Washington,
D.C. 20549
We would like to
extend an invitation for you to join us at our annual meeting of shareholders on May 25, 2017 at 11:00 a.m., Eastern Time, at the Thomasville Municipal Auditorium in Thomasville, Georgia for the following purposes, as more fully described in this
proxy statement:
In addition, Flowers Foods senior management team will report on the performance of the company and respond to questions from shareholders.
The company has implemented the Notice and Access rule of the Securities and Exchange Commission that permits companies to send their shareholders a notice
that proxy materials are available in electronic form on the Internet or in printed form by request instead of mailing a printed proxy statement and annual report to every shareholder. By utilizing Notice and Access, we are able to
speed delivery of the proxy materials, lower our distribution costs and reduce the environmental impact of proxy delivery. On or about April 11, 2017, we mailed to our shareholders a notice that contains instructions on how to access our 2017
proxy statement and 2016 annual report and vote online or to affirmatively elect to receive the proxy materials by mail.
Please carefully review the proxy
materials. Your vote is important to us and to our business. We encourage you to vote using telephone or Internet voting prior to the annual meeting, so that your shares of Flowers Foods common stock will be represented and voted at the annual
meeting even if you cannot attend. If you elected to receive paper copies of the proxy materials by mail, you may vote by signing, dating and mailing the proxy card in the envelope provided.
Flowers Foods, Inc.s 2017 proxy statement and 2016 annual report are available at www.proxyvote.com.
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Flowers Foods, Inc. will be held on May 25,
2017 at 11:00 a.m., Eastern Time, at the Thomasville Municipal Auditorium, 144 East Jackson Street, Thomasville, Georgia, for the following purposes:
and to transact any other business as may properly come before the annual meeting and at any adjournment or postponement thereof; all as set forth in the proxy statement
accompanying this notice.
Only record holders of issued and outstanding shares of our common stock at the close of business on March 23, 2017 are entitled to
notice of, and to vote at, the annual meeting, or any adjournment or postponement thereof. A list of such shareholders will be open for examination by any shareholder at the annual meeting.
Executive Compensation (page 27)
2016 Compensation Developments
Under the established executive compensation program, our named executive officers earned the following compensation based
upon 2016 performance:
|
|
Payment of cash bonuses at 48.80% of Target Bonus Percentage under our bonus plan, based upon the achievement of 89.76% of the target performance goal.
|
|
|
Vesting in 2017 of the ROIC Performance-Contingent Restricted Stock Award issued in 2015 at 87% of target as a result of the companys return on invested capital during the
two-year
|
|
|
performance period ending December 31, 2016 exceeding the companys weighted average cost of capital by 322 basis points.
|
|
|
Vesting in 2017 of the
TSR-Based
Performance-Contingent Restricted Stock Award issued in 2015 at 0% of target as a result of the companys TSR from January 1, 2015
through each of the last four quarters ending December 31, 2016, placing below the 30
th
percentile of the TSR Peer Group companies. We ended the
two-year
performance period with cumulative TSR of 10.9%.
|
Summary of Our Compensation Practices (page 28)
|
|
|
|
|
Practices We Have Adopted
|
|
|
|
Practices We Do Not Engage In
|
Moderate pay targeted
to the
size-adjusted
50th percentile of market data
Long-term incentives that are performance-based, not merely time-vested
Multiple
performance measures used in incentive plans
Capped incentives
Clawback policy
No
perquisites
Stock ownership guidelines for executives and outside directors and share
retention requirements for executives
Moderate change of control severance arrangements
Beginning with 2015 grants, double-trigger equity vesting upon a change of
control
Annual review of tally sheets by the compensation committee
Incentives
that are risk-mitigated through plan design and administration
Compensation committee comprised solely of independent directors
Independent
compensation consultant who reports directly to the compensation committee
Anti-hedging policy for executives and outside directors
|
|
|
|
Employment
agreements
Dividend equivalents on unvested performance shares
Income tax
gross-ups
Excise tax
gross-ups
on change of control severance
Backdating or repricing of stock options
Pension
credited service for years not worked
|
8 FLOWERS FOODS, INC.
- 2017 Proxy Statement
2016 Executive Compensation Summary (page 36)
Named Executive Compensation
Set forth below is a summary of the 2016
compensation for each named executive officer of the company as determined under applicable SEC rules and regulations (the Named Executives). Base salaries reflect increases of approximately 2.6% for Mr. Shiver; 6.1% for
Mr. Kinsey; 5.1% for Mr. Alexander; 3.3% for Mr. Avera; and 12.8% for Mr. Wheeler. Stock awards made in 2016 are performance-contingent and are established at market levels based on the industry survey data discussed under
Executive Compensation Compensation Discussion and Analysis Compensation Benchmarking on page 30. All other compensation consists solely of employer contributions to retirement plans, as we offer no perquisites to our Named
Executives. The information below should be read in connection with the explanatory information contained on page 27 under Executive Compensation Compensation Discussion and Analysis and page 36 under Executive Compensation
Summary Compensation Table, and is qualified in its entirety by such information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Salary
($)
|
|
|
Stock
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Allen L. Shiver
President and
Chief Executive Officer
|
|
|
1,000,000
|
|
|
|
3,975,616
|
|
|
|
536,800
|
|
|
|
52,212
|
|
|
|
84,366
|
|
|
|
5,648,994
|
|
R. Steve Kinsey
Executive Vice President and
Chief Financial Officer
|
|
|
531,923
|
|
|
|
842,428
|
|
|
|
207,663
|
|
|
|
32,259
|
|
|
|
40,361
|
|
|
|
1,654,634
|
|
Bradley K. Alexander
Executive Vice President and
Chief Operating Officer
|
|
|
534,231
|
|
|
|
859,321
|
|
|
|
208,564
|
|
|
|
60,400
|
|
|
|
40,492
|
|
|
|
1,703,008
|
|
Stephen R. Avera
Executive Vice President,
Secretary and General Counsel
|
|
|
471,539
|
|
|
|
637,870
|
|
|
|
161,078
|
|
|
|
19,641
|
|
|
|
35,424
|
|
|
|
1,325,552
|
|
D. Keith Wheeler
President, Flowers Bakeries
|
|
|
410,592
|
|
|
|
520,067
|
|
|
|
140,258
|
|
|
|
14,400
|
|
|
|
25,726
|
|
|
|
1,111,043
|
|
2016 Executive Total Compensation Mix (page 29)
The information below should be read in connection with the explanatory information contained on page 29 under Executive Compensation Compensation
Discussion and Analysis Mix of Compensation Opportunity, and is qualified in its entirety by reference to such information.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
9
FLOWERS FOODS, INC.
1919 Flowers
Circle
Thomasville, Georgia 31757
PROXY STATEMENT FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD MAY 25, 2017
This proxy
statement and the accompanying form of proxy are being furnished to the shareholders of Flowers Foods, Inc. on or about April 11, 2017 in connection with the solicitation of proxies by the board of directors for use at the annual meeting of
shareholders to be held on May 25, 2017 at 11:00 a.m., Eastern Time, at the Thomasville Municipal Auditorium, 144 East Jackson Street, Thomasville, Georgia, and any adjournment or postponement of the annual meeting.
QUESTIONS AND ANSWERS ABOUT
THE ANNUAL MEETING AND VOTING
What is the purpose of the annual meeting?
At the annual meeting, shareholders will:
(1)
|
vote to elect as directors of the company the twelve nominees identified in this proxy statement, each to serve for a term of one year;
|
(2)
|
hold an advisory vote on compensation of the Named Executives;
|
(3)
|
to hold an advisory vote on the frequency of future advisory votes on the compensation of the Named Executives;
|
(4)
|
vote on the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for Flowers Foods for the fiscal year ending December 30, 2017; and
|
(5)
|
to hold a vote on a shareholder proposal regarding whether the chairman of the board of directors should be independent, if properly presented at the annual meeting.
|
The shareholders will also transact any other business that may properly come before the annual meeting and any adjournment or postponement of the annual meeting. In
addition, Flowers Foods senior management team will report on the performance of the company and respond to questions from shareholders.
How do I attend the
annual meeting in person?
Important note:
If you plan to attend the annual meeting, you
must follow these instructions to gain admission.
Pre-registration
is required for attendance at the 2017 annual
meeting, and you must be a Flowers Foods shareholder to register. The deadline for registration is May 18, 2017. All attendees will be required to present a valid, government-issued photo ID, such as a passport or drivers license, to gain
admission.
Please visit
www.flowersfoods.com
, and click on Shareholders Meeting
Pre-Registration.
How does the board of directors recommend that I vote on each proposal?
The board of directors recommends that you vote:
|
|
FOR
the election of all the director-nominees to serve as directors until 2018;
|
|
|
FOR
the approval, on an advisory basis, of the compensation of the Named Executives;
|
|
|
1 YEAR
for the frequency of future advisory votes on the compensation of the Named Executives;
|
|
|
FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 30,
2017; and
|
|
|
AGAINST
the shareholder proposal regarding whether the chairman of the board of directors should be independent, if properly presented at the annual meeting.
|
10 FLOWERS FOODS, INC.
- 2017 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What is a proxy?
A proxy is your legal designation of another person to vote the shares of Flowers Foods common stock you own as of the
record date for the annual meeting. If you appoint someone as your proxy in a written document, that document is also called a proxy or a proxy card. We have designated three of our executive officers as proxies for the annual
meeting. These three officers are Allen L. Shiver, our president and chief executive officer, R. Steve Kinsey, our executive vice president and chief financial officer, and Stephen R. Avera, our
executive vice president, secretary and general counsel.
Are the proxy materials
available electronically?
Yes. Under SEC rules and regulations, Flowers Foods is making this proxy statement and its 2016 annual report available to
its shareholders electronically on the Internet at www.proxyvote.com. On or about April 11, 2017, we mailed to our shareholders a notice (the Notice) containing instructions on how to access this proxy statement and our 2016 annual
report online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Rather, the
Notice instructs you on how to access and review all of the important information contained in this proxy statement and our 2016 annual report on the Internet. The Notice also instructs you on
how you may submit your proxy vote over the Internet.
