June 21, 2023
Dear Fellow Stockholder:
It is my pleasure to invite you to attend the Annual Meeting of Stockholders of Albertsons Companies, Inc. at 2:30 p.m.
Mountain Daylight Time on Thursday, August 3, 2023.
During fiscal 2022, we undertook a review of strategic alternatives aimed at enhancing our growth and maximizing
stockholder value. This review led to our definitive merger agreement with The Kroger Co. in October 2022. Bringing together Kroger and Albertsons Cos. will allow our neighborhood grocery stores to serve more than 85 million households with
fresher food, faster. By combining two purpose-driven companies, we will be able to secure jobs, including union jobs, provide new career opportunities for our associates and build on our shared commitment to supporting local communities.
While the transaction is being reviewed by regulators, we remain focused on our performance as a stand-alone public company and continue to execute our Customers for Life strategy. We are also focused on our purpose, to bring people together
around the joys of food and to inspire well-being.
We are proud of the way our team continued to take care of our customers and serve our communities in fiscal 2022, while
driving strong operating and financial performance. Our results for fiscal 2022 exceeded our expectations and speak to the progress we have made, with identical sales increasing by 6.9% and digital sales increasing by 28%. Total sales were
$77.6 billion, net income reached $1.5 billion, or $2.27 per share, Adjusted net income was $2.0 billion, or $3.37 per share, and Adjusted EBITDA was $4.7 billion. We also returned $4.2 billion to our stockholders this fiscal year, including
a special cash dividend of $6.85 per share, which was paid in January 2023.
Throughout the year, we consistently executed against our four strategic priorities:
Deepening our Digital Connection and Engagement with our Customers – We increased loyalty membership to more than
34 million customers, acquired new e-commerce customers, added to Fresh Pass enrollment, and increased Drive Up and Go service to 2,150 stores. We also focused on achieving home deliveries within two hours or less, which is now available to
80% of our households.
Differentiating our Store Experience – We enhanced merchandising with displays that allow for easy meal ingredient
assembly and the addition of grab-and-go sections. We implemented AI technology for missed scans at self-checkout to make it faster and easier for our customers to complete an error free check out. We also improved in-store production
systems, helping to improve the scheduling of shifts to drive a better associate experience and higher customer satisfaction, while ensuring freshness and improved in-stock conditions.
Enhancing What We Offer – We expanded our Own Brand product portfolio with 375 new items and elevated our
distinctiveness in Fresh, tailoring our selection based on demographics. We also extended our Ready Meals program to over 1,100 stores, and enhanced capabilities in pricing and assortment.
Modernizing our Capabilities – We improved our supply chain through automation and began the rollout of a new
enterprise warehouse management system. We have also built the Albertsons Media Collective, an easy-to-use, transparent and modern media collective platform that has transformed us into a leader in client advocacy, innovation, and measurement
capability. We also modernized the network connectivity in our stores and deployed technology in produce departments to enhance freshness and reduce waste. In addition, we completed migration to the public cloud and enhanced the use of
advanced data and analytic capabilities throughout the business.
We are embedding ESG in everything we do and continue to make progress toward our goals. These commitments include
achieving our carbon emission reduction goals (approved by the Science Based Targets initiative) by 2030, achieving net zero emissions in our own operations by 2040, and zero food waste going into landfill by 2030, as well as increasing
diverse representation in management and enabling the donation of 1 billion meals by 2030.
Finally, I want to recognize the approximately 290,000 associates who have made our success possible through their
commitment to meeting the needs of our customers and communities.
On behalf of our board of directors, thank you for your continued support and investment in Albertsons Companies.
Sincerely,
Vivek Sankaran
Chief Executive Officer and Director
Notice of Annual Meeting
of Stockholders |
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June 21, 2023
Dear Stockholders:
Notice is hereby given that the 2023 annual meeting (“Annual Meeting”) of the Company will be held virtually on
August 3, 2023, at 2:30 p.m. Mountain Daylight Time, for the following purposes:
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| Proposals |
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Board Vote
Recommendation |
| 1. |
Elect 10 directors to serve on our Board for a term of one year |
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“FOR” each director
nominee |
| 2. |
Ratify the appointment of Deloitte and Touche LLP as the Company’s independent
registered public accounting firm for the fiscal year ending February 24, 2024 |
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“FOR” |
| 3. |
Hold the annual, non-binding, advisory vote on our executive compensation
program |
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“FOR” |
| 4. |
To transact such other business as may properly come before the Annual Meeting
or any adjournment thereof |
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Only stockholders of record of our Class A common stock, par value $0.01 per share (“Common Stock”) as of the close of business on June 7, 2023 (the “Record Date”) will
be entitled to notice of, and to vote at, the Annual Meeting. We are making available to our stockholders the proxy statement, the form of proxy and the notice of internet availability of our proxy materials on or about June 21, 2023.
We have designed the format of our Annual Meeting to facilitate stockholder attendance and participation from any location at minimal or no cost. Stockholders are
afforded the same rights and opportunities as they would at an in-person meeting, including the right to vote and ask questions through a virtual meeting platform.
See “Questions and Answers About the Annual Meeting and Voting” for information regarding how to attend the Annual Meeting and other details.
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| IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON AUGUST 3, 2023. THE PROXY STATEMENT AND THE 2022 FORM 10-K ARE AVAILABLE AT http://materials. proxyvote.com/ |
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YOUR VOTE IS IMPORTANT TO US.
Whether or not you plan to virtually attend the Annual Meeting, it is important that your shares be represented. Therefore, we urge you to promptly vote and submit your proxy in advance of the Annual Meeting. You can vote your shares
via the Internet, by telephone, or by signing, dating, and returning the proxy card or voting instruction form. |
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By order of the board of directors,
Vivek Sankaran
Chief Executive Officer
This summary highlights information contained elsewhere in this proxy statement and in our annual report on Form 10-K for
the year ended February 25, 2023 (the “2022 Form 10-K”) as filed with the Securities and Exchange Commission (the “SEC”) on April 25, 2023, for Albertsons Companies, Inc. (the “Company”, “Albertsons”, “we”, “ACI”, “our” or “us”). You should
read this proxy statement and the 2022 Form 10-K before voting.
Annual Meeting of Stockholders
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DATE AND TIME
August 3, 2023
2:30 p.m., Mountain Daylight Time |
PLACE:
www.virtualshareholdermeeting.com/ACI2023 |
RECORD DATE:
June 7, 2023 |
We are holding the Annual Meeting in a virtual-only format. You will not be able to attend the Annual Meeting at a
physical location.
How to Vote
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BY INTERNET |
● Go to the website http://www.proxyvote.com and follow the instructions, 24 hours a day, seven days a week.
● You will need the 16-digit number included on your proxy card.
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BY TELEPHONE |
● From a touch-tone telephone, dial 1-800-690-6903 and follow the recorded instructions, 24 hours a day, seven days a week.
● You will need the 16-digit number included on your proxy card.
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BY MAIL |
● Mark your selections on the proxy card.
● Date and sign your name exactly as it appears on your proxy card.
● Mail the proxy card in the enclosed postage-paid envelope provided to you.
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See “Questions and Answers About the Annual Meeting and Voting” for information regarding attending the Annual Meeting.
Annual Meeting Agenda and Voting Roadmap
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PROPOSAL 1:
Election of Directors
At our Annual Meeting, stockholders will elect 10 directors. Nominees were approved and
recommended for nomination by our Governance, Compliance and ESG Committee (the “Governance Committee”) and our board of directors (the “Board”) nominated them for re-election. The directors shall hold office until our 2024 annual
meeting and serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal.
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Our Board recommends a vote “FOR” the
election of each of the nominated directors. |
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PROPOSAL 2:
Ratification of the Appointment of the Independent Registered Public Accounting Firm
The Audit and Risk Committee (the “Audit Committee”) has appointed Deloitte and Touche LLP
(“Deloitte and Touche”) to serve as our independent registered public accounting firm for the fiscal year ending February 24, 2024.
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Our Board recommends a vote “FOR” this
proposal. |
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PROPOSAL 3:
Advisory (Non-Binding) Vote to Approve the Company’s Named Executive Officer Compensation
As required by Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), we
are providing stockholders with an opportunity to cast an advisory vote on the compensation of our named executive officers (the “NEOs”) as disclosed in the Compensation Discussion & Analysis (“CD&A”), the compensation
tables, narrative discussion, and related footnotes included in this proxy statement.
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Our Board recommends a vote “FOR” this proposal. |
In addition, we will conduct any other business that may properly come before the Annual Meeting. See “Questions and
Answers About the Annual Meeting and Voting” for more information.
Our Director Nominees
See Proposal 1 beginning on page 15 for more information on our Board and corporate governance. The following table provides summary information about each director nominee. Each director is elected annually by a majority of votes cast.
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Name
and Principal Occupation |
Age |
Director
Since |
Committee
Membership |
Relevant Skills & Experiences |
| CC |
AC |
GC |
TC |
FC |
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Vivek Sankaran
CEO of ACI |
60 |
2019 |
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Public Company Leadership;
Financial Literacy; Risk; Food & Retail; Operations; Strategy |
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James Donald*
Former CEO and President of ACI |
69 |
2019 |
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Public Company Leadership; Financial
Literacy; Risk; Food & Retail; Operations; Strategy; Real Estate |
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Chan Galbato*
CEO of Cerberus Operations and Advisory Company, LLC |
60 |
2021 |
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Public Company Leadership; Financial
Literacy; Risk; Operations; Strategy |
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Sharon Allen+
Former U.S. Chairman of Deloitte LLP |
71 |
2015 |
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Public Company Leadership; Corporate
Governance; Financial Expert; Risk; Strategy |
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Kim Fennebresque+
Former Senior Advisor to Cowen Group Inc. |
73 |
2015 |
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Public Company Leadership; Financial
Expert; Risk; Operations; Strategy |
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Allen Gibson+
Chief Investment Officer of Centaurus Capital LP |
57 |
2018 |
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Financial Literacy; Risk; Corporate
Governance; Strategy; Cyber and Technology |
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Alan Schumacher+
Former Member of the Federal Accounting Standards Advisory Board |
76 |
2015 |
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Public Company Leadership; Financial
Expert; Corporate Governance; Strategy; Risk |
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Brian Kevin Turner+
Chairman of Zayo Group and former COO of Microsoft Corporation |
58 |
2020 |
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Public Company Leadership; Financial Literacy; Risk; Food & Retail; Operations;
Strategy; Cyber and Technology
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Mary Elizabeth West+
Senior Advisor with McKinsey & Company |
60 |
2020 |
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Public Company Leadership; Financial Literacy; Risk; Food & Retail; Corporate
Governance; Operations; Strategy
|
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Scott Wille
Senior Managing Director and Head of Consumer and Retail Private Equity at Cerberus Capital Management, L.P. |
42 |
2020 |
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Financial Literacy; Risk; Food & Retail; Corporate Governance; Operations; Strategy
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| AC - Audit Committee |
FC - Finance Committee |
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Chair |
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| CC - Compensation Committee |
GC - Governance Committee |
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Member |
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| * Co-Chair of the Board |
TC - Technology Committee |
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| + Independent Director |
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Board Snapshot
Our Board believes that having a diverse mix of directors with complementary qualifications, expertise, and attributes
is essential to meeting its oversight responsibility. Our directors collectively possess the knowledge, skills and unique perspectives needed to successfully guide our Company toward continued sustainable growth. They have distinguished
professional careers and exhibit strong ethical values of honesty, character and good judgment. The following summarizes certain aspects of the Board’s current composition:
Our Board believes that having a diverse mix of directors with complementary qualifications, expertise, and attributes
is essential to meeting its oversight responsibility. Below are some of the relevant skills and experiences of our directors.
Relevant Skills & Experiences
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Financial Literacy/Expertise
10 directors
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Risk Management
10 directors
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Public Company Leadership/
Other Public Company Board Service
8 directors
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Food and Retail Industry
5 directors
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Strategic Planning
10 directors
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Real Estate
1 director
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Operations and Marketing
7 directors
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Information Technology
and Cybersecurity
2 directors
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Corporate Governance
5 directors
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Board Governance Highlights
Our adoption of leading governance practices fosters our sustained business success over the long term. Our core
corporate governance practices are listed in the following table.
| Majority of Board independent |
In full compliance with the corporate
governance transition rules of the New York Stock Exchange (“NYSE”) |
Separate CEO and Chair roles |
Co-Chair roles promote better Board oversight
and governance |
| Our largest stockholder has representation on our Board |
Board committees with focus on risk management, ESG and
cybersecurity |
Annual Board and committee evaluations using a third-party
facilitator |
Regularly scheduled executive sessions during Board and
committee meetings |
| Directors subject to stock ownership guidelines to align
with long-term stockholder interests |
No term limits or mandatory retirement age allowing
directors to develop insight into the Company and its operations |
Limitation on other board service |
Directors regularly attend all Board and committee
meetings |
| Annual election of all directors (unclassified Board) |
Our bylaws require a “majority voting” standard in uncontested director elections |
Our only class of voting shares is our Common Stock |
Commitment to management development and succession planning for Board and executive
leadership |
Fiscal 2022 Business Overview
|
We are a leading food and drug retailer in the United States, with both a strong local presence
and national scale. We are committed to making a meaningful difference, neighborhood by neighborhood, by bringing people together around the joys of food and inspiring well-being. In 2022, along with the Albertsons Companies
Foundation, we contributed more than $200 million in food and financial support, including more than $40 million through our Nourishing Neighbors Program to ensure those living in our communities and those impacted by disasters have
enough to eat. These efforts have helped millions of people in the areas of hunger relief, education, cancer research and treatment, social justice and programs for people with disabilities and veterans’ outreach.
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We have achieved significantly higher total returns as compared to the (i) S&P 500 Index, (ii) the S&P 500
Retailing Index and (iii) the newly selected S&P 500 Retail Composite Index for the period from June 26, 2020 (the date our Common Stock commenced trading on the NYSE) through February 25, 2023.
Comparison of Cumulative Total Return (Since Listing)
Merger Agreement
On October 13, 2022 the Company, The Kroger Co. (“Kroger” or “Parent”) and Kettle Merger Sub, Inc., a wholly owned
subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Merger Sub will be merged with and into the Company (the “Merger”). Pursuant to the Merger Agreement, (i) each
share of Common Stock issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”), shall be converted automatically at the Effective Time into the right to receive from Parent $34.10 per share in
cash, without interest, subject to certain reductions set forth in the Merger Agreement, and (ii) each share of Series A preferred stock of the Company issued and outstanding immediately prior to the Effective Time shall be converted
automatically at the Effective Time into the right to receive from Parent $34.10 per share in cash on an as-converted basis, without interest, subject to certain reductions set forth in the Merger Agreement. The Company has no outstanding
preferred stock as of the Record Date.
The Company has filed with the SEC a definitive information statement on Schedule 14C with respect to the approval of
the Merger. You may obtain copies of all documents filed by the Company with the SEC regarding this transaction, free of charge, at the SEC’s website, www.sec.gov or from the Company’s website at
https://www.albertsonscompanies.com/investors/overview/.
Executive Compensation Advisory Vote
Our Board recommends that stockholders vote to approve, on an advisory basis, the compensation paid to the Company’s
NEOs as described in this proxy statement (“say-on-pay vote”), for the reasons below.
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Pay for Performance |
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We have executed on our pay for performance philosophy |
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● Added Senior Leader Scorecard as a performance metric for our annual cash bonus program
● Revised Mr. Sankaran’s compensation design and granted annual equity awards given the approaching full vest of his 2019 equity award; increased Mr. Sankaran’s target cash bonus opportunity
from 150% to 175% to continue to align his interests with the long-term interests of stockholders
● Set a high percentage of the annual target compensation opportunity as variable – 90% for Mr. Sankaran and 84% for our other NEOs
● Set 60% of the annual target compensation opportunity for Mr. Sankaran as performance-based and an average of 57% for our other NEOs
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● Set 60% the annual target compensation opportunity as equity-based for Mr. Sankaran and an average of 54% for the other NEOs
● Included an earnings per share (“EPS”) modifier in the metric for our performance-based restricted stock units (“PBRSUs”) to align executives’ and stockholders’ long-term interests
● Determined annual cash bonus payout based on pre-established financial and operational targets
● Continued to cap annual cash bonus at 200% of target opportunity
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Sound Program Design |
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| We design our executive compensation
program to attract, motivate, and retain high caliber talent who drive our success and industry leadership while considering individual and Company performance measured over both short-term and longer-term periods. Our Compensation
Committee has adopted “best practices” for executive compensation which enables us to drive our pay-for-performance philosophy. Some of the highlights of our program design are as follows: |
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| What We Do |
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What We Don’t Do |
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Mix short- and
long-term performance measures
Provide competitive,
market-driven base salary
Balance mix of pay
components
Utilize quantitative
targets based on Company financial and operating performance and strategic goals for a significant portion of total compensation
Cap the amount of our annual bonus at 2x of target
Use a variety of equity incentive structures to promote performance and retention
Maintain robust stock ownership guidelines
Include a recoupment
or “clawback” policy in our compensation program
Provide
double-trigger arrangements in employment agreements for change in control
Restrict short sales
and other speculative trading on our Common Stock
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Provide automatic
salary increases
Provide high levels of fixed compensation
Use metrics unrelated to our operational goals
Reward imprudent risk-taking
Guarantee bonuses
Provide executive-only retirement programs
Pay above market returns on any deferred compensation plan
Maintain defined benefit pension plans for our executive officers
Pay excessive
perquisites
Provide tax gross
ups
|
See Proposal 3 beginning on page 43 for more information on our executive compensation.
Solicitation of Proxies
Our Board is soliciting proxies in connection with the Annual Meeting (and any adjournment thereof) to be held
virtually on August 3, 2023, at 2:30 p.m. Mountain Daylight Time. The approximate date on which this proxy statement and the enclosed proxy are first being sent to stockholders is June 21, 2023.
Shares Outstanding and Voting Rights
As of the Record Date, 575,630,760 shares of Common Stock of the Company were outstanding. There are no outstanding shares
of preferred stock. Holders of Common Stock are entitled to one vote for each share so held. Only holders of Common Stock as of the Record Date are entitled to receive notice of, and to vote at, the Annual Meeting.
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PROPOSAL 1: |
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Election of Directors |
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Our Board recommends that stockholders vote “FOR” each nominee |
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Board Composition
Our Board is currently comprised of 10 members. All Board members are elected to serve a one-year term.
As a result of the sale or transfer of Common Stock by former significant stockholders of the Company, effective February
24, 2023, we are no longer a controlled company under applicable NYSE listing rules. The majority of the members on our Board are independent and we have a fully independent Audit Committee and a fully independent Compensation Committee.
A majority of the members on our Governance Committee are currently independent. Under the corporate governance transition
rules of the NYSE, we have until February 23, 2024, to have a fully independent Governance Committee.
We are bound by certain contractual provisions under the stockholders’ agreement, dated June 25, 2020 (the “Stockholders’
Agreement”) regarding Board membership. Pursuant to the Stockholders’ Agreement, Cerberus Capital Management, L.P. (“Cerberus”), which is our largest stockholder, has the right to designate four directors to the Board. As of February 24,
2023, other than Cerberus, no other signatory to the Stockholders’ Agreement has any right to nominate a director or observer to the Board.
The nomination rights of Cerberus, based on their Common Stock ownership, are as follows:
| Common Share Beneficial Ownership Percentage
(Outstanding Shares) |
Number of Director or Observer Designation
Rights |
| at least 20% |
4 directors |
| at least 10% |
2 directors |
| at least 5% |
1 director and 1 observer |
Annual Meeting Slate
At our Annual Meeting, stockholders will elect 10 directors to hold office for one year, until our 2024 annual meeting of
stockholders, and serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal. As noted above, we are no longer a controlled company. Our largest stockholder owns less than 50%
of our Common Stock and there is no ACI Control Group as such term is defined in our Amended and Restated Certificate of Incorporation. Therefore, any vacancies on the Board shall be filled by the majority of the directors currently serving
on the Board. A director elected to fill a vacancy or a newly created directorship shall hold office until the next annual meeting of stockholders and until his or her successor shall be elected and qualify.
