UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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☐ | Preliminary Proxy Statement | |
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☑ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
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Brown-Forman Corporation
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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It began as a promise on a whiskey bottle label. 150 years later, it remains the standard for all our products. It guides our corporate responsibility practices today. “NOTHING BETTER IN THE MARKET” | ||
June 30, 2020 DEAR BROWN-FORMAN STOCKHOLDER: It is our pleasure to invite you to attend Brown-Forman Corporation’s 2020 Annual Meeting of Stockholders, which will be held onThursday, July 30, 2020, at 9:30 A.M. (Eastern Daylight Time). Traditionally, our Annual Meeting is held at the Brown-Forman Conference Center in Louisville, Kentucky. However, this year, in light of the public health impact of theCOVID-19 outbreak, the Annual Meeting will be held entirely online via video webcast to support the health and well-being of our stockholders, directors, employees, and guests. Please see the Notice of Annual Meeting on the next page for more information about how to attend and participate in this year’s Annual Meeting online. We expect to return to hosting our annual meetings in Louisville, Kentucky, next year. Your vote is important to us.Please complete and return your proxy card, or vote by telephone or online as soon as possible, even if you plan to attend the Annual Meeting online. We hope you join us on July 30. On behalf of the Board of Directors, thank you for your continued support. Very truly yours, | ||||||
LAWSON E. WHITING, | GEO. GARVIN BROWN IV, | |||||
President and Chief Executive Officer | Chairman of the Board of Directors |
2017 PROXYSTATEMENT
& NOTICE OF ANNUALMEETING OF STOCKHOLDERS
June 27, 2017
DEAR BROWN-FORMAN STOCKHOLDER:
It is our pleasure to invite you to attend Brown-Forman Corporation’s 2017 Annual Meeting of Stockholders, which will be held at the Brown-Forman Conference Center in Louisville, Kentucky, onThursday, July 27, 2017, at 9:30 A.M. (Eastern Daylight Time). Please see the Notice of Annual Meeting on the next page for more information about this location and our admission procedures.
Your vote is important to us.We urge you to complete and return your proxy card or to vote by telephone or online as soon as possible, even if you plan to attend the Annual Meeting.
We hope to see you on July 27. On behalf of the Board of Directors, thank you for your continued support.
Very truly yours,
Paul C. Varga,
Chairman and Chief Executive Officer
Geo. Garvin Brown IV,
Chairman of the Board of Directors
MEETING OF
STOCKHOLDERS
DATE: | Thursday, July | |||||
ADMISSION PROCEDURES We are committed to providing a safe, secure environment for our stockholders, directors, employees, and guests. To that end, the Annual Meeting will be held in virtual meeting format only this year. Although you will not be able to attend the Annual Meeting physically, we hope the online meeting format will allow participation by all stockholders regardless of location. To be admitted to the Annual Meeting, please visitwww.virtualshareholder meeting.com/BFA2020. If you are a Class A stockholder, you will log into the Annual Meeting by entering your unique16-digit control number found on your proxy card or voting instruction form. If you are a Class B stockholder, you will log into the Annual Meeting as a guest. For more information about how to attend the Annual Meeting online, please see “Attending the Annual Meeting” on page 4. Additionally, you can visitwww.virtualshareholdermeeting.com/ BFA2020 or contact Steve Cassin, our Investor Relations Manager, by telephone at (502)774-7658 or by email atInvestor_Relations@b-f.com for more information about attending the Annual Meeting. IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 30, 2020: The Notice of Annual Meeting, Proxy Statement, and Integrated Annual Report, which includes our Annual Report on Form10-K for fiscal 2020, are available atwww.brown-forman.com/investors/annual-report/. | ||||||
TIME: | 9:30 A.M.(Eastern Daylight Time) | |||||
LOCATION: | The Annual Meeting will be presented exclusively online at | |||||
The Annual Meeting will be held entirely online via video webcast due to the public health impact of the | ||||||
We are holding this meeting for the following purposes:
• | |
and • | |
Class A stockholders of record at the close of business on June 15, 2020, are entitled to vote at the meeting, either online at the Annual Meeting or by proxy. Your vote is very important. Even if you plan to attend the Annual Meeting online, we encourage you to complete, sign, and date the enclosed proxy card and return it in the enclosed envelope, or vote by telephone(1-800-690-6903) or online (www.proxyvote.com) prior to the Annual Meeting so your shares are represented and voted at the meeting even if your plans change and you are unable to attend online. Instructions on Louisville, Kentucky June 30, 2020 By order of | |
Matthew E. Hamel, Secretary |
Class A stockholders of record at the close of business on June 19, 2017, are entitled to vote at the meeting, either in person or by proxy.
There are several ways to vote. You may complete, sign, and date the enclosed proxy card and return it in the enclosed envelope, or you may vote by telephone (1-800-652-8683) or online(www.investorvote.com/BFB). Whatever method you choose, please vote in advance of the meeting to ensure that your shares will be voted as you direct. Instructions on telephone and online voting are on the proxy card enclosed with this Proxy Statement.
Louisville, KentuckyJune 27, 2017
By order of the Board of DirectorsMatthew E. Hamel, Secretary
ADMISSION PROCEDURES
We are committed to providing a safe, secure environment for our stockholders, employees, and guests. To that end, please observe the following procedures if you plan to attend the Annual Meeting:
If you do not register in advance, you may still be admitted if you present a photo ID along with your proxy card, brokerage statement, or other documentation of stock ownership.
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 27, 2017:
The Notice of Annual Meeting, Proxy Statement, and Annual Report to Stockholders, which includes our Form 10-K for fiscal 2017, are available atwww.brown-forman.com/ investors/annual-report/.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSTABLE OF
CONTENTS
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SUMMARY
In this section, we highlight certain information about matters discussed in this Proxy Statement. As it is only a summary, we encourage you to read the entire Proxy Statement before voting.
ANNUAL MEETING OF STOCKHOLDERS
ANNUAL MEETING OF STOCKHOLDERS | VOTING | |||||||
DATE: Thursday, July 30, 2020 TIME:9:30 A.M.(Eastern Daylight Time) LOCATION: The Annual Meeting will be presented exclusively online atwww.virtualshareholdermeeting.com/BFA2020 DATE OF DISTRIBUTION: The Notice of Annual Meeting of Stockholders, Proxy Statement, and proxy card are first being made available or mailed on or about June 30, 2020. |
PROPOSALS FOR STOCKHOLDER VOTING
Proposal | Our Board’s voting recommendation | |||||
Election of DETAILS:Pages 18–22 | FOR all nominees | |||||
Advisory vote to approve our | FOR the proposal | |||||
PERFORMANCE AND COMPENSATION HIGHLIGHTS
We believe our executive compensation program continues to attract, motivate, reward, and retain a talented and diverse team of executives. These individuals lead our efforts to be the best brand buildercontinually deliver on our corporate ambition so aptly described as “Nothing Better in the spirits industry,Market,” and enable us to deliver superior and sustainable value for our stockholders. The incentive payouts to our executives described in this Proxy Statement reflect our performanceperformance—both during the most recent fiscal 2017.
year and over time.
The following charts compare trends in Brown-Forman’sour performance with respect to total shareholder return (TSR), diluted earnings per share, and underlying operating income growth with trends in the compensation of our President and Chief Executive Officer, Paul Varga.Lawson E. Whiting. These three financial metrics are intended to reflect exceptional long-term value generated for our stockholders, and the charts show how our compensation strategy aligns with that performance.
OUR PERFORMANCE IN FISCAL 2017:2020:
(1) | Reflects the |
Total compensation for the Chief Executive Officer includes base salary, stock-settled stock appreciation rights, non-equity compensation, and all other compensation. Total compensation |
2 | BROWN-FORMAN |
PROXY SUMMARY | OUR DIRECTOR NOMINEES TO THE BOARD | ||
OUR DIRECTOR NOMINEES TO THE BOARD
Class A stockholders are being asked to vote on the election of the thirteen directors named below. More details about each director’s background, skills, and expertise can be found below under “Proposal 1: Election“Election of Directors” beginning on page 16. One new director, Kathleen M. Gutmann, joined the Board on May 24, 2017.18.
Board Nominees
Committee Membership as of April 30, 2020 | ||||||||||||||
Nominee Name & Occupation | Age | Director Since | Director Category | Audit | Comp | Corp Gov & Nom | Exec | |||||||
Patrick Bousquet-Chavanne Former Chief Executive Officer, Emaar Malls | 62 | 2005 | I | ● |
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Campbell P. Brown Senior Vice President, President and Managing Director of Old Forester, Brown-Forman | 52 | 2016 | B, M |
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Geo. Garvin Brown IV Chairman of the Board,Brown-Forman | 51 | 2006 | B |
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Stuart R. Brown Managing Partner, Typha Partners, LLC | 55 | 2015 | B |
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John D. Cook Director Emeritus, McKinsey & Company | 67 | 2008 | I |
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Marshall B. Farrer Senior Vice President, Managing Director of GTR and Developed APAC Region, Brown-Forman | 49 | 2016 | B, M |
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Laura L. Frazier Owner and Chairman, Bittners LLC | 62 | 2016 | B |
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KathleenM.Gutmann Chief Sales and Solutions Officer, United Parcel Service, Inc. | 51 | 2017 | I | ● |
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Augusta Brown Holland Founding Partner, Haystack Partners LLC | 44 | 2015 | B |
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Michael J. Roney Retired Chief Executive Officer, Bunzl plc | 66 | 2014 | I |
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TracyL. Skeans Chief Transformation and People Officer, Yum! Brands, Inc. | 47 | 2018 | I | ● | ● |
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Michael A. Todman Retired Vice Chairman, Whirlpool Corporation | 62 | 2014 | I | C |
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Lawson E. Whiting President and Chief Executive Officer, Brown-Forman | 52 | 2018 | M |
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B=Brown Family Director M=Management Director I=Independent Director C=Chair●=Committee Member
Fiscal 2020
“In building our brands and creating new opportunities, we are writing the next chapter in our story of innovation, perseverance, and success.”
Paul Varga, Chairman and CEO
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Return on Average Invested Capital is not derived in accordance with GAAP. | “BROWN-FORMAN IS AN ORGANIZATION FORTUNATE TO HAVE THOUGHTFUL, LONG-TERM FOCUSED LEADERSHIP; TALENTED AND DEDICATED PEOPLE; A ROBUST BALANCE SHEET; AND STRONG CASH FLOWS. WE BELIEVE WE HAVE THE RIGHT STRATEGY IN PLACE TO DRIVE THE NEXT GENERATION OF GROWTH.” | ||||
Lawson E. Whiting, President and |
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INFORMATION
ABOUT YOUR PROXY MATERIALS
Our Board of Directors (the Board) is soliciting proxies for our upcoming Annual Meeting of Stockholders to be held on July 27, 201730, 2020 (the Annual Meeting). This means that you can vote “by proxy” at the Annual Meeting —that is, you can instructby instructing us how you would like your shares to be voted, ateven if you cannot personally attend the meeting whether or not you personally attend.
online.
We are providing this Proxy Statement and accompanying materials to help you make an informed decision on the matters to be considered at the Annual Meeting. We will begin mailing this Proxy Statement and accompanying materials, and also make them available online, on or about June 27, 2017,30, 2020, to holders of record of our Class A and Class B common stock at the close of business on June 19, 2017,15, 2020, which is the “record date” for the Annual Meeting.
This Proxy Statement and our Integrated Annual Report, to Stockholders, which includes our Form10-K for fiscal 2017,2020, are available atwww.brown-forman.com/investors/annual-report/.You may request additional printed copies at any time using the contact information below.
