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Section 1: DEF 14A (DEF 14A)

DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

 

            

 

Filed by the Registrant

  

 

Filed by a Party other than the Registrant

  

 

 

Check the appropriate box:

   

        

 

Preliminary Proxy Statement

   

        

 

CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))

   

        

 

Definitive Proxy Statement

   

        

 

Definitive Additional Materials

   

        

 

Soliciting Material Pursuant to §240.14a-12

 

LOGO

Brown-Forman Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

        

 

No fee required.

        

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

   

(1) Title of each class of securities to which transaction applies:

   

(2) Aggregate number of securities to which transaction applies:

   

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

   

(4) Proposed maximum aggregate value of transaction:

   

(5) Total fee paid:

        

 

Fee paid previously with preliminary materials.

        

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

   

(1) Amount Previously Paid:

   

(2) Form, Schedule or Registration Statement No.:

   

(3) Filing Party:

   

(4) Date Filed:


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LOGO


Table of Contents
    

 

 

 

LOGO

 

 

    

It began as a promise on a whiskey bottle label. 150 years

later, it remains the standard for all our products. It guides

our corporate responsibility practices today.

 

“NOTHING BETTER IN THE MARKET”

             


Table of Contents
 
 
     

 

 

 

LOGO

 

 

LOGO

 

June 30, 2020

 

DEAR BROWN-FORMAN STOCKHOLDER:

 

It is our pleasure to invite you to attend Brown-Forman Corporation’s 2020 Annual Meeting of Stockholders, which will be held on Thursday, July 30, 2020, at 9:30 A.M. (Eastern Daylight Time). Traditionally, our Annual Meeting is held at the Brown-Forman Conference Center in Louisville, Kentucky. However, this year, in light of the public health impact of the COVID-19 outbreak, the Annual Meeting will be held entirely online via video webcast to support the health and well-being of our stockholders, directors, employees, and guests. Please see the Notice of Annual Meeting on the next page for more information about how to attend and participate in this year’s Annual Meeting online. We expect to return to hosting our annual meetings in Louisville, Kentucky, next year.

 

Your vote is important to us. Please complete and return your proxy card, or vote by telephone or online as soon as possible, even if you plan to attend the Annual Meeting online.

 

We hope you join us on July 30. On behalf of the Board of Directors, thank you for your continued support.

 

Very truly yours,

 

  LOGO   LOGO  
  LAWSON E. WHITING,   GEO. GARVIN BROWN IV,  
  President and Chief Executive Officer   Chairman of the Board of Directors  

 

 
 
     


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LOGO

NOTICE OF ANNUAL

MEETING OF

STOCKHOLDERS

 

 

   DATE:

 

 

 

Thursday, July 30, 2020

 

          

ADMISSION PROCEDURES

 

We are committed to providing a safe, secure environment for our stockholders, directors, employees, and guests. To that end, the Annual Meeting will be held in virtual meeting format only this year. Although you will not be able to attend the Annual Meeting physically, we hope the online meeting format will allow participation by all stockholders regardless of location.

 

To be admitted to the Annual Meeting, please visit www.virtualshareholder meeting.com/BFA2020. If you are a Class A stockholder, you will log into the Annual Meeting by entering your unique 16-digit control number found on your proxy card or voting instruction form. If you are a Class B stockholder, you will log into the Annual Meeting as a guest. For more information about how to attend the Annual Meeting online, please see “Attending the Annual Meeting” on page 4. Additionally, you can visit www.virtualshareholdermeeting.com/ BFA2020 or contact Steve Cassin, our Investor Relations Manager, by telephone at (502) 774-7658 or by email at [email protected] for more information about attending the Annual Meeting.

 

 

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 30, 2020:

 

The Notice of Annual Meeting, Proxy Statement, and Integrated Annual Report, which includes our Annual Report on Form 10-K for fiscal 2020, are available at www.brown-forman.com/investors/annual-report/.

 

 

   TIME:

 

 

9:30 A.M. (Eastern Daylight Time)

 

   LOCATION:  

The Annual Meeting will be presented exclusively online at www.virtualshareholdermeeting.com/BFA2020

 

 

The Annual Meeting will be held entirely online via video webcast due to the public health impact of the COVID-19 outbreak and to support the health and well-being of our stockholders, directors, employees, and guests. To attend and participate in the Annual Meeting online, please visit www.virtualshareholdermeeting.com/BFA2020. You will be able to watch and hear the proceedings online. Class A stockholders will also be able to vote and submit questions to management during the Annual Meeting.

 

We are holding this meeting for the following purposes:

 

•  to elect the thirteen directors named in this Proxy Statement; and

 

•  to vote, on a nonbinding advisory basis, to approve our executive compensation.

 

Class A stockholders of record at the close of business on June 15, 2020, are entitled to vote at the meeting, either online at the Annual Meeting or by proxy.

 

Your vote is very important. Even if you plan to attend the Annual Meeting online, we encourage you to complete, sign, and date the enclosed proxy card and return it in the enclosed envelope, or vote by telephone (1-800-690-6903) or online (www.proxyvote.com) prior to the Annual Meeting so your shares are represented and voted at the meeting even if your plans change and you are unable to attend online. Instructions on telephone and online voting are on the proxy card enclosed with this Proxy Statement.

 

Louisville, Kentucky

June 30, 2020

 

 

LOGO

 

 

By order of the Board of Directors

Matthew E. Hamel, Secretary

 

 

       
               
       


Table of Contents

LOGO

TABLE OF

CONTENTS

 

   Letter to Stockholders
   Notice of Annual Meeting of Stockholders

2

   Proxy Summary

4

   Annual Meeting Information

7

   Corporate Governance

7

   Our Board of Directors

7

   Selection of Directors

8

   Board Composition

10

   Leadership Structure

11

   Board Guidelines and Procedures

12

   Board Committees

14

   Board’s Role in Risk Oversight

14

   Best Practices

15

   Our Controlling Family Stockholders

16

   Environmental, Social, and Governance

18

   Proposal 1: Election of Directors

23

   Director Compensation

26

   Compensation Discussion and Analysis

26

   Executive Summary

28

   Overview of Our Compensation Program

29

   The Role of Our Compensation Committee

30

   Target Compensation

31

   Awards and Payouts in Fiscal 2020:
Fixed and Short-Term Compensation

33

   Awards and Payouts in Fiscal 2020:
Long-Term Compensation

38

   Other Compensation Elements

39

   Compensation Policies and Practices

41

   Compensation Committee Report

42

   Compensation Tables

42

   Summary Compensation

44

   Grants of Plan-Based Awards

45

   Outstanding Equity Awards

47

   Option Exercises and Stock Vested

48

   Pension Benefits

49

   Non-Qualified Deferred Compensation

50

   Potential Payments Upon Termination or
   Change in Control

53

   Proposal 2: Advisory Vote on Executive
   Compensation

54

   Stock Ownership

57

   Pay Ratio Disclosure

58

   Audit Matters

61

   Other Information

62

   Appendix A
 

 

 

       
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN    1  
       


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LOGO

PROXY

SUMMARY

In this section, we highlight certain information about matters discussed in this Proxy Statement. As it is only a summary, we encourage you to read the entire Proxy Statement before voting.

 

ANNUAL MEETING OF
STOCKHOLDERS
      PROPOSALS FOR STOCKHOLDER
VOTING

 

 

DATE: Thursday, July 30, 2020

 

TIME: 9:30 A.M. (Eastern Daylight Time)

 

LOCATION: The Annual Meeting will be presented exclusively online at www.virtualshareholdermeeting.com/BFA2020

 

DATE OF DISTRIBUTION: The Notice of Annual Meeting of Stockholders, Proxy Statement, and proxy card are first being made available or mailed on or about June 30, 2020.

 

     

 

Proposal

  

 

  Our Board’s voting

  recommendation

     

 

Election of thirteen directors

DETAILS: Pages 18–22

 

  

 

LOGO

 

 

 

 

FOR all nominees

 

     

 

Advisory vote to approve our
executive compensation
DETAILS: Page 53

 

  

 

LOGO

 

 

 

FOR the proposal

  
  
  

PERFORMANCE AND COMPENSATION HIGHLIGHTS

We believe our executive compensation program continues to attract, motivate, reward, and retain a talented and diverse team of executives. These individuals lead our efforts to continually deliver on our corporate ambition so aptly described as “Nothing Better in the Market,” and enable us to deliver superior and sustainable value for our stockholders. The incentive payouts to our executives described in this Proxy Statement reflect our performance—both during the most recent fiscal year and over time.

The following charts compare trends in our performance with respect to total shareholder return (TSR), diluted earnings per share, and underlying operating income growth with trends in the compensation of our President and Chief Executive Officer, Lawson E. Whiting. These three financial metrics are intended to reflect long-term value generated for our stockholders, and the charts show how our compensation strategy aligns with that performance.

OUR PERFORMANCE IN FISCAL 2020:

 

 

LOGO

 

(1)

Reflects the originally reported growth in “underlying operating income” over the past five fiscal years. “Underlying operating income” is not derived in accordance with U.S. generally accepted accounting principles (GAAP). The “underlying operating income” growth rates for fiscal 2018 were not retrospectively adjusted to reflect the impact of Accounting Standards Update 2017-07 (related to pension), which we adopted effective May 1, 2018, and other reclassified expenses related to certain marketing research and promotional agency costs. The impact of these changes, which had no effect on net income, was not material. The long-term incentive compensation related to fiscal 2018 also was not retrospectively adjusted. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.

 

(2)

Total compensation for the Chief Executive Officer includes base salary, stock-settled stock appreciation rights, non-equity compensation, and all other compensation. Total compensation also includes performance-adjusted restricted stock award values as reported at the end of the applicable three-year performance period. Changes in pension value are excluded. Values shown for fiscal 2018 are for former Chief Executive Officer, Paul C. Varga. Values for fiscal 2019 are for Mr. Varga, with the exception of base salary and all other compensation, which represents amounts paid to both Mr. Varga as well as our current Chief Executive Officer, Lawson E. Whiting.

 

       
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BROWN-FORMAN    2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

       


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PROXY SUMMARY    |    OUR DIRECTOR NOMINEES TO THE BOARD           
     

 

OUR DIRECTOR NOMINEES TO THE BOARD

Class A stockholders are being asked to vote on the election of the thirteen directors named below. More details about each director’s background, skills, and expertise can be found under “Election of Directors” beginning on page 18.

Board Nominees

 

               

Committee Membership as of April 30, 2020

Nominee Name & Occupation   Age   Director
Since
  Director
Category
  Audit   Comp  

Corp Gov

& Nom

  Exec

Patrick Bousquet-Chavanne

Former Chief Executive Officer, Emaar Malls

  62   2005   I      

 

     

 

Campbell P. Brown

Senior Vice President, President and Managing Director of Old Forester, Brown-Forman

  52   2016   B, M    

 

   

 

   

 

   

 

Geo. Garvin Brown IV

Chairman of the Board, Brown-Forman

  51   2006   B    

 

   

 

    C

Stuart R. Brown

Managing Partner, Typha Partners, LLC

  55   2015   B    

 

   

 

   

 

   

 

John D. Cook

Director Emeritus, McKinsey & Company

  67   2008   I    

 

    C  

Marshall B. Farrer

Senior Vice President, Managing Director of GTR and Developed APAC Region, Brown-Forman

  49   2016   B, M    

 

   

 

   

 

   

 

Laura L. Frazier

Owner and Chairman, Bittners LLC

  62   2016   B    

 

   

 

   

 

   

 

Kathleen M. Gutmann

Chief Sales and Solutions Officer, United Parcel Service, Inc.

  51   2017   I      

 

   

 

   

 

Augusta Brown Holland

Founding Partner, Haystack Partners LLC

  44   2015   B    

 

   

 

   

 

   

 

Michael J. Roney

Retired Chief Executive Officer, Bunzl plc

  66   2014   I    

 

  C    

 

   

 

Tracy L. Skeans

Chief Transformation and People Officer, Yum! Brands, Inc.

  47   2018   I        

 

   

 

Michael A. Todman

Retired Vice Chairman, Whirlpool Corporation

  62   2014   I   C    

 

     

 

Lawson E. Whiting

President and Chief Executive Officer, Brown-Forman

  52   2018   M    

 

   

 

   

 

 

B=Brown Family Director    M=Management Director    I=Independent Director    C=Chair    =Committee Member

Fiscal 2020

 

LOGO

 

(1) Return on Average Invested Capital is not derived in accordance with GAAP. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.

 

  

  

“BROWN-FORMAN IS AN ORGANIZATION FORTUNATE TO HAVE THOUGHTFUL, LONG-TERM FOCUSED LEADERSHIP; TALENTED AND DEDICATED PEOPLE; A ROBUST BALANCE SHEET; AND STRONG CASH FLOWS. WE BELIEVE WE HAVE THE RIGHT STRATEGY IN PLACE TO DRIVE THE NEXT GENERATION OF GROWTH.”

   
      

Lawson E. Whiting,

President and Chief Executive Officer

 

       
2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN    3  
       


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LOGO

ANNUAL MEETING

INFORMATION

ABOUT YOUR PROXY MATERIALS

Our Board of Directors (the Board) is soliciting proxies for our Annual Meeting of Stockholders to be held on July 30, 2020 (the Annual Meeting). This means that you can vote “by proxy” at the Annual Meeting by instructing us how you would like your shares to be voted, even if you cannot personally attend the meeting online.

We are providing this Proxy Statement and accompanying materials to help you make an informed decision on the matters to be considered at the Annual Meeting. We will begin mailing this Proxy Statement and accompanying materials, and also make them available online, on or about June 30, 2020, to holders of record of our Class A and Class B common stock at the close of business on June 15, 2020, which is the “record date” for the Annual Meeting.

This Proxy Statement and our Integrated Annual Report, which includes our Form 10-K for fiscal 2020, are available at www.brown-forman.com/investors/annual-report/. You may request additional printed copies at any time using the contact information below.

Please let us know as soon as possible how you would like your shares voted. See “How to Vote” on the next page for details.

Contact Information

For information about your stock ownership or other stockholder services, please contact Steve Cassin, our Investor Relations Manager, by telephone at (502) 774-7658, by e-mail at [email protected], or by mail at Brown-Forman Corporation, 850 Dixie Highway, Louisville, Kentucky 40210.

Reducing Duplicate Mailings

The Securities and Exchange Commission (SEC) permits us to deliver a single Proxy Statement and Integrated Annual Report to stockholders who share the same address and last name. Even if your household receives only one Proxy Statement and Integrated Annual Report, each stockholder will receive an individual proxy card. We implemented this “householding” process to reduce our printing costs and postage fees, and to reduce the environmental impact of our Annual Meeting. If you would like to enroll in householding, or if your household is already enrolled but you prefer to opt out of householding for next year, please inform us using the contact information above and we will promptly fulfill your request.

ATTENDING THE ANNUAL MEETING

In light of the public health impact of the COVID-19 outbreak, the Annual Meeting will be held exclusively online via video webcast to support the health and well-being of our stockholders, directors, employees, and guests. Although you will not be able to attend the Annual Meeting physically, we hope the online meeting format will allow participation by all stockholders regardless of location.

Although only Class A stockholders may vote and submit questions at the Annual Meeting, Class A and Class B stockholders who owned their shares as of the record date (or their legal proxies) are welcome to attend online.

To be admitted to the Annual Meeting, please visit www.virtualshareholdermeeting.com/BFA2020. If you are a Class A stockholder, you will log into the Annual Meeting by entering your unique 16-digit control number found on your proxy card or voting instruction form. If you are a Class B stockholder, you will log into the Annual Meeting as a guest.

The meeting will start at 9:30 A.M. (Eastern Daylight Time) on Thursday, July 30, 2020. We encourage you to access the meeting prior to the start time to familiarize yourself with the virtual platform. Online access will be available starting at 9:00 A.M. (Eastern Daylight Time) on July 30, 2020.

The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection from wherever they intend to participate in the Annual Meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, you should call the technical support number that will be posted on the virtual stockholder meeting login page.

A webcast replay will be posted to our Investor Relations website at https://investors.brown-forman.com/ following the Annual Meeting.