Our director nominees were approved by our Governance Committee, and our Board nominated them for re-election based on the
recommendation of the Governance Committee. At this time, we have no reason to believe that any nominee will be unable or unwilling to serve if elected. However, should any of them become unavailable or unwilling to serve before the Annual
Meeting, your proxy card authorizes us to vote for a replacement nominee if the Board names one. The following biographical information is furnished as to each nominee for election as a director as of June 7, 2023.
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Sharon Allen
Former U.S. Chairman of Deloitte LLP
Age: 71
Director Since: 2015
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| Committees: |
Governance Committee (Chair); Audit Committee
Independent Director
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PROFESSIONAL HIGHLIGHTS
● Ms. Allen served in various leadership roles at Deloitte LLP (“Deloitte”) for nearly 40 years including serving as U.S. Chairman of Deloitte from 2003 until her
retirement from that position in May 2011.
● She served as a member of the Global Board of Directors, Chair of the Global Risk Committee and U.S. Representative of the Global Governance Committee of Deloitte
Touche Tohmatsu Limited from 2003 to May 2011.
● Among her other leadership roles at Deloitte, Ms. Allen was partner and regional managing partner responsible for audit and consulting services for a number of Fortune
500 and large privately held companies.
● Ms. Allen is a Certified Public Accountant (Retired).
OTHER BOARD ENGAGEMENT
● Ms. Allen has served on the board of Bank of America Corporation, a multinational investment bank and financial services holding company, since 2012.
● Ms. Allen served on the board of First Solar, Inc., a manufacturer of solar panels and a provider of utility-scale PV power plants and supporting services, from 2013
to 2022.
SKILLS AND QUALIFICATIONS
Ms. Allen’s extensive accounting and audit experience
broadens the scope of our Board’s oversight of our financial performance and reporting. Additionally, her leadership and corporate governance experience with large public companies is valuable to our Board’s governance, strategic
planning, and risk management insight.
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James Donald
Former CEO and President of ACI
Age: 69
Director Since: 2019
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| Committees: |
Finance Committee (Co-Chair)
Co-Chairman of the Board
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PROFESSIONAL HIGHLIGHTS
● Mr. Donald served as our President and CEO from September 2018 to April 2019 and, prior to that, served as our President and Chief Operating Officer from March 2018 to
September 2018.
● Before joining the Company, Mr. Donald served as CEO and Director of Extended Stay America, Inc., a large North American owner and operator of hotels, and its
subsidiary, ESH Hospitality, Inc. (together with Extended Stay America, Inc., “ESH”).
● Prior to joining ESH, Mr. Donald served as President, CEO and Director of Starbucks Corporation, a multinational chain of coffeehouses and roastery reserves, President
and CEO of regional food and drug retailer, Haggen Food & Pharmacy, Chairman, President and CEO of regional food and drug retailer Pathmark Stores, Inc., and in a variety of other senior and executive roles at Wal-Mart Stores,
Inc., Safeway Inc. and Albertson’s, Inc.
● Mr. Donald began his grocery and retail career in 1971 with Publix Super Markets, Inc.
OTHER BOARD ENGAGEMENT
● Mr. Donald has served on the board of Nordstrom, Inc. (“Nordstrom”), a leading fashion retailer, since April 2020.
SKILLS AND QUALIFICATIONS
Mr. Donald’s depth of experience in the retail industry, his
expertise across real estate and operations, his decades of leadership roles at consumer-focused companies and his intimate familiarity with the Company makes him a valuable member of our Board.
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Kim Fennebresque
Former Senior Advisor to Cowen Group Inc.
Age: 73
Director Since: 2015
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| Committees: |
Compensation Committee (Chair); Audit Committee
Independent Director
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PROFESSIONAL HIGHLIGHTS
● Mr. Fennebresque served as a senior advisor to Cowen Group Inc., a diversified financial services firm, from 2008 to 2020, where he also served as its Chairman,
President, and CEO from 1999 to 2008.
● He has also served as head of the corporate finance and mergers and acquisitions departments at UBS, a global firm providing financial services, and general partner
and co-head of investment banking at Lazard Frères & Co., a leading financial advisory and asset management firm.
● From 2010 to 2012, Mr. Fennebresque served as chairman of Dahlman Rose & Co., LLC, an investment bank.
● Mr. Fennebresque has also held various positions at First Boston Corporation, an investment bank acquired by Credit Suisse.
OTHER BOARD ENGAGEMENT
● Mr. Fennebresque has served on the boards of Ally Financial Inc., a financial services company, since May 2009 and BlueLinx Holdings Inc., a distributor of building
products, since May 2013, including as its chairperson since 2016.
● Mr. Fennebresque served on the boards of Ribbon Communications Inc., a provider of network communications solutions, from October 2017 to February 2020, Delta Tucker
Holdings, Inc. (the parent of DynCorp International), a provider of defense and technical services and government outsourced solutions, from May 2015 to July 2017 and Rotor Acquisition Corp., a special purpose acquisition company,
from November 2020 to June 2021.
SKILLS AND QUALIFICATIONS
Mr. Fennebresque’s extensive experience as
a director of several public companies and history of leadership in the financial services industry brings corporate governance expertise and a diverse viewpoint to the deliberations of our Board. In addition, Mr. Fennebresque’s deep
experience in the financial services industry provides our Board valuable insight into the Company’s risk management, financial performance, and strategic plan.
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Chan Galbato
CEO of Cerberus Operations and Advisory Company, LLC
Age: 60
Director Since: 2021
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| Committees: |
Finance Committee (Co-Chair)
Co-Chairman of the Board
Cerberus Nominee#
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PROFESSIONAL HIGHLIGHTS
● Mr. Galbato is the CEO of Cerberus Operations, the operations platform of Cerberus. He oversees the platform’s operating executives and functional experts to integrate
operating expertise within Cerberus’ portfolio companies and investment strategies.
● Prior to joining Cerberus in 2009, Mr. Galbato served as President and CEO of the Controls Division of Invensys plc, a multinational engineering and information
technology company headquartered in London, United Kingdom, and President of Professional Distribution and Services at The Home Depot, the largest home improvement retailer in the United States.
● Mr. Galbato also served as President and CEO of Armstrong Floor Products and prior to that, was the CEO of Choice Parts.
● He spent 14 years with General Electric, serving in several operating and finance leadership positions within their various industrial divisions as well as holding the
role of President and CEO of Coregis, a GE Capital company.
OTHER BOARD ENGAGEMENT
● Mr. Galbato served on the board of Blue Bird Corporation (“Blue Bird”), the leading independent designer and manufacturer of school buses from February 2015 to April
2023.
● Mr. Galbato served on the boards of KORE Group Holdings, Inc., a pioneer in delivering IoT solutions and services, from September 2021 to February 2022 and AutoWeb,
Inc., an automotive media and marketing services company, from January 2019 to May 2022.
SKILLS AND QUALIFICATIONS
Mr. Galbato’s proven track record as an
executive and leader in multiple operational and strategic roles at a variety of public and private companies qualifies him to serve as the Co-Chair of the Board. In particular, Mr. Galbato provides our Board with valuable insights
into the Company’s operational and organizational strategy and effectiveness.
|
| |
|
|
|
Allen Gibson
Chief Investment Officer of Centaurus Capital LP
Age: 57
Director Since: 2018
|
| Committees: |
Governance Committee; Technology Committee (Co-Chair);
Finance Committee
Independent Director
Cerberus Nominee
|
|
PROFESSIONAL HIGHLIGHTS
● Since April 2011, Mr. Gibson has served as the Chief Investment Officer of Centaurus Capital LP (“Centaurus”), a private investment partnership with interests in oil
and gas, private equity, structured finance, and the debt capital markets.
● He has also served as the Investment Manager for the Laura and John Arnold Foundation since 2011.
● Prior to Centaurus, Mr. Gibson served as Senior Vice President in institutional asset management at Royal Bank of Canada from February 2008 to April 2011.
OTHER BOARD ENGAGEMENT
● Mr. Gibson serves on private company boards.
SKILLS AND QUALIFICATIONS
Mr. Gibson’s knowledge of capital markets
enhances the ability of our Board to make prudent financial judgments and provides our Board insight into and understanding of our financial performance and plan.
|
| |
|
|
|
Vivek Sankaran
CEO of ACI
Age: 60
Director Since: 2019
|
| Committees: |
None
|
|
PROFESSIONAL HIGHLIGHTS
● Mr. Sankaran has served as our CEO and Director since September 2021, and our CEO, President and Director since April 2019.
● Prior to joining the Company, Mr. Sankaran served since 2009 in various leadership and executive positions at PepsiCo, Inc. (“PepsiCo”), a multinational food, snack,
and beverage corporation.
● From January to March 2019, he served as CEO of PepsiCo Foods North America, a business unit within PepsiCo, where he led PepsiCo’s snack and convenient foods
business.
● Prior to that position, Mr. Sankaran served as President and COO of Frito-Lay North America, a subsidiary of PepsiCo, from April 2016 to December 2018, its COO from
February to April 2016 and Chief Commercial Officer, North America, of PepsiCo from 2014 to February 2016, where he led PepsiCo’s cross divisional performance across its North American customers.
● Prior to joining PepsiCo in 2009, Mr. Sankaran was a partner at McKinsey and Company, where he served various Fortune 100 companies, bringing a strong focus on
strategy and operations.
OTHER BOARD ENGAGEMENT
● Mr. Sankaran serves on private company boards.
SKILLS AND QUALIFICATIONS
Mr. Sankaran’s decades of experience in the
food and beverage industry, as well as his management and leadership experience, provides our Board with expertise relevant to our business and our operational, financial and strategic plan.
|
| |
|
|
|
Alan Schumacher
Former Member of the Federal Accounting Standards
Advisory Board
Age: 76
Director Since: 2015
|
| Committees: |
Audit Committee (Chair); Governance Committee
Independent Director
|
|
PROFESSIONAL HIGHLIGHTS
● Mr. Schumacher worked for 23 years at American National Can Corporation and American National Can Group, where he served as Executive Vice President and Chief
Financial Officer (“CFO”) from 1997 until his retirement in 2000, and Vice President, Controller and Chief Accounting Officer from 1985 until 1996.
● Mr. Schumacher served as a member of the Federal Accounting Standards Advisory Board from 2002 through June 2012.
OTHER BOARD ENGAGEMENT
● Mr. Schumacher has served on the boards of Warrior Met Coal, Inc. (“Warrior Met Coal”), a leading producer and exporter of metallurgical coal for the global steel
industry, since April 2017, Evertec Inc. (“Evertec”), a leading electronic transactions and technology company in Latin America, since 2013 and Blue Bird since 2008.
● Mr. Schumacher serves on the audit committees of Warrior Met Coal, Evertec and Blue Bird. Our Board has determined that simultaneous service on more than three audit
committees of public companies by Mr. Schumacher does not impair his ability to serve on our Audit Committee nor does it represent or in any way create a conflict of interest for the Company.
● Mr. Schumacher served on the board of BlueLinx Holdings Inc., a distributor of building products, from May 2004 to May 2021.
SKILLS AND QUALIFICATIONS
Mr. Schumacher’s experience as a board
member of several public companies including his deep understanding of accounting principles and his experience in risk management, expands the breadth of our Board’s expertise in accounting and financial reporting oversight and risk
management.
|
| |
|
|
|
Brian Kevin Turner
Chairman of Zayo Group and former COO of Microsoft
Corporation
Age: 58
Director Since: 2020
|
| Committees: |
Compensation Committee; Technology Committee (Co-Chair)
Independent Director
Cerberus Nominee
|
|
PROFESSIONAL HIGHLIGHTS
● Mr. Turner has served as the Chairman of Zayo Group, which is one of the largest providers of dark fiber and bandwidth to the world’s most impactful companies, since
June 2020.
● He served as President and CEO of Core Scientific, an emerging leader in blockchain and artificial intelligence infrastructure, hosting and transaction processing,
from July 2018 to May 2021.
● He served as Vice Chairman and Senior Advisor to our CEO from August 2017 to February 2020.
● From August 2016 to January 2017, Mr. Turner served as CEO of Citadel Securities and Vice Chairman of Citadel LLC (“Citadel”), global financial institutions.
● Prior to Citadel, Mr. Turner served as COO of Microsoft Corporation, an American multinational technology corporation, from 2005 to 2016, and as CEO and President of
Sam’s Club, an American chain of membership-only retail warehouse clubs owned and operated by Walmart Inc. (“Walmart”), from 2002 to 2005.
● Between 1985 and 2002, Mr. Turner held several positions of increasing responsibility with Wal-Mart, including Executive Vice President and Global Chief Information
Officer from 2001 to 2002.
OTHER BOARD ENGAGEMENT
● Mr. Turner was a member of the board of Nordstrom from 2010 to May 2020.
SKILLS AND QUALIFICATIONS
Mr. Turner’s strategic and operational
leadership skills and expertise in online worldwide sales, global operations, supply chain, merchandising, branding, marketing, information technology and public relations provide our Board with valuable insight relevant to our
business.
|
| |
|
|
|
Mary Elizabeth West
Senior Advisor with McKinsey & Company
Age: 60
Director Since: 2020
|
| Committees: |
Compensation Committee; Governance Committee
Independent Director
|
|
PROFESSIONAL HIGHLIGHTS
● Ms. West serves as a Senior Advisor with McKinsey & Company.
● Ms. West served as the Senior Vice President and Chief Growth Officer of The Hershey Company (“Hershey”), one of the largest chocolate manufacturers in the world, from
May 2017 to January 2020. She drove Hershey’s growth and marketing strategies as well as communication, disruptive innovation, research and development, and mergers and acquisitions. Ms. West ignited the transformation of the
company’s offerings beyond chocolate into snack categories.
● Prior to Hershey, Ms. West was at J.C. Penney Company, Inc., an American department store chain, after having served on its board from November 2005 to May 2015.
● From 2012 to 2014, Ms. West served as Executive Vice President, Chief Category and Marketing Officer of Mondelez International, Inc., the snack foods division spun off
from Kraft Foods, Inc. (“Kraft Foods”) in 2012.
● Ms. West began her career at Kraft Foods and served in various capacities over the course of 21 years and was named its Chief Marketing Officer in 2007. During her
tenure at Kraft Foods, Ms. West was involved with some of the food industry’s most iconic brands such as Kraft Macaroni and Cheese, Oreo, and Maxwell House coffee.
OTHER BOARD ENGAGEMENT
● Ms. West has served on the boards of Hasbro, Inc. a global play and entertainment company, since June 2016 and Lowe’s Inc., a home improvement retailer, since April
2021.
SKILLS AND QUALIFICATIONS
Ms. West’s proven track record of
innovation and transformation across myriad facets of retail brings to our Board extensive food and retail industry experience. Ms. West provides our Board with expertise in marketing, brand building and strategic and operational
planning for consumer-focused companies.
|
| |
|
|
|
Scott Wille
Senior Managing Director and Head of Consumer and
Retail Private Equity at Cerberus
Age: 42
Director Since: 2020
|
| Committees: |
Governance Committee; Finance Committee
Cerberus Nominee#
|
|
PROFESSIONAL HIGHLIGHTS
● Mr. Wille serves as Senior Managing Director and Head of Consumer and Retail Private Equity at Cerberus, which he joined in 2006.
● Since 2016, Mr. Wille has served as a member of Cerberus’ Private Equity Investment Committee.
● Mr. Wille served as a director of the Company from January 2015 to June 2020 before returning to serve on the Board in October 2020.
● Prior to joining Cerberus, Mr. Wille was with the leveraged finance group at Deutsche Bank Securities Inc. from 2004 to 2006.
OTHER BOARD ENGAGEMENT
● Mr. Wille has served on the board of NexTier Oilfield Solutions Inc., a provider of hydraulic fracturing, wireline technologies and drilling services, since March
2011.
● Mr. Wille served on the board of Tower International, Inc., a leading manufacturer of engineered automotive structural metal components and assemblies, from September
2010 to October 2021.
SKILLS AND QUALIFICATIONS
Mr. Wille’s experience in the financial and
private equity industries, and his in-depth knowledge of the Company and industry, are valuable to our Board’s understanding of the Company, its strategic plan, and its financial performance.
|
Director Qualifications,
Expertise and Attributes
The Governance Committee is responsible for facilitating director assessments,
identifying skills and expertise that candidates should possess, and screening, selecting, and recommending candidates for approval by our Board, including nominees duly submitted by stockholders. Although our Board retains ultimate
responsibility for approving candidates for election, the Governance Committee conducts the initial screening and evaluation. In evaluating candidates, the Governance Committee adheres to the director qualification standards outlined in our
Corporate Governance Guidelines. The Board has not established any minimum qualifications that must be met by a candidate or identified any set of specific qualities or skills that it deems to be mandatory. In evaluating any nomination, the
Governance Committee seeks to achieve a balance of knowledge, experience, and capability on the Board. Some of the factors that are taken into consideration in evaluating the suitability of individual candidates are experience in corporate
governance (such as an officer or former officer of a publicly-held company), experience as a board member of another publicly-held company, familiarity with the Company, expertise in a specific area of the Company’s operations, expertise in
financial markets, education and professional background and existing commitments to other businesses, including other boards of directors. Each candidate must also possess fundamental qualities of intelligence, honesty, demonstrated
character and good judgment, high ethics and standards of integrity, fairness and responsibility. The Governance Committee will also consider a candidate’s independence, as set forth in NYSE listing standards and, as applicable, the Exchange
Act in evaluating the qualification of prospective directors.
In determining whether to recommend a director for re-election, the Governance
Committee also considers the director’s past attendance at meetings and participation in, and contributions to, the activities of the Board.
The Governance Committee will consider candidates recommended by other members of the
Board, management and stockholders and may also retain professional search firms to identify candidates. All candidates, including candidates recommended by stockholders, are evaluated on the basis of the same criteria described above.
We believe that each of our directors has met the
qualifications set forth in the Board’s Corporate Governance Guidelines. Our Board is a highly engaged group and represent a diverse and broad range of attributes, qualifications, experiences and skills to provide an effective mix of
viewpoints and knowledge.
The following matrix summarizes the core competencies of each of our director
nominees. A mark indicates a specific area of focus or expertise on which the Board particularly relies. Not having a mark does not mean the director does not possess that qualification or skill. We believe that each of our directors meets
the criteria set forth in our Corporate Governance Guidelines. As noted in the director biographies, our directors have experience, qualifications, and skills across a wide range of public and private companies, possessing a broad spectrum of
experience both individually and collectively. Our director nominees’ biographies describe each director’s background and relevant experience in more detail.
| |
Director |
| Experience |
Sharon
Allen |
James
Donald |
Kim
Fennebresque |
Allen
Gibson |
Chan
Galbato |
Vivek
Sankaran |
Alan
Schumacher |
Brian
Kevin Turner |
Mary
Elizabeth West |
Scott
Wille |
| Financial Literacy/Expertise |
● |
● |
● |
● |
● |
● |
● |
● |
● |
● |
| Corporate Governance |
● |
|
|
● |
|
|
● |
|
● |
● |
| Risk Management |
● |
● |
● |
● |
● |
● |
● |
● |
● |
● |
| Public Company Leadership/Other Public
Company Board Service |
● |
● |
● |
|
● |
● |
● |
● |
● |
|
| Food and Retail Industry |
|
● |
|
|
|
● |
|
● |
● |
● |
| Operations and Marketing |
|
● |
● |
|
● |
● |
|
● |
● |
● |
| Strategic Planning |
● |
● |
● |
● |
● |
● |
● |
● |
● |
● |
| Real Estate |
|
● |
|
|
|
|
|
|
|
|
| Information Technology and
Cybersecurity |
|
|
|
● |
|
|
|
● |
|
|
Director Nomination Rights
Right to Designate Directors under the
Stockholders’ Agreement
As discussed above, under the terms of our Stockholders’ Agreement, Cerberus has the
right to designate four directors to our Board based on its level of ownership of our Common Stock. The current Cerberus nominees are Messrs. Galbato, Gibson, Turner and Wille.