Please let us know as soon as possible how you would like your shares voted. To do this, you may complete, sign, date, and returnSee “How to Vote” on the enclosed proxy card or voting instruction card, or you may instruct us by telephone or online. See “Voting” belownext page for details.
Contact Information
For information about your stock ownership or other stockholder services, please contact Linda Gering,Steve Cassin, our Stockholder ServicesInvestor Relations Manager, by telephone at (502) 774-7690,774-7658, bye-mail at Linda_Gering@b-f.com,Investor_Relations@b-f.com, or by mail at Brown-Forman Corporation, 850 Dixie Highway, Louisville, Kentucky 40210.
Reducing Duplicate Mailings
The Securities and Exchange Commission (SEC) permits us to deliver a single Proxy Statement and Integrated Annual Report to stockholders who share the same address and last name, unless we receive contrary instructions from any stockholder in the household.name. Even if your household receives only one Proxy Statement and Integrated Annual Report, each stockholder will receive an individual proxy card. We participate inimplemented this “householding” process to reduce our printing costs and postage fees, and to better facilitate voting.reduce the environmental impact of our Annual Meeting. If you would like to enroll in “householding,”householding, or if your household is already enrolled but you prefer to opt out of “householding”householding for next year, please inform us using the contact information above and we will promptly fulfill your request.
ATTENDING THE ANNUAL MEETING
In light of the public health impact of theCOVID-19 outbreak, the Annual Meeting will be held exclusively online via video webcast to support the health and well-being of our stockholders, directors, employees, and guests. Although you will not be able to attend the Annual Meeting physically, we hope the online meeting format will allow participation by all stockholders regardless of location.
Although only Class A stockholders may vote and submit questions at the Annual Meeting, Class A and Class B stockholders who owned their shares as of June 19, 2017,the record date (or their legal proxies) are welcome to attend.attend online.
To be admitted to the Annual Meeting, please visitwww.virtualshareholdermeeting.com/BFA2020. If you are a Class A stockholder, you will log into the Annual Meeting by entering your unique16-digit control number found on your proxy card or voting instruction form. If you are a Class B stockholder, you will log into the Annual Meeting as a guest.
The meeting will start at 9:30 A.M. (Eastern Daylight Time) on Thursday, July 30, 2020. We encourage you to access the meeting prior to the start time to familiarize yourself with the virtual platform. Online access will be available starting at 9:00 A.M. (Eastern Daylight Time) on July 30, 2020.
The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection from wherever they intend to participate in the Annual Meeting. If you encounter any difficulties accessing the virtual meeting during thecheck-in or meeting time, you should call the technical support number that will be posted on the virtual stockholder meeting login page.
A webcast replay will be posted to our Investor Relations website athttps://investors.brown-forman.com/ following the Annual Meeting.
4 | BROWN-FORMAN 2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | |
If you plan to attend, please register by July 25, 2017, by contacting Linda Gering using the contact information above. Please bring a photo ID and, if your shares are registered in the name of a bank, broker, or other holder of record, documentation of your stock ownership as of the record date.Please see “Admission Procedures” outlined in the Notice of Annual Meeting for full details.
ANNUAL MEETING INFORMATION | VOTING |
VOTING
Who May Vote
If you held shares of Class A common stock at the close of business on the record date, (June 19, 2017), you or(or your legal proxies,proxies) may vote at the Annual Meeting on all three proposals. At the close of business on the record date, there were 169,062,117 shares of Class A common stock outstanding and entitled to vote at the Annual Meeting. At the close of business on the record date, there were 215,189,294169,091,412 shares of Class BA common stock outstanding however those shares are notand entitled to vote at the Annual Meeting. Each share of Class A common stock is entitled to one vote.
If you purchased Class A common stock after the record date, you may vote those shares only if you receive a proxy to do so from the person who held the shares on the record date. Each share of Class A common stock is entitled to one vote. If you receive more than one proxy card or voting instruction card,form, you should complete, sign, date, and return each one (or follow the telephone or online voting instructions) because the cards representeach card represents different shares.
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ANNUAL MEETING INFORMATION •VOTING
At the close of business on the record date, there were 309,314,321 shares of Class B common stock outstanding. Class B shares are not entitled to vote.
How to Vote
Stockholders of record.If your shares are registered directly in your name with our stock transfer agent, Computershare, you are considered the “stockholder of record” of those shares. If you are a stockholder of record of Class A shares,common stock, you can give a proxy to be voted at the meeting:Annual Meeting:
• over the telephone by calling a toll-free number (1-800-652-8683);
• online(www.investorvote.com/BFB); or
• by completing, signing, and mailing the enclosed proxy card in the envelope provided.
| over the telephone by calling this toll-free number | online (www.proxyvote.com); or | by completing, signing, dating, |
Even if you plan to attend the meeting,Annual Meeting online, we encourage you to submit a proxy in advance. WeIf you are voting by telephone or online, we must receive your proxy by 1:00 a.m.11:59 P.M., Eastern Daylight Time, on Thursday,Wednesday, July 27, 2017,29, 2020, to ensure your vote is recorded. You may override a proxy or change your voting instructions by following the applicable procedure outlined below in “Changing Your Vote.”
The telephone and online voting procedures have been set up for your convenience and are designed to authenticate your identity, enable you to give voting instructions, and confirm that those instructions are recorded properly. If you are a stockholder of record and wish to vote by telephone or online, please refer to the instructions on the enclosed proxy card.
Your proxy will authorize the individuals named on the proxy card to vote your shares in accordance with your instructions. These individuals also will also have the obligation and authority to vote your shares as they see fit on any other matter properly presented for a vote at the Annual Meeting. If for any reason a director nominee is not available to serve, the individuals named as proxy holders may vote your shares at the Annual Meeting for another nominee. The proxy holders for this year’s Annual Meeting are Geo. Garvin Brown IV, Paul C. Varga,Lawson E. Whiting, and Matthew E. Hamel.
If you are a stockholder of record and you sign and return your proxy card (or give your proxy by telephone or online) without specifying how you want your shares to be voted, our proxy holders will vote your shares “FOR” the election of each of the nominees to the Board (Proposal 1), and “FOR” the advisory resolution to approve our executive compensation (Proposal 2), and for “EVERY THREE YEARS” as the frequency of future advisory votes on executive compensation (Proposal 3). With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote your shares as recommended by the Board or, if no recommendation is given, using their own discretion.
You may also vote online at the Annual Meeting. For more information about how to attend the Annual Meeting online, please see “Attending the Annual Meeting” on page 4.
“Street name” stockholders.If your shares are held in a stock brokerage account or by a bank (known as holding shares in “street name”), you have the right to instruct your broker or bank how to vote your shares, and the broker or bank is required to vote in accordance with your instructions. To provide those instructions by mail, please complete, sign, date, and return your voting instruction cardform in the accompanying postage-paid envelope provided by your broker or bank.envelope. Alternatively, if the broker or bank that holds your shares offers online or telephone voting, you will receive information from your broker or bank about how to submit your voting instructions by those methods. You may vote in person at
For more information about how to attend the meeting, but only if you obtain a “legal proxy” fromAnnual Meeting online, please see “Attending the broker or bank that holds your shares.Annual Meeting” on page 4.
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS BROWN-FORMAN | 5 | |
If you are a street name stockholder and you do not instruct your broker how to vote, your broker is not permitted to vote your shares on any of the proposals we will address at the Annual Meeting. This is known as a “broker
ANNUAL MEETING INFORMATION | ANNOUNCEMENT OF VOTING RESULTS |
If you are a street name stockholder and you do not instruct your broker how to vote, your broker is not permitted to vote your shares on any of the proposals we will address at the Annual Meeting. Under the rules of various securities exchanges, brokers that hold your shares may generally use their discretion to vote on “routine” matters but not on“non-routine” matters. The election of directors (Proposal 1) and advisory resolution to approve our executive compensation (Proposal 2) are considered“non-routine” matters. If your broker does not receive voting instructions from you on how to vote your shares on a“non-routine” matter and you do not vote on such matter at the Annual Meeting, your shares will not be voted on such matters. (This is known as a “brokernon-vote.”)
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Changing Your Vote
If you are astockholder of record, you may change your vote by submitting another proxy by telephone or online, by mailing another properly signed proxy card bearing a later date than your original one, or by attending the Annual Meeting and casting your vote in person.online. You also may revoke a proxy that you previously provided by delivering timely written notice of revocation to our Secretary, Matthew E. Hamel, at Brown-Forman Corporation, 850 Dixie Highway, Louisville, Kentucky 40210, or atSecretary@b-f.com.
If you hold your shares instreet nameand you wish to change or revoke your voting instructions, please refer to the materials your broker or bank provided to you for instructions.
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ANNUAL MEETING INFORMATION •ANNOUNCEMENT OF VOTING RESULTS
Quorum Requirements
Business can be conducted at the Annual Meeting only if a quorum consisting of a majority of the outstanding shares of Class A common stock is present in person or represented by proxy. Abstentions and broker non-votes, if any, will be counted as present for purposes of establishing a quorum.
Holders of Class A common stock who attend the Annual Meeting via the virtual meeting platform are deemed present for purposes of the quorum requirement.
Votes Needed For Approval
Proposal | Vote required to pass | Effect of abstentions and broker non-votes | ||
Election of directors | Nominees who receive a majority of the Class A votes cast (the number of shares voted “for” the nominee exceeds the number | No effect. | ||
Advisory resolution to approve executive compensation | Approval requires an affirmative vote of | Abstentions are equivalent to votesagainstthe proposal.
Brokernon-votes will have no effect.
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Dividend Reinvestment and Employee Stock Purchase Plan Shares
Shares of Class A common stock held in Brown-Forman’s dividend reinvestment and employee stock purchase plans are included in your holdings and reflected on your proxy card. These shares will be voted as you direct.
ANNOUNCEMENT OF VOTING RESULTS
We intend to announce the preliminary voting results at the Annual Meeting and to issue a press release announcing the final voting results later that day. In addition, we will report the final voting results by filing a Form8-K with the SEC within four business days following the Annual Meeting.
PROXY SOLICITATION EXPENSES
Brown-Forman bears the cost of soliciting proxies. Beginning on June 27, 2017,30, 2020, which is the mailing date for these proxy materials, our directors, officers, and other employees may solicit proxies in person or by regular or electronic mail, email, phone, fax, or online. These individuals will not receive additional compensation for soliciting proxies. We will reimburse banks, brokers, nominees, and other fiduciaries for their reasonable charges and expenses incurred in forwarding our proxy materials to the beneficial owners of our stock held in street name. In addition, we have retained Proxy Express, Inc. to assist with the distribution of proxy materials for a fee of approximately $15,000, plus expenses.
6 | BROWN-FORMAN |
GOVERNANCE
Our Board is the policy-making body that is ultimately responsible for Brown-Forman’s business success and ethical climate. The Board oversees the performance of our senior management team, which is responsible for leading and operating Brown-Forman’s business. The Board’s primary responsibilities include retention, evaluation, and succession planning for the Chief Executive Officer and the Chairman of the Board, as well as oversight of our corporate strategy, financial condition, executive compensation policies and practices, and enterprise risk management. The Board may retain independent advisors to help it perform its duties.
| BROWN-FORMAN IS A “CONTROLLED COMPANY.”