 

       
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ANNUAL MEETING INFORMATION    |    VOTING
 

 

VOTING

Who May Vote

If you held shares of Class A common stock at the close of business on the record date, you (or your legal proxies) may vote at the Annual Meeting. At the close of business on the record date, there were 169,091,412 shares of Class A common stock outstanding and entitled to vote at the Annual Meeting. Each share of Class A common stock is entitled to one vote.

If you purchased Class A common stock after the record date, you may vote those shares only if you receive a proxy to do so from the person who held the shares on the record date. If you receive more than one proxy card or voting instruction form, you should complete, sign, date, and return each one (or follow the telephone or online voting instructions) because each card represents different shares.

At the close of business on the record date, there were 309,314,321 shares of Class B common stock outstanding. Class B shares are not entitled to vote.

How to Vote

Stockholders of record. If your shares are registered directly in your name with our stock transfer agent, Computershare, you are considered the “stockholder of record” of those shares. If you are a stockholder of record of Class A common stock, you can give a proxy to be voted at the Annual Meeting:

 

 

LOGO

 

 

over the telephone by calling this

toll-free number
(1-800-690-6903);

    

 

LOGO

  

 

online

(www.proxyvote.com); or

    

 

LOGO

  

 

by completing, signing, dating,
and mailing the enclosed proxy
card in the envelope provided.

Even if you plan to attend the Annual Meeting online, we encourage you to submit a proxy in advance. If you are voting by telephone or online, we must receive your proxy by 11:59 P.M., Eastern Daylight Time, on Wednesday, July 29, 2020, to ensure your vote is recorded. You may override a proxy or change your voting instructions by following the applicable procedure outlined below in “Changing Your Vote.”

The telephone and online voting procedures are designed to authenticate your identity, enable you to give voting instructions, and confirm that those instructions are recorded properly.

Your proxy will authorize the individuals named on the proxy card to vote your shares in accordance with your instructions. These individuals also will have the obligation and authority to vote your shares as they see fit on any other matter properly presented for a vote at the Annual Meeting. If for any reason a director nominee is not available to serve, the individuals named as proxy holders may vote your shares at the Annual Meeting for another nominee. The proxy holders for this year’s Annual Meeting are Geo. Garvin Brown IV, Lawson E. Whiting, and Matthew E. Hamel.

 

If you are a stockholder of record and you sign and return your proxy card (or give your proxy by telephone or online) without specifying how you want your shares to be voted, our proxy holders will vote your shares “FOR” the election of each of the nominees to the Board (Proposal 1) and “FOR” the advisory resolution to approve our executive compensation (Proposal 2). With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote your shares as recommended by the Board or, if no recommendation is given, using their own discretion.

You may also vote online at the Annual Meeting. For more information about how to attend the Annual Meeting online, please see “Attending the Annual Meeting” on page 4.

“Street name” stockholders. If your shares are held in a stock brokerage account or by a bank (known as holding shares in “street name”), you have the right to instruct your broker or bank how to vote your shares, and the broker or bank is required to vote in accordance with your instructions. To provide those instructions by mail, please complete, sign, date, and return your voting instruction form in the accompanying postage-paid envelope. Alternatively, if the broker or bank that holds your shares offers online or telephone voting, you will receive information about how to submit your voting instructions by those methods.

For more information about how to attend the Annual Meeting online, please see “Attending the Annual Meeting” on page 4.

 

       
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Table of Contents
ANNUAL MEETING INFORMATION    |    ANNOUNCEMENT OF VOTING RESULTS
 

 

 

If you are a street name stockholder and you do not instruct your broker how to vote, your broker is not permitted to vote your shares on any of the proposals we will address at the Annual Meeting. Under the rules of various securities exchanges, brokers that hold your shares may generally use their discretion to vote on “routine” matters but not on “non-routine” matters. The election of directors (Proposal 1) and advisory resolution to approve our executive compensation (Proposal 2) are considered “non-routine” matters. If your broker does not receive voting instructions from you on how to vote your shares on a “non-routine” matter and you do not vote on such matter at the Annual Meeting, your shares will not be voted on such matters. (This is known as a “broker non-vote.”)

 

 

Changing Your Vote

If you are a stockholder of record, you may change your vote by submitting another proxy by telephone or online, by mailing another properly signed proxy card bearing a later date than your original one, or by attending the Annual Meeting and casting your vote online. You also may revoke a proxy that you previously provided by delivering timely written notice of revocation to our Secretary, at Brown-Forman Corporation, 850 Dixie Highway, Louisville, Kentucky 40210, or at [email protected]

If you hold your shares in street name and you wish to change or revoke your voting instructions, please refer to the materials your broker or bank provided to you for instructions.

Quorum Requirements

Business can be conducted at the Annual Meeting only if a quorum consisting of a majority of the outstanding shares of Class A common stock is present in person or represented by proxy. Abstentions will be counted as present for purposes of establishing a quorum. Holders of Class A common stock who attend the Annual Meeting via the virtual meeting platform are deemed present for purposes of the quorum requirement.

Votes Needed For Approval

 

Proposal   Vote required to pass   Effect of abstentions and broker non-votes

 

Election of directors

 

 

Nominees who receive a majority of the Class A votes cast (the number of shares voted “for” the nominee exceeds the number of shares voted “against” that nominee) will be elected.

 

 

 

No effect.

 

Advisory resolution to approve

executive compensation

 

 

Approval requires an affirmative vote of a majority of the Class A shares present (in person or represented by proxy) and entitled to vote.

 

 

 

Abstentions are equivalent to votes against the proposal.

 

Broker non-votes will have no effect.

 

Dividend Reinvestment and Employee Stock Purchase Plan Shares

Shares of Class A common stock held in Brown-Forman’s dividend reinvestment and employee stock purchase plans are included in your holdings and reflected on your proxy card. These shares will be voted as you direct.

ANNOUNCEMENT OF VOTING RESULTS

We intend to announce the preliminary voting results at the Annual Meeting and to issue a press release announcing the final voting results later that day. In addition, we will report the final voting results by filing a Form 8-K with the SEC within four business days following the Annual Meeting.

PROXY SOLICITATION EXPENSES

Brown-Forman bears the cost of soliciting proxies. Beginning on June 30, 2020, which is the mailing date for these proxy materials, our directors, officers, and other employees may solicit proxies in person or by regular mail, email, phone, or online. These individuals will not receive additional compensation for soliciting proxies. We will reimburse banks, brokers, nominees, and other fiduciaries for their reasonable charges and expenses incurred in forwarding our proxy materials to the beneficial owners of our stock held in street name.

 

       
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LOGO

CORPORATE

GOVERNANCE

 

OUR BOARD OF DIRECTORS

 

Our Board is the policy-making body that is ultimately responsible for Brown-Forman’s business success and ethical climate. The Board oversees the performance of our senior management team, which is responsible for leading and operating Brown-Forman’s business. The Board’s primary responsibilities include retention, evaluation, and succession planning for the Chief Executive Officer and the Chairman of the Board, as well as oversight of our corporate strategy, financial condition, executive compensation policies and practices, and enterprise risk management. The Board may retain independent advisors to help it perform its duties.

    

    

 

 

BROWN-FORMAN IS A “CONTROLLED COMPANY.”

 

As a publicly traded, family-controlled company, Brown-Forman enjoys a rare governance opportunity in that members of our controlling stockholder family, the Brown family, participate directly on our Board. We believe this governance structure gives us a distinct competitive advantage because Brown family members bring a long-term ownership perspective to our Board. This advantage is sustained by a careful balancing of the roles of our Board, management, and our stockholders — including the Brown family.

 

 

SELECTION OF DIRECTORS

 

In evaluating candidates for Board membership, the Corporate Governance and Nominating Committee seeks directors who will represent the long-term best interests of all stockholders. As articulated in our Corporate Governance Guidelines, all Brown-Forman directors should possess the highest personal and professional ethics, integrity, and values. The Board believes the best directors have the following additional qualities: good judgment, candor, civility, business courage, experience with businesses and other organizations of comparable character and comparable or larger size, and a lack of conflicts of interest. We also believe that a significant number of our directors should be independent.

 

The Corporate Governance and Nominating Committee and the Board consider diversity in evaluating candidates for Board membership, though neither has adopted a formal diversity policy. The Board’s goal is to maintain a well-balanced composition that combines a variety of experiences, backgrounds, skills, and perspectives to enable the Board, as a whole, to guide Brown-Forman effectively in the pursuit of our strategic objectives. In evaluating potential Board candidates, the Corporate Governance and Nominating Committee considers an individual’s independence; business, professional, or public service experience; relevant industry knowledge, experience, and relationships; business judgment; financial expertise; international experience; leadership skills; age, gender, race, ethnicity, religion, nationality, sexual orientation, cultural background, and other self-identified diversity characteristics; time availability; and familial relation to our controlling family stockholders.

  

 

     LOGO

 

         
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CORPORATE GOVERNANCE    |    BOARD COMPOSITION
 

 

The Corporate Governance and Nominating Committee occasionally engages independent search firms to assist in identifying potential Board candidates. The Board has not adopted a formal policy regarding stockholder-nominated director candidates because the Corporate Governance and Nominating Committee believes the process it follows to identify and select Board members has been appropriate and effective. Any candidates submitted by stockholders will be evaluated in the same manner as all other director candidates.

BOARD COMPOSITION

How Our Controlled-Company Status Affects Our Board

Our Board has determined that Brown-Forman is a “controlled company” under New York Stock Exchange (NYSE) rules because more than 50% of our Class A voting stock is held by members of the Brown family.

As a controlled company, we are exempt from NYSE listing standards that require boards to have a majority of independent directors, a fully independent nominating/corporate governance committee, and a fully independent compensation committee. As a matter of good corporate governance, the Board has voluntarily chosen to have a Compensation Committee that is composed entirely of directors who meet the NYSE’s heightened independence standards for compensation committee members. Our Board does not have a majority of independent directors or a fully independent nominating/corporate governance committee. We are not exempt from, and comply in full with, requirements regarding the independence and qualifications of our Audit Committee members.

Our Independent Directors

We recognize the value of having independent directors. Under NYSE listing rules, a director qualifies as “independent” if the board of directors affirmatively determines the director has no material relationship with the company. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships. While the focus is on independence from management, our Board considers all relevant facts and circumstances in making an independence determination. Our Board has determined that the following six directors are independent under NYSE standards: Patrick Bousquet-Chavanne, John D. Cook, Kathleen M. Gutmann, Michael J. Roney, Tracy L. Skeans, and Michael A. Todman.

The Board has determined that Campbell P. Brown, Marshall B. Farrer, and Lawson E. Whiting are not independent because they are members of Brown-Forman management. The Board elected not to make a determination with respect to the independence of Geo. Garvin Brown IV, Stuart R. Brown, Laura L. Frazier, and Augusta Brown Holland.

Our Brown Family Directors

The Board believes it is strategically important for Brown family members to be actively engaged in the oversight of Brown-Forman. Through participation on the Board, the Brown family’s long-term perspective is brought to bear, in some measure, upon each and every matter the Board considers. Brown family directors also serve as an effective link between the Board and the controlling family stockholders.

In addition, Board service allows the Brown family to actively oversee its investment in the company. Currently, the Brown family directors are Campbell P. Brown, Geo. Garvin Brown IV, Stuart R. Brown, Marshall B. Farrer, Laura L. Frazier, and Augusta Brown Holland.

Our Management Directors

The Board believes it is important, from a corporate governance standpoint, for management to be represented on the Board. Currently, Campbell P. Brown, Marshall B. Farrer, and Lawson E. Whiting serve in dual roles as Board members and Brown-Forman executives.

 

       
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CORPORATE GOVERNANCE    |    BOARD COMPOSITION
 

 

 

BROWN-FORMAN BOARD OF DIRECTORS

 

 

LOGO

 

 

Changes to Our Board

After ten years of dedicated service, Bruce L. Byrnes will not stand for re-election at the Annual Meeting and will retire from the Board following the completion of his current term.

 

       
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CORPORATE GOVERNANCE    |    LEADERSHIP STRUCTURE
 

 

LEADERSHIP STRUCTURE

 

BOARD LEADERSHIP STRUCTURE
           

Geo. Garvin Brown IV, a Brown family member, has served as Chairman of the Board since 2007.

       

Lawson E. Whiting has served as

President and Chief Executive Officer since 2019.

       

John D. Cook has served as Lead

Independent Director since 2012.

   
   

Chairman of the Board

Our Board believes that the determination of whether to separate or combine the roles of Chairman of the Board and Chief Executive Officer should depend largely upon the identity of the Chief Executive Officer and the composition of the Board at the time. For this reason, the Board does not have a policy on separation of these roles, but rather evaluates the situation on a case-by-case basis. Although we have had a separate Chairman of the Board and Chief Executive Officer since 2007, these roles have been combined in the past.

The duties of the Chairman of the Board include presiding over and managing the meetings of the Board; setting the agenda for each Board meeting and consulting with management regarding materials to be presented to the Board; supporting a strong board culture by fostering an environment of open dialogue, effective information flow, and constructive feedback among the Board and management; facilitating communication among the Board, management, and stockholders, including the Brown family; and encouraging director participation. When the roles are separated, the Chairman of the Board also acts as an advisor to the Chief Executive Officer on strategic aspects of Brown-Forman’s business, and performs other duties as prescribed by the Board. Geo. Garvin Brown IV has served in this role since 2007.

Lead Independent Director

When a director who has not been determined to be independent holds the office of Chairman of the Board, as is currently the case, the Board may select one independent director (after considering the recommendation of the Corporate Governance and Nominating Committee) to serve as Lead Independent Director. The Lead Independent Director, if any, is elected annually. John D. Cook has served in this role since 2012.

As Lead Independent Director, Mr. Cook’s responsibilities include calling meetings of the independent directors and non-management directors, when necessary or advisable, and setting the agenda for and chairing those meetings. Other responsibilities appear in our Corporate Governance Guidelines, which are available on our website (www.brown-forman.com/about/ corporate-governance/guidelines/).

Mr. Cook chaired one executive session of non-management directors in fiscal 2020 and called and presided over one executive session in fiscal 2020 that was attended solely by our independent directors.

President and Chief Executive Officer

As President and Chief Executive Officer of Brown-Forman, Lawson E. Whiting is our highest-ranking executive officer and is responsible for Brown-Forman’s strategy, operations, and performance. Mr. Whiting also serves as a management member of our Board.

Why the Board Chose this Leadership Structure

The Board has determined that this leadership structure currently serves the best interests of Brown-Forman and all of its stockholders. Having a Brown family member serve as Chairman of the Board promotes the Brown family’s active oversight of, and engagement and participation in, the company and its business, and reflects the fact that Brown-Forman is controlled by the Brown family. In addition, the division of responsibilities allows Mr. Brown to dedicate his efforts to Board governance and lead the Board in its fundamental role of providing oversight and guidance regarding the business, strategy, and operations of the company, while Mr. Whiting can concentrate on managing the company and providing the Board access to his comprehensive knowledge of Brown-Forman’s business. The Lead Independent Director position provides leadership to, and fosters coordination among, our independent directors, enabling them to fulfill their role of bringing outside perspectives to the Board.

 

       
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CORPORATE GOVERNANCE    |    BOARD GUIDELINES AND PROCEDURES
 

 

BOARD GUIDELINES AND PROCEDURES

Corporate Governance Guidelines

The Board believes transparency is a hallmark of good corporate governance. To that end, the Board has adopted Corporate Governance Guidelines that provide a framework for the Board to exercise its duties. Among other things, these guidelines contain policies and requirements regarding director qualifications; director responsibilities; meetings and attendance; committee composition and responsibilities; director compensation; and director access to management and independent advisors. The Corporate Governance Guidelines are published on our website at www.brown-forman.com/about/corporate-governance/guidelines/.

