| ☒ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☐ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to § 240.14a-12 |
| ☒ | No fee required. |
Fee paid previously with preliminary materials. | ||||||
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and0-11. |
2024 NOTICE AND PROXY STATEMENT AVERY DENNISON
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
| RECORD DATE | February 26, 2024 | |
| MEETING DATE | April 25, 2024 | |
| MEETING TIME | ||
| MEETING FORMAT | Virtual at www.virtualshareholdermeeting.com/AVY2024 | |
ITEMS OF BUSINESS FOR STOCKHOLDER VOTE | |||||||
| 1 | Election of the | ||||||
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| 3 | |||||||
4 | |||||||
Notice of 2015 Annual Meeting of Stockholders
To Our Stockholders:
You are cordially invited to attend our 2015 Annual Meeting of Stockholders to be held at the Hilton Hotel, 100 West Glenoaks Boulevard, Glendale, California 91202 on Thursday, April 23, 2015, at 1:30 p.m. Pacific Time. At the meeting, stockholders will vote on the following items of business:
1.Election of the nine directors nominated by our Board to serve a one-year term;2.Approval, on an advisory basis, of our executive compensation;3.Approval of our Amended and Restated Bylaws to, among other things, designate the Delaware Court of Chancery as the exclusive forum for adjudicating certain stockholder disputes;4.Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2015 fiscal year; and5.Transaction of any other business properly brought before the meeting or any adjournment or postponement thereof.
Our Board recommends that stockholdersyou voteFOR each of theour 10 director nominees nominated by our Board,in Item 1 andFOR Items 2, 3 and 4. After considering these items of business at the meeting, Dean Scarborough, our Chairman and Chief Executive Officer, will review our 2014 performance and answer your questions.
Stockholders of record as of February 23, 201526, 2024 are entitled to notice of, and to vote at,in connection with, the meeting and any adjournment or postponement thereof. This notice and our definitive proxy statement are being first mailed or made available to stockholders on or about March [●], 2024.
We want your shares to be represented and voted. We encourage you to vote promptly as this will save us the time and expense of additional proxy solicitation. As shown below, you can vote online, by telephone, by mail or, in certain circumstances, during the meeting.
On behalf of our Board of Directors, management and team members worldwide, thank you for investing in us and our company. We look forward to engaging with you during the virtual Annual Meeting.
Vikas Arora
Vice President, Associate General Counsel and
Corporate Secretary
March [●], 2024
| ONLINE | | BY TELEPHONE | | BY MAIL | | DURING MEETING | |||||||||
| You can vote online using the 16-digit control number shown on your Notice of Internet Availability, proxy card or voting instruction form. | In the U.S. and Canada, you can vote by telephone using the 16-digit control number shown on your Notice of Internet Availability, proxy card or voting instruction form. | You can vote by mail by completing, dating and signing your proxy card or voting instruction form and returning it in the accompanying postage-paid envelope. | Registered holders can vote during the meeting. Beneficial holders must contact their broker or other nominee to be able to vote during the meeting. Shares held through our Employee Savings Plan may not be voted during the meeting. | ||||||||||||
TABLE OF CONTENTS
Avery Dennison Corporation | 2024 Proxy Statement | Table of Contents |
PROXY SUMMARY
This proxy summary includes key messages related to this proxy statement and does not contain all the information you should consider before voting. We strongly encourage you to read the entire proxy statement before voting.
INFORMATION REGARDING ANNUAL MEETING
Distribution of Proxy Materials
We will bebegin mailing our Notice of Internet Availability of Proxy Materials, which includes instructions on how to access these materials on the Internet,online and vote your shares, on or beforeabout March 13, 2015. Stockholders who[●], 2024. If you previously elected to receive a paper copy of our proxy materials, on or about the same date, we will be mailedmail you a proxy card and our 2015 proxy statement, annual2023 integrated financial and sustainability report Chairman's(our “2023 Integrated Report”), which includes a letter to stockholders from our President/Chief Executive Officer (CEO); a description of our businesses, stakeholders and avalues; highlights of our strategies, financial performance and sustainability progress; our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (our “2023 Annual Report”); and the notice and proxy statement for our 2024 Annual Meeting of Stockholders (the “Annual Meeting”).
Time, Date and Format of Annual Meeting
The Annual Meeting will take place at 2:30 p.m. Eastern Time on April 25, 2024. To allow stockholders to attend without the time and expense of doing so in person, the meeting will be held virtually, with attendance via the internet. To attend the virtual Annual Meeting, you will need to log in to www.virtualshareholdermeeting.com/AVY2024 using the 16-digit control number on your Notice of Internet Availability of Proxy Materials, proxy card on approximately March 16, 2015.or voting instruction form.
Even if you cannot attendOnline access to the live audio webcast of the Annual Meeting it is important thatwill open at 2:15 p.m. Eastern Time to allow time for you to log in and test your shares be representeddevice’s audio system. We encourage you to access the meeting in advance of its start time as we plan to begin the meeting promptly. For additional instructions on how to attend the virtual Annual Meeting, please refer to the Voting and voted. You may vote as follows:
On behalf of the Board of Directors, management and employees of Avery Dennison, thank you for your continued support.
Our Values
At Avery Dennison, we have an ethical, values-driven culture where bold ideas turn into action. The following core values guide our decisions and support our vision to make brands more inspiring and the world more intelligent. We strive to live these values each and every day because, as a company, they represent who we are.
PROXY STATEMENT FOR2015 ANNUAL MEETING OF STOCKHOLDERS
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ThisMeeting Q&A section contains summary information described in greater detail in other parts of this proxy statement and does not contain all the information you should consider before voting. Stockholders are urged to read the entire proxy statement before voting.
ITEMS BEING VOTED ON AT ANNUAL MEETINGstatement.
StockholdersItems Being Voted on During Annual Meeting
You are being asked to vote on the following items of business atshown below during the Annual Meeting. As shown below, ourOur Board of Directors (our "Board"“Board”) recommends that stockholdersyou vote for all nineeach of our 10 director nominees nominatedand for Items 2, 3 and 4.
ITEM OF BUSINESS | BOARD RECOMMENDATION | VOTE REQUIRED | DISCRETIONARY BROKER VOTING | PAGE | ||||||||
| 1 | Election of directors |  | FOR each nominee | Majority of votes cast |
No |
39 | ||||||
2 | Advisory vote to approve executive compensation | | FOR
|
Majority of shares represented and entitled to vote |
No |
50 | ||||||
| 3 | Approval of a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to provide that stockholders holding 25% of outstanding common stock have the right to request that we call special meetings of stockholders | | FOR | Majority of shares outstanding | No | 94 | ||||||
| 4 | Ratification of appointment of PwC as our independent registered public accounting firm for FY 2024 | | FOR | Majority of shares represented and entitled to vote | Yes | 96 | ||||||
Voting Prior to or During Annual Meeting
You may vote your shares by our Board andsubmitting a proxy in favoradvance of the threeAnnual Meeting online, by telephone or by mail; only in certain circumstances may you vote during the meeting. If you are a registered stockholder who has not previously voted or wants to change your vote, you may vote during the Annual Meeting. Beneficial holders may only vote during the meeting if they properly request and receive a legal proxy in their name from the broker, bank or other items being brought for stockholder vote.nominee that holds their shares. Shares held through our Employee Savings Plan may not be voted during the meeting. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote and submit your proxy promptly by following the instructions on your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form.
Avery Dennison Corporation | 2024 Proxy Statement | 1 | |||||||
Asking Questions During Annual Meeting
We have designed the virtual Annual Meeting to ensure that you have the same rights and opportunities to participate as you would at an in-person meeting, with an easy-to-use online platform that allows you to attend, vote and ask questions. After we have finished acting upon the Annual Meeting items of business and the meeting is adjourned, our Executive Chairman will lead a Q&A session during which we intend to answer all questions submitted timely that are pertinent to our company or the items brought before stockholder vote. Answers to questions not addressed during the meeting, if any, will be posted promptly after the meeting on the investors section of our website. For information on how to submit questions during the Annual Meeting, please refer to the Voting and Meeting Q&A section of this proxy statement.
