UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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FOOT LOCKER, INC.
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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330 West 34th Street
New York, New York 10001

 

Chairman’s Letter to our Shareholders

 

April 7, 2017

 

Dear Fellow Shareholders:

 

I am pleased to invite you to Foot Locker, Inc.’s Annual Meeting of Shareholders on May 17, 2017 at NYC33, located at 125 West 33rd Street, New York, New York 10001, at 9:00 a.m., Eastern Daylight Time.

 

You are being asked to vote on the following proposals at the Annual Meeting:

 

·	Elect eleven members to the Board of Directors to serve for one-year terms;
·	Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2017 fiscal year;
·	Approve an amendment to the By-Laws to adopt majority voting in uncontested elections of directors;
·	Approve an amendment to the Foot Locker Annual Incentive Compensation Plan, as Amended and Restated;
·	Approve, on an advisory basis, our named executive officers’ compensation; and
·	Transact such other business as may properly come before the meeting and at any adjournment or postponement.

 

If you plan to attend the meeting, please see Page 91 for admission requirements. Regardless of whether you attend the meeting, your vote is important to us, so please vote your shares. For instructions on how to vote, please see Page 90 of this Proxy Statement.

 

Thank you for being a shareholder and for the trust you have in Foot Locker, Inc.

 

Sincerely,

 

Richard A. Johnson

Chairman and Chief Executive Officer

330 West 34th Street
New York, New York 10001

 

Notice of 2017 Annual Meeting of Shareholders

 

Date and Time:	May 17, 2017 at 9:00 a.m., Eastern Daylight Time (“EDT”)
Location:	NYC33, 125 West 33rd Street, New York, New York 10001
	(please see Page 92 for directions to the location of the 2017 Annual Meeting of Shareholders)
Record Date:	Shareholders of record as of March 20, 2017 can vote at this meeting.
Items of Business:	·	Elect eleven members to the Board of Directors (the “Board”) to serve for one-year terms
	·	Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2017 fiscal year
	·	Approve an amendment to the By-Laws to adopt majority voting in uncontested elections of directors
	·	Approve an amendment to the Foot Locker Annual Incentive Compensation Plan, as Amended and Restated
	·	Approve, on an advisory basis, our named executive officers’ compensation
	·	Transact such other business as may properly come before the meeting and at any adjournment or postponement
Proxy Voting:	Your vote is important to us. Whether or not you plan to attend the 2017 Annual Meeting in person, please promptly vote by telephone or by Internet, or by completing, signing, dating, and returning your proxy card or vote instruction form so your shares will be represented at the 2017 Annual Meeting.

Sheilagh M. Clarke Secretary

 

April 7, 2017

 

Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Shareholders to be Held on May 17, 2017

The Company’s Proxy Statement and 2016 Annual Report on Form 10-K are available at http://materials.proxyvote.com/344849.

Table of Contents

 

 

2017 Proxy Statement

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ii

2017 Proxy Statement

 

2017 Proxy Statement

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iv

2017 Proxy Statement

 

2017 Proxy Statement

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Proposal 1: Election of Directors

 

General

There are currently 12 directors on our Board. Nicholas DiPaolo will be retiring when his term expires at the conclusion of this Annual Meeting, and the Board has fixed the number of directors at 11 effective at such time. At our 2014 Annual Meeting, shareholders approved a proposal to declassify the Board beginning in 2015. Consequently, this year all current directors other than Mr. DiPaolo are standing for election for a one-year term at this meeting.

 

We have refreshed our Board over the past six years, as seven highly-qualified directors were added to the Board and five directors will have retired as of the Annual Meeting. We believe that the Board possesses the appropriate mix of diversity in terms of gender, age, ethnicity, skills, business experience, service on our Board and the boards of other organizations, and viewpoints.

 

Nominees

Our Nominating and Corporate Governance Committee (the “Nominating Committee”) is responsible for recommending director candidates to fill current and anticipated Board vacancies. The Nominating Committee identifies and evaluates potential candidates from recommendations from the Company’s directors, management, shareholders, and other outside sources, including professional search firms. In evaluating proposed candidates, the Nominating Committee may review their résumés, obtain references, and conduct personal interviews. The Nominating Committee considers, among other factors, the Board’s current and future needs for specific skills and the candidate’s experience, leadership qualities, integrity, diversity, ability to exercise judgment, independence, and ability to make the appropriate time commitment to the Board. The Nominating Committee strives to ensure the Board has a rich mix of relevant skills and experiences to address the Company’s needs by our strategic plan.

 

During 2016, the Nominating Committee conducted a director search for potential director candidates whose experience, skills, qualifications, and independence met the criteria it previously established, and the Nominating Committee reviewed its findings with the Board. In conducting its search, the Nominating Committee collected names of potential candidates from existing Foot Locker directors and engaged SpencerStuart, a third-party search firm, to identify and recruit qualified candidates. After reviewing the qualifications of the potential pool of candidates and narrowing the field to a handful of candidates, our Chairman and our Lead Director (who at the time was the Chair of the Nominating Committee) interviewed the candidates. Based on the Nominating Committee’s review, the candidates’ résumés, and the other directors’ interviews with the candidates, the Nominating Committee recommended and the Board approved the election of Ulice Payne, Jr. and Kimberly Underhill, each of whom was identified by SpencerStuart.

 

Maxine Clark, Alan D. Feldman, Jarobin Gilbert, Jr., Richard A. Johnson, Guillermo G. Marmol, Matthew M. McKenna, Steven Oakland, Ulice Payne, Jr., Cheryl Nido Turpin, Kimberly Underhill, and Dona D. Young will be considered for election as directors to serve for one-year terms expiring at the 2018 Annual Meeting. Each nominee has been nominated by the Board for election and has consented to serve. Ms. Clark, Mr. Feldman, Mr. Gilbert, Mr. Johnson, Mr. Marmol, and Mrs. Young were elected to serve for their present terms at the 2016 Annual Meeting; Mr. McKenna, Mr. Oakland, and Ms. Turpin were elected to serve for their present terms at the 2014 Annual Meeting; and Mr. Payne and Ms. Underhill were elected by the Board on November 16, 2016 to serve for their present terms, effective December 1, 2016. If, prior to the 2017 Annual Meeting, any nominee is unable to serve, then the persons designated as proxies for this meeting (Sheilagh M. Clarke, John A. Maurer, and Lauren B. Peters) will have full discretion to vote for another person to serve as a director in place of that nominee.

 

2017 Proxy Statement

1

Proposal 1

 

Director Qualifications

The Nominating Committee reviewed and updated the director skill set matrix in light of the Company’s 2015-20 long-term strategic plan and evaluated each of the directors’ skills, experience, and qualifications under the updated matrix, which is shown on Page 9.

 

The Board, acting through the Nominating Committee, considers its members, including those directors being nominated for reelection to the Board at the 2017 Annual Meeting, to be highly qualified for service on the Board due to a variety of factors reflected in each director’s education, areas of expertise, and experience serving on the boards of directors of other organizations during the past five years. Generally, the Board seeks individuals with broad-based experience, and who have the background, judgment, independence, and integrity to represent the shareholders in overseeing the Company’s management in their operation of the business, rather than specific, niche areas of expertise. Within this framework, specific items relevant to the Board’s determination for each director are listed in each director’s biographical information beginning on Page 3. The ages shown are as of April 7, 2017. There are no family relationships among our directors or executive officers.

 

The Board recommends that shareholders vote
FOR the election of each of the
eleven identified nominees to the Board.

 

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2017 Proxy Statement

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Proposal 1

 

 

 

4

2017 Proxy Statement

Proposal 1

 

 

 

2017 Proxy Statement

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Proposal 1

 

 

 

6

2017 Proxy Statement

Proposal 1

 

 

 

2017 Proxy Statement

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Proposal 1

 

 

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Summary of Director Qualifications and Experience

 

Maxine Clark

Nicholas DiPaolo(1)

Alan D. Feldman

Jarobin Gilbert, Jr.

Richard A. Johnson

Guillermo G. Marmol

Matthew M. McKenna

Steven Oakland

Ulice Payne, Jr.

Cheryl Nido Turpin

Kimberly Underhill

Dona D. Young

Leadership

Chief Executive experience is important because directors who have served as CEOs of public or substantial privately-held companies have experience working, communicating, and engaging with a variety of important stakeholder groups, including shareholders, bondholders, and investment analysts

Broad-Based Business expertise provides a depth of experience to leverage in evaluating issues, and making business judgments

Digital and Channel Connectivity experience is important to the Company as we build a more powerful digital experience for our customers

Information Security experience is relevant given the importance of protecting both the Company’s and our customers’ information

International experience is important in understanding and reviewing our business and strategy outside of the United States, particularly in Europe as it is a strategic priority

Strategy

Retail, Brand Marketing, and Social Media experience gives directors a practical understanding of assessing, developing, and implementing our marketing and customer engagement strategies

Strategic Planning and Analysis experience provides a practical understanding of assessing, developing, and implementing the metrics of our long-term financial objectives and strategic priorities

Target Market experience is important to understand our business and strategy as our brands keenly focus on their target customers

Technology and Systems experience is important given the importance of technology to the retail marketplace, our internal operations, and our customer engagement initiatives

Accounting or Financial expertise gained from experience as a CEO, audit professional, or finance executive is important because it assists our directors in understanding and overseeing our financial reporting and internal controls

Governance

Business Development / Mergers and Acquisitions experience is important because it helps in assessing potential growth opportunities

Risk Management experience is helpful to the Board’s role in overseeing the risks facing the Company

 

(1)	Mr. DiPaolo is not standing for reelection as a director and will retire from the Board following the 2017 Annual Meeting of Shareholders.

 

2017 Proxy Statement

9

Corporate Governance

 

The Board is committed to good corporate governance and has adopted Corporate Governance Guidelines and other policies and practices to guide the Board and senior management.

 

Board Diversity

We believe that the Board possesses the appropriate mix of diversity in terms of gender, age, ethnicity, skills, business experience, service on our Board and the boards of other organizations, and viewpoints. We have refreshed our Board over the past six years, as seven highly-qualified directors were added to the Board, and five directors will have retired as of this Annual Meeting.

 

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines. The Board periodically reviews the guidelines and revises them, as appropriate. The Corporate Governance Guidelines are available on the corporate governance section of the Company’s corporate website at www.footlocker.com/corpgov. You may also obtain a printed copy of the guidelines by writing to the Secretary at the Company’s headquarters.

 

Committee Charters

The Board has adopted charters for each of the Audit Committee, the Compensation Committee, the Finance Committee, and the Nominating Committee. Copies of the charters for these committees are available on the corporate governance section of the Company’s corporate website at www.footlocker.com/corpgov. You may also obtain printed copies of these charters by writing to the Secretary at the Company’s headquarters.

 

Policy on Voting for Directors

Our Corporate Governance Guidelines provide that if a nominee for director in an uncontested election receives more votes “withheld” from his or her election than votes “for” election, then the director must offer his or her resignation for consideration by the Nominating Committee. The Nominating Committee will evaluate the resignation, weighing the best interests of the Company and its shareholders, and make a recommendation to the Board on the action to be taken. For example, the Nominating Committee may recommend (i) accepting the resignation, (ii) maintaining the director but addressing what the Nominating Committee believes to be the underlying cause of the withheld votes, (iii) resolving that the director will not be re-nominated in the future for election, or (iv) rejecting the resignation. When making its determination, the Nominating Committee will consider all factors that it deems relevant, including (i) any stated reasons why shareholders withheld votes from the director, (ii) any alternatives for curing the underlying cause of the withheld votes, (iii) the director’s tenure, (iv) the director’s qualifications, (v) the director’s past and expected future contributions to the Board and to the Company, and (vi) the overall composition of the Board, including whether accepting the resignation would cause the Company to fall below the minimum number of directors required under the Company’s By-Laws or fail to meet any applicable U.S. Securities and Exchange Commission (the “SEC”) or New York Stock Exchange (the “NYSE”) requirements. We will promptly disclose the Board’s decision on whether to accept the director’s resignation, including, if applicable, the reasons for rejecting the offered resignation.

 

At this Annual Meeting, shareholders are being asked to approve an amendment to the By-Laws, which is recommended by the Board, to provide for majority voting for directors in uncontested elections. Please see Page 81 for more information on this proposal.

 

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Corporate Governance

 

Director Independence

The Board believes that a significant majority of its members should be independent, as determined by the Board based on the criteria established by the NYSE. Each year, the Nominating Committee reviews any relationships between outside directors and the Company that may affect independence. Currently, one of the twelve members of the Board serves as an officer of the Company, and the remaining eleven directors are independent under the criteria established by the NYSE. Please see Pages 16 through 17 for more information regarding director independence.

 

Committee Rotation

As a general principle, the Board believes that the periodic rotation of committee assignments on a staggered basis is desirable and provides an opportunity to foster diverse perspective and develop breadth of knowledge within the Board.

 

Lead Director

The Board believes that when the positions of Chairman and Chief Executive Officer are held by the same person, an independent lead director should be appointed.

 

The Lead Director’s responsibilities include:

 

	·	presiding at Board meetings at which the Chairman is not present;
	·	presiding at executive sessions of the independent directors;
	·	attending meetings of each of the Board committees;
	·	encouraging and facilitating active participation by, and communication among, all directors;
	·	serving as the liaison between the independent directors and the Chairman;
	·	approving Board meeting agendas after conferring with the Chairman and other members of the Board, as appropriate, and may add agenda items in her discretion;
	·	approving Board meeting schedules to assure that there is sufficient time for discussion of all agenda items;
	·	having the authority to call meetings of the independent directors;
	·	leading the Board’s annual performance evaluation of the Chief Executive Officer, including an annual evaluation of the Chief Executive Officer’s interaction with the Board;
	·	being available to advise the Chairman and the committee chairs in fulfilling their designated roles and responsibilities to the Board; and
	·	performing such other functions as the Board or other directors may request.

 

The Board considers the periodic rotation of the Lead Director from time to time, taking into account experience, continuity of leadership, and the best interests of the Company.

 

Dona D. Young currently serves as the Lead Director. The Board believes that Mrs. Young is well suited to serve as Lead Director, given her business, financial, and governance background, as well as her more than sixteen years of service on our Board.

 

2017 Proxy Statement

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Corporate Governance

 

Board Leadership Structure

Our Board evaluates, from time to time as appropriate, whether the same person should serve as Chairman and Chief Executive Officer, or whether the positions should be bifurcated, in light of all relevant facts and circumstances and what it considers to be in the best interests of the Company and our shareholders. In May 2016, the positions of Chairman and Chief Executive Officer were re-combined and are held by Richard A. Johnson, with Dona D. Young serving as independent Lead Director. The Board has utilized various leadership structures since 2001, as shown below:

 

Date		Leadership Structure
March 2001 – February 2004		Positions separated, with an independent director serving as Non-Executive Chairman
February 2004 – August 2009		Positions combined, with an independent Lead Director
August 2009 – January 2010		Positions separated, with the former Chairman and Chief Executive Officer serving as Executive Chairman and an independent director serving as Lead Director
January 2010 – December 2014		Positions combined, with an independent Lead Director
December 2014 – May 2015		Positions separated, with the former Chairman and Chief Executive Officer serving as Executive Chairman, and an independent director serving as Lead Director
May 2015 – May 2016		Positions separated, with an independent director serving as Non-Executive Chairman
May 2016 – Present		Positions combined, with an independent Lead Director

 

The Board believes that, based on the Company’s current facts and circumstances, its Board leadership structure is appropriate.

 

Executive Sessions of Non-Management Directors

The Board holds regularly scheduled executive sessions of non-management directors in conjunction with each quarterly Board meeting. Dona D. Young, as Lead Director, presides at these executive sessions.

 

Board Evaluations

Each year, the Board and its committees conduct self-evaluations. The Nominating Committee oversees the evaluation process and reviews the procedures, which may vary from year to year, in advance of each year’s evaluation process. The self-evaluation process is designed to elicit candid feedback regarding the areas where the Board and its committees could improve their effectiveness. In addition, in a prior year, the Nominating Committee engaged a third party to conduct a survey of the directors with regard to the assessment process and other governance areas and report to the full Board on the survey results and benchmark information, and may consider engaging a third party in the future with regard to the evaluation process.

 

Board Members’ Attendance at Annual Meetings

Directors are expected to attend annual meetings of shareholders. The annual meeting is normally scheduled on the same day as a quarterly Board meeting. In 2016, all of the directors then serving attended the annual meeting.