Board and Committee Self-Assessment

The Corporate Governance Guidelines require the Board to conduct an annual self-assessment. Each Board committee (except the Executive Committee) also annually assesses how it performed during the preceding twelve-month period. These assessment procedures vary. Some years we require members to complete questionnaires that call for both quantitative responses and free-ranging comments, while other years we invite an independent consultant to interview each member and synthesize themes that emerge. In addition, in fiscal 2020, our Chairman of the Board engaged in a 360-degree feedback process facilitated by an outside consultant. The Chairman of the Board, the Chief Executive Officer, and the Lead Independent Director consult at least annually regarding individual director performance.

Director Service on Other Public Company Boards

The Board recognizes that its members benefit from serving on the boards of other companies. The Board encourages that service, with the understanding that our directors must have adequate time to devote to their work for Brown-Forman. The Corporate Governance Guidelines provide that any director who is employed full-time should not serve on more than two public company boards in addition to the Brown-Forman Board, which includes the board of any public company at which a director is employed. Directors who are not employed full-time may serve on up to three public company boards in addition to the Brown-Forman Board. Directors must inform the Chairman, the Lead Independent Director, the Chair or Secretary of the Corporate Governance and Nominating Committee, or the Secretary of the Board as soon as practicable that they will be, or have been, elected to serve on an additional public company board.

The Board recognizes that service on the boards of nonprofit entities can be important and time consuming as well, and encourages directors to engage in such service as long as they continue to have the time necessary to devote to their work for Brown-Forman.

Director Service

The Board is authorized to fix the size of the Board at a number between three and seventeen members. Directors are elected each year at the Annual Meeting by a majority of the votes cast by our Class A stockholders. Once elected, a director holds office until the next Annual Meeting or until a successor is elected and qualified, unless the director first resigns, retires, or is removed. The Board does not have term limits, but directors generally may not stand for re-election to the Board after reaching the age of 71. In exceptional circumstances, the Board may ask a director to remain on the Board after age 71 if the director’s continued service would significantly benefit Brown-Forman. Service of a director beyond the age of 71 requires a recommendation by the Corporate Governance and Nominating Committee and the approval of two-thirds of the Board (not including the director under consideration).

Board Meetings

The Board held six regular meetings and no special meetings during fiscal 2020. Absent an appropriate reason, all directors are expected to attend the Annual Meeting, all Board meetings, and all meetings of each committee on which they serve. All directors attended 75% or more of the aggregate meetings of the Board and committees on which they served during fiscal 2020. All directors attended the 2019 Annual Meeting.

Communication with Our Board

Stockholders and other interested parties may communicate with our directors, including the non-management directors or the independent directors as a group, by writing to our Secretary, at 850 Dixie Highway, Louisville, Kentucky 40210, or at [email protected] The Secretary’s office will forward appropriate written communications to the individual director or group of directors to whom they are addressed, with copies to all other directors. We generally will not forward to directors a stockholder communication that the Secretary determines to be primarily commercial in nature, that relates to an improper or irrelevant topic, or that requests general information about Brown-Forman.

 

       
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CORPORATE GOVERNANCE    |    BOARD COMMITTEES
 

 

BOARD COMMITTEES

Our Board has four standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, and the Executive Committee. Each Board committee operates under a written charter that is posted on our website at www.brown-forman.com/about/corporate-governance/committee-composition/.

 

  AUDIT COMMITTEE

MET 10 TIMES IN FISCAL 2020

 

Committee Members:

 

 

 Michael A. Todman (Chair)

 

 Patrick Bousquet-Chavanne

 

 Bruce L. Byrnes

 

 Kathleen M. Gutmann

 

 Tracy L. Skeans

 

  

The Board has delegated to the Audit Committee responsibility for overseeing Brown-Forman’s financial statements; audit process; system of internal accounting and financial controls; policies and processes for assessment and management of enterprise risks; compliance with legal and regulatory requirements; and internal audit function. In addition, the Audit Committee is solely responsible for the appointment, replacement, and compensation of the independent auditor and oversees the independent auditor’s qualifications, independence, and performance. The Audit Committee’s responsibilities include preparing the Audit Committee Report that appears in this Proxy Statement on page 58.

 

Audit Committee members must satisfy director independence standards prescribed by the NYSE and mandated by the Sarbanes-Oxley Act. Each member of our Audit Committee satisfies all of these heightened independence standards. The Board has determined that each member of our Audit Committee is “financially literate” within the meaning of NYSE rules, and that Mr. Todman is an “audit committee financial expert” under SEC rules.

  
  COMPENSATION COMMITTEE

MET 7 TIMES IN FISCAL 2020

 

Committee Members:

 

 

 Michael J. Roney (Chair)

 

 John D. Cook

 

 Tracy L. Skeans

 

  

The Compensation Committee’s responsibilities include determining the compensation of the Chief Executive Officer and other executive officers; recommending market-competitive compensation for the Board; approving incentive compensation plan design and changes thereto for the Chief Executive Officer and other executive officers; assisting the Board in its oversight of risk related to compensation policies and practices; overseeing the preparation of the Compensation Discussion and Analysis section of this Proxy Statement; and preparing the Compensation Committee Report that appears in this Proxy Statement on page 41.

 

The Compensation Committee has retained FW Cook to provide independent advice on executive and director compensation matters. For additional information on the services provided by FW Cook, as well as the Compensation Committee’s processes and procedures for considering and determining executive compensation, please see the Compensation Discussion and Analysis, which begins on page 26.

 

Each member of the Compensation Committee qualifies as an independent director under NYSE listing standards (including the heightened independence standards for compensation committee members of non-controlled companies), as a “non-employee director” under SEC rules, and as an “outside director” under regulations adopted pursuant to Section 162(m) of the Internal Revenue Code. The Board specifically considered factors relevant to the ability of these directors to be independent from management in connection with Compensation Committee service.

 

       
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CORPORATE GOVERNANCE    |    BOARD COMMITTEES
 

 

  CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

MET 6 TIMES IN FISCAL 2020

 

Committee Members:

 

 

 John D. Cook (Chair)

 

 Patrick Bousquet-Chavanne

 

 Geo. Garvin Brown IV

 

 Bruce L. Byrnes

 

 Michael A. Todman

 

 

   The Corporate Governance and Nominating Committee’s responsibilities include helping the Board identify, recruit, and recommend appropriate candidates to serve as directors; reviewing periodically our corporate governance principles in light of developments in corporate governance and best practices, taking into account our controlled-company status; coordinating and overseeing Chief Executive Officer succession planning; assisting the Board with its annual self-assessment; assisting the Board in monitoring best practices, developments, and issues related to corporate governance; and overseeing evaluation of the Board and management, including, in cooperation with the Compensation Committee, the annual review of performance of the Chief Executive Officer. All of the Corporate Governance and Nominating Committee members are independent under NYSE listing standards, except Geo. Garvin Brown IV.
  
  EXECUTIVE COMMITTEE

MET ONCE IN FISCAL 2020

 

Committee Members:

 

 

 Geo. Garvin Brown IV (Chair)

 

 John D. Cook

 

 Lawson E. Whiting

 

   The Executive Committee consists of the Chief Executive Officer, the Chairman of the Board (if separate from the Chief Executive Officer), and one or more other directors as determined by the Board from time to time. In fiscal 2020, the Lead Independent Director served on the Executive Committee. The Board can change the Executive Committee membership, fill vacancies, or dissolve the committee at any time. The Executive Committee may exercise all of the powers of the Board, subject to certain exceptions specified in our By-laws or Delaware law. However, traditionally, the Executive Committee acts only when exercising a power the Board has specifically delegated, when there is an emergency, or when the issue does not warrant the full Board’s attention. In addition, the members of the Executive Committee communicate and meet informally, sometimes with Brown-Forman’s General Counsel, to engage in strategic planning of Board activities and agenda topics, to stay ahead of various issues on behalf of the full Board, and to review recent Board meetings.

 

       
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CORPORATE GOVERNANCE    |    BOARD’S ROLE IN RISK OVERSIGHT
 

 

BOARD’S ROLE IN RISK OVERSIGHT

The Board believes its current leadership structure best enables it to fulfill its risk oversight function. Our Corporate Governance Guidelines require the Board to ensure we implement appropriate processes for managing enterprise risk, and our Board considers risk oversight as an integral part of its role in the strategic planning process. The Board regularly and actively considers how strategic decisions affect Brown-Forman’s risk profile.

While the Board has ultimate oversight responsibility for the risk management process, certain committees have important supplementary roles. During fiscal 2020, the Board tasked its committees to assist with the responsibilities outlined below:

 

 

AUDIT COMMITTEE

 

Overseeing the integrity of the company’s financial statements and financial reporting processes; overseeing our policies and processes on enterprise risk assessment, risk management, and compliance, including cybersecurity risk; overseeing our most significant financial reporting and accounting control risks and management’s monitoring and management of those risks; and, together with the Corporate Governance and Nominating Committee, overseeing the disclosure of risk related to environmental, social, and governance matters.

 

 

 

COMPENSATION COMMITTEE

 

Overseeing risks related to compensation programs, policies, and practices.

 

 

 

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

 

Overseeing risks related to corporate governance, board composition, and succession planning for the Chief Executive Officer and the Chairman of the Board; and, together with the Audit Committee, overseeing risks related to environmental, social, and governance matters, including workforce diversity and inclusion.

 

These committees periodically met with members of management and outside advisors, as necessary, and reported to the Board regularly on their risk oversight and mitigation activities. In addition, management’s Disclosure Controls Committee and Risk Committee both played an integral role in making sure that relevant risk-related information was reported to senior management and the Board as directly and quickly as possible. For more information, see “Best Practices” below.

BEST PRACTICES

Our company has long believed that good corporate governance is essential to long-term success. We continually evaluate our corporate governance practices in the context of our controlled-company status to address the changing regulatory environment, and adopt those practices that we believe are in the best interests of Brown-Forman and all of our stockholders.

Code of Conduct and Code of Ethics for Senior Financial Officers

The Brown-Forman Code of Conduct expresses our expectation of ethical behavior for all of our employees and directors. Our Code of Ethics for Senior Financial Officers reflects the expectation that all of our financial, accounting, reporting, and auditing activities will be conducted in strict compliance with all applicable rules and regulations and will conform to the highest ethical standards. We encourage our employees to speak up when aware of a potential Code of Conduct violation, and provide multiple channels for doing so — including anonymously. Links to the Code of Conduct, including reporting channels, and the Code of Ethics for Senior Financial Officers can be found on the Corporate Governance page of our website at www.brown-forman.com/about/corporate-governance/.

 

       
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CORPORATE GOVERNANCE    |    OUR CONTROLLING FAMILY STOCKHOLDERS
 

 

Disclosure Controls Committee

The Disclosure Controls Committee is composed of members of management. This committee has established controls and procedures designed to ensure that information that we may be required to disclose is gathered and communicated to the committee and that all required disclosures are timely and accurate. The committee has implemented a financial review process that enables our Chief Ethics, Compliance and Risk Officer to certify our quarterly and annual reports, as well as procedures designed to ensure our compliance with SEC Regulation FD (Fair Disclosure).

Risk Committee

The management Risk Committee is responsible for the enterprise risk management of the company. The Risk Committee creates and maintains the risk register, facilitates risk scoring, identifies the individuals and teams that are responsible for mitigating risks, and ensures that plans are in place to mitigate Brown-Forman’s most significant risks. The Chief Ethics, Compliance, and Risk Officer reports on behalf of the Risk Committee to the Audit Committee regarding procedures, risk ranking results, and risk mitigation status. In addition, the Risk Committee is required to report to the Board at least annually regarding the top risks facing Brown-Forman, and periodically updates the Board on the mitigation plans related to those risks.

OUR CONTROLLING FAMILY STOCKHOLDERS

Brown-Forman has an engaged family stockholder base with a long-term ownership perspective. We view our status as a publicly traded, family-controlled company as a distinct competitive advantage, and we believe a strong relationship with the Brown family is essential to our growth, independence, and ability to create long-term value for all stockholders. Management interacts with Brown family members in a manner consistent with all applicable laws and regulations. We actively cultivate our relationship with the Brown family through a variety of channels, as detailed below.

Brown-Forman/Brown Family Shareholders Committee

The Brown-Forman/Brown Family Shareholders Committee was founded in 2007 and is co-chaired by Geo. Garvin Brown IV and Lawson E. Whiting. The Brown-Forman/Brown Family Shareholders Committee provides a forum for frequent, open, and constructive dialogue between Brown-Forman and its controlling family stockholders. In addition, the committee engages the Brown family on topics of mutual interest, such as the company and our industry, governance, ownership, and philanthropy.

Director of Family Shareholder Relations

The Director of Family Shareholder Relations, a Brown-Forman employee, works with other employees and Brown family members to develop and implement policies and practices designed to further strengthen the relationship between Brown-Forman and the Brown family.

Brown Family Member Employees

Brown-Forman currently employs ten Brown family members, some of whom participate on management teams that oversee strategic and operational matters. Participation in these roles enables our Brown family employees to contribute their perspectives on the important issues we confront. In addition to their management contributions, the Brown family employees play a critical role in upholding the Brown-Forman corporate culture.

 

       
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LOGO

ENVIRONMENTAL,
SOCIAL, AND
GOVERNANCE

PUTTING OUR VALUES INTO ACTION

Our history of responsibility began in 1870, when our founder, George Garvin Brown, first sold whiskey in sealed glass bottles to ensure quality and safety—an innovation some consider the first act of corporate responsibility in the industry.

 

LOGO

While pursuing these priorities, we strive to be responsible in everything we do. Corporate governance, discussed in the previous section of this Proxy Statement, is a keystone of our environmental, social, and governance strategy. We also emphasize our core values of integrity, respect, trust, teamwork, and excellence. Responses to our employee engagement survey demonstrate that we do not just treat these values as words. We live them too, and seek out business partners with the same principles.

 

       
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ENVIRONMENTAL, SOCIAL, AND GOVERNANCE    |    PUTTING OUR VALUES INTO ACTION
 

 

“WE CAN BUILD STRONGER, BETTER
 RELATIONSHIPS WITH PEOPLE IF THEY
 ENJOY OUR PRODUCTS THE RIGHT WAY.”

– Lawson E. Whiting, President and Chief Executive Officer

 

LOGO

We report our ongoing commitment and progress in our four focus areas of alcohol responsibility, sustainability, diversity and inclusion, and community in our Integrated Annual Report and on our website (www.brown-forman.com/responsibility).

Please note that the information provided on our website (or any other website referred to in this Proxy Statement) is not part of this Proxy Statement and is not incorporated by reference as part of this Proxy Statement.

 

       
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LOGO

PROPOSAL 1:

ELECTION OF DIRECTORS

This section provides information about our thirteen director nominees, including the experience, qualifications, attributes, and skills that enable them to make valuable contributions to our Board and that led the Board to conclude that they should serve as directors of Brown-Forman.

All of our nominees are current directors of Brown-Forman. Each director was elected by the stockholders at our 2019 Annual

Meeting.

 

 

   LOGO

 

 

 

The Board unanimously recommends a vote “FOR” the election of each
director nominee.

 

 

If any nominee becomes unable to serve before the Annual Meeting, the proxy holders may vote for a substitute nominee if the Board designates one. As of the date of this Proxy Statement, the Board believes each nominee is prepared to serve if elected.

NOMINEES

 

  PATRICK BOUSQUET-CHAVANNE

 

 

LOGO

 

Director since 2005

 

Age 62

                                       

 

COMMITTEES:

 

 Audit

 

 Corporate Governance and Nominating

 

 

 

CURRENT AND PAST POSITIONS

 

Emaar Malls (a developer of premium shopping malls and retail assets), Chief Executive Officer from 2018 to 2019

 

Positions with Marks and Spencer Group PLC:

 

 Executive Director of Customer, Marketing and M&S.com from 2016 to 2018

 

 Executive Director of Marketing and International from 2014 to 2016

 

 Executive Director of Marketing and Business Development from 2013 to 2014

 

 Corporate Director of Strategy and Business Development from 2012 to 2013

 

Positions with Yoostar Entertainment Group:

 

 Co-Chairman from 2010 to 2012

 

 President and Chief Executive Officer from 2009 to 2012

  

QUALIFICATIONS AND SKILLS

 

 Senior management and board experience at one of the world’s leading manufacturers and marketers of branded consumer goods, including experience with implementing strategy, branding, licensing, distribution, digital, and international expansion

 

 Experience dealing with governance issues relevant to family-controlled public companies

 

 Experience dealing with digital transformations

 

OTHER DIRECTORSHIPS

 

 Marks and Spencer Group PLC from 2013 to 2018

 

 HSNi Corporation from 2008 to 2013

  CAMPBELL P. BROWN
          

LOGO

 

Director since 2016

 

Age 52

 

CURRENT AND PAST POSITIONS

 

Positions with Brown-Forman and affiliates:

 

 Senior Vice President since 2018

 

 President and Managing Director of Old Forester, our founding bourbon brand, since 2015

 

 Led the wine and spirits portfolio in Canada and the Midwest region of the U.S.