If you received a Notice by mail but would like to receive a printed copy of this proxy statement and our 2016
annual report, please follow the instructions contained on the Notice.
Who can vote?
To be eligible to vote, you must have been a shareholder of record of the companys common stock at the close of business on March 23, 2017, which is the
record date for the annual meeting. There were 209,184,590 shares of our common stock outstanding and entitled to vote on the record date.
How many votes do I have?
You are entitled to one vote on each of the twelve director-nominees, and one vote on each other matter to be voted upon at the
annual meeting, for each share of common stock you held on the record date for the annual meeting. For example, if you owned 100 shares of our common stock on the record date, you would be entitled to 100 votes for each of the twelve
director-nominees and for each other matter to be voted upon at the annual meeting.
How do I vote?
You can vote in the following ways:
|
|
Voting by Mail
. If you elect to receive your proxy materials by mail, you may vote by completing and signing the enclosed proxy card and promptly mailing it in the enclosed postage-paid envelope. The envelope
does not require additional postage if you mail it within the United States.
|
|
|
Internet Voting
. If you have Internet access, you may vote your shares from any location in the world by following the Vote by Internet instructions set forth on the Notice or the proxy card.
|
|
|
Telephone Voting
. You may authorize the voting of your shares by following the Vote by Telephone instructions set forth on the proxy card.
|
|
|
Vote at the Meeting
. If you attend the annual meeting and you are a registered shareholder, you may vote by delivering your completed proxy card in person or you may vote by completing a ballot, which will be
available at the annual meeting. If your shares are held in street name through a bank, broker or other record holder, to be
|
|
eligible to vote your shares in person, you must obtain a legal proxy from your bank, broker or other record holder that specifies the number of shares you owned on the record date and bring the
legal proxy with you to the annual meeting.
|
By executing and returning your proxy (either by returning the proxy card or by submitting your proxy
electronically by the Internet or telephone), you appoint Allen L. Shiver, R. Steve Kinsey and Stephen R. Avera to represent you at the annual meeting and to vote your shares at the annual meeting in accordance with your voting instructions. The
Internet and telephone voting procedures are designed to authenticate shareholder identities, allow shareholders to give voting instructions and confirm that shareholders instructions have been recorded properly. Any shareholder voting by
Internet or telephone should understand that there may be costs associated with electronic access, like usage charges from Internet access and telephone or cable service providers, that must be paid by the shareholder.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
11
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
If I am a registered holder, what if I do not give any instructions
on a particular matter described in this proxy statement when voting by mail?
Registered shareholders should specify their choice for each matter on the proxy
card. If no specific instructions are given, proxies that are signed and returned will be voted:
|
|
FOR the election of each director-nominee, the approval, on an advisory basis, of the compensation of the Named Executives and the ratification of the appointment of PricewaterhouseCoopers LLP as our
independent registered public accounting firm for the fiscal year ending December 30, 2017.
|
|
|
1 YEAR for the frequency of future advisory votes on the compensation of the Named Executives.
|
|
|
AGAINST the shareholder sponsored proposal.
|
Can I change my vote after I have
mailed my proxy card or after I have authorized the voting of my shares over the Internet or by telephone?
Yes. You can change your vote and revoke your proxy at any time before the polls close at the annual meeting by doing any
one of the following things:
|
|
signing and delivering to our corporate secretary another proxy with a later date;
|
|
|
giving our corporate secretary a written notice before or at the annual meeting that you want to revoke your proxy; or
|
|
|
voting in person at the annual meeting.
|
Your attendance at the annual meeting alone will not revoke your proxy.
How do I vote my
401(k) shares?
If you participate in the Flowers Foods, Inc. 401(k) Retirement Savings Plan (the 401(k) Plan) and you received
the Notice, you may vote by the Internet or telephone as previously described in this proxy statement. If you elect to receive your proxy materials by mail, you may vote by completing and signing the enclosed proxy card and promptly mailing it in
the enclosed postage-paid envelope. In addition, if you received a Notice by mail but would like to receive a printed copy of this proxy statement and our 2016 annual report, please follow the instructions contained on the Notice. By voting, you
will direct
Great-
West Trust Company, LLC, as trustee of the 401(k) Plan (the Trustee), how to vote the shares of Flowers Foods common stock allocated to your account. Any unvoted or unallocated shares
will be voted by the Trustee in the same proportion on each proposal as the Trustee votes the shares of common stock credited to the 401(k) Plan participants accounts for which the Trustee receives voting directions from the 401(k) Plan
participants. The number of shares you are eligible to vote is based on the number of shares of Flowers Foods common stock in your account on the record date for the annual meeting.
Can I vote if my
shares are held in street name by a bank, broker or other record holder?
If your shares of Flowers Foods common stock are held in street name through a bank, broker or other record
holder, you will receive instructions from the registered holder that you must follow in order for your shares to be voted for you by that bank, broker or other record holder. Internet and telephone voting are offered to shareholders who own their
shares of Flowers Foods common stock through certain banks and brokers.
The election of directors (Proposal I), the advisory vote on the compensation of the Named
Executives (Proposal II), the advisory vote on the frequency of future advisory votes on the compensation of the Named Executives (Proposal III) and the shareholder proposal regarding whether the chairman of the board of directors should be
independent,
if properly presented at the annual meeting (Proposal V), are considered
non-discretionary
matters under applicable NYSE Rules. A broker or other nominee
cannot vote without instructions on
non-discretionary
matters, and therefore there may be broker
non-votes
on Proposal I, Proposal II, Proposal III and
Proposal V. The ratification of the appointment of our independent registered public accounting firm for fiscal 2017 (Proposal IV) is considered a discretionary matter under applicable rules, and a broker or other nominee may (but is not required
to) vote FOR Proposal IV without instructions. Accordingly, it is important that you follow the voting instructions sent to you by the registered holder of your shares held in street name if you want your vote to be counted.
12 FLOWERS FOODS, INC.
- 2017 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
How will broker
non-votes
be treated?
Broker
non-votes
will be counted as present in determining whether the
quorum requirement is satisfied but will not be included in vote totals and generally will not affect the outcome of the vote. A
non-vote
occurs when a nominee holding shares for a beneficial owner
does not vote on a proposal because the nominee has not received instructions from the beneficial owner and does not have discretionary power to vote.
In order for your shares to be voted on all matters presented at the annual meeting, including the election of
directors, we urge all shareholders whose shares are held in street name by a bank, broker or other record holder to provide voting instructions to the bank, broker or other record holder.
How will abstentions
be treated?
Abstentions will be counted as present in determining whether the quorum requirement is satisfied. However, abstentions will not be included in the
vote totals and will have no effect on the outcome of the vote with respect to Proposals I, II, III, IV and V.
What constitutes a
quorum?
The holders of at least a majority of the shares of our common stock entitled to vote at the annual meeting are required to
be present in person or represented by proxy to constitute a quorum for the transaction of business at the annual meeting. Abstentions and broker
non-votes
will be counted as present in determining
whether the quorum requirement is satisfied. The aggregate number of votes cast by all shareholders present
in person or represented by proxy at the annual meeting, whether those shareholders vote for or against the proposals, and the total number of votes cast for each of these proposals will be
counted for purposes of determining whether the proposals have been approved by the shareholders.
What if a quorum is
not present at the meeting?
If a quorum is not present at the scheduled time of the annual meeting, we may adjourn or postpone the annual meeting until a quorum
is present. The time and place of the adjourned or postponed annual meeting will be announced at the time the adjournment or postponement is taken, and, unless such adjournment or postponement is for more than 120 days, no other notice will be
given. An adjournment or postponement will have no effect on the business that may be conducted at the annual meeting.
What vote is
required for each matter to be voted upon at the annual meeting?
|
|
With regard to Proposal I, each of the twelve nominees for director who receive a majority of the votes cast at the meeting in person or by proxy will be elected (meaning the number of shares voted FOR a
director-nominee must exceed the number of votes cast AGAINST that director-nominee), subject to the board of directors existing policy regarding resignations by directors who do not receive
|
|
|
a majority of FOR votes, which is described in our corporate governance guidelines.
|
|
|
Approval of Proposals II, III, IV and V require the affirmative vote of the holders of a majority of the shares of our common stock present at the meeting in person or by proxy.
|
Will any other
business be conducted at the annual meeting or will other matters be voted on?
At this time, the board of directors does not know of any other business to be
brought before the annual meeting, but if any other business is properly brought before the annual meeting, the persons named as proxies, Messrs. Shiver, Kinsey and Avera, will exercise their judgment in deciding how to vote or otherwise act at the
annual meeting with respect to that matter or proposal.
Where can I find the voting results from the annual meeting?
We will report the voting results from the annual meeting on a Current Report on Form
8-K,
which we expect to file with the SEC
on or before May 31, 2017.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
13
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
How and when may I submit a shareholder proposal for the 2018 annual
meeting?
For information on how and when you may submit a shareholder proposal for the 2018 annual meeting, please refer to the section entitled 2018
Shareholder Proposals in this proxy statement.
Who pays the costs of soliciting proxies?
We will pay the cost of soliciting proxies. We have engaged Morrow Sodali LLC to assist in the solicitation of votes for a fee of $9,500, plus
out-of-pocket
expenses. In addition, our directors and officers may solicit proxies in person, by telephone or facsimile but will not receive additional compensation for these
services. Brokerage houses, nominees, custodians and fiduciaries will be requested to forward soliciting material to beneficial owners of common stock held of record by them, and we will reimburse those persons for their reasonable expenses in doing
so.
How can I obtain an Annual Report on Form
10-K?
The Notice, this proxy statement and our 2016 annual report are available on the Internet at www.proxyvote.com. You may also receive a copy of our 2016 annual report
free of charge by sending a written request to Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, Georgia 31757, Attention: Investor Relations Department.