 

Director On-Boarding and Education

We have an on-boarding program for new directors that is intended to educate a new director on the Company and the Board’s practices. Over the course of the one-year on-boarding program, the newly-elected director meets with the Company’s Chief Executive Officer, Chief Financial Officer, General Counsel and Secretary, and other members of senior management, to review the Company’s business operations, financial matters, strategy, investor relations, risk management, corporate governance, composition of the Board and its committees, and succession and development plans. Additionally, he

 

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Corporate Governance

 

or she visits our stores at the Company’s New York headquarters, and elsewhere, with senior management for an introduction to store operations. During the on-boarding year, new directors periodically meet with the Lead Director and will meet with the committee chairs for a deep dive into the work of the committees. We also provide the Board with educational training from time to time on subjects applicable to the Board and the Company, including with regard to retailing, accounting, financial reporting, and corporate governance, using both internal and external resources, and we encourage all directors to attend other continuing education programs.

 

Payment of Directors Fees in Stock

The non-employee directors receive one-half of their annual retainer fees, including committee chair retainer fees, in shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), with the balance payable in cash. Directors may elect to receive up to 100% of their annual retainer fees in stock.

 

Director Retirement

The Board has established a policy in its Corporate Governance Guidelines that directors retire from the Board at the annual meeting of shareholders following the director’s 72nd birthday.

 

Change in a Director’s Principal Employment

The Board has established a policy whereby a director is required to advise the Chair of the Nominating Committee of any change to his or her principal employment. If requested by the Chair of the Committee, after consultation with the members of the Committee, the director will submit a letter of resignation to the Chair of the Committee, and the Committee would then meet to consider whether to accept or reject the letter of resignation.

 

Succession Planning

The Board engages in an effective planning process to identify, evaluate, and select potential successors to the Chief Executive Officer and other members of senior management. The Chief Executive Officer reviews senior management succession planning with the Board. Each director has complete and open access to any member of management. Members of management are invited regularly to make presentations at Board and committee meetings and meet with directors in informal settings to allow the directors to form a more complete understanding of the executives’ skills and character.

 

Risk Oversight

The Board has oversight responsibilities regarding risks that could affect the Company. This oversight is conducted primarily through the Audit Committee. The Audit Committee has established procedures for reviewing the Company’s risks. These procedures include regular risk monitoring by management to update current risks and identify potential new and emerging risks, quarterly risk reviews by management with the Audit Committee, and an annual risk report to the full Board. The Audit Committee Chair reports on the committee’s meetings, considerations, and actions to the full Board at the next Board meeting following each committee meeting. In addition, the Compensation Committee considers risk in relation to the Company’s compensation policies and practices. The Compensation Committee’s independent compensation consultant provides an annual report to the committee on risk relative to the Company’s compensation programs.

 

The Company believes that this process for risk oversight is appropriate in light of the Company’s business, size, and active senior management participation, including by the Chief Executive Officer, in managing risk and holding regular discussions on risk with the Audit Committee, the Compensation Committee, and the Board.

 

2017 Proxy Statement

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Corporate Governance

 

Stock Ownership Guidelines

The Board has adopted Stock Ownership Guidelines applicable to the Board, the Chief Executive Officer, and other covered executives. The Guidelines are as follows:

 

Covered Position	Stock Ownership Guidelines
Non-employee Director	4 x Annual Retainer Fee
Chief Executive Officer	6 x Annual Base Salary
Executive Vice President	3 x Annual Base Salary
Senior Vice President	2 x Annual Base Salary
Senior Vice President and General Manager / President of Operating Division	2 x Annual Base Salary
Vice President and General Manager	0.5 x Annual Base Salary
Vice President	0.5 x Annual Base Salary

 

Shares of unvested restricted stock, unvested restricted stock units (“RSUs”), and deferred stock units (“DSUs”) are counted towards beneficial ownership. Performance-based RSUs are counted once earned. Stock options and shares held through the Foot Locker 401(k) Plan are disregarded in calculating beneficial ownership for purposes of the Stock Ownership Guidelines.

 

Non-employee directors and executives who are covered by the guidelines are required to be in compliance within five years after the effective date of becoming subject to these guidelines. In the event of any increase in the required ownership level, whether as a result of an increase in the annual retainer fee or base salary or an increase in the required ownership multiple, the target date for compliance with the increased ownership guideline would be five years after the effective date of such increase.

 

All non-employee directors and executives who were required to be in compliance with the guidelines as of the end of the 2016 fiscal year are in compliance. The Company measures compliance with the guidelines at the end of the prior fiscal year based on the market value of the Company’s stock at that time.

 

If a director or covered executive fails to be in compliance with the guidelines as of the end of the prior fiscal year, he or she must hold the net shares obtained through future stock option exercises and the vesting of restricted stock and RSUs, after payment of applicable taxes, until coming into compliance with the guidelines. In order to take into consideration fluctuations in the Company’s stock price, any person who has been in compliance with the guidelines as of the end of at least one of the two preceding fiscal years and who has not subsequently sold shares will not be subject to this holding requirement. For non-employee directors, the Nominating Committee will consider a director’s failure to comply with the Stock Ownership Guidelines when considering that director for reelection.

 

Political Contributions

Our Code of Business Conduct prohibits making contributions on behalf of the Company to political parties, political action committees, political candidates, or holders of public office. The Company is a member of several trade associations which, as part of their overall activities, may engage in advocacy activities with regard to issues important to the retail industry or the business community generally.

 

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Corporate Governance

 

Communications with the Board

The Board has established a procedure for shareholders and other interested parties to send communications to the non-management members of the Board. Shareholders and other interested parties who wish to communicate directly with the non-management directors of the Company should send a letter to the Board of Directors, c/o Secretary, Foot Locker, Inc., 330 West 34th Street, New York, New York 10001.

 

The Secretary will promptly send a copy of the communication to the Lead Director, who may direct the Secretary to send a copy of the communication to the other non-management directors and may determine whether a meeting of the non-management directors should be called to review the communication.

 

A copy of the Procedures for Communications with the Board is available on the corporate governance section of the Company’s corporate website at www.footlocker.com/corpgov. You may obtain a printed copy of the procedures by writing to the Secretary at the Company’s headquarters.

 

Retention of Outside Advisors

The Board and all of its committees have authority to retain outside advisors and consultants that they consider necessary or appropriate in carrying out their respective responsibilities. The independent accountants are retained by, and report directly to, the Audit Committee. In addition, the Committee is responsible for the selection, assessment, and termination of the internal auditors to which the Company has outsourced a portion of its internal audit function, which is ultimately accountable to the Audit Committee. Similarly, the consultant retained by the Compensation Committee to assist in the evaluation of senior executive compensation reports directly to that committee.

 

Code of Business Conduct

The Company has adopted a Code of Business Conduct for directors, officers, and other employees, including its Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer. A copy of the Code of Business Conduct is available on the corporate governance section of the Company’s corporate website at www.footlocker.com/corpgov. You may obtain a printed copy of the Code of Business Conduct by writing to the Secretary at the Company’s headquarters.

 

Any waivers of the Code of Business Conduct for directors and executive officers must be approved by the Audit Committee. The Company promptly discloses amendments to the Code of Business Conduct and any waivers of the Code of Business Conduct for directors and executive officers on the corporate governance section of the Company’s corporate website at www.footlocker.com/corpgov.

 

Related Person Transactions

We individually inquire of each of our directors and executive officers about any transactions in which the Company and any of these related persons or their immediate family members are participants. We also make inquiries within the Company’s records for information on any of these kinds of transactions. Once we gather the information, we then review all relationships and transactions of which we are aware in which the Company and any of our directors, executive officers, their immediate family members or five-percent shareholders are participants to determine, based on the facts and circumstances, whether the Company or the related persons have a direct or indirect material interest. The General Counsel’s office coordinates the related person transaction review process. The Nominating Committee reviews any reported transactions involving directors and their immediate family members in making its recommendation to the Board on the independence of the directors. The Company’s written policies and procedures for related person transactions are included within both the Corporate Governance Guidelines and the Code of Business Conduct. There were no related person transactions in 2016.

 

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Board of Directors

 

Organization and Powers

The Board has responsibility for establishing broad corporate policies, reviewing significant developments affecting the Company, and monitoring the general performance of the Company. Our By-Laws provide for a Board consisting of between 7 and 13 directors. The exact number of directors is determined from time to time by the entire Board. There are currently 12 directors on our Board. Mr. DiPaolo will be retiring at the conclusion of the Annual Meeting, and the Board has fixed the number of directors at 11 effective at such time.

 

The Board held five meetings during 2016. All of our directors attended at least 75% of the aggregate of the meetings of the Board and of the committees on which they served in 2016.

 

Directors’ Independence

A director is not considered independent under NYSE rules if he or she has a material relationship with the Company that would impair his or her independence. In addition to the independence criteria established by the NYSE, the Board has adopted categorical standards to assist it in making its independence determinations regarding individual directors. These categorical standards are contained in the Corporate Governance Guidelines, which are posted on the Company’s corporate website at www.footlocker.com/corpgov.

 

The Board has determined that the following categories of relationships are immaterial for purposes of determining whether a director is independent under the NYSE listing standards:

 

Categorical Relationship		Description
Investment Relationships with the Company		A director and any family member may own equities or other securities of the Company.
Relationships with Other Business Entities		A director and any family member may be a director, employee (other than an executive officer), or beneficial owner of less than 10% of the shares of a business entity with which the Company does business, provided that the aggregate amount involved in a fiscal year does not exceed the greater of $1 million or 2% of either that entity’s or the Company’s annual consolidated gross revenue.
Relationships with Not-for-Profit Entities		A director and any family member may be a director or employee (other than an executive officer or the equivalent) of a not-for-profit organization to which the Company (including the Foot Locker Foundation) makes contributions, provided that the aggregate amount of the Company’s contributions in any fiscal year do not exceed the greater of $1 million or 2% of the not-for-profit entity’s total annual receipts.

 

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The Board, upon the recommendation of the Nominating Committee, has determined that the following directors are independent under the NYSE rules because they have no material relationship to the Company that would impair their independence:

 

Maxine Clark	Guillermo G. Marmol	Cheryl Nido Turpin
Nicholas DiPaolo	Matthew M. McKenna	Kimberly Underhill
Alan D. Feldman	Steven Oakland	Dona D. Young
Jarobin Gilbert, Jr.	Ulice Payne, Jr.

 

In making its independence determination, the Board reviewed recommendations of the Nominating Committee and considered Dona D. Young’s and Ulice Payne, Jr.’s relationships as directors of companies with which we do business. The Board has determined that these relationships meet the categorical standard for Relationships with Other Business Entities and are immaterial with respect to determining independence.

 

The Board also considered, in making its independence determination, Matthew M. McKenna’s relationship as an adjunct professor of Fordham University School of Law because the Foot Locker Foundation awarded a $5,000 scholarship to a Fordham University student in 2016. The Board has determined that this relationship meets the categorical standard for Relationships with Not-for-Profit Entities and is immaterial with respect to determining independence.

 

The Board has determined that all members of the Audit Committee, the Compensation Committee, the Finance Committee, and the Nominating Committee are independent as defined under the NYSE listing standards and the director independence standards adopted by the Board.

 

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Board of Directors

 

Committees of the Board

The Board has delegated certain duties to committees, which assist the Board in carrying out its responsibilities. There are five standing committees of the Board. Each independent director serves on at least two committees. The key oversight responsibilities of the committees, the current committee memberships, and the number of meetings held during 2016 are described below.

 

Audit Committee   Guillermo G. Marmol, Chair   9 meetings in 2016		Key Oversight Responsibilities •  appoints the independent auditors •  approves the independent auditors’ compensation •  assists the Board in fulfilling its oversight responsibilities in the following areas: o  accounting policies and practices o  the integrity of the Company’s financial statements o  compliance with legal and regulatory requirements o  the Company’s risk assessment and risk management policies o  the qualifications, independence, and performance of the independent auditors o  the qualifications, performance, and compensation of the internal auditors •  reviews and monitors compliance with the Company’s Code of Business Conduct •  establishes procedures for the receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, and auditing matters		Members Clark, Gilbert, Marmol, McKenna, Payne
		This committee consists of five independent directors, as independence is defined under the SEC and NYSE rules applicable to audit committee members. All of the members meet the expertise requirements under the NYSE rules. The Board has determined that Mr. McKenna qualifies as an “audit committee financial expert,” as defined by the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), through his relevant experience as a former senior financial executive of a large multinational corporation.
		The Audit Committee Report appears on Page 80.

 

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Compensation and Management Resources Committee   Alan D. Feldman, Chair   4 meetings in 2016		Key Oversight Responsibilities •  determines the compensation of the Chief Executive Officer •  reviews and approves all compensation for the Company’s executive management group, which consists of the executive officers and corporate officers •  responsible for decisions regarding equity compensation for other employees •  assesses risk in relation to the Company’s compensation policies and practices •  administers the Company’s various compensation plans, including the incentive plans, the equity-based compensation plans, and the employees’ stock purchase plan (Other than the Company’s 2007 Stock Incentive Plan (the “Stock Incentive Plan”), committee members are ineligible to participate in these compensation plans) •  reviews and makes recommendations to the Board concerning executive development and succession •  meets jointly with the Nominating Committee to review non-employee directors’ compensation and make recommendations to the Board concerning the form and amount of non-employee directors’ compensation		Members DiPaolo, Feldman, Oakland, Turpin, Underhill, Young
		This committee consists of six independent directors, as independence is defined under the NYSE rules applicable to compensation committee members.
		Please see the Compensation Discussion and Analysis (“CD&A”) on Pages 29 through 46 for a discussion of the Compensation Committee’s procedures for determining compensation, and the Compensation Committee Report on Page 47.

 

Finance and Strategic Planning Committee   Matthew M. McKenna, Chair   4 meetings in 2016

Key Oversight Responsibilities •  reviews the overall strategic and financial plans, including capital expenditure plans, proposed debt or equity issues, and the capital structure •  considers and makes recommendations to the Board concerning dividend payments and share repurchases •  reviews acquisition and divestiture proposals

Members Clark, DiPaolo, Feldman, Marmol, McKenna, Underhill

 

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Board of Directors

 

Nominating and Corporate Governance Committee   Steven Oakland, Chair   5 meetings in 2016		Key Oversight Responsibilities •  oversees corporate governance matters affecting the Company, including developing and recommending criteria and policies relating to service and tenure of directors •  establishes criteria for Board candidates •  retains the services of a third-party search firm from time to time to identify potential director candidates •  selects new director nominees to recommend to the Board •  considers the re-nomination of existing directors after conducting an annual review of each director’s qualifications, experience, and independence •  reviews membership on the Board committees and, after consultation with the Chief Executive Officer and the Lead Director, makes recommendations to the Board annually regarding committee members and committee chair assignments •  oversees the annual self-assessment process for the Board and committees •  meets jointly with the Compensation Committee to review non-employee directors’ compensation and make recommendations to the Board concerning the form and amount of non-employee directors’ compensation		Members Gilbert, Oakland, Payne, Turpin, Young
		Shareholders who wish to recommend candidates may contact the Nominating Committee in the manner described on Page 15 under Communications with the Board. Shareholder nominations must be made according to the procedures required under, and within the timeframe described in, the By-Laws and on Page 87. Shareholder-recommended candidates and shareholder nominees whose nominations comply with these procedures will be evaluated by the Nominating Committee in the same manner as the Company’s nominees.

 

Executive Committee   Richard A. Johnson, Chair   No meetings in 2016

Key Oversight Responsibilities •  shares all of the powers of the Board during intervals between Board meetings, except for certain matters reserved to the Board

Members Feldman, Johnson, Marmol, McKenna, Oakland, Young

 

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Compensation and Management Resources Committee Interlocks and Insider Participation

Nicholas DiPaolo, Alan D. Feldman, Steven Oakland, Cheryl Nido Turpin, Kimberly Underhill, and Dona D. Young served on the Compensation Committee during 2016. None of the committee members was an officer or employee of the Company or any of its subsidiaries, and there were no interlocks with other companies within the meaning of the SEC’s proxy rules.