 

 Served in the emerging markets of India, the Philippines, and Turkey

 

 Various other positions over a 26-year career

 

 Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018

  

QUALIFICATIONS AND SKILLS

 

 Business and industry experience gained by serving in operational, management, and executive positions within Brown-Forman

 

 Deep knowledge of family corporate governance

 

 Perspective as a fifth generation Brown family stockholder

 

 A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders

 

OTHER DIRECTORSHIPS

 

 Kentucky Distillers Association since 2016

 

 Republic Bank and Trust Company since 2008

 

       
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PROPOSAL 1: ELECTION OF DIRECTORS    |    NOMINEES
 

 

  GEO. GARVIN BROWN IV
          

LOGO

 

Director since 2006

 

Age 51

                                       

 

COMMITTEES:

 

 Corporate Governance and Nominating

 

 Executive (Chair)

 

CURRENT AND PAST POSITIONS

 

Positions with Brown-Forman and affiliates:

 

 Chairman of the Board since 2007

 

 Executive Vice President from 2011 to 2015

 

 Senior Vice President and Managing Director of Western Europe and Africa from 2009 to 2011

 

 Vice President and Jack Daniel’s Brand Director in Europe and Africa from 2004 to 2008

 

 Director of the Office of the Chairman and Chief Executive Officer from 2002 to 2004

 

 Founding Member and Co-Chairman, Brown-Forman/Brown Family Shareholders Committee since 2007

  

QUALIFICATIONS AND SKILLS

 

 Business and industry experience gained by serving in operational, management, and executive positions within Brown-Forman

 

 Deep knowledge of family corporate governance

 

 Perspective as a fifth generation Brown family stockholder

 

 A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders

 

  STUART R. BROWN
          

LOGO

 

Director since 2015

 

Age 55

 

CURRENT AND PAST POSITIONS

 

Typha Partners, LLC (an early-stage private equity investment company), Managing Partner since 2010

 

DendriFund, Inc. (a private, non-operating foundation focused on natural resource sustainability, seeded by Brown-Forman), Founding Director and President from 2011 to 2019

 

Between the Covers Bookstore, Owner from 1998 to 2010

 

Positions with Brown-Forman and affiliates:

 

 Sales and Marketing Management from 1995 to 1998

 

 Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018

  

QUALIFICATIONS AND SKILLS

 

 Extensive experience in family governance, entrepreneurial management, finance, and board leadership

 

 Demonstrated commitment to sustainability and social issues

 

 Perspective as a fifth generation Brown family stockholder

 

 A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders

 

  JOHN D. COOK
           

LOGO

 

Director since 2008;

 

Lead Independent Director since 2012

 

Age 67

                                       

 

COMMITTEES:

 

 Compensation

 

 Corporate Governance and Nominating (Chair)

 

 Executive

  

CURRENT AND PAST POSITIONS

 

Positions with McKinsey & Company:

 

 Director Emeritus

 

 Director from 2003 to 2008

  

QUALIFICATIONS AND SKILLS

 

 Skills gained during an over 40-year career advising and managing consumer products companies and creating stockholder value

 

 Leadership and senior management experience

 

 Financial and international expertise

 

 Marketing skills

 

 Experience with strategic acquisitions and integrations

 

OTHER DIRECTORSHIPS

 

 Winona Capital Management since 2007

 

       
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PROPOSAL 1: ELECTION OF DIRECTORS    |    NOMINEES
 

 

  MARSHALL B. FARRER
 

LOGO

 

Director since 2016

 

Age 49

  

CURRENT AND PAST POSITIONS

 

Positions with Brown-Forman and affiliates:

 

  Senior Vice President, Managing Director, Global Travel Retail and Developed APAC Region since 2018

 

  Senior Vice President, Managing Director, Global Travel Retail region from 2015 to 2018

 

  Vice President, Managing Director, Jack Daniel’s Tennessee Honey brand from 2014 to 2015

 

  Vice President, Managing Director, Australia/New Zealand region from 2010 to 2014

 

  Vice President, Director, Latin America & Caribbean region from 2006 to 2009

 

  Other sales and marketing management positions over a 22-year Brown-Forman career

 

  Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018

  

QUALIFICATIONS AND SKILLS

 

  Business and industry experience gained from serving in operational, management, marketing, and executive positions within Brown-Forman and the beverage alcohol industry

 

  Extensive international operations and leadership experience

 

  Perspective as a fifth generation Brown family stockholder

 

  A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders

 

  LAURA L. FRAZIER
           

LOGO

 

Director since 2016

 

Age 62

  

CURRENT AND PAST POSITIONS

 

Bittners LLC (a more than 160-year-old interior and commercial design firm), Owner, Chairman, and former CEO

 

Positions with Brown-Forman and affiliates:

 

  Member of the board of directors of Lenox, Inc., a former subsidiary, from 1999 to 2005

 

  Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018

  

QUALIFICATIONS AND SKILLS

 

  Executive leadership and entrepreneurial management skills

 

  Perspective as a fifth generation Brown family stockholder

 

  A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of stockholders

 

  KATHLEEN M. GUTMANN
           

LOGO

 

Director since 2017

 

Age 51

                                       

 

COMMITTEES:

 

 Audit

  

CURRENT AND PAST POSITIONS

 

Positions with United Parcel Service:

 

  Chief Sales and Solutions Officer and Senior Vice President of UPS Healthcare and Life Sciences since 2020

 

  Chief Sales and Solutions Officer and Senior Vice President of The UPS Store and UPS Capital from 2014 to 2020

 

  President of Worldwide Sales from 2011 to 2014

  

QUALIFICATIONS AND SKILLS

 

  Extensive senior management and executive leadership experience

 

  Experience directing long-term strategy as a member of the UPS Management Committee

 

  Oversight of P&L for UPS Capital (a UPS subsidiary that provides supply chain, financial, insurance, and payment solutions) and The UPS Store (a franchise system of retail shipping, mailbox, print, and business service centers)

 

  Oversight of P&L for UPS Healthcare and Life Sciences (group with eight million square feet of dedicated healthcare certified logistics space and 5,000 healthcare logistics personnel)

 

       
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Table of Contents
PROPOSAL 1: ELECTION OF DIRECTORS    |    NOMINEES
 

 

  AUGUSTA BROWN HOLLAND
                

LOGO

 

Director since 2015

 

Age 44

  

CURRENT AND PAST POSITIONS

 

  Haystack Partners LLC (environmentally conscious real estate development company), Founding Partner since 2006

 

  Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018

  

QUALIFICATIONS AND SKILLS

 

  Extensive knowledge of urban planning and revitalization and environmentally friendly development

 

  Demonstrated commitment to sustainability and social issues

 

  Experience serving on numerous civic boards

 

  Perspective as a fifth generation Brown family stockholder

 

  A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of stockholders

 

  MICHAEL J. RONEY
           

LOGO

 

Director since 2014

 

Age 66

                                         

 

COMMITTEES:

 

 Compensation (Chair)

  

CURRENT AND PAST POSITIONS

 

Bunzl plc (a multinational distribution and outsourcing company), Chief Executive Officer from 2005 to 2016

  

QUALIFICATIONS AND SKILLS

 

  Extensive senior management and executive leadership experience

 

  Deep expertise in multinational production, distribution, and operations

 

  Financial expertise

 

  International mergers and acquisitions experience

 

OTHER DIRECTORSHIPS

 

  Next plc since 2017

 

  Grafton Group plc since 2016

 

  Johnson Matthey plc from 2007 to 2014

 

  Bunzl plc from 2003 to 2005

 

  TRACY L. SKEANS
           

LOGO

 

Director since 2018

 

Age 47

                                         

 

COMMITTEES:

 

 Audit

 

 Compensation

  

CURRENT AND PAST POSITIONS

 

Positions with Yum! Brands, Inc. and affiliates:

 

  Chief Transformation and People Officer, Yum! Brands, Inc. since 2016

 

  President, Pizza Hut International from 2014 to 2015

 

  Chief People Officer, Pizza Hut Global from 2013 to 2014

 

  Chief People Officer, Pizza Hut US from 2011 to 2013

  

QUALIFICATIONS AND SKILLS

 

  Strong track record of business leadership overseeing transformation strategy, human resources, and corporate communications functions

 

  Experience leading business transformation and global people capability strategies to build powerful brands and fuel sustainable results

 

  Extensive accounting, treasury, and financial expertise

 

       
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Table of Contents
PROPOSAL 1: ELECTION OF DIRECTORS    |    NOMINEES
 

 

  MICHAEL A. TODMAN
          

LOGO

 

Director since 2014

 

Age 62

                                       

 

COMMITTEES:

 

 Audit (Chair)

 

 Corporate Governance and Nominating

 

CURRENT AND PAST POSITIONS

 

Positions with Whirlpool and affiliates:

 

 Vice Chairman, Whirlpool Corporation from 2014 to 2015

 

 President, Whirlpool International from 2009 to 2014

 

 President, Whirlpool North America from 2007 to 2009

  

QUALIFICATIONS AND SKILLS

 

 Extensive knowledge and experience in multinational operations, sales and distribution, and manufacturing

 

 Executive leadership of large multinational organizations

 

 Financial expertise

 

OTHER DIRECTORSHIPS

 

 Mondelēz International, Inc. since May 2020

 

 Carrier Corporation since April 2020

 

 Prudential Financial, Inc. since 2016

 

 Newell Brands, Inc. from 2007 to May 2020

 

 Whirlpool Corporation from 2006 to 2015

 

  LAWSON E. WHITING
          

LOGO

 

Director since 2018

 

Age 52

                                       

 

COMMITTEES:

 

 Executive

 

CURRENT AND PAST POSITIONS

 

Positions with Brown-Forman and affiliates:

 

 President and Chief Executive Officer since 2019

 

 Executive Vice President and Chief Operating Officer from 2017 to 2018

 

 Executive Vice President and Chief Brands and Strategy Officer from 2015 to 2017

 

 Senior Vice President and Chief Brands Officer from 2013 to 2015

 

 Senior Vice President and Managing Director for Western Europe from 2011 to 2013

 

 Vice President and Finance Director for Western Europe from 2010 to 2011

 

 Vice President and Finance Director for North America from 2009 to 2010

  

QUALIFICATIONS AND SKILLS

 

 In-depth knowledge of Brown-Forman’s business, operations, and strategy gained during his 23-year career

 

 Extensive knowledge of the beverage alcohol industry

 

 Operations and financial experience

 

 Strategic thinking, leadership, management, consensus-building, and communication skills

Family relationships. No family relationship—first cousin or closer—exists between any two directors, executive officers, or individuals nominated or chosen to become a director or executive officer, except for the following relationships between Brown family directors: Geo. Garvin Brown IV and Campbell P. Brown are brothers, and Marshall B. Farrer is their first cousin; and Stuart R. Brown and Augusta Brown Holland are first cousins.

 

       
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Table of Contents

LOGO

DIRECTOR

COMPENSATION

OVERVIEW

Our directors serve one-year terms that begin when they are elected at an Annual Meeting and end immediately upon the election of directors at the next Annual Meeting. We refer to this period as a “Board Year” for director compensation purposes.

Our non-employee director compensation consists of an annual Board retainer, a Chair of the Board retainer, a Lead Independent Director retainer, committee member retainers, committee chair retainers, and meeting fees. To align the interests of our non-employee directors with those of our stockholders, non-employee directors receive their Board retainers in a combination of cash and equity. Non-employee directors receive meeting fees only if they attend more than eight meetings (Board), ten meetings (Audit Committee), or six meetings (Compensation Committee and Corporate Governance and Nominating Committee). The Compensation Committee believes this compensation structure appropriately reflects the importance of directors’ active participation at Board and committee meetings.

The Compensation Committee reviews, with the assistance of its independent consultant, FW Cook, information each year related to the competitiveness of our non-employee director compensation. From time to time, the Compensation Committee recommends adjustments to our compensation structure to ensure that it remains competitive and incorporates the appropriate level and mix of compensation. Based upon the review conducted in fiscal 2020, and with the advice of FW Cook, the Compensation Committee recommended to the Board, and the Board approved, that the existing retainer and fee structure remain unchanged.

 

 

DIRECTOR COMPENSATION STRUCTURE

 

Pay Element    Amount

Lead Independent Director Retainer

     $45,000

Paid in six installments over the Board Year.

    

 

 

 

 

 

    

 

Board Retainer

     $205,000 total
Directors may elect to receive their cash retainer in equity. Directors who have satisfied our stock ownership guidelines may elect to receive up to 100% of the retainer in cash rather than receiving equity. The cash retainer is paid in six installments over the Board Year. Any awards of deferred stock units are made in their entirety on the Annual Meeting date.     

•  $70,000 cash
•  $135,000 equity

(deferred stock units)

Meeting Fees

  Board      $5,000 per meeting
No fee is paid unless the director attends more than eight Board meetings.    

 

     $2,500 per telephonic meeting
No fee is paid unless the director attends more than ten meetings (Audit Committee) or six meetings (Compensation and Corporate Governance and Nominating Committees).  

Audit, Compensation, and Corporate

Governance and Nominating Committees

  

 

 

 

$2,500 per meeting

$1,250 per telephonic meeting

Committee Member Retainers

  Audit Committee      $25,000

Paid in six installments over the Board Year.

 

 

Compensation Committee

     $20,000
 

 

 

 

Corporate Governance and
Nominating Committee

  

 

 

 

$20,000

Committee Chair Retainers (excluding Executive Committee)

     $20,000
Paid in six installments over the Board Year. A director who chairs more than one committee will receive multiple chair retainers. The Committee Chair Retainer is in addition to the Committee Member Retainer.     

 

 

 

 

 

    

 

Non-Employee Chair of the Board Retainer

     $625,000

Paid in six installments over the Board Year.

    

 

 

 

 

 

    

 

Deferred Stock Units

Our Deferred Stock Unit (DSU) program for non-employee directors allows us to issue both Class A common DSUs and Class B common DSUs. Each DSU represents the right to receive one share of Brown-Forman’s Class A or Class B common stock, based on the closing price of the shares on the date the award is made. After a non-employee director’s Board service ends, his or her DSUs are paid out in shares of Class A or Class B common stock following a six-month waiting period. Directors may elect to receive this distribution either in a single lump sum or in ten equal annual installments.

 

       
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DIRECTOR COMPENSATION    |    OVERVIEW
 

 

Non-employee directors are credited with the cash dividends on the number of shares represented by the DSUs they held on the record date for that dividend. These dividend credits are converted to additional DSUs based on the market value of the Class A or Class B common stock as of the dividend payment date.

If a director’s Board service ends during a Board Year, the DSUs attributable to the remainder of that Board Year do not vest and are forfeited.

Employee Directors

Lawson E. Whiting, Campbell P. Brown, and Marshall B. Farrer are our employee directors. They do not receive any compensation for serving on our Board, any of its committees, or on the boards or equivalent bodies of any of our subsidiaries.

Stock Ownership Guideline

Our stock ownership guideline for non-employee directors is equal to five times the annual board retainer, which for the 2020 Board Year was $1,025,000. When considering whether a non-employee director has satisfied the stock ownership guideline, the Compensation Committee includes Class A or Class B common stock held directly and all DSUs. The value of any unexercised stock-settled stock appreciation rights (SSARs) is not included. Any non-employee director who has not yet met the stock ownership guideline will receive at least 60% of his or her annual Board retainer in DSUs.