OUR COMPANY
We are a global materials science and digital identification solutions company that provides a wide range of branding and information solutions that optimize labor and supply chain efficiency, reduce waste, advance sustainability, circularity and transparency, and better connect brands and consumers. Our products and solutions include labeling and functional materials, radio frequency identification (RFID) inlays and tags, software applications that connect the physical and digital, and a variety of products and solutions that enhance branded packaging and carry or display information that improves the customer experience. We serve an array of industries worldwide, including home and personal care, apparel, general retail, e-commerce, logistics, food and grocery, pharmaceuticals and automotive.
Our company is composed of two reportable segments, Materials Group and Solutions Group. Materials Group is a leading provider to pressure-sensitive label and graphics industries worldwide. Our innovative products include label materials, graphics and reflective materials and functional bonding materials, such as tapes. Our label materials enhance shelf appeal for brands, inform shoppers, advance circularity, increase transparency, help reduce waste and improve operational supply chain efficiency. Our graphics portfolio offers highly engineered materials that range from vehicle wraps to architectural films. Materials Group plays a key role in advancing our fast-growing Intelligent Labels business, providing the materials science capabilities and process engineering expertise essential to developing and manufacturing intelligent labels at scale.
Solutions Group is a leading global provider of information and branding products and solutions that cover a breadth of customer needs from digital identification and data management, branding and embellishment, as well as productivity, pricing and retail media. We empower customers across multiple retail and industry segments to connect the physical and digital, leveraging our industry-leading RFID solutions. Our technology addresses complex customer challenges, provides transparency and visibility across supply chains, improves labor and waste efficiency, and enables better consumer experiences at the point of purchase and beyond. Market segments served include the global apparel, logistics, food and grocery, and general retail industries. As a large ultra-high frequency RFID solutions provider, we leverage our innovation and data management capabilities, global footprint and market access in the ongoing advancement of our Intelligent Labels business.
STRATEGY OVERVIEW
We are committed to ensuring the long-term success of all our stakeholders – our customers, investors, employees and communities. Over the past five years, we have focused on delivering to our potential by managing through macro volatility while evolving our aspirations. In 2023, we evolved our long-term strategies as shown below, adding a vital new one that reflects our growing Materials and Solutions connected capabilities and combining two of our former strategies into one.
Drive outsized growth in high-value product categories through market-driven innovation
Grow profitably in our base businesses
Lead at the intersection of the physical and digital
Effectively allocate capital and relentlessly focus on productivity
Lead in an environmentally and socially responsible manner
Our customers are increasingly looking for help solving some of the most complex industry challenges, including labor efficiency and supply chain effectiveness; waste reduction, circularity and transparency; and better connection between brands and consumers. We believe that physical items will need a digital identity to solve these challenges, and that we are well-positioned to help the industries we serve overcome them. Our vision is to leverage the strengths of our Materials and Solutions businesses to lead at the intersection of the physical and digital.
2 | 2024 Proxy Statement | Avery Dennison Corporation |
We plan to realize this vision through segment leadership, market-driven innovation, and advancement of integrated digital solutions, leveraging our Intelligent Labels business. Our areas of focus address key megatrends that present both risks and opportunities for our company as we seek to help our customers navigate the increasingly digital world and operate more sustainably.
Our strategies prioritize using our market insights, driving long-term innovation and enhancing the digital capability of our teams, while continuing to execute well in the core businesses that have been key to our success. Our five strategic pillars and 2023 achievements are shown below.
STRATEGIC PILLARS
1 | ||||
Drive outsized growth in high-value categories through market-driven innovation
We aim to increase, both organically and through acquisitions, the proportion of our portfolio in high-value categories that serve markets that are growing faster than gross domestic product (GDP), represent large pools of potential profit and leverage our core capabilities. These products and solutions include our Intelligent Labels that use RFID tags and inlays, specialty and durable label materials, graphics and reflective solutions, industrial tapes, external embellishments, and shelf-edge pricing, productivity and consumer engagement solutions.
| • | In 2023, we continued to increase the proportion of our portfolio in high-value product categories, with significant organic growth in Intelligent Labels, external embellishments, and shelf-edge pricing, productivity and consumer engagement solutions, and the acquisition of three companies that expand the external embellishment capabilities in our Solutions Group. Over the past five years, we more than doubled the size of our Intelligent Labels business, with net sales of ~$850 million in 2023. |
2 | ||||
Grow profitably in our base businesses
| • | We strive to grow profitably in our base businesses by carefully balancing volume, price and mix, reducing complexity and tailoring our go-to-market strategies. |
| • | In 2023, we protected margins in our base businesses through product reengineering and productivity actions to mitigate the impact of |
3 | ||||
Lead at the intersection of the physical and digital
We connect the physical and digital, leveraging the core capabilities of our Materials and Solutions businesses to help our customers optimize labor efficiency and supply chain effectiveness, reduce waste, advance circularity and transparency, and better connect brands with consumers.
4 | ||||
Effectively allocate capital and relentlessly focus on productivity
We balance our capital investment in organic growth, productivity, and acquisitions and venture investments, while continuing to return cash to stockholders through dividends and share repurchases and ensure that we maintain a strong balance sheet with ample capacity to invest. In addition, we take actions to restructure our operations from time to time and use product reengineering and enterprise lean sigma principles to expand our margins, enhance our competitiveness and provide a funding source for reinvestment.
| • | In 2023, we invested $285.1 million in fixed and |
Avery Dennison Corporation | 2024 Proxy Statement | 3 |
5 | ||||
Lead in an environmentally and socially responsible manner
We aim to advance the environmental sustainability of our company and value chain by delivering innovations that advance the circular economy, reducing the environmental impact of our operations, and offering value-creation opportunities for our customers. We also seek to make a positive social sustainability impact by building a more diverse workforce and inclusive and equitable culture, maintaining operations that promote health and safety, and supporting our communities.
| • | In 2023, we made further progress toward our 2025 and 2030 sustainability goals, reducing the environmental impact of our operations and continuing to invest in our sustainability strategic innovation platform focused, among other things, |
With these strategies in mind, our near-term priorities are to deliver on our high-value growth initiatives; achieve our financial objectives for the first half of the year; deepen our ecosystem engagement and expand our M&A pipeline; accelerate sustainability-related and digital innovation; and expand organizational capability in both Materials and Solutions.
PERFORMANCE HIGHLIGHTS
2023 Performance
Although a lower demand environment driven primarily by significant inventory destocking downstream from our company led to a challenging 2023, we delivered sequential improvement each quarter during the year and continued advancement in key growth areas such as Intelligent Labels. Market conditions were significantly worse than we initially anticipated, which resulted in our not realizing our annual performance expectations. Demonstrating strength and resiliency, we navigated the challenging environment, protecting margins; improving service for our customers; deepening our insights into the drivers of demand and inventory throughout our value chain; continuing to shift our product portfolio toward high-value categories, particularly Intelligent Labels; and generating strong cash flow. By leveraging our core strengths of productivity, cost management and capital stewardship and expanding our potential in intelligent label solutions, we mitigated the impact of the lower volume environment on our bottom line.