Board Leadership
Separation of the Roles of Chairman of the Board
and CEO
Although our Board does not have a formal policy on separation of the roles of the
CEO and Chairman, our Board has decided to separate the roles of the CEO and the Chairman. Our Board has two Co-Chairs. The Co-Chairs, Messrs. Donald and Galbato, perform all duties typically performed by a board Chair including presiding
over Board meetings and approving the agendas and schedules of meetings of the Board. Pursuant to our Corporate Governance Guidelines, since neither of our Board Co-Chairs are members of management, we do not have a Lead Director.
Separation of the Chairman and CEO roles allows us to develop and implement corporate
strategy that is consistent with the Board’s oversight role, while facilitating strong day-to-day executive leadership by the CEO. Through the role of the Co-Chairs, the Board’s committees, and the regular use of executive sessions of the
non-management directors, the Board can maintain independent oversight of risks to our business, our long-term strategies, annual operating plan, and other corporate activities. Our Board has determined that the current structure ensures a
full and free discussion of issues that are important to our stockholders and provides an appropriate oversight over management that serves the interests of our stockholders.
Separate Sessions of Non-Management Directors
Pursuant to our Corporate Governance Guidelines and the rules of the NYSE, our
non-management directors regularly meet in executive sessions with no members of management present. Our Board Co-Chairs chair the meetings, and in their absence, the non-management directors will select a director present at the meeting to
chair the meeting.
Board Independence
The Board, in coordination with our Governance Committee, and with the assistance of
the Company’s legal counsel, considered the applicable NYSE tests to determine the independence of its members. Based on this review, the Board affirmatively determined that Mmes. Allen and West and Messrs. Fennebresque, Gibson, Turner and
Schumacher are (a) independent under the applicable rules of the NYSE and as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, (b) each of Mme. Allen and Messrs. Fennebresque and Schumacher meet all applicable requirements for
membership in the Audit Committee, and (c) each of Ms. Allen and Messrs. Fennebresque and Schumacher qualifies as an “audit committee financial expert” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC,
and satisfy the NYSE’s financial experience requirements.
Board’s Commitment to Diversity
While our Governance Committee does not have a written
policy regarding diversity in identifying director candidates or specific goals with respect to diversity on the Board, the Governance Committee considers diversity, including gender, racial and ethnic diversity, age, skills, experience,
backgrounds, and such other factors as it deems appropriate, in its search for the best candidates to serve on the Board. In selecting board members, our Board considers, in addition to the core attributes, the range of talents, experience
and expertise that are needed and would complement those that are currently represented on the Board. Our current directors bring a diverse set of skills, experiences and viewpoints to the Company that are important to drive our strategy
forward as the market and competitive landscape evolve.
The following presentation highlights some of the diversity metrics of our Board.
Tenure/Age/Gender/Racial
Role of Board in Risk Oversight
The entire Board is engaged in risk management and the oversight of Company-wide
risks. To supplement the Board’s risk oversight practices, our Board assigns to its committees additional oversight duties in their respective areas of focus.
Overseeing the development and execution of the Company’s strategy by management is
one of our Board’s primary responsibilities. Our Board and its committees work closely with management to provide oversight, review and counsel on long term strategy, risks and opportunities. Management benefits from the insights and
perspectives of a diverse mix of directors with complementary qualifications, expertise, and attributes. Senior management and other leaders from across the Company provide at least quarterly business and strategy updates to our Board and the
Board also reviews the alignment of the Company’s budget and capital plan with its strategic goals. Each committee also provides a report to the full Board at every meeting regarding the issues discussed and actions taken at the preceding
committee meeting.
Significant oversight areas of the Board are provided below.
Our full Board has the ultimate oversight responsibility of our risk management process.
| AUDIT COMMITTEE |
COMPENSATION COMMITTEE |
GOVERNANCE COMMITTEE |
| Oversees the quality and integrity of our financial reporting, including internal controls
over financial reporting, the independent auditor, and internal audit function. |
Oversees the management of risks related to our executive compensation plans and benefits
and the incentives created by the compensation awards it administers. |
Oversees risks associated with corporate governance, the Company’s non-financial regulatory, ethics and compliance programs
and ESG practices, director selection and succession planning, Board effectiveness and independence, adherence to our corporate governance framework and other corporate governance matters. |
| FINANCE COMMITTEE |
TECHNOLOGY
COMMITTEE |
| Oversees management of financial risks. |
Responsible for overseeing the management of our IT structure and risks associated with IT and cybersecurity. |
Board Meetings
During fiscal 2022, our Board met 14 times. All current directors attended at least
seventy-five percent (75%) of all Board meetings.
Pursuant to our Corporate Governance Guidelines, absent extraordinary circumstances,
each director is expected to attend in person our annual meeting of stockholders. 10 directors attended our annual meeting in 2022.
Corporate Governance Policies
and Charters
We have developed a corporate governance framework designed
to ensure our Board has the authority and procedures in place to review and evaluate our business operations and to make decisions independent of management. This framework establishes the practices our Board follows with respect to, among
other things, Board and committee composition and director selection, Board meeting agendas and involvement of senior management, director compensation, CEO performance evaluation, and management succession planning. The Board reviews and
updates, as needed, our corporate governance framework based on, among others, the Board and committees’ annual assessments, governance best practices, and regulatory developments.
The following documents make up our corporate governance framework:
|
● Corporate Governance Guidelines
● Audit and Risk Committee Charter (“Audit Committee Charter”)
|
|
● Governance, Compliance and ESG Committee Charter (“Governance Committee Charter”)
● Compensation Committee Charter (“Compensation Committee Charter”)
|
|
● Finance Committee Charter (“Finance Committee Charter”)
● Technology Committee Charter (“Technology Committee Charter”)
|
Current copies of the above policies and guidelines are available publicly on our
website at https://www.albertsonscompanies.com/investors under the “Governance” tab.
Code of Business Conduct and
Ethics
We have also adopted a Code of Business Conduct and Ethics, which applies to
directors, executive officers and employees. The Code of Business Conduct and Ethics sets forth our policies on critical issues such as conflicts of interest, insider trading, protection of our property, business opportunities and proprietary
information. We will post on our website any amendment to, or a waiver from, a provision of the Code of Business Conduct and Ethics for executive officers and directors that has been approved by our Board. The Code of Business Conduct and
Ethics is available on our website at https://albertsonscompanies.com/investors under the “Governance” tab and is also available in print to any stockholder upon request.
Board Committees
Our Board currently has five committees – Audit Committee, Compensation Committee,
Governance Committee, Technology Committee and the Finance Committee. The current composition of each of the committees is set forth below.
| Board Members |
|
Audit |
|
Compensation |
|
Governance |
|
Technology |
|
Finance |
| Sharon
Allen* |
|
|
|
|
|
|
|
|
|
|
James
Donald
Board Co-Chair |
|
|
|
|
|
|
|
|
|
|
| Kim
Fennebresque* |
|
|
|
|
|
|
|
|
|
|
Chan
Galbato
Board Co-Chair |
|
|
|
|
|
|
|
|
|
|
| Allen
Gibson* |
|
|
|
|
|
|
|
|
|
|
| Vivek
Sankaran |
|
|
|
|
|
|
|
|
|
|
| Alan
Schumacher* |
|
|
|
|
|
|
|
|
|
|
| Brian
Kevin Turner* |
|
|
|
|
|
|
|
|
|
|
| Mary
Elizabeth West* |
|
|
|
|
|
|
|
|
|
|
| Scott
Wille |
|
|
|
|
|
|
|
|
|
|
| |
|
Chairperson |
|
|
Member |
|
* |
Independent Director |
| Audit Committee |
Members:
Alan Schumacher (Chair)
Kim Fennebresque
Sharon Allen
|
Number of Meetings Held
During Fiscal 2022: 8 |
|
The Audit Committee assists our Board in its oversight
responsibilities relating to the quality and integrity of our financial statements, our compliance with legal and regulatory requirements (to the extent not otherwise handled by our Governance Committee), our independent registered
public accountant’s qualifications and independence and the establishment and performance of our internal audit function and the performance of the independent auditor. The Audit Committee maintains an open avenue of communication
between the Board, the independent auditor and management. Our Board has affirmatively determined that each of the three members of the Audit Committee qualify as an “audit committee financial expert” within the meaning of Item
407(d)(5)(ii) of Regulation S-K promulgated by the SEC. Each of the Audit Committee members satisfies the standards for independence of the NYSE and the SEC as they relate to audit committees.
The Audit Committee is governed by the Audit Committee
Charter which sets forth the purpose and responsibilities of this committee.
AUDIT COMMITTEE FUNCTIONS
Some of the key functions of the Audit Committee are the
following:
● assisting the Board in its oversight responsibilities regarding (1) the reliability and integrity of our financial accounting policies and financial reporting
processes, (2) performance of our internal audit function, (3) enterprise risk management, including major financial risk exposure, (4) adequacy and effectiveness of our systems of internal control and (5) our accounting and auditing
processes generally;
● appointing, retaining, compensating, evaluating, and replacing our independent registered public accountant;
● approving audit and non-audit services to be performed by the independent registered public accountant; and
● establishing procedures for the receipt, retention, and resolution of complaints regarding accounting, internal control or auditing matters submitted confidentially
and anonymously by employees through the whistleblower hotline.
The Audit Committee meets on a quarterly basis with Company
management and Deloitte and Touche to review and discuss, among other items, the earnings press release, the Company’s unaudited or audited financial statements related to the quarter and the year (as applicable) to be filed with the
Company’s annual report on Form 10-K or quarterly report on Form 10-Q, any changes in significant accounting policies and their impact on the Company’s financial statements, and the Company’s internal controls. The Audit Committee
also meets regularly with Deloitte and Touche in executive sessions without the presence of members of management. Additionally, the Audit Committee meets quarterly with the Company’s internal audit management team to review and
discuss the internal audit plan, reports, and significant matters identified by the internal audit team.
The Board has also delegated its authority to approve related
party transactions to the Audit Committee. The Company’s written policy regarding approval of related party transactions provides that management must present to the Audit Committee all potential related party transactions including
the related party’s interest in the transaction, nature of the transaction, material terms and the maximum dollar value of the transaction. The Audit Committee approves related party transactions based upon the determination of
whether the transaction is fair and in the best interest of the Company. See “Certain Relationships and Related Party Transactions” for further details on the related party transactions during fiscal 2022.
|
Approval of Audit and Non-Audit Services
The Audit Committee reviews and pre-approves all audit and permissible non-audit and
tax services performed for the Company by Deloitte and Touche.
Fees Paid to Independent Registered Public
Accounting Firm
We paid the following fees (in thousands) to Deloitte and Touche and its affiliates
for professional services rendered by them during the 2022 and 2021 fiscal years, respectively:
| Fees |
Fiscal
2022 |
|
Fiscal
2021 |
| Audit(1) |
$ |
5,275 |
|
$ |
5,490 |
| Audit Related(2) |
$ |
725 |
|
$ |
335 |
| Tax(3) |
$ |
243 |
|
$ |
575 |
| Total |
$ |
6,243 |
|
$ |
6,400 |
|
(1) |
Fees for professional services rendered for the audit of the Company’s consolidated annual financial statements and
review of the interim consolidated financial statements included in quarterly reports. Also includes audit services provided in connection with other statutory audits and regulatory filings. |
|
(2) |
Fees for services related to strategic alternatives, mergers and acquisitions due diligence, accounting
consultations and employee benefit plans. |
|
(3) |
Fees related to professional services rendered in connection with tax compliance and preparation related to tax
returns and tax audits, as well as for tax consulting and tax planning. |
Audit Committee Report
The Audit Committee has reviewed and discussed with management the Company’s audited
financial statements for fiscal 2022. We have discussed with Deloitte and Touche the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. We have received the
written disclosures and the letter from Deloitte and Touche as required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence and have discussed with
Deloitte and Touche its independence. Based on the above review and discussions, we recommended to the Board that the audited financial statements for the Company be included in the Company’s 2022 Form 10-K for filing with the SEC.
Respectfully submitted,
Alan Schumacher (Chair)
Kim Fennebresque
Sharon Allen
| Compensation Committee |
Members:
Kim Fennebresque (Chair)
Brian Kevin Turner
Mary Elizabeth West
|
Number of Meetings Held
During Fiscal 2022: 5 |
|
The Compensation Committee assists our Board in its review
and determination of executive compensation, compensation related plans and programs and oversight of human capital management. The Compensation Committee is governed by the Compensation Committee Charter, which sets forth the purpose
and responsibilities of the committee.
COMPENSATION COMMITTEE FUNCTIONS
Some of the key functions of the Compensation Committee are
the following:
● periodically reviewing and making recommendations to the Board on the Company’s general compensation philosophy and objectives and on all matters of policy and
procedures relating to executive compensation;
● determining and approving the CEO’s compensation (including annually reviewing and approving corporate goals and objectives applicable to the CEO’s compensation);
● determining and approving the compensation of the non-CEO NEOs and reviewing the compensation of certain other executive officers (including reviewing and approving
salaries, target bonus percentages, incentives, and equity);
● administering the incentive compensation and equity-based plans and recommending to the Board any modifications of such plans;
● reviewing and making recommendations to the Board regarding Board and committee compensation;
● validating and approving the achievement of performance levels under the Company’s incentive compensation plans;
● developing a succession planning program for the CEO and senior management;
● reviewing, discussing and approving the Company’s CD&A and related executive compensation information for inclusion in the Company’s proxy statement; and
● periodically reviewing management’s culture, diversity and inclusion policies and initiatives.
|
| Governance Committee |
Members:
Sharon Allen (Chair)
Allen Gibson
Alan Schumacher
Mary Elizabeth West
Scott Wille
|
Number of Meetings Held
During Fiscal 2022: 4 |
|
The Governance Committee assists our Board with its
responsibilities regarding Board composition, membership, non-financial regulatory compliance and ESG oversight. The Governance Committee is governed by the Governance Committee Charter setting forth the purpose and responsibilities
of this committee.
GOVERNANCE COMMITTEE FUNCTIONS
Some of the key functions of the Governance Committee are the
following:
● identifying individuals qualified to become Board members and evaluating candidates for Board membership;
● recommending director nominees for election at the annual stockholder meeting and/or filling any Board or committee vacancies;
● reviewing director independence and suitability for continued service in accordance with listing, governance and other regulatory requirements;
● developing and recommending to the Board a set of corporate governance guidelines and reviewing and reassessing the adequacy of such guidelines at least annually;
● overseeing the Board’s annual self-evaluation process and the Board’s evaluation of management;
● periodically reviewing the criteria for the selection of new directors to serve on the Board and recommending any proposed changes to the Board for approval;
● periodically reviewing and making recommendations regarding the composition and size of the Board or each of the Board’s committees;
● providing oversight and recommendation to the Board regarding effectiveness of the Company’s ethics and compliance programs, governance framework, non-financial risk
management and any significant legal or regulatory compliance exposure; and
● providing oversight and recommendation to the Board regarding the Company’s ESG strategy, initiatives, and policies.
|
| Technology Committee |
Members:
Allen Gibson (Co-Chair)
Brian Kevin Turner (Co-Chair)
|
Number of Meetings Held
During Fiscal 2022: 4 |
|
The Technology Committee is governed by the Technology
Committee Charter, which sets forth the purpose and responsibilities of the committee.
TECHNOLOGY COMMITTEE FUNCTIONS
Some of the key functions of the Technology Committee are the
following:
● reviewing the Company’s technology strategy and emerging technology issues and trends that may impact the Company’s business strategy;
● overseeing the Company’s technology planning and development process to support the Company’s growth objectives;
● overseeing the Company’s technology competitiveness, including its focus on leadership and talent acquisition and development;
● overseeing the Company’s technology risk management, including the Company’s programs, policies, practices and safeguards for information technology, cybersecurity and
data security; and
● approving management’s annual plan and budget for investments in technology.
|
| Finance Committee |
Members:
James Donald (Co-Chair)
Chan Galbato (Co-Chair)
Allen Gibson
Scott Wille
|
Number of Meetings Held
During Fiscal 2022: 4 |
|
The Finance Committee is governed by the Finance Committee
Charter, which sets forth the purpose and responsibilities of the committee.
FINANCE COMMITTEE FUNCTIONS
Some of the key functions of the Finance Committee are the
following:
● overseeing the Company’s financial and investment policies, including those related to short- and long-term financing, issuance of the Company’s capital stock and
share repurchases, policies and guidelines related to the Company’s capital structure and derivates or hedging transactions;
● reviewing strategies and plans for significant transactions;
● reviewing the Company’s insurance programs;
● approving significant borrowings and issuances of debt or security; and
● reviewing and approving plans for capital expenditures and significant capital investments.
|
Compensation Committee
Interlocks and Insider Participation
None of the members of our Compensation Committee is or has at any time during the
past year been an officer or employee of the Company. None of our executive officers serves as a member of the compensation committee or board of any other entity that has an executive officer serving as a member of our Board or Compensation
Committee.
Director Compensation
The Compensation Committee sets the compensation of our Board members. Similar to our
executive compensation, our director compensation program is also designed to attract and fairly compensate highly qualified, non-management directors to represent our stockholders on the Board and to act in the stockholders’ best interests.
The Company believes that compensation for non-management directors should be competitive and should encourage ownership of the Company’s Common Stock through the payment of a portion of director compensation in Company equity. Frederic W.
Cook & Co., Inc. (“FW Cook”), our independent compensation consultant, annually reviews and reports to the Compensation Committee how the Company’s director compensation practices compare with those of other similarly situated companies.
The Board makes changes in its director compensation practices only upon the recommendation of the Compensation Committee.
As the CEO, Mr. Sankaran does not receive any compensation for his services on the
Board.
The cash compensation of the non-management directors for fiscal 2022 was the same as
fiscal 2021 and was as follows:
|
(a) |
annual cash retainer of $125,000 for Board services; and |
|
(b) |
additional annual cash retainer for services on the committees as follows: |
| Committee |
|
Chairperson |
|
Member |
| Audit |
|
$ |
50,000 |
|
$ |
25,000 |
| Compensation |
|
$ |
40,000 |
|
$ |
20,000 |
| Finance |
|
$ |
40,000 |
|
$ |
20,000 |
| Governance |
|
$ |
40,000 |
|
$ |
20,000 |
| Technology |
|
$ |
40,000 |
|
$ |
20,000 |
Annual cash retainers are paid in four equal quarterly installments at the end of
each quarter for services rendered during the quarter. We do not pay any meeting fees but reimburse all of our directors for reasonable documented out-of-pocket expenses incurred by them in connection with their attendance at Board and
committee meetings.
In addition to the annual cash retainers, the non-management directors receive an
annual grant of time-based restricted stock units (“TBRSUs”) with a value of $145,000. The number of TBRSUs is determined by dividing $145,000 by the closing price of Common Stock on the grant date, rounded down to the nearest whole share.
The grant date is the first business day of the fiscal year, and the vest date is the last day of the corresponding fiscal year. Beginning with the fiscal 2021 annual equity grants, to the extent dividends are declared by our Board, each
unvested TBRSU is eligible to receive a dividend equivalent right (“DER”) which will vest according to the same schedule as the underlying unit. Accrued but unvested DERs will also receive DERs in subsequent dividends. This allows the account
of the non-management director to be credited with an additional number of TBRSUs equal to the cash dividend that the non-management director would have received had the TBRSUs been vested as of the record date of the dividend.