As a publicly traded, family-controlled company, Brown-Forman enjoys a rare governance opportunity in that members of our controlling stockholder family, the Brown family, participate directly on our Board. We believe this governance structure gives us a distinct competitive advantage because Brown family members bring a long-term ownership perspective to our Board. This advantage is sustained by a careful balancing of the roles of our Board, management, and our stockholders — including the Brown family.
In evaluating candidates for Board membership, the Corporate Governance and Nominating Committee seeks directors who will represent the long-term best interests of all stockholders. As articulated in our Corporate Governance Guidelines, all Brown-Forman directors should possess the highest personal and professional ethics, integrity, and values. The Board believes the best directors have the following additional qualities: good judgment, candor, civility, business courage, experience with businesses and other organizations of comparable character and comparable or larger size, and a lack of conflicts of interest. We also believe that a significant number of our directors should be independent. The Corporate Governance and Nominating Committee and the Board consider diversity in evaluating candidates for Board membership, though neither has adopted a formal diversity policy. The Board’s goal is to maintain a well-balanced composition that combines a variety of experiences, backgrounds, skills, and perspectives to enable the Board, as a whole, to guide Brown-Forman effectively in the pursuit of our strategic objectives. In evaluating potential Board candidates, the Corporate Governance and Nominating Committee considers an individual’s independence; business, professional, or public service experience; relevant industry knowledge, experience, and relationships; business judgment; financial expertise; international experience; leadership skills; age, gender, race, ethnicity, religion, nationality, sexual orientation, cultural background, and other self-identified diversity characteristics; time availability; and familial relation to our controlling family stockholders. |
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CORPORATE GOVERNANCE | BOARD COMPOSITION |
The Corporate Governance and Nominating Committee occasionally engages independent search firms to assist in identifying potential Board candidates. The Board has not adopted a formal policy regarding stockholder-nominated director candidates because the Corporate Governance and Nominating Committee believes the process it follows to identify and select Board members has been appropriate and effective. Any candidates submitted by stockholders will be evaluated in the same manner as all other director candidates.
CORPORATE GOVERNANCE •BOARD COMPOSITION
How Our Controlled-Company Status Affects Our Board
Our Board has determined that Brown-Forman is a “controlled company” under New York Stock Exchange (NYSE) rules because more than 50% of our Class A voting stock is held by members of the Brown family.
As a controlled company, we are exempt from NYSE listing standards that require boards to have a majority of independent directors, a fully independent nominating/corporate governance committee, and a fully independent compensation committee. As a matter of good corporate governance, the Board has voluntarily chosen to have a Compensation Committee that is composed entirely of directors who meet the NYSE’s heightened independence standards for compensation committee members. Our Board does not have a majority of independent directors or a fully independent nominating/corporate governance committee. We are not exempt from, and comply in full with, requirements regarding the independence and qualifications of our Audit Committee members.
Our Independent Directors
We recognize the value of having independent directors. Under NYSE listing rules, a director qualifies as “independent” if the board of directors affirmatively determines the director has no material relationship with the company. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships. While the focus is on independence from management, our Board considers all relevant facts and circumstances in making an independence determination. Our Board recognizes the value of having independent directors, and has determined that the following six directors are independent under NYSE standards: Patrick Bousquet-Chavanne, Bruce L. Byrnes, John D. Cook, Kathleen M. Gutmann, Michael J. Roney, Tracy L. Skeans, and Michael A. Todman.
The Board has determined that Geo. Garvin Brown IV, Campbell P. Brown, Marshall B. Farrer, and Paul C. VargaLawson E. Whiting are not independent because they are or recently have been, members of Brown-Forman management. The Board elected not to make a determination with respect to the independence of Geo. Garvin Brown IV, Stuart R. Brown, Laura L. Frazier, and Augusta Brown Holland.
Our Brown Family Directors
We believeThe Board believes it is strategically important for Brown family members to be actively engaged in the oversight of Brown-Forman. Through participation on the Board, the Brown family’s long-term perspective is brought to bear, in some measure, upon each and every matter the Board considers. Brown family directors also serve as an effective link between the Board and the controlling family stockholders.
In addition, Board service allows the Brown family to actively oversee its investment in the Company.company. Currently, the Brown family directors are:are Campbell P. Brown, Geo. Garvin Brown IV, Stuart R. Brown, Marshall B. Farrer, Laura L. Frazier, and Augusta Brown Holland.
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CORPORATE GOVERNANCE •BOARD COMPOSITION
Our Management Directors
We also believeThe Board believes it is important, from a corporate governance standpoint, for management to be represented on the Board. Currently, Campbell P. Brown, Marshall B. Farrer, and Paul C. VargaLawson E. Whiting serve in dual roles as Board members and Brown-Forman executives.
8 | BROWN-FORMAN 2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | |
CORPORATE GOVERNANCE | BOARD COMPOSITION |
BROWN-FORMAN BOARD OF DIRECTORS
Changes to Our Board
After ten years of dedicated service, Bruce L. Byrnes will not stand forre-election at the Annual Meeting and will retire from the Board following the completion of his current term.
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS BROWN-FORMAN | |||||||
CORPORATE GOVERNANCE | LEADERSHIP STRUCTURE | ||
BOARD LEADERSHIP STRUCTURE | |||||||||||
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Geo. Garvin Brown IV, a Brown family member, has served asChairman ofthe Boardsince 2007. | ||||||||
Lawson E. Whiting has served as President and Chief Executive Officer since 2019. | John D. Cook has served asLead Independent Directorsince 2012. | |||||||
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CORPORATE GOVERNANCE •LEADERSHIP STRUCTURE
Chairman of the Board
Our Board believes that the determination of whether to separate or combine the roles of Chairman of the Board and Chief Executive Officer should depend largely upon the identity of the Chief Executive Officer and the composition of the Board at the time. For this reason, itthe Board does not have a policy on separation of these roles, but rather evaluates the situation on acase-by-case basis. Currently,Although we have had a separate Chairman of the Board and Chief Executive Officer since 2007, these roles are separate, although they have been combined in the past.
The duties of the Chairman of the Board include presiding over and managing the meetings of the Board; setting the agenda for each Board meeting and consulting with management regarding materials to be presented to the Board; supporting a strong board culture by fostering an environment of open dialogue, effective information flow, and constructive feedback among the Board and management; facilitating communication among the Board, management, and stockholders, including the Brown family; and encouraging director participation. When the roles are separated, the Chairman of the Board also acts as an advisor to the Chief Executive Officer on strategic aspects of Brown-Forman’s business, and performs other duties as prescribed by the Board. Geo. Garvin Brown IV a Brown family member, serves as Chairman of the Board.has served in this role since 2007.
Company Chairman and CEO
Paul C. Varga serves as the Chairman and Chief Executive Officer of Brown-Forman. Mr. Varga is our highest ranking executive officer and is responsible for Brown-Forman’s strategy, operations, and performance.
Lead Independent Director
When a non-independent director who has not been determined to be independent holds the office of Chairman of the Board or Presiding Chairman of the Board, as is currently the case, the Board may select one independent director (after considering the recommendation of the Corporate Governance and Nominating Committee) to serve as Lead Independent Director. The Lead Independent Director, if any, will beis elected annually. John D. Cook has served in this role since 2012.
As Lead Independent Director, Mr. Cook’s responsibilities include calling meetings of the independent directors andnon-management directors, when necessary or advisable, and setting the agenda for and chairing those meetings. Other responsibilities appear in our Corporate Governance Guidelines, which are to:
available on our website(www.brown-forman.com/about/ corporate-governance/guidelines/).
Mr. Cook chaired one executive session ofnon-management directors in fiscal 2017. Also, because our non-management director group includes directors who are not “independent” under NYSE listing standards, Mr. Cook2020 and called and presided over one executiveoneexecutive session in fiscal 20172020 that was attended solely by our independent directors.
President and Chief Executive Officer
As President and Chief Executive Officer of Brown-Forman, Lawson E. Whiting is our highest-ranking executive officer and is responsible for Brown-Forman’s strategy, operations, and performance. Mr. Whiting also serves as a management member of our Board.
Why the Board Chose this Leadership Structure
The Board has determined that this leadership structure currently serves the best interests of Brown-Forman and all of its stockholders. Having a Brown family member serve as Chairman of the Board promotes the Brown family’s active oversight of, and engagement and participation in, the Companycompany and its business, and reflects the fact that Brown-Forman is controlled by the Brown family. In addition, becausethe division of responsibilities allows Mr. Brown handlesto dedicate his efforts to Board governance and lead the responsibilities associated withBoard in its fundamental role of providing oversight and guidance regarding the position of Chairmanbusiness, strategy, and operations of the Board,company, while Mr. VargaWhiting can concentrate on strategymanaging the company and operations, whileproviding the Board still has access to his comprehensive knowledge of the Company’sBrown-Forman’s business. The Lead Independent Director position provides leadership to, and fosters coordination among, our independent directors, enabling them to fulfill their role of bringing outside perspectives to the Board.
10 | BROWN-FORMAN | |
CORPORATE GOVERNANCE | BOARD GUIDELINES AND PROCEDURES |
CORPORATE GOVERNANCE •BOARD GUIDELINES AND PROCEDURES
BOARD GUIDELINES AND PROCEDURES
Corporate Governance Guidelines
The Board believes transparency is a hallmark of good corporate governance. To that end, the Board has adopted Corporate Governance Guidelines that provide a framework for the Board to exercise its duties. Among other things, these guidelines contain policies and requirements regarding:regarding director qualifications; director responsibilities, including the Lead Independent Director’s role;responsibilities; meetings and attendance; committee composition and responsibilities; director compensation; and director access to management and independent advisors. The Corporate Governance Guidelines are published on our website atwww.brown-forman.com/about/corporate-governance/guidelines/.
Board and Committee Self-Assessment
The Corporate Governance Guidelines require the Board to conduct an annual self-assessment. Each Board committee (except the Executive Committee) also annually assesses how it performed during the preceding twelve-month period. These assessment procedures vary, from requiringvary. Some years we require members to complete questionnaires that call for both quantitative responses and free-ranging comments, to havingwhile other years we invite an independent third partyconsultant to interview each member and then synthesize themes that emerge. In addition, in fiscal 2020, our Chairman of the Board engaged in a360-degree feedback process facilitated by an outside consultant. The Chairman of the Board, the Chief Executive Officer, and the Lead Independent Director consult at least annually regarding individual director performance.
Director Service on Other Public Company Boards
The Board recognizes that its members benefit from serving on the boards of other companies. The Board encourages that service, with the understanding that our directors must have adequate time to devote to their work for Brown-Forman. The Corporate Governance Guidelines provide that any director who is employed full-time should not serve on more than two public company boards in addition to the Brown-Forman Board, which includes the board of any public company at which a director is employed. Directors who are not employed full-time may serve on up to three public company boards in addition to the Brown-Forman Board. Directors must inform the Chairman, the Lead Independent Director, the Chair or Secretary of the Corporate Governance and Nominating Committee, or the Secretary of the Board as soon as practicable that they will be, or have been, elected to serve on an additional public company board.
The Board recognizes that service on the boards of nonprofit entities can be important and time consuming as well, and encourages directors to engage in such service as long as they continue to have the time necessary to devote to their work for Brown-Forman.
Director Service
The Board is authorized to fix the size of the Board at a number between three and seventeen members. Directors are elected each year at the Annual Meeting by a majority of the votes cast by our Class A stockholders. Once elected, a director holds office until the next Annual Meeting or until a successor is elected and qualified, unless the director first resigns, retires, or is removed. Directors areThe Board does not subject tohave term limits, but a directordirectors generally may not stand forre-election to the Board after reaching the age of 71. In exceptional circumstances, the Board may ask a director to remain on the Board until a given dateafter age 71 if the director’s continued service would significantly benefit Brown-Forman. Service of a director beyond the age of 71 requires a recommendation by the Corporate Governance and Nominating Committee and the approval oftwo-thirds of the Board (not including the director under consideration).
