The Annual Meeting will be held entirely online via live audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and wellness of our stockholders, directors, team members, and guests. The virtual Annual Meeting will also allow for greater participation by all of our stockholders, regardless of their geographic location. We are excited to embrace the latest technology to provide expanded access, improved communication and cost savings for our stockholders.
| | If you are a registered shareholder or beneficial owner of common stock holding shares at the close of business on the Record Date, you may attend the Annual Meeting by visiting virtualshareholdermeeting.com/WBA2021 and logging in by entering the 16-digit control number found on your proxy card, Notice of Internet Availability, or voter instruction form, as applicable. If you lost your 16-digit control number or are not a stockholder, you will be able to attend the meeting as a guest by visiting www.virtualshareholdermeeting.com/WBA2021 and registering as a guest. If you enter the meeting as a guest, you will not be able to vote your shares, examine our list of stockholders or submit questions during the meeting.
| | You may log into the Annual Meeting beginning at 7:45 a.m. Central Time on January 28, 2021 and the Annual Meeting will begin promptly at 8:00 a.m. Central Time. If you experience any technical difficulties accessing the Annual Meeting or during the meeting, please call the toll free number that will be available on our virtual stockholder login site (at www.virtualshareholdermeeting.com/WBA2021) for assistance. We will have technicians ready to assist you with any technical difficulties you may have beginning 15 minutes prior to the start of the Annual Meeting, at 7:45 a.m. Central Time on January 28, 2021.
| | A webcast replay of the entire meeting will be posted to our Investor Relations website at https:// investor.walgreensbootsalliance.com following the Annual Meeting.
| Q: | May I ask questions at the Annual Meeting?
| A: | Yes. Stockholders (other than those stockholders who enter the meeting as a guest, as described above) will have the ability to submit questions during the Annual Meeting via the annual meeting website at www.virtualshareholdermeeting.com/WBA2021. As part of the Annual Meeting, we will hold a live question and answer session, during which we intend to answer questions submitted during the meeting which are pertinent to WBA and the meeting matters, as time permits. If there are pertinent questions that cannot be answered during the Annual Meeting due to time constraints, management will post answers to a representative set of such questions (e.g., consolidating repetitive questions) on our Investor Relations website, investor.walgreensbootsalliance.com. The questions and answers will be made available as soon as practicable after the Annual Meeting. Detailed guidelines for submitting questions during the Annual Meeting and Rules of Conduct for the Annual Meeting will be available at www.virtualshareholdermeeting.com/WBA2021.
| Q: | How can I vote my shares at the Annual Meeting?
| A: | Shares held directly in your name as the stockholder of record may be voted if you are attending the virtual Annual Meeting by entering the 16-digit control number found on your proxy card or Notice of Internet Availability when you log into the meeting. Even if you plan to attend the Annual Meeting, we recommend that you vote in advance, as described below under “How can I vote my shares without attending the Annual Meeting?” so that your vote will be counted if you later decide not to attend the Annual Meeting.
| | Shares held in street name through a brokerage account or by a broker, bank or other nominee may be voted at the virtual Annual Meeting by entering the 16-digit control number found on your voter instruction form when you log into the meeting.
| Q: | How can I vote my shares without attending the Annual Meeting?
| A: | Whether you hold shares directly as the stockholder of record or beneficially in street name, you may vote by proxy or by submitting a voting instruction form without attending the Annual Meeting.
| | Shares held of record: If you hold your shares directly as the stockholder of record and you received a printed copy of the proxy materials by mail, you may vote without attending the Annual Meeting by one of the following methods:
| | ● | By Mail:Complete, sign and date the enclosed proxy card and return it in the prepaid envelope provided; | | ● | By Telephone:Call the toll-free telephone number set forth on the proxy card and follow the recorded instructions; or | | ● | By Internet:Go to https://www.proxyvote.com and follow the instructions on the website. | | Please refer to the specific instructions set forth on the proxy card you received.
| | If you are a stockholder of record and you received a Notice of Internet Availability, you may vote without attending the Annual Meeting by accessing the secure Internet website registration page identified on the Notice of Internet Availability and following the instructions. Alternatively, you may vote by mail or telephone if you request a printed copy of the proxy materials by calling the toll-free telephone number set forth on the Notice of Internet Availability. Please refer to the specific instructions set forth in the Notice of Internet Availability you received.
| | Please note that the Internet and telephone voting facilities for stockholders of record will close at 11:59 p.m., Eastern Time, on January 27, 2021.
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Questions and Answers About the Proxy Materials and the Annual Meeting
| Shares held beneficially: If you hold your shares in street name through a brokerage account or by a broker, bank or other nominee, you should have received instructions on how to vote your shares or how to instruct your broker, bank or other nominee to vote your shares. Please follow their instructions carefully. If you give the broker voting instructions, your shares will be voted as you direct. Please note that brokers, banks and other nominees may not vote your shares on non-routine matters in the absence of specific instructions from you, so please provide your voting instructions so your vote can be counted.
| | If you hold your shares in street name through a brokerage account or by a broker, bank or other nominee, then you generally may vote without attending the Annual Meeting by one of the following methods:
| | ● | By Mail:If you received a printed copy of the proxy materials, you may vote by signing, dating and returning the voting instruction card sent to you by your broker, bank, or other nominee in the pre-addressed envelope provided; or
| | ● | By Methods Listed on Voting Instruction Card:Please refer to your voting instruction card or other information provided by your broker, bank or other nominee to determine whether you may provide voting instructions by telephone or electronically on the Internet, and follow the instructions on the voting instruction card or other information provided by the broker, bank or other nominee.
| Q: | Can I change my vote or revoke my proxy?
| A: | If you are the stockholder of record, you may change your proxy instructions or revoke your proxy at any time before your proxy is voted at the Annual Meeting. Proxies may be revoked by any of the following actions:
| | ● | Filing a timely written notice of revocation with us at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary; | | ● | Submitting a new proxy at a later date via the Internet, by telephone or by mail to Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary; or | | ● | Attending the Annual Meeting online and voting at the Annual Meeting (attendance at the Annual Meeting will not, by itself, revoke a proxy). | | If your shares are held in a brokerage account or by a broker, bank or other nominee, you should follow the instructions provided by them.
| | Only the latest validly executed proxy that you submit will be counted.
| Q: | How will my shares be voted if I sign, date and return a proxy card without giving specific voting instructions?
| A: | You may vote “For,” “Against” or “Abstain” with respect to each of the proposals.
| | If you sign and return your accompanying proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board and, with respect to any other matters to be voted upon at the Annual Meeting, in accordance with the discretion of the persons named on the accompanying proxy card. Furthermore, if you sign and return your accompanying proxy card without giving specific voting instructions regarding the election of directors, then the persons named on the accompanying proxy card will have discretionary authority to cumulate votes and to allocate such votes among some or all of the nominees recommended by the Board.
| Q: | Who will count the votes?
| A: | A representative of Broadridge Financial Solutions, Inc. will tabulate the votes, and a representative of CT Hagberg LLC will act as the inspector of election. Each firm is independent of the Company.
| Q: | Is my vote confidential?
| A: | Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed to us or to third parties, except to allow for the tabulation and certification of votes and as necessary to meet applicable legal requirements, or to assert or defend claims for or against us. If you write comments on your proxy card or ballot, the proxy card or ballot may be forwarded to our management or to the Board for their review.
| Q: | What is the quorum requirement for the Annual Meeting?
| A: | The quorum requirement for holding the Annual Meeting and transacting business is a majority of the outstanding shares entitled to be voted at the Annual Meeting. The shares may be present in person or represented by proxy at the Annual Meeting. Stockholders who attend the Annual Meeting by following the instructions to join the virtual meeting will be considered to be attending the meeting in person. Abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. Once a share is represented for any purpose at the Annual Meeting, it will be deemed present for the purpose of the quorum requirement for the remainder of the meeting (including any meeting resulting from an adjournment of the Annual Meeting, unless a new record date is set).
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Questions and Answers About the Proxy Materials and the Annual Meeting
Q: | What is the voting requirement to approve each of the proposals? What effect will abstentions and broker non-votes have?
| A: | Proposal 1 (Election of Directors). The election of directors at the Annual Meeting is an uncontested election. This means, with respect to the election of directors, the number of votes “FOR” a director’s election must be a majority of the votes cast by the holders of the shares of our common stock voting in person or by proxy at the Annual Meeting with respect to that director’s election. Abstentions with respect to a director will have the same effect as a vote “AGAINST” him or her.
| | Other Proposals. The affirmative vote of a majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on the matter is required to approve each of the other proposals to be voted on at the Annual Meeting. For each of these proposals, abstentions have the same effect as a vote “AGAINST” approval of that proposal.
| | Broker Non-Votes. If you are a beneficial holder and do not provide specific voting instructions to your broker, then the organization that holds your shares will not be authorized to vote your shares, which would result in ��broker non-votes,” on proposals other than the ratification of the appointment of Deloitte as our independent registered public accounting firm for fiscal 2021 (Proposal 2). Accordingly, we encourage you to vote promptly, even if you plan to attend the Annual Meeting. Broker non-votes will not have an effect on any of the proposals presented at the Annual Meeting.
| Q: | What does it mean if I receive more than one Notice of Internet Availability, proxy card or voting instruction form?
| A: | It generally means your shares are registered differently or are in more than one account. Please provide voting instructions for each proxy card or, if you vote via the Internet or by telephone, vote once for each Notice of Internet Availability or proxy card you receive so as to ensure that all of your shares are voted.
| Q: | Where can I find the voting results of the Annual Meeting?
| A: | We expect to announce preliminary voting results at the Annual Meeting. We will publish the voting results in a Current Report on Form 8-K filed with the SEC subsequent to the Annual Meeting.
| Q: | Who will bear the cost of soliciting votes for the Annual Meeting?
| A: | We will pay the entire cost of preparing, assembling, printing, mailing, and distributing these proxy materials. We will also bear the cost of soliciting proxies on behalf of the Board. We will also provide copies of these proxy materials to banks, brokerage firms, fiduciaries and custodians holding in their names shares of our common stock beneficially owned by others, so that they may forward these proxy materials to the beneficial owners. We will, upon request, reimburse brokerage firms and other persons representing beneficial owners of shares for their reasonable expenses in forwarding solicitation materials to such beneficial owners.
| | We have retained the services of Alliance Advisors LLC to aid in the solicitation of proxies. We expect that we will pay Alliance Advisors LLC fees of approximately $8,500 in the aggregate, plus reasonable out-of-pocket expenses incurred in the process of soliciting proxies. We have agreed to indemnify Alliance Advisors LLC against certain liabilities relating to or arising out of their engagement.
| | Solicitations may also be made by personal interview, mail, telephone, e-mail, other electronic channels of communication, or otherwise by certain of our directors, officers and other employees, but we will not reimburse or provide additional compensation to these persons for these services.
| Q: | Where can I find additional copies of the proxy materials?
| A: | The Notice of Internet Availability, this Proxy Statement and the 2020 Annual Report are available at https:// www.proxyvote.com. We have also made available on our website at https://investor.walgreensbootsalliance.com the 2020 Annual Report, including the financial statements and schedules.
| | We will furnish, on written request and without charge, a printed copy of this Proxy Statement and the 2020 Annual Report to each person whose proxy is solicited and to each person representing that, as of the Record Date, he or she was a beneficial owner of shares entitled to be voted at the Annual Meeting. Such written request should be addressed to us at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary.
| Q: | How do I obtain a separate set of proxy materials if I share an address with other stockholders?
| A: | To reduce expenses, in some cases, we are delivering one set of proxy materials to certain stockholders who share an address, unless otherwise requested. This is pursuant to a procedure approved by the SEC called “householding.” If you received your proxy materials by mail, a separate proxy card is included in the proxy materials for each of these stockholders. |
| | If you share an address with another stockholder and received only one set of proxy materials, or would otherwise like to request a separate copy of these materials, please contact Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. We will promptly deliver a separate copy (free of charge) upon request. Similarly, if you are eligible for householding, but you and other stockholders |
| 2023 Proxy Statement | | 2021111 |
Table of Contents Questions and answers about the proxy materials and the annual meeting | of record with whom you share an address currently receive multiple copies of the Notice of Internet Availability or, if | | applicable, this Proxy Statement 101
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Questions and Answers About the Proxy Materials and the 2022 Annual MeetingReport, or if you hold stock in more than one account, and in either case, you wish to receive only a single copy of each of these documents for your household, you may also contact Broadridge Financial Solutions, Inc. If your shares are held through a brokerage account, please contact your broker directly.
| | Stockholders who participate in householding will continue to receive separate proxy cards to vote their shares, if you receive your proxy materials by mail. Stockholders that receive the Notice of Internet Availability will receive instructions how to vote their shares via the Internet. Householding does not affect dividend check mailings. | | Q: | How can I obtain an additional proxy card or voting instruction form? | If you share an address with another stockholder and received only one set of proxy materials, or would otherwise like to request a separate copy of these materials, please contact Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. We will promptly deliver a separate copy (free of charge) upon request. Similarly, if you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of the Notice of Internet Availability or, if applicable, this Proxy Statement and the 2020 Annual Report, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of each of these documents for your household, you may also contact Broadridge Financial Solutions, Inc. If your shares are held through a brokerage account, please contact your broker directly.
| | Stockholders who participate in householding will continue to receive separate proxy cards to vote their shares, if you receive your proxy materials by mail. Stockholders that receive the Notice of Internet Availability will receive instructions on how to vote their shares via the Internet. Householding does not affect dividend check mailings.
| Q: | | A: | How can I obtain an additional proxy card or voting instruction form?
| A: | If you lose, misplace or otherwise need to obtain a Notice of Internet Availability, proxy card or voting instruction form and: |
| ● | ●You are a stockholder of record, contact us in writing at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary; or
●You are the beneficial owner of shares held indirectly through a broker, bank or other nominee, contact your account representative at that organization.
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Additional Information
Attending the Annual Meeting
The Annual Meeting will be held entirely online via live audio webcast due to the public health impact of the COVID-19 pandemic and to support the health and wellness of our stockholders, directors, team members, and guests. The virtual Annual Meeting will also allow for greater participation by all of our stockholders, regardless of their geographic location. We are excited to embrace the latest technology to provide expanded access, improved communication and cost savings for our stockholders.