Expense Reimbursement

We reimburse all directors for reasonable and necessary expenses they incur in connection with attending Brown-Forman Board and committee meetings. In addition, we provide a stipend of $3,000 per meeting to directors who must travel to an overseas location for such Board and committee meetings.

Continuing Education Allowance

Brown-Forman covers the cost, up to $10,000 per director per Board Year, of continuing education programs to support our directors’ efforts to remain current on best practices in board governance, industry matters, or other business topics relevant to their Board service.

Events

We occasionally invite our directors and their spouses to events, including strategy retreats, retirement celebrations, award dinners, and similar functions. We believe these occasions provide valuable opportunities for our directors to establish and develop relationships with our senior executives, long-term stockholders, employees, and each other, furthering our objective of having a strong and cohesive board.

 

       
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Table of Contents
DIRECTOR COMPENSATION    |    FISCAL 2020 DIRECTOR COMPENSATION
 

 

FISCAL 2020 DIRECTOR COMPENSATION

The following table shows the compensation paid to non-employee directors for their service in fiscal 2020.

 

 

FISCAL 2020 DIRECTOR COMPENSATION TABLE

 

Name    Fees Earned or Paid in  Cash(1)        

 

     DSU Awards(2)(3)        

 

     All Other Compensation(4)        

 

     Total  

Patrick Bousquet-Chavanne

     $101,250                 $135,000                 $15,000                         $251,250  

Geo. Garvin Brown IV

     537,500                 312,500                 15,000                 865,000  

Stuart R. Brown

     111,250                 102,500                                 213,750  

Bruce L. Byrnes

     115,000                 135,000                                 250,000  

John D. Cook

     208,750                 135,000                                 343,750  

Laura L. Frazier

     205,000                                                 205,000  

Kathleen M. Gutmann

     95,000                 135,000                                 230,000  

Augusta Brown Holland

     64,341                 135,000                                 199,341  

Michael J. Roney

     57,500                 205,000                 15,000                 277,500  

Tracy L. Skeans

     27,500                 205,000                                 232,500  

Michael A. Todman

     120,000                 135,000                                 255,000  

Paul C. Varga(5)

     51,250                                                 51,250  

 

(1)

Amounts in this column reflect fees earned during fiscal 2020 and include annual Board retainer (if paid in cash), Lead Independent Director retainer, annual committee chair and committee member retainers, non-employee Chair of the Board retainer (if paid in cash), and any Board and committee meeting fees.

 

(2)

DSUs represent the right to receive one share of Class A or Class B common stock, and are determined by dividing the cash value of the compensation being paid in DSUs by the closing price of Class A or Class B common stock on the date of grant. DSU awards for the 2020 Board Year were granted on July 25, 2019. The closing price of our Class A common stock on that date was $53.34. The closing price of our Class B common stock on that date was $54.64. On dividend payment dates, outstanding DSUs are credited with dividend-equivalent DSUs.

 

(3)

The aggregate number of DSUs outstanding for each of our non-employee directors as of April 30, 2020, is set forth below. Annual grants of DSUs vest over the course of the Board Year.

 

Name   

DSUs Outstanding Class A

as of April 30, 2020

     DSUs Outstanding Class B
as of April 30, 2020
 

Patrick Bousquet–Chavanne

     23,730        18,654  

Geo. Garvin Brown IV

     31,317        4,873  

Stuart R. Brown

     3,023         

Bruce L. Byrnes

     17,355        12,181  

John D. Cook

     22,974        19,006  

Kathleen M. Gutmann

     7,480        689  

Augusta Brown Holland

     10,664        1,484  

Michael J. Roney

     22,378        4,078  

Tracy L. Skeans

     8,661         

Michael A. Todman

     15,780        2,761  

 

(4)

Reflects additional stipend amounts paid during fiscal 2020 to directors who must travel to an overseas location for Board and committee meetings.

 

(5)

Paul C. Varga retired from the Board on July 25, 2019. The amounts set forth under “Fees Earned or Paid in Cash” represent the fees earned for his service as a non-employee director for part of fiscal 2020.

 

       
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Table of Contents

LOGO

COMPENSATION

DISCUSSION AND

ANALYSIS

This section describes our executive compensation philosophy and objectives, and the decisions of the Compensation Committee (Committee) regarding the compensation of our Named Executive Officers (NEOs). For fiscal 2020, our NEOs were:

 

  Lawson E. Whiting    Jane C. Morreau    Matthew E. Hamel    John V. Hayes    Thomas Hinrichs    Mark I. McCallum
  President and Chief    Executive Vice    Executive Vice    Senior Vice President,    Senior Vice President,    Former Executive Vice  
  Executive Officer    President and Chief    President, General    President, USA &    President, International    President and Chief
   Financial Officer    Counsel and Secretary    Canada    Division    Brands Officer(1)

 

(1)

Mr. McCallum retired as an employee of Brown-Forman on December 31, 2019.

EXECUTIVE SUMMARY

Pay for Performance

We believe our short- and long-term incentive programs should drive performance. These programs utilize key performance metrics to compare our performance to that of our peers. We believe the use of these metrics accomplishes four key objectives:

 

       

demonstrating value provided to our stockholders;

   

ensuring that we hold ourselves to an objective performance standard;

   

reinforcing a competitive and innovative mindset among
our leadership; and

   

ensuring that incentive payments are appropriate.

We believe one of the best measures of the value our NEOs create is the return provided to our stockholders relative to the returns of other companies in our industry and the broader S&P 500. We show the trends in total shareholder return, and how our CEO’s compensation compares with those trends, in the charts below:

 

   

 

BROWN-FORMAN TOTAL SHAREHOLDER RETURN (TSR) VS. EARNINGS PER SHARE (EPS) VS. CEO TOTAL COMPENSATION GROWTH(1)

 

    

 

TSR: BROWN-FORMAN VS. INDUSTRY VS. S&P 500(2)

LOGO      LOGO

 

(1)

Compares trends for TSR of Brown-Forman Class B common stock and diluted EPS (percent change from prior fiscal year) with the change in total compensation for the CEO role (percent change from prior fiscal year). Compensation amounts include base salary, stock appreciation rights, non-equity compensation, and all other compensation as reported in the fiscal 2020 Summary Compensation table. Compensation shown also includes the performance-adjusted restricted stock award values as reported at the end of the applicable three-year performance period. Change in pension values are excluded.

 

(2)

Represents the compound annual growth rate of TSR. Industry TSR is based on a weighted average of comparable companies in the distilled spirits industry.

 

       
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    EXECUTIVE SUMMARY
 

 

Every year, the Committee evaluates NEO compensation in comparison to the compensation of executives with equivalent positions within our industry. (This process is described on page 30 under “How We Set Target Compensation for Our NEOs.”) The Committee’s 2020 annual review revealed that the total target direct compensation for our NEOs was either at or below the market median for our compensation peer group listed on page 31. In light of this review, we believe our executive compensation program delivers exceptional value to our stockholders, particularly considering the combination of strong returns and financial performance that Brown-Forman and our management team have delivered over multiple years.

Performance-Based Payouts for Fiscal 2020

Our compensation program demonstrates the close alignment between pay and performance.

 

 

CASH INCENTIVES

 

Short-Term Cash Incentive

 

   

Long-Term Cash Incentive

 

       

-6% growth

IN UNDERLYING OPERATING INCOME,(1)

    LOGO  

30%

WEIGHTING

 

    LOGO  

30%

WEIGHTING

    LOGO  

40%

WEIGHTING

 

driven primarily by the global COVID-19 pandemic. As a result, the company performance component of the short-term cash incentives paid out at 0% of target.

 

(1)   “Underlying operating income” is defined on page 32. “Underlying operating income” is not derived in accordance with GAAP. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.

   

 

absolute underlying operating income

   

 

relative underlying operating income compared to industry peers

   

 

achievement of key long-term strategic objectives in our B-F 150 corporate strategy

   
   

 

Our performance on these measures for the fiscal 2018–2020 performance period resulted in a payout of 80% of target.

EQUITY-BASED INCENTIVES

We use equity-based compensation to align the long-term economic interests of our NEOs with those of our stockholders. We offer our NEOs two types of equity-based incentives: performance-based restricted stock units and stock-settled stock appreciation rights.

 

• Performance-based restricted stock unit awards for the fiscal 2018–2020 performance period were converted into restricted shares shortly after the conclusion of fiscal 2020. The number of restricted shares awarded was determined by the cumulative TSR of our Class B common stock compared to the weighted average TSR of the companies constituting the Standard & Poor’s Consumer Staples Index.

      Our relative performance against this group over the performance period was at the 88th percentile, resulting in a payout at 150% of target.

 

 

Payouts of our stock-settled stock appreciation rights are determined by the increase of our Class B common stock price above the awards’ stated grant price.

Advisory Votes on Executive Compensation

We conduct an advisory vote on our executive compensation (“say-on-pay”) every three years. Our last “say-on-pay” vote occurred at our 2017 Annual Meeting, and our stockholders expressed overwhelming support for the compensation of our NEOs, with more than 99% of the votes cast approving the advisory “say-on-pay” resolution. The Committee considered these results as one of many factors in its executive compensation decisions for fiscal 2018, 2019, and 2020, and did not make any material changes to our executive compensation program.

Following the expressed preference of our stockholders, we expect to continue to conduct advisory votes on executive compensation every three years, but reserve the right to conduct votes more frequently in order to seek additional feedback from our stockholders. As in the past, the Committee will consider the results of this year’s “say-on-pay” advisory vote (Proposal 2 on page 53) in its future executive compensation decisions.

Following this year’s vote, we expect to hold our next “say-on-pay” advisory vote at the 2023 Annual Meeting.

 

       
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    OVERVIEW OF OUR COMPENSATION PROGRAM
 

 

OVERVIEW OF OUR COMPENSATION PROGRAM

 

Compensation Objectives and Principles

 

The objective of our executive compensation program is to attract, motivate, reward, and retain a diverse team of talented executives who will lead Brown-Forman to produce superior, sustainable, long-term value for our stockholders.

 

In order to remain competitive, as well as to ensure our compensation packages are aligned with the interests of our stockholders, we have established a program that we believe focuses on creating long-term value, reinforcing financial accountability, and delivering outstanding operational outcomes to drive sustained performance of Brown-Forman stock.

 

Compensation Elements

 

Principal elements of compensation for our NEOs include:

 

•  base salary (including holiday bonus);

 

•  short-term (one-year) performance-based cash compensation;

 

•  long-term (three-year) performance-based cash compensation;

 

•  long-term equity-based incentive compensation (stock-settled stock appreciation rights and performance-based restricted stock units);

 

•  benefits and limited perquisites generally available to all senior executives; and

 

•  limited post-employment compensation and other benefits.

 

Measuring Performance

 

To measure financial performance, we use a metric called “underlying operating income.” This metric is determined by adjusting GAAP operating income for the effects of acquisitions and divestitures, foreign currency changes, estimated net changes in distributor inventories for our brands, the impact of establishing the Brown-Forman Foundation, and the Chambord impairment. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.

 

The Committee believes the most relevant measures of our performance are:

 

•  strong and sustained growth in underlying operating income, both on an absolute basis and relative to industry peers;

 

•  progress toward our long-term strategic goals; and

 

•  our three-year TSR relative to the S&P Consumer Staples Index.

    

 

 

LOGO

 

On the advent of our 150th anniversary, Brown-Forman framed our long-term perspective and commitment as a thriving, family-controlled, independent company through the ambition “Nothing Better in the Market”. Driven by our values and core purpose of “enriching life”, the Company’s success is dependent on strategic priorities which build our brands and create shareholder value:

 

•  Keep Jack Daniel’s Tennessee Whiskey strong, healthy, and relevant to consumers worldwide;

 

•  Lead in premium American whiskey and increase the focus on our super-premium portfolio;

 

•  Deliver on balanced geographic growth and competitive routes to consumers;

 

•  Deliver top-tier TSR through shareholder-friendly capital allocation and balanced investments to fuel growth; and

 

•  Empower our people to lead, develop new capabilities, and live by our timeless values.

 

A more comprehensive view of our business integrates these priorities with a wider definition of value to recognize the many ways our Company contributes to the world around us. We are inspired to create an environment where leveraging diversity and inclusion occurs naturally. Our commitment to responsibility, sustainability, and the communities in which we live and work makes a meaningful difference in the way we build brands for our Company and consumers over the long-term.

 

 

       
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COMPENSATION DISCUSSION AND ANALYSIS    |    THE ROLE OF OUR COMPENSATION COMMITTEE
 

 

FISCAL 2020 PERFORMANCE METRICS FOR BROWN-FORMAN INCENTIVE PLANS

 

Performance-Based Component   Performance Measures

 

Short-Term Cash Incentive

 

 

80% Weighting: Underlying operating income growth(1) relative to expected performance among industry peers

 

    20% Weighting: Individual performance

Long-Term Cash Incentive

 

30% Weighting: Underlying operating income growth compared to sustained growth of 8%

 

 

30% Weighting: Underlying operating income growth compared to industry peers

 

    40% Weighting: Progress toward long-term quantitative and qualitative strategic goals

Performance-Based Restricted Stock Units

  TSR relative to S&P Consumer Staples Index

Stock-Settled Stock Appreciation Rights

  Stock price growth above grant price

 

(1)

“Underlying operating income” is not derived in accordance with GAAP. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.

Competitive Compensation

We aspire to provide target compensation for our NEOs that approximates median target compensation delivered to executives in similar positions at companies we consider as competitors for senior executive talent. We believe that providing strong, competitive target compensation aligned with performance enhances our ability to secure the right executive leadership while driving the right results for our stockholders.

To help ensure we meet this objective, the Committee compares Brown-Forman’s compensation practices with those of a group of high-performing, brand-building consumer products companies with similar financial characteristics. The Committee reviews this group of companies annually to ensure they continue to meet these criteria. These companies are listed on page 31.

THE ROLE OF OUR COMPENSATION COMMITTEE

The Committee serves a critical role in our compensation governance by providing independent oversight and thought leadership on executive compensation and establishing performance objectives that correlate pay and performance. The Committee, with the assistance of its independent compensation consultant, FW Cook, establishes compensation for our NEOs and other designated executive officers, and helps the Board fulfill its duties relating to the compensation of our directors, officers, and employees. The Committee also has the sole authority, on behalf of the Board, to determine the compensation of our CEO. Pursuant to its charter, the Committee may delegate to the Management Compensation and Benefits Committee, or to one or more company officers, the authority to make equity awards to eligible individuals other than the NEOs. The Committee may change or revoke any delegation at any time.

The Committee is composed of three independent directors — Michael J. Roney (Chair), John D. Cook, and Tracy L. Skeans. Each member of the Committee qualifies as an independent director under the NYSE’s heightened independence standards for compensation committee members of non-controlled companies, as a non-employee director under SEC rules, and as an outside director under regulations adopted pursuant to Section 162(m) of the Internal Revenue Code. As a “controlled company,” Brown-Forman is not required to meet all of these standards, but we believe that doing so is in the best interests of our company and our stockholders.

The Committee’s deliberations and decisions are informed by the diverse experience of its members, input from certain members of management, advice from FW Cook, and access to functional experts at the company.

Sound Pay Practices

We avoid pay practices that we believe do not support the objectives of our executive compensation program or our culture. We do not offer NEOs employment agreements, non-performance-based cash payments (other than salary and holiday bonus), tax gross-ups, excessive perquisites, or change-in-control agreements. We also have an Incentive Compensation Recoupment Policy (commonly known as a “clawback” policy) that permits Brown-Forman to seek recovery of incentive compensation paid or awarded in the event we restate a financial filing because of material noncompliance with financial reporting requirements or we discover an error in the calculation of that incentive compensation.

Each year, we assess and evaluate potential compensation-related risks. Based upon this year’s review, management and the Committee have concluded that our compensation policies and practices do not create any risk that is reasonably likely to have a material adverse effect on Brown-Forman. This is our intent and it is consistent with our findings in prior years.