Board Meetings
The Board held six regular meetings and no special meetings during fiscal 2017.2020. Absent an appropriate reason, all directors are expected to attend the Annual Meeting, all Board meetings, and all meetings of each committee on which they serve. All directors attended 90%75% or more of the aggregate meetings of the Board and committees on which they served during fiscal 2017.2020. All directors then serving attended the 20162019 Annual Meeting of Stockholders.Meeting.
Board Committees
Our Board has four standing committees: Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee, and Executive Committee. Each Board committee operates under a written charter that is posted on our website atwww.brown-forman.com/about/corporate-governance/committee-composition/.
Audit Committee members must satisfy director independence standards prescribed by the NYSE and mandated by the Sarbanes-Oxley Act. Each member of our Audit Committee satisfies all of these heightened independence standards. The Board has determined that each member of our Audit Committee is also “financially literate” within the meaning of the NYSE rules, and that Mr. Todman is an “audit committee financial expert” under SEC rules.
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CORPORATE GOVERNANCE •BOARD GUIDELINES AND PROCEDURES
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CORPORATE GOVERNANCE •BOARD GUIDELINES AND PROCEDURES
Board’s Role in Risk Oversight
The Board believes its current leadership structure best enables it to fulfill its risk oversight function. Our Corporate Governance Guidelines require the Board to ensure we implement appropriate processes for managing enterprise risk, and our Board considers risk oversight an integral part of its role in the strategic planning process. The Board regularly and actively considers how strategic decisions affect Brown-Forman’s risk profile.
While the Board has ultimate oversight responsibility for the risk management process, certain committees have important supplementary roles in that process. During fiscal 2017, the Board tasked its committees to assist with the responsibilities outlined below:
These committees met regularly with members of management and outside advisors, as necessary, and reported to the Board regularly on their risk oversight and mitigation activities. In addition, management’s Disclosure Controls Committee and Enterprise Risk Management Committee both play an integral role in making sure that relevant risk-related information is reported to senior management and the Board as directly and quickly as possible. Further, our management Ethics, Compliance and Risk Team, comprising a number of senior executives and subject matter experts, meets throughout the year to address issues related to risk, ethics, and compliance; to coordinate the work of those areas; and to oversee the formulation and promulgation of company policies and the training of employees in compliance with them.
Communication with Our Board
Stockholders and other interested parties may communicate with our directors, including thenon-management directors or the independent directors as a group, by writing to our Secretary, Matthew E. Hamel, at 850 Dixie Highway, Louisville, Kentucky 40210, or atSecretary@b-f.com. The Secretary’s office will forward appropriate written communications to the individual director or group of directors to whom they are addressed, with copies to all other directors. We generally will not forward to directors a stockholder communication that the Secretary determines to be primarily commercial in nature, that relates to an improper or irrelevant topic, or that requests general information about Brown-Forman.
CORPORATE GOVERNANCE | BOARD COMMITTEES |
Our Board has four standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, and the Executive Committee. Each Board committee operates under a written charter that is posted on our website atwww.brown-forman.com/about/corporate-governance/committee-composition/.
MET 10 TIMES IN FISCAL 2020 Committee Members: • Michael A. Todman (Chair) • Patrick Bousquet-Chavanne • Bruce L. Byrnes • Kathleen M. Gutmann • Tracy L. Skeans The Board has delegated to the Audit Committee responsibility for overseeing Brown-Forman’s financial statements; audit process; system of internal accounting and financial controls; policies and processes for assessment and management of enterprise risks; compliance with legal and regulatory requirements; and internal audit function. In addition, the Audit Committee is solely responsible for the appointment, replacement, and compensation of the independent auditor and oversees the independent auditor’s qualifications, independence, and performance. The Audit Committee’s responsibilities include preparing the Audit Committee Report that appears in this Proxy Statement on page 58. Audit Committee members must satisfy director independence standards prescribed by the NYSE and mandated by the Sarbanes-Oxley Act. Each member of our Audit Committee satisfies all of these heightened independence standards. The Board has determined that each member of our Audit Committee is “financially literate” within the meaning of NYSE rules, and that Mr. Todman is an “audit committee financial expert” under SEC rules. MET 7 TIMES IN FISCAL 2020 Committee Members: • Michael J. Roney (Chair) • John D. Cook • Tracy L. Skeans The Compensation Committee’s responsibilities include determining the compensation of the Chief Executive Officer and other executive officers; recommending market-competitive compensation for the Board; approving incentive compensation plan design and changes thereto for the Chief Executive Officer and other executive officers; assisting the Board in its oversight of risk related to compensation policies and practices; overseeing the preparation of the Compensation Discussion and Analysis section of this Proxy Statement; and preparing the Compensation Committee Report that appears in this Proxy Statement on page 41. The Compensation Committee has retained FW Cook to provide independent advice on executive and director compensation matters. For additional information on the services provided by FW Cook, as well as the Compensation Committee’s processes and procedures for considering and determining executive compensation, please see the Compensation Discussion and Analysis, which begins on page 26. Each member of the Compensation Committee qualifies as an independent director under NYSE listing standards (including the heightened independence standards for compensation committee members ofnon-controlled companies), as a“non-employee director” under SEC rules, and as an “outside director” under regulations adopted pursuant to Section 162(m) of the Internal Revenue Code. The Board specifically considered factors relevant to the ability of these directors to be independent from management in connection with Compensation Committee service.CORPORATE GOVERNANCE •BEST PRACTICES AUDIT COMMITTEE COMPENSATION COMMITTEE
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CORPORATE GOVERNANCE | BOARD COMMITTEES |
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE | ||
MET 6 TIMES IN FISCAL 2020 Committee Members: • John D. Cook (Chair) • Patrick Bousquet-Chavanne • Geo. Garvin Brown IV • Bruce L. Byrnes • Michael A. Todman | The Corporate Governance and Nominating Committee’s responsibilities include helping the Board identify, recruit, and recommend appropriate candidates to serve as directors; reviewing periodically our corporate governance principles in light of developments in corporate governance and best practices, taking into account our controlled-company status; coordinating and overseeing Chief Executive Officer succession planning; assisting the Board with its annual self-assessment; assisting the Board in monitoring best practices, developments, and issues related to corporate governance; and overseeing evaluation of the Board and management, including, in cooperation with the Compensation Committee, the annual review of performance of the Chief Executive Officer. All of the Corporate Governance and Nominating Committee members are independent under NYSE listing standards, except Geo. Garvin Brown IV. | |
EXECUTIVE COMMITTEE | ||
MET ONCE IN FISCAL 2020 Committee Members: • Geo. Garvin Brown IV (Chair) • John D. Cook • Lawson E. Whiting | The Executive Committee consists of the Chief Executive Officer, the Chairman of the Board (if separate from the Chief Executive Officer), and one or more other directors as determined by the Board from time to time. In fiscal 2020, the Lead Independent Director served on the Executive Committee. The Board can change the Executive Committee membership, fill vacancies, or dissolve the committee at any time. The Executive Committee may exercise all of the powers of the Board, subject to certain exceptions specified in ourBy-laws or Delaware law. However, traditionally, the Executive Committee acts only when exercising a power the Board has specifically delegated, when there is an emergency, or when the issue does not warrant the full Board’s attention. In addition, the members of the Executive Committee communicate and meet informally, sometimes with Brown-Forman’s General Counsel, to engage in strategic planning of Board activities and agenda topics, to stay ahead of various issues on behalf of the full Board, and to review recent Board meetings. |
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS BROWN-FORMAN | 13 | |
CORPORATE GOVERNANCE | BOARD’S ROLE IN RISK OVERSIGHT |
BOARD’S ROLE IN RISK OVERSIGHT
The Board believes its current leadership structure best enables it to fulfill its risk oversight function. Our Corporate Governance Guidelines require the Board to ensure we implement appropriate processes for managing enterprise risk, and our Board considers risk oversight as an integral part of its role in the strategic planning process. The Board regularly and actively considers how strategic decisions affect Brown-Forman’s risk profile.
While the Board has ultimate oversight responsibility for the risk management process, certain committees have important supplementary roles. During fiscal 2020, the Board tasked its committees to assist with the responsibilities outlined below:
AUDIT COMMITTEE Overseeing the integrity of the company’s financial statements and financial reporting processes; overseeing our policies and processes on enterprise risk assessment, risk management, and compliance, including cybersecurity risk; overseeing our most significant financial reporting and accounting control risks and management’s monitoring and management of those risks; and, together with the Corporate Governance and Nominating Committee, overseeing the disclosure of risk related to environmental, social, and governance matters. |
COMPENSATION COMMITTEE Overseeing risks related to compensation programs, policies, and practices. |
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE Overseeing risks related to corporate governance, board composition, and succession planning for the Chief Executive Officer and the Chairman of the Board; and, together with the Audit Committee, overseeing risks related to environmental, social, and governance matters, including workforce diversity and inclusion. |
These committees periodically met with members of management and outside advisors, as necessary, and reported to the Board regularly on their risk oversight and mitigation activities. In addition, management’s Disclosure Controls Committee and Risk Committee both played an integral role in making sure that relevant risk-related information was reported to senior management and the Board as directly and quickly as possible. For more information, see “Best Practices” below.
Brown-FormanOur company has long believed that good corporate governance is essential to long-term success. We continually evaluate our corporate governance practices in the context of our controlled-company status to address the changing regulatory environment, and adopt those practices that we believe are in the best interests of Brown-Forman and all of our stockholders.
Code of Conduct and Code of Ethics for Senior Financial Officers
The Brown-Forman Code of Conduct expresses its expectationsour expectation of ethical behavior for all of our employees and directors. The Code of Conduct includes ourOur Code of Ethics for Senior Financial Officers which reflects the expectation that all of our financial, accounting, reporting, and auditing activities will be conducted in strict compliance with all applicable rules and regulations and will conform to the highest ethical standards. Brown-Forman encourages itsWe encourage our employees to “speak up”speak up when aware of a potential codeCode of conductConduct violation, and providesprovide multiple channels for doing so — including anonymously. TheLinks to the Code of Conduct, including reporting channels, and the Code of Ethics for Senior Financial Officers can be found on the Corporate Governance page of our website atwww.brown-forman.com/about/corporate-governance/code-of-ethics/andwww.brown-forman.com/about/corporate-governance/code-of-ethics-for-senior-financial-officers/.
14 | BROWN-FORMAN 2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | |
CORPORATE GOVERNANCE | OUR CONTROLLING FAMILY STOCKHOLDERS |
Disclosure Controls Committee
The Disclosure Controls Committee is composed of members of management. This committee has established controls and procedures designed to ensure that information Brown-Formanthat we may be required to disclose is gathered and communicated to the committee and that all required disclosures are made in a timely and accurate manner.accurate. The committee has implemented a financial review process that enables our Chief Executive OfficerEthics, Compliance and Chief FinancialRisk Officer to certify our quarterly and annual reports, as well as procedures designed to ensure our compliance with SEC Regulation FD (Fair Disclosure).