 

Directors’ Compensation and Benefits

Non-employee directors are paid an annual retainer fee and meeting fees for attendance at each Board and committee meeting. The Lead Director and the committee chairs are each paid additional retainer fees for service in these capacities. We do not pay additional compensation to any director who is also an employee of the Company for service on the Board or any committee. The independent compensation consultant retained by the Compensation Committee conducts an annual review and analysis of the directors’ compensation program and makes recommendations to the Compensation Committee and Nominating Committee, jointly, with regard to the program structure. Below is a summary of the fees paid to the non-employee directors in 2016:

 

Summary of Directors’ Compensation
Annual Retainer:		$130,000 (increased to $140,000 beginning January 2017) payable 50% in cash and 50% in Common Stock. Directors may elect to receive up to 100% of their annual retainer, including their committee chair retainer, in Common Stock. We calculate the number of shares paid to the directors for their annual retainer by dividing their retainer fee by the closing price of a share of Common Stock on the last business day preceding the July stock payment date.
Committee Chair Retainers:		$25,000: $25,000: $15,000: $15,000: None:		Audit Committee Chair Compensation Committee Chair Finance Committee Chair Nominating Committee Chair Executive Committee Chair
		The committee chair retainers are paid in the same form as the annual retainer.
Lead Director Retainer:		$50,000 payable in cash.
Meeting Fees:		$2,000 per Board and committee meeting attended.
RSUs:		1,138 RSUs. The number of RSUs granted in 2016 was calculated by dividing $65,000 by the closing price of a share of Common Stock on the date of grant ($57.12). The RSUs will vest in May 2017, one year following the date of grant. Each RSU represents the right to receive one share of Common Stock on the vesting date.

 

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Board of Directors

 

Deferral Election

Non-employee directors may elect to receive all or a portion of the cash component of their annual retainer fee, including committee chair retainers, in the form of DSUs or to have these amounts placed in an interest account. Directors may also elect to receive all or part of the stock component of their annual retainer fee in the form of DSUs. The interest account is a hypothetical investment account bearing interest at the rate of 120% of the applicable federal long-term rate, compounded annually, and set as of the first day of each plan year. A stock unit is an accounting equivalent of one share of Common Stock.

 

Miscellaneous

We reimburse non-employee directors for reasonable expenses incurred in attending Board and committee meetings, and continuing education programs, including their transportation, hotel accommodations, and meals. Directors and their immediate families are eligible to receive the same discount on purchases of merchandise from our stores, catalogs, and Internet sites that is available to employees.

 

Fiscal 2016 Director Compensation

The amounts paid to each non-employee director for fiscal 2016, including amounts deferred under the Company’s Stock Incentive Plan, and the RSUs granted to each director are reported in the tables below:

 

Director Compensation

 

(a) Name		(b) Fees Earned or Paid in Cash ($)		(c) Stock Awards ($)(1)(2)		(d) Total ($)
M. Clark		101,462		129,957		231,419
N. DiPaolo		143,546		129,957		273,503
A. Feldman		103,954		171,579	(3)	275,533
J. Gilbert, Jr.		103,462		129,957		233,419
G. Marmol		113,954		142,465		256,419
M. McKenna		108,942		137,473		246,415
S. Oakland		61,535		164,118	(3)	225,653
U. Payne, Jr.		20,666		—		20,666
C. Turpin		83,712		176,605	(3)	260,317
K. Underhill		18,666		—		18,666
D. Young		126,712		207,407	(3)	334,119

 

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Notes to Director Compensation Table

(1)   Column (c) reflects the following three items:

 

Retainer fees paid in stock or deferred by the director

 

The fiscal 2016 grant date fair value for the portion of the annual retainer fees, including committee chair retainer fees, paid in shares of Common Stock or deferred by the director, is shown in the following table:

 

Name		Shares (#)		DSUs (#)		Grant Date Fair Value ($)
M. Clark		1,184		—		64,954
N. DiPaolo		1,184		—		64,954
A. Feldman		1,412		—		77,462
J. Gilbert, Jr.		1,184		—		64,954
G. Marmol		1,412		—		77,462
M. McKenna		1,321		—		72,470
S. Oakland		1,777		—		97,486
U. Payne, Jr.		—		—		—
C. Turpin		1,184		—		64,954
K. Underhill		—		—		—
D. Young		—		1,440		80,040

 

Stock portion of retainer fee. We made the annual stock payment to each director on July 1, 2016 (other than to Mr. Payne and Ms. Underhill who were not then serving). Under the terms of the Stock Incentive Plan, the stock payment was valued at the closing price of a share of Common Stock on June 30, 2016, which was $54.86. The 2016 grant date fair value is equal to the number of shares received or deferred by the director multiplied by $54.86, calculated in accordance with stock-based compensation accounting rules (ASC Topic 718). One director, who deferred the stock portion of her annual retainer, was credited with DSUs on the annual payment date, valued at $54.86 per unit.

 

Cash portion of retainer fee. For fiscal 2016, one director deferred part of the cash portion of her annual retainer fee and was credited during the fiscal year with DSUs on the quarterly cash retainer payment dates, valued at the fair market value on the payment dates, as follows: January 4, 2016 ($65.31; pro rated for 2 months of 2016 fiscal year), April 1, 2016 ($63.75), July 1, 2016 ($54.92), October 1, 2016 ($67.52), and January 3, 2017 ($71.73; pro rated for one month of 2016 fiscal year). The 2016 grant date fair value is equal to the number of DSUs received multiplied by the fair market value on the payment dates, calculated in accordance with stock-based compensation accounting rules (ASC Topic 718).

 

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Board of Directors

 

Dividend equivalents

 

The fiscal 2016 grant date fair value for dividend equivalents credited in the form of additional stock units to four directors during the year on the quarterly dividend payment dates, valued at the fair market value of the Common Stock on the dividend payment dates, is shown in the following table:

 

Name		04/29/16 FMV: $61.44 (#)		07/29/16 FMV: $59.62 (#)		10/28/16 FMV: $67.15 (#)		01/27/17 FMV: $68.01 (#)
A. Feldman		118		122		108		108
S. Oakland		7		7		6		6
C. Turpin		188		195		174		173
D. Young		248		262		234		232

 

The total number of DSUs credited to directors’ accounts for fiscal 2016, including the dividend equivalents and the units credited representing 2016 retainer fees reported in the above two tables, and the total number of units held at the end of fiscal 2016, are shown in the following table:

 

		Total DSUs
Name		Credited for 2016 (#)				Held at 1/28/17 (#)
A. Feldman		456				26,747
S. Oakland		26				1,496
C. Turpin		730				42,855
D. Young		2,416				57,668

 

Restricted Stock Units

 

The fiscal 2016 grant date fair value for the RSUs granted to the non-employee directors in 2016 is shown in the table below. The number of RSUs granted was calculated by dividing $65,000 by $57.12, which was the closing price of a share of Common Stock on the date of grant. The RSUs will vest in May 2017. The amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions, please refer to Note 21 to the Company’s financial statements in our 2016 Annual Report on Form 10-K. The following table shows the aggregate number of RSUs granted in 2016 and the number of RSUs outstanding at the end of the 2016 fiscal year:

 

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Board of Directors

 

Name		RSUs Granted (#)		Grant Date Fair Value ($)		RSUs Outstanding on 1/28/17 (#)
M. Clark		1,138		65,003		1,138
N. DiPaolo		1,138		65,003		1,138
A. Feldman		1,138		65,003		1,138
J. Gilbert, Jr.		1,138		65,003		1,138
G. Marmol		1,138		65,003		1,138
M. McKenna		1,138		65,003		1,138
S. Oakland		1,138		65,003		1,138
U. Payne, Jr.		—		—		—
C. Turpin		1,138		65,003		1,138
K. Underhill		—		—		—
D. Young		1,138		65,003		1,138

 

(2)	No stock options were granted to the non-employee directors in 2016. None of the non-employee directors held any stock options at the end of the 2016 fiscal year.

(3)	Stock payment deferred in the form of stock units under the Stock Incentive Plan.

 

Directors’ Retirement Plan

The Directors’ Retirement Plan was frozen as of December 31, 1995. Consequently, only Jarobin Gilbert, Jr. is entitled to receive a benefit under this plan after he completes his service as a director because he completed at least five years of service as a director prior to December 31, 1995. The retirement benefit under this plan is $24,000 per year, payable quarterly for the lesser of 10 years after the director leaves the Board or until his death.

 

Directors and Officers Indemnification and Insurance

We have purchased directors and officers liability and corporation reimbursement insurance from a group of insurers comprising ACE American Insurance Co., Zurich American Insurance Co., Arch Insurance Co., Travelers Casualty and Surety Company of America, Freedom Specialty Insurance Co., Berkley Insurance Co., Navigators Insurance Co., Aspen American Insurance Co., XL Insurance Bermuda Ltd., Illinois National Insurance Co., and Endurance American Insurance Co. These policies insure the Company and all of the Company’s wholly-owned subsidiaries. They also insure all of the directors and officers of the Company and the covered subsidiaries. The policies were written for a term of 12 months, from October 12, 2016 until October 12, 2017. The total annual premium for these policies, including fees and taxes, is $852,189. Directors and officers of the Company, as well as all other employees with fiduciary responsibilities under the Employee Retirement Income Security Act of 1974, as amended, are insured under policies issued by a group of insurers comprising Arch Insurance Co., Travelers Casualty and Surety Company of America and ACE American Insurance Co., which have a total premium, including fees and taxes, of $380,954 for the 12-month period ending October 12, 2017.

 

The Company has entered into indemnification agreements with its directors and officers, as approved by shareholders at the 1987 Annual Meeting.

 

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Beneficial Ownership of the Company’s Stock

 

Directors and Executive Officers

The table below shows the number of shares of Common Stock reported to us as beneficially owned by each of our directors and named executive officers as of March 20, 2017. The table also shows beneficial ownership by all directors, named executive officers, and executive officers as a group as of that date, including shares of Common Stock that they have a right to acquire within 60 days after March 20, 2017 by the exercise of stock options.

 

No director or named executive officer beneficially owned 1% or more of the total number of outstanding shares as of March 20, 2017. Each person has sole voting and investment power for the number of shares shown unless otherwise noted.

 

		Common Stock				Stock Options
		Beneficially Owned				Exercisable Within
		Excluding				60 Days After				RSUs and
		Stock Options				3/20/17				DSUs				Total
Name		(#) (a)				(#)				(#) (b)				(#)
Paulette R. Alviti			51,032				29,417				6,302				86,751
Maxine Clark			8,275				—				1,138				9,413
Nicholas DiPaolo			70,014	(c)			—				1,138				71,152
Alan D. Feldman			59,832				—				27,885				87,717
Jarobin Gilbert, Jr.			13,426				—				1,138				14,564
Stephen D. Jacobs			63,991				53,236				9,147				126,374
Richard A. Johnson			286,838				539,726				21,736				848,300
Lewis P. Kimble			41,875				42,503				7,250				91,628
Guillermo G. Marmol			27,336				—				1,138				28,474
Matthew M. McKenna			43,189				—				1,138				44,327
Steven Oakland			4,861				—				2,634				7,495
Ulice Payne, Jr.			—				—				—				—
Lauren B. Peters			140,197				215,836				7,657				363,690
Cheryl Nido Turpin			43,066				—				43,993				87,059
Kimberly Underhill			—				—				—				—
Dona D. Young			40,401				—				58,806				99,207
All 21 directors and executive officers as a group, including the named executive officers			1,026,736				1,035,602				202,022				2,264,360	(d)

 

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Beneficial Ownership of the Company’s Stock

 

Notes to Beneficial Ownership Table

(a)

This column includes shares held in the Company’s 401(k) Plan and, where applicable, executives’ unvested shares of restricted stock listed below over which they have sole voting power but no investment power:

 

	Unvested Shares
Name	of Restricted Stock (#)
R. Johnson	78,520
L. Peters	38,812
S. Jacobs	33,515
L. Kimble	15,677
P. Alviti	25,677

	(b)	This column includes (i) the number of DSUs credited as of March 20, 2017 to the accounts of the directors who elected to defer all or part of their annual retainer fee, and (ii) time-vested RSUs. The DSUs and RSUs do not have current voting or investment power.
	(c)	Includes 1,050 shares held by his spouse.
	(d)	This number represents approximately 1.7% of the shares of Common Stock outstanding at the close of business on March 20, 2017.

 

Persons Owning More Than Five-Percent of the Company’s Common Stock

The table below provides information on shareholders who beneficially own more than 5% of our Common Stock as of December 31, 2016 according to reports filed with the SEC. To the best of our knowledge, there are no other shareholders who beneficially own more than 5% of a class of the Company’s voting securities.

 

	Amount and Nature of		Percent of
Name and Address of Beneficial Owner	Beneficial Ownership (#)		Class
The Vanguard Group, Inc.	12,728,444(a)		9.61%(a)
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
BlackRock, Inc.	9,314,414(b)		7.0%(b)
55 East 52nd Street
New York, New York 10055
FMR LLC	7,218,272(c)		5.453%(c)
245 Summer Street
Boston, Massachusetts 02210

 

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Beneficial Ownership of the Company’s Stock

 

Notes to Table on Persons Owning More than Five-Percent of the Company’s Common Stock

	(a)	Reflects shares beneficially owned as of December 31, 2016 according to Amendment No. 5 to Schedule 13G filed with the SEC. As reported in this schedule, The Vanguard Group, an investment adviser, holds sole voting power with respect to 209,068 shares, sole dispositive power with respect to 12,485,805 shares, and shared dispositive power with respect to 242,639 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 172,989 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 105,729 shares as a result of its serving as investment manager of Australian investment offerings.
	(b)	Reflects shares beneficially owned as of December 31, 2016 according to Amendment No. 7 to Schedule 13G filed with the SEC. As reported in this schedule, BlackRock, Inc., a parent holding company, holds sole voting power with respect to 7,789,861 shares and sole dispositive power with respect to 9,314,414 shares.
	(c)	Reflects shares beneficially owned as of December 31, 2016 according to Amendment No. 1 to Schedule 13G filed with the SEC. Each of FIAM LLC, Fidelity Institutional Asset Management Trust Company, Fidelity Management Trust Company, FMR Co., Inc, and Strategic Advisers, Inc. beneficially owns shares. Abigail P. Johnson is a Director, the Chairman, and the Chief Executive Officer of FMR LLC. Neither FMR LLC nor Ms. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & Research Company (“FMR Co”), a wholly-owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. FMR Co carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees.

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires that our directors, executive officers, and persons who own more than 10% of the Company’s Common Stock file reports of ownership and changes in ownership of Foot Locker’s Common Stock with the SEC. Based solely on our review of copies of such forms furnished to the Company and written representations that no other reports were required during the 2016 fiscal year, we believe that during the 2016 fiscal year, the persons subject to Section 16(a) reporting complied with all applicable SEC filing requirements.

 

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Executive Compensation

 

Compensation and Risk

The Company has completed a risk-related review and assessment of our compensation program and considered whether our executive compensation is reasonably likely to result in a material adverse effect on the Company. As part of this review, the independent compensation consultant to the Compensation Committee reviewed risk in relation to the Company’s compensation policies and practices with the Company’s human resources executives directly involved in compensation matters. The consultant reviewed the compensation policies and practices in effect for corporate and division employees through the manager level, store managers, and store associates, and reviewed the features we have built into the compensation programs to discourage excessive risk taking by employees, including a balance between different elements of compensation, differing time periods for different elements, consistent Company-wide programs, plan performance targets based on the corporate budgeting process, and stock ownership guidelines for senior management.

 

Compensation Discussion and Analysis

This CD&A focuses on how our named executive officers were compensated in 2016, and how their 2016 compensation aligns with our pay-for-performance philosophy. Our CD&A is divided into the following four sections: Executive Summary, Our Compensation Program Design and Structure, Procedures for Determining Compensation, and Additional Information.

 

As part of an internal reorganization in 2016, we made a number of strategic changes designed to strengthen the Company’s position in the global marketplace, align with our vendor partners, and achieve our long-term goals across two macro geographies: North America and International. We appointed Stephen D. Jacobs to lead North America and Lewis P. Kimble to lead International, and they were designated as executive officers of the Company as a result of this reorganization.

 

Our five named executive officers included in this CD&A and the related compensation tables are listed below.