If you are a registered shareholder or beneficial owner of common stock holding shares at the close of business on the Record Date, you may attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/WBA2021 and logging in by entering the 16-digit control number found on your proxy card, Notice of Internet Availability, or voter instruction form, as applicable. If you lost your 16-digit control number or are not a stockholder, you will be able to attend the meeting by visiting www.virtualshareholdermeeting.com/ WBA2021 and registering as a guest. If you enter the meeting as a guest, you will not be able to vote your shares, examine our list of stockholders or submit questions during the meeting.
You may log into the virtual annual meeting beginning at 7:45 a.m. Central Time on January 28, 2021 and the Annual Meeting will begin promptly at 8:00 a.m. Central Time. If you experience any technical difficulties during the meeting, a toll free number will be available on our virtual stockholder login site for assistance.
Stockholder Proposals for Inclusion in the Proxy Statement for the 2022 Annual Meeting
We plan to hold the 2022 Annual Meeting on or around January 27, 2022, at a time and place to be specified in our proxy statement for that meeting.
We welcome comments or suggestions from our stockholders. If a stockholder wishes to have a proposal formally considered at the 2022 Annual Meeting and included in our proxy statement for that meeting, then we must receive the proposal in writing on or before the close of business on August 10, 2021 (or, if the date of the 2022 Annual Meeting is moved by 30 days from the anniversary of this year’s Annual Meeting, the deadline will be a reasonable time before we begin to print and send our proxy materials, which date we will announce separately), and the proposal must otherwise comply with Rule 14a-8 under the Exchange Act. The proposal must be delivered in writing to us at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary.
Director Nominations for Inclusion inSecretary; or
| | ● | You are the Proxy Statement for the 2022 Annual MeetingThe Board has implemented proxy access, which allowsbeneficial owner of shares held indirectly through a stockholderbroker, bank or group of up to 20 stockholders owning in aggregate 3% or more of our outstanding common stock continuously forother nominee, contact your account representative at least three years, to nominate and include in our proxy materials director nominees constituting up to 20% of the number of directors in office (rounding down); provided that the stockholder(s) and nominee(s) satisfy the requirements in our by-laws.
If a stockholder or group of stockholders wants to nominate one or more director candidates to be included in our proxy materials for the 2022 Annual Meeting pursuant to the proxy access provisions in our by-laws, then we must receive proper written notice of such nomination at organization.
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| 112 | | Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary by no earlier than the close of business on July 11, 2021 and no later than the close of business on August 10, 2021, and the nomination must otherwise comply with our by-laws. If, however, the date of the 2022 Annual Meeting is changed and is not within 30 days before or 60 days after the anniversary of this year’s Annual Meeting, then we must receive such written notice no earlier than the close of business on the 150th day prior to the 2022 Annual Meeting and not later than the close of business on the later of the 120th day prior to the 2022 Annual Meeting or, if the first public announcement of the date of the 2022 Annual Meeting is less than 130 days prior to the date of such meeting, the 10th day following the public announcement of the date of the 2022 Annual Meeting. Failure to comply with the requirements, procedures, and deadlines in our by-laws may preclude the proxy access nomination of the applicable candidate(s) for election at the 2022 Annual Meeting.2021 Proxy Statement 103
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Table of Contents Additional InformationOther ProposalsAdditional information
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Attending the annual meeting In order to help ensure the safety of all attendees at the Annual Meeting, we have implemented the following policies. Eligible Attendees. In addition to our personnel and guests, only the following persons may attend the Annual Meeting: | ● | A Company stockholder as of the Record Date, or Director Nominationsone named representative in lieu thereof; and | | ● | One guest of such stockholder or named representative. |
Obtaining an Admission Ticket. Any stockholder, named representative or guest who attends the Annual Meeting must be pre-registered and obtain an admission ticket in advance. | ● | In order to obtain an admission ticket, please click on the “Register for PresentationMeeting” button found at https://www.proxyvote.com and follow the 2022 Annual MeetingStockholder proposals or director nominations that are not intended for inclusion in our proxy statement forinstructions provided. Attendees must print their own admission ticket and bring it to the 2022 Annual Meeting may be brought beforeto gain access.
| | ● | A stockholder will need the 2022 Annual Meeting16-digit voting control number found on his, her or its Notice of Internet Availability, proxy card, or voting instruction form in accordance with the advance notice procedures described in our bylaws. Under our by-laws,order to pre-register and obtain an admission ticket, and, if applicable, will need to pre-register their named representative and any guest thereof. | | ● | If a stockholder wishesdoes not have Internet access or is unable to present other business or nominate a director candidateprint an admission ticket, then they can register by calling Broadridge Financial Solutions, Inc. at the 20221-844-318-0137. |
Admission Procedures. For admission to the Annual Meeting, each attendee must present (i) valid, government-issued photo identification (such as a driver’s license or passport) and (ii) an admission ticket. Persons without proper identification or an admission ticket may be denied admission to the Annual Meeting. Registration Deadline. Attendees must be pre-registered by no later than 11:59 p.m., Eastern Time, on Thursday, January 19, 2023. Additional Security Measures. No weapons, cameras, recording devices, laptops, tablets, or briefcases, backpacks, or other large bags or packages, will be permitted at the Annual Meeting. For security reasons, all attendees may be subject to security inspections, and all bags may be searched. No one will be admitted to the Annual Meeting once the meeting has commenced. Special Precautions Due to COVID-19. In order to protect the health and safety of our directors, employees and stockholders, we are taking special precautions in connection with the Annual Meeting due to the health impact of COVID-19. If you are not feeling well, have had close contact with someone who has tested positive for, or think you may have been exposed to, COVID-19, we ask that you vote by proxy for the meeting. We will require all attendees to comply with the Company’s policies in place at the time of the meeting, which may include but are not limited to temperature checks, attendance limitations, social distancing and other safety protocols in accordance with any then-required federal, state and local guidelines. We also strongly encourage stockholders who plan to attend the Annual Meeting to review and follow the relevant guidance from public health authorities prior to attendance. Seating at the Annual Meeting is limited, and admission is on a first come, first served basis. Please note that the Annual Meeting is a procedural business meeting, and item samples will not be offered.
Table of Contents Additional information Stockholder proposals for inclusion in the proxy statement for the 2024 annual meeting We plan to hold the 2024 Annual Meeting on or around January 25, 2024, at a time and place to be specified in our Proxy Statement for that meeting. We welcome comments or suggestions from our stockholders. If a stockholder wishes to have a proposal formally considered at the 2024 Annual Meeting and included in our Proxy Statement for that meeting, then we must receive the proposal in writing on or before the close of business on August 10, 2023 (or, if the date of the 2024 Annual Meeting is moved by 30 days from the anniversary of this year’s Annual Meeting, the deadline will be a reasonable time before we begin to print and send our proxy materials, which date we will announce separately), and the proposal must otherwise comply with Rule 14a-8 under the Exchange Act. The proposal must be delivered in writing to us at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary. Director nominations for inclusion in the proxy statement for the 2024 annual meeting The Board has implemented proxy access, which allows a stockholder or group of up to 20 stockholders owning in aggregate 3 percent or more of our outstanding common stock continuously for at least three years, to nominate and include in our proxy materials director nominees constituting up to 20 percent of the number of directors in office (rounding down); provided that the stockholder(s) and nominee(s) satisfy the requirements in our by-laws. If a stockholder or group of stockholders wants to nominate one or more director candidates to be included in our proxy materials for the 2024 Annual Meeting pursuant to the proxy access provisions in our by-laws, then we must receive proper written notice of such nomination at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary, by no earlier than the close of business on July 11, 2023 and no later than the close of business on August 10, 2023, and the nomination must otherwise comply with our by-laws. If, however, the date of the 2024 Annual Meeting is changed and is not within 30 days before or 60 days after the anniversary of this year’s Annual Meeting, then we must receive such written notice no earlier than the close of business on the 150th day prior to the 2024 Annual Meeting and not later than the close of business on the later of the 120th day prior to the 2024 Annual Meeting or, if the first public announcement of the date of the 2024 Annual Meeting is less than 130 days prior to the date of such meeting, the 10th day following the public announcement of the date of the 2024 Annual Meeting. Failure to comply with the requirements, procedures, and deadlines in our by-laws may preclude the proxy access nomination of the applicable candidate(s) for election at the 2024 Annual Meeting. Other proposals or director nominations for presentation at the 2024 annual meeting Stockholder proposals or director nominations that are not intended for inclusion in our Proxy Statement for the 2024 Annual Meeting may be brought before the 2024 Annual Meeting in accordance with the advance notice procedures described in our by-laws. Under our by-laws, if a stockholder wishes to present other business or nominate a director candidate at the 2024 Annual Meeting, then we must receive proper written notice of any such business or nomination at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary, by no earlier than the close of business on September 28, 2023 and no later than the close of business on October 28, 2023, and each such proposal, nomination, and nominee must otherwise comply with our by-laws. If, however, the date of the 2024 Annual Meeting is changed and is not within 30 days before or 60 days after the anniversary of this year’s Annual Meeting, then we must receive such notice no earlier than the close of business on the 120th day prior to the date of the 2024 Annual Meeting and not later than the close of business on the 90th day prior to the date of the 2024 Annual Meeting or, if the first public announcement of the date of the 2024 Annual Meeting is less than 100 days prior to the date of such meeting, the 10th day after the first public announcement of the date of the 2024 Annual Meeting. Failure to comply with the requirements, procedures, and deadlines in our by-laws may preclude presentation and consideration of the matter or nomination of the applicable candidate(s) for election at the 2024 Annual Meeting. | 114 | | Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary by no earlier than the close of business on September 30, 2021 and no later than the close of business on October 30, 2021, and each such proposal, nomination, and nominee must otherwise comply with our by-laws. If, however, the date of the 2022 Annual Meeting is changed and is not within 30 days before or 60 days after the anniversary of this year’s Annual Meeting, then we must receive such notice no earlier than the close of business on the 120th day prior to the date of the 2022 Annual Meeting and not later than the close of business on the 90th day prior to the date of the 2022 Annual Meeting or, if the first public announcement of the date of the 2022 Annual Meeting is less than 100 days prior to the date of such meeting, the 10th day after the first public announcement of the date of the 2022 Annual Meeting. Failure to comply with the requirements, procedures, and deadlines in our by-laws may preclude presentation and consideration of the matter or nomination of the applicable candidate(s) for election at the 2022 Annual Meeting. |
Table of ContentsCautionary Note Regarding Forward-Looking Statements Additional information Further, to comply with the universal proxy rules, if a stockholder intends to solicit proxies in support of director nominees submitted under these advance notice provisions, then we must receive proper written notice that sets forth all information required by Rule 14a-19 under the Exchange Act at Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary, by November 27, 2023 (or, if the 2024 Annual Meeting is called for a date that is not within 30 calendar days of the anniversary of the date of the 2023 Annual Meeting, then notice must be provided by the later of 60 calendar days prior to the date of the 2024 Annual Meeting or by the close of business on the 10th calendar day following the day on which public announcement of the date of the 2024 Annual Meeting is first made). The notice requirement under Rule 14a-19 is in addition to the applicable advance notice requirements under our by-laws as described above. Cautionary note regarding forward-looking statements This Proxy Statement contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements with respect to the CLP Committee’s intentions regarding future uses of discretion and statements relating to our ESG-related goals and commitments. Words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “pilot,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,” “continue,” “sustain,” “synergy,” “transform,” “accelerate,” “model,” “long-term,” “on track,” “on schedule,” “headwind,” “tailwind,” “believe,” “seek,” “estimate,” “anticipate,” “upcoming,” “to come,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, which could cause actual results to vary materially from those indicated or anticipated. These and other risks, assumptions and uncertainties are described in the 2022 Annual Report and in other documents that we may file or furnish with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we do not undertake, and we expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date of this Proxy Statement, whether as a result of new information, future events, changes in assumptions, or otherwise. The information on our website, including, but not limited to, the contents of our 2021 ESG Report and our 2020-2021 DEI Report, is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated herein or into any of our other filings with the SEC. Other matters The Board knows of no other matters (other than those identified herein) to be brought before the Annual Meeting. If any other business should properly come before the Annual Meeting, the persons named in the proxy will vote on such matters according to their best judgment. By order of the Board of Directors, Joseph B. Amsbary, Jr.
Senior Vice President, Corporate Secretary Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on January 26, 2023 The Notice of Internet Availability, this Proxy Statement and the 2022 Annual Report are available at https://www.proxyvote.com. We have also made available on our website at https://investor.walgreensbootsalliance.com/annual-reportsproxies a copy of the 2022 Annual Report, as filed with the SEC, including the financial statements and schedules. We will furnish, on written request and without charge, a printed copy of the 2022 Annual Report to each person whose proxy is solicited and to each person representing that, as of the Record Date, he, she or it was a beneficial owner of shares entitled to be voted at the meeting. Such written request should be directed to Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary.
2023 Proxy Statement contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “pilot,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “target,” “aim,” “continue,” “sustain,” “synergy,” “transform,” “accelerate,” “model,” “long-term,” “on track,” “on schedule,” “headwind,” “tailwind,” “believe,” “seek,” “estimate,” “anticipate,” “upcoming,” “to come,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, which could cause actual results to vary materially from those indicated or anticipated. These and other risks, assumptions and uncertainties are described in the 2020 Annual Report and in other documents that we may file or furnish with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we do not undertake, and we expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date of this Proxy Statement, whether as a result of new information, future events, changes in assumptions or otherwise.The information on our website, including, but not limited to, the contents of our 2019 CSR Report, is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated herein or into any of our other filings with the SEC.
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Table of Contents Additional Information
Other Matters
The Board knows of no other matters (other than those identified herein) to be brought before the Annual Meeting. If any other business should properly come before the Annual Meeting, the persons named in the proxy will vote on such matters according to their best judgment.
By order of the Board of Directors,
Joseph B. Amsbary, Jr.
Vice President, Corporate Secretary
| Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting of Stockholders to be Held on January 28, 2021
The Notice of Internet Availability, this Proxy Statement and the 2020 Annual Report are available
at https://www.proxyvote.com.
We have also made available on our website at https://investor.walgreensbootsalliance.com/annual-reportsproxies a copy of the 2020 Annual Report, as filed with the SEC, including the financial statements and schedules. We will furnish, on written request and without charge, a printed copy of the 2020 Annual Report to each person whose proxy is solicited and to each person representing that, as of the Record Date, he, she or it was a beneficial owner of shares entitled to be voted at the meeting. Such written request should be directed to Walgreens Boots Alliance, Inc., 108 Wilmot Road, MS #1858, Deerfield, Illinois 60015, Attention: Corporate Secretary.