Risk Committee
The missionmanagement Risk Committee is responsible for the enterprise risk management of the Enterprisecompany. The Risk Management (ERM) Committee which is composed of members of management, is to ensure that all of Brown-Forman’s major risks are identifiedcreates and evaluated. The ERM Committee alsomaintains the risk register, facilitates risk scoring, identifies the individuals and teams whothat are responsible for mitigating risks, and ensures that mitigation plans are in place to mitigate the Company’sBrown-Forman’s most significant risks. The ERMChief Ethics, Compliance, and Risk Officer reports on behalf of the Risk Committee reports to the Audit Committee regarding its policiesprocedures, risk ranking results, and processes.risk mitigation status. In addition, the ERMRisk Committee reportsis required to report to the Board at least annually regarding the top risks facing Brown-Forman, and periodically updates the Board on the mitigation plans related to those risks.
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CORPORATE GOVERNANCE •OUR CONTROLLING FAMILY STOCKHOLDERS
OUR CONTROLLING FAMILY STOCKHOLDERS
Brown-Forman has an engaged family stockholder base with a long-term ownership perspective. We view our status as a publicly traded, family-controlled company as a distinct competitive advantage, and we believe a strong relationship with the Brown family is essential to our growth, independence, and ability to create long-term value for all stockholders. Management interacts with Brown family members in a manner consistent with all applicable laws and regulations. We actively cultivate our relationship with the Brown family through a variety of channels, as detailed below.
Brown-Forman/Brown Family Shareholders Committee
InThe Brown-Forman/Brown Family Shareholders Committee was founded in 2007 and isco-chaired by Geo. Garvin Brown IV and Paul C. Varga organized theLawson E. Whiting. The Brown-Forman/Brown Family Shareholders Committee which they continue to co-chair. This committee provides a forum for frequent, open, and constructive dialogue between Brown-Forman and its controlling family stockholders. The Brown Family Shareholders CommitteeIn addition, the committee engages the Brown family on topics of mutual interest, such as the Companycompany and our industry, governance, ownership, and philanthropy.
Director of Family Shareholder Relations
The Director of Family Shareholder Relations, a Brown-Forman employee, works with other employees and Brown family members to develop and implement policies and practices designed to further strengthen the relationship between Brown-Forman and the Brown family.
Brown Family Member Employees
Brown-Forman currently employs ten Brown family members, some of whom participate on management teams that oversee strategic and operational matters. Participation onin these committeesroles enables our Brown family employees to contribute their perspectives on the important issues we confront. In addition to their management contributions, the Brown family employees play a critical role in upholding the Brown-Forman corporate culture.
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ENVIRONMENTAL,
SOCIAL, AND
GOVERNANCE
PUTTING OUR VALUES INTO ACTION
Our history of responsibility began in 1870, when our founder, George Garvin Brown, first sold whiskey in sealed glass bottles to ensure quality and safety—an innovation some consider the first act of corporate responsibility in the industry.
While pursuing these priorities, we strive to be responsible in everything we do. Corporate governance, discussed in the previous section of this Proxy Statement, is a keystone of our environmental, social, and governance strategy. We also emphasize our core values of integrity, respect, trust, teamwork, and excellence. Responses to our employee engagement survey demonstrate that we do not just treat these values as words. We live them too, and seek out business partners with the same principles.
16 | BROWN-FORMAN 2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | |
“WE CAN BUILD STRONGER, BETTER |
– Lawson E. Whiting,President and Chief Executive Officer
We report our ongoing commitment and progress in our four focus areas of alcohol responsibility, sustainability, diversity and inclusion, and community in our Integrated Annual Report and on our website (www.brown-forman.com/responsibility).
Please note that the information provided on our website (or any other website referred to in this Proxy Statement) is not part of this Proxy Statement and is not incorporated by reference as part of this Proxy Statement.
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS BROWN-FORMAN | 17 | |
ELECTION OF DIRECTORS
This section provides information about our thirteen director nominees, including the experience, qualifications, attributes, and skills that enable them to make valuable contributions to our Board.
Board and that led the Board to conclude that they should serve as directors of Brown-Forman.
All of our director nominees are current directors of Brown-Forman. Each director was elected by the stockholders at our 20162019 Annual Meeting except for Kathleen M. Gutmann, who was appointed to the Board in May 2017. Kathleen M. Gutmann was recommended for appointment to the Board by the Corporate Governance and Nominating Committee following a process conducted with the assistance of a third-party executive search firm.
Meeting.
| The Board unanimously recommends a vote “FOR” the election of each |
The Board unanimously recommends a vote “FOR” the election of each director nominee.
Your shares will be voted“FOR”the election of all director nominees listed below unless you instruct the proxy holders to vote against, or to abstain from voting for, one or more nominees. If any nominee becomes unable to serve before the meeting,Annual Meeting, the proxy holders may vote for a substitute nominee if the Board has designateddesignates one. As of the date of this Proxy Statement, the Board believes each nominee is prepared to serve if elected.
NOMINEES
PATRICK BOUSQUET-CHAVANNE | ||||||
Director since 2005
Age
• Corporate Governance and Nominating | CURRENT AND PAST POSITIONS Emaar Malls(a developer of premium shopping malls and retail assets), Chief Executive Officer from 2018 to 2019
Positions
• Executive Director of Marketing and International from 2014 to 2016
• Executive Director of Marketing and Business Development from 2013 to 2014
• Corporate Director of Strategy and Business Development from 2012 to 2013
Positions
• President and Chief Executive Officer from 2009 to 2012 | QUALIFICATIONS AND SKILLS
• Experience dealing with governance issues relevant to family-controlled public companies
• Marks and Spencer Group PLC
• HSNi Corporation from 2008 to 2013 |
CAMPBELL P. BROWN | ||||||
Director since 2016
Age | CURRENT AND PAST POSITIONS
Positions with Brown-Forman and affiliates:
• President and Managing Director of Old Forester, our founding bourbon brand, since 2015
• Led the wine and spirits portfolio in Canada and the Midwest region of the U.S.
• Served in the emerging markets of India, the Philippines, and Turkey
• Various other positions over a
• Founding | QUALIFICATIONS AND SKILLS
• Deep knowledge of family corporate governance
• Perspective as a fifth generation Brown family stockholder
• A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of
OTHER DIRECTORSHIPS
• Republic Bank and Trust Company since 2008 |
18 | BROWN-FORMAN | |
PROPOSAL 1: ELECTION OF DIRECTORS | NOMINEES |
ELECTION OF DIRECTORS•NOMINEES
GEO. GARVIN BROWN IV | ||||||
Director since 2006
Age
• Executive(Chair) | CURRENT AND PAST POSITIONS
Positions with Brown-Forman and affiliates:
• Executive Vice President from 2011 to 2015
• Senior Vice President and Managing Director of Western Europe and Africa from 2009 to 2011
• Vice President and Jack Daniel’s Brand Director in Europe and Africa from 2004 to 2008
• Director of the Office of the Chairman and Chief Executive Officer from 2002 to 2004
• Founding | QUALIFICATIONS AND SKILLS
• Deep knowledge of family corporate governance
• Perspective as a fifth generation Brown family stockholder
• A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of |
STUART R. BROWN | ||||||
Director since 2015
Age | CURRENT AND PAST POSITIONS
Typha Partners, LLC(an early-stage private equity investment company), Managing Partner since 2010
DendriFund, Inc.(a
Between the Covers Bookstore, Owner from 1998 to 2010
Positions with Brown-Forman and affiliates:
• Founding | QUALIFICATIONS AND SKILLS
• Demonstrated commitment to sustainability and social issues • Perspective as a fifth generation Brown family stockholder
• A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders |
JOHN D. COOK | ||||
Director since Lead Independent Director since 2012
Age
• Corporate Governance and Nominating(Chair) • Executive | CURRENT AND PAST POSITIONS
Positions with
• Director from
| QUALIFICATIONS AND SKILLS
• Leadership and senior management experience • Financial and
• Marketing skills • Experience with
OTHER DIRECTORSHIPS
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ELECTION OF DIRECTORS •NOMINEES
19 | ||||
PROPOSAL 1: ELECTION OF DIRECTORS | NOMINEES |
MARSHALL B. FARRER | ||||
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Director since 2016
Age | CURRENT AND PAST POSITIONS
Positions with Brown-Forman and affiliates:
• Senior Vice President, Managing Director, Global Travel Retail region from 2015 to 2018 • Vice President, Managing Director, Jack Daniel’s Tennessee Honey brand
• Vice President, Managing
• Vice President, Director, Latin America & Caribbean region from 2006 to 2009
• Other sales and marketing management positions over a
• Founding
| QUALIFICATIONS AND SKILLS
• Perspective as a fifth generation Brown family stockholder
• A history of service on the |
LAURA L. FRAZIER | ||||||
Director since 2016
Age | CURRENT AND PAST POSITIONS
Bittners LLC(a more than160-year-old interior and commercial design firm), Owner, Chairman, and
Positions with Brown-Forman and affiliates:
• Founding | QUALIFICATIONS AND SKILLS
• Perspective as a fifth generation Brown family stockholder
• A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of |
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ELECTION OF DIRECTORS •NOMINEES
KATHLEEN M. GUTMANN | ||||
Director since
Age COMMITTEES: • Audit | CURRENT AND PAST POSITIONS
Positions with United Parcel Service:
• Chief Sales and Solutions Officer and Senior Vice President of The UPS Store and UPS Capital
• President of Worldwide Sales from 2011 to 2014 | QUALIFICATIONS AND SKILLS
• Experience
• Oversight of P&L for UPS Capital • Oversight of P&L for UPS Healthcare and Life Sciences (group with eight million square feet of dedicated healthcare certified logistics space and 5,000 healthcare logistics personnel) |
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PROPOSAL 1: ELECTION OF DIRECTORS | NOMINEES |
AUGUSTA BROWN HOLLAND | ||||||
Director since 2015
Age | CURRENT AND PAST POSITIONS
• Founding | QUALIFICATIONS AND SKILLS
• Demonstrated commitment to sustainability and social issues • Experience serving on numerous civic boards
• Perspective as a fifth generation Brown family stockholder
• A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of | ||||
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ELECTION OF DIRECTORS •NOMINEES
MICHAEL | J. RONEY | |||
Director since 2014
Age
| CURRENT AND PAST POSITIONS Bunzl plc(a multinational distribution and outsourcing company), Chief Executive Officer from 2005 to 2016 | QUALIFICATIONS AND SKILLS • Extensive senior management and executive leadership experience • Deep expertise in multinational production, distribution, and operations • Financial expertise • International mergers and acquisitions experience OTHER DIRECTORSHIPS • Next plc since 2017 • Grafton Group plc since 2016 • Johnson Matthey plc from 2007 to 2014 • Bunzl plc from 2003 to 2005 |
TRACY L. SKEANS | ||||
Director since 2018 Age 47 COMMITTEES: • Audit • Compensation | CURRENT AND PAST POSITIONS Positions with Yum! Brands, Inc. and affiliates: • Chief Transformation and People Officer, Yum! Brands, Inc. since 2016 • President, Pizza Hut International from 2014 to 2015 • Chief People Officer, Pizza Hut Global from 2013 to 2014 • Chief People Officer, Pizza Hut US from 2011 to 2013 | QUALIFICATIONS AND SKILLS • Strong track record of business leadership overseeing transformation strategy, human resources, and corporate communications functions • Experience leading business transformation and global people capability strategies to build powerful brands and fuel sustainable results • Extensive accounting, treasury, and financial expertise |
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS BROWN-FORMAN | 21 | |
PROPOSAL 1: ELECTION OF DIRECTORS | NOMINEES |
MICHAEL A. TODMAN | ||||
Director since 2014 Age 62 COMMITTEES: • Audit(Chair) • Corporate Governance and Nominating | CURRENT AND PAST POSITIONS
Positions with Whirlpool and affiliates:
• President, Whirlpool International from 2009 to 2014
• President, Whirlpool North America from 2007 to 2009 | QUALIFICATIONS AND SKILLS
• Executive leadership of large multinational organizations
• Financial expertise
OTHER DIRECTORSHIPS
• Carrier Corporation since April 2020 • Prudential Financial, Inc. since 2016
• Newell Brands, Inc. from 2007 to May 2020 • Whirlpool Corporation from 2006 to 2015 | ||
LAWSON E. WHITING | ||||
Director since
Age
| CURRENT AND PAST POSITIONS
Positions with Brown-Forman and affiliates:
• Executive Vice President and Chief Operating Officer from
• Executive Vice President and Chief • Senior Vice President and Chief Brands Officer from 2013 to 2015 • Senior Vice President and Managing Director for • Vice President and Finance Director for Western Europe from 2010 to 2011 • Vice President and Finance Director for North America from 2009 to 2010 | QUALIFICATIONS AND SKILLS
• Extensive knowledge of the beverage alcohol industry
• Operations and financial
• Strategic thinking, leadership, management, consensus-building, and communication skills
|
Family relationships.No family relationship — relationship—first cousin or closer — closer—exists between any two directors, executive officers, or individuals nominated or chosen to become a director or executive officer, except for the following relationships between Brown family directors: Geo. Garvin Brown IV and Campbell P. Brown are brothers, and Marshall B. Farrer is their first cousin; and Stuart R. Brown and Augusta Brown Holland are first cousins.