 

       
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    TARGET COMPENSATION
 

 

The Compensation Consultant

As an independent compensation advisor, FW Cook is engaged by and reports directly to the Committee and attends Committee meetings as requested. FW Cook provides the Committee with information on external compensation trends and guidance on the compensation of our CEO and other NEOs, and also reviews this Compensation Discussion and Analysis. In addition, FW Cook provides independent advice to the Board on director remuneration, assists with the Board and Committee self-assessment process, and acts as the Committee’s advisor in working with management. FW Cook provides no other services to Brown- Forman or management.

In accordance with SEC and NYSE requirements, the Committee has reviewed the independence of FW Cook and determined that no conflict exists that would compromise the independence of the advice the firm provides.

TARGET COMPENSATION

How We Set Target Compensation for Our NEOs

We apply a customized approach to determine the target compensation for each NEO. We consider each NEO’s role, the value of the role in the labor market, and factors specific to the NEO as an individual. Individual factors include tenure with Brown-Forman, mastery of current role, potential to move into expanded roles, performance, scarcity of skill sets, retention risk, fit within our culture, career experience, and internal pay equity. We find that this approach leads to a more effective pay program than one based solely on external labor market data.

To ensure our pay is competitive, we compare NEO compensation with the compensation for executives in similar positions within our compensation comparator group. FW Cook prepares a market analysis comparing the target value of each element of compensation for Brown-Forman’s NEOs to the compensation paid by our compensation comparator group. This analysis produces a range of market-competitive levels of target compensation as one consideration in determining pay for our NEOs. While we do not set target compensation to meet specific benchmarks, we do consider the median of the comparator group as a guide to appropriate target pay ranges for our NEOs.

To determine the pay elements that make up each NEO’s compensation package, we begin by reviewing the pay mix offered by companies in our compensation comparator group. The objective of this practice is to design a pay mix that aligns with compensation programs in our comparator group, while supporting our goal of creating sustainable value for stockholders. FW Cook and the Committee periodically review pay mix to ensure we maintain this alignment.

 

 

BROWN-FORMAN CEO AND NEO PAY MIX VS. COMPENSATION COMPARATOR GROUP

 

 

LOGO

 

       
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    AWARDS AND PAYOUTS IN FISCAL 2020: FIXED AND SHORT-TERM COMPENSATION
 

 

Compensation Comparator Group

Each year, the Committee reviews the membership of the compensation comparator group to ensure continued alignment with the characteristics of Brown-Forman. As a result of the most recent review, we added Treasury Wine Estates Limited to the list of peers. The companies shown below constituted the compensation comparator group for decisions made as of March 25, 2020.

 

Church & Dwight Co., Inc.   Harley Davidson, Inc.   Pernod Ricard   Tiffany & Co.
Conagra Brands, Inc.   lululemon athletica inc.   Rémy Cointreau   Treasury Wine Estates Limited
Constellation Brands, Inc.   McCormick & Company, Incorporated   The Hain Celestial Group, Inc.  
Davide Campari-Milano S.p.A.   Molson Coors Beverage Company   The Hershey Company  
Diageo Plc   Monster Beverage Corporation   The J.M. Smucker Company  

Target Total Direct Compensation for Fiscal 2020

The chart below shows the annualized target total direct compensation for each of our NEOs in fiscal 2020 versus fiscal 2019, and the percentage change of the compensation packages.

 

 

FISCAL 2020 VERSUS FISCAL 2019 NEO TARGET TOTAL DIRECT COMPENSATION

 

LOGO

 

(1)

Salary and holiday bonus are based on the one-year period beginning on July 1. Other compensation elements are based on our fiscal year beginning May 1. Any change to compensation during the year is prorated.

 

(2)

Mr. Hinrichs is based in Amsterdam, Netherlands and paid in euros. The amount shown is the U.S.-dollar equivalent.

 

(3)

Mr. McCallum retired from Brown-Forman on December 31, 2019. Amounts shown reflect his pro-rated compensation based on his retirement date.

AWARDS AND PAYOUTS IN FISCAL 2020: FIXED AND SHORT-TERM COMPENSATION

Fixed Compensation

Base salary. Salaries typically are adjusted each July after we complete our annual performance review process, but an NEO’s salary may be adjusted at other times to reflect a change in role or responsibility.

Holiday bonus. One of our longstanding traditions is to offer all of our salaried employees, including our NEOs, a lump-sum cash bonus during the holiday season. This bonus is intended to promote continued service and to show appreciation for our employees. The holiday bonus, which we consider to be part of base salary, is guaranteed and based solely on an employee’s tenure with Brown-Forman.

 

       
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    AWARDS AND PAYOUTS IN FISCAL 2020: FIXED AND SHORT-TERM COMPENSATION
 

 

The table below shows the total amount of fixed compensation that each of our NEOs received in fiscal 2020.

 

 

FIXED COMPENSATION FOR 2020(1)

 

Name    Amount  

Lawson E. Whiting

  

 

$1,074,760

 

Jane C. Morreau

  

 

640,771

 

Matthew E. Hamel

  

 

549,995

 

John V. Hayes

  

 

427,180

 

Thomas Hinrichs(2)

  

 

473,487

 

Mark I. McCallum(3)

  

 

475,777

 

 

(1)

Reflects fiscal year fixed compensation from May 1, 2019, to April 30, 2020, which includes base salary and holiday bonus.

 

(2)

Mr. Hinrichs is based in Amsterdam, Netherlands and paid in euros. The amount shown is the U.S.-dollar equivalent.

 

(3)

Mr. McCallum retired from Brown-Forman on December 31, 2019. His fixed compensation has been pro-rated to reflect his employment period of May 1, 2019 to December 31, 2019.

Short-Term Incentive Compensation

Our NEOs participate in an annual performance-based cash compensation program in which payouts depend on the achievement of certain performance goals during the fiscal year.

For fiscal 2020, 80% of the target award was tied to company performance and 20% was tied to individual performance. We believe basing the majority of short-term incentive awards for NEOs on company performance appropriately reflects the collective accountability of our most senior executives for the success of the organization. We also believe that basing a lesser, but meaningful, portion of the short-term incentive on individual performance provides flexibility to differentiate awards among NEOs based on their respective achievements during the fiscal year.

Both the corporate and individual portions of our short-term incentives are subject to a performance factor of 0% to 200%. After adjusting for performance, the two components are added together to determine the total short-term incentive payment. As a result, the total value of short-term incentive payouts may vary between 0% and 200% of target—a range we believe is sufficient for recognizing varying levels of performance without encouraging excessive risk-taking.

Please see the “Non-Equity Incentive Plan Compensation” column of the Fiscal 2020 Summary Compensation Table found on page 42 for the amounts paid to the NEOs in short-term incentive compensation for fiscal 2020.

COMPANY PERFORMANCE (80% OF TARGET AWARD)

Company performance goals for fiscal 2020 were based on Brown-Forman’s underlying operating income growth compared to the expected performance of our industry peers. We aspire to outperform these peers consistently and sustainably, and considered our historic underlying operating income growth trends and outlook for fiscal 2020 performance when setting these objectives. The Committee determined that, for purposes of the short-term incentive compensation plan, Brown-Forman achieved underlying operating income of $1,053 million for fiscal 2020, which represents a decline of 6% compared to last fiscal year, compared to an expected growth rate set prior to the global COVID-19 pandemic of 7%. As shown on the next page, these results led to a payout of 0% of target for this portion of the short-term incentive.

Underlying operating income at Brown-Forman was calculated by adjusting GAAP operating income for the following effects:

 

 

acquisitions and divestitures;

 

 

foreign currency changes;

 

 

estimated net changes in distributor inventories for our brands; and

 

 

the Chambord impairment.

“Underlying operating income” is not derived in accordance with GAAP. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.

 

       
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    AWARDS AND PAYOUTS IN FISCAL 2020: LONG-TERM COMPENSATION
 

 

The fiscal 2020 short-term performance goal, our actual performance, and the resulting payout percentage of 0% of target are shown in the chart below:

 

 

FISCAL 2020 SHORT-TERM INCENTIVE COMPENSATION PERFORMANCE GOAL (IN $MM)

 

LOGO

 

 

INDIVIDUAL PERFORMANCE (20% OF TARGET AWARD)

Individual performance objectives for the NEOs consist of qualitative and quantitative goals that support the achievement of our strategic priorities, such as fulfilling individual job responsibilities, providing diversity and inclusion leadership, implementing talent development, developing profit-driving ideas, implementing B-F 150 strategies, and making overall contributions to Brown-Forman as a senior leader. Payout levels for the individual portion of the short-term incentive are based on the following guidelines for aligning performance and compensation:

 

Performance (B-F Nomenclature)    Payout as a Percentage of Target  

Superior (Excellent)

  

 

176%–200%

 

Above Target (Very Strong)

  

 

126%–175%

 

On Target (Strong)

  

 

76%–125%

 

Below Target (Varied or Inconsistent)

  

 

Up to 75%

 

Immediate Improvement Required (Performance Needs Improvement)

  

 

No incentive paid

 

AWARDS AND PAYOUTS IN FISCAL 2020: LONG-TERM COMPENSATION

Long-term incentives are the most important and largest portion of our NEOs’ compensation. These awards are intended to focus the efforts of our executives on long-range strategic goals, including sustainable growth and performance of our brands, and superior returns to our stockholders. They also serve as a strong retention incentive and enhance the alignment of our executives’ interests with those of our stockholders by building equity ownership.

The Committee initially determines the target dollar value of the total long-term incentive award for each NEO. The target long-term incentives are divided equally into four components:

 

       

 

     LOGO

 

 

25%

performance-based cash incentives

 

 

    LOGO

  

 

25%

stock-settled stock appreciation rights

 

 

     LOGO

 

 

25%

performance-based restricted stock units

 

 

    LOGO

  

 

25%

any combination of the above, based on the NEO’s
preference, subject to Committee discretion

 

The Committee has discretion to allocate the flexible 25% portion of the award in any manner it chooses. Traditionally, however, the Committee has chosen to follow the individual preferences expressed by each NEO. Our aim with this approach is to encourage balanced performance in order to create sustainable value for stockholders, while also delivering compensation that has the highest perceived value for each individual NEO.

 

       
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COMPENSATION DISCUSSION AND ANALYSIS    |    AWARDS AND PAYOUTS IN FISCAL 2020: LONG-TERM COMPENSATION
 

 

Long-Term Performance-Based Cash Incentive

(For the Fiscal 2020–2022 Performance Period)

We provide our NEOs with an opportunity to earn a cash-based incentive award linked to Brown-Forman’s achievement of long-term performance goals. The graphic below shows how we tie this incentive to those goals.

 

 

LONG-TERM CASH INCENTIVES FORMULA

To calculate the final payout, we:

 

1.

Assess performance under the three metrics below and calculate a payout percentage for each.

2.

Weight these payout percentages using the weightings shown below.

3.

Add the three weighted percentages to calculate the final payout percentage.

4.

Multiply each NEO’s target award by the final payout percentage.

 

 

LOGO

 

 

(1)

Before any long-term cash incentive may be earned, the company must achieve the threshold underlying operative income objective over the three-year performance period. If the underlying operating income threshold is not achieved, no awards will be earned.

 

(2)

Underlying net sales is a non-GAAP measure and is detailed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-GAAP Financial Measures,” in our Annual Report on Form 10-K for fiscal 2020.

 

       
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COMPENSATION DISCUSSION AND ANALYSIS    |    AWARDS AND PAYOUTS IN FISCAL 2020: LONG-TERM COMPENSATION
 

 

AWARDS GRANTED IN FISCAL 2020 (FOR THE FISCAL 2020–2022 PERFORMANCE PERIOD)

Long-term cash incentives granted in fiscal 2020 have a three-year performance period and, if earned, will be paid shortly after fiscal 2022 ends. The table below shows the target awards granted to each NEO in fiscal 2020.

 

 

TARGET LONG-TERM CASH AWARDS FOR FISCAL 2020–2022 PERFORMANCE PERIOD

 

Name    Amount  

Lawson E. Whiting

  

$

1,208,334

 

Jane C. Morreau

  

 

466,200

 

Matthew E. Hamel

  

 

168,418

 

John V. Hayes

  

 

210,000

 

Thomas Hinrichs(1)

  

 

128,021

 

Mark I. McCallum(2)

  

 

304,125

 

 

(1)

Mr. Hinrichs is based in Amsterdam, Netherlands and paid in euros. The amount shown is the U.S.-dollar equivalent.

 

(2)

Mr. McCallum’s amount shown is pro-rated for the period May 1, 2019 to December 31, 2019. See “Treatment of Short-Term and Long-Term Incentive Awards Upon Termination of Employment” on page 50.

AWARDS EARNED IN FISCAL 2020 (FOR THE FISCAL 2018–2020 PERFORMANCE PERIOD)

Our long-term cash awards for the three-year performance period beginning in fiscal 2018 were paid out shortly after fiscal 2020 ended. Based on our performance, the payout was 80% of the target award, calculated as shown in the graphic below:

 

 

ACTUAL PERFORMANCE AND PAYOUT FOR FISCAL 2018–2020 PERFORMANCE PERIOD(1)

 

LOGO

 

(1)

Reflects the originally reported growth in “underlying operating income.” “Underlying operating income” is not derived in accordance with GAAP. The “underlying operating income” growth rate for fiscal 2018 was not retrospectively adjusted to reflect the impact from the adoption of the Accounting Standards Update 2017-07 (related to pension) and other reclassified expenses related to certain marketing research and promotional agency costs. The impact of these changes, which had no effect on net income, was not material. The long-term incentive compensation related to fiscal 2018 was also not retrospectively adjusted as a result. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.

 

    

  
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    AWARDS AND PAYOUTS IN FISCAL 2020: LONG-TERM COMPENSATION
 

 

The table below shows the long-term cash award that each NEO earned in fiscal 2020 based on the 80% payout for the fiscal 2018–2020 performance period.

 

 

LONG-TERM CASH AWARDS PAID FOR FISCAL 2018–2020 PERFORMANCE PERIOD

 

Name    Amount  

Lawson E. Whiting

  

$

324,667

 

Jane C. Morreau

  

 

288,000

 

Matthew E. Hamel

  

 

127,000

 

John V. Hayes

  

 

114,000

 

Thomas Hinrichs(1)

  

 

162,565

 

Mark I. McCallum

  

 

344,000

 

 

(1)

Mr. Hinrichs is based in Amsterdam, Netherlands and paid in euros. The amount shown is the U.S.-dollar equivalent.

Performance-Based Restricted Stock Units

We award our NEOs and certain other executives shares of Class A common stock through our performance-based restricted stock unit awards. Unless otherwise determined by the Committee, performance-based restricted stock unit awards are granted on the date of the Annual Meeting.

AWARDS GRANTED IN FISCAL 2020 (FOR THE FISCAL 2020–2022 PERFORMANCE PERIOD)

Performance-based restricted stock units granted in fiscal 2020 have a three-year performance period. These awards are initially expressed as a dollar value and converted to a specific number of units. At the end of the three-year performance period, the number of units will be adjusted for performance and converted to shares that are subject to an additional one-year holding requirement.

 

 

TARGET PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARDS FOR FISCAL 2020–2022 PERFORMANCE PERIOD

 

Name    Amount  

Lawson E. Whiting

  

$

1,400,000

 

Jane C. Morreau

  

 

349,650

 

Matthew E. Hamel

  

 

168,418

 

John V. Hayes

  

 

105,000

 

Thomas Hinrichs(1)

  

 

129,765

 

Mark I. McCallum(2)

  

 

152,072

 

 

(1)

Mr. Hinrichs’s amount shown was converted from EUR to USD using grant date conversion methodology on July 25, 2019.

 

(2)

Mr. McCallum’s amount shown is pro-rated for the period May 1, 2019 to December 31, 2019. See “Treatment of Short-Term and Long-Term Incentive Awards Upon Termination of Employment” on page 50.

Performance will be measured by comparing the three-year cumulative TSR of Brown-Forman’s Class B common stock with the three-year cumulative TSR of the companies in the S&P Consumer Staples Index. The payout scale is shown on the next page. In addition to the relative TSR performance measurement, Brown-Forman must achieve a threshold underlying operating income objective during the three-year performance period. If the underlying operating income threshold is not achieved, no awards will be earned.