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2021 Proxy Statement 105
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Exhibit A: Appendix A
Reconciliation of GAAP and
non-GAAP financial measures
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This Proxy Statement includes the following financial measures defined as non-GAAP financial measures by the SEC: Adjusted EPS. The tables below reconcile the non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). The supplemental non-GAAP financial measures are presented because management has evaluated the Company’s financial results both including and excluding the adjusted items or the effects of foreign currency translation, as applicable, and believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the Company’s business from period to period and trends in the Company’s historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the Proxy Statement. We do not provide a reconciliation for non-GAAP estimates on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred, are out of the Company’s control and/or cannot be reasonably predicted, and that would impact diluted net earnings per share, the most directly comparable forward-looking GAAP financial measure. For the same reasons, we are unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures. Constant currency The Company also presents certain information related to current period operating results in “constant currency,” which is a non-GAAP financial measure. These amounts are calculated by translating current period results at the foreign currency exchange rates used in the comparable period in the prior year. The Company presents such constant currency financial information because it has significant operations outside of the U.S. reporting in currencies other than the U.S. dollar and this presentation provides a framework to assess how its business performed excluding the impact of foreign currency exchange rate fluctuations. | 116 | | Walgreens Boots Alliance, Inc. |
Table of Contents Appendix A NET EARNINGS AND DILUTED NET EARNINGS PER SHARE | | (in millions) | | | Three months ended
August 31, | | Twelve months ended
August 31, | | | 2022 | | 2021 | | 2022 | | 2021 | | Net (loss) earnings attributable to Walgreens Boots Alliance, Inc. - continuing operations (GAAP) Adjustments to operating income: | | $ | (415 | ) | | $ | 358 | | | $ | 4,337 | | | $ | 1,994 | | | Adjustments to equity earnings (loss) in AmerisourceBergen1 | | | 63 | | | | 70 | | | | 218 | | | | 1,645 | | | Acquisition-related amortization2 | | | 239 | | | | 156 | | | | 855 | | | | 523 | | | Transformational cost management3 | | | 305 | | | | 79 | | | | 763 | | | | 417 | | | Certain legal and regulatory accruals and settlements4 | | | 34 | | | | 15 | | | | 768 | | | | 75 | | | Acquisition-related costs5 | | | 69 | | | | 29 | | | | 223 | | | | 54 | | | Impairment of goodwill and intangible assets6 | | | 783 | | | | 49 | | | | 783 | | | | 49 | | | LIFO provision7 | | | 71 | | | | (73 | ) | | | 135 | | | | 13 | | | Total adjustments to operating income | | | 1,565 | | | | 325 | | | | 3,746 | | | | 2,775 | | | Adjustments to other income, net: | | | | | | | | | | | | | | | | | | Net investment hedging loss8 | | | — | | | | 2 | | | | 1 | | | | 8 | | | Impairment of equity method investment and investment in equity securities9 | | | — | | | | — | | | | 190 | | | | — | | | Adjustment to gain on disposal of discontinued operations10 | | | — | | | | — | | | | 38 | | | | — | | | Gain on sale of equity method investment11 | | | (138 | ) | | | — | | | | (559 | ) | | | (290 | ) | | Gain on previously held investments12 | | | — | | | | — | | | | (2,576 | ) | | | — | | | Total adjustments to other income, net | | | (138 | ) | | | 3 | | | | (2,906 | ) | | | (281 | ) | | Adjustments to interest expense, net: | | | | | | | | | | | | | | | | | | Early debt extinguishment13 | | | — | | | | (5 | ) | | | 4 | | | | 414 | | | Total adjustments to interest expense, net | | | — | | | | (5 | ) | | | 4 | | | | 414 | | | Adjustments to income tax (benefit) provision: | | | | | | | | | | | | | | | | | | UK tax rate change14 | | | — | | | | 378 | | | | — | | | | 378 | | | Equity method non-cash tax14 | | | 16 | | | | 8 | | | | 70 | | | | (161 | ) | | Tax impact of adjustments14 | | | (285 | ) | | | (38 | ) | | | (752 | ) | | | (283 | ) | | Total adjustments to income tax (benefit) provision | | | (270 | ) | | | 348 | | | | (681 | ) | | | (65 | ) | | Adjustments to post-tax earnings from other equity method investments: | | | | | | | | | | | | | | | | | | Adjustments to earnings in other equity method investments15 | | | 9 | | | | 17 | | | | 58 | | | | (504 | ) | | Total adjustments to post-tax earnings from other equity method investments | | | 9 | | | | 17 | | | | 58 | | | | (504 | ) | | Adjustments to net loss attributable to non-controlling interests - continuing operations: | | | | | | | | | | | | | | | | | | Acquisition-related amortization2 | | | (45 | ) | | | (30 | ) | | | (164 | ) | | | (75 | ) | | Transformational cost management3 | | | — | | | | (2 | ) | | | (1 | ) | | | 1 | | | Acquisition-related costs5 | | | (13 | ) | | | — | | | | (32 | ) | | | — | | | LIFO provision7 | | | — | | | | 5 | | | | — | | | | (2 | ) | | Early debt extinguishment13 | | | — | | | | — | | | | (1 | ) | | | — | | | Total adjustments to net loss attributable to non-controlling interests - continuing operations | | | (58 | ) | | | (27 | ) | | | (198 | ) | | | (77 | ) | | Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - | | | | | | | | | | | | | | | | | | continuing operations (Non-GAAP measure) | | $ | 694 | | | $ | 1,019 | | | $ | 4,360 | | | $ | 4,256 | | | Net earnings attributable to Walgreens Boots Alliance, Inc. - discontinued operations (GAAP) | | $ | — | | | $ | 268 | | | $ | | | | $ | 548 | | | Acquisition-related amortization2 | | | — | | | | — | | | | — | | | | 28 | | | Transformational cost management3 | | | — | | | | — | | | | — | | | | 1 | | | Acquisition-related costs5 | | | — | | | | 44 | | | | — | | | | 92 | | | Gain on disposal of discontinued operations10 | | | — | | | | (322 | ) | | | — | | | | (322 | ) |
2021 Omnibus Incentive Plan
Walgreens Boots Alliance, Inc.
2021 Omnibus Incentive Plan
Effective [ ]
20212023 Proxy Statement A-1
Table of Contents
| | Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive PlanWalgreens Boots Alliance, Inc.
2021 Omnibus Incentive Plan
TABLE OF CONTENTS
A-2 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
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Table of Contents Appendix A | | | | | | | | | | Tax impact of adjustments14 | | | — | | | | 10 | | | | — | | | | (6 | ) | | Total adjustments to net earnings attributable to Walgreens Boots Alliance, Inc. - discontinued operations | | $ | — | | | $ | (268 | ) | | $ | — | | | $ | (206 | ) | | Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. - discontinued operations (Non-GAAP measure) | | $ | — | | | $ | — | | | $ | — | | | $ | 342 | | | Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) | | $ | 694 | | | $ | 1,019 | | | $ | 4,360 | | | $ | 4,598 | | | Diluted net (loss) earnings per common share - continuing operations (GAAP)16 | | $ | (0.48 | ) | | $ | 0.41 | | | $ | 5.01 | | | $ | 2.30 | | | Adjustments to operating income | | | 1.81 | | | | 0.38 | | | | 4.33 | | | | 3.20 | | | Adjustments to other income, net | | | (0.16 | ) | | | — | | | | (3.36 | ) | | | (0.32 | ) | | Adjustments to interest expense, net | | | — | | | | (0.01 | ) | | | 0.01 | | | | 0.48 | | | Adjustments to income tax (benefit) provision | | | (0.31 | ) | | | 0.40 | | | | (0.79 | ) | | | (0.08 | ) | | Adjustments to post tax earnings from other equity method investments15 | | | 0.01 | | | | 0.02 | | | | 0.07 | | | | (0.58 | ) | | Adjustments to net loss attributable to non-controlling interests | | | (0.07 | ) | | | (0.03 | ) | | | (0.23 | ) | | | (0.09 | ) | | Adjusted diluted net earnings per common share - continuing operations (Non-GAAP measure)17 | | $ | 0.80 | | | $ | 1.17 | | | $ | 5.04 | | | $ | 4.91 | | | Diluted net earnings per common share - discontinued operations (GAAP) | | $ | — | | | $ | 0.31 | | | $ | — | | | $ | 0.63 | | | Total adjustments to net earnings attributable to Walgreens Boots Alliance, Inc. – discontinued operations | | | — | | | | (0.31 | ) | | | — | | | | (0.24 | ) | | Adjusted diluted net earnings per common share - discontinued operations (Non-GAAP measure) | | $ | — | | | $ | — | | | $ | — | | | $ | 0.39 | | | Adjusted diluted net earnings per common share (Non-GAAP measure)17 | | $ | 0.80 | | | $ | 1.17 | | | $ | 5.04 | | | $ | 5.31 | | | Weighted average common shares outstanding, diluted (in millions)17 | | | 865.3 | | | | 867.2 | | | | 865.9 | | | | 866.4 | |
2021 Proxy Statement A-31
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
Walgreens Boots Alliance, Inc.
2021 Omnibus Incentive Plan
I. Background
Walgreens Boots Alliance, Inc., a Delaware corporation (the “Company”), previously maintained the Walgreens Boots Alliance, Inc. 2013 Omnibus Incentive Plan, as amended and restated effective July 11, 2017 (the “Former Plan”). On October 29, 2020, the Board adopted the Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan, as set forth herein (the “Plan”),
| Adjustments to be effective upon and subject to the approvalequity earnings (loss) in AmerisourceBergen consist of the PlanCompany’s proportionate share of non-GAAP adjustments reported by the stockholders of the Company (the “Effective Date”). Upon and after the Effective Date, no additional awards shall be granted under the Former Plan.II. Purpose
The purpose of the Plan is to aid the Company in attracting, retaining, motivating and rewarding employees, Non-Employee Directors, and other persons who provide substantial services to the Company or its Affiliates, to provide for equitable and competitive compensation opportunities, including deferral opportunities, to encourage long-term service, to recognize individual contributions and reward achievement of Company goals, and promote the creation of long-term value for stockholders by closely aligning the interests of Participants with those of stockholders. The Plan authorizes stock-based and cash-based incentives for Participants.
III. Definitions
In addition to the terms defined in Article I above and elsewhere in the Plan, the following capitalized terms used in the Plan have the respective meanings set forth in this Section:
3.01 | “Affiliate” means any person with whom the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code, except that in applying Sections 1563(a)(1), (2) and (3) of the Code for purposes of determining a controlled group of corporations under Section 414(b) of the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Sections 1563(a)(1), (2) and (3) of the Code, and in applying Treas. Reg. §1.414(c)-2 for purposes of determining a controlled group of trades or businesses under Section 414(c) of the Code, the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears in Treas. Reg. §1.414(c)-2. Notwithstanding the foregoing, where justified by legitimate business criteria as determined by the Committee in its sole discretion, “at least 20 percent” shall be substituted for “at least 50 percent” in the preceding sentence in determining whether a Participant has had a Termination of Service.
| 3.02 | “Award” means any Option, SAR, Restricted Stock Share, Restricted Stock Unit, Performance Share, Performance Unit, Other Award or Stock granted as a bonus or in lieu of another award, together with any related right or interest, granted to an Eligible Person under the Plan.
| 3.03 | “Award Agreement” means the agreement setting forth the terms and conditions to which an Award is subject, to the extent not provided in the Plan, together with any additional documents (such as Beneficiary designations) relating to a specific Award.
| 3.04 | “Beneficiary” means the individual or entity designated by the Participant to receive the benefits specified under the Participant’s Award upon such Participant’s death. See Section 10.03. No Beneficiary shall have any rights under the Plan prior to the death of the Participant.
| 3.05 | “Beneficial Owner” has the meaning specified in Rule 13d-3 under the Exchange Act.
| 3.06 | “Board” means the Board of Directors of the Company. | 3.07 | “Cause” means any one or more of the following, as determined by the Committee or its delegate in its sole discretion:
| | (a) | a Participant’s commission of a felony or any crime of moral turpitude;
| | (b) | a Participant’s dishonesty or material violation of standards of integrity in the course of fulfilling his or her employment duties to the Company or any Affiliate;
| | (c) | a material violation of a material written policy of the Company or any Affiliate violation of which is grounds for immediate termination;
| | (d) | failure on the part of the Participant to perform his or her employment duties to the Company or any Affiliate in any material respect, after reasonable notice of such failure and an opportunity to correct it; or
| | (e) | failure to comply in any material respect with any applicable legal or regulatory requirements, including but not limited to the Foreign Corrupt Practices Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Truth in Negotiations Act, or any rules or regulations thereunder.