If you
elected to receive your proxy materials by mail, a copy of our 2016 annual report, which includes our Annual Report on Form
10-K
and our financial statements for the fiscal year ended December 31, 2016,
is included in the mailing of this proxy statement.
The annual report does not form any part of the material for the solicitation of proxies.
Can I elect to receive future notices and proxy materials electronically?
Yes. If you are a registered shareholder or if you participate in the 401(k) Plan, go to the companys website,
www.flowersfoods.com, and follow the instructions for signing up for electronic delivery of proxy materials. Those shareholders signing up for this service will receive all future proxy materials, including the Notice, proxy statement and annual
report electronically. Please call Lisa Hay, our manager of shareholder relations, at (229)
226-9110
if you need assistance.
If you hold your shares in a brokerage account or bank you may also have the opportunity to receive these documents
electronically. Please contact your brokerage service, bank or financial advisor to make arrangements for electronic delivery of your proxy materials.
Who should I contact if I have any questions?
If you have any questions about the annual meeting or your ownership of our common stock, please contact Marta J. Turner, our executive vice president of corporate
relations, at the above address or by calling (229)
226-9110.
14 FLOWERS FOODS, INC.
- 2017 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
Director-Nominees Serving Until 2017
George E. Deese,
age 71, served as executive chairman of the board of directors of the company from May 22, 2013 until he retired December 31,
2014 and continues to serve as
non-executive
chairman. Mr. Deese was chief executive officer of Flowers Foods from January 2004 until May 2013. Mr. Deese has served as a director of Flowers Foods
since June 2004 and chairman of the board of directors since January 1, 2006. Previously, he served as president and chief operating officer of Flowers Foods from May 2002 to January 2004 and as president and chief operating officer of Flowers
Bakeries, the companys core business division, from 1983 to May 2002. Mr. Deese joined the company in 1964. He previously served as a board member of the Grocery Manufacturers of America (GMA), and previously served as a trustee of the
Georgia Research Alliance. Mr. Deese previously served as chairman of the American Bakers Association (ABA) and on the ABA board and executive committee. He previously served as vice chairman of the board for Quality Bakers of America (QBA) and
as a member of the QBA board for 15 years. Mr. Deese has gained extensive operational and financial experience as an executive in various capacities during his
50-year
career with the company.
Rhonda Gass
, age 53, has served as vice president and chief information officer for Stanley Black & Decker since
2012 and was named an executive officer of the company the same year. Mrs. Gass is responsible for Stanley Black & Deckers comprehensive and cross business unit IT strategy, delivery and support, and security infrastructure. She
also leads the functional transformation activities for the company, focusing on effectiveness and efficiency. Previously, she was vice president of strategy, technology, and governance for Dell, where she worked for 12 years in positions of
increasing scope and responsibility. Ms. Gass brings extensive strategic and information technology experience to the board of directors.
Benjamin H. Griswold, IV,
age 76, is partner and chairman of Brown Advisory. Mr. Griswold retired in February 2005
as senior chairman of Deutsche Bank Securities, a position he had held since 1999. Prior to that time, Mr. Griswold held several positions with Alex. Brown & Sons, ultimately being elected the firms chairman of the board.
Following the merger of Alex. Brown and Bankers Trust New York, he became senior chairman of BT Alex. Brown, which was acquired by Deutsche Bank in 1999. Mr. Griswold also served on the board of the New York Stock Exchange, completing his term
in 1999. He has been
non-executive
chairman of W.P. Carey Inc. (NYSE) since 2012 and a director since 2006. Previously he served as a director of Stanley Black & Decker, Inc. (NYSE) from 2001 until
his retirement from the board effective April 20, 2016, and is a trustee emeritus of Johns Hopkins University. Mr. Griswold has extensive experience in investment banking, corporate finance and strategic planning.
Richard Lan,
age 62, Mr. Lan spent 20 years with Maple Leaf Foods/Canada Bread Ltd., Canadas largest food processing company. He was chief
operating officer of Maple Leaf Food Group, which included both Maple Leafs animal protein and bakery businesses. Lan also served as chief executive officer of Canada Bread Ltd., which was publicly traded and 90% owned by Maple Leaf Foods
until it was sold in 2014. Prior to his career with Maple Leaf, Lan held management positions at other food and beverage companies, including Dell Products Corp. and McCain Foods, Ltd. Mr. Lan has management, operational and financial
experience as the chief operating officer and chief executive officer of publicly traded companies.
Margaret G. Lewis,
age 63, is the retired president of HCAs Capital Division, which includes facilities in
northern, central and southwestern Virginia, New Hampshire, Indiana and Kentucky, and has served as a director of the company since May 2014. She began her career with HCA in 1978 and held several positions in nursing management and quality
management before becoming chief nursing officer of HCAs Richmond Division in 1997. Ms. Lewis became chief operating officer of CJW Medical Center in 1998 and chief executive officer in 2001. She is a registered nurse and a diplomat of
the American College of Healthcare Executives. Ms. Lewis has served as a director of the Federal Reserve Bank of Richmond since September 2013. She previously served as a director of Smithfield Foods from 2011 to 2013. Ms. Lewis brings
extensive leadership experience and management skills to the board of directors. Her variety of senior management roles provides expertise in executive decision-making and strategic planning.
Amos R. McMullian,
age 79, chairman emeritus of Flowers Foods, retired as chairman of the board of directors of Flowers
Foods effective January 1, 2006, a position he had held since November 2000. He previously served as chief executive officer of Flowers Foods from November 2000 to January 2004. Mr. McMullian previously served as chairman of the board of
directors of Flowers Industries, Inc. from 1985 until March 2001 and as its chief executive officer from 1981 until March 2001. Mr. McMullian previously served on the board of directors of Hughes Supply (2001-2006). Mr. McMullian has
extensive operational and financial experience as an executive in various capacities during his
50-year
career with the company, 24 years of which he served as the chief executive officer. Mr. McMullian
joined the company in 1963.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
15
DIRECTORS AND CORPORATE GOVERNANCE
J.V. Shields, Jr.,
age 79, has been chairman of Wellington Shields & Co., LLC, a diversified financial services
company and member of the New York Stock Exchange, since 2009, following the merger of Shields & Co. with H.G. Wellington & Co. Prior to the merger, Mr. Shields had been chairman of the board of directors and chief executive
officer of Shields & Co. since 1982. Mr. Shields also is chairman of Capital Management Associates, Inc., and chairman of Wellington Shields Capital Management LLC, both registered investment advisors, and was chairman and director of
The BBH Funds, the Brown Brothers Harriman mutual funds group, from 1990-January 2014. He has served as a director of Flowers Foods since March 2001, and he previously served as a director of Flowers Industries, Inc. from March 1989 until March
2001. Mr. Shields has extensive corporate finance and investing experience and has operational and financial experience from his service as a chief executive officer of Shields & Co.
Allen L. Shiver,
age 61
,
was elected president and chief executive officer of the company effective May 22,
2013 and has served as a director of the company since that date. Mr. Shiver was president of Flowers Foods from January 2010 to May 22, 2013. Mr. Shiver previously served as executive vice president and chief marketing officer of
Flowers Foods from May 2008 to January 2010. He previously served as president and chief operating officer of the warehouse delivery segment from April 2003 until May 2008. Prior to that, he served as president and chief operating officer of Flowers
Snack from July 2002 until April 2003. Prior to that, Mr. Shiver served as executive vice president of Flowers Bakeries from 1998 until 2002, as a regional vice president of Flowers Bakeries in 1998 and as president of Flowers Baking Company of
Villa Rica from 1995 until 1998. Prior to that time, Mr. Shiver served in various sales and marketing positions at Flowers Bakeries. Mr. Shiver joined the company in 1979. Mr. Shiver has extensive operational and financial experience
as an executive in various capacities during his over
33-year
career with the company.
David V. Singer,
age 61, is the retired chief executive officer of
Snyders-Lance,
Inc. (NASDAQ), a position he served in from 2010, following the merger of Lance, Inc. and Snyders of Hanover, Inc, to 2014. He previously served as the president and chief executive
officer of Lance, Inc. from 2005 until the merger with Snyders in 2010. He was the executive vice president and chief financial officer of Coca-Cola Bottling Co. Consolidated, Charlotte, NC, from 2001 until 2005 and vice president and chief
financial officer of Coca-Cola Bottling Co. Consolidated from 1987 until 2001. Mr. Singer was a director of
Snyders-Lance,
Inc. from 2010 to 2014 and previously served as a director of Lance, Inc.
from 2003-2010. He joined Flowers Foods board of directors on January 1, 2010. Mr. Singer was elected as a director of SPX Flow, Inc. (NYSE) in 2015, having served previously as a director of its former parent company, SPX
Corporation (NYSE) since 2013. He also has served as a director of Brunswick Corporation (NYSE) and as a director of Hanesbrands, Inc. (NYSE) since 2014. Mr. Singer has management and financial experience as well as operational and financial
experience as the chief executive officer of a publicly traded consumer products company.
James T. Spear,
age 62, joined the companys board of directors on January 1, 2015. Mr. Spear is the
retired executive vice president and chief financial officer of Cadence Health, where he served from 2006 to 2012. Prior to that Mr. Spear served as vice president finance at Keebler Foods and also operated an independent advisory and
consulting business. Since his retirement, Mr. Spear has periodically engaged in various consulting activities. Mr. Spear also currently serves on the board of directors of both The Trust Company of Illinois and The Trinity Forum. He also
serves on the board of advisors to the Wheaton College Center for Faith, Politics, and Economics, where he also serves as an adjunct professor. Since 2013, the National Association of Corporate Directors has designated Mr. Spear as a Board
Leadership Fellow. Mr. Spear has extensive food and health care industry, and leadership experience with public and private companies along with expertise in acquisitions and divestitures, financial reporting and auditing, corporate finance,
risk management, information technology, investor relations, and strategic planning.