 

Richard A. Johnson	Chairman of the Board, President and Chief Executive Officer
Lauren B. Peters	Executive Vice President and Chief Financial Officer
Stephen D. Jacobs	Executive Vice President and Chief Executive Officer—North America
Lewis P. Kimble	Executive Vice President and Chief Executive Officer—International
Paulette R. Alviti	Senior Vice President and Chief Human Resources Officer

 

Executive Summary

We design our executive compensation program to attract, motivate, and retain talented executives in order to achieve the Company’s short- and long-term strategic priorities and deliver value to our shareholders. We do this by tying pay closely to our business strategy and Company performance. The more senior an executive’s position, the greater the portion of his or her compensation that is tied to Company performance. The Compensation Committee, which is comprised of six independent directors, oversees the executive compensation program.

 

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Executive Compensation

 

CEO		Average of Other Named Executive Officers’
2016 Total Direct Compensation*		2016 Total Direct Compensation*
Performance-Based Compensation=85%		Performance-Based Compensation=68%

 

 

*

Total Direct Compensation includes salary, Annual Bonus, and long-term incentives (“LTI”) (consisting of LTIP, stock options, and, where applicable, RSU awards).

 

Our Key Compensation Governance Policies

 

What We Do

What We Do Not Do

 

 

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Executive Compensation

 

2016 Performance Highlights

Our 2016 fiscal year was a very strong year for Foot Locker. The power and relevance of our strategic initiatives, as well as our team’s outstanding execution of them, can be seen in the financial success we achieved in 2016, as shown in this brief list of highlights:

 

•

Sales totaled $7.8 billion, the most in our history as an athletic company;

 

•

Full-year comparable store sales gain of 4.3%, our seventh consecutive year of significant sales growth;

 

•

Operating income reached $1 billion, the first time our Company has attained this milestone;

 

•

Gross margin and operating expense rates both improved, as did our rate of EBIT,* which reached a record 13%;

 

•

Earned net income of $4.82 per share, on a non-GAAP* basis, a 12% increase over 2015;

 

•

Invested $254 million in our business to drive future growth; and

 

•

Total Shareholder Return (stock price appreciation plus reinvested dividends) was 3.2%, which positioned us at the 77th percentile versus our peer group.

 

* A reconciliation to GAAP is provided on Pages 16 through 18 of our 2016 Annual Report on Form 10-K.

 

Strategic Plan Results

We have now completed two years under our 2015-20 long-term strategic framework, which is described below. This framework established priorities over the near-term, intermediate-term, and long-term to enhance our performance and achieve even more challenging long-term financial objectives than under the prior long-term strategic plan, and we have made significant progress towards achieving these long-term objectives, as shown below.

 

Strategic Framework

Priorities

• Drive performance in the Core Business with compelling customer engagement   • Expand our leading position in the Kids’ business   • Aggressively pursue European Expansion opportunities   • Build our Apparel penetration and profitability   • Build a more powerful Digital business with customer-focused channel connectivity   • Deliver exceptional growth in our Women’s business   • Build on our industry-leading team by embracing the power of our People

 

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Executive Compensation

 

Progress Made Towards Achieving Our Strategic Plan

 

								2015-20
								Long-Term
Financial Metrics		2015			2016			Objectives
Sales (billions)		$7.4			$7.8			$10
Sales Per Gross Square Foot		$504			$515			$600
Adjusted Earnings Before Interest and Taxes (EBIT) Margin		12.8	%		13.0	%		12.5	%
Adjusted Net Income Margin		8.2	%		8.4	%		8.5	%
Return on Invested Capital (ROIC)		15.8	%		15.1	%		17	%

 

The chart above reflects non-GAAP results. There is a reconciliation to GAAP on Pages 16 through 18 of our 2016 Annual Report on Form 10-K.

 

Impact of Company Performance on Annual and Long-Term Incentive Pay

Foot Locker strives to be a consistently high-performing company, with a history of setting very challenging performance goals. When we achieve our goals, incentive payouts are earned. As shown above, our 2016 performance was quite strong but, compared to the very high bar we set for ourselves, that strong performance fell short of our 2016 Annual Bonus Plan target performance goals. As a result, below-target awards were earned for 2016 under the Annual Bonus Plan. For the 2015-16 performance period under the Long-Term Incentive Plan (“LTIP”), however, especially strong performance in 2015 helped the Company to exceed the applicable target performance goals and the named executive officers earned above-target LTIP awards. Please see Pages 37 through 40 and the Summary Compensation Table on Pages 48 through 49 for more details on these incentive programs and the named executive officers’ earned awards under the plans.

 

Compensation Program Changes for 2016 and Beyond

The Compensation Committee reviewed the executive compensation program for 2016 and, following its review, made certain changes to the program, which we describe below. The purpose of these changes was to continue to incentivize strong performance and provide the executives with competitive total compensation opportunities appropriate to their positions, while further aligning their interests with our shareholders.

 

Increased Equity Portion of LTIP Payout. Beginning with the 2016-17 performance period, the LTIP payout was changed to 75% RSUs and 25% cash to further align the compensation for our executives with the interests of our shareholders. For prior performance periods, the payout mix was 50% RSUs and 50% cash. Beginning with the 2017-18 performance period, the payout mix for our CEO will be 100% RSUs.

 

Instituted an LTIP Performance Floor. The Compensation Committee approved a “performance floor” set at 85% of the target goal for LTIP awards. As a result, beginning with awards made for the 2016-17 performance period, no payouts will be earned if actual performance is below 85% of the pre-established target goal. In setting a performance floor, the Compensation Committee considered various factors, such as our long-term strategic plan and financial objectives, the consistent rigor of LTIP performance goals established by the Compensation Committee based on the financial plans approved by the Finance Committee and the Board, the market environment, and the overall objectives of our compensation program. Previously (including for the completed 2015-16 performance period), LTIP awards were subject to a “performance gate,” meaning that no amounts would be earned unless the Company’s average annual after-tax income for the performance period exceeded the Company’s after-tax income in the year prior to the beginning of the relevant performance period. The Committee made this change to set a consistent performance threshold for each performance period relative to the approved financial plans and ensure that our LTIP is market-competitive among peer companies with similar program designs. We believe this change supports the goals of our overall compensation program, which are to attract, motivate, and retain executives most critical to the long-term success of the Company.

 

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Rebalanced Long-Term Incentive Awards to CEO. The Compensation Committee changed the mix of long-term incentives awarded to the CEO so that a majority of his long-term incentives is awarded in the form of performance-based LTIP. The remainder is delivered in annual stock option grants. After this rebalance, the target LTIP award represents approximately 80% of the total long-term incentives granted to the CEO, and the grant date value of his stock option awards equals approximately 20% of his total long-term incentives.

 

2016 Say-on-Pay Shareholder Vote

At our 2016 Annual Meeting, 91% of shareholders voting on the advisory vote on executive compensation supported the executive compensation program. The Compensation Committee considered the results of the 2016 Say-on-Pay vote and our shareholders’ strong support of our executive compensation program in reviewing the executive compensation program for 2017. In light of this, the Compensation Committee decided to retain the general program design, which ties executive pay closely with Company performance. In the future, the Compensation Committee will continue to consider the executive compensation program in light of changing circumstances and shareholder feedback. Our Say-on-Pay vote is currently held on an annual basis, consistent with the views expressed by a majority of our shareholders last year.

 

2016 Compensation Decisions

The Compensation Committee made certain compensation decisions for our named executive officers in 2016, including setting and approving incentive compensation performance goals, which are described below.

 

Base Salaries

As part of its annual review of compensation, the Compensation Committee approved base salary increases effective May 1, 2016 for each of the named executive officers, as shown below, based on each executive’s performance and a position-oriented analysis of market salaries. Mr. Johnson’s salary increase reflected his expanded role as Chairman of the Board in addition to Chief Executive Officer and was made to ensure a competitive base salary in this role. In 2016, Ms. Peters’ role as Chief Financial Officer was expanded to include responsibility for Sourcing and Logistics, and Mr. Jacobs’ and Mr. Kimble’s roles expanded when they were promoted to head, respectively, the newly-established North America and International divisions. The Committee considered the increased scope of the roles for Ms. Peters, Mr. Jacobs, and Mr. Kimble in determining the level of salary increase for these executives in 2016.

 

Named Executive Officer		2015 Base Salary			2016 Base Salary			Base Salary Increase (%)
Richard A. Johnson		$1,050,000			$1,100,000			4.8	%
Lauren B. Peters		$605,000			$675,000			11.6	%
Stephen D. Jacobs		$780,000			$850,000			9.0	%
Lewis P. Kimble		$555,000			$650,000			17.1	%
Paulette R. Alviti		$475,000			$490,000			3.2	%

 

Annual Bonus Plan

At the beginning of 2016, the Compensation Committee established annual bonus performance targets under the Annual Bonus Plan for the named executive officers. The targets with regard to Mr. Johnson, Ms. Peters, and Ms. Alviti were based on the Company achieving adjusted pre-tax income of $1,038.0 million, a 9.3% increase over 2015 adjusted pre-tax income, in line with the Company’s financial plan and strategic objectives. Based on adjusted pre-tax income of $1,010.1 million, these executives earned a bonus of 79.8% of their respective target awards for 2016.

 

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As division executives, the annual bonus targets for Mr. Jacobs and Mr. Kimble were based on division profit targets for the North America division and the International division, respectively. We established these divisions in 2016, which include both store and digital operations for these regions, in order to further “channel-agnostic” behavior and performance. The North America division comprises the stores and digital operations of Foot Locker U.S., Lady Foot Locker, Kids Foot Locker, SIX:02, Champs Sports, Footaction, and Foot Locker Canada. International comprises the stores and digital operations of Foot Locker Europe, Foot Locker Asia Pacific, Runners Point, and Sidestep. Based on the profit achieved by each of the divisions, Mr. Jacobs earned a bonus of 82.4% and Mr. Kimble earned a bonus of 66.0% of their respective target awards for 2016. For competitive reasons, we do not disclose the profit targets for the North America or International divisions, as we do not publicly disclose results of these divisions on a separate basis, and we consider it competitively harmful to make that information public. Consistent with our objective of setting challenging goals for executives throughout the Company, we believe that the achievement of the profit goals for these divisions was demanding, as evidenced by the below-target awards earned by these executives despite the overall strong performance of the divisions in 2016.

 

The Compensation Committee increased the annual target awards for 2016 for certain executives, reflecting the increased scope of their roles and to differentiate among the roles most critical to the continued success of the Company. Annual target awards are based on a percentage of base salary, and for 2016 the named executive officers’ target awards are shown below, along with changes, as applicable, to the 2015 target awards:

 

Executive		2015 Annual Target Award			2016 Annual Target Award
R. Johnson		125	%		150	%
L. Peters, S. Jacobs, and L. Kimble		65	%		75	%
P. Alviti		50	%		50	%

 

Please see Pages 37 through 38 and the Summary Compensation Table on Pages 48 through 49 for more details on the Annual Bonus Plan and the named executive officers’ earned payouts.

 

Long-Term Incentive Program

Our long-term incentive program includes (i) the performance-based LTIP delivered in cash under this plan and equity under the Stock Incentive Plan and (ii) long-term equity awards under the Stock Incentive Plan in the form of stock options, time-based restricted stock and RSUs. Performance-based LTIP awards and stock options are granted annually, while time-vested restricted stock and RSU awards are granted in special circumstances, such as for new hires, promotions, or retention purposes.

 

LTIP. At the beginning of 2015, the Compensation Committee established performance targets for the 2015-16 performance period under the LTIP. The targets that the Compensation Committee established were based on the Company achieving two-year average annual net income of $572.4 million (which accounts for 70% of the payout) and ROIC of 15.3% (which accounts for 30% of the payout). Based on actual results for the performance period, each of our named executive officers earned a payout of 141.3% of his or her respective target award. The amounts earned for this two-year performance period will not be paid to participants until 2018, following the completion of a one-year time-based vesting period. Please see Pages 38 through 40 and the Summary Compensation Table on Pages 48 through 49 for more details on the LTIP and the named executive officers’ earned payouts.

 

In 2016, the Compensation Committee established LTIP performance targets for the 2016-17 performance period based on two-year average annual net income (70%) and ROIC (30%). Since this performance period is still on-going, the Committee will determine whether payouts have been earned following the end of the Company’s 2017 fiscal year. If awards are earned for the 2016-17 performance period, payment will be made to participating executives in 2019, following the completion of a one-year time-based vesting period.

 

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Stock Options. The Compensation Committee granted stock options to each of the named executive officers as part of its annual compensation review in 2016. In deciding to grant the stock options and determining the value of the awards, the Compensation Committee considered each executive’s position and the competitive market for equivalent talent. For Mr. Johnson, the approximate grant date value of his stock option award equalled 200% of base salary. For other executives, the Committee awarded a standardized grant to executives holding comparable positions. These awards are shown in the chart below. All of the stock options have a three-year vesting schedule, with one-third of each option grant vesting on the first, second, and third anniversary of the grant date, subject to continuous service through each vesting date. The values shown for the stock option grants are based on a Black-Scholes value of $15.78 on the date of grant.

 

Named Executive Officer		Stock Options (#)			Stock Options Black-Scholes Value ($)
R. Johnson		139,380			2,200,016
L. Peters		28,510			450,010
S. Jacobs		28,510			450,010
L. Kimble		28,510			450,010
P. Alviti		14,255			225,005

 

Special Retention RSU Awards. The Compensation Committee granted special RSU awards in 2016 for retention and succession planning objectives to each of the named executive officers, other than Mr. Johnson. In deciding to grant these awards and determining the value of the awards, the Compensation Committee considered each executive’s position, including those with expanded scope and responsibilities, and the competitive market for equivalent talent. These awards are shown in the chart below. Other than for Mr. Kimble, all of the special awards will vest 50% on the third anniversary of the date of grant and 50% on the fourth anniversary of the date of grant, subject to continuous service through the vesting dates. Mr. Kimble’s special award will cliff vest on the third anniversary of the date of grant, which aligns with the time period of his current international assignment, and is subject to his continuous service through the vesting date. The values shown for the RSU awards are based on the closing stock price of $63.79 on the date of grant. Other than with regard to these special awards, no awards of time-vested restricted stock or RSUs were granted to the named executive officers in 2016.

 

Named Executive Officer		RSUs (#)			Grant Date Fair Value ($)
L. Peters		18,812			1,200,017
S. Jacobs		23,515			1,500,022
L. Kimble		15,677			1,000,036
P. Alviti		15,677			1,000,036

 

Special Performance-Based RSU Award. In 2014, the Compensation Committee approved a special performance-based RSU (“PBRSU”) award for Mr. Jacobs based on total Company EBIT for 2014-16, with the EBIT targets for each fiscal year within this performance period set at the beginning of each fiscal year. The Compensation Committee granted this special award to incentivize Mr. Jacobs, as a division executive, to focus on achieving total Company performance, as well as division performance. Under this special award, if 90%-120% of the EBIT target for the three-year period was achieved, Mr. Jacobs would earn 10,000 RSUs; and if greater than 120% of the three-year target was achieved, Mr. Jacobs would earn 12,000 RSUs. Based on achieving 104.3% of the target for the three-year period, Mr. Jacobs earned 10,000 RSUs, which fully vested on March 31, 2017. The targets and actual performance for each of the years in the performance period are shown in the table below.

 

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Total Company EBIT		Target		Actual
2014		$744.7 million		$813.1 million
2015		$871.1 million		$945.7 million
2016		$1,042.0 million		$1,012.1 million
Performance Result				104.3% of Target

 

Our Compensation Program Design and Structure

 

Pay Components and Mix

Our compensation program objectives are to pay for performance by establishing challenging objectives that support the attainment of Foot Locker’s long-term strategic plan, to align the interests of our executives with our shareholders through the use of equity vehicles, and to provide a balance of incentives that reward the attainment of both short- and long-term goals. Consistent with these objectives, a significant portion of compensation for our executives is performance-based using a combination of annual bonus and long-term incentives. For 2016, 85% of the total direct compensation delivered to our CEO was performance based and, on average, 68% of the other named executive officers’ compensation was performance based. The variability in performance-based compensation directly ties the executives’ pay to our performance, including our financial results, strategic priorities, and stock price performance. The payment of a base salary provides a balance between fixed, cash compensation and compensation at risk through Company performance.

 

CEO 2016 Total Direct Compensation*	Average of Other Named Executive Officers’ 2016 Total Direct Compensation*
Performance-Based Compensation=85%	Performance-Based Compensation=68%

*	Total Direct Compensation includes salary, Annual Bonus, and long-term incentives (“LTI”) (consisting of LTIP, stock options, and, where applicable, RSU awards).