Key financial results for the year are shown below.
| • | Net sales of | |||||||
2014 PERFORMANCE HIGHLIGHTS
Fiscal year 2014 was another year of solid progress for our company. On net sales of approximately $6.3 billion, we delivered 3% organic sales growth and 16% growth in adjusted earnings per share (EPS). While we delivered solid annual free cash flow of over $300 million during 2012 and 2013, 2014 free cash flow came in below our expectations, due primarily to
Excluding the impact of currency, fluctuations and actions we took to reduce the volatility associated with year-end changes to our levels of working capital.sales declined 6.9%
Reported earnings per share (EPS) decreased from $9.21 in 2022 to $6.20 in 2023 |
Adjusted EPS decreased 13.7% from $9.15 to $7.90, primarily reflecting lower volume, partially offset by productivity and restructuring actions
| • | With net cash provided by operating activities of $826.0 million, delivered adjusted free cash flow of $591.9 million; adjusted free cash flow conversion, meaning the proportion of net income we were able to convert to cash, was more than 100% |
| • | On net income of $503.0 million, achieved return on total capital (ROTC) of 12.4% |
 |  |  |
4 | 2024 Proxy Statement | Avery Dennison Corporation |
TableSales change excluding the impact of Contents
Organic sales growth,currency (sales change ex. currency), adjusted EPS, andadjusted free cash flow and ROTC – as well as organic sales change, adjusted earnings before interest, taxes depreciation and amortization (EBITDA) and adjusted EBITDA margin, which are used later in this proxy statement – are supplemental non-GAAP financial measures that we use internally and provide to assist investors in assessing our performance, operating trends and liquidity. These measures are defined, in theCompensation Discussionqualified and Analysis section of this proxy statement. These financial measures, which are not in accordance withreconciled from generally accepted accounting principles in the United States of America (GAAP), are reconciled to GAAP in Appendix A toof this proxy statement. These non-GAAP financial measures are not a substitute for or superior to the comparable financial measures under GAAP.
The fundamentals of our business shown below continue to provide us with significant competitive advantage.
We are exposed to diverse and growing end markets, with catalysts for long-term growth
We are industry leaders in our primary businesses, with strength in scale and innovation
We have a clear set of strategies that have been key to our success over the long term across a wide range of business cycles
We are uniquely positioned to connect the physical and digital to help address some of the most complex problems facing the industries we serve
Progress Toward Long-Term2025 Financial Targets.Targets
In May 2012,March 2021, we communicated to our stockholders the long-termannounced financial targets through 2025. Given the challenges we planned to realize through the end of 2015. As shown below, we delivered strong financial performanceexperienced in 2023, our progress toward these long-term targets slowed during the first three yearsyear; however, we expect significant progress in 2024 as label and apparel markets rebound and growth in our Intelligent Labels business accelerates. We believe that our strategies, together with our team’s ability to execute in various environments, will allow us to continue generating long-term value creation through a balance of this four-year period, meeting or exceeding our organic salesGDP+ growth and adjustedstrong returns, as we unlock significant growth opportunities and our core businesses rebound.
In 2021-2023, on a three-year compound annual basis (with 2020 as the base period), GAAP reported net sales increased by 6.3%, while GAAP operating income, net income and EPS growth targets. Although our free cash flow fell short of our annual targetdecreased by 1.1%, 3.3% and 2.1%, respectively. GAAP reported operating margin in 2014 and negatively impacted our three-year average for this measure, as of February 2, 2015, we expected substantially to deliver on our commitments to investors by the end of 2015.2023 was 9.4%.
|
| 2021-2025 Targets | 2021-2023 Results(1) | ||
Sales Change Ex. Currency(2) | 5%+ | 7.7% | ||
Adjusted EBITDA Growth(2)(3) | 6.5% | 5.7% | ||
Adjusted EBITDA Margin | 16%+ in 2025 | 15.1% in 2023 | ||
Adjusted EPS Growth(2) | 10% | 3.6% | ||
ROTC | 18%+ | 12.4% in 2023 | ||
| (1) | Results for non-GAAP measures are reconciled from GAAP in Appendix A of this proxy statement. | |||
| (2) | Percentages for targets reflect five-year compound annual growth rates, with 2020 as the base period. Percentages for results reflect three-year compound annual growth rates, with 2020 as the base period. |
| (3) | Although adjusted EBITDA growth was not one of our original financial targets, it was implied by our sales change ex. currency and adjusted EBITDA margin targets. The foreign currency translation impact to EBITDA was a benefit of approximately $38 million in 2021 and a headwind of approximately $81 million and $20 million in 2022 and 2023, respectively. |
Effective Capital Discipline. We are committed to maintaining capital discipline, as demonstrated through our significant return of cash to stockholders. Allocation
We have paid quarterly dividendsinvested in our businesses to support organic growth and acquired companies that expand our capabilities in high-value product categories, increase our pace of innovation and advance our sustainability priorities. Our fixed and IT capital spending in 2023 of $285.1 million was comparable to 2022, reflecting our continued investment in high-value categories, particularly our Intelligent Labels business. During the year, we acquired Thermopatch, Inc. (“Thermopatch”), a New York-based manufacturer specializing in labeling, embellishments and transfers for decadesthe sports, industrial laundry, workwear and increasedhospitality industries; LG Group, Inc. (“Lion Brothers”), a Maryland-based designer and manufacturer of apparel brand embellishments; and Silver Crystal Group (“Silver Crystal”), a Canada-based provider of sports apparel customizations and application solutions across in-venue,direct-to-business and e-commerce platforms; together, these acquisitions expand the external embellishments portfolio in our annual dividends nearly 68% since 2010.Solutions Group. We also made one venture investment in a company developing technological solutions that we believe have been disciplinedthe potential to advance our strategies.
In 2023, we paid $256.7 million in executing ourdividends of $3.18 per share repurchase program, more than offsetting the dilutive effect of the stock-based incentive compensation we granted in recent years. In December 2014, we announced an authorization from our Board to repurchase an additional $500and repurchased 0.8 million shares of our common stock. We raised our quarterly dividend rate by ~8% in April 2023.
Avery Dennison Corporation | 2024 Proxy Statement | 5 |
As shown below, over the last threefive years, we have delivered on our commitmentdeployed over $2 billion to increase the amount of cashacquisitions (including venture investments) and returned over $2 billion to our stockholders.stockholders in dividends and share repurchases.
 |
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StrongLonger-Term Total Stockholder Return. As shownReturn (TSR) Outperformance
Our TSR in 2023 was modestly below our total stockholder return (TSR) for the 2012-2014 three-year period outperformed the S&P 500® and the medianTSR of the S&P 500 Index and the S&P 500 Industrials subsetIndex and modestly above the Dow Jones U.S. Container & Packaging Index, three comparator groups we use to assess our relative performance. In 2023, we disaggregated our market basket comparator group used in previous years into the S&P 500 Industrials Index and the Dow Jones U.S. Container & Packaging Index, of which we are a member. We believe this presentation provides greater clarity on our relative performance, reflecting it in a manner more consistent with the methodology used by peer companies.
We believe that our longer-term TSR measures the return that we have providedis a more meaningful measure than our stockholders, including stock price appreciation and dividends paid (assuming reinvestment thereof).one-year TSR, which can be impacted by short-term market volatility unrelated to our performance. Our five-year cumulative TSR significantly outperformed all three of these comparator groups.
TOTAL STOCKHOLDER RETURN | ||||||||
| | | | | | | | | |
| 2012 | 2013 | 2014 | 3-Year TSR | |||||
AVY | 26.2% | 47.5% | 6.2% | 97.7% | ||||
| | | | | | | | | |
S&P 500 | 16.0% | 32.4% | 13.7% | 74.6% | ||||
| | | | | | | | | |
S&P Industrials (median) | 17.3% | 38.0% | 11.3% | 80.8% | ||||
5-YEAR CUMULATIVE TSR |
1-, 3- AND 5-YEAR TSR |
| AVY | S&P 500 Index | S&P 500 Industrials Index | Dow Jones U.S. Container & | |||||
2019 | 49% | 31% | 29% | 29% | ||||
2020 | 21% | 18% | 11% | 21% | ||||
2021 | 41% | 29% | 21% | 11% | ||||
2022 | (15)% | (18)% | (5)% | (18)% | ||||
2023 | 14% | 26% | 18% | 8% | ||||
3-Year TSR | 37% | 33% | 35% | (2)% | ||||
5-Year TSR | 145% | 107% | 94% | 53% | ||||
LEADERSHIP TRANSITION
| EXECUTIVE CHAIRMAN | PRESIDENT/CEO | |||
 |  | |||
Mitch Butier | Deon Stander |
In May 2023, Mitch Butier announced his decision to step down as our CEO. Our Board elected Mr. Butier as Executive Chairman effective September 1, 2023 to ensure a smooth transition by providing counsel and guidance to our new CEO, noting that, during his tenure as CEO, our company delivered superior performance while creating even greater future potential, accelerated growth and expanded margins, and advanced our sustainability priorities.