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A-4 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
3.08 | “Change in Control” means any one or more of the following:
| | (a) | any one person, or more than one person acting as a group other than (A) an employee benefit plan (or related trust) of the Company or a subsidiary or (B) the Company or a subsidiary (collectively, the “Excluded Persons”) acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company; or
| | (b) | any one person, or more than one person acting as a group (other than any Excluded Person), acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company that constitutes thirty percent (30%) or more of the total fair market value or total voting power of the stock of the Company; or
| | (c) | any one person, or more than one person acting as a group (other than any Excluded Person), acquires (or has acquired during the twelve (12)-month period ending on date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions; or
| | (d) | a majority of members of the Company’s Board is replaced during any twelve (12)-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election.
| | Notwithstanding the provisions of this Section 3.08, there shall not be a Change in Control if any event described in Section 3.08 occurs, and immediately following such event: (1) all or substantially all of the individuals and entities who are the Beneficial Owners, respectively, of the outstanding Stock and outstanding Company voting securities immediately prior to such event will beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the outstanding shares of Stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such event (including, without limitation, a corporation which as a result of such event owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such corporate transaction, of the outstanding Stock and outstanding Company voting securities, as the case may be; (2) no person (other than an Excluded Person or a corporation resulting from such event) will beneficially own, directly or indirectly, thirty percent (30%) or more of, respectively, the outstanding shares of common stock of the corporation resulting from such event or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors, except to the extent that such ownership existed prior to the event; and (3) individuals who were members of the incumbent Board at the time of the Board’s approval of the execution of the initial agreement providing for such corporate transaction will constitute at least a majority of the members of the board of directors of the corporation resulting from such corporate transaction.
| 3.09 | “Code” means the Internal Revenue Code of 1986, as amended. Reference to any provision of the Code or regulation thereunder shall include any successor provision and any regulations and other applicable guidance or pronouncement of the Internal Revenue Service or the Department of the Treasury and applicable case law relating to such Section of the Code.
| 3.10 | “Committee” means the Compensation and Leadership Performance Committee of the Board, the composition and governance of which is established in the Committee’s charter as approved from time to time by the Board. Each member of the Committee is intended to qualify as “independent” as determined in accordance with the regulations of the stock exchange on which the Stock is principally registered, and the Company’s categorical standards, and to qualify as a “non-employee director” under SEC Rule 16b-3. However, no action of the Committee shall be void or deemed to be without authority due to the failure of any member, at the time the action was taken, to meet the foregoing qualification standards. The full Board may perform any function of the Committee hereunder except to the extent limited under the applicable stock exchange policies and requirements for listed companies or the Company’s bylaws, in which case the term “Committee” shall refer to the Board. To the extent the Committee has delegated authority to another person or persons the term “Committee” shall refer to such other person or persons.
| 3.11 | “Company” means Walgreens Boots Alliance, Inc. and any successor thereto.
| 3.12 | “Deferred Award” means any Award to the extent that by its terms the Award will not or might not be paid or otherwise settled in full no later than the 15th day of the third month after the later of (a) the last day of the first calendar year in which the Award is no longer subject to a Substantial Risk of Forfeiture or (b) the last day of the Company’s first fiscal year in which the Award is no longer subject to a Substantial Risk of Forfeiture.
| 3.13 | “Director” means a member of the Board.
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2021 Proxy Statement A-5
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
3.14 | “Disability” means that the Participant has become disabled as provided in the long-term disability plan of the Company or an Affiliate applicable to the Participant (or which would be applicable if the Participant was eligible for and elected coverage under such plan).
| 3.15 | “Dividend Equivalent” means a right granted to an Eligible Person to receive cash, Stock, or other property equal in value to all or a specified portion of the dividends paid with respect to a specified number of shares of Stock in connection with dividend declarations, reclassifications, spin-offs, and the like.
| 3.16 | “Effective Date” is defined in the Preamble.
| 3.17 | “Eligible Person” means an employee of the Company or any Affiliate, or a Non-Employee Director of the Company.
| 3.18 | “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time and the rules and regulations thereunder.
| 3.19 | “Fair Market Value” means as of any applicable date:
| | (a) | If the Stock is listed on the NASDAQ Stock Market or other United States national securities exchange registered under the Exchange Act, the value under such of the following as the Committee shall determine based on actual reported transactions in such Stock on the NASDAQ Stock Market or such other exchange:
| | | (i) | The last sale before or the first sale after the date the Award is granted;
| | | (ii) | the closing sales price on such date or (whether or not sales are reported on such date) the last preceding date on which a sale was reported;
| | | (iii) | the arithmetic mean of the high and low prices on such date or (whether or not sales are reported on such date) the last preceding date on which sales were reported;
| | | (iv) | the average selling price of the Stock over a specified period beginning within 30 days before and ending within 30 days after the applicable date, based on the arithmetic mean of such selling prices during the specified period, or an average of such prices weighted based on the volume of trading of the Stock on each trading date during the specified period; provided, however, that such method may be used only if the relevant Eligible Person, the number and class of shares of Stock subject to such method, and the method for determining such price including the period over which the average are determined, are irrevocably determined and set forth in an Award Agreement before the beginning of the specified period.
| | The Committee may apply different of the foregoing methods for different purposes; provided, however, that if no other method is determined by the Committee the Fair Market Value shall be determined based on the closing sales price on the last preceding date on which a sale was reported, and the grant price for an Option or Stock Appreciation Right shall be (i) the closing sales price on the date of grant if Stock is traded on such date, or (ii) the closing sales price on the next date on which Stock is traded.
| | (b) | If Stock is publicly traded but is not listed on any such exchange, any of the methods set forth in subsection (a) applied to the bid quotations with respect to a share of Stock on the OTC Bulletin Board or other over-the-counter quotation system then in use as the principle system then available for reporting or ascertaining quotations for the Stock; and
| | (c) | If Stock is not publicly traded, the fair market value on the applicable date of a share of Stock as determined by the Committee in good faith.
| 3.20 | “Former Plan” means the Walgreens Boots Alliance, Inc. 2013 Omnibus Incentive Plan, as amended.
| 3.21 | “409A Compensation” means a Deferred Award or other compensation that is “nonqualified deferred compensation” subject to Section 409A of the Code, regardless of when granted or awarded.
| 3.22 | “Incentive Stock Option” or “ISO” means any Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code, and qualifying thereunder.
| 3.23 | “Non-Employee Director” means a Director who is not an employee of the Company or an Affiliate.
| 3.24 | “Nonstatutory Option” means an Option that is not an Incentive Stock Option.
| 3.25 | “Option” means a right granted to an Eligible Person to purchase a number of shares of Stock (which may be Restricted Stock) at a specified price during a specified time period, and subject to such other terms and conditions as the Committee may determine. The term “Option” includes both an Incentive Stock Option and a Nonstatutory Option.
| 3.26 | “Other Awards” means cash or stock-based awards granted to an Eligible Person under Section 7.08 or 7.09.
| 3.27 | “Participant” means an Eligible Person (or former Eligible Person) who has been granted an Award under the Plan which remains outstanding or which remains subject to any provision of this Plan, including without limitation Sections 10.01 and 10.08.
| 3.28 | “Performance Award” means an Award that (in addition to any other conditions) is conditional based upon the degree of satisfaction of performance criteria specified by the Committee. Performance Awards include, but are not limited to, Performance Shares and Performance Units.
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A-6 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
3.29 | “Performance Share” means a conditional right granted to an Eligible Person to receive a variable number of shares of Stock based upon the degree of satisfaction of performance criteria specified by the Committee.
| 3.30 | “Performance Unit” means a conditional right granted to an Eligible Person to receive a payment equal to the value of the performance unit based upon the degree of satisfaction of criteria specified by the Committee.
| 3.31 | “Restricted Stock” means a Restricted Stock Share or a Restricted Stock Unit.
| 3.32 | “Restricted Stock Share” means a share of Stock granted to an Eligible Person under Section 7.03 which is subject to certain restrictions and to a substantial risk of forfeiture.
| 3.33 | “Restricted Stock Unit” or “RSU” means a bookkeeping entry representing a hypothetical share of Stock granted to an Eligible Person under Section 7.04 which is subject to certain restrictions and to a substantial risk of forfeiture. A Restricted Stock Unit shall have a nominal value on any date equal to the Fair Market Value of one share of Stock on that date. A Restricted Stock Unit may be settled for cash, property, or shares of Stock, and may be a Performance Award. Restricted Stock Units represent an unfunded an unsecured obligation of the Company.
| 3.34 | “Retire” or “Retirement” means a Termination of Service for any reason other than a Termination of Service for Cause, Disability, or death after attaining age 55 and having at least 10 years of service (whether as an employee or Director) with the Company or any Affiliate.
| 3.35 | “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.
| 3.36 | “Separation from Service” means
| | (a) | In the case of an individual who is an employee of the Company or an Affiliate, the employee’s termination of employment with the Company and its Affiliates. Whether a termination of employment has occurred shall be determined based on whether the facts and circumstances indicate the individual and the employer reasonably anticipate that no further services will be performed by the individual for the Company and its Affiliates; provided, however, that an individual shall be deemed to have a Separation from Service if the level of services he or she would perform for the Company and its Affiliates after a certain date permanently decreases to no more than twenty percent (20%) of the average level of bona fide services performed for the Company and its Affiliates (whether as an employee or independent contractor) over the immediately preceding 36-month period (or the full period of services to the Company and its Affiliates if the individual has been providing services for less than 36 months). For this purpose, an individual is not treated as having a Separation from Service while he or she is on a military leave, sick leave, or other bona fide leave of absence, if the period of such leave does not exceed six months (90 days in the case of an Incentive Stock Option), or if longer, so long as the individual has a right to reemployment with the Company or an Affiliate under an applicable statute or by contract; and
| | (b) | In the case of a Director, the individual ceases to be a Director of the Company and all Affiliates, unless immediately upon such cessation the individual has a relationship with the Company or an Affiliate such that such cessation would not be a separation from service under Section 409A of the Code, in which case a Separation from Service will occur upon the cessation of such relationship as provided in Section 409A of the Code; and
| | (c) | In the case of a consultant or advisor, the individual ceases to have a contractual obligation to perform consulting services for the Company and all Affiliates, unless immediately upon such cessation the individual has a relationship with the Company or an Affiliate such that such cessation would not be a separation from service under Section 409A of the Code, in which case a Separation from Service will occur upon the cessation of such relationship as provided in Section 409A of the Code.
| | (d) | Notwithstanding the foregoing, no such event shall be a Separation from Service if immediately upon such event the individual continues to be an Eligible Person by reason of another relationship with the Company or any Affiliate from which no Separation from Service has occurred.
| 3.37 | “Specified Employee” means an individual who, as of the date of his or her Termination of Service, is a key employee of the Company or any Affiliate whose stock is publicly traded, as determined under the policy of the Company as in effect from time to time, for determining “specified employees” consistent with the requirements of Section 409A of the Code.
| 3.38 | “Stock” means a share of the Company’s common stock $0.01 par value and any other equity securities of the Company that may be substituted or resubstituted for such Stock.
| 3.39 | “Stock Appreciation Right” or “SAR” means a right granted to an Eligible Person to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee, which grant price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such SAR.
| 3.40 | “Substantial Risk of Forfeiture” means such term as described in Treas. Reg. §§ 1.409A-1(d) and 1.409A-1(b)(4).
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2021 Proxy Statement A-7
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
3.41 | “Termination of Service” “termination of employment”, and words of similar import, unless the context clearly indicates otherwise, mean termination of employment (or for a Participant who is not an employee, termination of service), as determined by the Committee; provided that in the case of an Award that is 409A Compensation, such term shall mean Separation from Service.
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4.01 Authority of the Committee. The Plan shall be administered by the Committee or by a duly appointed delegate of the Committee, which shall have full and final authority, in its discretion, in each case subject to andAmerisourceBergen consistent with the provisionsCompany’s non-GAAP measures. The Company recognized equity losses in AmerisourceBergen of $1,373 million during the Plan,(a) | to determine which Eligible Persons shall be granted Awards;
| (b) | to determine the type and size of Awards, the dates on which Awards may be granted, exercised or settled and on which the risk of forfeiture or any deferral period relating to Awards shall lapse or terminate, and to accelerate any such dates;
| (c) | to determine the expiration date of any Award;
| (d) | to determine whether an Award will be granted on a standalone or tandem basis;
| (e) | to determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards, or other property;
| (f) | to determine other terms and conditions of, and all other matters relating to, Awards;
| (g) | to prescribe Award Agreements evidencing or setting terms of Awards (such Award Agreements need not be identical for each Participant);
| (h) | to adopt amendments to Award Agreements; provided that, except as set forth herein or in the Award Agreement, the Committee shall not amend an Award Agreement in a manner that materially and adversely affects the Participant without the consent of the Participant (for this purpose, actions that alter the timing of federal income taxation of a Participant will not be deemed material unless such action results in an income tax penalty on the Participant);
| (i) | to establish rules and regulations for the administration of the Plan and amendments thereto and to create sub-plans;
| (j) | to determine whether, to what extent, and under what circumstances any Award shall be terminated or forfeited or the Participant shall be required to disgorge to the Company gains or earnings attributable to an Award;
| (k) | to construe and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein;
| (l) | to make all other decisions and determinations (including factual determinations) in its discretion as the Committee may deem necessary or advisable for the administration of the Plan.
three months ended November 30, 2020. These equity losses are primarily due to AmerisourceBergen’s recognition of $5.6 billion, net of tax, charges related to its ongoing opioid litigation in its financial statements for the three months period ended September 30, 2020. |
Decisions| 2 | Acquisition-related amortization includes amortization of acquisition-related intangible assets, inventory valuation adjustments and stock-based compensation fair valuation adjustments. Amortization of acquisition-related intangible assets includes amortization of intangible assets such as customer relationships, trade names, trademarks, developed technology and contract intangibles. Intangible asset amortization excluded from the Committee with respect torelated non-GAAP measure represents the administration and interpretation ofentire amount recorded within the Plan and any Award Agreement shall be final, conclusive, and binding upon all persons interested in the Plan, including all Eligible Persons, Participants, Beneficiaries, transferees under Section 6.05(c) and other persons claiming rights from or through a Participant, and stockholders.Company’s GAAP financial statements. The foregoing notwithstanding, to the extent requiredrevenue generated by the Company’s bylaws,associated intangible assets has not been excluded from the Board shall performrelated non-GAAP measures. Amortization expense, unlike the functions of the Committee for purposes of granting Awards under the Plan to Non-Employee Directors and shall have all the powers of the Committee with respect thereto (authority with respect to other aspects of Non-Employee Director awardsrelated revenue, is not exclusive to the Board, however). 4.02 Manner of Exercise of Committee Authority.(a) | The Committee may act through subcommittees, including for purposes of perfecting exemptions under Rule 16b-3 (in which case the members of the Committee who qualify as Non-Employee Directors shall act as the Committee). The express grant of any specific power to the Committee, and the taking of any action by the Committee or a subcommittee, shall not be construed as limiting any power or authority of the Committee.
| (b) | Subject to the Company’s by-laws and applicable law, the Committee may delegate to any other committee of the Board or to one or more members of the Board the authority, subject to such terms as the Committee may determine, to exercise such powers and authority and perform such functions as the Committee in its discretion may determine. Such delegation may be revoked at any time.
| (c) | The Committee may delegate to officers of the Company or any Affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions and exercise such powers and authority, as the Committee in its discretion may determine, to the fullest extent permitted under the Delaware General Corporation Law and the Company’s bylaws. Such delegation may be revoked at any time.
| (d) | Except to the extent prohibited by applicable law, the Committee may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to the Committee under the Plan. Such delegation may be revoked at any time.