The Board has also adopted a Non-management Director Share Retention Guideline to
align the interests of its non-management directors with the interests of the Company’s stockholders. Each non-management director must, during his or her service on the Board, retain at least 50% of the shares of Common Stock received as a
result of equity or equity-based awards.
The following table sets forth summary information regarding the compensation of our
non-management directors for fiscal 2022. See “Compensation Discussion and Analysis” for Mr. Sankaran’s compensation.
| Name |
|
Fees Earned or
Paid in Cash |
|
Stock
Awards(6) |
|
All Other
Compensation |
|
Total |
| Sharon Allen |
|
$ |
188,750 |
|
$ |
144,992 |
|
|
— |
|
$ |
333,742 |
| James Donald(1) |
|
$ |
1,000,000 |
|
$ |
— |
|
|
— |
|
$ |
1,000,000 |
| Kim Fennebresque |
|
$ |
190,000 |
|
$ |
144,992 |
|
|
— |
|
$ |
334,992 |
| Chan Galbato |
|
$ |
125,000 |
|
$ |
144,992 |
|
|
— |
|
$ |
269,992 |
| Allen Gibson |
|
$ |
205,000 |
|
$ |
144,992 |
|
|
— |
|
$ |
349,992 |
| Alan Schumacher |
|
$ |
195,000 |
|
$ |
144,992 |
|
|
— |
|
$ |
339,992 |
| Brian Kevin Turner |
|
$ |
185,000 |
|
$ |
144,992 |
|
|
— |
|
$ |
329,992 |
| Mary Elizabeth West |
|
$ |
165,000 |
|
$ |
144,992 |
|
|
— |
|
$ |
309,992 |
| Scott Wille |
|
$ |
165,000 |
|
$ |
144,992 |
|
|
— |
|
$ |
309,992 |
| Former Directors |
|
|
|
|
|
|
|
|
|
|
|
|
| Shant Babikian(2) |
|
$ |
— |
|
$ |
— |
|
|
— |
|
$ |
— |
| Steven Davis(3) |
|
$ |
59,375 |
|
$ |
144,992 |
|
$ |
134,488 |
|
$ |
338,855 |
| Hersch Klaff(4) |
|
$ |
145,000 |
|
$ |
144,992 |
|
|
— |
|
$ |
289,992 |
| Jay Schottenstein(5) |
|
$ |
62,366 |
|
$ |
144,992 |
|
|
— |
|
$ |
207,358 |
|
(1) |
As previously disclosed, pursuant to his amended and restated employment agreement dated May 22, 2019, Mr. Donald
received an annual base salary of $1.0 million as of the end of fiscal 2022. Mr. Donald did not receive a non-management director annual equity grant. |
|
(2) |
Mr. Babikian, who resigned from the Board effective October 14, 2022, elected not to receive any cash or equity
compensation for his services on the Board. |
|
(3) |
Mr. Davis’s director fees are pro-rated as of the date of his death on July 10, 2022. His 2022 TBRSU award was
forfeited upon his death pursuant to the terms of the award agreement. The sum reported under ‘All Other Compensation’ is the cash award that the Compensation Committee paid to his estate for the years of valuable service provided by
Mr. Davis. This cash award reflects the dollar value of the TBRSUs that were forfeited (including the DERs for the dividend paid in May 2022) at the closing price of our Common Stock on July 8, 2022. |
|
(4) |
Mr. Klaff resigned from the Board effective February 21, 2023. His 2022 TBRSU award was forfeited upon his
resignation from the Board. |
|
(5) |
Mr. Schottenstein’s director fees are pro-rated as of the date he resigned from the Board effective August 2, 2022.
His 2022 TBRSU award was forfeited upon his resignation from the Board. |
|
(6) |
Reflects the grant date fair value calculated in accordance with Accounting Standards Codification 718,
Compensation-Stock Compensation (ASC 718). See Notes 1 and 10 – Equity-Based Compensation in our 2022 Form 10-K for discussions of the assumptions used in determining the grant date fair value of these share-based awards, including
forfeiture assumptions and the period over which the Company will recognize the compensation expense for such awards. At February 25, 2023, each of the non-management directors, except Mr. Donald received 4,974 TBRSUs related to the
fiscal 2022 award. See “Security Ownership of Certain Beneficial Owners and Management” for total ownership of each of the directors as of the Record Date. |
Communications with the Board
As stated in our Corporate Governance Guidelines, any stockholder or other interested
party who wishes to communicate with the Board, any Chairman, a committee, the non-management directors or any individual director in his or her capacity as such may direct such communication in writing to the:
General Counsel
c/o Albertsons Companies, Inc.
250 Parkcenter Blvd.
Boise, Idaho, 83706
The General Counsel will forward the communication to the appropriate group or
individual except for correspondence which is not more suitably directed to management or items of the following nature – advertising, promotions of a product or service, patently offensive material and matters completely unrelated to the
Board’s functions, Company performance, Company policies or that could not reasonably be expected to affect the Company’s public perception.
Environmental, Social and
Governance Disclosure |
As a long-standing neighborhood grocer, we believe we have an ongoing commitment to
leverage our resources and expertise to support the communities we serve and the planet we share. Our Board is deeply committed to this effort and the Governance Committee provides oversight to ensure that the Company’s strategy is
appropriate, takes account of material risks, and is likely to deliver results.
During fiscal 2020, we completed a materiality assessment that laid the foundation
for our Environmental, Social and Governance (“ESG”) strategy and initiatives for the future. Through this process, we identified high priority areas that align with our long-term company strategy and are most critical to our internal and
external stakeholders, including Climate Action, Diversity, Equity & Inclusion (“DE&I”), Waste Reduction & Circularity and Community Stewardship. During fiscal 2021, we developed our ESG aspirations and roadmaps for how to achieve
those ambitions, including achieving a science-based carbon reduction target. That in-depth focus enabled us to announce our new ESG platform Recipe for Change in April 2022 based on the following four pillars:
We are committed to doing our part to promote a flourishing environment for the
generations to come. To do this, we are letting science lead the way in our goal to reduce carbon emissions across our operations and value chain. Our climate goals have been approved by the Science Based Targets initiative (“SBTi”) which has
set the standard for emission goals globally, and include the following:
|
● |
Achieve SBTi approved emissions reduction goals by 2030. |
|
● |
Reduce emissions from our own operations by 47%. |
|
● |
Reduce downstream emissions from the use of sold goods by approximately 27%. |
|
● |
Engage our top suppliers to set science-based targets by 2026. |
|
● |
Achieve Net Zero emissions in our own operations by 2040. |
Our fiscal 2021 carbon calculation revealed that we reduced emissions from our own
operations by more than 8% from the previous year. The pathways to further reductions include continuing improvements to energy efficiency, further enhancing our refrigeration infrastructure, and increasing the use of renewable energy. Our
carbon emission calculations for fiscal 2022 will be completed by the end of the first quarter of fiscal 2023 and are scheduled to be included in our 2023 ESG Report.
| |
|
Diversity, Equity & Inclusion (People) |
As one of the largest food and drug retailers in the U.S., we recognize that our
ability to delight our customers lies in the engagement of our associates. We are committed to fostering a diverse, equitable and inclusive culture and aspire to reflect the vibrant and thriving communities in which we live and work. To
enable an inclusive and welcoming culture among our associates we engaged in the following during fiscal 2022:
|
● |
Continued to incorporate DE&I goals into the annual performance management process of our top leaders. |
|
● |
Added our newest supported associate resource group (“ARG”) – diverseABILITY – an ARG focused on driving disability
inclusion for people with diverse abilities, their caretakers, and allies. Our ARGs are open to associates in the corporate and division offices, field leadership and supply chain facilities. The ARGs during fiscal 2022 consisted of
over 5,300 members representing the Women’s Inspiration and Inclusion Network, the Hispanic Leadership Network, the Asian Network, the African American Leadership Council, the Pride Alliance, the Green Team and the Veterans Associate
Resource Group. |
|
● |
Celebrated the 2nd year of the ARG mentorship program that enabled mentors and mentees to build new relationships,
help sharpen their skills and support the talent development objective of our DE&I framework. |
|
● |
Trained over 15,000 leaders through our “Leading with Inclusion” workshops – a highly
interactive experience designed to heighten awareness around bias, blind spot recognition, authenticity and tools to support associates’ ability to create a more inclusive work environment that acknowledges and celebrates courageous
conversations. |
|
● |
Continued to expand opportunities for our associates to learn more about DE&I by
facilitating leadership discussions on how to be more inclusive, holding bi-annual store and supply chain huddles and providing monthly online microlearning modules, discussing various diversity, equity and inclusion topics. |
|
● |
Supported Inclusion Councils in our 12 operating divisions and back-office functions through
the National Diversity Council which is co-chaired by our CEO and Chief Diversity Officer and aims to advance DE&I within our Company. |
|
● |
Continued to encourage, empower, and engage social justice and racial equity initiatives
through our Racial & Social Justice Grant Program. As of fiscal 2022 we have provided over $3 million dollars to non-profit organizations operating within the communities we serve to fund programs, activities, initiatives, or
educational outreach that helps to eliminate inequities and address the unique needs of racial and ethnic minority groups in the community. |
We believe in fostering DE&I not only among our associates, but also among our
business partners. We provide opportunities to diverse suppliers to grow their business and have their products on more shelves. Given one of the biggest hurdles for small businesses is access to working capital, we have an expanded early
payment program to determine the best time and terms for payments for our diverse-owned suppliers. The goal is to help these businesses alleviate immediate capital challenges by making access to working capital more equitable. During fiscal
2022, we hosted our annual event with nearly 265 diverse suppliers focused on promoting innovation and appealing to growing demographic groups.
Our Supplier Diversity Program applies to the following
suppliers that are over 50% owned and controlled/operated by a U.S. citizen who belongs to one or more of the following categories or ethnicities:
|
● African American
● Asian American
● Hispanic
|
|
● LGBTQ+
● Native American
|
|
● Service-Disabled Veteran
● Female
|
|
|
Waste Reduction and Circularity (Product) |
As part of our Recipe for Change, we have committed to eliminate food waste going to
landfills by 2030 and improving the recyclability, composability and reusability of our Own Brand product packaging. To help achieve this, we launched enhanced food donation guidelines in our stores that expanded both the categories and
quantity of food going to our local donation partners. At the end of fiscal 2022, over 90% of our stores were donating on a weekly basis. In addition, we have organic diversion services for over 1,600 of our stores for food that cannot be
donated. In total we diverted over 321 million pounds of food from landfills in fiscal 2022.
In the area of plastics and packaging, we rolled out recycling instructions on more
than 7,000 Own Brands packaged products through the use of the How2Recycle label and QR codes. In addition, more than 40,000 store-made items now feature recycling information on scale labels and other packaging, directing customers to an
informative new recycling page. Moving forward, all new Own Brands products will feature the How2Recycle labeling system to improve the reliability and transparency of recyclability claims. This label helps customers know how to properly
dispose of and recycle our Own Brands product packaging to help keep plastic out of the landfill.
|
|
Community Stewardship (Community) |
During fiscal 2022, along with the Albertsons Companies Foundation, we enabled 254
million meals through both food and financial support to our communities, including donating approximately $40 million through the Nourishing Neighbors program. The September 2022 Nourishing Neighbors breakfast campaign raised over $7 million
to provide 28 million healthy breakfasts for children throughout the country. The Nourishing Neighbors program also engaged over 20,000 middle and high school kids in their Explore. Act. Tell. program that encourages kids to take on hunger
and find solutions in their own community. In addition to offering community support, we provided assistance through our “We Care” fund to help over 190 of our associates who were personally impacted by natural disasters and personal
hardships.
| Certain Relationships and Related Party
Transactions |
The following discussion is a brief summary of certain material arrangements,
agreements and transactions we had with related parties during fiscal 2022. These transactions include, amongst others, professional advisory, consulting and other corporate services.
Our Board has adopted a written policy (the “Related Party Policy”) and procedures
for the review, approval or ratification of “Related Party Transactions” by the Audit Committee. For purposes of the Related Party Policy, a “Related Party Transaction” is any transaction, arrangement or relationship or series of similar
transactions, arrangements or relationships (including the incurrence or issuance of any indebtedness or the guarantee of indebtedness) in which (1) the aggregate amount involved will or may be reasonably expected to exceed $120,000 in any
fiscal year, (2) we or any of our subsidiaries is a participant and (3) any related party has or will have a direct or indirect material interest.
Prior to the Company entering into any Related Party Transaction, it is reported to
the Company’s General Counsel who undertakes an evaluation of the Related Party Transaction. The General Counsel then reports the findings of the investigation to the Audit Committee, including a summary of material facts. The Audit Committee
reviews the material facts of all Related Party Transactions which require the Committee’s approval and either approve or disapprove, subject to the exceptions described below. If advance notice of a Related Party Transaction has been given
to the Audit Committee and it is not possible to convene a meeting of the Audit Committee, then the Chairman of the Audit Committee will consider whether the Related Party Transaction is appropriate and, if it is, will approve it and present
it to the Audit Committee for ratification at the next regularly scheduled meeting. In the event the Audit Committee does not ratify any such Related Party Transaction, management shall make all reasonable efforts to cancel or annul such
Related Party Transaction. In the event the Company becomes aware of a Related Party Transaction that was not previously approved or ratified under the Related Party Policy, the Company will promptly notify the Chairman, and the Audit
Committee (or, if it is not practicable for the Company to wait for the Audit Committee to consider the matter, the Chairman) will consider whether the Related Party Transaction should be ratified or rescinded or other action should be taken,
with such review considering all of the relevant facts and circumstances regarding the Related Party Transaction. The Chairman will report to the Audit Committee at the next regularly scheduled meeting of the Audit Committee any actions taken
under the Related Party Policy. The Audit Committee will also review all of the facts and circumstances pertaining to the failure to report the Related Party Transaction to the Audit Committee and will take, or recommend to the Board, any
action the Audit Committee deems appropriate.
Transactions with Cerberus
We paid Cerberus Technology Solutions, an affiliate of Cerberus, fees totaling
approximately $5.5 million for fiscal 2022 for information technology advisory and implementation services in connection with modernizing our information systems.
We paid Cerberus Operations and Advisory Company, LLC, an affiliate of Cerberus, fees
totaling approximately $0.5 million for fiscal 2022 for consulting services provided in connection with improving the Company’s operations.
| |
|
|
|
| |
PROPOSAL 2:
Ratification of the Appointment of the Independent Registered Public Accounting Firm |
|
| |
The Audit Committee has appointed, and our Board has ratified
the appointment of, Deloitte and Touche to serve as our independent registered public accounting firm for the fiscal year ending February 24, 2024. We are not required by our bylaws or applicable law to submit the ratification of the
appointment of Deloitte and Touche for stockholder approval. However, as a matter of good corporate governance, we are seeking stockholder ratification of the appointment of Deloitte and Touche. If the stockholders do not ratify the
appointment of Deloitte and Touche, the Audit Committee may consider the appointment of another independent registered public accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, may appoint a
different independent registered public accounting firm if it believes that such a change would be in the best interests of the Company and our stockholders.
One or more representatives of Deloitte and Touche are
expected to attend the Annual Meeting. They will have the opportunity to make a statement if they so desire and will be available to answer appropriate questions. See “Fees Paid to Independent Registered Public Accounting Firm” for
the fees paid to Deloitte and Touche during fiscal years 2021 and 2022.
Required Vote
The affirmative vote of a majority of votes cast is required
to ratify the appointment of Deloitte and Touche as our independent registered public accounting firm for the fiscal year ending February 24, 2024.
|
|
| |
|
|
| |
|
Our Board recommends that stockholders vote “FOR” the proposal
|
|
| |
|
See page 32 for the fees paid to Deloitte and Touche during fiscal 2022.
|
|
| |
|
|
|
| |
PROPOSAL 3:
Advisory (Non-Binding) Vote to Approve the Company’s Named Executive Officer Compensation |
|
| |
As required by Section 14A of the Exchange Act, the Company
is providing stockholders with an opportunity to cast an advisory vote on the compensation of our NEOs as disclosed in the CD&A, the compensation tables, narrative discussion, and related footnotes included in this proxy
statement.
While the vote is advisory, and therefore non-binding on the
Company, the Compensation Committee values the opinions of our stockholders and will take into account the outcome of the vote when considering future executive compensation decisions.
As discussed in more detail in the CD&A, our executive
compensation program is designed to attract and retain a talented team of executives who can deliver on our commitment to build long-term stockholder value. The Compensation Committee believes our program is competitive in the
marketplace and links pay to performance.
Accordingly, the Board recommends that you vote in favor of
the following resolution:
RESOLVED, that the compensation paid to the NEOs, as
disclosed in this proxy statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the CD&A, the compensation tables and the narrative discussion, and related footnotes that accompany the
compensation tables), is hereby approved.
Required Vote
The affirmative vote of a majority of votes cast is required
to approve, on an advisory (non-binding) basis, the compensation of the NEOs as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K under the Exchange Act, including the CD&A, the compensation tables, the
narrative discussion, and related footnotes that accompany the compensation tables.
|
|
| |
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|
| |
|
Our Board recommends that stockholders vote “FOR” the proposal |
|
| |
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|
| Compensation Discussion and Analysis |
The CD&A provides a description of the material elements of our executive compensation program, as well as perspective and context for decisions made regarding the compensation
of our fiscal 2022 NEOs. To assist our stockholders in locating important information regarding our executive compensation program, the CD&A is organized into the following sections:
Our NEOs for fiscal 2022 were as follows:
| Name |
Age |
Position |
| Vivek Sankaran |
60 |
Chief Executive Officer; Director |
| Sharon McCollam |
61 |
President and Chief Financial Officer |
| Susan Morris |
54 |
Executive Vice President and Chief Operations Officer |
| Juliette Pryor(1) |
58 |
Former Executive Vice President, General Counsel and
Secretary |
| Anuj Dhanda(2) |
60 |
Executive Vice President and Chief Technology and
Transformation Officer |
| (1) |
Ms. Pryor resigned from the Company effective April 29, 2023. |
| (2) |
Mr. Dhanda’s new title is effective as of May 10, 2023. |
2022 Say-on-Pay Result
Our stockholders have the opportunity each year to cast an advisory “say-on-pay” vote on our NEO’s compensation. At our 2022 annual meeting, our stockholders signaled overwhelming
support for our executive compensation program with 95.8% of the votes cast in favor. The Compensation Committee considers the level of voting support from our stockholders and uses this information, among numerous other factors, to inform
compensation decisions.
Fiscal 2022 Financial and Operational Highlights
Our results for fiscal 2022, were fueled by the rollout of our Customers for Life transformation strategy, which places our customers at the center of everything we do, with the
ultimate goal of supporting them every day, every week, and for a lifetime.
Some of our fiscal 2022 operational accomplishments illustrate our continued commitment to:
|
|
|
|
|
| Deepening our Digital Connection and Engagement with our
Customers |
Differentiating our Store Experience |
Enhancing What
We Offer |
Modernizing
our Capabilities |
Embedding ESG in Everything We Do |
Our financial and operating highlights for fiscal 2022 include:
|
|
|
| Identical sales growth of 6.9% |
Continued modernization of store fleet, including 173 remodels
and 5 new store openings |
Membership in our loyalty program increased by 15%, reaching over 34 million members |
| |
Digital sales increase of 28% |
Operating cash flow of $2,854 million |
Donation of more than $200 million in food and financial support by The Albertsons Companies Foundation and the Company, including more than $40 million through
our Nourishing Neighbors Program |
Net income per share of Common Stock of $2.27 and Adjusted net income per share of Common Stock of $3.37*; Adjusted EBITDA of $4,677 million* |
|
* |
For a reconciliation of non-GAAP measures, please see pages 46-48 of our 2022 Form 10-K. |
Merger Agreement
On October 13, 2022 the Company, Kroger and Merger Sub, entered into the Merger Agreement. Pursuant to the Merger Agreement, (i) each share of Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted automatically at the Effective Time into the right to receive from Parent $34.10 per share in cash, without interest, subject to certain reductions set forth in the Merger Agreement,
and (ii) each share of Series A preferred stock of the Company issued and outstanding immediately prior to the Effective Time shall be converted automatically at the Effective Time into the right to receive from Parent $34.10 per share in cash
on an as-converted basis, without interest, subject to certain reductions set forth in the Merger Agreement. The Company has no outstanding preferred stock as of the Record Date.