 

Benchmarking Approach

We have established benchmarks for compensation, including cash and equity, for each named executive officer. These benchmarks are reviewed annually and are based upon compensation for comparable positions in a peer group consisting of publicly-traded global retail companies with revenues of approximately one-third to two and one-half times the Company’s revenue. We also use the peer group data to assess the competitiveness of total direct compensation awarded to our senior executives and as a data point in designing compensation plans, benefits, and perquisites.

 

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The Compensation Committee has determined that the following companies comprise the appropriate peer group for executive compensation purposes based upon the nature of their businesses, their revenues, and the pool from which they recruit their executives. The companies included in our peer group for 2016 compensation decisions were:

 

Abercrombie & Fitch Co.	Dick’s Sporting Goods Inc.	Genesco Inc.
American Eagle Outfitters, Inc.	DSW Inc.	L Brands, Inc.
Ascena Retail Group, Inc.	The Finish Line Inc.	Ross Stores, Inc.
Autozone, Inc.	GameStop Corp.	Signet Jewelers Limited
Bed, Bath & Beyond Inc.	The Gap Inc.	Williams-Sonoma, Inc.
Caleres, Inc.

 

One goal of the Compensation Committee is to provide competitive total compensation opportunities for the named executive officers that vary with Company performance. The Compensation Committee uses the peer group benchmark information as a reference point in evaluating executive compensation, assessing the competitiveness of total direct compensation awarded to our senior executives, and designing compensation plans, benefits, and perquisites; it does not, however, attempt to match the compensation of each executive position in the Company precisely with that of an equivalent position in the peer group. In general, the Compensation Committee looks to position an executive’s total compensation between the median and 75th percentile of comparable positions at peer companies, consistent with the Company’s revenue in relation to peer companies. The Compensation Committee also considers other factors, including performance, responsibility, experience, tenure, and market positioning, when determining compensation.

 

Components of Our Executive Compensation Program

Another goal of the Compensation Committee is to align the compensation program with our business strategy and our shareholders’ interests. In order to achieve these objectives, our executive compensation program includes a mix of annual and long-term compensation, as well as a mix of cash and equity compensation. The components of our executive compensation program are: base salary, Annual Bonus, Long-Term Incentive Program, retirement and other benefits, and perquisites.

 

Base Salary

Base salaries represent the fixed portion of total direct compensation for our executives. We pay base salaries to provide our named executive officers with market-competitive fixed compensation that is appropriate to their position, experience, and responsibilities. Base salaries aid in attracting and retaining talented executives. The Compensation Committee annually reviews the named executive officers’ salaries. Annual salary increases are not automatic. Salary adjustments are made after consideration of pay for similar positions among our peer group, internal pay equity, and scope of responsibilities for each position. Base salaries of named executive officers rarely change materially from year-to-year unless there has been a promotion, other change in responsibility, or other special factors apply.

 

Performance-Based Annual Cash Bonus

We pay performance-based annual cash bonuses to our named executive officers under the Annual Bonus Plan in order to incentivize them to work toward achievement of annual performance goals established by the Compensation Committee. Payments are calculated as a percentage of actual base salary earned by the executive during the year.

 

Our Annual Bonus Plan is formula driven, with targets established by the Compensation Committee based upon the business plan and budget reviewed and approved each year by our Finance Committee and the Board. Our Annual Bonus Plan allows the Compensation Committee, in establishing performance targets under the plan, to choose one or more performance measures from a list of factors that have been approved by shareholders. The Compensation Committee established a corporate performance target under the Annual Bonus Plan for Mr. Johnson, Ms. Peters, and Ms. Alviti for 2016 based upon

 

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the Company’s achievement of a prescribed level of pre-tax income, and established performance targets based on division profit for Mr. Jacobs and Mr. Kimble. The Annual Bonus Plan for the named executive officers makes bonus payments based upon the Company’s or relevant division’s results, without individual performance adjustments. Executives who receive a “not meeting performance” rating in their annual performance review are ineligible to receive an annual bonus payment. All bonus targets and calculations are based on the results of continuing operations.

 

The Company achieved adjusted pre-tax income of $1,010.1 million in 2016, a 7.3% increase over 2015. While this performance was quite strong, we had established even more challenging performance goals under the Annual Bonus Plan, which we did not achieve. As a result, below-target annual cash bonuses were earned by Mr. Johnson, Ms. Peters, and Ms. Alviti. Similarly, based on the division profit results for the North America and International divisions relative to their performance targets, Mr. Jacobs and Mr. Kimble earned below-target annual cash bonuses. Consistent with our objective of setting challenging goals for executives throughout the Company, we believe that the achievement of the division profit goals for these divisions was demanding, as evidenced by the below-target awards earned by these executives despite strong performance of the divisions in 2016. The corporate performance targets under the Annual Bonus Plan, the actual results achieved for 2016, and the corresponding payout percentages are shown below. As previously stated, for competitive reasons, we do not disclose the division profit for the North America or International divisions, as we do not publicly disclose results of these divisions on a separate basis, and we consider it competitively harmful to make that information public.

 

Total Company		Threshold		Target		Maximum		Actual
Adjusted Pre-tax profit		$934.2 million		$1,038.0 million		$1,245.5 million		$1,010.1 million
Payout as Percentage of Target Award		25%		100%		175%		79.8%

 

Bonus payouts are calculated on the basis of straight-line interpolation between the threshold, target, and maximum points. If the Company does not achieve threshold performance, then no annual bonus is paid. Target payments under the Annual Bonus Plan for the named executive officers, and actual payments for 2016 based upon the Company’s and applicable divisions’ performance, are shown in the chart below.

 

		Target as a Percentage of Base Salary			Actual 2016 Payout Percentage			Actual 2016 Payout ($)
R. Johnson		150	%		79.8	%		1,301,738
L. Peters		75	%		79.8	%		393,514
S. Jacobs		75	%		82.4	%		521,867
L. Kimble		75	%		66.0	%		318,018
P. Alviti		50	%		79.8	%		194,014

 

Long-Term Incentive Program

Our long-term incentive program consists of the (i) performance-based LTIP delivered in cash under the LTIP Plan and equity under the Stock Incentive Plan, and (ii) long-term equity awards under the Stock Incentive Plan, in the form of stock options, restricted stock or time-vested RSUs. We provide long-term incentives and make these awards to our named executive officers in order to incentivize them to work toward the Company’s achievement of performance goals established by the Compensation Committee for each performance period. We provide equity-based long-term incentives to our named executive officers in order to provide alignment with shareholder value creation and enhance the retentive value of our compensation program.

 

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LTIP

The LTIP is designed to reward executives for achieving multi-year performance targets. Our LTIP is formula-driven, with targets established by the Compensation Committee based upon financial targets included in the business plan reviewed and approved each year by our Finance Committee and Board. The LTIP pays out based upon the Company’s results, without individual performance adjustments. Key design features of the LTIP are:

 

Mix of Cash and RSUs. For the completed 2015-16 performance period, the LTIP awards were denominated 50% in cash payable under the LTIP and 50% in RSUs payable under the Stock Incentive Plan. Beginning with the 2016-17 performance period, awards are denominated 25% in cash and 75% in RSUs. The same performance target is established for both the cash and RSU portions of the award.

 

Two-Year Performance Period and Additional One-Year Vesting Period. The performance period is two years; however, while award payouts are calculated following the end of the two-year performance period, payments require continued employment and are subject to forfeiture, as well as stock price fluctuations, for another year—that is, payments are not made until the end of a three-year period.

 

Net Income and ROIC Targets. The performance targets are based on net income (70%) and ROIC (30%) that are contained in the business and financial plan adopted by the Finance Committee and the Board for the performance period.

 

Target Awards are a Percentage of Base Salary. The target awards are expressed as a percentage of initial base salary—that is, the base salary paid to the executive following any salary adjustments that take place on May 1 of the first year of the performance period, adjusted only for promotion-related salary increases. Mr. Johnson has a 250% target award for 2016 and 175% for 2015. The target award for the other named executive officers is established by position and is 75% of initial base salary.

 

The Compensation Committee established the net income and ROIC targets at the beginning of 2015 for the 2015-16 performance period. The Company achieved average annual net income of $632.3 million and ROIC of 15.7% for this performance period, which resulted in above-target LTIP awards being earned by the named executive officers. The LTIP awards for this performance period were denominated 50% in cash and 50% in RSUs and will be paid out in 2018, following a one-year time-based vesting period. The targets, along with the adjusted actual performance for the period, and the calculation of ROIC are shown in the charts below:

 

		Threshold		Target		Maximum		Actual
Average Annual Net Income (weighted 70%)		$519.9 million		$572.4 million		$686.9 million		$632.3 million
Two-Year Average ROIC (weighted 30%)		14.1%		15.3%		17.8%		15.7%
Payout as Percentage of Target Award		25%		100%		200%		141.3%

 

For the 2015-16 performance period, LTIP payouts were subject to a “performance gate,” which provided that no amounts would be paid out under the plan unless the Company’s average annual after-tax income for the performance period exceeded the Company’s after-tax income in the year prior to the commencement of the performance period. Once this performance level is achieved, LTIP payouts are calculated on the basis of straight-line interpolation between the threshold, target, and maximum points. If the Company did not achieve threshold performance, then no LTIP would have been paid.

 

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ROIC Calculation for LTIP. Return on Invested Capital, or ROIC, is a non-GAAP financial measure. For purposes of calculating this long-term incentive, we define ROIC as follows:

 

	ROIC =	Operating Profit After Taxes
		Average Invested Capital

Operating Profit after Taxes (Numerator) =		Average Invested Capital (Denominator) =
Pre-tax income		Average total assets
+/–  interest expense/income		–  average cash, cash equivalents, and short-term investments
+  implied interest portion of operating lease payments		–  average year-end inventory
+/–  Unusual/non-recurring items		–  non-interest-bearing current liabilities
+  LTIP award expense		+  13-month average inventory
=  Earnings before LTIP award expense, interest and taxes		+  average estimated asset base of capitalized operating leases
–  Estimated income tax expense
=  Operating Profit After Taxes		=  Average Invested Capital

 

Certain items used in the calculation of ROIC for bonus purposes, such as the implied interest portion of operating lease payments, certain unusual or non-recurring items, average estimated asset base of capitalized operating leases, and 13-month average inventory, while calculated from our financial records, cannot be calculated from our audited financial statements. Prior to the Compensation Committee determining whether bonus targets have been achieved, the Company’s independent registered public accounting firm, at the request and for the restricted use of the Compensation Committee, reviews the bonus calculations to ensure that the payout is calculated in accordance with the plan. There is a calculation of basic ROIC, which is not precisely the same as the calculation used for incentive compensation purposes because of the exclusion of certain items (please see Page 46 for a discussion of disregarded items, and a reconciliation to GAAP, on Pages 16 through 18 of our 2016 Annual Report on Form 10-K).

 

For the 2015-16 performance period, LTIP awards were denominated 50% in cash and 50% in RSUs. There is an additional one-year vesting period, so that the payouts earned for the 2015-16 performance period will not be made to executives until 2018. The RSUs allocated to each executive were valued at the closing price on the date of grant in March 2015. The target payment level, actual percentage payout, and cash and RSUs earned, based on the Company’s actual performance measured against the performance goals, are shown in the chart below.

 

		Target as a Percentage of Initial Base Salary			Actual as a Percentage of Initial Base Salary			Cash Earned ($)			RSUs Earned (#)
R. Johnson		175	%		141.3	%		1,298,194			20,902
L. Peters		75	%		141.3	%		320,574			5,162
S. Jacobs		75	%		141.3	%		430,371			6,910
L. Kimble		75	%		141.3	%		317,244			5,093
P. Alviti		75	%		141.3	%		251,691			4,053

 

Long-Term Equity Awards

Equity awards are generally designed to reward executives for increasing our return to our shareholders through increases in our stock price and are made under the Stock Incentive Plan, which has been approved by our shareholders. Equity awards may, in addition, serve to help retain key executives.

 

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Stock Options

We grant stock options to our named executive officers to align their interests more closely with those of our shareholders. The Compensation Committee awards stock options with exercise prices equal to the fair market value of our stock on the date of grant. Therefore, executives who receive stock options will only realize value if there is appreciation in the share price.

 

Stock option grants of the same value are normally made each year to executives holding comparable positions, with larger awards being made to those with greater responsibility. The Compensation Committee determines the number of options granted based on a fixed value, using the Black-Scholes values on the date of grant. The option exercise price is equal to the closing price of the Company’s common stock on the grant date. Stock options normally vest at the rate of one-third of the total grant per year over the first three years of the ten-year option term, subject to continuous service through each vesting date and accelerated vesting in certain limited circumstances. The Compensation Committee does not normally consider an executive’s gains from prior stock awards in making new awards.

 

Restricted Stock and Restricted Stock Units

We normally make restricted stock or time-vested RSU awards only in special circumstances, such as related to promotions, recruitment, special performance, or retention, rather than as part of an executive’s normal compensation. Restricted stock and RSUs are valued based upon the share price at the time of grant.

 

Retirement and Other Benefits

 

Retirement Plan and Excess Cash Balance Plan

All U.S.-based associates and expatriate U.S. employees of the Company who meet the eligibility requirements are participants in the Foot Locker Retirement Plan (the “Retirement Plan”). The Retirement Plan and the method of calculating benefits payable under it are described on Pages 63 through 64. All of the named executive officers are participants in the Retirement Plan. The Internal Revenue Code limits the amount of compensation that may be taken into consideration in determining an individual’s retirement benefits. Therefore, those participants in the Retirement Plan whose compensation exceeds the Internal Revenue Code limit are also participants in the Excess Cash Balance Plan, described on Page 64, which provides a benefit equal to the difference between the amount a participant receives from the Retirement Plan and the amount the participant would have received were it not for the Internal Revenue Code limits. The Retirement Plan and Excess Cash Balance Plan take into account only base salary and annual bonus in determining pension benefits. Therefore, long-term incentives, stock options, and stock awards have no effect on the calculation of benefits or payments under these plans.

 

401(k) Plan

The Company has a 401(k) Plan that is available to employees whose primary place of employment is in the United States, as well as to expatriate U.S. employees. The 401(k) Plan limits participation to employees who have attained at least the age of twenty-one and have completed one year of service consisting of at least 1,000 hours. All of the named executive officers participate in the 401(k) Plan, other than Mr. Kimble. The 401(k) Plan allows eligible employees to contribute up to 40% of their compensation on a pre-tax basis, subject to a maximum of $18,000. The Company matches 25% of employees’ pre-tax contributions on up to the first 4% of the employees’ compensation (subject to certain limitations). The Summary Compensation Table on Pages 48 through 49 includes, under All Other Compensation, the amount of the Company match for each of the named executive officers. Beginning with the 2015 plan year, the matching contribution is made in cash. Prior to this, it was made in Company stock. Matching contributions are vested incrementally over the first five years of participation.

 

Supplemental Executive Retirement Plan

The Company maintains a Supplemental Executive Retirement Plan (the “SERP”), described on Page 64, for certain senior officers of the Company and other key employees, including the named executive officers. The SERP is an unfunded plan that sets an annual target for each participant consisting of a percentage of base salary and annual bonus based on the

 

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Company’s performance against target. This is the same target as set under the Annual Bonus Plan. Contributions range from 4% to 12% of salary and annual bonus, depending on the Company’s performance against an established target, with an 8% contribution being made for target performance. The Compensation Committee establishes the SERP target each year, and it is normally the same as the performance target under the Annual Bonus Plan. In addition, performance-based participant accounts accrue interest at the rate of 6% annually. The SERP also provides for the continuation of medical and dental insurance benefits following retirement to vested participants who were participants in the SERP prior to the start of the 2014 fiscal year when this benefit was closed to new participants.

 

Based upon the Company’s performance in 2016, a credit of 6.9% of 2016 base salary and annual bonus was made to the SERP for each of the named executive officers. Credits to the SERP are based only on base salary and annual bonus; therefore, long-term incentives, stock options, and stock awards have no effect on the calculation of benefits or payments under this plan. As of the end of 2016, the account balances of the named executive officers ranged from $256,730 for Ms. Alviti to $1,945,883 for Mr. Johnson. Under the terms of the SERP, executives are vested in their account balances based upon a combination of age and service. As of the end of 2016, all of the named executive officers, other than Ms. Alviti who has not yet met the age and service requirements, were vested in the SERP.