6 | 2024 Proxy Statement | Avery Dennison Corporation |
TableOur Board has a well-established CEO succession planning process that is part of Contents
CORPORATE GOVERNANCE HIGHLIGHTS
Our corporate governance policies and practices reflect our values, and allowits broader ongoing leadership succession planning. Reflecting a thoughtful succession process, in May 2023 our Board to effectively overseeelected Deon Stander as President/CEO, effective September 1, 2023. Mr. Stander had been our President/Chief Operating Officer (COO) since March 2022, after having served as Vice President/General Manager of our business now known as Solutions Group since June 2015. Having evaluated his attributes, experiences and strengths as a leader during multiple discussions over the preceding 18-24 months, our Board determined that Mr. Stander, who has served in a number of leadership roles across the globe with increasing responsibility and impact during his 20-year career with our company, inwas the interest of creating long-term value. The key elements ofright individual to lead our program andcompany into the related benefits to our stockholders are set forth below.
2015 DIRECTOR NOMINEES
Since 2011, our Board has overseen a significant transformation of our company, includingSolutions business and helping accelerate growth in Intelligent Labels.
In connection with their transitions to these respective roles, giving consideration to the executionadvice of its independent compensation consultant, WTW, our business strategiesBoard’s Talent and Compensation Committee (the “Compensation Committee”) made the decisions described below related to deliver strong three-the compensation of Messrs. Stander and five-year TSRButier.
For Mr. Stander, increased his annual base salary from $700,000 to $1.1 million and his target Annual Incentive Plan (AIP) opportunity from 75% to 135% of 98% and 68%, respectively; the divestiturebase salary, in each case effective September 1, 2023. The Compensation Committee preliminarily aligned to increase his target long-term incentive (LTI) opportunity from 300% to 550% of two of our businesses in 2013 to focus primarily on our industry-leading Pressure-sensitive Materials and Retail Branding and Information Solutions segments; a restructuring program that delivered over $100 million in annualized savings by mid-2013 and substantially improved our productivity; and the implementation of our Board's succession planningbase salary, effective with the recent appointmentannual LTI award on March 1, 2024, subject to its review of Mitchell Butier as our President and Chief Operating Officer. Our Board members have demonstrated commitment to diligently and effectively executing their fiduciary dutiesmarket pay for similar roles at that time. In addition, the Compensation Committee approved a special promotion award of stock options on behalfSeptember 1, 2023 with a grant date fair value of our stockholders, and we recommend thatapproximately $3 million, 50% of which vests on each of the following currently serving directors be re-electedthird and fourth anniversaries of the grant date, in each case subject to his continued service.
For Mr. Butier, reduced his annual base salary from $1.3 million to $1 million and his target AIP opportunity from 160% to 120% of base salary, in each case effective September 1, 2023. He received no special LTI award in connection with his role change.
2024 DIRECTOR NOMINEES (ITEM 1)
As previously disclosed, in February 2024, Julia Stewart notified our Board of her intention not to stand for reelection at the Annual Meeting.
| NAME | AGE | DIRECTOR SINCE | PRINCIPAL OCCUPATION | INDEPENDENT | AC | CC | GC | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bradley A. Alford | | 58 | | 2010 | Retired Chairman & CEO, Nestlé USA | Yes | | M | M | |||||||
| Anthony K. Anderson | 59 | 2012 | Retired Vice Chair & Managing Partner, Ernst & Young LLP | Yes | M | |||||||||||
| Peter K. Barker | | 66 | | 2003 | Retired Chairman of California, JPMorgan Chase & Co. | Yes | C | | | |||||||
| Ken C. Hicks | 62 | 2007 | Executive Chairman, Foot Locker, Inc. | Yes | M | M | ||||||||||
| David E. I. Pyott (LID) | | 61 | | 1999 | Chairman & CEO, Allergan, Inc. | Yes | | C | M | |||||||
| Dean A. Scarborough | 59 | 2000 | Chairman & CEO, Avery Dennison Corporation | No | ||||||||||||
| Patrick T. Siewert | | 59 | | 2005 | Managing Director and Partner, The Carlyle Group | Yes | M | | | |||||||
| Julia A. Stewart | 59 | 2003 | Chairman & CEO, DineEquity, Inc. | Yes | M | C | ||||||||||
| Martha N. Sullivan | | 58 | | 2013 | President & CEO, Sensata Technologies Holding N.V. | Yes | | M | | |||||||
AC = Audit & Finance Committee CC = Compensation & Executive Personnel Committee GC = Governance & Social Responsibility CommitteeM = Member C = Chairman LID = Lead Independent Director
Director Rolf L. Börjesson, Retired Chairman of Rexam PLC and member of As a result, her membership on our Board since 2005, is not being nominated for re-election since he has reached the age of 72 and will be retiringend on the date of the Annual MeetingMeeting.
Board Performance Highlights
Our Board provides strong oversight of our management team and company, with highlights of its accomplishments in recent years described below.
Supported management in navigating our response to the pandemic, including related labor, freight and inflationary challenges, in 2020 and 2021; pandemic-related challenges in China, the Russia-Ukraine war, supply chain disruptions, sizable currency movements and inflationary pressures in 2022; and lower demand driven primarily by downstream inventory destocking in 2023
Oversaw management’s consistent execution of our strategies, delivering performance that exceeded our 2021 financial targets and progressed us toward achieving our 2025 financial targets, as requiredwell as 2019-2023 TSR of 145%, significantly outperforming the S&P 500 Index, S&P 500 Industrials Index and Dow Jones U.S. Container & Packaging Index
Supported management in evaluating synergistic acquisition targets, resulting in 15 companies becoming part of our portfolio, adding new capabilities, expanding our position in high-value product categories and enhancing our opportunities in the marketplace
Implemented thoughtful Board refreshment and director succession planning to ensure we maintain a high-caliber Board; mitigate the potential impact of concentrated mandatory retirements given the closeness in age of many of our directors; and further enhance overall Board diversity, leading to the appointment of three new independent directors in the last 18 months, two of whom increased the gender and/or ethnic diversity on our Board
Conducted regular executive succession planning, resulting in experienced leaders promoted to more senior positions, including our new CEO and Solutions Group President, each appointed in 2023
Sharpened focus on advancing our sustainability agenda, with continuous progress toward achieving our 2025 sustainability goals and more ambitious 2030 goals, as well as enhanced sustainability reporting
Avery Dennison Corporation | 2024 Proxy Statement | 7 |
Matrix of Director Nominee Skills, Qualifications and Demographic Backgrounds
Our director nominees bring a balance of skills, qualifications and demographic backgrounds to their roles in providing oversight of our company, as shown by individual in the matrix below. This matrix, which has been revised and expanded from previous years to, among other things, specify key areas of industry and functional experience or expertise, reflects additional information we solicited from directors in our mandatoryyear-end 2023 questionnaire.
As part of its ongoing director retirement policy. Mr. Börjesson issuccession planning process, the Governance Committee regularly discussed and reported to our Board during 2023 on the skills, qualifications and demographic backgrounds desirable for our Board to best serve the needs of our company. As part of this process, the Governance Committee initiated a search for new directors with retail/consumer packaged goods (CPG) or finance expertise, which led to the appointment of Maria Fernanda Mejia to our Board in February 2024. The search for an independent director with finance expertise continues and memberis expected to conclude in the coming months.