Melvin T. Stith, Ph.D.,
age 70, is dean emeritus of the Whitman School of Management at Syracuse University in New York.
From June 2013 until he retired in December 2015, he was professor of marketing at the Whitman School of Management. He previously served as dean of the Whitman School of Management from 2005 to 2013. Prior to that time, he was dean of the College
of Business at Florida State University and the Jim Moran Professor of Business Administration. He also is a director of Synovus Financial Corp. (NYSE) (1998-present) and Aflac Incorporated (NYSE) (2012-present). Dr. Stith previously served as
a director of Keebler Foods Company from 1999 to 2001. He has served as a director of Flowers Foods since July 2004. Dr. Stith has a significant background in marketing and accounting, has a high level of financial literacy and brings a unique
academic perspective to the board of directors.
C. Martin Wood III,
age 73, has been a partner in Wood Associates, a private investment firm, since January 2000. He
retired as senior vice president and chief financial officer of Flowers Industries, Inc. on January 1, 2000, a position that he had held since 1978. Mr. Wood has served as a director of Flowers Foods since March 2001 and he previously
served as a director of Flowers Industries, Inc. from 1975 until March 2001. Mr. Wood joined the company in 1970. Mr. Wood also serves as senior active trustee on the board of Archbold Medical Center and as a trustee for the Archbold
Foundation. Mr. Wood has a high degree of financial literacy and extensive knowledge of the company gained through his 43 years of service with the company, 22 of which he served as its chief financial officer.
16 FLOWERS FOODS, INC.
- 2017 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
General
We believe that good corporate governance is essential to ensure that the company is effectively managed for the long-term
benefit of our shareholders. We have thoroughly reviewed our corporate governance policies and practices and compared them with those recommended by corporate governance advisors and the policies and practices of other publicly-held companies.
Based upon this review we have adopted the following corporate governance documents:
|
|
Corporate Governance Guidelines
|
|
|
Audit Committee Charter
|
|
|
Compensation Committee Charter
|
|
|
Nominating/Corporate Governance Committee Charter
|
|
|
Finance Committee Charter
|
|
|
Code of Business Conduct and Ethics for Officers and Members of the Board of Directors
|
|
|
Stock Ownership Guidelines for Executive Officers and
Non-Employee
Directors
|
|
|
Flowers Foods, Inc. Employee Code of Conduct
|
You can access the full text of all these corporate governance documents on our website at
www.flowersfoods.com by clicking on the Investor Center tab and selecting Corporate Governance. You can also receive a copy of these documents by writing to Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, Georgia
31757, Attention: Investor Relations Department.
Determination of
Independence
Pursuant to our corporate governance guidelines, the nominating/corporate governance committee and the board of directors
are required to annually review the independence of each director and director-nominee. During this review, transactions and relationships among each director and director-nominee or any member of his or her immediate family and the company are
considered, including, among others, all commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships and those reported in this proxy statement under Transactions with Management and Others. In
addition, transactions and relationships among directors or director-nominees or their affiliates and members of senior management and their affiliates are examined. The purpose of this annual review is to determine whether each director and
director-nominee meets the applicable criteria for independence in accordance with the SEC rules and regulations, NYSE Rules and our corporate governance guidelines. Only those directors who meet the applicable criteria for independence and the
board of directors affirmatively determines to have no direct or indirect material relationship with the company are considered independent directors.
As part of our
corporate governance guidelines, we have adopted categorical standards which provide that certain relationships will be considered material relationships and will preclude a directors independence. Under these standards, an
independent director is one who:
|
|
has not been employed by the company or any of its subsidiaries or affiliates, or whose immediate family member has not been employed as an executive officer by the company, within the previous three years;
|
|
|
does not, or whose immediate family member does not, receive more than $120,000 per year in direct compensation from the company, other than director and committee fees and pension or other forms of deferred
compensation for prior service, provided such compensation is not contingent in any way on continued service (such person is presumed not to be independent until three years
|
|
|
after he or she (or their immediate family member) ceases to receive more than $120,000 per year in such compensation); provided that compensation received by an immediate family member for
service as an employee of the company (other than as an executive officer) need not be considered;
|
|
|
is not affiliated with or employed by, or whose immediate family member is not affiliated with or employed in a professional capacity by, a present or former internal or external auditor of the company (such person is
not independent until three years after the end of either the affiliation or the auditing relationship);
|
|
|
is not employed, or whose immediate family member is not employed, as an executive officer of another company where any of Flowers Foods present executives serve on such other companys compensation committee
(such person is not independent until three years after the end of such service or the employment relationship); and
|
|
|
is not a current employee, or whose immediate family member is not a current executive officer, of a company that has made payments to, or received payments from, Flowers Foods for property or services in an amount
which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other companys consolidated gross revenues.
|
The nominating/corporate governance committee and the board of directors conducted the required annual independence review in February 2017. Upon the recommendation of
the nominating/corporate governance committee, the board of directors affirmatively determined that a majority of our directors and director-nominees are independent of the company and its management as required by the SEC rules and regulations,
NYSE Rules and our corporate governance guidelines. Messrs. Griswold, Lan, McMullian, Shields, Singer, Spear, Stith and Wood and Mses. Lewis and Gass are independent director-nominees and Messrs. Beverly and Burke were independent directors prior to
their retirement in May of 2016. Mr. Deese is considered an inside director
FLOWERS FOODS, INC.
- 2017 Proxy Statement
17
DIRECTORS AND CORPORATE GOVERNANCE
because of the proximity of his employment with the company as executive chairman and Mr. Shiver is an inside director
because he is currently the president and chief executive officer of the company. Each director and director-nominee abstained from voting on his or her own independence.
The foregoing discussion of director independence is applicable only to service as a member of the board of directors, the
compensation committee and the nominating/corporate governance committee. Additional guidelines apply to the members of the audit committee under the SEC rules and regulations and NYSE Rules.
Presiding Director
Pursuant to our corporate governance guidelines, the board of directors created the position of presiding
director, whose primary responsibilities are to preside over periodic executive sessions of the board of directors in which management directors and other members of management do not participate and to:
|
|
serve as the liaison between the chairman of the board of directors and the outside, independent directors of the company;
|
|
|
oversee information sent by the company to the members of the board of directors;
|
|
|
review meeting agendas and schedules for the board of directors;
|
|
|
call meetings of the independent,
non-management
directors; and
|
|
|
be available for consultation and director communication with shareholders.
|
Each year at the meeting of the board of
directors following the annual meeting, a presiding director is appointed among the independent directors to serve until the companys annual meeting of shareholders the following year. On May 26, 2016, Benjamin H. Griswold, IV was
appointed to serve as the presiding director until the 2017 annual meeting of shareholders.
The Board of Directors
and Committees of the Board of Directors
In accordance with the companys amended and restated bylaws, the board of directors has set the number of members of
the board of directors at twelve. The board of directors held nine meetings in fiscal 2016, and no incumbent director attended fewer than 75% of the aggregate of:
|
|
the total number of meetings of the board of directors held during the period for which he or she has been a director; and
|
|
|
the total number of committee meetings held by all committees of the board of directors on which he or she served during the periods that he or she served.
|
The board of directors has established several standing committees: an audit committee, a nominating/corporate governance
committee, a compensation committee and a finance committee. The board of directors has adopted a written charter for each of these committees, all of which are available on the companys website at www.flowersfoods.com.
The following table describes the current members of
each of the committees and the number of meetings held during fiscal 2016:
|
|
|
|
|
|
|
|
|
|
|
Audit
Committee
|
|
Nominating/Corporate
Governance Committee
|
|
Compensation
Committee
|
|
Finance
Committee
|
George E. Deese
|
|
|
|
|
|
|
|
|
Rhonda Gass*
|
|
X
|
|
|
|
|
|
X
|
Benjamin H. Griswold, IV*
|
|
|
|
Chair
|
|
X
|
|
|
Richard Lan*
|
|
X
|
|
|
|
|
|
X
|
Margaret G. Lewis*
|
|
X
|
|
|
|
|
|
X
|
Amos R. McMullian*
|
|
|
|
|
|
|
|
|
J.V. Shields, Jr.*
|
|
|
|
X
|
|
X
|
|
|
Allen L. Shiver
|
|
|
|
|
|
|
|
|
David V. Singer*
|
|
|
|
X
|
|
Chair
|
|
|
James T. Spear*
|
|
Chair
|
|
|
|
|
|
X
|
Melvin T. Stith*
|
|
|
|
X
|
|
X
|
|
|
C. Martin Wood III*
|
|
X
|
|
|
|
|
|
Chair
|
NUMBER OF MEETINGS
|
|
9
|
|
6
|
|
4
|
|
4
|
|
Messrs. Beverly and Burke retired from the board of directors effective at the 2016 annual meeting of shareholders. Each served on the Audit Committee and Finance Committee prior to retirement.
|
18 FLOWERS FOODS, INC.
- 2017 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
Audit Committee
Under the terms of its charter, the audit committee represents and assists the board of directors in fulfilling its
oversight responsibilities with respect to:
|
|
the integrity of our financial statements;
|
|
|
our compliance with legal and regulatory requirements;
|
|
|
the independent registered public accounting firms qualifications and independence; and
|
|
|
the performance of the companys internal audit function and the independent registered public accounting firm.
|
The
audit committees duties and responsibilities include:
|
|
responsibility for overseeing our financial reporting process on behalf of the board of directors;
|
|
|
direct responsibility for the appointment, retention, termination, compensation and oversight of the work of the independent registered public accounting firm employed by the company, which reports directly to the
committee, and sole authority to
pre-approve
all services to be provided by the independent registered public accounting firm;
|
|
|
review and discussion of our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm;
|
|
|
review of the internal audit functions organization, plans and results and of the qualifications and performance of our independent registered public accounting firm (our internal audit function and its compliance
officer report directly to the audit committee);
|
|
|
review with management and our independent registered public accounting firm the effectiveness of our internal controls;
|
|
|
review with management any material legal matters and the effectiveness of our procedures to ensure compliance with our legal and regulatory responsibilities, including the monitoring of our whistle-blower hotline;
|
|
|
discussion of guidelines and policies with respect to risk assessment and risk management to assess and manage the companys exposure to risk; and
|
|
|
oversight of the companys enterprise risk management activities (ERM), with the full understanding that responsibility for ERM continues to be shared by the entire board of directors and all directors
have the authority and obligation to scrutinize the companys ERM efforts.
|
The board of directors has determined that all audit committee members
serving during 2016 are or were independent under the SEC rules and regulations, NYSE Rules and our corporate governance guidelines. Messrs. Beverly and Burke retired from the board of directors and the audit committee effective at the
2016 annual meeting of shareholders. Mr. Lan and Ms. Gass have been elected to the audit committee and both are independent under the SEC rules and regulations, NYSE Rules and our corporate governance guidelines.