 

International Assignment Compensation

We provide expatriate employees, such as Mr. Kimble, with additional benefits and allowances that are designed to minimize any financial detriment or gain to the employee from the international assignment. For Mr. Kimble, who was the only named executive officer who was an expatriate employee in 2016, we provide benefits and allowances for certain home leave, goods and services differential, dependent education, housing, relocation, automobile costs, and tax preparation assistance.

 

Perquisites

We provide the named executive officers with certain perquisites, which the Compensation Committee believes to be reasonable and consistent with its overall objective of attracting and retaining talented executives. The Company provides the named executive officers with an automobile allowance, financial planning, medical expense allowance, annual physical, supplemental long-term disability insurance, and life insurance. In addition, the Company reimburses Mr. Johnson for reasonable expenses of using car service for transportation in the New York metropolitan area. We do not provide a gross-up to executives for the income tax liability they incur due to their receipt of these perquisites.

 

Procedures for Determining Compensation

 

Setting Compensation, Establishing Goals, and Evaluating Performance

The Compensation Committee oversees a rigorous and comprehensive compensation approval and goal setting process. Each year, in advance of making compensation decisions for the forthcoming year, the Compensation Committee meets with management and reviews the Company’s overall executive compensation program in light of the Company’s long-term strategy and financial objectives approved by the Finance Committee and the Board. The Compensation Committee meets with management, the Company’s compensation consultant, and the Compensation Committee’s independent compensation consultant to review the executive compensation environment, including recent developments and trends in executive compensation relative to the Company’s executive compensation program, and a historical view of the pay-for-performance correlation in the program and any changes to the program being recommended by management or either of the consultants.

 

After the financial results for the prior year have been finalized and audited, the Compensation Committee meets to review and approve bonus and incentive compensation payments for the prior year and to review and approve compensation arrangements—base salaries, stock awards, and incentive plan targets—for the upcoming year. The Compensation Committee meets privately with its independent compensation consultant for the purpose of establishing the compensation

 

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of the Chief Executive Officer, including establishing target awards under the Annual Bonus Plan and the LTIP, and making stock awards to him under the Stock Incentive Plan. Except in the case of promotions or other unusual circumstances, the Compensation Committee considers stock awards only at this meeting, which is normally held within a few weeks following the issuance of the Company’s full-year earnings release for the prior year.

 

The Compensation Committee may hold other meetings during the year to review specific issues related to executive compensation, new developments in executive compensation, or other issues related to management resources. It also has responsibility, along with the Nominating Committee, for annually reviewing compensation paid to non-employee directors and making recommendations to the full Board regarding the directors’ compensation program.

 

Use of Compensation Consultants

The Compensation Committee has retained as its advisor a nationally-recognized executive compensation consultant—Compensation Advisory Partners (“CAP”)—that is independent and performs no work for management. CAP reports directly to the Compensation Committee, meets with the Compensation Committee privately without management present, and regularly communicates privately with the Compensation Committee Chair. The Compensation Committee has assessed the independence of CAP based on standards promulgated by the SEC and concluded that no conflict of interest exists that would prevent it from serving as an independent consultant to the Compensation Committee. Each year, the Compensation Committee’s compensation consultant reviews a report on risk in relation to the Company’s compensation policies and practices, provides a pay-for-performance analysis of our executive compensation program, and reviews the Chief Executive Officer’s compensation. In addition, each year the Compensation Committee’s consultant reviews the compensation program for non-employee directors, and the Compensation Committee, together with the Nominating Committee, consider the consultant’s report on the program. Management utilizes the services of ClearBridge Compensation Group, a nationally-recognized compensation consultant, to provide advice on the executive compensation program and plan design.

 

Management Involvement in Developing the Compensation Program

Management is involved in various aspects of developing the executive compensation program. Our Senior Vice President and Chief Human Resources Officer, Vice President—Global Total Rewards, and staff in the Human Resources Department work with our Chief Executive Officer to develop compensation recommendations for all corporate officers other than the Chief Executive Officer. The Chief Executive Officer or the Senior Vice President and Chief Human Resources Officer reviews these proposals with the Compensation Committee Chair, and may make changes to the recommendations based upon his input, before the recommendations are forwarded to the Compensation Committee for review. Our Senior Vice President and General Counsel also attends meetings of the Compensation Committee and participates in some of these discussions and preparations.

 

Additional Information

 

Key Compensation Governance Policies

 

Independent Compensation Consultant

With regard to executive and director compensation matters, our Compensation Committee directly retains, and is advised by, an independent compensation consultant who performs no other work for the Company.

 

Clawback Policy

We have adopted a clawback policy that provides for the recovery of incentive compensation—paid in cash or equity—if the Compensation Committee determines that an executive engaged in fraud or gross misconduct which results in an accounting adjustment, whether or not the adjustment results in a restatement of our financial statements. The SEC proposed rules in 2015 on clawback policies, and we intend to review our clawback policy once the SEC and NYSE establish final rules governing clawbacks.

 

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Stock Ownership Guidelines

We have meaningful stock ownership guidelines for our senior executives. These are set at six times annual base salary for the Chief Executive Officer, three times annual base salary for executive vice presidents, two times annual base salary for senior vice presidents, and a multiple of annual base salary for other covered executives. If an executive has not met the ownership requirements following a five-year phase-in period, the executive is required to hold 100% of net shares acquired from the vesting of restricted stock or RSUs or the exercise of stock options until they comply with the stock ownership guidelines. At the end of 2016, all of the named executive officers met or exceeded their applicable ownership guidelines.

 

No Tax Gross-Ups

We do not provide a tax gross-up with regard to any compensation, benefit, or perquisite paid by the Company, other than our relocation program that is applicable to all employees. We also do not provide tax gross-ups for any amount paid to an executive upon termination of employment or in connection with a change in control.

 

Anti-Hedging Policy

We do not permit our executive officers to take short positions in our shares or to hedge their economic interest in their shares.

 

No Stock Option Repricing

Our Stock Incentive Plan does not permit the repricing of stock options without shareholder approval.

 

Compensation Plans and Risk

We believe that our compensation program encourages our named executive officers to take energetic action to improve the Company’s performance without encouraging them to take undue risk. The performance-based annual cash bonus and LTIP elements of the program are paid based upon performance as compared to the Company’s annual and two-year financial plans, which are prepared each year by the Company’s management and reviewed and approved by the Finance Committee and the Board. No bonuses are paid unless the applicable performance goals are achieved. We believe that, on balance, the plans are reasonably achievable under normal business conditions. This encourages our executives to manage the business well without pressuring them to take undue risks in order to obtain a bonus payment.

 

Our equity-based compensation for the named executive officers is designed with a similar goal in mind. We believe that our equity grants are reasonable in relation to overall compensation. Stock options normally vest ratably over a three-year period and have a 10-year term, reducing the risk that an executive will take short-term action to inflate the price of the Company’s stock for a brief period.

 

LTIP payouts are calculated at the conclusion of a two-year performance period, but are not actually paid to the participant until after an additional year of vesting has been satisfied. In addition to serving as a retention vehicle, this also requires that the executive continue to have the value of the stock portion of his or her award at risk, dependent on fluctuations in stock price, for an additional year. It also allows a year to pass in which any issues concerning the Company’s operating or financial performance may come to light before payments are made.

 

In addition, there are certain other factors related to our compensation programs for the named executive officers that we believe help reduce the likelihood that our compensation programs will encourage our executives to take undue risk, as described below. Please also see Page 29 for a discussion of compensation and risk in our compensation plans more generally, and the procedures we followed to evaluate this.

 

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Factor		Description
ROIC as Bonus Measurement		As a retail company, we believe that one of the potential risks we have is that management will attempt to achieve profit targets without taking into account the capital used, particularly working capital invested in inventory and operating leases. We have, therefore, designed our LTIP for senior management, including the named executive officers, to take into account ROIC as well as net income in determining whether a bonus will be paid.
No Bonus Payments to Executives with Poor Performance Ratings		We have designed our plans so that executives who receive a “Not Meeting Performance” rating under the Company’s annual performance appraisal process are not eligible to receive an annual bonus payment. This helps prevent an individual executive from taking any action inconsistent with the business plan or otherwise exposing the Company to undue risk.
Bonus Targets		Bonus targets are based on the financial plan that is reviewed and approved by the Board.
Incentive Payments Proportional to Base Salary		We believe that our cash incentive payments are not outsized in relation to base salary. Mr. Johnson, as Chief Executive Officer, has the opportunity to earn at target 150% of his base salary in annual bonus and 250% of his base salary in long-term bonus. Comparable percentages for the other named executive officers currently range from 50%-100% for annual bonus and from 75%-100% for long-term bonus.
Bonus Caps		Annual cash bonus and the cash portion of the LTIP awards to executives are capped and do not include excessive leverage.
Mix of Components		We use a mix of annual and long-term incentive components, as well as a mix between the use of cash and equity.

 

Executive Employment Agreements

As more fully described on Pages 52 through 54, we have employment agreements with each of our named executive officers. Other than the agreements with Mr. Johnson as Chief Executive Officer, the agreements with the named executive officers are in the same form.

 

Our employment agreements with the named executive officers provide for severance payments to the executive if we terminate the executive’s employment without cause or if the executive terminates his or her employment for good reason. These payments to the named executive officers, calculated as if termination of employment occurred at the end of our last fiscal year, are set out in the tables on Pages 66 through 76.

 

The named executive officers would receive an enhanced severance payment if the executive’s employment is terminated without cause or if the executive terminates employment for good reason within two years following a change in control. For an executive to receive the enhanced severance payment, two events must occur: first, employment must be terminated for one of the specified reasons, and second, this termination must occur within two years following a change in control. We believe that these provisions, which we have had in place for a number of years, provide appropriate protection to our executives, comparable to that available at other public companies, and, with regard to the enhanced severance following a change in control, protect us from losing key executives during a period when a change in control may be threatened or pending. None of the named executive officers is entitled to a gross-up payment for any excise taxes that may become payable in connection with a change in control.

 

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All of the named executive officers have agreed in their employment contracts not to compete with the Company for two years following the termination of employment and not to hire Company employees during that same period. This restriction does not apply following a change in control.

 

Delegation of Authority

The Compensation Committee currently has delegated authority to its Chair to approve, between meetings of the Committee, time-vested RSU awards up to 7,500 RSUs per individual award and stock option awards up to 25,000 shares per individual award, in both cases only to executives who are not corporate or executive officers of the Company, division chief executive officers, or general managers. It is expected that the Chair would use this authority to approve awards made during the course of the year in connection with promotions, new hires, or special retention purposes. Options are priced at fair market value on the date the Chair signs the approval, which is the date of grant for awards made under this delegation authority. Similarly, the value of RSU awards is based on the fair market value on the date the Chair signs the approval. In 2016, the Chair used this authority one time and approved a special retention RSU award. The Compensation Committee has not delegated authority to management to make stock option, restricted stock, RSU, or other equity-based awards.

 

Items Disregarded for Bonus Calculations

Annual Bonus and LTIP payments are formula-driven based upon Company performance, and our program for the named executive officers does not provide for discretionary adjustments based upon individual performance. The Compensation Committee may, however, in its sole discretion, determine to eliminate or reduce the amounts payable under these incentive programs consistent with Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), but has no discretion to increase Annual Bonus or LTIP payments. The Compensation Committee has not adjusted any of the Annual Bonus or LTIP payments to the named executive officers shown in the Summary Compensation Table from payouts calculated based upon the applicable formula. When determining bonus and incentive payments, consistent with Section 162(m), the Compensation Committee is required to disregard certain events that it determines to be unusual or non-recurring. When establishing the targets, the Compensation Committee normally specifies certain items that it considers to be unusual or non-recurring, and these events, if they occur, are automatically excluded when calculating payments. All of the references in this CD&A to target and actual performance levels refer to amounts after taking these adjustments into consideration.

 

Accounting and Tax Considerations

While we review both the accounting and tax effects of various components of compensation, these effects are not a significant factor in the Compensation Committee’s allocation of compensation among the different components. In general, it is our position that compensation paid to executive officers should be fully deductible for U.S. tax purposes, and we have structured our bonus, long-term incentive, and stock option programs so that payments made under them are deductible. In certain instances, however, we believe that it is in the Company’s best interests, and that of our shareholders, to have the flexibility to pay compensation that is not deductible under the limitations of Section 162(m) in order to provide compensation consistent with our program and objectives. The portion of base salary paid to Mr. Johnson that exceeds $1 million, the value of time-based restricted stock awards made to Mr. Johnson, the taxable portion of certain perquisites provided to Mr. Johnson, and potentially a portion of the value of time-based restricted stock or RSU awards made to one or more of the other named executive officers, are not expected to be deductible.

 

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Compensation and Management Resources Committee Report

The Compensation Committee has reviewed and discussed the CD&A required by Item 402(b) of Regulation S-K with management and, based on that review and discussion, has recommended to the Board that the CD&A be included in this Proxy Statement.

 

	Members of the Compensation Committee
	Alan D. Feldman, Chair		Nicholas DiPaolo		Steven Oakland
	Cheryl Nido Turpin		Kimberly Underhill		Dona D. Young

 

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Summary Compensation Table

 

(a)			(b)					(c)					(d)						(e)				(f)					(g)					(h)					(i)
																												Change in
																												Pension Value and
																							Non-Equity					Nonqualified Deferred
Name and Principal																							Incentive Plan					Compensation					All Other
Position								Salary					Stock Awards					Option Awards					Compensation					Earnings					Compensation					Total
(1)			Year					($)(2)					($)(3)(4)					($)(3)					($)(5)					($)(6)					($)(7)					($)
Richard A. Johnson				2016					1,087,500					2,062,522					2,200,016					2,599,932					403,443					572,455					8,925,868
Chairman, President and				2015					1,037,500					918,793					3,328,479					2,866,278					420,164					49,353					8,620,567
Chief Executive Officer				2014					931,250					4,728,272					1,596,328					1,690,209					365,092					427,558					9,738,709
Lauren B. Peters				2016					657,500					1,579,759					450,010					714,088					205,626					84,011					3,690,994
Executive Vice President				2015					595,000					226,888					512,320					857,976					196,559					20,404					2,409,147
and Chief Financial Officer				2014					561,250					1,196,558					506,437					762,160					231,420					377,010					3,634,835
Stephen D. Jacobs				2016					844,445					2,654,792					450,010					952,238					222,934					117,513					5,241,932
Executive Vice President and
Chief Executive Officer—North America
Lewis P. Kimble				2016					642,460					1,365,680					450,010					635,262					326,186					235,970					3,655,568
Executive Vice President and
Chief Executive Officer—International
Paulette R. Alviti				2016					486,250					1,275,673					225,005					445,705					82,626					178,857					2,694,116
Senior Vice President and				2015					472,500					178,131					256,160					597,324					109,543					46,814					1,660,472
Chief Human Resources Officer				2014					461,250					693,556					253,218					495,404					121,769					223,333					2,248,530
Notes to Summary Compensation Table
(1)  Richard A. Johnson has served as Chairman of the Board since May 2016, and President and Chief Executive Officer since December 2014. Mr. Johnson previously served as Executive Vice President and Chief Operating Officer from May 2012 to November 2014; Executive Vice President and Group President—Retail Stores from July 2011 to May 2012; President and Chief Executive Officer of Foot Locker U.S., Lady Foot Locker, Kids Foot Locker, and Footaction from January 2010 to June 2011; President and Chief Executive Officer of Foot Locker Europe from August 2007 to January 2010; and President and Chief Executive Officer of Footlocker.com/Eastbay from April 2003 to August 2007.   Lauren B. Peters has served as Executive Vice President and Chief Financial Officer since July 2011.   Stephen D. Jacobs has served as Executive Vice President and Chief Executive Officer—North America since February 2016 and has been an executive officer of the Company as of this date. Mr. Jacobs previously served as Executive Vice President and Chief Executive Officer Foot Locker—North America from December 2014 through February 2016; President and Chief Executive Officer of Foot Locker U.S., Lady Foot Locker, Kids Foot Locker, and Footaction from July 2011 to November 2014; and President and Chief Executive Officer of Champs Sports from January 2009 to June 2011.   Lewis P. Kimble has served as Executive Vice President and Chief Executive Officer—International since February 2016 and has been an executive officer of the Company as of this date. Mr. Kimble previously served as President and Chief Executive Officer of Foot Locker Europe from February 2010 to February 2016; and Managing Director of Foot Locker Asia Pacific from February 2006 to February 2010.   Paulette Alviti has served as Senior Vice President and Chief Human Resources Officer since June 2013.																		(2)  The amounts in column (c) reflect the annual base salaries earned by our named executive officers for the designated years. Including the non-equity incentive plan compensation included in column (f), these amounts represented the following percentages of the named executive officers’ total compensation for 2016: Mr. Johnson (42.3%), Ms. Peters (37.2%), Mr. Jacobs (34.3%), Mr. Kimble (34.9%), and Ms. Alviti (34.6%). Information on the named executive officers’ employment agreements appears beginning on Page 52.   (3)  The amounts in these columns reflect the stock and option awards granted in the designated years. The amounts represent the aggregate grant date fair value of the awards granted in each respective year calculated in accordance with stock-based compensation accounting rules (ASC Topic 718). A discussion of the assumptions used in computing the award values may be found in Note 21 to our financial statements in our 2016 Annual Report on Form 10-K. As provided under the SEC’s rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions and include, for restricted stock awards, expected dividend payments at the same rate as paid on our shares of Common Stock. Please see the Grants of Plan-Based Awards Table on Page 55 for additional information on awards granted in 2016. The amounts shown in the table do not necessarily reflect the actual value that may be recognized by the named executive officers.   (4)  The amounts in column (d) include the grant date fair value of performance-based RSUs granted for the long-term performance measurement periods of 2016-17, 2015-16, and 2014-15, valued at grant date based upon the probable outcome of meeting the performance conditions. The amounts are consistent with the estimates of the aggregate compensation cost to be recognized over the service period determined at the grant date under FASB ASC Topic 718, and exclude the effect of estimated forfeitures. Column (d) also includes restricted stock awards, where applicable. Please see the Grants of Plan-Based Awards Table on Page 55 for additional information on the awards granted in 2016.