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A-8 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
4.03 Advisors and Agents of the Committee. The Committee may (i) authorize one or more of its members or an agent to execute or deliver any instrument, and make any payment on its behalf and (ii) utilize and cause the Company to pay for the services of associates and engage accountants, agents, clerks, legal counsel, record keepers and professional consultants (any of whom may also be serving another Affiliate of the Company) to assist in the administration of this Plan or to render advice with regard to any responsibility under this Plan.4.04 Records and Reports of the Committee. The Committee shall maintain records and accounts relating to the administration of the Plan.4.05 Limitation of Liability; Indemnification. The members of the Board, the Committee, and their delegates, shall have no liability with respect to any action or omission madeaffected by them in good faith nor from any action made in reliance on (i) the advice or opinionoperations of any accountant, legal counsel, medical adviserparticular period unless an intangible asset becomes impaired, or other professional consultant or (ii) any resolutionsthe estimated useful life of the Board certified by the secretary or assistant secretary of the Company. Each member of the Board, the Committee,an intangible asset is revised. These charges are primarily recorded within selling, general and each employee of the Company or any Affiliateadministrative expenses. Business combination accounting principles require us to whom are delegated duties, responsibilities and authority with respect to the Plan shall be indemnified, defended, and held harmless by the Company and its Affiliates and their respective successors against all claims, liabilities, fines and penalties and all expenses (including but not limited to attorneys' fees) reasonably incurred by or imposed on such member or employee that arise as a result of his actions or failure to act in connection with the operation and administration of the Plan, to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty or expense is not paid for by liability insurance purchased by or paid for by the Company or an Affiliate. Notwithstanding the foregoing, the Company or an Affiliate shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Company or Affiliate consents in writing to such settlement or compromise.4.06 Expenses. Expenses relating to the Plan prior to its termination shall be paid from the general assets of the Company or an Affiliate. Any individual who serves as a member of the Committee shall receive no compensation for such service.4.07 Service in More than One Capacity. Any person or group of persons may serve the Plan in more than one capacity.V. Shares Subject to Plan5.01 Overall Number of Shares Available for Delivery. Subject to adjustment as provided in Section 5.04, the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall be:(a) | Shares of Stock available as of the Effective Date under the Former Plan;
| (b) | Shares of Stock which become available from the Former Plan after the Effective Date in accordance with Section 5.02; and
| (c) | 65 million additional shares of Stock, as approved by stockholders of the Company on [ ];
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provided, however, that the total number of shares with respect to which ISOs may be granted shall not exceed 15,000,000. Of the shares described in (a), (b) and (c), 100% may be delivered in connection with “full-value Awards,” meaning Awards other than Options, SARs, or Awards for which the Participant pays for the shares of Stock subject to the Award either directly or in exchange for (or by foregoing) a right to receive a cash payment from the Company equal to themeasure acquired inventory at fair marketvalue. The fair value of the Award; provided, however, that any shares granted under Options or SARs shall be counted against the share limit oninventory reflects cost of acquired inventory and a one-for-one basis and any shares granted as full-value Awards shall be counted against the share limit as three (3) shares for every one (1) share subject to such Award. The Company shall at all times during the termportion of the Plan retain as authorized and unissued Stock or treasury Stock at leastexpected profit margin. The acquisition-related inventory valuation adjustments exclude the numberexpected profit margin component from cost of shares of Stock from time to time requiredsales recorded under the provisionsbusiness combination accounting principles. The stock based compensation fair valuation adjustment reflects the difference between the fair value based remeasurement of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.
5.02 Share Counting Rules.(a) | The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award.
| (b) | Shares of Stock subject to an Award will again be available for Awards if the Award (or an award under the Former Plan) is canceled, expired, forfeited, settled in cash or otherwise terminated or settled without delivery of the full number of shares of Stock subject to such Award. The following shares of Stock will not be added to the total number of shares available or to be made available again for delivery under the Plan: (i) shares not issued or not delivered as a result of the net settlement of an outstanding Option or Stock Appreciation Right; (ii) shares delivered to or withheld by the Company to pay the exercise price of or withholding taxes with respect to an Award; and (iii) shares of Stock repurchased by the Company on the open market with the proceeds from the payment of the exercise price of an Option.
| (c) | In the case of any Award granted in substitution for an award of a company or business acquired by the Company or an Affiliate, shares delivered or to be delivered in connection with such substitute Award shall not be counted against the number of shares reserved under the Plan, but shall be available under the Plan by virtue of the Company’s assumption of the plan or arrangement of the acquired company or business.
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2021 Proxy Statement A-9
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
(d) | This Section shall apply to the number of shares reserved and available for ISOs only to the extent consistent with applicable regulations relating to ISOs under the Code.
| (e) | Because shares will count against the number reserved in Section 5.01 upon delivery (or later vesting) and subject to the share counting rules under this Section 5.02, the Committee may determine that Awards may be outstanding that relate to more shares than the aggregate remaining available under the Plan, so long as Awards will not result in delivery and vesting of shares in excess of the number then available under the Plan.
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5.03 Director Award Limits. The aggregate value of cash compensationawards under purchase accounting and the grant date fair valuation. Post-acquisition compensation expense recognized in excess of the original grant date fair value of shares of Stock that may be paid or granted during any fiscal year of the Company to any Non-Employee Director shall not exceed $750,000.5.04 Adjustments. In the event that any large, special and non-recurring dividend or other distribution (whether in the form of cash or property other than Stock), recapitalization, forward or reverse split, stock dividend, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the shares of Stock such that an adjustment is appropriate, or, in the case of any outstanding Award, necessary, in order to prevent dilution or enlargement of the rights of the Participant, then the Committee shall, in an equitable manner as determined by the Committee, adjust any or all of (i) the aggregate number and kind of shares of Stock which may be delivered in connection with Awards granted under the Plan, (ii) the number and kind of shares of Stock subject to or deliverable in respect of outstanding Awards, and (iii) the exercise price, grant price or purchase price relating to any Award or, if deemed appropriate, the Committee may make provision for a payment of cash or property to the holder of an outstanding Option.5.05 Former Plan. Upon stockholder approval of this Plan, no further grants of Awards will be made under the Former Plan.VI. Eligibility and General Conditions for Awards6.01 Eligibility. Awards may be granted under the Plan only to Eligible Persons. The Committee shall determine, in its sole discretion, the extent to which a Participant shall be considered employed during an approved leave of absence.6.02 Awards. Awards may be granted on the terms and conditions set forth in this Plan. In addition, the Committee may impose on any Award, or the exercise thereof, at the date of grant or thereafter (subject to Section 10.06), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine in its sole discretion, including performance conditions for the exercise or vesting of an Award, terms requiring forfeiture of Awards in the event of Termination of Service by the Participant or other events or actions by the Participant, terms for deferred payment or other settlement of an Award, and terms permitting a Participant to make elections relating to his or her Award. Such terms and conditions need not be uniform among types of Awards nor among Eligible Persons receiving the same type of Award. The Committee shall retain full power and discretion with respect to any term or condition of an Award that is not mandatory under the Plan. The Committee shall require the payment of lawful consideration for an Award to the extent necessary to satisfy the requirements of the Delaware General Corporation Law, and may otherwise require payment of consideration for an Award except as limited by the Plan.6.03 Award Agreement. To the extent not set forth in the Plan, the terms and conditions of each Award shall be set forth in an Award Agreement.6.04 Vesting; Termination of Service. The Committee may determine and set forth in the Award Agreement the vesting schedule for the Award and the extent to which an Award not vested shall be forfeited or shall terminate upon a Participant’s Termination of Service. No Award shall become exercisable or vested prior to the one-year anniversary of the date of grant; provided, however, that, such restriction shall not apply toacquiree awards granted under this Plan with respect to the number of shares of Stock which, in the aggregate, does not exceed five percent (5%) of the total number of shares available for awards under this Plan. This Section 6.04 shall not restrict the right of the Committee to accelerate or continue the vesting or exercisability of an Award upon or after a Change in Control or termination of employment or otherwise pursuant to Section 4.01 or 6.04(d) of the Plan. Subject to the below subsections, Awards held by a Participant upon Termination of Service shall be treated as set forth in the applicable Award Agreement, based on the determination by the Committee in its sole discretion of the reason for Termination of Service:(a) | Cause. Upon a Participant’s Termination of Service for Cause, all Awards (whether or not then vested or forfeitable under the terms of the Award) shall be forfeited and terminate. In the event that within one year after Termination of Service a Participant commits an act or omission that would be Cause, or it is discovered that the Participant has committed such act or omission before Termination of Service, then the Committee may in its discretion determine that the Termination of Service shall be deemed to have occurred for Cause.
| (b) | Automatic Extended Exercisability in Certain Cases. Notwithstanding the foregoing provisions of this Section or the applicable Award Agreement, if the date a vested Award would otherwise terminate is a date that the Participant is prohibited from exercising the Award under the Company’s insider trading policy or such other conditions under applicable securities laws as the Committee shall specify, the term of the Award, to the extent vested, shall be extended to the second business day after the Participant is no longer so prohibited from exercising the Award, but in no event shall the Award be extended beyond the original stated term of the Award.
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A-10 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
(c) | Automatic Exercise in Certain Cases. In addition, if determined by the Committee in its discretion, on such terms and conditions and under such circumstances as the Committee shall establish, which may be applied differently among Participants or Awards, Options and SARs will be deemed exercised by the Participant (or in the event of the death of or authorized transfer by the Participant by the beneficiary or transferee) on the expiration date of the Option or SAR using a net share settlement (or net settlement) method of exercise to the extent that as of such expiration date the Option or SAR is vested and exercisable and the per share exercise price of the Option or SAR is below the Fair Market Value of a share of Stock on such expiration date.
| (d) | Waiver by Committee. Notwithstanding the foregoing provisions of this Section, the Committee may in its sole discretion as to all or part of any Award as to any Participant, at the time the Award is granted or thereafter, which treatment need not be uniform among Participants, determine that Awards shall become exercisable or vested upon a Termination of Service, determine that Awards shall continue to become exercisable or vested in full or in installments after Termination of Service, extend the period for exercise of Options or SARs following Termination of Service (but not beyond the original stated term of the Option or SAR), or provide that any performance-based Award shall in whole or in part not be forfeited upon such Termination of Service.
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6.05 Nontransferability of Awards.(a) | During the Participant’s lifetime, each Award and each right under any Award shall be exercisable only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative, or by a transferee receiving such Award pursuant to a domestic relations order issued by a court with jurisdiction over the Company, requiring the transfer of the Award. Nothing herein shall be construed as requiring the Committee to honor a domestic relations order except to the extent required under applicable law.
| (b) | No Award (prior to the time, if applicable, unrestricted shares of Stock are delivered in respect of such Award or Restricted Stock becomes unrestricted), and no right under any Award, may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution (or in the case of Restricted Stock Shares, by transfer to the Company); and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate.
| (c) | Notwithstanding subsections (a) and (b) above, a Participant may transfer a Nonstatutory Option or SAR for no consideration to a Permitted Transferee in accordance with rules and subject to such conditions as may be specified by the Committee in the Award Agreement or in the Committee’s rules or procedures of general application. For this purpose, a “Permitted Transferee” in respect of any Participant means any member of the Immediate Family of such Participant, any trust of which all of the primary beneficiaries are such Participant or members of his or her Immediate Family, or any partnership (including limited liability companies and similar entities) of which all of the partners or members are such Participant or members of his or her Immediate Family; and the “Immediate Family” of a Participant includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the employee) control the management of assets, and any other entity in which these persons (or the employee) own more than fifty percent of the voting interests. Such Award may be exercised by such transferee in accordance with the terms of such Award. Following the transfer of a Nonstatutory Stock Option or SAR to a Permitted Transferee, the Permitted Transferee shall have all of the rights and obligations of the Participant to whom the Award was granted and such Participant shall not retain any rights with respect to the transferred Award, except that (i) the payment of any tax attributable to the exercise of the Nonstatutory Option or SAR shall remain the obligation of the Participant, (ii) the period during which the Nonstatutory Option or SAR shall become exercisable or remain exercisable shall depend on the service of the original Participant and the circumstances of his or her Termination of Service. A Permitted Transferee may not again transfer an Award to another Permitted Transferee.
| (d) | If for any reason an Award is exercised or shares of Stock are to be delivered or payment is to be made under any Award to a person other than the original Participant, the person exercising or receiving delivery or payment under such Award shall, as a condition to such exercise, delivery or receipt, supply to the Committee such evidence as the Committee may reasonably require to establish the identity of such person and such person’s right to exercise or receive delivery or payment under such Award. A Permitted Transferee or other transferee, Beneficiary, guardian, legal representative or other person claiming any rights under the Plan from or through any Participant shall be subject to the provisions of the Plan and any applicable Award Agreement, except to the extent the Plan and Award Agreement otherwise provide with respect to such persons, and to any additional restrictions or limitations deemed necessary or appropriate by the Committee.
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6.06 Cancellation and Rescission of Awards. Unless the Award Agreement specifies otherwise, the Committee may cancel, rescind, suspend, withhold, or otherwise limit or restrict any unexercised Award at any time if the Participant is not in compliance with all applicable provisions of the Award Agreement and the Plan.2021 Proxy Statement A-11
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
6.07 Stand-Alone, Tandem and Substitute Awards.
(a) | Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for, any other Award granted under the Plan. If an Award is granted in substitution for another Award or any non-Plan award or benefit, the Committee shall require the surrender of such other Award or non-Plan award or benefit in consideration for the grant of the new Award. Awards granted in addition to or in tandem with other Awards or non-Plan awards or benefits may be granted either at the same time as or at a different time from the grant of such other Awards or non-Plan awards or benefits.
| (b) | The Committee may, in its discretion and on such terms and conditions as the Committee considers appropriate in the circumstances, grant Awards under the Plan (“Substitute Awards”) in substitution for stock and stock-based awards (“Acquired Entity Awards”) held immediately prior to such merger, consolidation or acquisition by employees or directors of another corporation or entity who become Eligible Persons as the result of a merger or consolidation of the employing corporation or other entity (the “Acquired Entity”) with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the Acquired Entity, in order to preserve for such newly Eligible Persons the economic value of all or a portion of such Acquired Entity Award, at such price as the Committee determines necessary to achieve preservation of economic value.