The board of directors has also determined that Mr. Spear is an audit committee financial expert under Item 407(d)(5) of Regulation
S-K
of the Securities Act of 1933. Each member of the audit committee is financially literate, knowledgeable and qualified to review financial statements.
Nominating/Corporate
Governance Committee
Under the terms of its charter, the nominating/corporate governance committee is responsible for considering and making
recommendations to the board of directors with regard to the function and needs of the board of directors, and the review and development of our corporate governance guidelines. In fulfilling its duties, the nominating/corporate governance committee
shall:
|
|
receive identification of individuals qualified to become board members;
|
|
|
select, or recommend that the board of directors select, the director-nominees for our next annual meeting of shareholders;
|
|
|
evaluate incumbent directors;
|
|
|
develop and recommend corporate governance principles applicable to the company;
|
|
|
review possible conflicts of interest of directors and management and make recommendations to prevent, minimize or eliminate such conflicts;
|
|
|
make recommendations to the board of directors regarding the independence of each director or director-nominee;
|
|
|
review director compensation;
|
|
|
oversee the evaluation of the board of directors and management;
|
|
|
oversee risks related to ethics issues, shareholder activism, change of control, investor relations and corporate structure; and
|
|
|
perform any other duties and responsibilities delegated to the committee from time to time.
|
The board of directors has
determined that all members of the nominating/corporate governance committee are independent under the SEC rules and regulations, NYSE Rules and our corporate governance guidelines. For information relating to nomination of directors by
shareholders, please see Selection of
Director-Nominees.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
19
DIRECTORS AND CORPORATE GOVERNANCE
Compensation Committee
Under the terms of its charter, the compensation committee has overall responsibility for evaluating and approving the
companys compensation plans, policies and programs. The compensation committees duties and responsibilities include:
|
|
review and approval of corporate goals and objectives relevant to our chief executive officers compensation, evaluation of our chief executive officers performance in light of these goals and objectives,
and, either as a committee or together with the other independent directors (as directed by the board of directors), determination and approval of our chief executive officers compensation level based on this evaluation;
|
|
|
making recommendations to the board of directors with respect to senior officer compensation, incentive-compensation plans and equity-based plans;
|
|
|
administration of equity-based incentive plans and other plans adopted by the board of directors that contemplate administration by the compensation committee;
|
|
|
overseeing regulatory compliance with respect to compensation matters;
|
|
|
review of employment agreements (if any), severance agreements and any severance or other termination payments proposed with respect to any of our executive officers;
|
|
|
overseeing risks related to executive compensation disclosures, human capital needs, intellectual capital loss, labor relations, employee retention and public compensation disclosures; and
|
|
|
production of a report on executive compensation for inclusion in our proxy statement for the annual meeting of shareholders.
|
For fiscal 2016, the compensation committee completed its annual review of our compensation philosophies and practices with respect to our employees and concluded that
the risks arising from such policies and practices are not reasonably likely to have a material adverse effect on us. While risk is inherent in any strategy for growth, the companys compensation programs minimize risk through the following
design elements, among others:
|
|
balanced incentive plans designed to reward both annual and long-term performance, and both internal and stock price performance;
|
|
|
incentive goals set at the corporate level;
|
|
|
double-trigger equity vesting upon a change of control;
|
|
|
stock ownership guidelines requiring the Named Executives to own a significant amount of our common stock; and
|
|
|
a recoupment (clawback) policy for equity grants and cash bonuses if they are paid based on incorrect financial results due to knowing misconduct by a participant.
|
The board of directors has determined that all members of the compensation committee are independent under SEC rules and regulations, NYSE Rules and our
corporate governance guidelines.
Finance Committee
Under the terms of its charter, the finance committee reviews and makes recommendations with respect to financial matters
affecting the company. The finance committees duties and responsibilities include:
|
|
make recommendations to the board of directors with respect to (i) managements capital expenditure plans and other uses of the companys cash flows (including the financial impact of stock repurchases,
acquisitions and the payment of dividends), (ii) the companys credit facilities, (iii) commodities hedging and (iv) liquidity matters;
|
|
|
make plan design recommendations to the board of directors with respect to the approval, adoption and any significant amendment of all defined benefit and defined contribution retirement plans;
|
|
|
recommend to the board of directors appointments to and have oversight over the Fiduciary Oversight Committee; and
|
|
|
be responsible for oversight of risks regarding the following matters:
|
|
|
leverage and debt service/cash flow;
|
|
|
mergers and acquisitions;
|
|
|
benefit plan funding and multi-employer pension plan funding;
|
|
|
use of derivatives, including for commodity and foreign currency exchange;
|
|
|
global procurement and interruption of supply chain;
|
|
|
volatility of inventory because of inflation or deflation; and
|
|
|
energy availability and cost, including unstable fuel costs.
|
20 FLOWERS FOODS, INC.
- 2017 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
Board Leadership Structure
Mr. Deese, our former executive chairman of the board of directors, is
non-executive
chairman and continues to provide guidance regarding the strategic direction of the company. Mr. Shiver, in his role as president and chief executive officer, has primary responsibility for
the
day-to-day
operations of the company. In his role as
non-executive
chairman of the board of directors, Mr. Deese
continues to set the strategic priorities for the board of directors (with input from the presiding director), preside over its meetings and communicate its strategic findings and guidance to management. The board of directors believes that the
close working relationship between the president and chief executive officer and
non-executive
chairman of the board of directors will continue to provide consistent communication and coordination throughout
the organization, which results in a more effective and efficient implementation of corporate strategy. The board of directors further believes that Mr. Deeses continued active role on the board of directors is important in unifying the
companys strategy behind a consistent vision as the company transitions through its established succession plans.
As noted earlier, the independent
non-management
directors appointed Mr. Griswold as independent presiding director in fiscal
2016, which provides balance to the boards leadership structure. With a supermajority of independent directors, an audit committee, compensation committee, nominating/corporate governance committee and finance committee each comprised entirely
of independent directors, and an independent presiding director to oversee all meetings of the
non-management
directors, the companys board of directors believes the existing leadership structure
provides for an appropriate balance that best serves the company and its shareholders. The board of directors annually reviews its leadership structure to ensure that it remains the optimal structure for the company and our shareholders.
Risk Management
The board of directors is actively involved in oversight of risks that could affect the company. This oversight is
conducted primarily through the audit committee, as described above and in the audit committee charter, but the full board of directors has retained responsibility for general oversight of risks. Specifically, the board of directors has
responsibility for overseeing, reviewing and monitoring the companys overall risks, and each board committee is responsible for the oversight of specific risk areas relevant to its purpose as provided in the committee charters. The overall
responsibility of the board of directors and its committees is enabled by an enterprise risk management model and process implemented by management that is designed to identify, assess, manage and mitigate risks. The board of directors satisfies
this responsibility through full reports by each committee chair
regarding the committees considerations and actions, as well as through regular reports to the board of directors directly from executive officers responsible for oversight of particular
risks within the company. In addition, the compensation committee, nominating/corporate governance committee and finance committee are responsible for the oversight of specific risks, as described above and in each committees charter. The
company believes that the boards leadership structure, discussed in detail above, supports the risk oversight function of the board of directors. Strong directors chair the various board committees involved with risk oversight, there is open
communication between management and directors and all directors are actively involved in the risk oversight function.
Relationships Among
Certain Directors
J.V. Shields, Jr. and C. Martin Wood III are married to sisters.
Attendance at Annual Meetings
In accordance with our corporate governance guidelines, directors are expected to rigorously prepare for, attend and
participate in all meetings of the board of directors and meetings of the committees on which they serve and to devote the time necessary to appropriately discharge their responsibilities. Aside
from these requirements, the company does not maintain a formal policy for attendance by directors at annual meetings of shareholders. However, all of our directors attended the annual meeting of
shareholders held on May 26, 2016.
Selection of
Director-Nominees
The nominating/corporate governance committee identifies and considers director candidates recommended by its members and
other board members, as well as management and shareholders. A shareholder who wishes to recommend a prospective director-nominee
for the committees consideration should submit the candidates name and qualifications to Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, Georgia 31757, Attention: Executive
Vice President, Secretary and General Counsel. The nominating/corporate governance
FLOWERS FOODS, INC.
- 2017 Proxy Statement
21
DIRECTORS AND CORPORATE GOVERNANCE
committee will also consider whether to recommend for nomination any person identified by a shareholder pursuant to the
provisions of our amended and restated bylaws relating to shareholder nominations. Recommendations by shareholders that are made in accordance with these procedures will receive the same consideration given to nominees of the nominating/corporate
governance committee.