 

       
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COMPENSATION DISCUSSION AND ANALYSIS    |    AWARDS AND PAYOUTS IN FISCAL 2020: LONG-TERM COMPENSATION
 

 

 

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARDS:

PAYOUT SCALE AND POTENTIAL PAYOUTS FOR FISCAL 2020–2022 PERFORMANCE PERIOD

 

LOGO

Payouts for performance between threshold and target and between target and maximum will be interpolated using a straight-line method. In calculating TSR, we look at the average closing stock prices over the 60 trading days preceding the performance period and the final 60 trading days of the performance period. The companies used for the performance comparison will be those that constitute the S&P Consumer Products Index at the end of the performance period.

AWARDS EARNED IN FISCAL 2020 (FOR THE FISCAL 2018–2020 PERFORMANCE PERIOD)

Performance-based restricted stock unit awards for the fiscal 2018–2020 performance period were determined based on a three-year performance period, and now are subject to a one-year holding period. Performance was measured by comparing the three-year cumulative TSR of Brown-Forman’s Class B common stock with the three-year cumulative TSR of the companies that constituted the S&P Consumer Staples Index when the performance period ended. Performance-based restricted stock unit awards earned over the three-year performance period ending April 30, 2020, are subject to a holding requirement that ends April 30, 2021, though certain events may cause an award to vest earlier.

The following companies constituted the comparative S&P Consumer Staples Index at the end of the 2018–2020 performance period:

 

Altria Group, Inc.   Coty Inc.   Lamb Weston Holdings, Inc.   The Kraft Heinz Company
Archer-Daniels-Midland Company     General Mills, Inc.   PepsiCo, Inc.   The Kroger Co.
Brown-Forman Corporation (Cl B)   Hormel Foods Corporation   Philip Morris International Inc.   The Procter & Gamble Company
Campbell Soup Company   Kellogg Company   Sysco Corporation   Tyson Foods, Inc. (Cl A)
Church & Dwight Co., Inc.   Kimberly-Clark Corporation   The Clorox Company   Walgreens Boots Alliance, Inc.
Colgate-Palmolive Company   McCormick & Company, Incorporated   The Coca-Cola Company   Walmart Inc.
Conagra Brands, Inc.   Molson Coors Beverage Company (Cl B)   The Estée Lauder Companies Inc. (Cl A)  
Constellation Brands, Inc. (Cl A)   Mondelēz International, Inc. (Cl A)   The Hershey Company  
Costco Wholesale Corporation   Monster Beverage Corporation   The J.M. Smucker Company  

The Committee chose a range of payouts (50% to 150% of target) to support our goals of pay for performance and increased NEO equity ownership, while at the same time discouraging unnecessary risk-taking. Based on performance over the three-year period ending in fiscal 2020, the awards paid out at 150% of target, as shown below.

 

 

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARDS:

PERFORMANCE FOR FISCAL 2018–2020 PERFORMANCE PERIOD

 

 

LOGO

Payouts for performance between threshold and target and between target and maximum are interpolated using a straight-line method. In calculating TSR, we look at average closing stock prices over the 60 trading days preceding the performance period and the final 60 trading days of the performance period.

The number of shares issued was determined by multiplying the target award by a three-year performance percentage and adjusting the resulting number upwards to account for dividends paid during the second and third years of the performance period. The Committee chose this calculation method to ensure that our NEOs remain exposed to changes in stock price, but also earn the dividends paid during the performance period, consistent with the goals of our long-term incentive plan.

 

       
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COMPENSATION DISCUSSION AND ANALYSIS    |    OTHER COMPENSATION ELEMENTS
 

 

The shares awarded for the 2018–2020 performance period were issued on June 1, 2020, and are subject to a one-year holding period that ends on April 30, 2021. For more information on the performance-based restricted stock unit awards granted during fiscal 2020, please see the Fiscal 2020 Grants of Plan-Based Awards Table and the Outstanding Equity Awards at 2020 Fiscal Year-End Table, set forth on pages 44 and 45, respectively.

The table below shows the number of shares of performance-based restricted stock units issued for the fiscal 2018–2020 performance period.

 

 

SHARES ISSUED FOR FISCAL 2018–2020 PERFORMANCE PERIOD(1)

 

 

     
Name    Class A Shares(2)      Class B Shares(3)      Total Shares  

Lawson E. Whiting

     4,782        1,196        5,978  

Jane C. Morreau

     7,945        1,986        9,931  

Matthew E. Hamel

     4,672        1,168        5,840  

John V. Hayes

     2,098        525        2,623  

Thomas Hinrichs

     2,481        621        3,102  

Mark I. McCallum

     6,328        1,582        7,910  

 

(1)

The 5-for-4 stock split effective February 28, 2018, granted all additional shares in Class B common stock, regardless of the initial class of shares held. As a result, our NEOs received shares issued in both Class A and Class B common stock.

 

(2)

Reflects the number of shares of Class A common stock inclusive of the February 28, 2018, stock split and the April 23, 2018, special dividend.

 

(3)

Shares of Class B common stock were awarded as a result of the February 28, 2018, stock split, and are likewise inclusive of the April 23, 2018, special dividend.

Stock-Settled Stock Appreciation Rights

We award stock-settled stock appreciation rights (SSARs) that allow our NEOs to receive the value of the appreciation of our Class B common stock between the grant date and the exercise date three years later. Unless the Committee determines otherwise, SSARs are granted annually on the date of the Annual Meeting. The number of Class B common stock SSARs awarded to our NEOs for fiscal 2020 was determined by dividing the total dollar value of each SSAR award by the value of one SSAR (determined by the Black-Scholes method) at the close of trading on the grant date. SSARs become exercisable on the first day of the third fiscal year following the grant date, and generally are exercisable for seven fiscal years thereafter. The SSARs granted in July 2019 (for fiscal 2020) therefore become exercisable on May 1, 2022, and expire on April 30, 2029.

 

 

SSAR GRANTS IN FISCAL 2020 (IN CLASS B COMMON STOCK)

 

  
Name    SSARs Granted  

Lawson E. Whiting

     110,063  

Jane C. Morreau

     31,416  

Matthew E. Hamel

     30,264  

John V. Hayes

     9,434  

Thomas Hinrichs

     23,319  

Mark I. McCallum(1)

     13,663  

 

(1)

Mr. McCallum’s amount shown is pro-rated for the period May 1, 2019, to December 31, 2019. See “Treatment of Short-Term and Long-Term Incentive Awards Upon Termination of Employment” on page 50.

OTHER COMPENSATION ELEMENTS

Post-Termination Compensation and Benefits

We do not have employment agreements with any of our NEOs, nor do we maintain a formal severance plan that provides for post-termination compensation or benefits.

Employee Benefits and Perquisites

We provide our NEOs with certain benefits that are available to nearly all of our salaried employees in the United States, including term life insurance (equal to two times target cash compensation), travel accident insurance, matching contributions to a 401(k)

 

       
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    COMPENSATION POLICIES AND PRACTICES
 

 

savings plan, medical and dental insurance, and a pension that grows with each additional year of service and pay. NEOs and certain other executives receive additional benefits, including a leased automobile, automobile insurance, and limited reimbursement of financial planning expenses.

We purchase tickets to sporting and entertainment events for business outings with customers and suppliers. If the tickets are not used for business purposes, employees (including the NEOs) may use the tickets at no incremental cost to Brown-Forman. In addition, we occasionally invite the NEOs and their spouses to social events, including retirement celebrations, award dinners, and similar functions. We believe these events provide valuable opportunities for our senior executives to establish and develop relationships with our directors, long-term stockholders, employees, and each other, furthering our objectives of retention and having a strong and cohesive management team. For more detail on these employee benefits, please see the “All Other Compensation” column of the Fiscal 2020 Summary Compensation Table found on page 42.

Brown-Forman Corporation Non-Qualified Savings Plan

We provide our NEOs and other senior executives the opportunity to defer income on a pre-tax basis to help them plan for future financial needs. The Brown-Forman Corporation Non-Qualified Savings Plan (Savings Plan) enhances the perceived value of compensation for participants at very little cost to Brown-Forman. The Savings Plan allows our NEOs to make pre-tax deferrals of up to 50% of base salary (including holiday bonus) and up to 75% of short- and long-term cash incentives. Participants in the Savings Plan may notionally invest their plan balances in mutual funds within generally the same asset classes available to participants in our qualified 401(k) savings plan.

In the event a participant’s deferrals into the Savings Plan reduce the participant’s taxable compensation that would otherwise be considered 401(k)-eligible pay upon which a company matching contribution is calculated, Brown-Forman will contribute to the Savings Plan to make up for any lost match under the 401(k) plan. All deferrals to the Savings Plan, and Brown-Forman’s contributions to it, are 100% vested when made, as are any deemed earnings related to those contributions. The benefits owed under the Savings Plan are general unsecured obligations of Brown-Forman. Brown-Forman is not entitled to an income tax deduction on the benefits owed under the Savings Plan until the benefits become taxable to the participants, which generally will be when the benefits are actually paid. Benefits accumulated under the Savings Plan are payable at either a participant-selected date at least two years after a contribution is made or after a participant’s employment terminates. Amounts accumulated are payable in a lump sum six months after termination, except in the case of retirement, where the form of payment (lump sum or installments of up to ten years) and the time of payment (up to ten years after retirement) will be chosen by the participant. The fiscal 2020 Non-Qualified Deferred Compensation Table on page 49 contains information about NEO activity in the Savings Plan during fiscal 2020, including employee contributions, gains and losses attributable to the change in market value of the notional investments, and any payments to our NEOs.

COMPENSATION POLICIES AND PRACTICES

Incentive Compensation Recoupment Policy

The Committee oversees our Incentive Compensation Recoupment Policy. If Brown-Forman restates its reported financial results due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws within three years after the date the results are first publicly issued or filed, or if we discover an error in the calculation of any incentive compensation that was awarded or paid within the preceding three years, then Brown-Forman will, at the direction of the Committee, seek to recover all or part of the incentive compensation awarded or paid to executive officers that would not have been awarded or paid based upon the restated financial results or correct incentive calculation. If the Committee determines that any executive officer engaged in fraud or intentional misconduct in connection with any such material noncompliance or error in incentive calculation, the Committee can direct Brown-Forman to seek to recover incentive compensation awarded or paid to that executive officer that would not have been awarded or paid based upon the restated financial results or correct calculation for a period of six years after the date such financial results were first publicly issued or filed or six years prior to the date such fraud or misconduct was discovered. The Committee has sole discretion in making all determinations under the Incentive Compensation Recoupment Policy, including the amount, if any, the company will seek to recover, whether the conduct of an executive officer caused or contributed to the need for a financial restatement or correction in the calculation of an incentive payment, and whether an executive officer engaged in fraud or intentional misconduct. Any determination made by the Committee under this policy is final, conclusive, and binding on all interested parties.

Retirement Age Policy

Our NEOs and other executive officers with high level policy-making positions are subject to a mandatory retirement age of 65. Such NEOs and executive officers are personally notified of the mandatory retirement policy at age 60 (or older if the individual attains such a position after age 60). An employee who does not become an NEO or executive officer until after attaining the age of 65 will have a two-year grace period once becoming subject to the policy.

 

       
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Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS    |    COMPENSATION POLICIES AND PRACTICES
 

 

Deductibility of Compensation

Section 162(m) of the Internal Revenue Code limits to $1 million the amount of annual compensation Brown-Forman may deduct for tax purposes for compensation paid to each of the Chief Executive Officer, the Chief Financial Officer, and the three highest compensated officers other than those two individuals. Prior to 2018, Brown-Forman could deduct compensation above $1 million if it was “performance-based compensation” within the meaning of Section 162(m). Under the Tax Cuts and Jobs Act of 2017, effective for our taxable years beginning on or after January 1, 2018, the exception under Section 162(m) for performance-based compensation is no longer available, subject to transition relief for certain grandfathered arrangements in effect as of November 2, 2017.

To maintain flexibility, Brown-Forman has never had a policy requiring that all NEO compensation be fully deductible, but the

Committee has generally considered the issue of deductibility when making compensation decisions.

Compensation Risk Assessment

To determine the level of risk arising from our compensation policies and practices, we conduct an annual risk assessment, with oversight by the Committee, its independent advisor, FW Cook, and by our internal auditors. The assessment is based on a framework provided by FW Cook and examines the risk associated with the compensation programs applicable to all of our employees. The assessment also considers the features of our compensation programs that are designed to mitigate risk. We believe our compensation programs encourage and reward an appropriate level of risk-taking. Management and the Committee concluded, based upon the results of the assessment for fiscal 2020, that our compensation policies and practices are not reasonably likely to have a material adverse effect on Brown-Forman.

Equity Award Grants

Under our equity award grant policy, the grant date of any award must be the date of the Committee or Board meeting at which it was approved, and the grant price must be the closing price of the relevant class of our common stock on the grant date. We do not have a program, plan, or practice of timing equity award grants in conjunction with the release of material nonpublic information (or vice versa). We have never re-priced or back-dated options or SSARs granted under any of our equity compensation plans, and our 2013 Omnibus Compensation Plan specifically prohibits such practices.

Source of Plan Shares

We try to limit the source of shares delivered to participants under our equity compensation plans to those we purchase from time to time on the open market (in connection with our publicly announced share repurchase programs), in private transactions, or otherwise. If we determine that the timing of such purchases may unduly affect the market price of the shares, the purchases may be spread over a period of time sufficient to minimize this effect. We may use newly-issued shares to cover exercises or redemptions of awards and then purchase an equal number of shares on the open market or otherwise as quickly as is reasonably practicable thereafter. These practices minimize long-term dilution to our stockholders.

Margin Sales, Derivative, and Hedging Transactions Prohibited

Our Insider Trading Policy prohibits employees, officers, and directors from selling Brown-Forman securities that they do not own

(a “short sale”), purchasing shares on margin, or holding shares in a margin account. Employees, officers, and directors also are prohibited from engaging in transactions involving exchange-traded options, puts, calls, or other derivative securities based on Brown-Forman securities and in any hedging or monetization transactions accomplished through a number of possible mechanisms, including the use of financial instruments such as prepaid variable forwards, equity swaps, and collars.

Our Policy on Stock Ownership Guidelines

We do not have stock ownership guidelines for our employees. Due to our family-controlled status, we do not believe that encouraging employees to accumulate large quantities of Brown-Forman stock is a top priority. However, the Committee does review the stock ownership status of our NEOs before granting additional stock-based compensation each year to ensure that such grants are necessary and to assess potential retention risk. We list the stock beneficially owned by our NEOs on page 55.

 

Conclusion

We believe our executive compensation program continues to successfully attract, motivate, reward, and retain a team of talented and diverse executives and key employees, both in the United States and around the world, who will lead us to achieve our corporate ambition so aptly described as “Nothing Better in the Market” and enable us to deliver sustainable and superior value to our stockholders over time.

 

       
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Table of Contents

LOGO

COMPENSATION

COMMITTEE REPORT

We, the Compensation Committee of the Board of Directors of Brown-Forman Corporation, have reviewed and discussed with management the foregoing Compensation Discussion and Analysis, and based on such review and discussion, have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

COMPENSATION COMMITTEE

Michael J. Roney, Chairman

John D. Cook

Tracy L. Skeans

 

       
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Table of Contents

LOGO

COMPENSATION

TABLES

SUMMARY COMPENSATION

The following table sets forth the compensation of our NEOs for the fiscal years shown below, calculated under SEC rules.