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6.08 Deferred Awards. The Committee may provide in an Award Agreement that the Award shall be in whole or in part a Deferred Award. In addition, the Committee may provide, in a manner specified by the Committee in the Award Agreement or in the Committee’s rules and procedures of general application, that a Participant may elect to defer settlement of an Award so that the Award becomes a Deferred Award, subject to the following terms and to such additional terms and conditions as the Committee shall designate in its discretion:
(a) | Deferral Elections. An election to defer an Award shall be made on or before December 31 of the calendar year preceding the calendar year in which the Award is granted, on a form (which may be electronic) authorized by the Committee, and except as provided in Section 7.07 shall not carry over from year to year unless the Committee timely provides otherwise. Such election shall become irrevocable for the period to which it applies as of the last date for making such election. The deferral election shall include (i) the designation and portion of the Award to be deferred, (ii) the date on which settlement of the deferred Award shall be made or commence (which may be a fixed date such as the Participant’s attainment of a particular age, the Participant’s Termination of Service for any reason, or such other dates or circumstances as may be required or permitted by the Committee); and (iii) whether settlement shall be made on a single date or in installments over a period and subject to such terms and conditions as may be set by the Committee at the time of the deferral election. If there is no election as to form of settlement, then settlement shall be made no later than 90 days following the date designated in (ii), in a lump sum in cash, shares of Stock, or such other medium as the Committee may designate.
| (b) | New Participants.Notwithstanding subsection (a) above, the Committee may permit a deferral election to be made by a Participant who was never previously eligible to defer an Award and was never previously eligible to defer compensation under any other plan required by Section 409A of the Code to be aggregated with deferrals of Awards under this Plan. Such an individual’s deferral election shall be made within 30 days of the grant of the Award and shall be effective only with respect to a fractional portion of the Award determined by multiplying (separately with respect to each applicable vesting date), the grant date value of the number of applicable portion of shares of Stock (or other portion of an Award not denominated in shares of Stock) vesting on such vesting date by a fraction, the numerator of which is the number of calendar days between the date the deferral election is received by the Committee and the date such Award (or portion thereof) vests, and the denominator of which is the total number of calendar days between the grant date and the vesting date.
| (c) | Performance-Based Compensation.Notwithstanding subsection (a) above, the Committee may permit a deferral election to be made by a Participant with respect to a Performance Award on or before a date that is at least six months before the end of the applicable performance period of at least 12 months, provided the Participant has continuously performed services from the later of the beginning of the performance period or the date the performance criteria are established (provided they are established within 90 days of the beginning of the performance period) through the date such election is made, and provided that the compensation to be paid under the Performance Award is not at the time of the election readily ascertainable within the meaning of Treas. Reg. § 1.409A-2(a)(8).
| (d) | Awards Vesting in More than Twelve Months.Notwithstanding subsection (a) above, the Committee may permit a deferral election to be made by a Participant with respect to an Award that is subject to a condition requiring the Participant to continue to remain employed for a period of at least 12 months from the date of the grant. Such a deferral election, if permitted, must be made on or before the 30th day after the grant date, provided that the election is made at least 12 months in advance of the earliest vesting date (other than vesting on account of death or a Change in Control).
| (e) | Dividend Equivalents on Deferred Awards.To the extent specified in the Award Agreement, Dividend Equivalents may be credited to deferred Awards (other than Options and SARs) during the deferral period, subject to such terms and conditions as the Committee shall specify.
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A-12 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
VII. Specific Provisions for Awards
7.01 Options. The Committee is authorized to grant Options to Eligible Persons on the following terms and conditions:
(a) | Exercise Price. The exercise price per share of Stock purchasable under an Option (including both ISOs and Nonstatutory Options) shall be determined by the Committee, provided that such exercise price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option.
| (b) | Option Term; Time and Method of Exercise. The Committee shall determine the term of each Option, which in no event shall exceed a period of ten years from the date of grant. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or deemed to be paid and the form of such payment, including, without limitation, cash, Stock (including Stock deliverable upon exercise), Restricted Stock or other property that does not have a deferral feature, other Awards or awards granted under other plans of the Company or any Affiliate, or other property (including through “net exercise” or “cashless exercise” arrangements, to the extent permitted by applicable law), and the methods by or forms in which Stock will be delivered or deemed to be delivered in satisfaction of Options.
| (c) | Incentive Stock Options.
| | (i) | Only employees (as determined in accordance with Section 3401(c) of the Code) of the Company or any of its subsidiaries may be granted Incentive Stock Options. For this purpose, “subsidiary” means any company (other than the Company) in an unbroken chain beginning with the Company; provided each company in the unbroken chain (other than the Company) owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain.
| | (ii) | If and to the extent that the aggregate Fair Market Value of the Stock (determined as of the date of grant) with respect to which a Participant’s Incentive Stock Options are exercisable for the first time during any calendar year exceeds $100,000, such Options shall be treated as Nonstatutory Options. For purposes of applying this limitation, Incentive Stock Options shall be taken into account in the order in which they were granted.
| | (iii) | No Incentive Stock Option shall be granted more than 10 years after the earlier of the adoption of the Plan or stockholder approval of the Plan; provided that after the initial adoption of the Plan, such 10-year period shall be measured from the earlier of a subsequent amendment of the Plan requiring stockholder approval or stockholder approval of the Plan as so subsequently amended.
| | (iv) | Award Agreements evidencing Incentive Stock Options shall contain such other terms and conditions as may be necessary to comply with the applicable provisions of Section 422 of the Code.
| (d) | Dividend Equivalents.No dividends or Dividend Equivalents shall be payable, credited or accrued with respect to an Option.
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7.02 Stock Appreciation Rights. The Committee is authorized to grant SARs to Eligible Persons. The Committee shall determine the term of each SAR, provided that in no event shall the term of an SAR exceed a period of ten yearsare excluded from the daterelated non-GAAP measures as these arise from acquisition-related accounting requirements or agreements, and are not reflective of grant. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which an SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method of exercise, method of settlement, form of consideration payable in settlement (whether cash, Stock, or other property), and the method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not an SAR shall be free-standing or in tandem or combination with any other Award. The base price per share of Stock subject to an SAR shall be determined by the Committee, provided that such base price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such SAR. No dividends or Dividend Equivalents shall be payable, credited or accrued with respect to an SAR.
7.03 Restricted Stock Shares. The Committee is authorized to grant Restricted Stock Shares to Eligible Persons on the following terms and conditions:
(a) | Grant and Restrictions. Restricted Stock Shares shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/ or future service requirements), in such installments or otherwise and under such other circumstances as the Committee may determine at the date of grant or thereafter. A Participant shall pay such consideration for the Restricted Stock Shares as the Committee may require, which shall not be less than the par value of the Restricted Stock Shares on the date of grant unless the Restricted Stock Shares are to be settled in treasury shares. Section 10.04(b) (restricting elections under Section 83(b)of the Code) shall apply to Restricted Stock Shares except to the extent provided in the Award Agreement. Except to the extent restricted under the terms of the Plan or any Award Agreement relating to the Restricted Stock Shares, a Participant granted Restricted Stock Shares shall have all of the rights of a stockholder, including the right to vote the Restricted Stock Shares and the right to receive dividends thereon (subject to subsection (c) below).normal operating activities.
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| | 3 | 2021 Proxy Statement A-13
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
(b) | Evidence of Stock Ownership. Restricted Stock Shares granted under the Plan may be evidenced in such manner as the Committee shall determine, including appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company. If certificates representing Restricted Stock Shares are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock Shares, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock Shares.
| (c) | Dividends and Splits.Any cash dividends paid on a Restricted Stock Share shall be automatically reinvested in additional Restricted Stock Shares or held in kind, which shall be subject to the same terms as applied to the original Restricted Stock to which it relates. Cash, shares of Stock or other property distributed in connection with a stock split or stock dividend, and other property distributed as a non-cash dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock Shares with respect to which such Stock or other property has been distributed.
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7.04 Restricted Stock Units. The Committee is authorized to grant RSUs to Eligible Persons, subject to the following terms and conditions:
(a) | Award and Restrictions. RSUs shall be subject to restrictions constituting a Substantial Risk of Forfeiture, which conditions may be time-based or performance-based. Unless deferred pursuant to Section 6.08, settlement of RSUs by delivery of cash, shares of Stock, or other property, as specified in the Award Agreement, shall occur upon the lapse of the Substantial Risk of Forfeiture, but no later than within two and one-half months after the last day of the calendar year in which the Substantial Risk of Forfeiture lapses. In addition, RSUs shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose, which restrictions may lapse at the same time as the Substantial Risk of Forfeiture or at earlier or later specified times, separately or in combination, in installments or otherwise, and under such other circumstances as the Committee may determine at the date of grant or thereafter. Except as restricted under the terms of the Plan or any Award Agreement relating to the RSUs, prior to settlement a Participant granted RSUs shall have the right to receive Dividend Equivalents thereon pursuant to subsection (b) but shall have no right to vote respecting the RSUs or any other rights of a stockholder.
| (b) | Dividend Equivalents.Unless otherwise determined by the Committee, Dividend Equivalents on RSUs shall be automatically deemed reinvested in RSUs and shall be paid when the RSUs to which they relate are settled. Notwithstanding the foregoing, Dividend Equivalents shall be forfeited if the RSUs to which they relate are forfeited or otherwise not earned. Cash, shares of Stock or other property distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the RSUs with respect to which such Stock or other property has been distributed.
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7.05 Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to an Eligible Person, entitling the Participant to receive cash, shares of Stock, other Awards, or other property equivalent to all or a portion of the dividends paid with respect to a specified number of shares of Stock. Dividend Equivalents may be awarded on a freestanding basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to restrictions on transferability, risks of forfeiture and such other terms as the Committee may specify with due regard to the applicability of Section 409A of the Code. Notwithstanding the foregoing, (a) Dividend Equivalents shall not be provided with respect to Options or Stock Appreciation Rights, and (b) any Dividend EquivalentsTransformational Cost Management Program charges are costs associated with any other Award shall be subject to the same vesting conditions as the shares subject to such Award to which the Dividend Equivalents relate,a formal restructuring plan. These charges are primarily recorded within selling, general and shall be forfeited to the extent the Award is forfeited or otherwiseadministrative expenses. These costs do not earned.
7.06 Performance Sharesreflect current operating performance and Performance Units. The Committee is authorized to grant Performance Shares and Performance Units to Eligible Persons, subject to the following terms and conditions:
(a) | Performance Shares shall be denominated in shares of Stock. Performance Units shall be denominated in dollars and have an initial value that is establishedare impacted by the Committee at the time of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units or Performance Shares that will be paid out to the Participant, and shall set a performance period in accordance with Section 8.01.
| (b) | After the applicable performance period has ended, the holder of Performance Units or Performance Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the performance period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
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A-14 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
(c) | Unless the Performance Shares or Performance Units are deferred as provided in Section 6.08, payment of earned Performance Units and Performance Shares shall be made in a single lump sum, as soon as practicable after the Committee has determined the number of Performance Units or Performance Shares earned for the performance period, but in no event later than within two and one-half months after the last day of the calendar year in which the Participant’s rights to such Units/Shares have become vested and nonforfeitable and the Substantial Risk of Forfeiture has lapsed. Except as otherwise provided in an Award Agreement, the Committee shall pay earned Performance Shares in Stock but may in its sole discretion pay earned Performance Units in the form of cash or in Stock (or in a combination thereof) which have an aggregate Fair Market Value equal to the value as of the date of distribution of the number of earned Performance Units at the close of the applicable performance period. Such Stock may be made subject to any further restrictions deemed appropriate by the Committee.
| (d) | Unless otherwise provided in the Award Agreement, Participants shall be entitled to receive Dividend Equivalents paid with respect to Stock which has been earned and become vested as of the close of the performance period in connection with grants of Performance Units or Performance Shares but not yet distributed to Participants, provided that any such Dividend Equivalents shall in all cases be subject to the same terms and conditions as apply to Dividends Equivalents earned with respect to RSUs as set forth in Section 7.04(b).
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7.07 Annual Equity Grants, Deferred Stock Units and Deferrals for Non-Employee Directors.
(a) | Unless the Board or the Committee sets a different equity award policy for Non-Employee Directors, but subject to the limitation in Section 5.03, on the date specified by the Committee of each year, each Non-Employee Director shall receive a fully vested annual grant of shares of Stock (an “Annual Equity Grant”), with the number determined by dividing a dollar amount by the Fair Market Value of a share of Stock on the date of the Annual Equity Grant. If the Non-Employee Director has then not served for the full period since the date of the prior Annual Equity Grant, his or her Annual Equity Grant shall be a pro-rata grant based on the full months of service as a Non-Employee Director since the date of the prior Annual Equity Grant. The dollar amount shall be $200,000 or such lesser or greater amount as may be approved by the Committee from time to time as part of its periodic evaluation of Non-Employee Director compensation. Unless deferred under subsection (b) below, the Annual Equity Grant shall be immediately distributed in Stock.
| (b) | A Non-Employee Director may elect to defer all or any part (in 10% increments) of his or her Annual Equity Grant into either deferred stock units (“DSUs”) or, to the extent permitted by the Committee, into the account (the “Deferred Cash Compensation Account”) established under subsection (c) below.
| | (i) | An election to defer the Annual Equity Grant shall be made on or before December 31 of the calendar year preceding the calendar year in which the 12-month period over which the Annual Equity Grant is earned begins (except for a new Non-Employee Director, in which event Section 6.08(b) shall apply), on a form (which may be electronic) prescribed by the Company. Notwithstanding the foregoing, if an Annual Equity Grant is subject to a condition requiring the Non-Employee Director to remain in continuous service for a period of at least 12 months, the Non-Employee Director may elect to defer such Annual Equity Grant on or before the 30th day after the first day of such period, provided that the election is made at least 12 months in advance of the earliest vesting date (other than vesting on account of death or a Change in Control). An election to defer an Annual Equity Grant shall become irrevocable for the period to which it applies as of the last date for making such election. Notwithstanding Section 6.08(a), a deferral election under this subsection (b) shall carry over from year to year, unless changed or revoked at the same time and in the same manner as the a deferral election could be made under this subsection (b). The deferral election shall include (i) the designation and portion of the Annual Equity Grant to be deferred, (ii) whether it shall be deferred into DSUs or, if permitted by the Committee, into the Deferred Cash Compensation Account and (iii) to the extent the Non-Employee Director elects an alternative time and form of payment pursuant to clause (iv) of this Section 7.07(b) or clause (iv) of Section 7.07(c), below, the time and form of payment of the Non-Employee Director’s DSUs or Deferred Cash Compensation Account, as applicable.
| | (ii) | The value of any DSU at any time shall be the Fair Market Value of one share of Stock. Prior to the conversion of DSUs to a cash-denominated deferral account pursuant to clause (iii) below or the settlement of DSUs in Stock, Dividend Equivalents shall be earned on DSUs and converted into additional DSUs based on the Fair Market Value of the Stock on the date the dividends are converted.