The nominating/corporate governance committee believes that any director-nominee must meet the director qualification criteria set forth in our
corporate governance guidelines before such director-nominee can be recommended for election to the board of directors. These factors include:
|
|
integrity and demonstrated high ethical standards;
|
|
|
the ability to express opinions, raise tough questions and make informed, independent judgments;
|
|
|
experience managing or operating public companies;
|
|
|
knowledge, experience and skills in at least one specialty area;
|
|
|
ability to devote sufficient time to prepare for and attend board of directors meetings;
|
|
|
willingness and ability to work with other members of the board of directors in an open and constructive manner;
|
|
|
ability to communicate clearly and persuasively; and
|
|
|
diversity in background, personal and professional experience, viewpoints or other demographics.
|
The nominating/corporate
governance committee considers these factors as it deems appropriate, as well as other factors it determines
are pertinent in light of the current needs of the board of directors. The nominating/corporate governance committee may use the services of a third-party executive search firm to assist it in
identifying and evaluating possible director-nominees.
On February 17, 2017, the board of directors voted to approve an amendment to the corporate governance
guidelines eliminating the mandatory retirement age for directors. In making this determination, the board of directors considered its overall composition, including the qualifications, background and tenure of its current members, and the prospect
that the current retirement age could result in the arbitrary or premature loss of valuable, experienced directors with deep knowledge of the operations of the company and a thorough understanding of the companys history, operations, policies
and strategic vision. The board of directors concluded that a specific retirement age may be counterproductive and that it is in the best interests of the company and its shareholders to retain flexibility in electing or reelecting directors without
an age restriction. The elimination of the retirement age of 75 resulted in the following directors retaining eligibility for reelection in 2017: Benjamin H. Griswold, IV, age 76, who has been a director of the company since 2005; Amos R. McMullian,
age 79, who is chairman emeritus of the company and served as chairman of the board of directors from 2000 to 2006 and chief executive officer of the company from 2000 to 2004; and J.V. Shields, Jr., age 79, who has been a director of the company
since 2001. Messrs. Griswold, McMullian and Shields abstained from the vote of directors approving the amendment to the corporate governance guidelines.
Shareholder &
Other Interested Party Communication with Directors
The board of directors will give proper attention to written communications that are submitted by shareholders and other
interested parties and will respond if appropriate. Shareholders and other interested parties interested in communicating directly with the board of directors as a group, the independent,
non-management
directors as a group or any individual director may do so by writing to Presiding Director, Flowers Foods, Inc., 1919 Flowers Circle,
Thomasville, GA 31757. Absent circumstances contemplated by committee charters, the chair of the nominating/corporate governance committee and the presiding director, with the assistance of our
executive vice president, secretary and general counsel will monitor and review all correspondence from shareholders and other interested parties and provide copies or summaries of such communications to other directors as they deem appropriate.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The following table lists
information regarding the ownership of our common stock by the only
non-affiliated
individuals, entities or groups known to us to be the beneficial owner of more than 5% of our common stock:
|
|
|
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Shares of
Common Stock
Beneficially Owned
|
|
|
Percent of
Class
(1)
|
|
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
(2)
|
|
|
16,414,744
|
|
|
|
7.85%
|
|
BlackRock, Inc.
55 East 52
nd
Street
New York, NY 10055
(3)
|
|
|
13,653,942
|
|
|
|
6.53%
|
|
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202
(4)
|
|
|
11,600,127
|
|
|
|
5.55%
|
|
(1)
|
Percent of class is based upon the number of shares of Flowers Foods common stock outstanding on March 23, 2017.
|
(2)
|
The beneficial ownership reported is based upon a Schedule 13G/A filed by The Vanguard Group on February 13, 2017. The Schedule 13G/A indicates that The Vanguard Group has sole dispositive power as to 16,295,440
shares reported, sole voting power as to 106,768 shares, shared voting power as to 23,350 shares and shared dispositive power as to 119,304 shares reported.
|
(3)
|
The beneficial ownership reported is based upon a Schedule 13G/A filed by BlackRock, Inc. on January 24, 2017. The Schedule 13G/A indicates that BlackRock, Inc. has sole dispositive power as to all shares
reported and sole voting power as to 13,021,831 shares.
|
(4)
|
The beneficial ownership reported is based upon a Schedule 13G/A filed by T. Rowe Price Associates, Inc. on February 7, 2017. The Schedule 13G/A indicates that T. Rowe Price Associates, Inc. has sole dispositive
power as to all shares reported and sole voting power as to 2,589,012 shares.
|
FLOWERS FOODS, INC.
- 2017 Proxy Statement
25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Share Ownership of Certain Executive Officers, Directors and
Director-Nominees
The following table lists information as of March 23, 2017 regarding the number of shares owned by each director, each director-nominee,
each executive officer listed on the Summary Compensation Table included later in this proxy statement and by all of our directors, director-nominees and executive officers as a group:
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
(1)
|
|
|
Percent of
Class
|
|
Bradley K. Alexander
|
|
|
436,225
|
(2)
|
|
|
*
|
|
Stephen R. Avera
|
|
|
677,414
|
(3)
|
|
|
*
|
|
George E. Deese
|
|
|
3,051,400
|
(4)
|
|
|
1.46%
|
|
Rhonda Gass
|
|
|
2,530
|
|
|
|
*
|
|
Benjamin H. Griswold, IV
|
|
|
311,042
|
(5)
|
|
|
*
|
|
R. Steve Kinsey
|
|
|
488,687
|
(6)
|
|
|
*
|
|
Richard Lan
|
|
|
38,285
|
|
|
|
*
|
|
Margaret G. Lewis
|
|
|
13,856
|
|
|
|
*
|
|
Amos R. McMullian
|
|
|
3,650,940
|
|
|
|
1.75%
|
|
J. V. Shields, Jr.
|
|
|
14,963,798
|
(7)
|
|
|
7.15%
|
|
Allen L. Shiver
|
|
|
1,397,585
|
(8)
|
|
|
*
|
|
David V. Singer
|
|
|
87,753
|
|
|
|
*
|
|
James T. Spear
|
|
|
42,921
|
(9)
|
|
|
*
|
|
Melvin T. Stith, Ph.D.
|
|
|
43,112
|
|
|
|
*
|
|
D. Keith Wheeler
|
|
|
99,757
|
(10)
|
|
|
*
|
|
C. Martin Wood III
|
|
|
7,856,364
|
(11)
|
|
|
3.76%
|
|
All Directors, Director-Nominees and Executive Officers as a Group
(16 persons)
|
|
|
33,161,669
|
|
|
|
15.81%
|
|
*
|
Represents beneficial ownership of less than 1% of Flowers Foods common stock.
|
(1)
|
Unless otherwise indicated, each person has sole voting and dispositive power with respect to all shares listed opposite his or her name.
|
(2)
|
Includes (i) performance-contingent restricted stock awards of 79,100 shares all of which are subject to forfeiture and (ii) unexercised stock options for 110,362 shares.
|
(3)
|
Includes (i) performance-contingent restricted stock awards of 59,280 shares all of which are subject to forfeiture and (ii) unexercised stock options for 115,200 shares. Also includes (i) 675 shares owned
by Mr. Averas spouse as custodian for their minor children and (ii) 61,880 shares held by a trust of which Mr. Avera is a
co-trustee,
in each case as to which shares Mr. Avera disclaims
any beneficial ownership.
|
(4)
|
Includes (i) 50,301 shares owned by the spouse of Mr. Deese, as to which Mr. Deese disclaims any beneficial ownership and (ii) 175,000 shares held by a family LLC, for which shares Mr. Deese retains
sole voting and dispositive power.
|
(5)
|
Includes 5,062 shares owned by the spouse of Mr. Griswold, as to which Mr. Griswold disclaims any beneficial ownership.
|
(6)
|
Includes (i) performance-contingent restricted stock awards of 78,360 shares all of which are subject to forfeiture and (ii) unexercised stock options for 149,400 shares.
|
(7)
|
Includes (i) 6,199,681 shares held by investment advisory clients of Wellington Shields Capital Management Associates, LLC, of which Mr. Shields is the chairman; (ii) 482,096 shares held by trusts of which
Mr. Shields is trustee; (iii) 7,685,421 shares owned by the spouse of Mr. Shields and (iv) 138,362 shares held by investment advisory clients of Wellington Shields & Co., LLC, of which Mr. Shields is chairman, in each case as
to which Mr. Shields disclaims any beneficial ownership. Mr. Shields business address is Wellington Shields & Company, LLC 140 Broadway, New York, NY 10005.
|
(8)
|
Includes performance-contingent restricted stock awards for 379,100 shares and time-based restricted stock of 58,500 shares, all of which are subject to forfeiture and unexercised stock options for 226,125 shares.
Also includes 7,282 shares held by Mr. Shiver as custodian for his child and 4,437 shares held by the spouse of Mr. Shiver, as to which shares Mr. Shiver disclaims any beneficial ownership.
|
(9)
|
Includes 100 shares held by Mr. Spears child, over which shares Mr. Spear shares voting and investment authority.
|
(10)
|
Includes (i) performance-contingent restricted stock awards of 50,580 shares, all of which are subject to forfeiture and (ii) unexercised stock options for 25,987 shares.
|
(11)
|
Includes 116,865 shares held by a trust of which Mr. Wood is trustee and 6,527,872 shares owned by the spouse of Mr. Wood, as to which shares Mr. Wood disclaims any beneficial ownership.
|
26 FLOWERS FOODS, INC.
- 2017 Proxy Statement
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of our records and written representations by the persons required to file these reports, except as set forth below, all stock
transaction reports required to be filed by Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act), with the SEC were timely filed in fiscal 2016 by directors and executive officers.