The Company has filed with the SEC a definitive information statement on Schedule 14C with respect to the approval of the Merger. You may obtain copies of all documents filed by
the Company with the SEC regarding this transaction, free of charge, at the SEC’s website, www.sec.gov or from the Company’s website at https://www.albertsonscompanies.com/investors/overview/.
Our Executive Compensation Philosophy
We design our executive compensation program to attract, motivate, and retain high caliber talent who drive our success and industry leadership while considering individual and
Company performance measured over both short-term and longer-term periods. Each year the Compensation Committee reviews the existing incentive structure, taking into consideration business performance, and our strategic roadmap, in considering
the efficacy of further enhancements.
The guiding principles of our compensation program are as follows:
Our Compensation Philosophy
Key NEO Compensation Decisions for Fiscal 2022
CEO Compensation
During fiscal 2022, the Compensation Committee addressed the need to provide ongoing incentives to Mr. Sankaran. Given that Mr. Sankaran’s 2019 equity award which was granted to
him when he joined the Company was going to fully vest in 2024, the Compensation Committee awarded Mr. Sankaran the annual equity award granted to all other NEOs. In reviewing Mr. Sankaran’s total compensation, the Compensation Committee
focused on ensuring that his incentive compensation is performance-based, is aligned to long-term stockholder interests and is motivational and appropriately positioned versus leaders of comparably sized companies in similarly situated
industries. Based on those determinants, the Compensation Committee concluded that the appropriate mix of Mr. Sankaran’s total compensation would be achieved by raising his annual target cash bonus opportunity from 150% to 175% of his salary
and awarding him $9.5 million of annual equity compensation split equally between PBRSUs and TBRSUs, vesting over a three-year term.
The Compensation Committee designed the following compensation package for our CEO for fiscal 2022.
| ● |
no increase in base salary; |
| ● |
approximately 90% of target compensation opportunity was variable (performance-based and time-based equity and cash bonus); and |
| ● |
approximately 60% of target compensation opportunity was performance-based (performance-based equity and cash bonus) with payouts based on achievement against pre-established
performance metrics that drive short and long-term growth. |
The mix of the various components of compensation for Mr. Sankaran and the other NEOs as a group for fiscal 2022 were as follows (excluding sign-on and tax bonuses):
Executive Compensation Best Practices
The Compensation Committee closely monitors emerging best practices in executive compensation for consideration in our compensation program. The chart below lists some of our
compensation “best practices” and those we do not follow:
| What We Do |
|
What We Don’t Do |
|
Mix short- and long-term performance measures
Provide competitive, market-driven base salary
Balance mix of pay
components
Utilize quantitative
targets based on Company financial and operating performance and strategic goals for a significant portion of total compensation
Cap the amount of our
annual bonus at 2x of target
Use a variety of
equity incentive structures to promote performance and retention
Maintain robust stock
ownership guidelines
Include a recoupment
or “clawback” policy in our compensation program
Provide
double-trigger arrangements in employment agreements for change in control
Restrict short sales
and other speculative trading on our Common Stock
|
|
Provide automatic salary increases
Provide high levels of fixed compensation
Use metrics unrelated to our operational goals
Reward imprudent risk-taking
Guarantee bonuses
Provide executive-only retirement programs
Pay above market returns on any deferred compensation plan
Maintain defined benefit pension plans for our executive officers
Pay excessive perquisites
Provide tax gross ups
|
Overview of Fiscal 2022 Executive Compensation
The following chart summarizes the components and associated objectives of our executive compensation program for fiscal 2022:
| Element |
|
Overview of Element |
|
Objective of Element |
|
Performance Metric and Payout |
| Base Salary |
|
Fixed amount of cash compensation |
|
Set market competitive base compensation to retain talent and influence target for
cash bonus |
|
Individual performance and market competitiveness based on
role and responsibility |
| Corporate Management Bonus Plan (Cash Bonus) |
|
Quarterly bonus based on Company performance during the fiscal quarter |
|
Drive Company performance on a quarter-by-quarter basis |
|
Pre-established targets
Weighted 60% Adjusted EBITDA and 40% ID Sales
Payout capped at 200% of target
|
| |
|
Annual bonus based on Company performance during the fiscal year; for the Senior
Leadership Team (SLT) which includes the NEOs and Division Presidents, annual bonus is based on Company performance plus the Senior Leader Scorecard |
|
Drive overall Company performance on an annual basis; in addition, for the SLT and
Division Presidents, drive the Company’s measurable strategic objectives for the year |
|
Pre-established targets weighted 50% Adjusted EBITDA, 40% ID Sales and 10% Senior Leader
Scorecard
Payout capped at 200% of target
|
| Long-Term Incentive Award Program (Equity) |
|
PBRSU Awards |
|
Align executive interests with long-term stockholder interests and promote long-term
value creation |
|
Pre-established financial targets that are critically important to stockholders – Adjusted
EPS and ROIC
Payout capped at 200%; awards earned annually based on Company performance; vests after 3
years
|
| |
|
TBRSU Awards |
|
Promote retention and align executive interests with long-term stockholder interests |
|
Increase in value of Common Stock
Time-based; 1/3 vest annually
|
Additionally, some of our executives, including our NEOs, have certain severance protections pursuant to their employment agreements. See “Potential Payments Upon Termination of
Employment” for amounts payable to the NEOs under certain termination scenarios. Consistent with standard business practice, our NEOs also receive business-related perquisites, and benefits that are provided to all employees, including
healthcare benefits, life insurance, retirement savings plans and disability plans.
Design of Our Executive Compensation Program
The design of our executive compensation program is consistent with our compensation philosophy noted above. We use various compensation elements to provide an overall competitive
total compensation and benefits package to the NEOs that is tied to creating value, is commensurate with our results, and aligns with our business strategy. Set forth below are the key elements of the compensation program for the NEOs for
fiscal 2022:
| ● |
Long-term equity incentive awards |
Base Salary
We provide our NEOs with a base salary to compensate them for services rendered during the fiscal year. In alignment with our pay for performance philosophy, base salary represents
the smallest portion of annual total compensation.
The base salary component of our compensation program is designed to attract and retain key talent and is determined by the Compensation Committee based on a variety of factors
including:
| ● |
nature and responsibility of the position; |
| ● |
expertise of the executive and competition in the market for the executive’s services; |
| ● |
potential for driving the Company’s success in the future; |
| ● |
peer group compensation data; |
| ● |
performance reviews and recommendations of the CEO (except in the case of his own compensation); and |
| ● |
other judgmental factors deemed relevant by the Compensation Committee. |
Our NEOs are not eligible for automatic annual base salary increases. During 2022, NEO base salaries generally remained at their 2021 levels. The Compensation Committee approved an
increase to Mr. Dhanda’s base salary in recognition of his individual performance, role and responsibilities and after considering market data presented by FW Cook.
| Name |
|
Fiscal 2021 Annual
Base Salary |
|
Fiscal 2022 Annual
Base Salary |
|
Percentage
Change |
| Vivek Sankaran |
|
$ |
1,500,000 |
|
$ |
1,500,000 |
|
- |
| Sharon McCollam |
|
$ |
1,000,000 |
|
$ |
1,000,000 |
|
- |
| Susan Morris |
|
$ |
1,000,000 |
|
$ |
1,000,000 |
|
- |
| Juliette Pryor(1) |
|
$ |
725,000 |
|
$ |
725,000 |
|
- |
| Anuj Dhanda |
|
$ |
700,000 |
|
$ |
750,000 |
|
7.1% |
|
(1) |
Ms. Pryor was not a NEO in fiscal 2021. |
Cash Bonus
Performance-Based Bonus Plans
Our NEOs participated in our corporate management bonus plan (“Corporate Incentive Plan”) for fiscal 2022. The Corporate Incentive Plan is for bonus-eligible associates and is
intended to compensate participants for their contribution to achieving short-term financial and operational goals of the Company. Each participant is assigned a target bonus which is a percentage of his or her base salary and is determined
based on the participant’s job function, position, responsibility, and the individual’s ability to impact the Company’s financial performance.
What are the components of the cash bonus program for fiscal 2022?
Our cash bonus program is based on two components – quarterly Company performance and annual Company performance - with each component accounting for 50% of the total cash bonus for the fiscal year.
The performance metrics for the quarterly bonus for fiscal 2022 remained the same as fiscal 2021:
| Quarterly Bonus |
| 40% ID Sales |
| 60% Adjusted EBITDA |
The performance metrics for the annual bonus for the SLT for fiscal 2022 were as follows:
| Annual Bonus |
| Corporate Plan SLT |
| 40% ID Sales |
| 50% Adjusted EBITDA |
| 10% Senior Leader Scorecard |
What were the changes to the Corporate Incentive Plan for fiscal 2022 and why were these changes made?
As a growth-focused company with a pay-for-performance compensation philosophy, we continue to evaluate how best to further align executive compensation to our financial and business performance and execution of our long-term strategy. As part
of that evaluation, our Compensation Committee calibrated the annual cash bonus program as follows:
| ● |
Addition of Senior Leader Scorecard as a Performance Metric for Annual Bonus: The Senior Leader
Scorecard was added as a bonus component for members of the SLT. The objective of the Senior Leader Scorecard is to measure performance of the senior leaders as a team against measurable preset goals for key strategic objectives of the
Company for the fiscal year. The Senior Leader Scorecard accounts for 10% of the annual bonus of each SLT member and payout is in the range of 25% to 200% based on the team’s performance. The strategic objectives for the fiscal year and
the associated measurements and payouts were as follows: |
| Strategic Objectives |
|
Target Bonus Weight |
|
Payout |
| Improve
customer digital engagement |
|
2.5% |
|
0 – 200 |
% |
| Achieve fiscal 2022
carbon reduction and DE&I goals |
|
2.5% |
|
0 – 200 |
% |
| Grow e-commerce sales |
|
2.5% |
|
0 – 200 |
% |
| Grow pharmacy sales |
|
2.5% |
|
0 – 200 |
% |
How are cash bonus targets set for the fiscal year?
Adjusted EBITDA and ID Sales are regarded as key performance indicators in our industry and are highly correlated to long-term stockholder value. The targets for Adjusted EBITDA and ID Sales are set by the Compensation Committee prior to the
beginning of the fiscal year based on the financial plan approved for the fiscal year by the Board. The Compensation Committee also set the strategic goals against which the Senior Leader Scorecard would be measured. The goals set under the
Corporate Incentive Plan for fiscal 2022 were designed to be challenging and difficult to achieve, yet still within a realizable range so that achievement was uncertain but did not encourage excessive risk taking. In line with that compensation
philosophy, the Compensation Committee recognized that while the targets were stretch goals, there were certain macroeconomic challenges such as supply chain and labor which were beyond the control of management and would unfairly impact
performance. With that consideration, the Compensation Committee adjusted the target payout percentages for target performances as presented below.
For fiscal 2022, cash bonus amounts could be earned above or below the target level based on the following scale:
| |
|
Minimum
Performance |
|
Target
Performance |
|
Maximum
Performance |
|
Minimum
Payout |
|
Target
Payout |
|
Maximum
Payout |
| Adjusted EBITDA |
|
90% |
|
95% |
|
110% |
|
25% |
|
100% |
|
200% |
| ID Sales |
|
98.5% |
|
99.5% |
|
101.5% |
|
25% |
|
100% |
|
200% |
ID Sales performance metric will not pay out over 100% (target) unless the Adjusted EBITDA result achieves at least 100% (target) performance. The Senior Leader Scorecard payout
can range from 0 - 200% based on the Compensation Committee’s assessment of achievement against the preset goals.
How is a participant’s cash bonus determined under the Corporate Incentive Plan?
A participant’s target cash bonus is a percentage of his or her base salary. In setting the target cash bonus percentage of each NEO, the Compensation Committee takes into consideration market data and such other factors as deemed relevant,
such as the individual’s role and responsibilities, ability to impact and execute, our financial and operational performance, prior performance, overall market conditions, and recommendations from the CEO (except for himself).
Each participant to the Corporate Incentive Plan is eligible to receive a ratable portion of the participant’s target cash bonus based upon the Company’s level of achievement,
within the range of minimum and maximum percentages, of the target performance metric set by the Compensation Committee. The actual payout, if any, may result in a cash bonus that is greater or less than the stated individual target bonus (and
could be zero) depending on whether, and to what extent, the applicable performance metric is satisfied. However, in no event will a participant receive over 200% of the target bonus for any quarter or the fiscal year. We believe that having a
maximum cap encourages good judgment by the NEOs, promotes responsible risk management procedures, reduces the likelihood of windfalls and makes the maximum cost of the plan predictable. No amount would be payable for an applicable fiscal
quarter if results for that quarter fell below established threshold levels.
The target bonus opportunity for each NEO for fiscal 2022 was as follows:
| Name |
|
Base Salary
for Fiscal
2022 |
|
Target Bonus
Opportunity
(% of Base
Salary) |
|
Target Bonus
Opportunity
($) |
| Vivek
Sankaran |
|
$ |
1,500,000 |
|
175% |
|
$ |
2,625,000 |
| Sharon McCollam |
|
$ |
1,000,000 |
|
125% |
|
$ |
1,250,000 |
| Susan Morris |
|
$ |
1,000,000 |
|
100% |
|
$ |
1,000,000 |
| Juliette Pryor |
|
$ |
725,000 |
|
100% |
|
$ |
725,000 |
| Anuj Dhanda |
|
$ |
750,000 |
|
100% |
|
$ |
750,000 |
Quarterly Bonus
Quarterly Target Amount. Each NEO’s quarterly bonus opportunity (“Quarterly Target Amount”) is determined by multiplying the target for the quarterly bonus by approximately 25% (the number of weeks in the applicable quarter divided by
the number of weeks in the year).
Quarterly Performance Modifier. Prior to the beginning of the fiscal year, our Board reviews and approves the fiscal plan for the financial year. The approved fiscal plan is
based on forecasted financials including quarterly ID Sales and Adjusted EBITDA. After the completion of every quarter, management provides an update to the Board of the Company’s performance against the approved fiscal plan which determines
the payout percentage of the Quarterly Target Amount (“Quarterly Performance Modifier”). The Compensation Committee certifies the Quarterly Performance Modifier for the quarterly cash bonus payout.
The quarterly bonus structure is summarized below.
The Company’s actual performance against the set targets and the quarter’s cash bonus payouts based on such performance were as follows (in millions, except percentages):
| Metric |
|
Q1 2022 |
|
Q2 2022 |
|
Q3 2022 |
|
Q4 2022 |
| Target
Adjusted EBITDA |
|
$ |
1,406 |
|
$ |
951 |
|
$ |
1,009 |
|
$ |
880 |
| Actual Adjusted EBITDA* |
|
$ |
1,420 |
|
$ |
1,049 |
|
$ |
1,158 |
|
$ |
1,050 |
| Adjusted EBITDA*
Payout |
|
|
140% |
|
|
189% |
|
|
200% |
|
|
200% |
| Target ID Sales % |
|
|
6.2% |
|
|
3.8% |
|
|
0.8% |
|
|
0.2% |
| Actual ID Sales % |
|
|
6.8% |
|
|
7.4% |
|
|
7.9% |
|
|
5.6% |
| ID Sales Payout |
|
|
155% |
|
|
200% |
|
|
200% |
|
|
200% |
| Total Payout % |
|
|
146% |
|
|
193% |
|
|
200% |
|
|
200% |
|
* |
For a reconciliation of non-GAAP measures, please see pages 46-48 of our 2022 Form 10-K. |
The quarterly bonus earned by the NEOs were as follows:
| |
Actual
Quarterly Cash Bonus Earned(1) |
Aggregate
Quarterly
Bonus |
| Name |
Q1 2022 |
Q2
2022 |
Q3
2022 |
Q4
2022 |
| Vivek
Sankaran |
$ |
589,543 |
$ |
585,252 |
$ |
605,769 |
$ |
605,769 |
$ |
2,386,333 |
| Sharon McCollam |
$ |
280,735 |
$ |
278,691 |
$ |
288,462 |
$ |
288,462 |
$ |
1,136,350 |
| Susan Morris |
$ |
224,588 |
$ |
222,953 |
$ |
230,769 |
$ |
230,769 |
$ |
909,079 |
| Juliette Pryor |
$ |
162,826 |
$ |
161,641 |
$ |
167,308 |
$ |
167,308 |
$ |
659,083 |
| Anuj Dhanda |
$ |
168,441 |
$ |
167,215 |
$ |
173,077 |
$ |
173,077 |
$ |
681,810 |
| (1) |
Based on a 16-week quarter in Q1 and 12-week quarters Q2 through Q4. |
Annual Bonus
Amounts under the annual bonus could be earned above or below the target level based on the scale discussed above. The targets and actual performance for fiscal 2022 for purposes of the annual cash bonus were as follows (in millions, except
percentages):
| Metric |
Fiscal 2022 |
| Target
Adjusted EBITDA |
$ |
4,247 |
| Actual Adjusted EBITDA* |
$ |
4,677 |
| Percentage Achieved |
|
110% |
| Payout |
|
200% |
| Target ID Sales % |
|
2.8% |
| Actual ID Sales % |
|
6.9% |
| Senior Leader Scorecard
Payout |
|
118.75% |
| Total Payout – SLT |
|
191.88% |
|
* |
For a reconciliation of non-GAAP measures, please see pages 46-48 of our 2022 Form 10-K. |
The cash bonus for the annual portion and the aggregate cash bonus (inclusive of quarterly bonus) earned by each NEO for fiscal 2022 were as follows:
| Name |
Aggregate
Quarterly
Bonus |
|
Annual
Portion of Total
Cash Bonus
Earned |
|
Total Quarterly
+ Annual Cash
Bonus for
Fiscal 2022 |
| Vivek
Sankaran |
$ |
2,386,333 |
|
$ |
2,518,359 |
|
$ |
4,904,692 |
| Sharon McCollam |
$ |
1,136,350 |
|
$ |
1,199,219 |
|
$ |
2,335,569 |
| Susan Morris |
$ |
909,079 |
|
$ |
959,375 |
|
$ |
1,868,454 |
| Juliette Pryor |
$ |
659,083 |
|
$ |
695,547 |
|
$ |
1,354,630 |
| Anuj Dhanda |
$ |
681,810 |
|
$ |
719,531 |
|
$ |
1,401,341 |
When is a participant’s cash bonus paid?
The quarterly bonus is paid at the end of each quarter upon certification of quarterly performance by the Compensation Committee. The annual bonus is paid at the end of the fiscal year, upon certification of annual performance by the
Compensation Committee.
Long-Term Incentive Award Programs
The Compensation Committee annually awards performance-based and time-based equity incentive compensation to certain eligible employees, including the NEOs. The combination of the
two ensures a balance between performance and retention and aligns the executive’s interests with the interests of our stockholders.
How are long-term equity incentives set for the fiscal year?
The target value of long-term equity incentive awards is based on competitive data and the executive’s total compensation taking into consideration other relevant factors, such as
the individual’s role and responsibilities, ability to impact and execute our financial and operational performance, prior performance, overall market conditions, and recommendations from the CEO (except for himself). Annual equity grants are
typically split 50-50 between performance-based and time-based awards. The equity awards are in the form of restricted stock units (“RSUs”).