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2021 Proxy Statement A-15
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
| (iii) | Except to the extent a Non-Employee Director elects an alternative time and form of payment pursuant to clause (iv) below, DSUs will be converted to a cash-denominated deferral account as of the date of the Non-Employee Director’s Termination of Service, in an amount equal to the Fair Market Value of the DSUs as of such date, and such account shall be paid out in cash in two installments. The first installment shall be paid within 30 days after the date of the Non-Employee Director’s Termination of Service in an amount equal to one-half of the value of such deferral account. The second installment shall be paid on the first annual anniversary of the first installment payment in an amount equal to the remaining value of such deferral account; provided that during the period beginning on the date of the Non-Employee Director’s Termination of Service and prior to payment of the second installment, such account will be credited with interest on a monthly basis at a monthly compounding rate (the “Prime Borrowing Rate”) equal to the prime lending rate of interest in effect as of the first business day of that month as quoted by the Company’s then-current lending bank financing source for commercial borrowings. | | (iv) | In lieu of the time and form of payment prescribed by clause (iii) above, a Non-Employee Director may elect either or both of the following: (A) that all of his or her DSUs be paid or commence within 30 days after the date of the Non-Employee Director’s Termination of Service and be paid in the form of a lump-sum distribution or in annual installments payable over a period of five, 10 or 15 years and/or (B) that all of his or her DSUs be credited and paid in the form of an equal number of shares of Stock; provided that if a Non-Employee Director has previously made an election to defer any Annual Equity Grants in the form of DSUs, (x) any subsequent election with respect to the time or form of payment pursuant to clause (A) above shall not take effect until the 12-month anniversary of the date of such election, and shall take effect only if the previously-scheduled payment date does not occur within such 12-month period, and (y) the Non-Employee Director must elect that, notwithstanding clause (A) above, the DSUs be paid or commence on a date that is at least five years after the date on which the DSUs otherwise would have been paid or commenced and in no event shall installments continue later than 15 years after the date of such Non-Employee Director’s Termination of Service. For purposes of Section 409A of the Code, a right to receive installment payments pursuant to this Section 7.07(b) shall be treated as a right to receive a single payment. Unless the Non-Employee Director elects to receive a distribution in the form of shares of Stock, then following the date of the Non-Employee Director’s Termination of Service and prior to the date on which the DSUs are paid in full, the unpaid DSUs will be credited with interest on a monthly basis at the Prime Borrowing Rate. If a Non-Employee Director elects to receive his or her DSUs in the form of installments, and the value of such DSUs is less than $10,000 as of the date of such Non-Employee Director’s Termination of Service or any anniversary thereof, then the unpaid portion of such Non-Employee Director’s DSUs shall be distributed to such Non-Employee Director in a lump-sum distribution. Within 90 days after the date of a Non-Employee Director’s death, all unpaid installments shall accelerate and be paid to the Non-Employee Director’s beneficiary or estate in a lump sum payment. | (c) | A Non-Employee Director may elect to defer all or any part (in 10% increments) of his or her annual retainer, committee fees, meeting fees, or any similar fees for service as a Non-Employee Director (“Directors Fees”), plus, to the extent permitted by the Committee, all or any portion (in 10% increments) of his or her Annual Equity Grant, into a Deferred Cash Compensation Account. | | (i) | An election to defer Directors Fees into the Deferred Cash Compensation Account shall be made on or before December 31 of the calendar year preceding the calendar year in which the Directors Fees are earned (except for a new Non-Employee Director, in which event Section 6.08(b) shall apply), on a form (which may be electronic) prescribed by the Company. Such election shall become irrevocable for the period to which it applies as of the last date for making such election. Notwithstanding Section 6.08(a), a deferral election under this subsection (c) shall carry over from year to year, unless changed or revoked at the same time and in the same manner as a deferral election could be made under this subsection (c). The deferral election shall include (i) the designation and portion of the Directors Fees to be deferred and (ii) to the extent the Non-Employee Director elects an alternative time of payment pursuant to clause (iv) below, the time of payment of the Non-Employee Director’s Deferred Cash Compensation Account. | | (ii) | The Deferred Cash Compensation Account shall accrue interest on a monthly basis at a monthly compounding rate equal to 120% of the applicable federal midterm rate (as determined under Section 1274(d) of the Code) until the Non-Employee Director’s Termination of Service. | | (iii) | Except to the extent a Non-Employee Director elects an alternative time of payment pursuant to clause (iv) below or, if permitted by the Committee, Section 7.07(b) above, the Deferred Cash Compensation Account will be paid out in cash in two installments. The first installment shall be paid within 30 days after the date of the Non-Employee Director’s Termination of Service in an amount equal to one-half of the balance of his or her Deferred Cash Compensation Account. The second installment shall be paid on the first annual anniversary of the first installment payment in an amount equal to the remaining balance of the Non-Employee Director’s Deferred Cash Compensation Account. Following the date of the Non-Employee Director’s Termination of Service and prior to the payment of the second installment, the Deferred Cash Compensation Account will be credited with interest on a monthly basis at Prime Borrowing Rate. |
A-16 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
| (iv) | In lieu of the time of payment prescribed by clause (iii) above, a Non-Employee Director may elect that all of his or her Deferred Cash Compensation Account be paid or commence within 30 days after the date of the Non-Employee Director’s Termination of Service and be paid in the form of a lump sum distribution or in annual installments payable over a period of five, 10 or 15 years; provided that if a Non-Employee Director has previously made an election to defer any Directors Fees or Annual Equity Grants to his or her Deferred Cash Compensation Account, (x) any subsequent election with respect to the time of payment pursuant to this clause (iv) shall not take effect until the 12-month anniversary of the date of such election, and shall take effect only if the previously scheduled payment date does not occur within such 12-month period, and (y) the Non-Employee Director must elect that, notwithstanding clause (A) above, the Deferred Cash Compensation Account be paid or commence on a date that is at least five years after the date on which the Deferred Cash Compensation Account otherwise would have been paid or commenced and in no event shall installments continue later than 15 years after the date of such Non-Employee Director’s Termination of Service. For purposes of Section 409A of the Code, a right to receive installment payments pursuant to this Section 7.07(c) shall be treated as a right to receive a single payment. Following the date of the Non-Employee Director’s Termination of Service and prior to full payment of the Deferred Cash Compensation Account, the Deferred Cash Compensation Account will be credited with interest on a monthly basis at the Prime Borrowing Rate. If a Non-Employee Director elects to receive his or her Deferred Cash Compensation Account in the form of installments, and the value of such Deferred Cash Compensation Account is less than $10,000 as of the date of such Non-Employee Director’s Termination of Service or any anniversary thereof, then the unpaid portion of such Non-Employee Director’s Deferred Cash Compensation Account shall be distributed to such Non-Employee Director in a lump-sum distribution. Within 90 days after the date of a Non-Employee Director’s death, all unpaid installments shall accelerate and be paid to the Non-Employee Director’s beneficiary or estate in a lump sum payment. | (d) | Annual Equity Grants, DSUs, and the Deferred Cash Compensation Account, shall be fully vested at all times. | (e) | The Committee may from time to time establish other compensation and deferral arrangements for Non-employee Directors in addition to or in lieu of the program outlined above in this Section 7.07. |
7.08 Bonus Stock and Other Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Stock or factors that may influence the value of shares of Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Stock, purchase rights for shares of Stock, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee, and Awards valued by reference to the book value of shares of Stock or the value of securities of or the performance of specified subsidiaries or Affiliates or other business units. The Committee is authorized to grant shares of Stock as a bonus, or to grant shares of stock or other Awards in lieu of obligations of the Company or an Affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee. The Committee shall determine the terms and conditions of such Awards, which may include the right to elective deferral thereof, subject to such terms and conditions as the Committee may specify in its discretion. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, shares of Stock, other Awards, or other property, as the Committee shall determine, subject to any applicable restrictions of this Plan.
7.09 Cash Awards. The Committee is authorized to grant cash Awards to Eligible Persons as a bonus on such terms and condition as the Committee shall determine, subject to any applicable restrictions of this Plan.
VIII. Performance Awards
8.01 Performance Awards Generally. The Committee is authorized to grant any Award in the form of a Performance Award. Performance Awards may be denominated as a cash amount, number of shares of Stock, or specified number of other Awards or property (or a combination) which may be earned upon achievement or satisfaction of performance conditions specified by the Committee over a performance period established by the Committee. In addition, the Committee may specify that any other Award shall constitute a Performance Award by conditioning the right of a Participant to exercise the Award or have it settled, and the timing thereof, upon achievement or satisfaction of such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. After the end of each performance period, the Committee shall determine the amount, if any, of the Performance Award for that performance period payable to each Participant. The Committee may, in its discretion, determine that the amount payable to any Participant as a Performance Award shall be reduced from the amount of his or her potential Performance Award, including a determination to make no final Award whatsoever, and may exercise its discretion to increase the amounts payable under any Performance Award. The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of Termination of Service by the Participant or other event (including a Change in Control) prior to the end of a performance period or otherwise prior to settlement of such Performance Awards. Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, as provided in the Award Agreement in the discretion of the Committee.
2021 Proxy Statement A-17
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
8.02 Performance Criteria. A Performance Award may be subject to any performance criteria selected by the Committee, including without limitation the following:
(a) | Sales, on a corporate, divisional or unit basis, including (i) net sales; (ii) unit sales volume; (iii) aggregate product price; (iv) same store sales or (v) comparable store sales;
| (b) | Share price, including (i) market price per share; and (ii) share price appreciation;
| (c) | Earnings, on a corporate, divisional or unit basis, including (i) earnings per share, reflecting dilution of shares; (ii) gross or pre-tax profits; (iii) post-tax profits; (iv) operating profit; (v) earnings net of or including dividends; (vi) earnings net of or including the after-tax cost of capital; (vii) earnings before (or after) interest and taxes (“EBIT”); (viii) earnings per share from continuing operations, diluted or basic; (ix) earnings before (or after) interest, taxes, depreciation and amortization (“EBITDA”); (x) pre-tax operating earnings after interest and before incentives, service fees and extraordinary or special items; (xi) operating earnings; (xii) growth in earnings or growth in earnings per share; and (xiii) total earnings;
| (d) | Return on equity, on a corporate, divisional or unit basis; including (i) return on equity; (ii) return on invested capital; (iii) return or net return on assets; (iv) return on net assets; (v) return on equity; (vi) return on gross sales; (vii) return on investment; (viii) return on capital; (ix) return on invested capital; (x) return on committed capital; (xi) financial return ratios; (xii) value of assets; and (xiii) change in assets;
| (e) | Cash flow(s), on a corporate, divisional or unit basis, including (i) operating cash flow; (ii) net cash flow; (iii) free cash flow; (iv) cash flow on investment;
| (f) | Revenue, on a corporate, divisional or unit basis, including (i) gross or net revenue; and (ii) changes in annual revenues;
| (g) | Margins, on a corporate, divisional or unit basis, including (i) adjusted pre-tax margin; and (ii) operating margins;
| (h) | Income, on a corporate, divisional or unit basis, including (i) net income; and (ii) consolidated net income,
| (i) | Economic value added;
| (j) | Costs, on a corporate, divisional or unit basis, including (i) operating or administrative expenses; (ii) operating expenses as a percentage of revenue; (iii) expense or cost levels; (iv) reduction of losses, loss ratios or expense ratios; (v) reduction in fixed costs; (vi) expense reduction levels; (vii) operating cost management; and (viii) cost of capital;
| (k) | Financial ratings, on a corporate, divisional or unit basis, including (i) credit rating; (ii) capital expenditures; (iii) debt; (iv) debt reduction; (v) working capital; (vi) average invested capital; and (vii) attainment of balance sheet or income statement objectives;
| (l) | Market or category share, on a corporate, divisional or unit basis, including (i) market share; (ii) volume; (iii) unit sales volume; and (iv) market share or market penetration with respect to specific designated products or product groups and/or specific geographic areas;
| (m) | Shareholder return, including (i) total shareholder return, stockholder return based on growth measures or the attainment of a specified share price for a specified period of time; and (ii) dividends; and
| (n) | Objective nonfinancial performance criteria on a corporate, divisional or unit basis, including (i) attainment of strategic and business goals; (ii) regulatory compliance; (iii) productivity and productivity improvements; (iv) inventory turnover, average inventory turnover or inventory controls; (v) net asset turnover; (vi) customer satisfaction based on specified objective goals or company-sponsored customer surveys; (vii) employee satisfaction based on specified objective goals or company-sponsored employee surveys; (viii) objective employee diversity goals; (ix) employee turnover; (x) specified objective environmental goals; (xi) specified objective social goals; (xii) specified objective goals in corporate ethics and integrity; (xiii) specified objective safety goals; (xiv) specified objective business integration goals; (xv) specified objective business expansion goals or goals relating to acquisitions or divestitures; and (xvi) succession plan development and implementation.
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In establishing a Performance Award or determining the achievement of an applicable performance measure, the Committee may provide that achievement of a performance measure may be amended or adjusted to include or exclude components of such performance measure, including, without limitation, foreign exchange gains and losses, asset write-downs, litigation or claim judgments or settlements, acquisitions and divestitures, changes in fiscal year, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, annual incentive payments or other bonuses, capital charges, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Company or its financial statements or changes in law or accounting principles.
8.03 Additional and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either in addition to, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity acquired or to be acquired by the Company or an Affiliate. An Award may specify that the Participant is to receive payment from the Company or any Affiliate. Awards granted in addition to other Awards or awards may be granted either as of the same time as or a different time from the grant of such other Awards or awards.
A-18 Walgreens Boots Alliance
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
8.04 Interest. Unless interest is specifically provided for in this Plan or the Award Agreement, no interest will be paid on Awards. The Award Agreement may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the granting or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock.