Due to administrative error, late Form 4s reporting the vesting of deferred stock awards granted to Messrs. Deese, Griswold, McMullian, Shields, Singer, Wood, and
Ms. Lewis that were due on May 31, 2016 were filed on June 10, 2016.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
2016 In Brief
Under our
pay-for-performance
program, our
Named Executives earned the following compensation based upon 2016 performance:
|
|
Payment of cash bonuses at 48.80% of Target Bonus Percentage (as defined below) under our bonus plan, based upon the achievement of 89.76% of the target performance goal.
|
|
|
Vesting in 2017 of the ROIC Performance-Contingent Restricted Stock Award issued in 2015 at 87% of target as a result of the companys return on invested capital (the Company ROIC) during
|
|
|
the
two-year
performance period ending December 31, 2016 exceeding the companys weighted average cost of capital (the Company
WACC) by 322 basis points.
|
|
|
Vesting in 2017 of the
TSR-Based
Performance-Contingent Restricted Stock Award issued in 2015 at 0% of target as a result of the companys TSR from January 1, 2015
through each of the last four quarters ending December 31, 2016, placing below the 30
th
percentile of the TSR Peer Group companies (as defined below). We ended the
two-year
performance period with cumulative TSR of 10.9%.
|
Consideration of 2016
Say on Pay Vote
At our 2016 annual meeting of shareholders, more than 98% of the shares voted were cast in support of the companys executive compensation
program. As a result of the significant level of approval, we continued to apply similar principles to our executive compensation decisions during the remainder of 2016 and in early 2017.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
27
EXECUTIVE COMPENSATION
Summary of Our Compensation Practices
|
|
|
|
|
Practices We Have Adopted
|
|
|
|
Practices We Do Not Engage in
|
Moderate pay targeted to
the
size-adjusted
50th percentile of market data
Long-term incentives that are performance-based, not merely time-vested
Multiple
performance measures used in incentive plans
Capped incentives
Clawback policy
No perquisites
Stock ownership guidelines for executives and outside directors and share retention requirements for executives
Moderate change of control severance arrangements
Beginning with 2015
grants, double-trigger equity vesting upon a change of control
Annual review of tally sheets by the compensation committee
Incentives that are
risk-mitigated through plan design and administration
Compensation committee comprised solely of independent directors
Independent compensation consultant who reports directly to the committee
Anti-hedging policy
for executives and outside directors
|
|
|
|
Employment agreements
Dividend
equivalents on unvested performance shares
Income tax
gross-ups
Excise tax
gross-ups
on change of control
severance
Backdating or repricing of stock options
Pension credited
service for years not worked
|
Executive Compensation Generally
Objectives of Executive Compensation
The primary objective of our executive compensation program is to attract, retain and motivate qualified executives
necessary for the future success of the company and the maximization of shareholder value. Our compensation program is designed to motivate our executives by rewarding them for the achievement of specific annual, long-term and strategic goals of the
company. The program aligns our executives interests with those of the shareholders by rewarding performance above established goals, with the ultimate objective of improving shareholder value. We strive to foster a sense of ownership among
our executives by establishing stock ownership guidelines that require them to maintain ownership of a specified amount of our common stock.
The compensation
committee evaluates both performance and compensation to ensure that (i) the company maintains its ability to attract and retain the most qualified executives; (ii) each executives compensation remains competitive relative to the
compensation paid to similarly situated executives in comparable companies; and (iii) each of the companys primary objectives with respect to compensation is
being fulfilled. To meet those goals, our compensation program includes three primary components:
|
|
annual cash bonuses; and
|
|
|
long-term incentives, through stock-based compensation.
|
Certain retirement and other post-employment benefits are also
included in the executives compensation package. In addition, see the section entitled Potential Payments Upon Termination or Change of Control of this proxy statement for details on payments and benefits payable (or realizable)
upon termination of employment and a change of control of the company. We do not offer perquisites as part of our executive compensation program.
Each element of our
compensation program is described in greater detail below, including a discussion of why the company chooses to pay each element, how we determine the amount of each element to pay and how each element and the companys decisions regarding that
element fit into our overall compensation objectives.
28 FLOWERS FOODS, INC.
- 2017 Proxy Statement
EXECUTIVE COMPENSATION
Mix of Compensation Opportunity
The objectives of our executive compensation program are accomplished through a balance of pay components that are
competitive with market practice and place considerable emphasis on performance-based compensation. Salary and
non-equity
incentive compensation, equity compensation, and other compensation
expressed as a percentage of total compensation for each Named Executive for the fiscal year ended December 31, 2016 were as shown below. There is no prescribed mix of our compensation
elements; the mix below is driven by Relevant Market Data (as defined below) for each element of pay.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Salary
Percentage
|
|
|
Non-Equity
Incentive Comp.
Percentage
|
|
|
Equity Comp.
Percentage
|
|
|
Other Comp.
Percentage
|
|
|
Total %
|
|
Allen L. Shiver
President and Chief Executive Officer
|
|
|
18
|
%
|
|
|
10
|
%
|
|
|
70
|
%
|
|
|
2
|
%
|
|
|
100%
|
|
R. Steve Kinsey
Executive Vice President
and Chief Financial
Officer
|
|
|
32
|
%
|
|
|
13
|
%
|
|
|
51
|
%
|
|
|
4
|
%
|
|
|
100%
|
|
Bradley K. Alexander
Executive Vice President
and Chief Operating Officer
|
|
|
31
|
%
|
|
|
12
|
%
|
|
|
50
|
%
|
|
|
7
|
%
|
|
|
100%
|
|
Stephen R. Avera
Executive Vice President,
Secretary and General Counsel
|
|
|
36
|
%
|
|
|
12
|
%
|
|
|
48
|
%
|
|
|
4
|
%
|
|
|
100%
|
|
D. Keith Wheeler
President, Flowers Bakeries
|
|
|
37
|
%
|
|
|
13
|
%
|
|
|
47
|
%
|
|
|
3
|
%
|
|
|
100%
|
|
Role of Executive Officers in Compensation Decisions
The compensation committee, which is comprised entirely of independent directors, has overall responsibility for
evaluating, analyzing and approving the companys compensation plans, policies and programs.
The president and chief executive officer consults with and advises
the compensation committee with respect to the companys compensation philosophy and makes recommendations regarding the compensation of other executive officers including the Named Executives, but not regarding his own compensation. All
recommendations of the chief executive officer to the compensation committee regarding
compensation of executive officers are independently evaluated by the committee.
The chief financial officer,
or his designee, assists the compensation committee in understanding the key drivers of company performance, particularly those measures used in our annual cash bonus and long-term incentive plans and also provides the compensation committee with
regular updates on company performance as it relates to certain performance measures used in our annual cash bonus and long-term incentive plans.
Compensation
Consultants
For fiscal 2016, the compensation committee engaged Meridian as its independent compensation consultant. At the
compensation committees request, Meridian evaluated the competitiveness of the base salaries, annual bonuses and long-term incentives awarded to the Named Executives, provided competitive market data on new compensation arrangements and
evaluated the continued appropriateness of existing arrangements. Meridian attended compensation committee meetings at the committees request and was available to provide guidance to the compensation committee on compensation questions and
issues as they arose.
In December 2016, the compensation committee, in accordance with SEC rules and regulations, considered various factors related to consultant
conflicts of interest. In connection with this review, the compensation committee considered the following six factors established by the SEC:
|
|
the provision of other services to the company by the consultants employer;
|
|
|
the amount of fees received from the company by the consultants employer as a percentage of total revenue;
|
|
|
the policies and procedures of the consultants employer designed to prevent conflicts of interest;
|
|
|
any business or personal relationship of the consultant with a member of the compensation committee;
|
|
|
any stock of the company owned by the consultant; and
|
|
|
any business or personal relationship of the consultant or the consultants employer with an executive officer of the company.
|
As a result of its review of these six factors, the committee determined that the work of the compensation consultant did not raise any conflicts of interest.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
29
EXECUTIVE COMPENSATION
Compensation Benchmarking
Because there are not
many food companies the size of Flowers Foods, a specific set of peer companies is not used for market compensation comparisons. We use market pay data for base salary, bonus and long-term incentives opportunity based on available food industry and
general industry peers pay data from published surveys. We use an average of food industry and general industry (the Relevant Market Sector) survey data when making market comparisons, and the data is adjusted to reflect pay for
companies with annual revenues comparable to the company (the Relevant Market Data). When establishing pay levels for fiscal 2016, data was collected from the Willis Towers Watson Executive Compensation Database using both general
industry data (from 700+ companies) and data from the Food & Beverage industry cut comprised of the following companies:
|
|
|
|
|
WILLIS TOWERS WATSON EXECUTIVE COMPENSATION DATABASE FOOD & BEVERAGE COMPANIES
|
ACH Food Companies, Inc.
American Sugar Refining
Beam Suntory
Bob Evans
Bush Brothers & Company
The Coca-Cola Company
Coca-Cola Enterprises
ConAgra Foods, Inc.
Dean Foods
Diageo North America, Inc.
Dr. Pepper Snapple
Group
General Mills, Inc.
|
|
Hershey
Hormel Foods
Jack in the Box
J.M. Smucker
Kellogg
Keurig Green Mountain
Keystone Foods
Land OLakes
Leprino Foods
MillerCoors
Molson Coors Brewing
Nestle USA
|
|
Parmalat
PepsiCo
Schreiber Foods
Schwans Food Company
Sodexo
Starbucks Coffee
Sysco Corporation
Tyson Foods
Ventura Foods
WhiteWave Foods
|
The Relevant Market Data obtained from the companies above was for pay opportunity, not actual payout, and was regressed
(size-adjusted)
to reflect appropriate scope of revenue responsibility. The Relevant Market Data is calculated using the simple average of the regressed food industry and general industry market rates. Both are
established at levels that approximate the
size-adjusted
50
th
percentile for each component of pay opportunity (
i.e
., base salary, target bonus and
long-term incentive opportunity). This approach sets executive pay opportunities high enough to be competitive and to attract and retain a strong motivated leadership team but not so high that they create negative perception among other
constituencies.
The compensation committee concluded that the proposed 2016 compensation levels under the companys incentive and equity compensation plans for
each Named Executive, and their total compensation opportunities, were consistent with the pay philosophy, as well as appropriate to meet the companys goal to retain each Named Executive and to align his interests with those of the
companys shareholders.