 

 

FISCAL 2020 SUMMARY COMPENSATION TABLE

 

 

           
Name and Principal Position    Year      Salary(1)      Bonus(2)      Stock
Awards(3)
     SSAR/Option
Awards(4)
     Non-Equity
Incentive Plan
Compensation(5)
     Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings(6)
     All Other
Compensation(7)
     Total  
 

Lawson E. Whiting

President and

Chief Executive Officer              

     2020        $1,074,760        $—        $1,480,080        $1,225,001        $660,412        $1,720,684        $35,470        $6,196,407  
     2019        872,374               459,765        450,009        1,147,350        729,193        37,202        3,695,893  
     2018        597,524               184,620        227,510        931,719        402,500        33,732        2,377,605  

Jane C. Morreau

Executive Vice President and Chief Financial Officer                       

     2020        640,771               369,650        349,660        416,700        1,442,638        33,161        3,252,580  
     2019        620,842               321,836        315,011        747,180        1,027,251        33,088        3,065,208  
     2018        598,978               306,754        270,008        966,665        772,978        31,264        2,946,647  

Matthew E. Hamel(8)

Executive Vice President, General Counsel and Secretary

     2020        549,995               178,052        336,838        209,750        557,686        35,962        1,868,283  
     2019        533,969               167,061        327,033        458,917        335,765        33,246        1,855,991  
    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

John V. Hayes(9)

Senior Vice President, President, USA & Canada

     2020        427,180               111,006        105,000        180,950        843,923        31,050        1,699,109  

Thomas Hinrichs(8)(10)

Senior Vice President, President, International Division

     2020        473,487               137,188        259,540        268,533        11,681        207,022        1,357,451  
     2019        477,044               126,020        123,352        558,170        21,421        167,008        1,473,015  
    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

    

 

 

 

 

 

Mark I. McCallum(11)

Former Executive Vice President and Chief Brands Officer

     2020        475,777               160,760        152,069        427,089        931,022        15,365        2,162,082  
     2019        678,140               226,255        221,454        886,006        532,313        34,517        2,578,685  
     2018        661,480               244,267        215,006        1,173,350        450,726        30,466        2,775,295  

 

(1)

Salary includes holiday bonus and is based on the fiscal year beginning May 1, 2019. The holiday bonus, which is provided to all salaried employees, is based on the employee’s tenure as shown in the table below:

 

Length of Continuous Service    Amount of Holiday Bonus

3 months but less than 6 months

   1/8 of monthly salary

6 months but less than 5 years

   1/4 of monthly salary

5 years but less than 10 years

   3/8 of monthly salary

10 years or more

   1/2 of monthly salary

 

(2)

Our NEOs do not receive non-performance-based compensation that would be considered a “Bonus” under SEC rules.

 

(3)

Includes the aggregate grant date fair value of performance-based restricted stock units granted during the respective fiscal years, calculated in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. The grant date fair value for the performance-based restricted stock units granted during fiscal 2020, assuming the maximum achievement of the performance goals would have been $2,220,120 for Mr. Whiting, $554,475 for Ms. Morreau, $267,078 for Mr. Hamel, $166,509 for Mr. Hayes, $205,782 for Mr. Hinrichs, and $241,140 for Mr. McCallum. Assumptions used in the calculation of these amounts are included in Note 10 to our audited financial statements for the fiscal year ended April 30, 2020, which appear in our Annual Report on Form 10-K for fiscal 2020.

 

(4)

Includes the aggregate grant date fair value of SSARs granted during the respective fiscal years, calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 10 to our audited financial statements for the fiscal year ended April 30, 2020, which appear in our Annual Report on Form 10-K for fiscal 2020.

 

       
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Table of Contents
COMPENSATION TABLES    |    SUMMARY COMPENSATION
 

 

(5)

Amounts listed for fiscal 2020 include short-term cash incentive compensation paid for the one-year performance period ending on April 30, 2020, and long-term cash incentive compensation paid for the three-year performance period ending on April 30, 2020, as approved by the Compensation Committee in May 2020 and paid on June 15, 2020. These amounts are shown below.

 

  

 

     Short-Term Cash        Long-Term Cash        Total  

Lawson E. Whiting

       $335,745          $324,667        $ 660,412  

Jane C. Morreau

       128,700          288,000          416,700  

Matthew E. Hamel

       82,750          127,000          209,750  

John V. Hayes

       66,950          114,000          180,950  

Thomas Hinrichs

       105,968          162,565          268,533  

Mark I. McCallum

       83,089          344,000          427,089  

 

(6)

Amounts represent changes between fiscal years in the actuarial present value of the accumulated pension benefits of each of the NEOs under the applicable pension or savings plan. Pension values may fluctuate significantly from year to year depending on a number of factors, including age, years of service, average annual earnings, and the assumptions used to determine the present value, such as the discount rate and mortality tables. Please see the Fiscal 2020 Pension Benefits Table on page 48 for the assumptions used in calculating the change in pension value. None of the NEOs received above-market or preferential earnings (as these terms are defined by the SEC) on their non-qualified deferred compensation accounts.

 

  

 

     Qualified        Non-Qualified        Total  

Lawson E. Whiting

       $239,859          $1,480,825          $1,720,684  

Jane C. Morreau

       321,066          1,121,572          1,442,638  

Matthew E. Hamel

       166,048          391,638          557,686  

John V. Hayes

       285,511          558,412          843,923  

Thomas Hinrichs

       11,681                   11,681  

Mark I. McCallum

       168,577          762,445          931,022  

 

(7)

The following table sets forth each component of the “All Other Compensation” column for fiscal 2020.

 

Name      401(k) Matching
Contribution(a)
       Cost of Company-
Provided Life
Insurance
       Cost of Company-
Leased Car(b)(c)
       Other(d)(e)        Total  

Lawson E. Whiting

       $14,250          $3,600          $16,420          $1,200          $35,470  

Jane C. Morreau

       13,525          3,600          12,036          4,000          33,161  

Matthew E. Hamel

       14,225          3,070          14,667          4,000          35,962  

John V. Hayes

       14,750          1,732          13,533          1,035          31,050  

Thomas Hinrichs

                         17,956          189,066          207,022  

Mark I. McCallum

       4,462          2,470          8,433                   15,365  

 

  (a)

For the period May 1, 2019, through April 30, 2020.

 

  (b)

Values based on the cost to Brown-Forman during the fiscal year, including lease payments, maintenance, registration, and insurance premiums.

 

  (c)

Amount shown for Mr. Hinrichs includes a car allowance in lieu of a company car.

 

  (d)

Reimbursement of financial planning expenses up to a limit of $4,000 for the fiscal year.

 

  (e)

Includes expatriate costs associated with Mr. Hinrichs’s assignment in the Netherlands, including cost of living allowance, rent, dependent education, utilities, language training, and storage of household goods.

 

(8)

Compensation for Mr. Hamel and Mr. Hinrichs is provided for only fiscal 2020 and 2019. Neither officer was an NEO in fiscal 2018.

 

(9)

Compensation for Mr. Hayes is provided only for fiscal 2020. Mr. Hayes was not a NEO in fiscal 2018 and 2019.

 

(10)

Mr. Hinrichs is based in Amsterdam, Netherlands and paid in euros. The amount shown is the U.S.-dollar equivalent.

 

(11)

Mr. McCallum retired as an employee on December 31, 2019. His amounts in the table above for fiscal 2020 are for the period from May 1, 2019, to December 31, 2019.

 

       
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Table of Contents
 
COMPENSATION TABLES    |    GRANTS OF PLAN-BASED AWARDS           
     

 

GRANTS OF PLAN-BASED AWARDS

The following table contains information regarding the equity and non-equity awards granted to our NEOs during fiscal 2020 under our 2013 Omnibus Compensation Plan. For additional information on the fiscal 2020 awards, please see the Compensation Discussion and Analysis, which begins on page 26.

 

 

FISCAL 2020 GRANTS OF PLAN-BASED AWARDS TABLE

 

                                                   

All Other
Option Awards:

Number of
Securities

Underlying
Options(4)

         

Grant Date

Fair Value

of Stock

and Option
Awards(6)

 
   

Grant

Date

   

Award
Type(1)

   

 

Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(2)

    Estimated Possible Payouts Under
Equity Incentive Plan Awards(3)
   

Exercise or
Base Price

of Option
Awards(5)

 
Name   Threshold     Target     Maximum     Threshold     Target     Maximum  

Lawson E. Whiting

   

 

 

 

 

 

    STC       $—     $ 1,291,325     $ 2,582,650      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

   

 

 

 

 

 

    LTC             2,666,667       5,333,334      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2019       PBRSU      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    13,124       26,247       39,371      

 

 

 

 

 

   

 

 

 

 

 

  $ 1,480,080  
 

 

    7/25/2019       SSAR      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    110,063       54.64       1,225,001  

Jane C. Morreau

   

 

 

 

 

 

    STC             495,000       990,000      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

   

 

 

 

 

 

    LTC             1,165,500       2,331,000      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2019       PBRSU      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    3,278       6,556       9,834      

 

 

 

 

 

   

 

 

 

 

 

    369,650  
 

 

    7/25/2019       SSAR      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    31,416       54.64       349,660  

Matthew E. Hamel

   

 

 

 

 

 

    STC             318,270       636,540      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

   

 

 

 

 

 

    LTC             673,672       1,347,344      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2019       PBRSU      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    1,579       3,158       4,737      

 

 

 

 

 

   

 

 

 

 

 

    178,052  
 

 

    7/25/2019       SSAR      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    30,264       54.64       336,838  

John V. Hayes

   

 

 

 

 

 

    STC             257,500       515,000      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

   

 

 

 

 

 

    LTC             420,000       840,000      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2019       PBRSU      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    985       1,969       2,954      

 

 

 

 

 

   

 

 

 

 

 

    111,006  
 

 

    7/25/2019       SSAR      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    9,434       54.64       105,000  

Thomas Hinrichs(7)

   

 

 

 

 

 

    STC             407,750       815,500      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

   

 

 

 

 

 

    LTC             512,081       1,024,162      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2019       PBRSU      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    1,217       2,433       3,650      

 

 

 

 

 

   

 

 

 

 

 

    137,188  
 

 

    7/25/2019       SSAR      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    23,319       54.64       259,540  

Mark I. McCallum(8)

   

 

 

 

 

 

    STC             319,574       639,148      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

   

 

 

 

 

 

    LTC             608,249       1,216,498      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2019       PBRSU      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    1,426       2,851       4,277      

 

 

 

 

 

   

 

 

 

 

 

    160,760  
 

 

    7/25/2019       SSAR      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    13,663       54.64       152,069  

 

(1)

“STC” represents short-term (or annual) incentive compensation payable in cash. “LTC” represents long-term incentive compensation payable in cash at the end of a three-year performance period. “PBRSU” represents Class A common performance-based restricted stock units. “SSAR” represents Class B common stock-settled stock appreciation rights.

 

(2)

Amounts represent potential value of the short-term incentive compensation opportunity for the fiscal 2020 performance period and the cash component of the long-term incentive compensation opportunity for the fiscal 2020 through fiscal 2022 performance period. No amounts are payable if threshold underlying operating income performance levels are not achieved. STC and LTC are capped at 200% of target. Please see the “Non-Equity Incentive Plan Compensation” column of the Fiscal 2020 Summary Compensation Table on page 42 for amounts actually paid. These amounts include the short-term cash incentive compensation paid for the one-year performance period ending on April 30, 2020, and the long-term cash incentive compensation paid for the three-year performance period ending on April 30, 2020. The maximum awards providing for cash settlement that may be granted to any NEO in fiscal 2020 were capped at $6,000,000.

 

(3)

Amounts represent the estimated payouts of the PBRSU awards granted in fiscal 2020. PBRSU awards are subject to a three-year performance period followed by a one-year holding period. The final number of shares earned will be determined by multiplying the number of units by the three-year performance percentage, and adjusting the resulting number upwards to account for dividends paid during the second and third years of the performance period. PBRSU awards granted in fiscal 2020 will vest on June 1, 2022. The estimated possible payouts assume a 50% threshold and 150% maximum payout.

 

(4)

The number of SSARs awarded for fiscal 2020 was determined by dividing the total cash value of each SSAR award by the Black-Scholes value ($11.13) of our Class B common stock as of the close of trading on the date of grant, July 25, 2019. SSARs become exercisable on the first day of the third fiscal year following the fiscal year of grant, and generally are exercisable for seven fiscal years thereafter (barring certain events that may cause an award to become exercisable earlier). SSARs granted July 25, 2019, become exercisable on May 1, 2022, and expire April 30, 2029.

 

(5)

The exercise price for the SSARs represents the closing price of our Class B common stock on the grant date.

 

(6)

Calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts appear in Note 10 to our audited financial statements for the fiscal year ended April 30, 2020, which are included in our Annual Report on Form 10-K for fiscal 2020.

 

(7)

Mr. Hinrichs is based in Amsterdam, Netherlands and paid in euros. The amount shown is the U.S.-dollar equivalent.

 

(8)

Mr. McCallum retired as an employee on December 31, 2019. His amounts in the table are for the period from May 1, 2019, to December 31, 2019. See “Treatment of Short- Term and Long-Term Incentive Awards Upon Termination of Employment” on page 50.

 

       
  44    BROWN-FORMAN    2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
       


Table of Contents
COMPENSATION TABLES    |    OUTSTANDING EQUITY AWARDS
 

 

OUTSTANDING EQUITY AWARDS

The following table lists the outstanding equity awards held by our NEOs as of April 30, 2020. The year-end values shown in the table are based on the April 30, 2020, closing prices for our Class A common stock, $56.72, and our Class B common stock, $62.20.

 

 

OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR END TABLE

 

          SSAR Awards(1)     Stock Awards(2)  
Name   Grant Date     Number of
Securities
Underlying
Unexercised
SSARs
Exercisable
    Number of
Securities
Underlying
Unexercised
SSARs
Unexercisable
   

SSAR

Exercise
Price

    SSAR
Expiration
Date
    Number of
Shares or
Units of Stock
That Have Not
Vested(3)
    Market Value
of Shares or
Units of Stock
That Have Not
Vested(3)(4)
    Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested(5)
   

Equity Incentive
Plan Awards:
Market or
Payout Value

of Unearned
Shares, Units

or Other Rights
That Have Not
Vested(6)

 

Lawson E. Whiting

    7/28/2011       21,848      

 

 

 

 

 

    $18.22       4/30/2021      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/26/2012       19,763      

 

 

 

 

 

    23.05       4/30/2022      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2013       21,884      

 

 

 

 

 

    28.43       4/30/2023      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/24/2014       15,382      

 

 

 

 

 

    36.11       4/30/2024      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/23/2015       20,045      

 

 

 

 

 

    40.15       4/30/2025      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/28/2016       28,903      

 

 

 

 

 

    38.48       4/30/2026      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/27/2017      

 

 

 

 

 

    34,134       39.76       4/30/2027      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/26/2018      

 

 

 

 

 

    40,688       54.00       4/30/2028      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2019      

 

 

 

 

 

    110,063       54.64       4/30/2029      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/27/2017      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    5,978       $345,626      

 

 

 

 

 

   

 

 

 

 

 

 

    7/26/2018      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    12,455       $706,419  
 

 

    7/25/2019      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    39,371       2,233,095  

Jane C. Morreau

    7/26/2012       28,267      

 

 

 

 

 

  $ 23.05       4/30/2022      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2013       23,601      

 

 

 

 

 

    28.43       4/30/2023      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/24/2014       34,194      

 

 

 

 

 

    36.11       4/30/2024      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/23/2015       34,077      

 

 

 

 

 

    40.15       4/30/2025      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/28/2016       52,827      

 

 

 

 

 

    38.48       4/30/2026      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/27/2017      

 

 

 

 

 

    40,510       39.76       4/30/2027      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/26/2018      

 

 

 

 

 

    28,482       54.00       4/30/2028      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2019      

 

 

 

 

 

    31,416       54.64       4/30/2029      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/27/2017      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    9,931       574,170      

 

 

 

 

 

   

 

 

 

 

 

 

    7/26/2018      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    8,718       494,485  
 

 

    7/25/2019      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    9,834       557,784  

Matthew E. Hamel

    7/28/2011       60,980      

 

 

 

 

 

  $ 18.22       4/30/2021      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/26/2012       56,531      

 

 

 

 

 

    23.05       4/30/2022      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/25/2013       42,910      

 

 

 

 

 

    28.43       4/30/2023      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/24/2014       33,676      

 

 

 

 

 

    36.11       4/30/2024      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/23/2015       38,419      

 

 

 

 

 

    40.15       4/30/2025      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

    7/28/2016       56,472      

 

 

 

 

 

    38.48       4/30/2026