8.05 Exemptions from Section 16(b) Liability. With respect to a Participant who is then subject to the reporting requirements of Section 16(a) of the Exchange Act in respect of the Company, the Committee shall grant Awards under the Plan and otherwise administer the Plan in a manner so that the grant and exercise of each Award with respect to such a Participant may qualify for an available exemption from liability under Rule 16b-3, Rule 16b-6, or otherwise not be subject to liability under Section 16(b), provided that this provision shall not be construed to limit sales or other dispositions by such a Participant (in connection with an exercise or otherwise), and shall not limit a Participant’s ability to engage in other non-exempt transactions under the Plan. The Committee may authorize the Company to repurchase any Award or shares of Stock deliverable or delivered in connection with any Award in order to avoid a Participant who is subject to Section 16 of the Exchange Act incurring liability under Section 16(b). Unless otherwise specified by the Participant, equity securities or derivative securities acquired under the Plan which are disposed of by a Participant shall be deemed to be disposed of in the order acquired by the Participant.
IX. Change in Control
Unless otherwise provided in the Award Agreement, in the event there is any Change in Control, the Committee may, in its discretion, with respect to any Award or agreement that is not 409A Compensation, without the consent of the Participant, provide for any or all of the following to occur:
(a) | the assumption or substitution of, or adjustment to, such outstanding Award or agreement;
| (b) | acceleration of the vesting of such Award and termination of any restrictions or performance conditions on such Award, either immediately upon the Change in Control or upon the Termination of Service of the Participant within a fixed time following the Change in Control, as determined by the Committee; or
| (c) | the cancellation of such Award or agreement for a payment to the Participant in cash or other property in an amount determined by the Committee.
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In addition, with respect to any unexercised Option or SAR, the Committee may extend the period for exercising the vested portion thereof for a stated period following such a Termination of Service within such fixed time (but only during the stated term of the Option or SAR).
X. General Provisions
10.01 Additional Award Forfeiture Provisions. The Committee may condition an Eligible Person’s right to receive a grant of an Award, or a Participant’s right to exercise an Award, to retain Stock, cash or other property acquired in connection with an Award, or to retain the profit or gain realized by a Participant in connection with an Award, including cash or other property received upon sale of Stock acquired in connection with an Award, upon the Participant’s compliance with specified conditions relating to non-competition, confidentiality of information relating to the Company, non-solicitation of customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of the Company and its officers, Directors and Affiliates, or other requirements applicable to the Participant, as determined by the Committee, at the time of grant or otherwise, including during specified periods following Termination of Service.
10.02 Compliance with Legal and Other Requirements.
(a) | The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation (including, without limitation, obtaining any approval, order or ruling from the Securities and Exchange Commission, the Internal Revenue Service or any other governmental agency that the Committee or the Company shall determine to be necessary or advisable), listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Company are listed or quoted, or compliance with any other obligation of the Company, as the Company may consider appropriate, and may require any Participant, as a condition of receiving payment under an Award or delivery of Stock under an Award, to make such representations and covenants, furnish such information and comply with or be subject to such other conditions as the Company deems necessary or advisable in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations.
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2021 Proxy Statement A-19
Table of Contents
Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
(b) | Without limiting the generality of the foregoing, no Stock or other form of payment shall be delivered with respect to any Award unless the Company shall be satisfied based on the advice of its counsel that such issuance will be in compliance with applicable federal, state and other securities laws. All certificates, or book-entry accounts, for shares of Stock delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Stock is then listed and any applicable federal, state or other securities laws, and the Company may cause a legend or legends to be placed on any such certificates, or notations on such book-entry accounts, to make appropriate reference to such restrictions. The foregoing provisions of this paragraph 10.02(b) shall not be effective with respect to Awards held by United States residents (a) if and to the extent that the shares of Stock delivered under the Plan are covered by an effective and current registration statement under the Securities Act of 1933, as amended, and the Stock is a “covered security” within the meaning of Section 18 of the Securities Act of 1933, as amended, or (b) if and so long as the Company determines that application of such provisions are no longer required or desirable. Without limiting the foregoing, the Committee may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by a Participant of any shares of Stock delivered under the Plan, including, without limitation, restrictions under the Company’s insider trading policy and restrictions as to the use of a specified brokerage firm for such resales or other transfers.
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10.03 Designation of Beneficiary. By written instrument filed with the Company during the Participant’s lifetime in a manner specified by the Committee in the Award Agreement or in the Committee’s rules and procedures of general application, each Participant may file with the Committee a written designation of one or more persons or revocable trusts as the Beneficiary who shall be entitled to receive the amount, if any, payable hereunder after the Participant’s death or to exercise an Award or to receive settlement of an Award after the Participant’s death. No such designation of Beneficiary shall be effective until filed with the Committee. A Participant may, from time to time, revoke or change his or her Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Committee. The last such designation received by the Committee prior to the Participant’s death shall be controlling. If no such Beneficiary designation is in effect at the time of the Participant’s death, or if no designated Beneficiary survives the Participant, the Participant’s estate shall be deemed to have been designated his or her Beneficiary and the executor or administrator thereof shall receive the amount, if any, payable hereunder and shall be entitled to exercise or receive settlement of an Award after the Participant’s death. If the Committee is in doubt as to the right of any person as Beneficiary, the Company may retain any amount in question until the rights thereto are determined, or the Company may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Company therefor.(a) | Withholding. The Company and any Affiliate is authorized to withhold, at the time of grant or settlement or other time as appropriate, from any Award or account, any payment relating to an Award or account, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes required to be withheld by the Company or Affiliate. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of the Company’s (or an Affiliate’s) withholding obligations in the discretion of the Committee. Unless the Committee otherwise specifies, Participants shall satisfy withholding tax amounts by having the Company (or an Affiliate) withhold from the Stock to be delivered upon exercise of an Option or vesting or settlement of an Award that whole number of shares of Stock having a Fair Market Value equal to the amount to be withheld, and any additional withholding amount shall be satisfied in cash.
| (b) | Required Consent to and Notification of Section 83(b) Election of the Code. No election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award Agreement or by action of the Committee in writing prior to the making of such election. In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Committee of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code or other applicable provision.
| (c) | Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code. If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Committee of such disposition within ten days thereof.
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A-20 Walgreens Boots Alliance
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Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
(d) | Payment of Tax Amount. Notwithstanding anything herein to the contrary, in the event the Internal Revenue Service should finally determine that an Award that has not been settled is nevertheless required to be included in the Participant’s or a Beneficiary’s gross income for federal income tax purposes, then an amount necessary to pay the applicable federal, state or local income taxes on such includible value shall be distributed with respect to the Award in a lump sum cash payment within sixty (60) days after such determination, without the requirement of separate approval by the Committee. A “final determination” of the Internal Revenue Service is a determination in writing ordering the payment of additional tax, reporting of additional gross income or otherwise requiring an account or portion thereof to be included in gross income, which is not appealable or which the Participant or Beneficiary does not appeal within the time prescribed for appeals. For avoidance of doubt, this Section 10.04(d) applies to all Awards and accounts, including both 409A Compensation and non-409A Compensation.
| (e) | Participant Responsibility. Each Participant is solely responsible for all taxes of any nature imposed on the Participant in connection with any Award, including without limitation any taxes under Section 409A or Section 4999 of the Code. Nothing in this Plan or any Award Agreement shall be construed to guarantee the tax consequences to the Participant of any Award.
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10.05 Limitation on Benefits.(a) | To the extent that any payment or distribution to or for the benefit of a Participant pursuant to the terms of this Plan or any other plan, arrangement or agreement with the Company, any of its affiliated companies, any person whose actions result in a change of ownership or effective control covered by Section 280G(b)(2) of the Code or any person affiliated with the Company or such person, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise (the “Payments”) would be subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the Code, then the Company shall reduce the Payments to the amount that is (after taking into account federal, state, local and social security taxes at the maximum marginal rates, including any excise taxes imposed by Section 4999 of the Code) one dollar less than the amount of the Payments that would subject the Participant to the Excise Tax (the “Safe Harbor Cap”) if, and only if, such reduction would result in the Participant receiving a higher net after-tax amount. Unless a Participant shall have given prior written notice specifying a different order to the Company to effectuate the Safe Harbor Cap, the Payments to be reduced hereunder will be determined in a manner which has the least economic cost to the Participant and, to the extent the economic cost is equivalent, will be reduced in the reverse order of when the Payment would have been made to the Participant until the reduction specified herein is achieved. A Participant’s right to specify the order of reduction of the Payments shall apply only to the extent that it does not directly or indirectly alter the time or method of payment of any amount that is deferred compensation subject to (and not exempt from) Section 409A.
| (b) | All determinations required to be made under this Section 10.05, including whether and when the Safe Harbor Cap is required and the amount of the reduction of the Payments pursuant to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determination, shall be made by a public accounting firm or other nationally recognized consulting firm with expertise in Section 280G of the Code that is retained by the Company as of the date immediately prior to the Change in Control (the “Calculating Firm”) which shall provide detailed supporting calculations both to the Company and the Participant within fifteen (15) business days of the receipt of notice from the Company or the Participant that there has been a Payment, or such earlier time as is requested by the Company (collectively, the “Determination”). All fees and expenses of the Calculating Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Calculating Firm in connection with the performance of the services hereunder. The Determination by the Calculating Firm shall be binding upon the Company and the Participant. The Company shall bear and pay directly all costs and expenses incurred in connection with any contests or disputes with the Internal Revenue Service relating to the Excise Tax, and the Participant shall cooperate, to the extent his or her reasonable out-of pocket expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any such contests or disputes.
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10.06 Amendment and Termination of the Plan. The Company, acting through its Board or the Committee, may at any time terminate, and from time to time may amend or modify the Plan; provided, however, that no amendment or modification may become effective without approval of the amendment or modification by the stockholders if stockholder approval is required to enable the Plan to satisfy any applicable federal or state statutory or regulatory requirements or applicable exchange listing requirements; and provided further, that, without the consent of an affected Participant, no such Board or Committee action may materially and adversely affect the rights of such Participant under any outstanding Award (for this purpose, actions that alter the timing of federal income taxation of a Participant will not be deemed material unless the Board or the Committee determines that such action would result in an income tax penalty on the Participant).restructuring activity. | 410.07 No Repricing. Without the approval of stockholders, the Committee will not amend or replace previously granted Options or SARs in a transaction that constitutes a “repricing,” within the meaning of the listing requirements of the Nasdaq Stock Market. | Certain legal and regulatory accruals and settlements relate to significant charges associated with certain legal proceedings, including legal defense costs. In addition, and for avoidance of doubt, none of the following is permitted to occur without approval of stockholders: (a) lowering the grant price of outstanding Options and SARs, and (b) cancelling outstanding Options and SARs in exchange for cash, other Awards, or replacement Options and SARs with grant prices that are less than the grant prices of the cancelled Options or SARs. 10.08 Clawback; Right of Setoff. Awards are subject to the Company’s policy on recoveries and such other terms and conditions as the Committee may impose. The Company or any Affiliate may, to the extent permitted by applicable law, deduct from and set off against any amountsfiscal 2022, the Company or an Affiliate may owerecorded a $683 million charge related to the Participant from time to time, including amounts payable2021 Proxy Statement A-21
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Exhibit A: Walgreens Boots Alliance, Inc. 2021 Omnibus Incentive Plan
in connectiona settlement agreement with any Award, owed as wages, fringe benefits, or other compensation owed to the Participant, such amounts as may be owed by the Participant to the Company, although the Participant shall remain liable for any part of the Participant’s payment obligation not satisfied through such deduction and setoff. By accepting any Award granted hereunder, the Participant agrees to any deduction or setoff under this Section. Notwithstanding the foregoing, no setoff form 409A Compensation may be made if it results in acceleration or deferral of the permitted payment date under Section 409A of the Code.
10.09 Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements, apart from the Plan, as it may deem desirable, and such other arrangements may be either applicable generally or only in specific cases.10.10 Treatment of Awards by Other Plans. No Award shall be treated as compensation for the purpose of determining benefits based on compensation under any other plan or arrangement of the Company or any Affiliate unless such plan or arrangement provides to the contrary making specific reference to this Plan or to such form of compensation under the Former Plan.10.11 Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration, or if less, the Fair Market Value on the date of forfeiture of the Stock for which the Participant paid. Distributions in Stock shall be made in whole and fractional shares, unless the Company elects to pay fractional shares in cash.10.12 Considerations Under Section 409A of the Code.(a) | Construction in Compliance with Code Section 409A. The Company intends that none of the grant, exercise, settlement or amendment or termination of any Award under the Plan will cause the Participant to be liable for payment of interest or a tax penalty under Code Section 409A. The provisions of the Plan and any Award Agreement shall be construed consistent with that intent.
| (b) | Six-Month Delay. Any distribution or settlement of 409A Compensation triggered by the Termination of Service of a Specified Employee that would otherwise be made prior to the Deferred Distribution Date (as defined below) shall not occur earlier than the Deferred Distribution Date. The “Deferred Distribution Date” is the day that is six (6) months and one (1) day after a Participant’s Termination of Service (or the Specified Employee’s date of death, if earlier).
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10.13 Governing Law. The Plan and all agreements and forms hereunder shall be construed in accordance with and governed by the laws of the State of Delaware without giving effectFlorida to principles of conflicts of laws, and applicable provisions of federal law.10.14 Awards to Participants Outside the United States. The Committee may adopt rules and procedures relatingresolve all claims related to the operationdistribution and administrationdispensing of prescription opioid medications across the Company’s pharmacies in the State of Florida. The Company excludes these charges when evaluating operating performance because it does not incur such charges on a predictable basis and exclusion of such charges enables more consistent evaluation of the PlanCompany’s operating performance. These charges are recorded within selling, general and administrative expenses. | | 5 | Acquisition-related costs are transaction and integration costs associated with certain merger, acquisition and divestitures related activities. These costs include charges incurred related to accommodatecertain mergers, acquisition and divestitures related activities recorded in operating income, for example, costs related to integration efforts for merger, acquisition and divestitures activities. Examples of such costs include deal costs, severance and stock compensation. These charges are primarily recorded within selling, general and administrative expenses. These costs are significantly impacted by the specific requirements of local lawstiming and procedures for a Participant or group of participants who are then resident or primarily employed outsidecomplexity of the United States. Without limitingunderlying merger, acquisition and divestitures related activities and do not reflect the generality of the foregoing, the Committee is specifically authorized (a) to adopt the rules and procedures regarding the conversion of local currency, withholding procedures and handling of evidence of Stock ownership which vary with local requirements and (b) to adopt sub-plans, and Plan addenda as the Committee deems desirable, to accommodate foreign laws, regulations and practice; and (c) to modify the terms of any Award under the Plan in any manner deemed by the Committee to be necessary or appropriate in order that such Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States. Company’s current operating performance. | |
Independent
Chair