22 | BROWN-FORMAN |
COMPENSATION
OVERVIEW
Our directors serveone-year terms that begin with their electionwhen they are elected at an Annual Meeting and end immediately upon the election of directors at the next Annual Meeting. We refer to this period as a “Board Year” for director compensation purposes.
Ournon-employee director compensation consists of an annual Board retainer, a Chair of the Board retainer, a Lead Independent Director retainer, committee member retainers, committee chair retainers, and meeting fees. To align the interests of ournon-employee directors with those of our stockholders,non-employee directors receive their Board retainers in a combination of cash and equity.Non-employee directors receive meeting fees only if they attend more than eight meetings (Board), ten meetings (Audit Committee), or six meetings (Compensation Committee and Corporate Governance &and Nominating Committee). The Compensation Committee believes this compensation structure appropriately reflects the importance of directors’ active participation at Board and committee meetings.
The Compensation Committee reviews, with the assistance of its independent consultant, Frederic W.FW Cook, & Co. (FWC) information each year related to the competitiveness of ournon-employee Director compensation and, from director compensation. From time to time, the Compensation Committee recommends adjustments to itsour compensation structure to ensure both continued competitivenessthat it remains competitive and incorporates the appropriate level and mix of compensation. Based upon the review of this informationconducted in fiscal 2017, FWC2020, and with the advice of FW Cook, the Compensation Committee recommended to the Board, and the Board confirmed and approved, no changes tothat the existing retainersretainer and fees listed below.fee structure remain unchanged.
DIRECTOR COMPENSATION STRUCTURE
Pay Element | Amount | ||||||||
Lead Independent Director Retainer | $45,000 | ||||||||
Paid in six installments over the Board Year. | |||||||||
Board Retainer | $ | ||||||||
Directors may elect to receive their cash retainer in equity. Directors who have satisfied our stock ownership guidelines may elect to receive up to 100% of the retainer in cash |
| • $70,000 cash
(deferred stock units) | |||||||
Meeting Fees | Board | $5,000 per meeting | |||||||
No fee is paid unless the director attends more than eight | $ | ||||||||
No fee is paid unless the director attends more than ten meetings | Audit, Compensation, and Corporate Governance | $2,500 per meeting $1,250 per telephonic meeting | |||||||
Committee Member Retainers | Audit Committee | $25,000 | |||||||
Paid in six installments over the Board Year. | Compensation Committee | $20,000 | |||||||
Corporate Governance and | $20,000 | ||||||||
Committee Chair Retainers(excluding Executive Committee) | $20,000 | ||||||||
Paid in six installments over the Board Year. A director who chairs more than one committee will receive multiple chair retainers. The Committee Chair Retainer is in addition to the Committee Member Retainer. | |||||||||
| $625,000 | ||||||||
Paid in six installments over the Board Year. | |||||||||
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DIRECTOR COMPENSATION • OVERVIEW
Deferred Stock Units
Our Deferred Stock Unit (DSU) program fornon-employee directors allows us to issue both Class A common DSUs and Class B common DSUs. Each DSU represents the right to receive one share of Brown-Forman’s Class A or Class B common stock, based on the closing price of the shares on the date the award is made. After anon-employee director’s Board service ends, his or her DSUs are paid out in shares of Class A or Class B common stock following asix-month waiting period. Directors may elect to receive this distribution either in a single lump sum or in ten equal annual installments.
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS BROWN-FORMAN | 23 | |
On each dividend payment date, non-employee
DIRECTOR COMPENSATION | OVERVIEW |
Non-employee directors are credited with the cash dividends on the number of shares represented by the DSUs they held on the record date for that dividend. These dividend credits are converted to additional DSUs based on the market value of the Class A or Class B common stock as of the dividend payment date.
If a director’s Board service ends during a Board Year, the DSUs attributable to the remainder of that Board Year do not vest and are forfeited.
Employee Directors
Paul C. Varga,Lawson E. Whiting, Campbell P. Brown, and Marshall B. Farrer are our employee directors. They do not receive any compensation for serving on our Board, any of its committees, or on the boards or equivalent bodies of any of our subsidiaries.
Stock Ownership Guideline
Our stock ownership guideline fornon-employee directors is equal to five times the annual board retainer, which in fiscal 2017for the 2020 Board Year was $925,000.$1,025,000. When considering whether anon-employee director has satisfied the stock ownership guideline, the Compensation Committee includes DSUs as well as Class A or Class B common stock held directly.directly and all DSUs. The value of any unexercised stock-settled stock appreciation rights (SSARs) is not included. Anynon-employee director who has not yet met the stock ownership guideline must elect towill receive at least 60% of his or her annual equity boardBoard retainer in DSUs.
Expense Reimbursement
We reimburse all directors for reasonable and necessary expenses they incur in performing their duties as directors.connection with attending Brown-Forman Board and committee meetings. In addition, we provide a travel stipend of $3,000 per meeting to directors who must travel to an overseas location for such Board meetings from outside the United States.
and committee meetings.
Continuing Education Allowance
Brown-Forman covers the cost, up to $10,000 per director per Board Year, of continuing education programs to support our directors’ efforts to remain current on best practices in board governance, industry matters, or other business topics relevant to their Board service.
Events
We occasionally invite our directors and their spouses to certain events, including strategy retreats, retirement celebrations, award dinners, and similar functions. We believe these occasions provide valuable opportunities for our directors to establish and develop relationships with our senior executives, long-term stockholders, employees, and each other, furthering our objective of having a strong and cohesive board.
24 | BROWN-FORMAN | |
DIRECTOR COMPENSATION | FISCAL 2020 DIRECTOR COMPENSATION |
DIRECTOR COMPENSATION • FISCAL 2017 DIRECTOR COMPENSATION
FISCAL 20172020 DIRECTOR COMPENSATION
The following table shows the compensation paid tonon-employee directors for their service in fiscal 2017.2020.
FISCAL 20172020 DIRECTOR COMPENSATION TABLE
Name | Fees Earned or Paid in Cash(1) | DSU Awards(2)(3) | All Other Compensation(4) | Total | Fees Earned or Paid in Cash(1) |
| DSU Awards(2)(3) |
| All Other Compensation(4) |
| Total | ||||||||||||||||||||||||||||||||
Joan C. Lordi Amble(5) | $13,615 | $— | $— | $13,615 | |||||||||||||||||||||||||||||||||||||||
Patrick Bousquet-Chavanne | 59,394 | 185,000 | 15,000 | 259,394 | $101,250 | $135,000 | $15,000 | $251,250 | |||||||||||||||||||||||||||||||||||
Geo. Garvin Brown IV | 517,727 | 312,500 | 18,000 | 848,227 | 537,500 | 312,500 | 15,000 | 865,000 | |||||||||||||||||||||||||||||||||||
Martin S. Brown Jr.(5) | 45,066 | — | — | 45,066 | |||||||||||||||||||||||||||||||||||||||
Stuart R. Brown | 185,227 | — | — | 185,227 | 111,250 | 102,500 | — | 213,750 | |||||||||||||||||||||||||||||||||||
Bruce L. Byrnes | 116,477 | 115,000 | — | 231,477 | 115,000 | 135,000 | — | 250,000 | |||||||||||||||||||||||||||||||||||
John D. Cook | 115,158 | 185,000 | — | 300,158 | 208,750 | 135,000 | — | 343,750 | |||||||||||||||||||||||||||||||||||
Laura L. Frazier | 172,567 | — | — | 172,567 | 205,000 | — | — | 205,000 | |||||||||||||||||||||||||||||||||||
Sandra A. Frazier(5) | 45,066 | — | — | 45,066 | |||||||||||||||||||||||||||||||||||||||
Kathleen M. Gutmann | 95,000 | 135,000 | — | 230,000 | |||||||||||||||||||||||||||||||||||||||
Augusta Brown Holland | 85,227 | 115,000 | — | 200,227 | 64,341 | 135,000 | — | 199,341 | |||||||||||||||||||||||||||||||||||
Michael J. Roney | 26,061 | 185,000 | 18,000 | 229,061 | 57,500 | 205,000 | 15,000 | 277,500 | |||||||||||||||||||||||||||||||||||
Tracy L. Skeans | 27,500 | 205,000 | — | 232,500 | |||||||||||||||||||||||||||||||||||||||
Michael A. Todman | 115,133 | 115,000 | — | 230,133 | 120,000 | 135,000 | — | 255,000 | |||||||||||||||||||||||||||||||||||
Paul C. Varga(5) | 51,250 | — | — | 51,250 |
(1) | Amounts in this column reflect fees earned during fiscal |
(2) | DSUs represent the right to receive one share of Class A or Class B common stock, and are determined by dividing the cash value of the compensation being paid in DSUs by the closing price of Class A or Class B common stock on the date of grant. DSU awards for the |
(3) | The aggregate number of |
Name | DSUs Outstanding Class A as of April 30, 2017 | DSUs Outstanding Class B as of April 30, 2017 | Class B SSAR Outstanding as of April 30, 2017 | Class B Time-Based Restricted Stock Units as of April 30, 2017 | DSUs Outstanding Class A as of April 30, 2020 | DSUs Outstanding Class B as of April 30, 2020 | ||||||||||
Joan C. Lordi Amble | 9,179 | 4,252 | — | — | ||||||||||||
Patrick Bousquet-Chavanne | 15,773 | 10,526 | — | — | ||||||||||||
Patrick Bousquet–Chavanne | 23,730 | 18,654 | ||||||||||||||
Geo. Garvin Brown IV | 12,485 | — | 12,512 | 7,612 | 31,317 | 4,873 | ||||||||||
Martin S. Brown, Jr. | — | 3,163 | 24,494 | — | ||||||||||||
Stuart R. Brown | — | — | — | — | 3,023 | — | ||||||||||
Bruce L. Byrnes | 9,747 | 6,831 | — | — | 17,355 | 12,181 | ||||||||||
John D. Cook | 15,773 | 10,526 | 43,504 | — | 22,974 | 19,006 | ||||||||||
Laura L. Frazier | — | — | — | — | ||||||||||||
Sandra A. Frazier | — | 3,163 | 24,494 | — | ||||||||||||
Kathleen M. Gutmann | 7,480 | 689 | ||||||||||||||
Augusta Brown Holland | 3,424 | — | — | — | 10,664 | 1,484 | ||||||||||
Michael J. Roney | 11,909 | — | — | — | 22,378 | 4,078 | ||||||||||
Tracy L. Skeans | 8,661 | — | ||||||||||||||
Michael A. Todman | 8,259 | — | — | — | 15,780 | 2,761 |
(4) | Reflects |
(5) | Paul C. |
DISCUSSION AND
ANALYSIS
This section describes our executive compensation philosophy and objectives, and the decisions of the Compensation Committee (Committee) regarding the compensation of our Named Executive Officers (NEOs). For fiscal 2017,2020, our NEOs were:
Lawson E. Whiting | Jane C. Morreau | Matthew E. Hamel | John V. Hayes | Thomas Hinrichs | Mark I. McCallum | |||||
President and Chief | Executive Vice | Executive Vice | Senior Vice President, | Senior Vice President, | Former Executive Vice | |||||
Executive Officer | President and Chief | President, General | President, USA & | President, International | President and Chief | |||||
Financial Officer | ||||||||||
Division | Brands |
(1) | Mr. McCallum retired as an employee of Brown-Forman on December 31, 2019. |
Pay for Performance
We believe in pay for performance through our short- and long-term incentive programs.programs should drive performance. These programs utilize key performance metrics to compare our performance to that of our peers. We believe the use of these metrics:metrics accomplishes four key objectives:
①demonstrating value provided to our stockholders; | ||||||||||||
②ensuring that we hold ourselves to | ||||||||||||
③reinforcing a competitive and innovative mindset among | ||||||||||||
④ensuring that |
We believe one of the best measures of value to the Company created byvalue our NEOs create is the return provided to our stockholders relative to the returns of other companies in our industry and the broader S&P 500, as shown500. We show the trends in total shareholder return, and how our CEO’s compensation compares with those trends, in the charts below:
BROWN-FORMAN TOTAL SHAREHOLDER RETURN (TSR) VS. EARNINGS PER SHARE (EPS) VS. CEO TOTAL COMPENSATION GROWTH(1) |
| |||||
(1) | Compares |
(2) | Represents the compound annual growth rate of TSR. Industry |
26 | BROWN-FORMAN | |
COMPENSATION DISCUSSION AND ANALYSIS | EXECUTIVE SUMMARY |
COMPENSATION DISCUSSION AND ANALYSIS • OVERVIEW OF OUR COMPENSATION PROGRAM
As a resultEvery year, the Committee evaluates NEO compensation in comparison to the compensation of theexecutives with equivalent positions within our industry. (This process is described on page 30 under “How We Set Target Compensation for Our NEOs.”) The Committee’s 2020 annual review process, it was determinedrevealed that the total target direct compensation for our NEOs was either at or below the market median when compared tofor our compensation peer group listed on page 28.31. In light of this review, we believe our executive compensation program delivers exceptional value to our stockholders, particularly considering the combination of strong returns and financial performance that Brown-Forman and itsour management team have delivered over multiple years.