8 | 2024 Proxy Statement | Avery Dennison Corporation |
DIRECTOR NOMINEE MATRIX
|
| Initial Criteria | ||||||||||||||||||||
Independent(1) | ✓ | ✓ |
| ✓ | ✓ | ✓ | ✓ |
| ✓ | ✓ | ||||||||||
Public Company Leadership Exp.(2) | ✓ |
| ✓ |
| ✓ |
| ✓ | ✓ |
| ✓ | ||||||||||
Public Company Board Exp.(3) |
| ✓ |
|
| ✓ | ✓ |
|
| ✓ | ✓ | ||||||||||
| Industry Experience(4) | ||||||||||||||||||||
Digital/Technology |
|
| ● |
| ● |
| ● | ● |
| ● | ||||||||||
Retail |
| ● | ● |
| ● | ● |
| ● | ● |
| ||||||||||
Consumer Goods |
| ● |
|
| ● | ● |
|
| ● | ● | ||||||||||
Packaging | ● | ● | ● | ● | ● | ● |
| ● | ● |
| ||||||||||
Materials Science | ● |
| ● | ● |
|
| ● | ● | ● |
| ||||||||||
Industrial Goods | ● |
| ● | ● |
|
| ● | ● | ● |
| ||||||||||
| Functional Experience(4) | ||||||||||||||||||||
Finance | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||
Marketing | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||
M&A | ● | ● | ● |
| ● | ● | ● | ● | ● | ● | ||||||||||
Environmental Sustainability | ● |
| ● | ● | ● | ● | ● | ● | ● |
| ||||||||||
Cybersecurity | ● |
| ● |
| ● |
| ● | ● | ● | ● | ||||||||||
Science/Engineering/R&D | ● | ● | ● | ● |
| ● | ● | ● | ● | ● | ||||||||||
| Demographic Background(5) | ||||||||||||||||||||
Tenure (years as of YE 2023) | 63⁄4 | 133⁄4 | <1 | 3⁄4 | 161⁄2 | – | 103⁄4 | 73⁄4 | 183⁄4 | 11⁄4 | ||||||||||
Gender |
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|
|
|
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| ||||||||||
Woman |
|
|
| ✓ |
| ✓ | ✓ |
|
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| ||||||||||
Man | ✓ | ✓ | ✓ |
| ✓ |
|
| ✓ | ✓ | ✓ | ||||||||||
Non-Binary |
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| ||||||||||
Age | 61 | 67 | 55 | 52 | 71 | 60 | 67 | 52 | 68 | 57 | ||||||||||
Mandatory Retirement Year | 2035 | 2029 | 2041 | 2044 | 2025 | 2036 | 2029 | 2044 | 2028 | 2039 | ||||||||||
Race/Ethnicity |
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|
|
|
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| ||||||||||
Black or African American |
|
|
|
|
|
|
|
|
|
| ||||||||||
Hispanic or Latino | ✓ |
|
|
|
| ✓ |
|
|
|
| ||||||||||
White | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||
Asian (including South Asian) |
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|
|
|
| ||||||||||
Native Hawaiian or Pacific Islander |
|
|
|
|
|
|
|
|
|
| ||||||||||
Native American or Alaska Native |
|
|
|
| ✓ |
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|
|
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| ||||||||||
LGBTQ+ | ||||||||||||||||||||
Veteran |
|
|
|
| ✓ |
|
|
|
|
| ||||||||||
Works/Worked Outside U.S. | ✓ | ✓ | ✓ | ✓ |
| ✓ |
| ✓ | ✓ |
| ||||||||||
| (1) | Determined by our Board as independent under NYSE listing standards. |
| (2) | Service as U.S. public company CEO, COO and/or CFO. |
| (3) | Prior or concurrent service on another U.S. public company board excluding companies at which individual served or serves as CEO, COO and/or CFO. |
| (4) | Key for industry and functional experience: |
| • | Technical expertise – Direct management experience or subject matter expertise during professional career. |
| • | Supervisory experience – Supervisory management experience during professional career. |
| • | Substantial knowledge – Knowledge from serving on board of another U.S. public company and/or gained from investment banking or private equity experience. |
| (5) | Classifications for gender, race/ethnicity, LGBTQ+, veteran and works/worked outside the U.S. based on directors’ responses to questionnaire. |
Avery Dennison Corporation | 2024 Proxy Statement | 9 |
Board Governance Highlights
Highlights of our governance program are shown below.
Stockholder Rights | ✓ Market-standard proxy access ✓ If Item 3 is approved at Annual Meeting, stockholders will have the right to request that we call special meetings of stockholders at 25% ownership threshold ✓ No supermajority voting requirements ✓ No poison pill ✓ No exclusive forum or fee-shifting bylaws | |
Board Governance | ✓ Annual election of directors ✓ Majority voting in director elections ✓ Single class of outstanding voting stock ✓ Director nominees 80% independent ✓ Robust Lead Independent Director role ✓ Regular director succession planning and paced Board refreshment, including four new directors appointed within last 18 months ✓ Continuous executive succession planning and leadership development ✓ Annual Board/Committee evaluations and individual director feedback process ✓ Mandatory director retirement policy at age 72 with no exemptions or waivers allowed or granted ✓ Best practice Governance Guidelines ✓ Strong Board and Committee governance ✓ Direct access to management and experts |
SUSTAINABILITY
We have been consistently focused on advancing our sustainability agenda by establishing our priorities, setting ambitious goals and making consistent progress toward their achievement. Our sustainability progress reflects the leadership of our management team and the engagement and oversight of our Board, as well as the commitment and passion of our team members worldwide.
Sustainability Governance
We believe that strong sustainability governance ensures consistency and accuracy of information we use to provide transparency to our stakeholders. Our governance structure is shown below.
| SUSTAINABILITY GOVERNANCE STRUCTURE |
10 | 2024 Proxy Statement | Avery Dennison Corporation |
Sustainability Data and Reporting
We continue to refine and expand the sustainability data we disclose, which has provided our stakeholders with regular insight into our progress. Our sustainability data is indexed to the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) frameworks to facilitate comparability of our results with those of other companies. We partnered with a third-party expert to assess our disclosures against the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) regarding the information that companies should disclose to allow their stakeholders to assess and price their climate-related risks and have developed a plan to align with TCFD requirements.We also report to Carbon Disclosure Project (CDP) Climate, Water and Forests and support the growing adoption of International Sustainability Standards Board (ISSB) standards. We plan to assess our reporting against ISSB standards, and other disclosures that incorporate those standards, as part of our ongoing sustainability reporting transparency efforts.
Our sustainability teams assess our reporting in accordance with external frameworks; engage with environmental, social and governance (ESG) rating agencies; manage our data collection and reporting processes; establish and monitor assurance guidance and controls; and approve reports, data and information. In addition, we engage an independent third party to validate our energy and greenhouse gas (GHG) emissions data. Having aligned with the Audit Committee to ensure Board oversight of sustainability governance, our reporting processes ensure data owner sign-off, Sustainability Disclosure Committee review and senior management approval prior to publication.
Our March 2024 ESG Download, being made available on our website at esg.averydennison.com on or before the filing of our definitive proxy statement, reflects our focus and progress on sustainability and governance matters. It includes ~140 metrics covering our policies, goals, strategies, risks, outcomes and certifications. Information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement.
Sustainability Progress
Sustainability is one of our core values and has long been integral to our way of doing business. To create value for all our stakeholders, we are advancing our sustainability strategic innovation platform focused, among other things, on material circularity and waste reduction/elimination; building a more diverse workforce and inclusive and equitable culture; maintaining operations that promote health and safety; and supporting our communities. Integrating sustainability into our business strategies has helped us engage employees at all levels to deliver sustained progress.