 

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(5)

For 2016, this column reflects the sum of the cash incentive payouts made in 2017 under the Annual Bonus Plan for 2016 and the cash portion of the earned payout under the LTIP for the 2015-16 performance measurement period that is payable in 2018 if the executive continues to be employed on the payment date, as shown in Table I below. For 2015, this column reflects the sum of the cash incentive payouts made in 2016 under the Annual Bonus Plan for 2015 and the cash portion of the earned LTIP payout for the 2014-15 performance measurement period that was paid in 2017, as shown in Table II below. For 2014, this column reflects the sum of the cash incentive payouts made in 2015 under the Annual Bonus Plan for 2014 and the cash portion of the earned LTIP payout for the 2013-14 performance measurement period that was paid in 2016, as shown in Table III below.

 

I—Cash Incentive Payouts for 2016

 

			Payout in 2017				Payout in 2018
							LTIP
							2015-16 Performance Period				Total
			Annual Bonus Plan				(Cash Payout Earned—				As Shown in Summary
Name			Cash Payment for 2016 ($)				Payable in 2018) ($)				Compensation Table ($)
R. Johnson			1,301,738				1,298,194				2,599,932
L. Peters			393,514				320,574				714,088
S. Jacobs			521,867				430,371				952,238
L. Kimble			318,018				317,244				635,262
P. Alviti			194,014				251,691				445,705

 

II—Cash Incentive Payouts for 2015

 

Payout in 2016

Payout in 2017

LTIP

2014-15 Performance Period

Total

Annual Bonus Plan

(Cash Payout Earned—

As Shown in Summary

Name

Cash Payment for 2015 ($)

Paid in 2017) ($)

Compensation Table ($)

R. Johnson

1,719,656

1,146,622

2,866,278

L. Peters

512,831

345,145

857,976

P. Alviti

313,267

284,057

597,324

 

III—Cash Incentive Payouts for 2014

 

Payout in 2015

Payout in 2016

LTIP

2013-14 Performance Period

Total

Annual Bonus Plan

(Cash Payout Earned—

As Shown in Summary

Name

Cash Payment for 2014 ($)

Paid in 2016) ($)

Compensation Table ($)

R. Johnson

1,063,990

626,219

1,690,209

L. Peters

496,510

265,650

762,160

P. Alviti

313,881

181,523

495,404

 

(6)	Amounts shown in column (g) represent the annual change in pension value during each of our last three fiscal years. Please see Pages 62 through 63 for more information on 2016 pension benefits.

 

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(7)	This column includes perquisites and other compensation attributable to the executives for 2016, valued at the incremental cost to the Company of providing them, which represents the actual cost:

	•	The amounts shown for medical expense reimbursement reflect amounts reimbursed in 2016, which may also include reimbursement of amounts submitted in 2016 for expenses incurred in 2015.
	•	The amounts shown in the table under the 401(k) Match column represent the Company’s matching contribution under the Foot Locker 401(k) Plan made to the named executive’s account.
	•	The amounts shown under the column headed “Accrual for Post-Retirement Medical” reflect the amounts accrued in 2016 for the actuarial present value of the future cost of providing this benefit to these individuals. These benefit accruals reflect an increase in premiums, a decrease in the applicable discount rate and the adoption of the RPH 2016 Generational Mortality Table Projected using Scale MP 2016.
	•	For Mr. Johnson, the amount shown under the column headed “Expatriate Tax Payments” reflects U.S. and foreign tax payments net of hypothetical tax deductions in connection with the exercise of stock options that vested in whole or in part during the term of his service from August 2007 to January 2010 as President and Chief Executive Officer of our Foot Locker Europe division headquartered in Vianen, The Netherlands. These payments are made under the Company’s international assignment policy (“IAP”) and are designed to facilitate these assignments by holding these employees responsible for the tax liabilities they would have incurred had they remained in their home countries. The amount shown under the column headed “Tax Gross Up” for Mr. Johnson reflects the net gross ups associated with tax payments made under the IAP (and not related to perquisites).
	•	For Mr. Kimble, the amounts shown under the columns headed “Foreign Earnings” and “Expatriate Tax Payments” reflect expatriate compensation for 2016 in his position as Executive Vice President and Chief Executive Officer—International in Vianen, The Netherlands. Under Foreign Earnings, the amount shown includes expatriate benefits and allowances for certain home leave, goods and services differential, dependent education, housing, relocation, and automobile costs in connection with his international assignment. Mr. Kimble received the majority of these benefits and allowances under the IAP, which applies to employees on international assignment and is designed to minimize any financial detriment or gain to the employee from the assignment. Under Expatriate Tax Payments, the amount shown includes tax equalization payments, and U.S. and foreign tax payments net of hypothetical tax deductions, in connection with his international assignment. These payments are made under the IAP and are designed to facilitate these assignments by holding these employees responsible for the tax liabilities they would have incurred had they remained in their home countries. No amount is reported under the column headed “Expatriate Tax Payments” for Mr. Kimble because his hypothetical tax withholding exceeded the sum of the actual tax payments and other tax items associated with his assignment. No amount is reported under the column headed “Tax Gross Up” for Mr. Kimble because the net gross ups associated with tax payments made under the IAP (and not related to perquisites) were negative.

 

					Car						Med.						Supp.			Accrual												Expatriate			Tax
		Auto.			Service			Univ. Life			Expense			Exec.			LTD Ins.			for Post-			Financial			401(k)			Foreign			Tax			Gross
		Allow.			Reimb.			Ins. Prem.			Reimb.			Physical			Prem.			Ret.			Planning			Match			Earnings			Payments			Up		Total
Name		($)			($)			($)			($)			($)			($)			Med.			($)			($)			($)			($)			($)		($)
R. Johnson		15,100			9,659			5,570			8,245			—			6,075			56,958			9,000			2,650			—			196,782			262,416		572,455
L. Peters		8,485			—			2,967			1,195			556			—			68,158			—			2,650			—			—			—		84,011
S. Jacobs		21,438			—			—			5,000			—			—			88,425			—			2,650			—			—			—		117,513
L. Kimble		—			—			3,668			450			556			—			56,958			—			—			174,338			—			—		235,970
P. Alviti		20,923			—			2,995			5,000			494			4,774			133,021			9,000			2,650			—			—			—		178,857

 

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Employment Agreements

We have employment agreements with each of the named executive officers, and we describe the material terms of each of these agreements below. Information on potential payments and benefits upon termination of the agreements is described under Potential Payments Upon Termination or Change in Control, beginning on Page 66.

 

Richard A. Johnson

Position. We entered into an employment agreement with Mr. Johnson on November 6, 2014 in connection with his promotion to serve as our Chief Executive Officer.

 

Term. The term of this agreement began on December 1, 2014 and ends on January 31, 2019. The agreement contains an “evergreen” renewal provision that provides for additional one-year renewals of the employment term, unless either party gives notice of non-renewal one year prior to the end of the then-current term.

 

Base Salary and Bonus. During the term of the agreement, the Company shall pay Mr. Johnson an annual base salary of not less than $1,000,000. Mr. Johnson’s 2016 base salary rate was $1,100,000. As Chief Executive Officer, for 2016, Mr. Johnson’s annual bonus at target under the Annual Bonus Plan was 150% of his base salary, and his annual bonus at target under the LTIP was 250% of his base salary at the start of the performance period.

 

Stock Awards. Mr. Johnson’s agreement provided for certain restricted stock and stock option awards effective December 1, 2014, with vesting subject to his continued employment with the Company.

 

Benefit Plans and Perquisites. Mr. Johnson is entitled to participate in all bonus, incentive, and equity plans offered to senior executives. He is also eligible to participate in all pension, welfare, and fringe benefit plans and perquisites offered to senior executives. The benefits and perquisites available to Mr. Johnson include:

 

	•	Company-paid life insurance in the amount of his annual base salary;
	•	Long-term disability insurance coverage of $25,000 per month;
	•	Annual out-of-pocket medical expense reimbursement of up to $7,500;
	•	Reimbursement for financial planning expenses of up to $9,000 per year; and
	•	Automobile expense reimbursement for up to $40,000 annually and reimbursement of reasonable expenses for car service for transportation within the New York metropolitan area.

 

Non-Compete Provision. Mr. Johnson’s agreement provides that he may not compete with the Company or solicit our employees for two years following the termination of his employment agreement.

 

Certain Defined Terms in the Agreement:

 

“Cause” means with regard to Mr. Johnson:

 

	•	his refusal or willful failure to substantially perform his duties;
	•	his dishonesty, willful misconduct, misappropriation, breach of fiduciary duty or fraud with regard to the Company, its business or assets;
	•	his willful breach of any material provision of the agreement, which is not cured; or
	•	his conviction of a felony (other than a traffic violation) or any other crime involving moral turpitude.

 

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“Change in Control” means any of the following:

 

	•	the Company merges with another company or sells all (or substantially all) of its assets. This event would exclude, for example, mergers (or similar transactions) in which shareholders of the Company prior to the transaction continue to represent a majority of the stock outstanding after the transaction;
	•	the acquisition of 35% or more of the outstanding stock; or
	•	during any period of not more than 12 months, the directors at the start of the period, plus any new director whose election or nomination for election was approved by at least two-thirds of the directors then remaining on the Board who either were directors at the beginning of the period or whose election or nomination was approved in this manner, do not comprise at least a majority of the Board.

 

“Good Reason” means,

 

	•	prior to a Change in Control, (A) a reduction in his rate of base salary, other than a reduction that occurs in connection with, and in the same percentage as, an across-the-board reduction over any 3-year period in the base salaries of all senior executives and where the reduction is less than 20% of his base salary; or (B) a material and adverse change in the nature and status of his authority or responsibilities.
	•	on or after a Change in Control, (A) a reduction in his rate of base salary; (B) a failure to continue, or a reduction in, the benefits applicable to him without providing a substitute plan(s) providing materially similar benefits; or (C) any material demotion or reduction in his authority or responsibility.
	•	at any time, (A) a reduction in his annual bonus classification level; (B) any successor’s failure to assume in writing the Company’s obligations under the agreement; or (C) the Company’s failure to renew the agreement.

 

Lauren B. Peters, Stephen D. Jacobs, Lewis P. Kimble, and Paulette R. Alviti

 

Position/Term/Base Salary. We have substantially identical employment agreements with these executives in their current positions, as follows:

 

		Current Term	2016 Base
Name	Position	End Date	Salary Rate ($)
L. Peters	Executive Vice President and Chief Financial Officer	1/31/2018	675,000
S. Jacobs	Executive Vice President and Chief Executive Officer—North America	1/31/2018	850,000
L. Kimble	Executive Vice President and Chief Executive Officer—International	1/31/2018	650,000
P. Alviti	Senior Vice President and Chief Human Resources Officer	1/31/2018	490,000

The terms of the agreements will automatically be extended for another year unless notice of non-renewal is given by the October 31 prior to the then-current expiration of the term. We pay these executives annual base salaries at rates not less than their salaries at the start of their agreements. The executives’ base salaries for 2016 are shown in the table above.

 

Benefit Plans and Perquisites. These executives are entitled to participate in all benefit plans and arrangements in effect at the start of the agreement, including retirement plans, Annual Bonus Plan, LTIP, medical, dental, and disability plans, and any other plans subsequently offered to our senior executives.

 

Non-Compete Provision. The executives’ agreements provide that they may not compete with the Company or solicit our employees for two years following the termination of their employment agreements.

 

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Executive Compensation

 

Certain Defined Terms in the Agreements:

 

“Cause” means each executive’s:

 

	•	refusal or willful failure to substantially perform his or her duties;
	•	dishonesty, willful misconduct, or fraud with regard to the Company’s business or assets;
	•	willful breach of his or her employment agreement and the executive does not correct the breach; or
	•	conviction of a felony (other than a traffic violation) or any other crime involving moral turpitude.

 

“Change in Control” means any of the following:

 

	•	the Company merges with another company or sells all (or substantially all) of its assets. This event would exclude, for example, mergers (or similar transactions) in which shareholders of the Company prior to the transaction continue to represent a majority of the stock outstanding after the transaction;
	•	the acquisition of 35% or more of the outstanding stock; or
	•	during any period of not more than 12 months, the directors at the start of the period, plus any new director whose election or nomination for election was approved by at least two-thirds of the directors then remaining on the Board who either were directors at the beginning of the period or whose election or nomination was approved in this manner, do not comprise at least a majority of the Board.

 

“Disability” means:

 

•

The executive is incapacitated due to physical or mental illness and, as a result, has not performed his or her duties on a full-time basis for six months, and does not return to perform his or her duties after the Company gives notice.

 

“Good Reason” means:

 

Prior to a Change in Control,

 

	•	a reduction in base salary, other than an across-the-board reduction in senior executive salaries over a three-year period and the reduction is less than 20% of the executive’s salary from the beginning of the three-year period; or
	•	a material change in the executive’s authority or responsibilities, except temporarily as a result of illness or other absence;

 

Following a Change in Control,

 

	•	any reduction in base salary;
	•	failure to continue the benefit plans and programs that apply to the executive, or the reduction of his or her benefits, without providing substitute comparable plans and benefits; or
	•	a material demotion or reduction in executive’s authority or responsibility (except temporarily because of illness or other absence);

 

At any time,

 

	•	a reduction in the executive’s annual bonus classification level, other than in connection with a redesign that affects all other employees in the executive’s bonus level;
	•	failure by a successor to the Company to confirm in writing that it will assume the Company’s obligations under the agreement; or
	•	failure by the Company to renew the agreement.

 

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Executive Compensation

 

Grants of Plan-Based Awards Table

 

The following table shows the awards made to the named executive officers in 2016 under the Annual Bonus Plan and the LTIP, as well as the RSU and stock option awards under the Stock Incentive Plan:

 

				Estimated Future Payouts						Estimated Future Payouts
				Under Non-Equity Incentive						Under Equity Incentive
				Plan Awards						Plan Awards
(a)		(b)		(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)		(k)		(l)
																		All
																All		Other				Grant
																Other		Option				Date
																Stock		Awards:				Fair
																Awards:		Number of		Exercise		Value of
																Number of		Securities		or Base		Stock
																Shares		Under-		Price of		and
																of Stock		lying		Option		Option
				Threshold		Target		Maximum		Threshold		Target		Maximum		or Units		Options		Awards		Awards
Name		Grant Date		($)		($)		($)		(#)		(#)		(#)		(#)		(#)		($/Sh)		($)(5)
R. Johnson		03/23/16(1)		412,500		1,650,000		2,887,500
		03/23/16(2)		171,875		687,500		1,375,000
		03/23/16(2)								8,084		32,333		64,666								2,062,522
		03/23/16(3)																139,380		63.79		2,200,016
L. Peters		03/23/16(1)		126,563		506,250		885,938
		03/23/16(2)		31,641		126,563		253,125
		03/23/16(2)								1,489		5,953		11,905								379,742
		03/23/16(3)																28,510		63.79		450,010
		03/23/16(4)														18,812				63.79		1,200,017
S. Jacobs		03/23/16(1)		159,375		637,500		1,115,625
		03/23/16(2)		39,844		159,375		318,750
		03/23/16(2)								1,874		7,496		14,991								478,170
		03/23/16(3)																28,510		63.79		450,010
		03/23/16(4)														23,515				63.79		1,500,022
L. Kimble		03/23/16(1)		121,875		487,500		853,125
		03/23/16(2)		30,469		121,875		243,750
		03/23/16(2)								1,433		5,732		11,464								365,644
		03/23/16(3)																28,510		63.79		450,010
		03/23/16(4)														15,677				63.79		1,000,036
P. Alviti		03/23/16(1)		61,250		245,000		428,750
		03/23/16(2)		22,969		91,875		183,750
		03/23/16(2)								1,081		4,321		8,642								275,637
		03/23/16(3)																14,255		63.79		225,005
		03/23/16(4)														15,677				63.79		1,000,036

 

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Executive Compensation

 

Notes to Grants of Plan-Based Awards Table

 

(1)	Annual Incentive Awards

Amounts shown reflect the payment levels at threshold, target, and maximum performance for the 2016 fiscal year under the Annual Bonus Plan and reflect the potential amounts that would be paid at the end of the period if the applicable performance goals were achieved. The estimated bonus payouts are based on a percentage of the executive’s base salary, as shown in the table below:

 

Name	Threshold		Target		Maximum
R. Johnson	37.5%		150%		262.5%
L. Peters, S. Jacobs, and L. Kimble	18.75%		75%		131.25%
P. Alviti	12.5%		50%		87.5%

 

The annual bonus payments actually made to the named executive officers for 2016 are shown in Note 5 to the Summary Compensation Table on Page 50.

 

(2)	LTIP Awards

Provided the performance goals for the 2016-17 long-term performance measurement period are achieved, the payout structure of the executives’ awards is as follows: (a) 25% of the award would be payable in cash under the LTIP, (b) 75% of the award would be payable in RSUs under the Stock Incentive Plan, and (c) both the cash portion and the stock portion of the payout would be subject to a time-based, one-year vesting period following the end of the performance measurement period before payout to the executives. The amounts shown in the table reflect the estimated payment levels in cash and number of RSUs at threshold, target, and maximum performance for the 2016-17 performance measurement period. Columns (c), (d), and (e) show the estimated cash payments and columns (f), (g), and (h) show the number of RSUs that would be paid out at threshold, target, and maximum performance if the applicable performance goals are achieved.

 

The threshold, target, and maximum number of RSUs for each executive was calculated on the date of grant on the basis of that day’s closing stock price of a share of Common Stock. The closing price on the grant date of March 23, 2016 for each of the named executive officers was $63.79. Similarly, the grant date fair values of the RSU awards are based on the closing stock price on these grant dates. The actual number of RSUs paid out will be based on the Company’s performance compared to targets. The value of the RSUs received by an executive will depend upon the Company’s stock price on the payment date in 2019. No dividends are paid or accrued for the RSUs.

 

The aggregate payout in cash and stock at threshold, target, and maximum performance for each of the named executive officers is based on a percentage of the executive’s base salary in the first year of the performance period, adjusted for promotion-related salary increases. The percent of base salary for each executive at threshold, target, and maximum performance is shown in the table below:

 

Name	Threshold		Target		Maximum
R. Johnson	62.5%		250%		500%
L. Peters, S. Jacobs, L. Kimble, and P. Alviti	18.75%		75%		150%

 

No amounts would be paid to the executives under the LTIP awards unless the performance goals for the performance measurement period are achieved.

 

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(3)	Stock Option Grants

The amounts in column (j) reflect the number of stock options granted in 2016 under the Stock Incentive Plan. The exercise price reflected in column (k) is equal to the closing price of a share of Common Stock on the grant date. In general, no portion of any stock option may be exercised until the first anniversary of its date of grant. Vested options may be exercised for ten years following the date of grant, unless the option is cancelled or exercised sooner. If the executive retires, becomes disabled, or dies while employed by the Company or one of its subsidiaries, all unexercised options that are then exercisable, plus those options that would have become exercisable on the next anniversary of the grant date, will remain (or become) exercisable as of that date. Options granted in 2016 will become exercisable upon a participant’s termination of employment on or within 24 months following a Change in Control. In general, options may remain exercisable for up to three years following a participant’s retirement or termination due to disability, and for up to one year for any other termination of employment for reasons other than cause.

 

The vesting schedule for options granted to the executives in 2016 is as follows:

 

Vest Date:

Vest Date:

Vest Date:

Name

Grant Date

Shares (#)

Shares (#)

Shares (#)

Shares (#)

R. Johnson

03/23/16

139,380

03/23/17:

46,460

03/23/18:

46,460

03/23/19:

46,460

L. Peters

03/23/16

28,510

03/23/17:

9,503

03/23/18:

9,503

03/23/19:

9,504

S. Jacobs

03/23/16

28,510

03/23/17:

9,503

03/23/18:

9,503

03/23/19:

9,504

L. Kimble

03/23/16

28,510

03/23/17:

9,503

03/23/18:

9,503

03/23/19:

9,504

P. Alviti

03/23/16

14,255

03/23/17:

4,751

03/23/18:

4,752

03/23/19:

4,752

 

(4)	Restricted Stock Units

The amounts shown in the table under column (i) represent the number of RSUs awarded to the executive under the Stock Incentive Plan on the grant date. The RSU awards will vest according to the schedule below, provided, that they remain employed by the Company through the applicable vesting dates. No dividends are paid or accrued for RSU awards.

 

						Vest Date:			Vest Date:
Name		Grant Date		Shares (#)		Shares (#)			Shares (#)
L. Peters		03/23/16		18,812		03/23/19:	9,406		03/23/20:	9,406
S. Jacobs		03/23/16		23,515		03/23/19:	11,757		03/23/20:	11,758
L. Kimble		03/23/16		15,677		03/23/19:	15,677
P. Alviti		03/23/16		15,677		03/23/19:	7,838		03/23/20:	7,839

 

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57

Executive Compensation

 

(5)	Grant Date Fair Value

The amounts shown in column (l) reflect the aggregate grant date fair value of the restricted stock, RSU, and stock option awards granted in 2016, calculated in accordance with stock-based compensation accounting rules (FASB ASC Topic 718). A discussion of the assumptions used in computing the award values may be found in Note 21 to our financial statements in our 2016 Annual Report on Form 10-K. As provided under the SEC’s rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For option awards, the value is calculated by multiplying the Black-Scholes value by the number of options granted. For RSUs, the fair value is calculated by multiplying the closing price of our Common Stock on the NYSE on the award date by the number of shares granted. For the performance-based RSUs awarded under the Stock Incentive Plan in connection with the 2016-17 long-term performance measurement period, the fair value is calculated based upon the probable outcome of meeting the performance conditions at the target performance level and multiplying the number of units that would be received at that level by the closing price of a share of our Common Stock on the grant date. This is consistent with the estimate of the aggregate compensation cost to be recognized over the service period determined at the grant date under FASB ASC Topic 718. All of these values are shown in the table below.

 

		Black-Scholes
		Value for Stock		Performance-Based RSU
		Options Granted on		Awards Granted on
		March 23, 2016		March 23, 2016
Name		($)		($)
R. Johnson		15.78		—
L. Peters		15.78		63.79
S. Jacobs		15.78		63.79
L. Kimble		15.78		63.79
P. Alviti		15.78		63.79

 

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Outstanding Equity Awards at Fiscal Year-End

The following table shows the number of outstanding stock options, both vested and unvested, and the number of unvested shares of restricted stock and RSUs held by the named executive officers at the end of the 2016 fiscal year:

 

		Option Awards										Stock Awards
(a)		(b)		(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)
																		Equity
																		Incentive
																Equity		Plan Awards:
						Equity										Incentive		Market or
						Incentive										Plan Awards:		Payout
		Number of		Number of		Plan Awards:								Market		Number of		Value of
		Securities		Securities		Number of						Number		Value of		Unearned		Unearned
		Underlying		Underlying		Securities						of Shares		Shares or		Shares,		Shares,
		Unexercised		Unexercised		Underlying						or Units		Units of		Units or		Units or
		Options		Options		Unexercised		Option				of Stock		Stock		Other Rights		Other Rights
		(#)		(#)		Unearned		Exercise		Option		That Have		That Have		That Have		That Have
		Exercisable		Unexercisable		Options		Price		Expiration		Not Vested		Not Vested		Not Vested		Not Vested
Name		(1)		(1)		(#)		($)		Date		(#)(2)		($)(3)		(#)(2)		($)(3)
R. Johnson		25,000		—		—		9.93		03/25/2019		—		—		—		—
		80,000		—		—		15.10		03/23/2020		—		—		—		—
		80,000		—		—		18.84		03/23/2021		—		—		—		—
		49,000		—		—		30.92		03/21/2022		—		—		—		—
		47,000		—		—		34.24		03/28/2023		—		—		—		—
		24,666		12,334		—		45.08		03/26/2024		—		—		—		—
		36,666		18,334		—		56.35		12/01/2024		—		—		—		—
		69,300		138,600		—		62.11		03/25/2025		—		—		—		—
		—		139,380		—		63.79		03/23/2026		—		—		—		—
		—		—		—		—		—		60,000		4,080,600		—		—
		—		—		—		—		—		18,520		1,259,545		—		—
		—		—		—		—		—		21,736		1,478,265		—		—
		—		—		—		—		—		—		—		20,902		1,421,545
		—		—		—		—		—		—		—		64,666		4,397,935
L. Peters		25,000		—		—		11.66		03/26/2018		—		—		—		—
		25,000		—		—		9.93		03/25/2019		—		—		—		—
		40,000		—		—		24.75		05/26/2021		—		—		—		—
		44,000		—		—		30.92		03/21/2022		—		—		—		—
		42,000		—		—		34.24		03/28/2023		—		—		—		—
		22,666		11,334		—		45.08		03/26/2024		—		—		—		—
		10,666		21,334		—		62.11		03/25/2025		—		—		—		—
		—		28,510		—		63.79		03/23/2026		—		—		—		—
		—		—		—		—		—		20,000		1,360,200		—		—
		—		—		—		—		—		18,812		1,279,404		—		—
		—		—		—		—		—		7,657		520,753		—		—
		—		—		—		—		—		—		—		5,162		351,068
		—		—		—		—		—		—		—		11,905		809,659
S. Jacobs		8,000		—		—		34.24		03/28/2023		—		—		—		—
		6,333		6,334		—		45.08		03/26/2024		—		—		—		—
		9,066		4,534		—		56.35		12/01/2024		—		—		—		—
		7,000		14,000		—		62.11		03/25/2025		—		—		—		—
		—		28,510		—		63.79		03/23/2026		—		—		—		—
		—		—		—		—		—		23,515		1,599,255		—		—
		—		—		—		—		—		10,000		680,100		—		—
		—		—		—		—		—		9,147		622,087		—		—
		—		—		—		—		—		—		—		6,910		469,949
		—		—		—		—		—		—		—		14,991		1,019,538
L. Kimble		12,666		6,334		—		45.08		03/26/2024		—		—		—		—
		7,000		14,000		—		62.11		03/25/2025		—		—		—		—
		—		28,510		—		63.79		03/23/2026		—		—		—		—
		—		—		—		—		—		15,677		1,066,193		—		—
		—		—		—		—		—		7,250		493,073		—		—
		—		—		—		—		—		—		—		5,093		346,375
		—		—		—		—		—		—		—		11,464		779,667
P. Alviti		8,333		5,667		—		45.08		03/26/2024		—		—		—		—
		5,333		10,667		—		62.11		03/25/2025		—		—		—		—
		—		14,255		—		63.79		03/23/2026		—		—		—		—
		—		—		—		—		—		10,000		680,100		—		—
		—		—		—		—		—		15,677		1,066,193		—		—
		—		—		—		—		—		6,302		428,599		—		—
		—		—		—		—		—		—		—		4,053		275,645
		—		—		—		—		—		—		—		8,642		587,742

 

2017 Proxy Statement

59

Executive Compensation

 

Notes to Table on Outstanding Equity Awards at Fiscal Year-End

(1)	The Vesting Schedules for the options shown in columns (b) and (c) are as follows:

 

Total

Securities Underlying

Vesting Date for 1/3

Vesting Date for 1/3

Vesting Date for 1/3

Name

Unexercised Options (#)

Date of Grant

of Total Grant

of Total Grant

of Total Grant

R. Johnson

25,000

03/25/2009

03/25/2010

03/25/2011

03/25/2012

80,000

03/23/2010

03/23/2011

03/23/2012

03/23/2013

80,000

03/23/2011

03/23/2012

03/23/2013

03/23/2014

49,000

03/21/2012

03/21/2013

03/21/2014

03/21/2015

47,000

03/28/2013

03/28/2014

03/28/2015

03/28/2016

37,000

03/26/2014

03/26/2015

03/26/2016

03/26/2017

55,000

12/01/2014

12/01/2015

12/01/2016

12/01/2017

207,900

03/25/2015

03/25/2016

03/25/2017

03/25/2018

139,380

03/23/2016

03/23/2017

03/23/2018

03/23/2019

720,280

L. Peters

25,000

03/26/2008

03/26/2009

03/26/2010

03/26/2011

25,000

03/25/2009

03/25/2010

03/25/2011

03/25/2012

40,000

05/26/2011

05/26/2012

05/26/2013

05/26/2014

44,000

03/21/2012

03/21/2013

03/21/2014

03/21/2015

42,000

03/28/2013

03/28/2014

03/28/2015

03/28/2016

34,000

03/26/2014

03/26/2015

03/26/2016

03/26/2017

32,000

03/25/2015

03/25/2016

03/25/2017

03/25/2018

28,510

03/23/2016

03/23/2017

03/23/2018

03/23/2019

270,510

S. Jacobs

8,000

03/28/2013

03/28/2014

03/28/2015

03/28/2016

12,667

03/26/2014

03/26/2015

03/26/2016

03/26/2017

13,600

12/01/2014

12/01/2015

12/01/2016

12/01/2017

21,000

03/25/2015

03/25/2016

03/25/2017

03/25/2018

28,510

03/23/2016

03/23/2017

03/23/2018

03/23/2019

83,777

L. Kimble

19,000

03/26/2014

03/26/2015

03/26/2016

03/26/2017

21,000

03/25/2015

03/25/2016

03/25/2017

03/25/2018

28,510

03/23/2016

03/23/2017

03/23/2018

03/23/2019

68,510

P. Alviti

14,000

03/26/2014

03/26/2015

03/26/2016

03/26/2017

16,000

03/25/2015

03/25/2016

03/25/2017

03/25/2018

14,255

03/23/2016

03/23/2017

03/23/2018

03/23/2019

44,255

 

(2)

The vesting dates for the restricted stock and RSU awards shown in columns (g) and (i) are set forth in the table below. The RSU awards shown in column (g) granted in 2014 were earned following the end of the 2015 fiscal year when the Compensation Committee certified the achievement of the performance goals at above-target performance for the 2014-15 long-term performance measurement period and vested in March 2017; the RSU awards shown in column (i) granted in 2015 for the 2015-16 performance period were earned following the end of the 2016 fiscal year when the Compensation Committee certified the achievement of above-target performance for the 2015-16 long-term performance measurement period and will vest in 2018; and the RSU awards shown in column (i) granted in 2016 will be earned only if the maximum performance goals for the 2016-17 performance measurement period are achieved and, if earned, will vest in 2019.

 

60

2017 Proxy Statement

Executive Compensation

 

Name		Date of Grant		Type of Award		Shares/RSUs (#)		Vesting Date
R. Johnson		03/26/2014		RSU		21,736		03/26/2017
		03/26/2014		Restricted Stock		60,000		03/26/2017
		12/01/2014		Restricted Stock		18,520