Performance-Based Restricted Stock Units
The PBRSU awards specify a target number of RSUs subject to the award. At the time of grant, the performance-based awards are hypothetical shares of Common Stock subject to
issuance only upon attainment of the performance measures. The term of the PBRSU awards is three years. The actual number of RSUs the NEO can earn is based on the separate achievement of specified performance goals in the three fiscal years
inclusive of the grant year. At the end of each fiscal year of the three-year award term, the participant’s account is credited with the number of RSUs equal to the target number for such fiscal year multiplied by the accrual factor for such
fiscal year. Accrual factor for a fiscal year is a number equal to the product of the EPS Accrual Percentage and the ROIC Modifier, both further explained below. The accrual factor for each fiscal year is certified by the Compensation Committee
at the end of the fiscal year upon which certification the Company credits the participants account with the number of earned units for the recently completed fiscal year. To the extent any RSUs are earned at the end of a fiscal year, they are
accrued until their vest at the end of the three-year award term subject to continued employment through the term. Any RSUs not earned at the end of a fiscal year as a result of the performance criteria not being met are automatically
forfeited.
The performance measures are based on one or more pre-established objective criteria set by the Compensation Committee prior to the beginning of the fiscal year. The performance
goals for the fiscal year are calibrated annually by the Compensation Committee with the expectation that attainment of these goals would require significant effort in light of the business environment and tie to stockholder interests of
long-term growth.
EPS Accrual Percentage: The “EPS Accrual Percentage” for a particular fiscal year is determined as indicated in the table below by comparing the Company’s Adjusted EPS
achieved for such fiscal year to the Adjusted EPS goal for the fiscal year (expressed as a percentage). Straight-line interpolation is used to determine the EPS Accrual Percentage. In no event shall the EPS Accrual Percentage for a fiscal year
be more than 160%. Similar to the cash bonus goals, the Compensation Committee adjusts the goals for the performance measures for each fiscal year subject to a PBRSU grant. The adjustment is based on anticipated macroeconomic challenges and
other factors that could unduly challenge performance and diminish the incentive nature of our compensation program. The Adjusted EPS goals and accrual percentages for the first tranche of the fiscal 2022 grants were as follows:
Attainment of EPS Goal
(EPS/EPS Goal) |
|
EPS Accrual Percentage |
| Less than 70% |
|
0% |
| 70% |
|
50% |
| 90% |
|
100% |
| Greater than or equal to 120% |
|
160% |
The Adjusted EPS goals and accrual percentages for the second and third tranches of fiscal 2022 grants are as follows:
Attainment of EPS Goal
(EPS/EPS Goal) |
|
EPS Accrual Percentage |
| Less than 70% |
|
0% |
| 70% |
|
50% |
| 100% |
|
100% |
| Greater than or equal to 120% |
|
160% |
ROIC Modifier. The “ROIC Modifier” for a particular fiscal year is determined by comparing the Company’s ROIC achieved for the fiscal year to the ROIC goal for the fiscal
year (expressed as a percentage) and as presented in the table below. Straight-line interpolation is used to determine the ROIC Modifier. In no event shall the ROIC Modifier for a fiscal year be more than 125%. The ROIC goals and ROIC Modifier
for fiscal 2022 were as follows:
Attainment
of ROIC Goal
(ROIC/ROIC Goal) |
|
ROIC Modifier |
| Less
than or equal to 85% |
|
75% |
| Greater
than 85% but less than 105% |
|
100% |
| Greater
than or equal to 105% |
|
125% |
The performance awards vest, to the extent earned, after the third fiscal year from the grant year, after certification by the Compensation Committee and subject to continuous
employment of the participant through the vest dates.
The target goals and actual performance for fiscal 2022 are presented below. Similar to the targets for the annual cash bonus, the Compensation Committee set a high bar for the
targets in the fiscal 2022 tranche for the performance-based awards but took into consideration the macroeconomic challenges that would unduly challenge meeting the performance goals.
The following table shows the number of PBRSUs awarded (at target) to each of the NEOs in fiscal 2022, the number of PBRSUs that were subject to being earned
for fiscal 2022 performance (at target) and the number of PBRSUs that were actually earned upon certification of fiscal 2022 performance. The first tranche of the fiscal 2022 grant was earned at 200% of target.
| Name |
|
Performance- Based RSUs Awarded in Fiscal 2022
(@ Target) |
|
Performance-
Based RSUs
Subject to Being
Earned For
Fiscal 2022
(@ Target) |
|
Performance-
Based RSUs
Earned For
Fiscal 2022
(200% of Target) |
| Vivek Sankaran |
|
162,950 |
|
54,316 |
|
108,632 |
| Sharon McCollam |
|
68,611 |
|
22,870 |
|
45,740 |
| Susan Morris |
|
68,611 |
|
22,870 |
|
45,740 |
| Juliette Pryor |
|
34,305 |
|
11,435 |
|
22,870 |
| Anuj Dhanda |
|
42,882 |
|
14,294 |
|
28,588 |
As stated in the discussion of director compensation, beginning with the fiscal 2021 annual equity grants, to the extent dividends are declared by our Board, each earned but
unvested PBRSU and each unvested TBRSU is eligible to receive DERs which vest according to the same schedule as the underlying unit. Accrued but unvested DERs also receive DERs in subsequent dividends.
Special Dividend
On October 13, 2022 we declared a special cash dividend of $6.85 per share of Common Stock (the “Special Dividend”) payable to stockholders of record as of the close of business on
October 24, 2022. We paid the dividend on January 20, 2023. All unvested equity awards outstanding as of October 24, 2022 participate in the Special Dividend, according to the same vesting terms and conditions as the underlying equity award.
Unvested equity awards with DERs receive the Special Dividend through the issuance of additional RSUs relating to TBRSUs and PBRSUs, as applicable. Unvested equity awards without DERs receive the Special Dividend in cash subject to
anti-dilution provisions. See “Options Exercised and Stock Vested” table for the Special Dividend received in cash by certain NEOs.
Vested Performance-Based Restricted Stock Units Under Prior Grants
The PBRSUs awarded to certain NEOs in fiscal 2020 and fiscal 2021 (“Prior Grants”) have identical vest schedules as the fiscal 2022 awards. The following tables provide the number
of PBRSUs that were earned by the NEOs pursuant to the Prior Grants (third tranche of the fiscal 2020 grant and the second tranche of the fiscal 2021 grant) upon certification of fiscal 2022 performance by the Compensation Committee in April
2023. The maximum payout under the fiscal 2020 grant was 200% and fiscal 2021 grant was approximately 197%.
Fiscal 2020 Grant
| Name |
|
Fiscal 2020
Performance-
Based RSUs
@Target |
|
% Achieved |
|
Performance-
Based RSUs
Earned for
Fiscal 2022
Performance |
| Vivek
Sankaran(1) |
|
N/A |
|
N/A |
|
|
N/A |
| Sharon McCollam(2) |
|
N/A |
|
N/A |
|
|
N/A |
| Susan Morris |
|
47,473 |
|
200 |
% |
|
94,946 |
| Juliette Pryor |
|
33,552 |
|
200 |
% |
|
67,104 |
| Anuj Dhanda |
|
20,345 |
|
200 |
% |
|
40,690 |
|
(1) |
As discussed under “Discussion of the Terms of the Employment Agreements with our NEOs - Vivek Sankaran” Mr. Sankaran was granted equity awards in fiscal 2019 that were intended to cover his initial
employment term. As a result, Mr. Sankaran was not granted any additional annual equity awards in fiscal 2019, fiscal 2020 or fiscal 2021. However, in fiscal 2022, Mr. Sankaran received annual equity grants. |
|
(2) |
Ms. McCollam joined the Company in fiscal 2021. |
Fiscal 2021 Grant
| Name |
|
Fiscal 2021
Performance-
Based RSUs
@Target |
|
%
Achieved |
|
Performance
Based RSUs
Earned for
Fiscal 2022
Performance |
| Vivek Sankaran(1) |
|
N/A |
|
N/A |
|
|
N/A |
| Sharon
McCollam |
|
40,623 |
|
197.07 |
% |
|
80,056 |
| Susan
Morris |
|
31,312 |
|
197.07 |
% |
|
61,707 |
| Juliette
Pryor |
|
17,892 |
|
197.07 |
% |
|
35,260 |
| Anuj
Dhanda |
|
15,656 |
|
197.07 |
% |
|
30,853 |
|
(1) |
As discussed under “Discussion of the Terms of the Employment Agreements with our NEOs - Vivek Sankaran” Mr. Sankaran was granted equity awards in fiscal 2019 that were intended to cover his initial
employment term. As a result, Mr. Sankaran was not granted any additional annual equity awards in fiscal 2019, fiscal 2020 or fiscal 2021. However, in fiscal 2022, Mr. Sankaran received annual equity grants. |
Time-Based Restricted Stock Units
TBRSUs enable us to retain highly qualified individuals while tying their pay to continued growth of the Company over the long-term. The term of the TBRSU awards is generally three
years, typically vesting one-third annually on the last date of the fiscal year over the three-year period, subject to continuous employment of the participant through the vest dates.
Deferred Compensation Plan
For fiscal 2022, our NEOs were eligible to participate in the Albertsons Companies Deferred Compensation Plan and Mmes. Morris and Pryor and Mr. Dhanda were the only participants.
See “Nonqualified Deferred Compensation” table below for information with regard to the participation of the NEOs in the Deferred Compensation Plan.
401(k) Plan
The Albertsons Companies 401(k) Plan (the “ACI 401(k) Plan”) permits eligible employees to make voluntary, pre-tax employee contributions and/or voluntary after-tax Roth
contributions up to a specified percentage of compensation, subject to applicable tax limitations. We may make a discretionary matching contribution equal to a pre-determined percentage of an employee’s contributions, subject to applicable tax
limitations. Eligible employees who elect to participate in the ACI 401(k) Plan are generally 50% vested upon completion of two years of service and 100% vested after three years of service in any discretionary matching contribution, and fully
vested at all times in their employee contributions. For the 2022 plan year, our Board set a matching contribution rate equal to 50% of an employee’s contribution up to 7% of total compensation (base salary plus cash bonus).
Other Benefits
The NEOs participate in the health and dental coverage, Company-paid term life insurance, disability insurance, paid time off and paid holidays programs applicable to other
associates in their locality. We also maintain a relocation policy applicable to associates who are required to relocate their residence. These benefits are designed to be competitive with overall market practices and are in place to attract
and retain the necessary talent in the business.
Perquisites
Except as otherwise noted below, the NEOs generally are not entitled to any perquisites that are not otherwise available to all of our employees.
All NEOs are eligible for an executive physical.
Mr. Sankaran is entitled to the use of our corporate aircraft for up to 50 hours per year for himself, his family members and guests at no cost to him, other than the payment of
income tax on such usage at the lowest permissible rate.
For fiscal 2022, Ms. McCollam was eligible for financial and tax planning services and/or executive physical up to a maximum annual amount of $8,000.
Stock Ownership Guidelines and Restrictions on Trading
To more closely align the interests of senior management with the interests of our stockholders, the Board has adopted stock ownership guidelines. These guidelines require certain
senior executives to acquire and hold a minimum dollar value of our Common Stock as set forth below:
| Employee Level |
|
Applicable Multiple |
|
|
| Chief Executive Officer |
|
|
|
6x base salary |
| Executive Vice President |
|
|
|
3x base salary |
| Senior Vice Presidents and Division Presidents |
|
|
|
1x base salary |
All covered individuals are expected to achieve the target level within five years from the later of June 30, 2020, or appointment to their positions. Until the requirements are
met, covered individuals, including the NEOs, must hold 50% of Common Stock received upon the (i) vesting and settlement of performance shares or performance stock units; (ii) vesting of shares of restricted stock; and (iii) vesting and
settlement of RSUs, except those necessary to pay applicable taxes.
Our Insider Trading Policy prohibits our officers and directors from engaging, directly or indirectly, in any speculative transactions involving Company securities, including short
sales and buying or selling put or call options on Company securities, or entering into any derivative contracts. Any pledge or hedge of Company securities must be pre-cleared by the Company.
Recoupment Policy
We have a recoupment and forfeiture policy. It provides that if an executive at the level of Senior Vice President or higher (including Division President) engaged, directly or
indirectly, in fraudulent or other misconduct that caused a material restatement of the Company’s financials or required the recalculation of the performance achieved by the Company then, upon written notice from, and as determined by, the
Compensation Committee, the executive will reimburse the Company for the amounts that would not have been paid or earned or gains realized if the error had not occurred. Alternatively, the Compensation Committee can also adjust any unpaid
compensation or cancel or rescind outstanding vested or unvested awards. This recoupment policy applies to those amounts paid by the Company within the three-year period prior to the detection of the error. This policy will be modified or
otherwise updated to comply with the rules recently finalized by the SEC and the NYSE.
Retention Agreements
The Company entered into retention agreements with Mmes. McCollam, Morris and Pryor and Mr. Dhanda on March 1, 2023 in connection with the proposed Merger. Pursuant to their
respective retention agreements, Mmes. McCollam, Morris and Pryor and Mr. Dhanda were granted special retention incentive awards (each, a “SRI Award”) in the amounts of $4 million, $4 million, $2 million and $1 million, respectively.
Each SRI Award will be payable in cash in two equal installments. The first installment will be payable on the closing date of the Merger and the second installment will be payable
six months thereafter, subject to the executive’s continued employment through the applicable payment dates with the surviving corporation of the Merger (or such other affiliate that employs the executive after the closing of the Merger). If an
executive is terminated on or after the closing date of the Merger, any unpaid SRI Award will become payable (i) if the executive was terminated without “cause,” (ii) due to the executive’s “death or disability,” or (iii) if the executive
resigned for “good reason” (each term as defined in the executive’s respective employment agreement). The retention agreements include customary restrictive covenants of nondisclosure, non-disparagement, non-solicitation and non-competition (as
applicable). The restrictive covenants survive a termination of employment for a period of twelve months. In the event the Merger agreement is terminated, the SRI Award will be paid in two equal installments with the first installment to be
paid on the later of (a) the Merger agreement termination date or (b) October 13, 2024, and the second installment to be paid on the later of (x) the Merger agreement termination date or (y) October 13, 2025.
The Process of Setting Executive Compensation
Role of the Compensation Committee and the Compensation Consultant
The Compensation Committee oversees and provides strategic direction to management regarding all aspects of our pay program for senior executives. It sets the compensation of the
CEO and the non-CEO NEOs. The Compensation Committee conducts and reviews with the Board an annual evaluation of the performance of the CEO and determines and approves the CEO’s compensation based on this evaluation. The Compensation Committee
takes into consideration the results of the most recent say-on-pay vote when it determines CEO compensation.
Each year the Compensation Committee engages in extensive executive compensation discussions with our independent compensation consultant to review best practices and receive a
competitive assessment of executive compensation compared to peers. The Committee reviews total compensation and approves each of the elements of executive compensation, and reviews whether compensation programs and practices carry undue risk.
During fiscal 2022, the Compensation Committee continued to engage FW Cook as its independent compensation consultant. FW Cook evaluates the competitiveness of the design of the Company’s executive compensation program and recommends
appropriate changes, reviews the competitiveness of the compensation of the NEOs and certain other executive officers, evaluates market pay data and competitive-positioning, provides analyses and inputs on program structure, performance
measures, and goals, provides updates on market trends and the regulatory environment as it relates to executive compensation, reviews various management proposals presented to the Compensation Committee related to executive compensation and
provides objective analysis and recommendations, and works with the Compensation Committee to validate and strengthen the pay-for-performance relationship and alignment. FW Cook does not perform other services for the Company and will not do so
without the prior consent of the Compensation Committee. FW Cook meets with the Compensation Committee, outside the presence of management, in executive sessions.
Role of Management and the CEO in Setting Executive Compensation
The Compensation Committee solicits the views of our CEO when making compensation decisions for other NEOs (except his own). None of our NEOs participate in their own compensation
discussion.
Use of Peer Data in Setting Our Executive Compensation
The Compensation Committee believes our NEOs’ compensation should be aligned to similarly situated executives within a peer group of companies in order to attract, retain and
motivate the highest caliber executive management team critical to our long-term success. While we do not rely solely on benchmark compensation to establish target pay levels, FW Cook conducts a review, annually, of the compensation programs of
peers selected based on size-appropriate comparators operating in retail industries (the “peer group”) that are also traded publicly. We believe the resulting peer group provides the Compensation Committee with a valid comparison for the
Company’s executive compensation program.
Our compensation peer group for fiscal 2022 remained the same as fiscal 2021 and was as follows:
|
Best Buy
Costco
CVS
Dollar General
Dollar Tree
|
|
Home Depot
Kroger
Lowe’s Companies
Starbucks
Sysco
|
|
Target
TJX Companies
Walgreens
|
Compensation Risk Assessment
Our compensation program motivates our leaders to perform and engages them in the Company’s success which contributes to stockholder value. We believe our approach to compensation
helps mitigate excessive risk-taking that could harm stockholder value or reward poor judgment by our executives. Below are some highlights of the Company’s compensation program which mitigate risks associated with compensation:
|
● |
balance between “short- and long-term” pay and “fixed and variable” pay; |
|
● |
performance-based payouts within range of competitive practices; |
|
● |
company performance measured against objective, pre-determined financial metrics; |
|
● |
capped payout levels for incentive compensation; |
|
● |
stock ownership guidelines for directors, NEOs and upper management; |
|
● |
recoupment and forfeiture policy for upper management; and |
|
● |
solicitation of stockholder feedback about our compensation programs on an annual basis. |
Our Compensation Committee monitors and considers the risk mitigating factors when setting executive compensation. Based on such review, the Compensation Committee has concluded
that the compensation program does not create risks that are reasonably likely to have a materially adverse effect on the Company or put the Company at-risk.
| Compensation Committee Report |
The Compensation Committee has reviewed and discussed the CD&A as required by Item 402(b) of Regulation S-K with management and based on such review and discussion, the
Compensation Committee recommended to the Board that the CD&A be included in this proxy statement and incorporated by reference in the 2022 Form 10-K. The Board has approved the recommendation.