Performance-Based Payouts for Fiscal 20172020
Brown-Forman performance in fiscal 2017 reflectedOur compensation program demonstrates the close alignment between executive compensationpay and Brown-Forman’s performance.
CASH INCENTIVES
Short-Term Cash Incentive | Long-Term Cash Incentive | |||||||||||||||||
-6% growth IN UNDERLYING OPERATING INCOME,(1) | 30% WEIGHTING | 30% WEIGHTING | 40% WEIGHTING | |||||||||||||||
driven primarily by the globalCOVID-19 pandemic. As a result, the company performance component of the short-term cash incentives paid out at | ||||||||||||||||||
(1) “Underlying operating income” is defined on page 32. “Underlying operating income” is not derived in accordance with GAAP. Please refer to Appendix A of this Proxy Statement for information about our use ofnon-GAAP measures. | absolute underlying operating income | relative underlying operating income compared to industry peers | achievement of key long-term strategic objectives in our | |||||||||||||||
Our performance on these measures for the fiscal |
EQUITY-BASED INCENTIVES
We use equity-based compensation to align the long-term economic interests of our executivesNEOs with those of our stockholders. We offer our NEOs two types of equity-based incentives: performance-based restricted Class A common stock units and stock-settled stock appreciation rights settled in shares of Class B common stock.rights.
• Performance-based restricted stock unit awards for the fiscal | Our relative performance against this group over the performance period was at the | |||
Payouts of our stock-settled stock appreciation rights are determined by the increase of our Class B common stock price above the awards’ stated grant price.
Advisory Votes on Executive Compensation
InWe conduct an advisory vote on our first “say-on-pay”executive compensation(“say-on-pay”) every three years. Our last“say-on-pay” vote inoccurred at our 20142017 Annual Meeting, and our stockholders expressed overwhelming support for the compensation of our NEOs, with more than 99% of the votes cast approving the advisory“say-on-pay” resolution. The Committee considered these results as one of many factors in its executive compensation decisions for fiscal 2015, 2016,2018, 2019, and 2017,2020, and did not make any material changes to theour executive compensation program.
Following the expressed preference of our stockholders, Brown-Forman expectswe expect to continue to conduct advisory votes on executive compensation every three years, but reservesreserve the right to conduct votes more frequently in order to seek additional feedback from our stockholders. As in the past, years, the Committee will consider the results of this year’s “say-on-pay”“say-on-pay” advisory vote (Proposal 2 on page 51)53) in its future executive compensation decisions.
OVERVIEW OF OUR COMPENSATION PROGRAM
Compensation Objectives and Principles
The objective ofFollowing this year’s vote, we expect to hold our executive compensation program is to attract, motivate, reward, and retain a diverse team of talented executives who will lead Brown-Forman to produce superior, sustainable long-term value for our stockholders.
As a family-controlled company, our history guides our perspective on executive compensation. Members of the Brown family have historically served as our senior leadership, and their compensation was modest by competitive market standards. While this was not a major concernnext“say-on-pay” advisory vote at the time given their significant stock holdings, in recent years employees other than Brown family members have more frequently held our most senior executive positions. These individuals have less substantial ownership in the Company and, as a result, our compensation structure has evolved over time to better reflect the competitive landscape for executive talent. In order to remain competitive, as well as ensure our alignment with the interests of the Brown Family and our stockholders, we have established programs that remain focused on creating long-term value, reinforcing financial accountability, and delivering outstanding operational outcomes to drive sustained performance of Brown-Forman’s stock.2023 Annual Meeting.
COMPENSATION DISCUSSION AND ANALYSIS •27 OVERVIEW OF OUR COMPENSATION PROGRAM
| ||
Compensation Elements
Principal elements of compensation for our NEOs include:
• | base salary (including holiday bonus); |
• | short-term(one-year) performance-based cash compensation; |
• | long-term (three-year) performance-based cash compensation; |
• | long-term equity-based incentive compensation (stock-settled stock appreciation rights and performance-based restricted |
• | benefits and limited perquisites |
• | limited post-employment compensation and other benefits. |
Measuring Performance
To measure financial performance, we use a metric called “underlying operating income.” This number is determined by adjusting GAAP operating income for the effect of foreign currency changes, the effect of estimated net changes in distributor inventories for our brands, and the effect of acquisitions and divestitures.
Measuring Performance
To measure financial performance, we use a metric called “underlying operating income.” This metric is determined by adjusting GAAP operating income for the effects of acquisitions and divestitures, foreign currency changes, estimated net changes in distributor inventories for our brands, the impact of establishing the Brown-Forman Foundation, and the Chambord impairment. Please refer to Appendix A of this Proxy Statement for information about our use ofnon-GAAP measures.
The Committee believes the most relevant measures of our performance are:
• | strong and sustained growth in underlying operating income, both on an absolute basis and relative to industry | ||||
peers; • | progress toward our long-term strategic | ||||
• | our three-year | On the advent of our 150th anniversary, Brown-Forman framed our long-term perspective and commitment as a thriving, family-controlled, independent company through the ambition “Nothing Better in the Market”. Driven by our values and core purpose of “enriching life”, the Company’s success is dependent on strategic priorities which build our brands and create shareholder value: • Keep Jack Daniel’s Tennessee Whiskey strong, healthy, and relevant to consumers worldwide; • Lead in premium American whiskey and increase the focus on our super-premium portfolio; • Deliver on balanced geographic growth and competitive routes to consumers; • Delivertop-tier TSR through shareholder-friendly capital allocation and balanced investments to fuel growth; and • Empower our people to lead, develop new capabilities, and live by our timeless values. A more comprehensive view of our business integrates these priorities with a wider definition of value to recognize the many ways our Company contributes to the world around us. We are inspired to create an environment where leveraging diversity and inclusion occurs naturally. Our commitment to responsibility, sustainability, and the communities in which we live and work makes a meaningful difference in the way we build brands for our Company and consumers over the long-term. |
28 | BROWN-FORMAN | |
COMPENSATION DISCUSSION AND ANALYSIS | THE ROLE OF OUR COMPENSATION COMMITTEE |
FISCAL 2020 PERFORMANCE METRICS FOR BROWN-FORMAN INCENTIVE PLANS
Performance-Based Component | Performance Measures | |
Short-Term Cash Incentive | 80% Weighting: Underlying operating income growth(1)relative to expected performance among industry peers | |
20% Weighting: Individual performance | ||
Long-Term Cash Incentive | 30% Weighting: Underlying operating income growth compared to sustained growth of 8% | |
30% Weighting: Underlying operating income growth compared to industry peers | ||
40% Weighting: Progress toward long-term quantitative and qualitative strategic goals | ||
Performance-Based Restricted Stock Units | TSR relative to S&P Consumer Staples Index | |
Stock-Settled Stock Appreciation Rights | Stock price growth above grant price |
(1) | “Underlying operating income” is not derived in accordance with GAAP. |
Competitive Compensation
We aspire to provide target compensation for our NEOs that approximates median target compensation delivered to executives in similar positions at companies we consider competitionas competitors for senior executive talent. We believe that providing strong, competitive target compensation aligned with performance enhances our ability to secure the right executive leadership while driving the right results for our stockholders.
To help ensure we meet this objective, the Committee compares Brown-Forman’s compensation practices with those of a group of high-performing, brand-building consumer products companies with similar financial characteristics. The Committee reviews this group of companies annually to ensure they continue to meet these criteria. These companies are listed on page 28.
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31.
COMPENSATION DISCUSSION AND ANALYSIS • TARGET COMPENSATION
THE ROLE OF OUR COMPENSATION COMMITTEE
The Committee serves a critical role in our compensation governance. Throughgovernance by providing independent oversight and thought leadership on executive compensation and its relationship to Company performance, the Committee establishesestablishing performance objectives that correlate pay and performance. The Committee, with the assistance of its independent compensation consultant, FWC,FW Cook, establishes compensation for our NEOs and other designated executive officers, and helps the Board fulfill its duties relating to the compensation of our directors, officers, and employees. The Committee also has the sole authority, on behalf of the Board, to determine the compensation of our CEO.
Pursuant to its charter, the Committee may delegate to the Management Compensation and Benefits Committee, or to one or more company officers, the authority to make equity awards to eligible individuals other than the NEOs. The Committee may change or revoke any delegation at any time.