Avery Dennison Corporation | 2024 Proxy Statement | 11 |
In the first eight years of the 10-year horizon for our 2025 sustainability goals, we have made substantial progress, including exceeding our goal for cumulative GHG emissions reduction, as shown in the scorecard below. You can find additional information on our sustainability progress in our 2023 Integrated Report being furnished to the Securities and Exchange Commission (SEC) prior to the distribution of our proxy materials, as well as in our March 2024 ESG Download.
| 2023 SCORECARD OF PROGRESS TOWARD 2025 SUSTAINABILITY GOALS | ||||||
Goal(s) | Baseline Year | Highlights of Progress | ||||
Greenhouse Gas Emissions
| Achieve at least 3% absolute reduction year-over-year and at least 26% cumulative reduction by 2025 | 2015 | Reduced GHG emissions by additional ~7% in 12 months through Q3 2023, our most recently available data, compared to same period in prior year and by ~63% cumulatively through Q3 2023 compared to baseline year | |||
Paper
| Source 100% certified paper, of which at least 70% is Forest Stewardship Council®-certified | 2015 | Of total volume of paper procured in 2023, ~96% was certified, with ~79% of face stock Forest Stewardship Council®-certified | |||
Films
| 70% of films we buy conform to, or enable end products to conform to, our environmental and social guiding principles | N/A | ~97% of 2023 film volume conformed to Materials Group’s Restricted Substance List (RSL) | |||
Chemicals
| 70% of chemicals we buy conform to, or enable end products to conform to, our environmental and social guiding principles | N/A | ~96% of 2023 chemical volume conformed to Materials Group’s RSL | |||
Products and Solutions
| Derive 70% of revenues from sustainability-driven products (as defined by our Sustainable ADvantage criteria) | 2015 | ~67% of Materials Group (based only on Label and Graphic Materials) and ~64% of Solutions Group (based only on Apparel Solutions) sales in 2023 came from sustainability-driven products that are responsibly sourced, enable recyclability, contain recycled content or use less material | |||
Waste
| Be 95% landfill-free, with at least 75% of our waste reused, repurposed or recycled | 2015 | Diverted ~93% of solid waste from landfills and recycled ~64% of waste as of Q3 2023, our most recently available data | |||
People
| Continue to cultivate diverse (40%+ female at level of manager and above), engaged, safe (recordable incident rate (RIR) of <0.25), productive and healthy workforce Maintain world-class safety and employee engagement scores | 2015 | Increased female representation at level of manager and above by ~4% from baseline year, reaching ~36% at YE 2023 Continued world-class safety record, with RIR of 0.22 in 2023, substantially better than manufacturing industry average of 3.2 in 2022 (most recently available data) Employee engagement of ~80%* in 2023 | |||
Transparency
| Commit to goals publicly and be transparent in reporting progress | N/A | Continued enhancing sustainability transparency with more comprehensive reporting, including in our Integrated Reports, proxy statements and ESG Downloads | |||
| * | Data reflects change in engagement survey platform and methodology. |
12 | 2024 Proxy Statement | Avery Dennison Corporation |
After completing our biannual materiality assessment in 2020 to prioritize the most significant environmental and social sustainability challenges then facing our company and our stakeholders, we established an additional set of sustainability goals that we are aiming to achieve by 2030. Within these goals, we have specific targets. In 2022, we completed an enhanced materiality assessment, which included an updated mapping of our sustainability priorities throughout our value chain. This process included interviews with internal and external stakeholders such as members of management, customers and non-governmental organizations (NGOs), as well as industry analysis. The topics that ranked highest in the assessment also offer substantial value-creation opportunities for our company and customers. The most material topics identified in our 2022 materiality assessment – transition to a circular economy, advanced technologies and innovation, climate change, GHG emissions and reduction, supply chain, fair and inclusive marketplace, materials management and operational waste – are all reflected in our 2030 sustainability goals and targets. Our progress toward our 2030 goals through 2023 is shown below.
| 2023 SCORECARD OF PROGRESS TOWARD 2030 SUSTAINABILITY GOALS | ||||||
Goal | Targets | Baseline Year | Highlights of Progress | |||
Deliver innovations that advance the circular economy | Satisfy the recycling, composting or reuse requirements of all single-use consumer packaging and apparel with our products and solutions | |||||
Solutions Group: 100% of our core product categories (printed fabric labels, woven labels, paper, interior heat-transfer labels, packaging and RFID) will meet our Sustainable ADvantage standard | N/A | ~75% (based only on Apparel Solutions) | ||||
Materials Group: 100% of our standard label products will contain recycled or renewable content; all of our regions will have labels that enable circularity of plastics | N/A | ~61% (based only on Label and Graphic Materials) | ||||
Reduce the environmental impact in our operations and supply chain | Reduce our Scope 1 and 2 GHG emissions by 70% from our 2015 baseline. Work with our supply chain to reduce our 2018 baseline Scope 3 GHG emissions by 30%, with an ambition of net zero by 2050 | N/A | Scope 1 and 2: ~63%; as of Q3 2023, our most recently available data Scope 3: Prior-year calculations publicly available in our most recent CDP Climate response* | |||
Source 100% of paper fiber from certified sources focused on a deforestation-free future | 2015 | ~96% certified | ||||
Divert 95% of our waste away from landfills, with a minimum of 80% of our waste recycled and the remainder either reused, composted or sent to energy recovery | 2015 | ~89% landfill-free ~64% recycled | ||||
Deliver a 15% increase in water efficiency at our sites that are located in high- or extremely high-risk countries as identified in the World Resources Institute Aqueduct Tool | N/A | ~9% as of Q3 2023 | ||||
Make a positive social impact by enhancing the livelihood of our people and communities | Foster an engaged team and an inclusive workplace • Inclusion Index: 85% • Employee Engagement: 82% • Females in manager level or above positions: 40% • Safety: RIR of 0.20 | 2015 | ~76%** (N/A in 2015) ~80%** (from 80%) ~36% (from 32%) 0.22 (from 0.31) | |||
Support the participation of our employees in ADF grants and foster the well-being of the communities in which we and our supply chain operate • 85% of countries in which we operate receive ADF grants • 50% of all ADF grants incorporate volunteerism | N/A | Made ADF grants in ~72% of countries in which we operate 95% of grants incorporated employee volunteerism | ||||
| * | Our Scope 3 GHG emissions reporting is currently spend-based and fluctuates with market trends and inflation. |
| ** | Data reflects change in engagement survey platform and methodology. |
Avery Dennison Corporation | 2024 Proxy Statement | 13 |
PEOPLE AND CULTURE
Our employee experience depends on our culture, technology and work environment, whether in an office, remote or hybrid. To enhance this experience, we have advanced our professional-level onboarding and expanded digital access for our manufacturing and remote employees; enabled the continuous growth of our employee resource groups (ERGs), which are open to all employees; further enhanced flexible work arrangements; provided more targeted talent development programming; and matured our enterprise leader development program.
We have continued annually evaluating pay equity, making adjustments where appropriate. In 2023, we reviewed pay equity (considering total base and annual incentive compensation) with respect to gender for all non-manufacturing employees globally, as well as all manufacturing employees in the U.S. and certain other countries, and with respect to race/ethnicity for all U.S. employees. Our teams engaged with company leadership on our pay equity/transparency priorities and implemented several advancements, such as including employees from recently integrated acquisitions in our population data, expanding our analysis to include long-term incentives for director-level and above employees, and fine-tuning our analytic model in certain regions to reflect their unique circumstances. We also enhanced pay transparency to comply with evolving laws and regulations.
Diversity is one of our core values, reflecting our commitment to ensuring an inclusive and equitable environment for people of all backgrounds. It is our belief that we gain strength from diverse ideas and teams. Our DEI efforts are intended to foster an environment where our employees can grow and be increasingly productive and innovative, enhancing our reputation as a great place to work and allowing us to attract and retain talent for the benefit of our stakeholders. We hold ourselves accountable for our DEI progress in our 2030 sustainability goals. Over the past several years, we have significantly advanced our DEI journey, as shown below. Our 2023 EEO-1 statistics, which reflect the voluntary self-identification by our U.S. employees, can be found in our March 2024 ESG Download.
HIGHLIGHTS OF DEI JOURNEY | ||
2015 | • Established goal of 40%+ female at manager level and above • Employees established first ERG | |
2016-2020
| • Added Diversity as one of our company values • Established Regional DEI Councils • Launched and expanded gender pay equity review and began evaluating U.S. racial/ethnic pay equity, in each case making adjustments where appropriate • Began requiring gender-diverse hiring slates globally • Conducted unconscious bias training for managers globally • Added inclusion index to annual employee engagement survey • Expanded flexible work arrangements • Initiated Women.Empowered development program • Joined CEO Action for Diversity & Inclusion • Employees established several new ERGs, including for women and Black/African American, LGBTQ+ and Latinx employees | |
2021
| • Formalized DEI strategy with four global pillars and supporting regional focus areas • Established DEI infrastructure with global leader and dedicated regional resources • Further enhanced pay equity review with third-party analysis of U.S. racial/ethnic data • Began annually publishing EEO-1 statistics • Reached milestone of 20+ ERGs, which are open to all our employees • Implemented more equitable benefits for LGBTQ+ employees and their families | |
2022-2023
| • Made additional progress in female manager+ representation; on track to reach 40% by 2026 • Improved global female employee engagement and maintained rate of female departures in manager+ positions despite competitive talent market • Grew ERG membership globally by 30%+ • Launched AD Advocate, pairing executives to sponsor and mentor top diverse talent • Implemented new employee engagement survey, providing expanded set of questions more reflective of market best practices, enhanced comparability with peers, improved analytics and pulse survey capability • Completed foundational work focused on DEI strategic pillars of women leaders, fairness manufacturing, inclusion and underrepresented groups (from hiring to development and career growth) | |
In 2024, we plan to maintain our focus on fair and transparent talent practices and standards, equitable access to opportunities for career growth and development, and manufacturing team communication and camaraderie.
14 | 2024 Proxy Statement | Avery Dennison Corporation |
STOCKHOLDER ENGAGEMENT
In addition to our ongoing investor relations program through which our CEO, Chief Financial Officer (CFO), business leaders and Investor Relations team engage with our investors throughout the year, for over a decade, we have semiannually engaged with stockholders to solicit feedback on our strategies, executive compensation and sustainability progress, offering to include directors as participants in scheduled meetings. The objectives of this program are to maintain regular and thoughtful engagement to directly obtain investor feedback; continue to strengthen our relationships with key investors; and gather perspectives on our sustainability and governance profile to identify potential improvement opportunities. Our Board and management believe that ongoing stockholder engagement fosters a deeper understanding of evolving investor expectations and helps ensure we continue to reflect best practices.
2023 Engagement Results
| 2023 ENGAGEMENT RESULTS* | ||||||
| Outreach | Conversations | |||||
In 2023, we contacted our top 35 investors in proxy season and the off-season. Board members, in particular our Lead Independent Director (LID), and management were made available to answer questions and discuss matters of investor interest. We engaged with every stockholder who requested a meeting or accepted our invitation to meet, and our Lead Independent Director led the majority of our off-season engagements. | |  | |  | ||
| * | Based on percentage of shares outstanding. |
We discussed the results and feedback from our 2023 engagement regarding executive compensation and social sustainability with the Compensation Committee and regarding governance and environmental sustainability with our Board’s Governance Committee. We also shared highlights with our Board to supplement the reports from those Committee Chairs.
In February 2024, giving consideration to the feedback we received from investors during our 2023 engagements, our Board approved, subject to stockholder approval at the Annual Meeting, a Certificate of Amendment to our Amended and Restated Articles of Incorporation to provide that stockholders holding 25% of our outstanding common stock have the right to request that we call special meetings of stockholders.
2023 Engagement Feedback
We discussed our leadership transition in all off-season engagements, with investors interested to learn about our Board’s executive succession planning process, engagement with the CEO successor in and outside the boardroom, and strategic rationale for determining Mr. Stander to be the right individual to guide our company in the next phase of its journey. Stockholders also sought to understand the role, responsibilities and anticipated tenure of our Executive Chairman.
Governance Feedback
Our 2023 engagements provided feedback on the governance matters described below.
| • | Board composition, including the appropriateness of the balance of skills, qualifications, demographic backgrounds and tenure distribution on our Board given our evolving strategies |
| • | Board refreshment and diversity, including our director succession planning process to ensure a robust pipeline of potential new directors, the rationale for recent director appointments and our Governance Committee’s search for new directors with retail/CPG or finance expertise |
| • | Board leadership structure, including our rationale for maintaining a non-independent Chairman complemented by a proactive and engaged Lead Independent Director |
| • | Our stockholder rights profile, particularly the inability of our stockholders to request that we call special meetings of stockholders |
Avery Dennison Corporation | 2024 Proxy Statement | 15 |
Environmental Sustainability Feedback
Environmental sustainability was a significant area of focus for the stockholders with which we engaged. Investors uniformly commended our sustainability transparency in the disclosures contained in our Integrated Reports, proxy statements and ESG Downloads. During our conversations, we primarily discussed the matters described below.
| • | Our progress against our 2025 and 2030 sustainability goals, including our substantial achievement of the former set of goals and whether adjustments would be made to the original goals or would be reflected in our next set of sustainability goals |
| • | Our current focus areas, including goal attainment, actions to address increasing regulatory requirements, improved transparency and ESG ratings agency engagement, and approach to materiality |
| • | Our efforts to reduce Scope 3 GHG emissions, including our investment in internal infrastructure with dedicated procurement resources in each of our business segments; partnership with CDP Supply Chain to optimize engagement with our customers; and measurement methodology, including our potential transition from spend-based to materials-based measurement of these emissions |
| • | Our 2025 goal related to 70% sustainability-driven products, including our criteria for designation as sustainability-driven and our shift from our goals for 2025 focused on our products to our goals for 2030 focused on what our products enable for our customers and end users |
| • | Our efforts toward aligning with TCFD requirements, including our assessment with a third-party expert to understand our physical and transactional risks and our plans to incorporate TCFD into our enterprise risk management (ERM) and long-term strategic planning processes |
| • | Our net zero ambition, including internal strategy development, the impact of our progress reducing Scope 1 and Scope 2 GHG emissions, and our dependence on other parties to reduce Scope 3 GHG emissions |
Executive Compensation and Social Responsibility Committee.Sustainability Feedback
The primary focus areas during our 2023 engagements were our leadership transition, Board refreshment and governance profile; executive compensation and social sustainability were not significant topics of discussion. Stockholders did express interest in the impacts of our leadership transition on executive compensation, including the compensation of our new CEO and our Executive Chairman, as well as any additional incentives provided to senior leaders in connection with the transition. Investors continued to want to learn more about the ways in which we incent our leaders to progress toward achieving our sustainability goals.
Engagement Process
16 | 2024 Proxy Statement | Avery Dennison Corporation |
APPROVAL OF EXECUTIVE COMPENSATION HIGHLIGHTS(ITEM 2)
Our Board'sThe Compensation and Executive Personnel Committee designsoversees our executive compensation program, which is designed to motivate our executives to execute our business strategies and deliver long-term stockholder value. The program delivers pay for performance, with realized compensation dependent on our achievingachievement of challenging annual financial targets and long-term financial and business performancelonger-term value creation objectives that advance the interests of our stockholders.
We value our stockholders' opinions about our governance and compensation practices, and we actively solicit input through our stockholder engagement program. In advanceExecutive Compensation Program
The substantial majority of the 2014 Annual Meeting, we engaged in telephonic discussions with stockholders representing approximately 20% of our then-outstanding shares. We also met in person with four of our largest stockholders and the two leading proxy advisory firms in the fall of 2014.
Total target direct compensation to our executives is comprised of the following three components:
•Base salary;•Performance-based cash incentive under our Annual Incentive Plan (AIP award); and•Long-term performance-based incentives delivered in equity, consisting 50% of performance units (PUs) and 50% of market-leveraged stock units (MSUs).
We target our Named Executive Officers' (NEOs') total direct compensation at the market median, and for 2014, each of our NEOs'Officer (NEO) target total direct compensation fell at or around(TDC) is performance based, meaning that our executives ultimately may not realize the medianvalue of the market data utilized by the Compensation and Executive Personnel Committee. The majority of this compensation is at risk, meaning thatat-risk components if we fail to deliver onachieve the designated performance objectives. The Compensation Committee approves the target TDC of our NEOs to incent strong operational and financial objectivesperformance and create stockholder value our executives may ultimately not realize some or allcreation. The mix and elements of these performance-based components of compensation. In 2014, 85% and 71% of our Chief Executive Officer's (CEO's) and average of other current NEOs'NEO target direct compensation, respectively, was performance-based.TDC are shown below.
| ANNUALIZED TARGET TDC MIX | 2023 TARGET TDC MIX | |||||||||
 | CEO* |
|  | Avg. of Other NEOs** |
| |||||
| * | Mr. Stander’s annualized target TDC reflects his compensation package as CEO, excluding his special promotion award of stock options with a grant date fair value of approximately $3 million. |
| ** | Mr. Butier is excluded because his target 2023 TDC primarily reflected his compensation as CEO given the timing of our leadership transition. Francisco Melo’s target TDC mix included in the average reflects his target TDC as President, Solutions Group. |
| ELEMENTS OF NEO TARGET TDC | ||||||
 | LTI Compensation | |||||
| Performance Units (PUs) | Corporate NEOs | Solutions NEO | ||||
• 50% of LTI with payout = 0% to 200% of target award • 3-year performance period - Company EVA(1) (50%) - Company Relative TSR(2) (50%) | • 50% of LTI with payout = 0% to 200% of target award • 3-year performance period - Solutions Group EVA (75%) - Company Relative TSR (25%) | |||||
• Relative TSR payout capped at 100% if absolute TSR is negative | ||||||
Market-leveraged Stock Units (MSUs) | • 50% of LTI with payout = 0% to 200% of target award • 100% Absolute TSR(3) • 1-, 2-, 3- and 4-year performance periods | |||||
| Annual Incentive Compensation | ||||||
| AIP Award(4) |  |  | ||||
• Drives performance consistent with annual company or business financial goals • Individual performance modifier based on achievement against predetermined strategic and sustainability objectives (generally capped at 100% for NEOs) | ||||||
| Base Salary | • Annual fixed-cash compensation generally set around market median | |||||
| (1) | Economic Value Added (EVA) is a measure of financial performance calculated by deducting the economic cost associated with the use of capital (weighted average cost of capital multiplied by average invested capital) from after-tax operating profit. |
| (2) | Relative TSR compares our TSR to the TSR of companies in a peer group satisfying certain objective criteria described in the Compensation Discussion and Analysis section of this proxy statement. |
| (3) | Absolute TSR measures the return that we provided our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends). |
| (4) | AIP award for Mr. Melo reflects performance objectives and weightings for the nine months of the year he served as President, Solutions Group. He had different performance objectives and weightings for the three months of the year he served as SVP/GM, Avery Dennison Smartrac. His 2023 AIP award would have been prorated to reflect the respective performance objectives and weightings had not the payout been zero. |
Avery Dennison Corporation| | 17 |
Table of ContentsPay for Performance
Over the past five years, there has been strong alignment between our CEO's pay and our TSR, as shown inIn the graph below. The substantial year-over-year increasebelow, CEO compensation for 2019 through 2022 reflects Mr. Butier’s compensation as reported in our CEO'sSummary Compensation Tables for those years and, for 2023, Mr. Stander’s compensation as reported in 2014our 2023 Summary Compensation Table. Our CEO pay has generally reflected our cumulative TSR except that Mr. Stander’s pay in 2023 was substantially lower than prior-year amounts for Mr. Butier because it primarily due toreflected his compensation as COO, which was significantly lower than Mr. Butier’s as CEO, as well as his special award of stock options with a $4.6 million increase in thegrant date fair value of approximately $3 million granted in connection with his accumulated pension benefit, which was driven by the one-time impact of using the recently released mortality assumptions and the impact of calculating benefits using the current discount rate. Notably, the value of his AIP award decreased by approximately 53% comparedpromotion to 2013, with the other components of his compensation substantially similar to the prior year.CEO. See theSummary Compensation Table inDiscussion and Analysis section of this proxy statement for more information.
History of Strong CEO Pay and TSR Alignment
Executive Compensation Best Practices
As summarized on the following pagebelow and described in further detail in theCompensation Discussion and Analysissection of this proxy statement, our executive compensation program is alignedaligns with our financial goals and business strategies and reflects best practices.
Pay for Performance | ✓ 87% of CEO’s annualized target TDC tied to company performance ✓ Rigorous stock ownership policy requires CEO and Executive Chairman each to own 6x respective base salary, 50%+ of which must be vested shares; does not count unvested PUs or stock options and only counts 50% of unvested MSUs at target | |
Compensation Best Practices | ✓ Double-trigger equity vesting requires termination of employment after change of control ✓ YE 2023 three-year average burn rate of 0.50%, in line with 50th percentile of S&P 500 companies ✓ Compensation clawback policy for executive officers in event of accounting restatement; additional clawback policy applies to all AIP and LTI recipients ✓ Independent compensation consultant serves at direction of Compensation Committee ✓ Annual Compensation Committee evaluation and charter review ✓ Periodic strategic review of compensation program and assessment of compensation program features that mitigate excessive risk-taking ✓ Releases from liability and restrictive covenants for departing executives ✓ Compensation Committee review of NEO tally sheets reflecting all compensation components | |
✓ No NEO employment contracts unless required by laws of home country ✓ No guaranteed AIP awards; 2023 NEO AIP awards based solely on financial performance ✓ No excise tax gross-ups on change of control severance benefits ✓ No tax gross-ups on perquisites ✓ No above-market interest rates for deferred compensation ✓ No re-pricing of stock options without stockholder approval ✓ No payout of MSU dividend equivalents unless and until awards vest ✓ No stock options awarded below fair market value ✓ No supplemental retirement benefits |
18 | 2024 Proxy Statement | Avery Dennison Corporation |
What We Do
APPROVAL OF CERTIFICATE OF AMENDMENT TO
✓Pay for performance — 85%AMENDED AND RESTATED CERTIFICATE OF INCORPORATION (ITEM 3)
In February 2024, after giving consideration to the feedback we received from investors during our 2023 engagements and its review of market practices, upon the recommendation of the Governance Committee, our Board approved, subject to stockholder approval at the Annual Meeting, a Certificate of Amendment to our Amended and Restated Certificate of Incorporation (our “Charter”) to provide that stockholders holding 25% of our
CEO's target total direct compensation is tiedoutstanding common stock have the right tocompany performance✓Emphasize long-term performance — 66%request that we call special meetings of stockholders. The amendment also removes out-of-date references to the declassification of ourCEO's target total direct compensation is equity-based and tied to creating stockholder value✓Use double-trigger change of control vesting provisions — Vesting of equity following a change of control requires termination of employment within 24 months✓Manage share usage conservatively — We reduced our burn rateBoard that had been fully implemented byover 75% since the end of fiscal year 2012✓Maintain rigorous stock ownership guidelines — 5x base salaryApril 2014, providing that directors shall be elected annually forour CEO and 3-4x base salary for our other NEOs✓Review tally sheets — Compensation and Executive Personnel Committee performs a detailed review of executive compensation components, including potential severance and change of control payments✓Maintain clawback policy✓Use an independent compensation consultant retained directly by the Compensation and Executive Personnel Committee, in its sole discretion✓Regularly assess potential risks relating to our compensation policies and practices
What We Don't Do
✗Have employment agreementsone-year terms, consistent with ourNEOs✗Gross up change of control severance benefits for excise taxes✗Provide above-market interest rates in our only deferred compensation plan currently open for deferrals✗Provide gross-ups to cover tax liabilities associated with executive perquisites✗Permit directors or officers to hedge or pledge company stock✗Grant stock options with an exercise price less than the fair market value on the date of grant✗Re-price or exchange stock options without stockholder approval