Compensation Committee
Kim Fennebresque (Chair)
Brian Kevin Turner
Mary Elizabeth West
| Summary Compensation Table |
The following table sets forth summary information concerning the total compensation earned by our NEOs for each of the last three completed fiscal years.
| Name and Principal Position |
Fiscal
Year(1) |
|
Salary
($)(2) |
|
Bonus
($)(3) |
|
Stock
Awards
($)(4) |
|
Non-Equity
Incentive Plan
Compensation
($)(5) |
|
All Other
Compensation
($)(6) |
|
Total
($) |
Vivek Sankaran
Chief Executive Officer |
2022 |
|
1,500,000 |
|
— |
|
9,499,985 |
|
4,904,692 |
|
198,453 |
|
16,103,130 |
| 2021 |
|
1,500,000 |
|
2,500,000 |
|
— |
|
4,500,000 |
|
139,520 |
|
8,639,520 |
| 2020 |
|
1,500,000 |
|
2,500,000 |
|
— |
|
4,343,244 |
|
140,091 |
|
8,483,335 |
Sharon McCollam
President and
Chief Financial Officer |
2022 |
|
1,000,000 |
|
— |
|
4,000,021 |
|
2,335,569 |
|
5,378 |
|
7,340,968 |
| 2021 |
|
476,923 |
|
2,000,000 |
|
7,999,986 |
|
1,201,923 |
|
30,489 |
|
11,709,321 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Susan Morris
Executive Vice President and
Chief Operations Officer |
2022 |
|
1,000,000 |
|
172,637 |
|
4,000,021 |
|
1,868,454 |
|
105,756 |
|
7,146,868 |
| 2021 |
|
1,000,000 |
|
91,597 |
|
3,500,018 |
|
2,000,000 |
|
146,498 |
|
6,738,113 |
| 2020 |
|
900,000 |
|
91,597 |
|
4,598,031 |
|
1,737,298 |
|
60,340 |
|
7,387,266 |
Juliette
Pryor
Former Executive Vice President, General
Counsel and Secretary |
2022 |
|
725,000 |
|
875,000 |
|
1,999,982 |
|
1,354,630 |
|
63,167 |
|
5,017,779 |
| 2021 |
|
725,000 |
|
875,000 |
|
2,000,000 |
|
1,450,001 |
|
21,856 |
|
5,071,857 |
| 2020 |
|
515,865 |
|
1,500,000 |
|
2,814,286 |
|
981,220 |
|
5,000 |
|
5,816,370 |
Anuj Dhanda
Executive Vice President and
Chief Technology and
Transformation Officer |
2022 |
|
750,000 |
|
— |
|
2,500,021 |
|
1,401,341 |
|
75,900 |
|
4,727,262 |
| 2021 |
|
700,000 |
|
3,057,253 |
|
1,749,990 |
|
1,400,000 |
|
139,646 |
|
7,046,889 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Reflects the fiscal years ended February 25, 2023, February 26, 2022, and February 27, 2021. Since Mr. Dhanda was not a NEO in fiscal 2020, per the rules of the SEC his compensation for fiscal 2020 has not
been disclosed. Ms. Pryor resigned from the Company effective April 29, 2023. |
|
(2) |
Ms. McCollam was hired on September 7, 2021. The amount shown for fiscal 2021 reflects the pro-rata amount based on an annual salary of $1,000,000. Ms. Pryor was hired on June 15, 2020. The amount shown for
fiscal 2020 reflects the pro-rata amount based on an annual salary of $725,000. |
|
(3) |
Retention bonuses, sign-on bonuses and tax bonuses paid to the NEOs as set forth in the table below. During each of the fiscal years, Ms. Morris received tax bonuses equal to 4% of the grant date fair market
value of certain pre-IPO TBRSU grants upon their vest. Ms. Pryor received her sign-on bonus of $3.2 million over the three fiscal years. In fiscal 2021, Mr. Dhanda received a retention award bonus in the form of 129,590 TBRSUs that will
vest fully on August 5, 2024 and the reported amount includes the grant date fair market value of the restricted stock units. |
| Name |
Fiscal
Year |
|
Retention Bonus
($) |
|
Sign On Bonus
($) |
|
Tax Bonus
($) |
| Vivek Sankaran |
2022 |
|
— |
|
— |
|
— |
| |
2021 |
|
2,500,000 |
|
— |
|
— |
| |
2020 |
|
2,500,000 |
|
— |
|
— |
| Sharon McCollam |
2022 |
|
— |
|
— |
|
— |
| |
2021 |
|
— |
|
2,000,000 |
|
— |
| Susan Morris |
2022 |
|
— |
|
— |
|
172,637 |
| |
2021 |
|
— |
|
— |
|
91,597 |
| |
2020 |
|
— |
|
— |
|
91,597 |
| Juliette Pryor |
2022 |
|
— |
|
875,000 |
|
— |
| |
2021 |
|
— |
|
875,000 |
|
— |
| |
2020 |
|
— |
|
1,500,000 |
|
— |
| Anuj Dhanda |
2022 |
|
— |
|
— |
|
— |
| |
2021 |
|
3,000,009 |
|
— |
|
57,244 |
| |
2020 |
|
— |
|
— |
|
— |
|
(4) |
Reflects the aggregate grant date fair market values of the equity awards at target. |
Prior to the Company’s IPO, the fair value of equity-based compensation awards in fiscal 2020 was determined using an option pricing model,
adjusted for lack of marketability and using an expected term or time to liquidity based on judgments by management. Following the Company’s IPO, the grant date fair market values were determined based on the closing price per share of Common
Stock on May 12, 2021 of $18.63, on August 5, 2021 of $23.15, on September 7, 2021 of $33.50, on September 9, 2021 of $32.17 and on February 28, 2022 of $29.15.
See Notes 1 and 10—Equity-Based Compensation in our audited consolidated financial statements included in our 2022 Form 10-K for a discussion
of the assumptions used in the valuation of such awards pursuant to FASB ASC Topic 718.
As required by the rules of the SEC, the grant date fair market values assuming the maximum level of performance for the PBRSUs are as follows:
| Name |
Fiscal 2022 |
|
Fiscal 2021 |
|
Fiscal 2020 |
| Vivek Sankaran |
$9,499,985 |
|
N/A |
|
N/A |
| Sharon McCollam |
$4,000,021 |
|
$7,999,985 |
|
N/A |
| Susan Morris |
$4,000,021 |
|
$3,500,018 |
|
$4,597,285 |
| Juliette Pryor |
$1,999,981 |
|
$2,000,005 |
|
$2,814,285 |
| Anuj Dhanda |
$2,500,020 |
|
$1,749,990 |
|
N/A |
|
(5) |
Reflects amounts paid to the NEOs under our bonus program for the applicable fiscal year. For a discussion of our cash bonus structure see “Compensation Discussion and Analysis—Cash Bonus.” |
|
(6) |
Excludes DERs which are factored into the grant date fair value of disclosed equity awards. A detailed breakdown of “All Other Compensation” for fiscal 2022 is provided in the table below: |
| Name |
|
|
Fiscal
Year |
|
Aircraft
($)(a) |
|
Life
Insurance
($) |
|
Other
Payments
($)(b) |
|
Financial/
Tax Planning
($) |
|
Deferred
Compensation
Plan Company
Contribution
($)(c) |
|
401(k)Plan
Company
Contribution
($) |
|
Total
($) |
| Vivek Sankaran |
|
|
2022 |
|
194,697 |
|
3,756 |
|
— |
|
— |
|
— |
|
— |
|
198,453 |
| Sharon McCollam |
|
|
2022 |
|
— |
|
5,378 |
|
— |
|
— |
|
— |
|
— |
|
5,378 |
| Susan Morris |
|
|
2022 |
|
— |
|
— |
|
— |
|
4,608 |
|
91,398 |
|
9,750 |
|
105,756 |
| Juliette Pryor |
|
|
2022 |
|
— |
|
4,727 |
|
— |
|
— |
|
58,440 |
|
— |
|
63,167 |
| Anuj Dhanda |
|
|
2022 |
|
— |
|
— |
|
43 |
|
— |
|
66,107 |
|
9,750 |
|
75,900 |
|
(a) |
The aggregate incremental cost to us for personal use of Company aircraft. |
|
(b) |
Miscellaneous payments. |
|
(c) |
Contributions to the NEO’s Deferred Compensation Plan account in an amount equal to the excess of the amount we would contribute to the ACI 401(k) Plan as a Company contribution on the NEO’s behalf for the
plan year without regard to any limitations imposed by the Internal Revenue Code based on the NEO’s compensation over the amount of our actual contributions to the ACI 401(k) Plan for the plan year. |
Grants of Plan Based Awards
The following table specifies the grants of awards made under our cash bonus and
equity incentive plans to the NEOs during and for fiscal 2022.
| |
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(3) |
|
Estimated Future Payouts Under
Equity Incentive Plan Awards(4) |
|
All
Other
Stock
Awards:
Number
of Units(5)(#) |
|
Grant
Date Fair
Value
of Stock
Awards
($)(6) |
| Name |
|
Approval
Date(1) |
|
Grant
Date(2) |
|
Threshold
($) |
|
Target
($) |
|
Maximum
($) |
|
Threshold
(#) |
|
Target
(#) |
|
Maximum
(#) |
|
|
| Vivek Sankaran |
|
|
|
|
|
656,250 |
|
2,625,000 |
|
5,250,000 |
|
|
|
|
|
|
|
|
|
|
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
122,213 |
|
162,950 |
|
325,900 |
|
|
|
4,749,993 |
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
162,950 |
|
4,749,993 |
| Sharon McCollam |
|
|
|
|
|
312,500 |
|
1,250,000 |
|
2,500,000 |
|
|
|
|
|
|
|
|
|
|
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
51,458 |
|
68,611 |
|
137,222 |
|
|
|
2,000,011 |
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
68,611 |
|
2,000,011 |
| Susan Morris |
|
|
|
|
|
250,000 |
|
1,000,000 |
|
2,000,000 |
|
|
|
|
|
|
|
|
|
— |
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
51,458 |
|
68,611 |
|
137,222 |
|
|
|
2,000,011 |
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
68,611 |
|
2,000,011 |
| Juliette Pryor |
|
|
|
|
|
181,250 |
|
725,000 |
|
1,450,000 |
|
|
|
|
|
|
|
|
|
|
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
25,729 |
|
34,305 |
|
68,610 |
|
|
|
999,991 |
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
34,305 |
|
999,991 |
| Anuj Dhanda |
|
|
|
|
|
187,500 |
|
750,000 |
|
1,500,000 |
|
|
|
|
|
|
|
|
|
|
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
32,162 |
|
42,882 |
|
85,764 |
|
|
|
1,250,010 |
| |
|
2/24/2022 |
|
2/28/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
42,882 |
|
1,250,010 |
|
(1) |
The dates the Compensation Committee approved the grants of the long-term incentive awards. |
|
(2) |
The grant date of the equity awards. |
|
(3) |
Amounts represent the range of cash bonus awards the NEO was potentially entitled to receive based on the
achievement of performance goals for fiscal 2022 under our Corporate Incentive Plan. See “Compensation Discussion and Analysis—Cash Bonus” for a description of the bonus process and the target bonus opportunities of each NEO for 2022.
The amounts actually paid are reported in the Summary Compensation Table. See Key NEO Compensation Decisions for Fiscal 2022 for the percentage of target compensation paid as cash bonus. |
|
(4) |
The reported numbers are PBRSUs granted pursuant to the annual award. See “Compensation Discussion and Analysis—
Long-Term Incentive Award Programs” for a description of the terms of the PBRSUs. |
|
(5) |
The reported numbers are TBRSUs granted pursuant to the annual award. See “Compensation Discussion and Analysis—
Long-Term Incentive Award Programs” for a description of the terms of the TBRSUs. |
|
(6) |
The grant date fair values of the TBRSUs and the PBRSUs were determined using the closing price of Common Stock on
February 28, 2022 of $29.15 per share. |
See Notes 1 and 10—Equity Based Compensation in our audited
consolidated financial statements included in our 2022 Form 10-K for a discussion of the assumptions used in the valuation of such awards pursuant to FASB ASC Topic 718.
Outstanding Equity Awards at
Fiscal Year End
| Name |
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(1) |
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(2) |
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares or
Units That
Have Not
Vested
(#)(3) |
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares or
Units That
Have Not
Vested
($)(2) |
| Vivek Sankaran |
|
469,377 |
(4) |
|
9,500,190 |
|
485,747 |
(5) |
|
9,831,519 |
| Sharon McCollam |
|
226,623 |
(6) |
|
4,586,850 |
|
149,859 |
(7) |
|
3,033,146 |
| Susan Morris |
|
188,962 |
(8) |
|
3,824,591 |
|
178,707 |
(9) |
|
3,617,030 |
| Juliette Pryor |
|
137,121 |
(10) |
|
2,775,329 |
|
103,642 |
(11) |
|
2,097,714 |
| Anuj Dhanda |
|
278,513 |
(12) |
|
5,637,103 |
|
94,538 |
(13) |
|
1,913,449 |
|
(1) |
Includes (i) TBRSUs, and (ii) PBRSUs pursuant to Prior Grants that have been earned based on certification by the
Compensation Committee and will vest upon the completion of the term of the full award and continued service through the applicable vesting date, and (iii) related DERs. The reported number for Mr. Sankaran includes his
performance-based restricted stock. |
|
(2) |
Based on closing price of $20.24 per share of Common Stock as of February 27, 2023. |
|
(3) |
Reflects PBRSUs pursuant to Prior Grants and fiscal 2022 awards that may be earned based upon certification by the
Compensation Committee of the performance achieved for the respective fiscal year and will vest subject to continued service through the applicable vesting date. The numbers have been reported at target. The reported number for Mr.
Sankaran includes his performance-based restricted stock. See tables on page 56 for the number of PBRSUs that were earned based on fiscal 2022 performance upon certification by the Compensation Committee. |
|
(4) |
Reflects 215,198 shares of restricted stock that vested on April 25, 2023, 107,599 shares of restricted stock that
will vest on April 25, 2024, 73,446 shares of RSUs that will vest on February 24, 2024, 73,134 shares of RSUs that will vest on February 22, 2025, provided Mr. Sankaran is employed on the applicable vesting dates. |
|
(5) |
Reflects 215,198 shares of performance-based restricted stock subject to fiscal 2022 performance, 107,599 shares of
performance-based restricted stock subject to fiscal 2023 performance, 54,316 shares of PBRSUs subject to fiscal 2022 performance, 54,317 shares of PBRSUs subject to fiscal 2023 performance, and 54,317 shares of PBRSUs subject to fiscal
2024 performance. |
|
(6) |
Reflects 86,124 TBRSUs that will vest on February 24, 2024, and 30,793 TBRSUs that will vest on February 22, 2025,
provided Ms. McCollam is employed on the applicable vesting date. Also, reflects 109,706 PBRSUs earned pursuant to the fiscal 2021 award. |
|
(7) |
Reflects 63,493 PBRSUs subject to fiscal 2022 performance, 63,495 PBRSUs subject to fiscal 2023 performance, and
22,871 PBRSUs subject to fiscal 2024 performance. |
|
(8) |
Reflects 73,610 TBRSUs that will vest on February 24, 2024 and 30,793 TBRSUs that will vest on February 25, 2025
provided Ms. Morris is employed on the applicable vesting dates. Also, reflects 84,559 PBRSUs earned pursuant to the fiscal 2021 award. |
|
(9) |
Reflects 101,655 PBRSUs that were subject to fiscal 2022 performance, 54,181 PBRSUs subject to fiscal 2023
performance, and 22,871 PBRSUs subject to fiscal 2024 performance. |
|
(10) |
Reflects 33,552 TBRSUs that will vest on June 15, 2023, 39,851 TBRSUs that will vest on February 24, 2024, and
15,400 TBRSUs that will vest on February 22, 2025 provided Ms. Pryor is employed on the applicable vesting dates. Also, reflects 48,318 PBRSUs earned pursuant to the fiscal 2021 award. |
|
(11) |
Reflects 62,879 PBRSUs that were subject to fiscal 2022 performance, 29,328 PBRSUs subject to fiscal 2023
performance, and 11,435 PBRSUs subject to fiscal 2024 performance. |
|
(12) |
Reflects 40,670 TBRSUs that will vest on February 24, 2024, 176,318 TBRSUs that will vest on August 5, 2024, and
19,245 TBRSUs that will vest on February 22, 2025 provided Mr. Dhanda is employed on the applicable vesting dates. Also, reflects 42,280 PBRSUs earned pursuant to the fiscal 2021 award. |
|
(13) |
Reflects 50,295 PBRSUs that were subject to being earned based on fiscal 2022 performance, 29,949 PBRSUs that may be
earned based on fiscal 2023 performance, and 14,294 PBRSUs that may be earned based on fiscal 2024 performance. |
Option Exercises and Stock
Vested
| Name |
|
Number of
Shares
Acquired on
Vesting
(#)(1) |
|
Value
Realized on
Vesting
($)(2) |
| Vivek Sankaran |
|
719,039 |
|
20,305,592 |
| Sharon McCollam |
|
127,205 |
|
2,939,342 |
| Susan Morris |
|
530,828 |
|
14,406,052 |
| Juliette Pryor |
|
91,570 |
|
2,298,082 |
| Anuj Dhanda |
|
172,271 |
|
4,477,468 |
|
(1) |
Excludes performance-based restricted stock and PBRSUs related to Prior Grants that vested upon certification by the
Compensation Committee in April 2023 based on fiscal 2022 performance. Includes DERs issued for regular quarterly dividends as well as for the Special Dividend. Excludes the Special Dividend paid in cash to Ms. Morris and Mr. Dhanda
related to equity awards without DERs that vested during fiscal 2022. |
|
(2) |
Calculated based on the closing price of Common Stock on the vesting date multiplied by the number of vested shares. |
Nonqualified Deferred
Compensation
The following table shows the executive and Company contributions, earnings and
account balances for the NEOs under the Deferred Compensation Plans during fiscal 2022. The Deferred Compensation Plans are nonqualified deferred compensation arrangements intended to comply with Section 409A of the Code. See “Compensation
Discussion and Analysis—Deferred Compensation Plan” for a description of the terms and conditions of the Deferred Compensation Plans. The aggregate balance of each participant’s account consists of amounts that have been deferred by the
participant, Company contributions, plus earnings (or minus losses). We do not deposit any amounts into any trust or other account for the benefit of plan participants. In accordance with tax requirements, the assets of the Deferred
Compensation Plans are subject to claims of our creditors.
| Name |
|
Executive
Contributions
in Last Fiscal
Year(1)
($) |
|
Registrant
Contributions
in Last Fiscal
Year(1)
($) |
|
Aggregate
Earnings
in Last
Fiscal
Year(2)
($) |
|
Aggregate
Withdrawals/
Distributions
($) |
|
Aggregate
Balance at
Last Fiscal
Year End
($) |
| Vivek Sankaran |
|
— |
|
— |
|
— |
|
|
— |
|
— |
| Sharon McCollam |
|
— |
|
— |
|
— |
|
|
— |
|
— |
| Susan Morris |
|
131,203 |
|
91,398 |
|
(130,319 |
) |
|
— |
|
1,600,644 |
| Juliette Pryor |
|
447,779 |
|
58,440 |
|
(43,538 |
) |
|
— |
|
888,945 |
| Anuj Dhanda |
|
1,532,139 |
|
66,107 |
|
(136,212 |
) |
|
— |
|
3,013,191 |
|
(1) |
All executive contributions represent amounts deferred by each NEO under a Deferred Compensation Plan and are
included as compensation in the Summary Compensation Table. All Company contributions are reported under “All Other Compensation” in the Summary Compensation Table. See footnote (6) of the Summary Compensation Table. |
|
(2) |
These amounts are not reported in the Summary Compensation Table as none of the earnings are based on interest above
the market rate. |
| Discussion of the Terms of the Employment Agreements with Our NEOs |
Below is a summary of the key provisions under the employment agreements with our
NEOs.
Vivek Sankaran
Term and Renewal Provisions. Mr. Sankaran’s employment agreement had an
initial term of three years with an automatic renewal for additional one-year periods at the end of each year until the termination of his employment.
Salary and Bonus. Mr. Sankaran is entitled to receive an annual base salary
subject to increase from time to time as determined by our Board or the Compensation Committee. He is also eligible to receive a cash bonus for the fiscal year in an amount determined by the Board or Compensation Committee.
Equity Awards. Following the completion of the initial term of three years of
his employment, Mr. Sankaran is eligible to receive equity-based incentive awards at such times and subject to such terms and conditions, as equity-based incentive awards made to other senior executives of the Company.
Conversion to Restricted Stock. Upon the consummation of our IPO, Mr.
Sankaran’s Class B-1 Units converted into 968,391 shares of restricted Common Stock (the “Time-Based Restricted Stock”) and Mr. Sankaran’s Class B-2 Units converted into 968,391 shares of restricted Common Stock (the “Performance-Based
Restricted Stock”, and together with the Time-Based Restricted Stock, the “Restricted Stock”) of the Company and continue to vest in accordance with the vesting schedule described below.