The Committee is composed of three independent directors — Messrs.Michael J. Roney (Chair), Bousquet-Chavanne,John D. Cook, and Cook.Tracy L. Skeans. Each member of the Committee qualifies as an independent director under the NYSE’s heightened independence standards for Compensation Committeecompensation committee members ofnon-controlled companies, as anon-employee director under SEC rules, and as an outside director under regulations adopted pursuant to Section 162162(m) of the Internal Revenue Code. As a “controlled company,” Brown-Forman is not required to meet all of these standards, but we believe that doing so is in the best interests of our Companycompany and our stockholders.
The Committee’s deliberations and decisions are informed by the diverse experience of its members, input from certain members of management, advice from FWC,FW Cook, and access to functional experts in our human resources department.at the company.
Sound Pay Practices
We avoid pay practices that we believe do not support the objectives of our executive compensation program or our culture. We do not offer NEOs employment agreements,non-performance-based cash payments (other than salary and holiday bonus), taxgross-ups, excessive perquisites, or severance or change-in-control agreements. We also have an Incentive Compensation Recoupment Policy (commonly known as a “clawback” policy) that permits Brown-Forman to seek recovery of incentive compensation paid or awarded in the event ofwe restate a subsequent financial restatement due tofiling because of material noncompliance with financial reporting requirements or the discovery ofwe discover an error in the calculation of thethat incentive compensation that was awarded or paid.
compensation.
Each year, we assess and evaluate potential compensation-related risks. Based upon this year’s review, management and the Committee have concluded that our compensation policies and practices do not create any risk that is reasonably likely to have a material adverse effect on Brown-Forman. This is our intent and it is consistent with our findings in prior years.
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS BROWN-FORMAN | 29 | |
COMPENSATION DISCUSSION AND ANALYSIS | TARGET COMPENSATION |
The Compensation Consultant
As an independent compensation advisor, FWCFW Cook is engaged by and reports directly to the Committee and attends Committee meetings as requested. FWCFW Cook provides the Committee with information on external compensation trends and guidance on the compensation of our CEO and other NEOs, and also reviews this Compensation Discussion and Analysis. In addition, FWCFW Cook provides independent advice to the Board on director remuneration, assists with the Board and Committee self-assessment process, and acts as the Committee’s advisor in working with management. FWCFW Cook provides no other services to Brown-FormanBrown- Forman or management.
In accordance with SEC and NYSE requirements, the Committee has reviewed the independence of FWCFW Cook and determined that no conflict exists that would compromise the independence of the advice the firm provides.
How We Set Target Compensation for Our NEOs
We apply a customized approach to determine the target compensation offor each NEO. We consider each NEO’s role, the value of the role in the labor market, and factors specific to the NEO as an individual. Individual factors include tenure with Brown-Forman, mastery of current role, potential to move into expanded roles, performance, scarcity of skill-sets,skill sets, retention risk, fit within our culture, career experience, and internal pay equity. We find that this approach leads to a more effective pay program than one based solely based on external labor market data.
To ensure our pay is competitive, we compare NEO compensation with the compensation for executives in similar positions within aour compensation comparator group of high-performing, brand-building consumer products companies with financial characteristics similar to those of Brown-Forman. FWCgroup. FW Cook prepares a market analysis comparing the target value of each element of compensation for Brown-Forman’s NEOs to the compensation paid by theour compensation comparator group. This analysis produces a range of market-competitive levels of target compensation as one consideration in determining pay for our
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COMPENSATION DISCUSSION AND ANALYSIS • TARGET COMPENSATION
NEOs. While we do not set target compensation to meet specific benchmarks, we do consider the median of the comparator group as a guide to appropriate target pay ranges for our NEOs.
To determine the pay elements that make up each NEO’s target compensation package, we begin by reviewing a preferred “pro-forma”the pay mix of pay developed and recommendedoffered by FWC.companies in our compensation comparator group. The objective of this practice is to havedesign a pay mix that aligns from an internal perspective and supportswith compensation programs in our comparator group, while supporting our goal of promoting shareholder value. FWCcreating sustainable value for stockholders. FW Cook and the Committee periodically review the “pro-forma”pay mix to ensure we maintain this continued alignment.
BROWN-FORMAN CEO AND NEO PAY MIX VS. COMPENSATION COMPARATOR GROUP
30 | BROWN-FORMAN 2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | |
COMPENSATION DISCUSSION AND ANALYSIS | AWARDS AND PAYOUTS IN FISCAL 2020: FIXED AND SHORT-TERM COMPENSATION |
Compensation Comparator Group
During fiscal 2017,Each year, the Committee reviewedreviews the membership of the compensation comparator group to ensure continued alignment with the characteristics of Brown-Forman. As a result of thisthe most recent review, Keurig Green Mountain Inc. was removedwe added Treasury Wine Estates Limited to the list of peers. The companies shown below constituted the compensation comparator group for decisions made as they were recently acquired.of March 25, 2020.
Church & Dwight Co., Inc. | ||||||
Tiffany & Co. | ||||||
lululemon athletica inc. | Treasury Wine Estates Limited | |||||
McCormick & | The Hain Celestial Group, Inc. | |||||
Davide Campari-Milano S.p.A. | Molson Coors Beverage Company | The Hershey Company | ||||
Diageo Plc | Monster Beverage Corporation | The J.M. Smucker Company |
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COMPENSATION DISCUSSION AND ANALYSIS •
AWARDS AND PAYOUTS IN FISCAL 2017: FIXED AND SHORT-TERM COMPENSATION
Target Total Direct Compensation for Fiscal 20172020
The chart below shows the annualized target total direct compensation for each of our NEOs in fiscal 20172020 versus fiscal 2016,2019, and the percentage increasechange of each component.the compensation packages.
FISCAL 20172020 VERSUS FISCAL 20162019 NEO TARGET TOTAL DIRECT COMPENSATION
■ Salary and | ■ Short-Term | ■ Long-Term | Target Total | Percent | ||||||||||
Name | Year | Holiday Bonus(1) | Incentive Target | Incentive Target | Direct Comp | Increase | Pay Mix at Target | |||||||
Paul C. Varga | 2017 | 1,145,870 | 1,455,000 | 4,400,000 | 7,000,870 | 4% | ||||||||
2016 | 1,133,370 | 1,400,000 | 4,200,000 | 6,733,370 | ||||||||||
Jane C. Morreau | 2017 | 598,978 | 420,000 | 900,000 | 1,918,978 | 5% | ||||||||
2016 | 572,935 | 400,000 | 850,000 | 1,822,935 | ||||||||||
Mark I. McCallum | 2017 | 661,480 | 450,000 | 860,000 | 1,971,480 | 2% | ||||||||
2016 | 645,854 | 440,000 | 850,000 | 1,935,854 | ||||||||||
Jill A. Jones | 2017 | 614,603 | 440,000 | 840,000 | 1,894,603 | 4% | ||||||||
2016 | 598,978 | 430,000 | 800,000 | 1,828,978 | ||||||||||
Lawson E. Whiting | 2017 | 494,808 | 300,000 | 650,000 | 1,444,808 | 9% | ||||||||
2016 | 447,931 | 275,000 | 600,000 | 1,322,931 |
(1) | Salary and holiday bonus are based on theone-year period beginning on July 1. Other compensation elements are based on our fiscal year beginning May 1. Any change to compensation during the year is prorated. |
(2) | Mr. Hinrichs is based in Amsterdam, Netherlands and paid in euros. The amount shown is the U.S.-dollar equivalent. |
(3) | Mr. McCallum retired from Brown-Forman on December 31, 2019. Amounts shown reflect hispro-rated compensation based on his retirement date. |
AWARDS AND PAYOUTS IN FISCAL 2017:2020: FIXED AND SHORT-TERM COMPENSATION
Fixed Compensation
Base salary.Salaries typically are typically adjusted each July following completion ofafter we complete our annual performance review process, thoughbut an NEO’s salary may be adjusted during the fiscal year if he or she experiencesat other times to reflect a change in role or responsibility.
Holiday bonus.One of our longstanding traditions is to offer a majorityall of our salaried employees, including our NEOs, alump-sum cash bonus during the holiday season. The intent of thisThis bonus is intended to promote continued service and likewise to recognizeshow appreciation for our employees. The holiday bonus, which we consider to be part of base salary, is guaranteed and based solely on thean employee’s length of servicetenure with Brown-Forman.
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS BROWN-FORMAN | 31 | |
COMPENSATION DISCUSSION AND ANALYSIS | AWARDS AND PAYOUTS IN FISCAL 2020: FIXED AND SHORT-TERM COMPENSATION |
The table below shows the total amount of fixed compensation that each of our NEOs received in fiscal 2017.2020.
FIXED COMPENSATION FOR 2020(1)
Name | Amount | |||
Lawson E. Whiting | $1,074,760 | |||
Jane C. Morreau | 640,771 | |||
Matthew E. Hamel | 549,995 | |||
John V. Hayes | 427,180 | |||
Thomas Hinrichs(2) | 473,487 | |||
Mark I. McCallum(3) | ||||
475,777 |
(1) | Reflects fiscal year fixed compensation from May 1, |
(2) | Mr. Hinrichs is based in Amsterdam, Netherlands and paid in euros. The amount shown is the U.S.-dollar equivalent. |
(3) |
|
COMPENSATION DISCUSSION AND ANALYSIS •
AWARDS AND PAYOUTS IN FISCAL 2017: FIXED AND SHORT-TERM COMPENSATION
Short-Term Incentive Compensation
Our NEOs participate in an annual performance-based cash compensation program in which payouts depend on the achievement of certain performance goals during the fiscal year.
For fiscal 2017,2020, 80% of the target award was tied to Brown-Forman’s Companycompany performance and 20% was tied to individual performance. We believe basing the majority of short-term incentive awards for NEOs on Companycompany performance appropriately reflects the collective accountability of our most senior executives for the performancesuccess of the enterprise.organization. We also believe that basing a lesser, but meaningful, portion of the short-term incentive on individual performance provides flexibility to differentiate awards among NEOs based on their individualrespective achievements during the fiscal year.
Both the corporate and individual portions of our short-term incentives are subject to a performance factor of 0% to 200%. After adjusting for performance, the two components are added together to determine the total short-term incentive payment. As a result, the total value of short-term incentivesincentive payouts may vary between 0% and 200% of target, which is target—a range we believe to beis sufficient infor recognizing our varying levels of performance while notwithout encouraging excessive risk-taking.
Please see the “Non-Equity“Non-Equity Incentive Plan Compensation” column of the Fiscal 2020 Summary Compensation Table for Fiscal 2017 found on page 4042 for the amounts paid to the NEOs in short-term incentive compensation for fiscal 2017.
2020.
COMPANY PERFORMANCE (80% OF TARGET AWARD)
Company performance goals for fiscal 20172020 were based on Brown-Forman’s underlying operating income growth compared to the expected performance of our industry peers. We aspire to outperform these peers consistently and sustainably, and considerconsidered our historic underlying operating income growth trends and outlook for fiscal 20172020 performance when setting these objectives.
The Committee determined that, for purposes of the short-term incentive compensation plan, Brown-Forman achieved underlying operating income of $1,006$1,053 million for fiscal 2017 (on2020, which represents a decline of 6% compared to last fiscal year, compared to an as-reported basis, fiscal 2017 operating income was $989 million) resulting inexpected growth rate set prior to the globalCOVID-19 pandemic of 7%. As shown on the next page, these results led to a payout of 127%0% of target.
target for this portion of the short-term incentive.
Underlying operating income at Brown-Forman was calculated by adjusting GAAP operating income for the following effects: