UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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

Exchange Act of 1934 (Amendment No. )

 

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Brown-Forman Corporation

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

 

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		It began as a promise on a whiskey bottle label. 150 years later, it remains the standard for all our products. It guides our corporate responsibility practices today.   “NOTHING BETTER IN THE MARKET”

 

		June 30, 2020   DEAR BROWN-FORMAN STOCKHOLDER:   It is our pleasure to invite you to attend Brown-Forman Corporation’s 2020 Annual Meeting of Stockholders, which will be held on Thursday, July 30, 2020, at 9:30 A.M. (Eastern Daylight Time). Traditionally, our Annual Meeting is held at the Brown-Forman Conference Center in Louisville, Kentucky. However, this year, in light of the public health impact of the COVID-19 outbreak, the Annual Meeting will be held entirely online via video webcast to support the health and well-being of our stockholders, directors, employees, and guests. Please see the Notice of Annual Meeting on the next page for more information about how to attend and participate in this year’s Annual Meeting online. We expect to return to hosting our annual meetings in Louisville, Kentucky, next year.   Your vote is important to us. Please complete and return your proxy card, or vote by telephone or online as soon as possible, even if you plan to attend the Annual Meeting online.   We hope you join us on July 30. On behalf of the Board of Directors, thank you for your continued support.   Very truly yours,
		LAWSON E. WHITING,		GEO. GARVIN BROWN IV,
		President and Chief Executive Officer		Chairman of the Board of Directors

 

 

NOTICE OF ANNUAL

MEETING OF

STOCKHOLDERS

 

DATE:		Thursday, July 30, 2020				ADMISSION PROCEDURES   We are committed to providing a safe, secure environment for our stockholders, directors, employees, and guests. To that end, the Annual Meeting will be held in virtual meeting format only this year. Although you will not be able to attend the Annual Meeting physically, we hope the online meeting format will allow participation by all stockholders regardless of location.   To be admitted to the Annual Meeting, please visit www.virtualshareholder meeting.com/BFA2020. If you are a Class A stockholder, you will log into the Annual Meeting by entering your unique 16-digit control number found on your proxy card or voting instruction form. If you are a Class B stockholder, you will log into the Annual Meeting as a guest. For more information about how to attend the Annual Meeting online, please see “Attending the Annual Meeting” on page 4. Additionally, you can visit www.virtualshareholdermeeting.com/ BFA2020 or contact Steve Cassin, our Investor Relations Manager, by telephone at (502) 774-7658 or by email at Investor_Relations@b-f.com for more information about attending the Annual Meeting.     IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 30, 2020:   The Notice of Annual Meeting, Proxy Statement, and Integrated Annual Report, which includes our Annual Report on Form 10-K for fiscal 2020, are available at www.brown-forman.com/investors/annual-report/.
TIME:		9:30 A.M. (Eastern Daylight Time)
LOCATION:		The Annual Meeting will be presented exclusively online at www.virtualshareholdermeeting.com/BFA2020
The Annual Meeting will be held entirely online via video webcast due to the public health impact of the COVID-19 outbreak and to support the health and well-being of our stockholders, directors, employees, and guests. To attend and participate in the Annual Meeting online, please visit www.virtualshareholdermeeting.com/BFA2020. You will be able to watch and hear the proceedings online. Class A stockholders will also be able to vote and submit questions to management during the Annual Meeting.   We are holding this meeting for the following purposes:   •  to elect the thirteen directors named in this Proxy Statement; and   •  to vote, on a nonbinding advisory basis, to approve our executive compensation.   Class A stockholders of record at the close of business on June 15, 2020, are entitled to vote at the meeting, either online at the Annual Meeting or by proxy.   Your vote is very important. Even if you plan to attend the Annual Meeting online, we encourage you to complete, sign, and date the enclosed proxy card and return it in the enclosed envelope, or vote by telephone (1-800-690-6903) or online (www.proxyvote.com) prior to the Annual Meeting so your shares are represented and voted at the meeting even if your plans change and you are unable to attend online. Instructions on telephone and online voting are on the proxy card enclosed with this Proxy Statement.   Louisville, Kentucky June 30, 2020         By order of the Board of Directors Matthew E. Hamel, Secretary

 

TABLE OF

CONTENTS

 

 

 

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

PROXY

SUMMARY

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

 

ANNUAL MEETING OF STOCKHOLDERS				PROPOSALS FOR STOCKHOLDER VOTING
DATE: Thursday, July 30, 2020   TIME: 9:30 A.M. (Eastern Daylight Time)   LOCATION: The Annual Meeting will be presented exclusively online at www.virtualshareholdermeeting.com/BFA2020   DATE OF DISTRIBUTION: The Notice of Annual Meeting of Stockholders, Proxy Statement, and proxy card are first being made available or mailed on or about June 30, 2020.				Proposal		Our Board’s voting   recommendation
				Election of thirteen directors DETAILS: Pages 18–22				FOR all nominees
				Advisory vote to approve our executive compensation DETAILS: Page 53				FOR the proposal

PERFORMANCE AND COMPENSATION HIGHLIGHTS

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

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

OUR PERFORMANCE IN FISCAL 2020:

 

 

 

(1)

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

 

(2)

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

 

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

PROXY SUMMARY    |    OUR DIRECTOR NOMINEES TO THE BOARD

 

OUR DIRECTOR NOMINEES TO THE BOARD

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

Board Nominees

 

Committee Membership as of April 30, 2020

Nominee Name & Occupation

Age

Director Since

Director Category

Audit

Comp

Corp Gov & Nom

Exec

Patrick Bousquet-Chavanne Former Chief Executive Officer, Emaar Malls

62

2005

I

●

●

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

52

2016

B, M

Geo. Garvin Brown IV Chairman of the Board, Brown-Forman

51

2006

B

●

C

Stuart R. Brown Managing Partner, Typha Partners, LLC

55

2015

B

John D. Cook Director Emeritus, McKinsey & Company

67

2008

I

●

C

●

Marshall B. Farrer Senior Vice President, Managing Director of GTR and Developed APAC Region, Brown-Forman

49

2016

B, M

Laura L. Frazier Owner and Chairman, Bittners LLC

62

2016

B

Kathleen M. Gutmann Chief Sales and Solutions Officer, United Parcel Service, Inc.

51

2017

I

●

Augusta Brown Holland Founding Partner, Haystack Partners LLC

44

2015

B

Michael J. Roney Retired Chief Executive Officer, Bunzl plc

66

2014

I

C

Tracy L. Skeans Chief Transformation and People Officer, Yum! Brands, Inc.

47

2018

I

●

●

Michael A. Todman Retired Vice Chairman, Whirlpool Corporation

62

2014

I

C

●

Lawson E. Whiting President and Chief Executive Officer, Brown-Forman

52

2018

M

●

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

Fiscal 2020

 

(1) Return on Average Invested Capital is not derived in accordance with GAAP. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.				“BROWN-FORMAN IS AN ORGANIZATION FORTUNATE TO HAVE THOUGHTFUL, LONG-TERM FOCUSED LEADERSHIP; TALENTED AND DEDICATED PEOPLE; A ROBUST BALANCE SHEET; AND STRONG CASH FLOWS. WE BELIEVE WE HAVE THE RIGHT STRATEGY IN PLACE TO DRIVE THE NEXT GENERATION OF GROWTH.”
				Lawson E. Whiting, President and Chief Executive Officer

 

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

ANNUAL MEETING

INFORMATION

ABOUT YOUR PROXY MATERIALS

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

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

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

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

Contact Information

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

Reducing Duplicate Mailings

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

ATTENDING THE ANNUAL MEETING

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

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

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

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

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

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

 

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

ANNUAL MEETING INFORMATION    |    VOTING

 

VOTING

Who May Vote

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

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

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

How to Vote

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

 

over the telephone by calling this toll-free number (1-800-690-6903);

online (www.proxyvote.com); or

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

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

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

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

 

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

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

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

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN		5

ANNUAL MEETING INFORMATION    |    ANNOUNCEMENT OF VOTING RESULTS

 

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

Changing Your Vote

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

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

Quorum Requirements

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

Votes Needed For Approval

 

Proposal		Vote required to pass		Effect of abstentions and broker non-votes
Election of directors		Nominees who receive a majority of the Class A votes cast (the number of shares voted “for” the nominee exceeds the number of shares voted “against” that nominee) will be elected.		No effect.
Advisory resolution to approve executive compensation		Approval requires an affirmative vote of a majority of the Class A shares present (in person or represented by proxy) and entitled to vote.		Abstentions are equivalent to votes against the proposal.   Broker non-votes will have no effect.

Dividend Reinvestment and Employee Stock Purchase Plan Shares

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

ANNOUNCEMENT OF VOTING RESULTS

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

PROXY SOLICITATION EXPENSES

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

 

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

CORPORATE

GOVERNANCE

 

OUR BOARD OF DIRECTORS   Our Board is the policy-making body that is ultimately responsible for Brown-Forman’s business success and ethical climate. The Board oversees the performance of our senior management team, which is responsible for leading and operating Brown-Forman’s business. The Board’s primary responsibilities include retention, evaluation, and succession planning for the Chief Executive Officer and the Chairman of the Board, as well as oversight of our corporate strategy, financial condition, executive compensation policies and practices, and enterprise risk management. The Board may retain independent advisors to help it perform its duties.               BROWN-FORMAN IS A “CONTROLLED COMPANY.”   As a publicly traded, family-controlled company, Brown-Forman enjoys a rare governance opportunity in that members of our controlling stockholder family, the Brown family, participate directly on our Board. We believe this governance structure gives us a distinct competitive advantage because Brown family members bring a long-term ownership perspective to our Board. This advantage is sustained by a careful balancing of the roles of our Board, management, and our stockholders — including the Brown family.     SELECTION OF DIRECTORS   In evaluating candidates for Board membership, the Corporate Governance and Nominating Committee seeks directors who will represent the long-term best interests of all stockholders. As articulated in our Corporate Governance Guidelines, all Brown-Forman directors should possess the highest personal and professional ethics, integrity, and values. The Board believes the best directors have the following additional qualities: good judgment, candor, civility, business courage, experience with businesses and other organizations of comparable character and comparable or larger size, and a lack of conflicts of interest. We also believe that a significant number of our directors should be independent.   The Corporate Governance and Nominating Committee and the Board consider diversity in evaluating candidates for Board membership, though neither has adopted a formal diversity policy. The Board’s goal is to maintain a well-balanced composition that combines a variety of experiences, backgrounds, skills, and perspectives to enable the Board, as a whole, to guide Brown-Forman effectively in the pursuit of our strategic objectives. In evaluating potential Board candidates, the Corporate Governance and Nominating Committee considers an individual’s independence; business, professional, or public service experience; relevant industry knowledge, experience, and relationships; business judgment; financial expertise; international experience; leadership skills; age, gender, race, ethnicity, religion, nationality, sexual orientation, cultural background, and other self-identified diversity characteristics; time availability; and familial relation to our controlling family stockholders.

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN		7

CORPORATE GOVERNANCE    |    BOARD COMPOSITION

 

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

BOARD COMPOSITION

How Our Controlled-Company Status Affects Our Board

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

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

Our Independent Directors

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

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

Our Brown Family Directors

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

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

Our Management Directors

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

 

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

CORPORATE GOVERNANCE    |    BOARD COMPOSITION

 

 

BROWN-FORMAN BOARD OF DIRECTORS

 

 

 

 

Changes to Our Board

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

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN		9

CORPORATE GOVERNANCE    |    LEADERSHIP STRUCTURE

 

LEADERSHIP STRUCTURE

 

BOARD LEADERSHIP STRUCTURE

Geo. Garvin Brown IV, a Brown family member, has served as Chairman of the Board since 2007.				Lawson E. Whiting has served as President and Chief Executive Officer since 2019.				John D. Cook has served as Lead Independent Director since 2012.

Chairman of the Board

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

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

Lead Independent Director

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

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

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

President and Chief Executive Officer

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

Why the Board Chose this Leadership Structure

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

 

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CORPORATE GOVERNANCE    |    BOARD GUIDELINES AND PROCEDURES

 

BOARD GUIDELINES AND PROCEDURES

Corporate Governance Guidelines

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

Board and Committee Self-Assessment

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

Director Service on Other Public Company Boards

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

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

Director Service

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

Board Meetings

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

Communication with Our Board

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

 

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CORPORATE GOVERNANCE    |    BOARD COMMITTEES

 

BOARD COMMITTEES

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

 

AUDIT COMMITTEE
MET 10 TIMES IN FISCAL 2020   Committee Members:     • Michael A. Todman (Chair)   • Patrick Bousquet-Chavanne   • Bruce L. Byrnes   • Kathleen M. Gutmann   • Tracy L. Skeans		The Board has delegated to the Audit Committee responsibility for overseeing Brown-Forman’s financial statements; audit process; system of internal accounting and financial controls; policies and processes for assessment and management of enterprise risks; compliance with legal and regulatory requirements; and internal audit function. In addition, the Audit Committee is solely responsible for the appointment, replacement, and compensation of the independent auditor and oversees the independent auditor’s qualifications, independence, and performance. The Audit Committee’s responsibilities include preparing the Audit Committee Report that appears in this Proxy Statement on page 58.   Audit Committee members must satisfy director independence standards prescribed by the NYSE and mandated by the Sarbanes-Oxley Act. Each member of our Audit Committee satisfies all of these heightened independence standards. The Board has determined that each member of our Audit Committee is “financially literate” within the meaning of NYSE rules, and that Mr. Todman is an “audit committee financial expert” under SEC rules.
COMPENSATION COMMITTEE
MET 7 TIMES IN FISCAL 2020   Committee Members:     • Michael J. Roney (Chair)   • John D. Cook   • Tracy L. Skeans		The Compensation Committee’s responsibilities include determining the compensation of the Chief Executive Officer and other executive officers; recommending market-competitive compensation for the Board; approving incentive compensation plan design and changes thereto for the Chief Executive Officer and other executive officers; assisting the Board in its oversight of risk related to compensation policies and practices; overseeing the preparation of the Compensation Discussion and Analysis section of this Proxy Statement; and preparing the Compensation Committee Report that appears in this Proxy Statement on page 41.   The Compensation Committee has retained FW Cook to provide independent advice on executive and director compensation matters. For additional information on the services provided by FW Cook, as well as the Compensation Committee’s processes and procedures for considering and determining executive compensation, please see the Compensation Discussion and Analysis, which begins on page 26.   Each member of the Compensation Committee qualifies as an independent director under NYSE listing standards (including the heightened independence standards for compensation committee members of non-controlled companies), as a “non-employee director” under SEC rules, and as an “outside director” under regulations adopted pursuant to Section 162(m) of the Internal Revenue Code. The Board specifically considered factors relevant to the ability of these directors to be independent from management in connection with Compensation Committee service.

 

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CORPORATE GOVERNANCE    |    BOARD COMMITTEES

 

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
MET 6 TIMES IN FISCAL 2020   Committee Members:     • John D. Cook (Chair)   • Patrick Bousquet-Chavanne   • Geo. Garvin Brown IV   • Bruce L. Byrnes   • Michael A. Todman		The Corporate Governance and Nominating Committee’s responsibilities include helping the Board identify, recruit, and recommend appropriate candidates to serve as directors; reviewing periodically our corporate governance principles in light of developments in corporate governance and best practices, taking into account our controlled-company status; coordinating and overseeing Chief Executive Officer succession planning; assisting the Board with its annual self-assessment; assisting the Board in monitoring best practices, developments, and issues related to corporate governance; and overseeing evaluation of the Board and management, including, in cooperation with the Compensation Committee, the annual review of performance of the Chief Executive Officer. All of the Corporate Governance and Nominating Committee members are independent under NYSE listing standards, except Geo. Garvin Brown IV.
EXECUTIVE COMMITTEE
MET ONCE IN FISCAL 2020   Committee Members:     • Geo. Garvin Brown IV (Chair)   • John D. Cook   • Lawson E. Whiting		The Executive Committee consists of the Chief Executive Officer, the Chairman of the Board (if separate from the Chief Executive Officer), and one or more other directors as determined by the Board from time to time. In fiscal 2020, the Lead Independent Director served on the Executive Committee. The Board can change the Executive Committee membership, fill vacancies, or dissolve the committee at any time. The Executive Committee may exercise all of the powers of the Board, subject to certain exceptions specified in our By-laws or Delaware law. However, traditionally, the Executive Committee acts only when exercising a power the Board has specifically delegated, when there is an emergency, or when the issue does not warrant the full Board’s attention. In addition, the members of the Executive Committee communicate and meet informally, sometimes with Brown-Forman’s General Counsel, to engage in strategic planning of Board activities and agenda topics, to stay ahead of various issues on behalf of the full Board, and to review recent Board meetings.

 

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CORPORATE GOVERNANCE    |    BOARD’S ROLE IN RISK OVERSIGHT

 

BOARD’S ROLE IN RISK OVERSIGHT

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

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

 

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

 

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

 

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

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

BEST PRACTICES

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

Code of Conduct and Code of Ethics for Senior Financial Officers

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

 

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CORPORATE GOVERNANCE    |    OUR CONTROLLING FAMILY STOCKHOLDERS

 

Disclosure Controls Committee

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

Risk Committee

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

OUR CONTROLLING FAMILY STOCKHOLDERS

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

Brown-Forman/Brown Family Shareholders Committee

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

Director of Family Shareholder Relations

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

Brown Family Member Employees

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

 

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ENVIRONMENTAL,
SOCIAL, AND
GOVERNANCE

PUTTING OUR VALUES INTO ACTION

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

 

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

 

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

 

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

– Lawson E. Whiting, President and Chief Executive Officer

 

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

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

 

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PROPOSAL 1:

ELECTION OF DIRECTORS

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

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

Meeting.

 

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

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

NOMINEES

 

PATRICK BOUSQUET-CHAVANNE
Director since 2005   Age 62                                           COMMITTEES:   • Audit   • Corporate Governance and Nominating		CURRENT AND PAST POSITIONS   Emaar Malls (a developer of premium shopping malls and retail assets), Chief Executive Officer from 2018 to 2019   Positions with Marks and Spencer Group PLC:   • Executive Director of Customer, Marketing and M&S.com from 2016 to 2018   • Executive Director of Marketing and International from 2014 to 2016   • Executive Director of Marketing and Business Development from 2013 to 2014   • Corporate Director of Strategy and Business Development from 2012 to 2013   Positions with Yoostar Entertainment Group:   • Co-Chairman from 2010 to 2012   • President and Chief Executive Officer from 2009 to 2012		QUALIFICATIONS AND SKILLS   • Senior management and board experience at one of the world’s leading manufacturers and marketers of branded consumer goods, including experience with implementing strategy, branding, licensing, distribution, digital, and international expansion   • Experience dealing with governance issues relevant to family-controlled public companies   • Experience dealing with digital transformations   OTHER DIRECTORSHIPS   • Marks and Spencer Group PLC from 2013 to 2018   • HSNi Corporation from 2008 to 2013

CAMPBELL P. BROWN
Director since 2016   Age 52		CURRENT AND PAST POSITIONS   Positions with Brown-Forman and affiliates:   • Senior Vice President since 2018   • President and Managing Director of Old Forester, our founding bourbon brand, since 2015   • Led the wine and spirits portfolio in Canada and the Midwest region of the U.S.   • Served in the emerging markets of India, the Philippines, and Turkey   • Various other positions over a 26-year career   • Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018		QUALIFICATIONS AND SKILLS   • Business and industry experience gained by serving in operational, management, and executive positions within Brown-Forman   • Deep knowledge of family corporate governance   • Perspective as a fifth generation Brown family stockholder   • A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders   OTHER DIRECTORSHIPS   • Kentucky Distillers Association since 2016   • Republic Bank and Trust Company since 2008

 

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PROPOSAL 1: ELECTION OF DIRECTORS    |    NOMINEES

 

GEO. GARVIN BROWN IV
Director since 2006   Age 51                                           COMMITTEES:   • Corporate Governance and Nominating   • Executive (Chair)		CURRENT AND PAST POSITIONS   Positions with Brown-Forman and affiliates:   • Chairman of the Board since 2007   • Executive Vice President from 2011 to 2015   • Senior Vice President and Managing Director of Western Europe and Africa from 2009 to 2011   • Vice President and Jack Daniel’s Brand Director in Europe and Africa from 2004 to 2008   • Director of the Office of the Chairman and Chief Executive Officer from 2002 to 2004   • Founding Member and Co-Chairman, Brown-Forman/Brown Family Shareholders Committee since 2007		QUALIFICATIONS AND SKILLS   • Business and industry experience gained by serving in operational, management, and executive positions within Brown-Forman   • Deep knowledge of family corporate governance   • Perspective as a fifth generation Brown family stockholder   • A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders

 

STUART R. BROWN
Director since 2015   Age 55		CURRENT AND PAST POSITIONS   Typha Partners, LLC (an early-stage private equity investment company), Managing Partner since 2010   DendriFund, Inc. (a private, non-operating foundation focused on natural resource sustainability, seeded by Brown-Forman), Founding Director and President from 2011 to 2019   Between the Covers Bookstore, Owner from 1998 to 2010   Positions with Brown-Forman and affiliates:   • Sales and Marketing Management from 1995 to 1998   • Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018		QUALIFICATIONS AND SKILLS   • Extensive experience in family governance, entrepreneurial management, finance, and board leadership   • Demonstrated commitment to sustainability and social issues   • Perspective as a fifth generation Brown family stockholder   • A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders

 

JOHN D. COOK
Director since 2008;   Lead Independent Director since 2012   Age 67                                           COMMITTEES:   • Compensation   • Corporate Governance and Nominating (Chair)   • Executive		CURRENT AND PAST POSITIONS   Positions with McKinsey & Company:   • Director Emeritus   • Director from 2003 to 2008		QUALIFICATIONS AND SKILLS   • Skills gained during an over 40-year career advising and managing consumer products companies and creating stockholder value   • Leadership and senior management experience   • Financial and international expertise   • Marketing skills   • Experience with strategic acquisitions and integrations   OTHER DIRECTORSHIPS   • Winona Capital Management since 2007

 

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PROPOSAL 1: ELECTION OF DIRECTORS    |    NOMINEES

 

MARSHALL B. FARRER
Director since 2016   Age 49		CURRENT AND PAST POSITIONS   Positions with Brown-Forman and affiliates:   •  Senior Vice President, Managing Director, Global Travel Retail and Developed APAC Region since 2018   •  Senior Vice President, Managing Director, Global Travel Retail region from 2015 to 2018   •  Vice President, Managing Director, Jack Daniel’s Tennessee Honey brand from 2014 to 2015   •  Vice President, Managing Director, Australia/New Zealand region from 2010 to 2014   •  Vice President, Director, Latin America & Caribbean region from 2006 to 2009   •  Other sales and marketing management positions over a 22-year Brown-Forman career   •  Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018		QUALIFICATIONS AND SKILLS   •  Business and industry experience gained from serving in operational, management, marketing, and executive positions within Brown-Forman and the beverage alcohol industry   •  Extensive international operations and leadership experience   •  Perspective as a fifth generation Brown family stockholder   •  A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of stockholders

 

LAURA L. FRAZIER
Director since 2016   Age 62		CURRENT AND PAST POSITIONS   Bittners LLC (a more than 160-year-old interior and commercial design firm), Owner, Chairman, and former CEO   Positions with Brown-Forman and affiliates:   •  Member of the board of directors of Lenox, Inc., a former subsidiary, from 1999 to 2005   •  Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018		QUALIFICATIONS AND SKILLS   •  Executive leadership and entrepreneurial management skills   •  Perspective as a fifth generation Brown family stockholder   •  A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of stockholders

 

KATHLEEN M. GUTMANN
Director since 2017   Age 51                                           COMMITTEES:   • Audit		CURRENT AND PAST POSITIONS   Positions with United Parcel Service:   •  Chief Sales and Solutions Officer and Senior Vice President of UPS Healthcare and Life Sciences since 2020   •  Chief Sales and Solutions Officer and Senior Vice President of The UPS Store and UPS Capital from 2014 to 2020   •  President of Worldwide Sales from 2011 to 2014		QUALIFICATIONS AND SKILLS   •  Extensive senior management and executive leadership experience   •  Experience directing long-term strategy as a member of the UPS Management Committee   •  Oversight of P&L for UPS Capital (a UPS subsidiary that provides supply chain, financial, insurance, and payment solutions) and The UPS Store (a franchise system of retail shipping, mailbox, print, and business service centers)   •  Oversight of P&L for UPS Healthcare and Life Sciences (group with eight million square feet of dedicated healthcare certified logistics space and 5,000 healthcare logistics personnel)

 

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PROPOSAL 1: ELECTION OF DIRECTORS    |    NOMINEES

 

AUGUSTA BROWN HOLLAND
Director since 2015   Age 44		CURRENT AND PAST POSITIONS   •  Haystack Partners LLC (environmentally conscious real estate development company), Founding Partner since 2006   •  Founding Member, Brown-Forman/Brown Family Shareholders Committee from 2007 to 2018		QUALIFICATIONS AND SKILLS   •  Extensive knowledge of urban planning and revitalization and environmentally friendly development   •  Demonstrated commitment to sustainability and social issues   •  Experience serving on numerous civic boards   •  Perspective as a fifth generation Brown family stockholder   •  A history of service on the Brown-Forman/Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of stockholders

 

MICHAEL J. RONEY
Director since 2014   Age 66                                             COMMITTEES:   • Compensation (Chair)		CURRENT AND PAST POSITIONS   Bunzl plc (a multinational distribution and outsourcing company), Chief Executive Officer from 2005 to 2016		QUALIFICATIONS AND SKILLS   •  Extensive senior management and executive leadership experience   •  Deep expertise in multinational production, distribution, and operations   •  Financial expertise   •  International mergers and acquisitions experience   OTHER DIRECTORSHIPS   •  Next plc since 2017   •  Grafton Group plc since 2016   •  Johnson Matthey plc from 2007 to 2014   •  Bunzl plc from 2003 to 2005

 

TRACY L. SKEANS
Director since 2018   Age 47                                             COMMITTEES:   • Audit   • Compensation		CURRENT AND PAST POSITIONS   Positions with Yum! Brands, Inc. and affiliates:   •  Chief Transformation and People Officer, Yum! Brands, Inc. since 2016   •  President, Pizza Hut International from 2014 to 2015   •  Chief People Officer, Pizza Hut Global from 2013 to 2014   •  Chief People Officer, Pizza Hut US from 2011 to 2013		QUALIFICATIONS AND SKILLS   •  Strong track record of business leadership overseeing transformation strategy, human resources, and corporate communications functions   •  Experience leading business transformation and global people capability strategies to build powerful brands and fuel sustainable results   •  Extensive accounting, treasury, and financial expertise

 

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PROPOSAL 1: ELECTION OF DIRECTORS    |    NOMINEES

 

MICHAEL A. TODMAN
Director since 2014   Age 62                                           COMMITTEES:   • Audit (Chair)   • Corporate Governance and Nominating		CURRENT AND PAST POSITIONS   Positions with Whirlpool and affiliates:   • Vice Chairman, Whirlpool Corporation from 2014 to 2015   • President, Whirlpool International from 2009 to 2014   • President, Whirlpool North America from 2007 to 2009		QUALIFICATIONS AND SKILLS   • Extensive knowledge and experience in multinational operations, sales and distribution, and manufacturing   • Executive leadership of large multinational organizations   • Financial expertise   OTHER DIRECTORSHIPS   • Mondelēz International, Inc. since May 2020   • Carrier Corporation since April 2020   • Prudential Financial, Inc. since 2016   • Newell Brands, Inc. from 2007 to May 2020   • Whirlpool Corporation from 2006 to 2015

 

LAWSON E. WHITING
Director since 2018   Age 52                                           COMMITTEES:   • Executive		CURRENT AND PAST POSITIONS   Positions with Brown-Forman and affiliates:   • President and Chief Executive Officer since 2019   • Executive Vice President and Chief Operating Officer from 2017 to 2018   • Executive Vice President and Chief Brands and Strategy Officer from 2015 to 2017   • Senior Vice President and Chief Brands Officer from 2013 to 2015   • Senior Vice President and Managing Director for Western Europe from 2011 to 2013   • Vice President and Finance Director for Western Europe from 2010 to 2011   • Vice President and Finance Director for North America from 2009 to 2010		QUALIFICATIONS AND SKILLS   • In-depth knowledge of Brown-Forman’s business, operations, and strategy gained during his 23-year career   • Extensive knowledge of the beverage alcohol industry   • Operations and financial experience   • Strategic thinking, leadership, management, consensus-building, and communication skills

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

 

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DIRECTOR

COMPENSATION

OVERVIEW

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

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

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

 

 

DIRECTOR COMPENSATION STRUCTURE

 

Pay Element				Amount
Lead Independent Director Retainer					$45,000
Paid in six installments over the Board Year.
Board Retainer					$205,000 total
Directors may elect to receive their cash retainer in equity. Directors who have satisfied our stock ownership guidelines may elect to receive up to 100% of the retainer in cash rather than receiving equity. The cash retainer is paid in six installments over the Board Year. Any awards of deferred stock units are made in their entirety on the Annual Meeting date.					•  $70,000 cash •  $135,000 equity (deferred stock units)
Meeting Fees		Board			$5,000 per meeting
No fee is paid unless the director attends more than eight Board meetings.					$2,500 per telephonic meeting
No fee is paid unless the director attends more than ten meetings (Audit Committee) or six meetings (Compensation and Corporate Governance and Nominating Committees).		Audit, Compensation, and Corporate Governance and Nominating Committees			$2,500 per meeting $1,250 per telephonic meeting
Committee Member Retainers		Audit Committee			$25,000
Paid in six installments over the Board Year.		Compensation Committee			$20,000
		Corporate Governance and Nominating Committee			$20,000
Committee Chair Retainers (excluding Executive Committee)					$20,000
Paid in six installments over the Board Year. A director who chairs more than one committee will receive multiple chair retainers. The Committee Chair Retainer is in addition to the Committee Member Retainer.
Non-Employee Chair of the Board Retainer					$625,000
Paid in six installments over the Board Year.

Deferred Stock Units

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

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN		23

DIRECTOR COMPENSATION    |    OVERVIEW

 

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

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

Employee Directors

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

Stock Ownership Guideline

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

Expense Reimbursement

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

Continuing Education Allowance

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

Events

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

 

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

DIRECTOR COMPENSATION    |    FISCAL 2020 DIRECTOR COMPENSATION

 

FISCAL 2020 DIRECTOR COMPENSATION

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

 

 

FISCAL 2020 DIRECTOR COMPENSATION TABLE

 

Name		Fees Earned or Paid in  Cash(1)								DSU Awards(2)(3)								All Other Compensation(4)								Total
Patrick Bousquet-Chavanne			$101,250								$135,000								$15,000								$251,250
Geo. Garvin Brown IV			537,500								312,500								15,000								865,000
Stuart R. Brown			111,250								102,500								—								213,750
Bruce L. Byrnes			115,000								135,000								—								250,000
John D. Cook			208,750								135,000								—								343,750
Laura L. Frazier			205,000								—								—								205,000
Kathleen M. Gutmann			95,000								135,000								—								230,000
Augusta Brown Holland			64,341								135,000								—								199,341
Michael J. Roney			57,500								205,000								15,000								277,500
Tracy L. Skeans			27,500								205,000								—								232,500
Michael A. Todman			120,000								135,000								—								255,000
Paul C. Varga(5)			51,250								—								—								51,250

 

(1)

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

 

(2)

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

 

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

 

 

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

 

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

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN		25

COMPENSATION

DISCUSSION AND

ANALYSIS

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

 

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

 

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

EXECUTIVE SUMMARY

Pay for Performance

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

 

① demonstrating value provided to our stockholders;

② ensuring that we hold ourselves to an objective performance standard;

③ reinforcing a competitive and innovative mindset among our leadership; and

④ ensuring that incentive payments are appropriate.

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

 

BROWN-FORMAN TOTAL SHAREHOLDER RETURN (TSR) VS. EARNINGS PER SHARE (EPS) VS. CEO TOTAL COMPENSATION GROWTH(1)						TSR: BROWN-FORMAN VS. INDUSTRY VS. S&P 500(2)

 

(1)

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

 

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

 

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

COMPENSATION DISCUSSION AND ANALYSIS    |    EXECUTIVE SUMMARY

 

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

Performance-Based Payouts for Fiscal 2020

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

 

 

CASH INCENTIVES

 

Short-Term Cash Incentive

Long-Term Cash Incentive

-6% growth IN UNDERLYING OPERATING INCOME,(1)

30% WEIGHTING

30% WEIGHTING

40% WEIGHTING

driven primarily by the global COVID-19 pandemic. As a result, the company performance component of the short-term cash incentives paid out at 0% of target.   (1)   “Underlying operating income” is defined on page 32. “Underlying operating income” is not derived in accordance with GAAP. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.

absolute underlying operating income

relative underlying operating income compared to industry peers

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

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

EQUITY-BASED INCENTIVES

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

 

• Performance-based restricted stock unit awards for the fiscal 2018–2020 performance period were converted into restricted shares shortly after the conclusion of fiscal 2020. The number of restricted shares awarded was determined by the cumulative TSR of our Class B common stock compared to the weighted average TSR of the companies constituting the Standard & Poor’s Consumer Staples Index.				Our relative performance against this group over the performance period was at the 88th percentile, resulting in a payout at 150% of target.

 

•

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

Advisory Votes on Executive Compensation

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

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

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

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN		27

COMPENSATION DISCUSSION AND ANALYSIS    |    OVERVIEW OF OUR COMPENSATION PROGRAM

 

OVERVIEW OF OUR COMPENSATION PROGRAM   Compensation Objectives and Principles   The objective of our executive compensation program is to attract, motivate, reward, and retain a diverse team of talented executives who will lead Brown-Forman to produce superior, sustainable, long-term value for our stockholders.   In order to remain competitive, as well as to ensure our compensation packages are aligned with the interests of our stockholders, we have established a program that we believe focuses on creating long-term value, reinforcing financial accountability, and delivering outstanding operational outcomes to drive sustained performance of Brown-Forman stock.   Compensation Elements   Principal elements of compensation for our NEOs include:   •  base salary (including holiday bonus);   •  short-term (one-year) performance-based cash compensation;   •  long-term (three-year) performance-based cash compensation;   •  long-term equity-based incentive compensation (stock-settled stock appreciation rights and performance-based restricted stock units);   •  benefits and limited perquisites generally available to all senior executives; and   •  limited post-employment compensation and other benefits.   Measuring Performance   To measure financial performance, we use a metric called “underlying operating income.” This metric is determined by adjusting GAAP operating income for the effects of acquisitions and divestitures, foreign currency changes, estimated net changes in distributor inventories for our brands, the impact of establishing the Brown-Forman Foundation, and the Chambord impairment. Please refer to Appendix A of this Proxy Statement for information about our use of non-GAAP measures.   The Committee believes the most relevant measures of our performance are:   •  strong and sustained growth in underlying operating income, both on an absolute basis and relative to industry peers;   •  progress toward our long-term strategic goals; and   •  our three-year TSR relative to the S&P Consumer Staples Index.				On the advent of our 150th anniversary, Brown-Forman framed our long-term perspective and commitment as a thriving, family-controlled, independent company through the ambition “Nothing Better in the Market”. Driven by our values and core purpose of “enriching life”, the Company’s success is dependent on strategic priorities which build our brands and create shareholder value:   •  Keep Jack Daniel’s Tennessee Whiskey strong, healthy, and relevant to consumers worldwide;   •  Lead in premium American whiskey and increase the focus on our super-premium portfolio;   •  Deliver on balanced geographic growth and competitive routes to consumers;   •  Deliver top-tier TSR through shareholder-friendly capital allocation and balanced investments to fuel growth; and   •  Empower our people to lead, develop new capabilities, and live by our timeless values.   A more comprehensive view of our business integrates these priorities with a wider definition of value to recognize the many ways our Company contributes to the world around us. We are inspired to create an environment where leveraging diversity and inclusion occurs naturally. Our commitment to responsibility, sustainability, and the communities in which we live and work makes a meaningful difference in the way we build brands for our Company and consumers over the long-term.

 

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

COMPENSATION DISCUSSION AND ANALYSIS    |    THE ROLE OF OUR COMPENSATION COMMITTEE

 

FISCAL 2020 PERFORMANCE METRICS FOR BROWN-FORMAN INCENTIVE PLANS

 

Performance-Based Component		Performance Measures
Short-Term Cash Incentive		80% Weighting: Underlying operating income growth(1) relative to expected performance among industry peers
		20% Weighting: Individual performance
Long-Term Cash Incentive		30% Weighting: Underlying operating income growth compared to sustained growth of 8%
		30% Weighting: Underlying operating income growth compared to industry peers
		40% Weighting: Progress toward long-term quantitative and qualitative strategic goals
Performance-Based Restricted Stock Units		TSR relative to S&P Consumer Staples Index
Stock-Settled Stock Appreciation Rights		Stock price growth above grant price

 

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

Competitive Compensation

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

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

THE ROLE OF OUR COMPENSATION COMMITTEE

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

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

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

Sound Pay Practices

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

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

 

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COMPENSATION DISCUSSION AND ANALYSIS    |    TARGET COMPENSATION

 

The Compensation Consultant

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

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

TARGET COMPENSATION

How We Set Target Compensation for Our NEOs

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

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

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

 

 

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

 

 

 

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

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

 

Compensation Comparator Group

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

 

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

Target Total Direct Compensation for Fiscal 2020

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

 

 

FISCAL 2020 VERSUS FISCAL 2019 NEO TARGET TOTAL DIRECT COMPENSATION

 

 

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

 

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

 

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

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

Fixed Compensation

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

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

 

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

 

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

 

 

FIXED COMPENSATION FOR 2020⁽¹⁾

 

Name		Amount
Lawson E. Whiting			$1,074,760
Jane C. Morreau			640,771
Matthew E. Hamel			549,995
John V. Hayes			427,180
Thomas Hinrichs(2)			473,487
Mark I. McCallum(3)			475,777

 

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

 

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

 

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

Short-Term Incentive Compensation

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

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

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

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

COMPANY PERFORMANCE (80% OF TARGET AWARD)

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

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

 

•

acquisitions and divestitures;

 

•

foreign currency changes;

 

•

estimated net changes in distributor inventories for our brands; and

 

•

the Chambord impairment.

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

 

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

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

 

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

 

 

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

 

 

 

INDIVIDUAL PERFORMANCE (20% OF TARGET AWARD)

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

 

Performance (B-F Nomenclature)		Payout as a Percentage of Target
Superior (Excellent)			176%–200%
Above Target (Very Strong)			126%–175%
On Target (Strong)			76%–125%
Below Target (Varied or Inconsistent)			Up to 75%
Immediate Improvement Required (Performance Needs Improvement)			No incentive paid

AWARDS AND PAYOUTS IN FISCAL 2020: LONG-TERM COMPENSATION

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

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

 

		25% performance-based cash incentives				25% stock-settled stock appreciation rights
		25% performance-based restricted stock units				25% any combination of the above, based on the NEO’s preference, subject to Committee discretion

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

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS    BROWN-FORMAN		33