Terms of Time-Based Restricted Stock.
|
● |
Mr. Sankaran’s Time-Based Restricted Stock will vest in equal installments on each of the first, second, third,
fourth and fifth anniversaries of his Commencement Date. |
|
● |
If, prior to a change in control, Mr. Sankaran’s employment terminates due to his death or disability, Mr. Sankaran
will become vested in the number of Time-Based Restricted Stock that would have vested on the next anniversary of the grant date, prorated based on the number of days of service during the period commencing on the prior anniversary of
the grant date and ending on the date of Mr. Sankaran’s termination of employment. |
|
● |
If, prior to a change in control, Mr. Sankaran’s employment is terminated by us without “cause” or Mr. Sankaran
resigns for “good reason” (as defined in the Sankaran Employment Agreement), Mr. Sankaran will become vested in the Time-Based Restricted Stock that he would have become vested on the next anniversary of the grant date following such
termination of employment. |
|
● |
If following a change in control, Mr. Sankaran’s employment terminates due to his death or disability, Mr. Sankaran
will become fully vested in all unvested Time-Based Restricted Stock. |
|
● |
If Mr. Sankaran’s employment is terminated by us without cause or Mr. Sankaran resigns for good reason following a
change in control or within the 180-day period immediately prior to a change in control, Mr. Sankaran will become fully vested in the Time-Based Restricted Stock. |
|
● |
If Mr. Sankaran’s employment terminates due to our non-renewal of the term, Mr. Sankaran will become vested in any
Time-Based Restricted Stock that would have vested during the 13-month period following such termination of employment. |
Terms of Performance-Based Restricted Stock.
|
● |
Mr. Sankaran’s Performance-Based Restricted Stock are divided into three equal tranches, each of which will vest in
installments: |
|
● |
the first tranche, consisting of one-third of the Performance-Based Restricted Stock, vested at the end of each of
fiscal 2019, fiscal 2020 and fiscal 2021; |
|
● |
the second tranche, consisting of one-third of the Performance-Based Restricted Stock, vested at the end of each of
fiscal 2020, fiscal 2021 and fiscal 2022; and |
|
● |
the third tranche, consisting of one-third of the Performance-Based Restricted Stock, vested or will vest at the
end of each of fiscal 2021, fiscal 2022 and fiscal 2023, in each case based on our attainment of performance criteria for each applicable fiscal year, and in each case subject to Mr. Sankaran’s continued employment with the Company
through the applicable vest date. |
Terms of Time-Based and Performance-Based Restricted Stock Units
As discussed in the CD&A, Mr. Sankaran was granted the annual equity award in
fiscal 2022. The TBRSUs and PBRSUs subject to his fiscal 2022 grant are governed by the terms of the Company’s equity award agreements. See discussion under “Potential Payments Upon Termination of Employment’ for details regarding the
treatment of equity awards upon termination of employment.
Benefits. Mr. Sankaran is entitled, if and to the extent eligible, to
participate in the Company’s benefit plans that are available to other senior executives of the Company and on the same terms as such other executives. In addition, for Mr. Sankaran only, the Company maintains a $5 million life insurance
policy.
Perquisites. During the term of his employment, Mr. Sankaran is entitled to
the use of a corporate aircraft for up to fifty (50) hours per year for his personal use, his family members and guests at no cost to him except to pay income taxes at the lowest permissible rate.
Sharon McCollam
Term and Renewal Provisions. Ms. McCollam’s employment agreement has an
initial term of three years with an automatic renewal for additional one-year periods at the end of each year until the termination of her employment.
Salary and Bonus. Ms. McCollam is entitled to receive an annual base salary
subject to increase from time to time as determined by our Board or the Compensation Committee. She is also eligible to receive a cash bonus for the fiscal year in an amount determined by the Board or Compensation Committee.
Equity Awards. During the Term (as defined in Ms. McCollam’s employment
agreement), Ms. McCollam is eligible to receive an annual equity award grant with a fair market value of not less than $4 million with a 50-50 split between TBRSUs and PBRSUs.
Expense Reimbursement. Ms. McCollam is entitled to receive up to a maximum of
$8,000, subject to increase or decrease by the Compensation Committee, for preparation of tax returns or physical examination.
Employment Agreements with Other NEOs
During fiscal 2022, the Compensation Committee approved a form employment agreement
for senior Company executives, as applicable, except for Mr. Sankaran and Ms. McCollam. Accordingly, effective July 20, 2022 (the “Effective Date”), the Company entered into respective employment agreements with Mme. Morris and Pryor and Mr.
Dhanda (each, a “New Employment Agreement” and collectively, the “New Employment Agreements”). The New Employment Agreements amend and restate the respective employment agreements of Ms. Morris and Mr. Dhanda dated May 1, 2019 and Ms. Pryor
dated June 15, 2020 (collectively, the “Original Employment Agreements”) which were due to expire January 30, 2023.
The New Employment Agreements amended the Original Employment Agreements to, among
others, make the following changes:
Term. The term of the New Employment Agreements shall continue until
termination of the executive’s employment.
Termination provisions and benefits. The executive can terminate employment,
subject to certain notice and cure provisions, on the basis of Good Reason (as defined in the New Employment Agreement) in the event of (i) a material reduction in the executive’s base salary or target bonus opportunity, unless such decrease
is part of a temporary, uniform reduction in salary for all executive officers of the Company that is undertaken in the reasonable business judgment of the Board, based on the Company’s financial performance or a reasonably anticipated
economic downturn; (ii) relocation of the executive’s principal location of work to any location that is in excess of thirty (30) miles from the executive’s principal work location on the Effective Date; or (iii) a material diminution in the
executive’s authority, responsibilities or duties. The executive shall also be entitled to receive the bonus (on a pro-rata basis) upon termination for Good Reason or without Cause (as defined in the New Employment Agreement).
In the event the executive’s employment terminates due to death or Disability (as
defined in the New Employment Agreement), the executive or the executive’s estate (in the case of the executive’s death), shall be entitled to receive a lump sum payment equal to the earned but unpaid portion of any bonus earned in respect of
any performance period that is completed prior to the executive’s death or Disability.
The New Employment Agreements contain various covenants, including covenants related
to confidentiality, non-competition and non-solicitation.
Potential Payments Upon Termination of Employment
The employment agreements provide for severance payments upon termination of
employment, the amount and nature of which depends upon the reason for termination. The estimated payments disclosed in the tables following the narrative discussion exclude Accrued Benefits (defined below) accrued through February 25, 2023
that would be paid in the normal course of continued employment. The value of the equity awards is based on the terms of our equity award agreements and the closing price of our Common Stock on February 27, 2023 of $20.24 per share.
Ms. Pryor left the Company effective April 29, 2023. None of the enhanced severance
payments and benefits under her employment agreement were triggered and she received the Accrued Benefits (defined below).
The treatment of equity awards for NEOs (including Mr. Sankaran’s fiscal 2022 equity
grant) is set forth below:
| |
|
Termination
due to Death or Disability |
|
Termination
– By
Company with
Cause/By Executive
without Good Reason |
|
Termination
– By Company without Cause/By Executive
for Good Reason |
|
Termination
due to
Death or Disability
and Change
In Control |
|
Termination – By
Company without
Cause/Good Reason
and Change in
Control |
| TBRSUs |
|
Accelerated vesting of all (100%)
outstanding TBRSUs in which the NEO has not yet become vested, payable on the Termination Date |
|
None |
|
For Ms. McCollam only, accelerated vesting
of TBRSUs that would vest on the next anniversary of the grant date after termination of service |
|
Accelerated vesting of all (100%)
outstanding TBRSUs in which the NEO has not yet become vested, payable on the Termination Date |
|
Accelerated vesting
of all (100%) outstanding TBRSUs in which the NEO has not yet become vested, payable on the Termination Date |
| PBRSUs |
|
Accelerated vesting (100%) of PBRSUs equal
to the target for each open fiscal year of the award term, payable on the Termination Date |
|
None |
|
For Ms. McCollam only, vest of any PBRSUs
that would have vested as of the last day of the fiscal year in which termination occurred based on the applicable accrual factor |
|
Accelerated vesting (100%) of PBRSUs equal
to the target for each open fiscal year of the award term, payable on the Termination Date |
|
Accelerated vesting
(100%) of PBRSUs equal to the target for each open fiscal year of the award term, payable on the Termination Date |
Termination by Company for cause, by the NEO without good reason or non-renewal of
the employment agreement by the NEO: In the event the NEO’s employment is terminated by us for “cause” (as defined in each executive employment agreement) or under a voluntary termination without “good reason” (as defined in each
executive employment agreement) or the NEO does not renew his or her employment agreement, the NEO will receive accrued but unpaid Base Salary through the date of termination, the earned but unpaid portion of any cash bonus in respect of any
completed performance period prior to termination, payment for accrued but unused vacation days, vested benefits to which the executive is entitled to under the Company’s plans, programs or arrangements in which the executive participates and
all reimbursable expenses (“Accrued Benefits”).
Termination by the Company without cause or by the executive for good reason:
If Mr. Sankaran’s employment is terminated by us without cause or if he voluntarily resigns for good reason, Mr. Sankaran would be entitled to receive (i) any earned but unpaid bonus with respect to any completed performance period prior to
the date of termination, (ii) a lump sum payment in an amount equal to 200% of the sum of Mr. Sankaran’s base salary plus target bonus, (iii) a bonus based on actual performance metrics for the fiscal year in which termination occurs, but
prorated based on the number of days of service during the applicable fiscal year through the termination date and payable at the same time it would otherwise be paid, (iv) payment of the unvested or unpaid portions of the sign-on retention
award and (v) cost of reimbursement for health care for Mr. Sankaran and his dependents up to 18 months. In addition, as stated above, Mr. Sankaran will become vested in the Time-Based Restricted Stock that he would have become vested on the
next anniversary of the grant date following such termination of employment.
If Ms. McCollam’s employment is terminated by us without cause or if she voluntarily
resigns for good reason, Ms. McCollam would be entitled to receive (i) a lump sum payment in an amount equal to 200% of the sum of Ms. McCollam’s base salary plus target bonus, (ii) a bonus based on actual performance metrics for the fiscal
year in which termination occurs, but prorated based on the number of days of service during the applicable fiscal year through the termination date and payable at the same time it would otherwise be paid and (iii) cost of reimbursement for
health care for Ms. McCollam and her dependents up to 18 months.
If Mr. Dhanda or Ms. Morris’ employment is terminated by us without cause or by the
executive voluntarily for good reason, the executive would be entitled to (i) a lump sum payment in an amount equal to 200% of the sum of his or her base salary plus target bonus; (ii) earned but unpaid portion of any bonus earned in respect
of any completed performance period completed prior to the termination date; (iii) a bonus that would have been earned based on actual performance metrics for the fiscal year in which termination occurs, but prorated based on the number of
days of service during the applicable fiscal year through the termination date and payable at the same time it would otherwise be paid; and (iv) and reimbursement of the cost of continuation coverage of group health coverage for a period of
18 months.
All payments for termination by us without cause or by executive for good reason are
subject to the execution of a release by the executive.
The following table provides the amounts payable to the NEOs upon severance without
cause or for a good reason, assuming such triggering event occurred on February 25, 2023.
| Name |
|
Potential Payments Upon Termination
By Company Without Cause or By Executive For Good Reason |
| |
Base Salary |
|
Bonus(1) |
|
Health Coverage |
|
Equity |
|
Total |
| Vivek Sankaran |
|
$ |
8,250,000 |
|
$ |
3,124,129 |
|
$ |
30,372 |
|
$ |
11,096,180 |
|
$ |
22,500,681 |
| Sharon
McCollam |
|
$ |
4,500,000 |
|
$ |
1,250,000 |
|
$ |
30,659 |
|
$ |
2,974,386 |
|
$ |
8,755,045 |
| Susan
Morris |
|
$ |
4,000,000 |
|
$ |
1,190,144 |
|
$ |
23,010 |
|
$ |
— |
|
$ |
5,213,154 |
| Anuj
Dhanda |
|
$ |
3,000,000 |
|
$ |
892,608 |
|
$ |
12,879 |
|
$ |
— |
|
$ |
3,905,487 |
|
(1) |
Includes quarterly cash bonus for Q4 fiscal 2022 and annual cash bonus for fiscal 2022. |
Termination due to death or disability: If Mr. Sankaran’s employment
terminates due to his death or is terminated
due to his disability (as defined in each executive employment agreement), Mr. Sankaran or his legal representative, as appropriate, would be entitled to receive (i) any earned but unpaid bonus with respect to any completed performance period
prior to the date of termination, (ii) a lump sum payment in an amount equal to 25% of Mr. Sankaran’s base salary, (iii) a bonus based on actual performance metrics for the fiscal year in which termination occurs, but prorated based on the
number of days of service during the applicable fiscal year through the termination date and payable at the same time it would otherwise be paid, (iv) payment of the unvested or unpaid portions of the sign-on retention award and (v) cost
of reimbursement for health care for Mr. Sankaran and his dependents up to 18 months. Mr. Sankaran’s sign-on retention award was fully paid in fiscal 2021.
If Ms. McCollam’s employment terminates due to her death or is terminated due to her
disability, Ms. McCollam or her legal representative, as appropriate, would be entitled to receive, (i) a bonus based on actual performance metrics for the fiscal year in which termination occurs, but prorated based on the number of days of
service during the applicable fiscal year through the termination date and payable at the same time it would otherwise be paid, (ii) any earned but unpaid bonus with respect to any completed performance period prior to the date of
termination, (iii) a lump sum payment in an amount equal to 25% of Ms. McCollam’s base salary, and (iv) cost of reimbursement for health care for Ms. McCollam and her dependents up to 18 months.
If Mr. Dhanda or Ms. Morris’ employment is terminated due to death or disability, the
executive or executive’s representative shall be entitled to receive a lump sum payment equal to (i) a bonus based on actual performance metrics for the fiscal year in which termination occurs, but prorated based on the number of days of
service during the applicable fiscal year through the termination date and payable at the same time it would otherwise be paid and (ii) any earned but unpaid bonus with respect to any completed performance period prior to the date of
termination.
All payments for termination due to death or disability are subject to the execution
of a release by the executive or his or her representative, as appropriate.
The following table provides the amounts payable to the NEOs upon severance due to
death or disability, assuming such triggering event occurred on February 25, 2023.
| Name |
|
Potential
Payments Upon Termination
Due to Death or Disability |
| |
Base
Salary |
|
Bonus(1) |
|
Health
Coverage |
|
Equity |
|
Total |
| Vivek
Sankaran |
|
$ |
375,000 |
|
$ |
3,124,129 |
|
$ |
30,372 |
|
$ |
7,864,746 |
|
$ |
11,394,247 |
| Sharon McCollam |
|
$ |
250,000 |
|
$ |
1,487,680 |
|
$ |
30,659 |
|
$ |
7,484,462 |
|
$ |
9,252,801 |
| Susan Morris |
|
$ |
— |
|
$ |
1,190,144 |
|
$ |
— |
|
$ |
7,309,259 |
|
$ |
8,499,403 |
| Anuj Dhanda |
|
$ |
— |
|
$ |
892,608 |
|
$ |
— |
|
$ |
7,416,254 |
|
$ |
8,308,862 |
|
(1) |
Includes quarterly cash bonus for Q4 fiscal 2022 and annual cash bonus for fiscal 2022. |
Termination Upon Change in Control: The following tables provide the amounts
payable to the NEOs upon severance without cause, for a good reason or death or disability within 24 months following a Change in Control (as defined in the executive’s equity award agreements), assuming such triggering event occurred on
February 25, 2023. Additionally, if Mr. Sankaran’s employment is terminated by us without cause or Mr. Sankaran resigns for good reason following a change in control or within the 180-day period immediately prior to a change in control, Mr.
Sankaran will become fully vested in the Time-Based Restricted Stock.
| Name |
|
Potential
Payments Upon Termination
By Company Without Cause or By Executive For Good Reason after a Change in Control |
| |
Base
Salary |
|
Bonus |
|
Health
Coverage |
|
Equity |
|
Total |
| Vivek
Sankaran |
|
$ |
8,250,000 |
|
$ |
3,124,129 |
|
$ |
30,372 |
|
$ |
18,987,864 |
|
$ |
30,392,365 |
| Sharon McCollam |
|
$ |
4,500,000 |
|
$ |
1,250,000 |
|
$ |
30,659 |
|
$ |
7,484,462 |
|
$ |
13,265,121 |
| Susan Morris |
|
$ |
4,000,000 |
|
$ |
1,190,144 |
|
$ |
23,010 |
|
$ |
7,309,259 |
|
$ |
12,522,414 |
| Anuj Dhanda |
|
$ |
3,000,000 |
|
$ |
892,608 |
|
$ |
12,879 |
|
$ |
7,416,254 |
|
$ |
11,321,741 |
| Name |
|
Potential
Payments Upon Termination
Due to Death or Disability after a Change in Control |
| |
Base
Salary |
|
Bonus |
|
Health
Coverage |
|
Equity |
|
Total |
| Vivek
Sankaran |
|
$ |
375,000 |
|
$ |
3,124,129 |
|
$ |
30,372 |
|
$ |
18,987,864 |
|
$ |
22,517,365 |
| Sharon McCollam |
|
$ |
250,000 |
|
$ |
1,487,680 |
|
$ |
30,659 |
|
$ |
7,484,462 |
|
$ |
9,252,801 |
| Susan Morris |
|
$ |
— |
|
$ |
1,190,144 |
|
$ |
— |
|
$ |
7,309,259 |
|
$ |
8,499,403 |
| Anuj Dhanda |
|
$ |
— |
|
$ |
892,608 |
|
$ |
— |
|
$ |
7,416,254 |
|
$ |
8,308,862 |
Termination due to non-renewal of employment agreement by the Company: If Mr.
Sankaran’s employment agreement is not renewed by us, he will be entitled to receive a lump sum cash payment equal to the sum of (i) any earned but unpaid bonus with respect to any completed performance period prior to the date of
termination, (ii) a lump sum payment in an amount equal to 200% of the sum of Mr. Sankaran’s base salary plus target bonus, and (ii) cost of reimbursement for health care for Mr. Sankaran and his dependents up to 18 months.
If Ms. McCollam’s employment terminates due to the employment agreement not renewed
by us, she will be entitled to receive (i) a lump sum payment in an amount equal to 200% of the sum of Ms. McCollam’s base salary plus target bonus, and (ii) cost of reimbursement for health care for Ms. McCollam and her dependents up to 18
months. The Initial Term of Ms. McCollam’s employment agreement is three years and subject to renewal in September 2024.
CEO Pay Ratio
As required by Item 402(u) of Regulation S-K, the Company is providing information
about the relationship of the annual total compensation of our median employee and the annual compensation of our CEO for fiscal 2022. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with
Item 402(u) of Regulation S-K.
To identify our median employee, payroll data was collected for all employees,
whether employed on a full-time, part-time, or seasonal basis, as of December 31, 2022, excluding the CEO. As permitted by the SEC, we excluded employee populations in jurisdictions outside of the United States comprising less than 5% of our
total employees.
We used total W-2 compensation as we believe the use of W-2 compensation is a
consistently applied compensation measure. Using this methodology, we determined that our median employee is a non-exempt, full-time hourly employee with an annual total compensation of $31,781 for fiscal 2022. The annual total compensation
of our CEO for fiscal 2022, as reported in the Summary Compensation Table, was $16,103,130.
Based on the information set forth above, for fiscal 2022 the estimated ratio of the
annual compensation of our CEO to the annual compensation of our median employee was 506 to 1. Refer to the CD&A for changes to, and considerations behind the compensation decisions, for Mr. Sankaran’s compensation for fiscal 2022,
including the decision to grant Mr. Sankaran annual equity awards for the first time since fiscal 2019.
This pay ratio is a reasonable estimate calculated in a manner consistent with
applicable rules and guidance promulgated by the SEC as of the date of this proxy statement. We have derived this estimate based on our payroll and employment records, the compensation for our CEO as set forth in the Summary Compensation
Table, and the methodologies described above. The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply
certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may
have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