Cash Compensation
Base Salary
Base salary represents the fixed and recurring part of each Named Executives annual compensation. Its objective is to
reward experience and expertise, functional progression (
i.e.
, the development of the executive through a series of work experiences and duties and accountabilities relevant to the current position held), career development, skills and
competencies. It rewards core competence in the executive role. We choose to pay base salary because it is a standard element of pay for executive positions and is required to attract and retain talent.
We have established a system of tiered salary grades, and executives are assigned an appropriate salary grade considering the positions internal value as well as
external comparisons to the Relevant Market Data. With respect to the positions internal value, we have developed salary grades on the basis that a given position is at least one salary grade below that of the supervising position,
which is the only weight assigned to internal value in establishing the salary grades.
Named Executives base salaries are related to a salary grade and the base salaries for the grades are determined
based on (i) external competitive market base salaries, as determined through benchmarking analysis of the Relevant Market Data and (ii) the internal relationships (
i.e.
, value and progression) of these positions. We periodically
make adjustments to the base salaries based on the factors discussed above as well as the performance of the respective Named Executive.
Individual salaries for
Named Executives reporting directly to the president and chief executive officer are subject to approval by the compensation committee after consideration of the recommendations he submits. The president and chief executive officers salary is
subject to review and approval by the compensation committee and the board of directors. Base salaries for all Named Executives are reviewed annually by the compensation committee and the board of directors.
30 FLOWERS FOODS, INC.
- 2017 Proxy Statement
EXECUTIVE COMPENSATION
The 2016 base salary for the following Named Executives increased as shown below and for the reasons provided:
|
|
|
|
|
|
|
Executive
|
|
Base Salary
Increase
|
|
|
Reasons
|
Allen L. Shiver
|
|
|
2.6
|
%
|
|
Merit pay increase
|
R. Steve Kinsey
|
|
|
6.1
|
%
|
|
Merit pay increase
|
Bradley K. Alexander
|
|
|
5.1
|
%
|
|
Merit pay increase
|
Stephen R. Avera
|
|
|
3.3
|
%
|
|
Merit pay increase
|
D. Keith Wheeler
|
|
|
12.8
|
%
|
|
Achieved further progress toward market pay for the President of Flowers Bakeries role after promotion in 2014
|
Annual Executive Cash Incentive Awards
For 2016, the annual cash incentive awards were granted to
Named Executives under our Omnibus Plan, which was designed to provide an incentive to achieve critical annual goals that lead to our long-term success. We choose to pay it in order to motivate achievement of annual performance metrics critical to
continued company growth and shareholder value creation.
For 2016, the compensation committee established target bonus levels under the Omnibus Plan, which are
expressed as a percentage of each Named Executives base salary (the Target Bonus Percentage). Target Bonus Percentages for each Named Executive in 2016 were as follows:
|
|
|
|
|
Named Executive
|
|
Target Bonus Percentage
|
|
Allen L. Shiver
|
|
|
110
|
%
|
R. Steve Kinsey
|
|
|
80
|
%
|
Bradley K. Alexander
|
|
|
80
|
%
|
Stephen R. Avera
|
|
|
70
|
%
|
D. Keith Wheeler
|
|
|
70
|
%
|
For 2016, a bonus was awarded to participating Named Executives based on the following formula:
|
|
the Named Executives base salary;
multiplied by
|
|
|
the Target Bonus Percentage;
multiplied by
|
|
|
the Actual Bonus Percentage, a percentage based upon the companys actual EBITDA for the fiscal year as compared to the payout scale below which uses straight-line interpolation between points. The
scale also shows the percentage of the 2016 EBITDA Goal achieved and the related Actual Bonus Percentages:
|
|
|
|
|
|
|
|
|
|
Level of Achievement
|
|
% of EBITDA
Goal Achieved
|
|
|
Actual Bonus
Percentage
|
|
Maximum
|
|
|
110
|
%
|
|
|
150
|
%
|
Target
|
|
|
100
|
%
|
|
|
100
|
%
|
Actual
|
|
|
89.76
|
%
|
|
|
48.80
|
%
|
Threshold
|
|
|
80
|
%
|
|
|
0
|
%
|
Each Named Executives 2016 bonus payment could not exceed the lesser of 150% of his base salary or $3.0 million.
The Actual Bonus Percentage would have been zero if actual EBITDA were 80% or less of the EBITDA Goal. This mechanism provided motivation for each Named Executive to strive for improved company performance in 2016 even if the EBITDA Goal itself were
not attained.
The company does not pay bonuses under the Omnibus Plan to any Named Executive until such time as the compensation
committee has certified the Actual Bonus Percentage and the annual report on Form
10-K
for the applicable fiscal year has been filed with the SEC.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
31
EXECUTIVE COMPENSATION
Long-Term Incentive Compensation
The objective of
providing long-term incentive compensation is to focus executives on metrics that lead to increased shareholder value over a longer period of time. It rewards achievement of the specific metrics described below. We choose to pay long-term incentive
compensation because it aligns Named Executives interests with those of shareholders and helps to retain a stable management team.
Equity and Performance Compensation Awards
In keeping with the compensation committees
pay-for-performance
philosophy, stock-based incentives comprise our entire long-term incentive program and a significant portion of total compensation opportunity for
Named Executives. We believe our stock-based incentives, as designed, are fundamental to the enhancement of shareholder value, reward performance over the long-term and align the Named Executives interests with those of our shareholders. The
2016 awards under the Omnibus Plan contain elements that helped focus the
Named Executives attention on one of the companys primary goals the long-term success of the company and, ultimately, the enhancement of shareholder value.
Individual long-term incentive grants are reviewed annually and approved by the compensation committee with reference to the Relevant Market Data it receives from its
compensation consultant.
Ongoing Stock-Based Incentive Grants
As in 2015, in 2016 the compensation committee allocated equity-based awards between two types of performance-contingent restricted stock, as described below, and did not
grant any stock options. The use of performance-contingent restricted stock is intended to encourage Named Executives to focus on capital investments that produce returns in excess of the Company WACC and that enhance the companys total
shareholder return relative to food industry peers.
The determination of 2016 performance-contingent restricted stock award levels for the Named Executives was based
on the Relevant Market Data, the expected allocation of value between types of equity award, and a value of 101.6% of face value for both types of performance-contingent restricted stock.
The 2016 performance-contingent restricted stock agreement (the Performance Restricted Stock Agreement) provides the terms and conditions under which the
shares of restricted stock will vest. Vesting of the awards occurs approximately two years from the date of grant (after the filing of our Annual Report on Form
10-K)
to the extent that the vesting conditions
described below are satisfied.
ROIC-Based Performance-Contingent Restricted Stock Awards.
The Performance Restricted Stock Agreement provides that, as to 50%
of the restricted stock underlying each executives performance-contingent restricted stock award (the ROIC-Based Award), vesting will occur in the manner set forth below, if the Companys ROIC exceeds its WAAC by the following
levels during the
24-month
performance period ending December 30, 2017 (the Performance Period):
|
|
|
|
|
ROIC minus WACC
|
|
Payment
Percentage
(% of
Target)
|
|
Less than 175 basis points
|
|
|
0
|
%
|
175 basis points
|
|
|
50
|
%
|
375 basis points
|
|
|
100
|
%
|
475 basis points
|
|
|
125
|
%
|
For performance between the levels described above, the degree of vesting is interpolated on a linear basis.
TSR-Based
Performance-Contingent Restricted Stock Awards
. The Performance
Restricted Stock Agreement provides that, as to the remaining 50% of the restricted stock underlying each Named Executives performance-contingent restricted stock award (the
TSR-Based
Award),
vesting will occur based on the companys performance, measured by Company TSR over the
two-year
performance period, as compared to the total shareholder return of the companies in a specified peer
group (the TSR Peer Group).
For 2016, the TSR Peer Group consisted of the following 19 publicly traded packaged food and meats companies:
|
|
|
B&G Foods
Campbell Soup
Conagra Foods
Dean Foods
General Mills
Hain Celestial Group
Hershey Co.
Hormel Foods
J&J Snack Foods
J.M. Smucker
|
|
Kellogg
The Kraft Heinz Company
Lancaster Colony
McCormick & Co.
Mondelez International,
Inc.
Pinnacle Foods, Inc.
Post Holdings, Inc.
Snyders-Lance
Treehouse Foods
The Whitewave Foods Company
|
Hypothetical payouts based on the total shareholder return for the company and each member of the TSR Peer Group are calculated at the end
of each of the last four quarters of the Performance Period using the performance/payout schedule below and then averaged to determine the actual payout:
|
|
|
|
|
Percentile of Company TSR
vs. Peer Group TSR
|
|
Payment
Percentage
(% of Target)
|
|
Less than 30
th
|
|
|
0
|
%
|
30
th
|
|
|
50
|
%
|
50
th
|
|
|
100
|
%
|
70
th
|
|
|
150
|
%
|
90
th
or
above
|
|
|
200
|
%
|
For performance between the percentiles described above, the degree of vesting is interpolated on a linear basis.
Vesting Upon Death, Disability, Retirement or Change of Control
. For the 2016 grant, if the grantee dies or becomes disabled, the performance-contingent restricted
stock awards generally vest at the
32 FLOWERS FOODS, INC.
- 2017 Proxy Statement
EXECUTIVE COMPENSATION
target level immediately. If the grantee retires at age 65 (or age 55 with at least ten years of service with the company)
or later, on the normal vesting date the grantee will receive a prorated number of shares based upon the retirement date and actual performance for the entire performance period. For the 2016 grants, double-trigger vesting applies if a
change of control occurs. In addition to change of control, double-trigger vesting requires either that an award fail to be assumed by a successor employer or that the executives employment be terminated under specific circumstances within a
specified period of time following the change of control before accelerated vesting can occur.
Dividends
. Dividends accrue on the restricted stock and are
paid to the executive on the vesting date on all shares of restricted stock that vest. At the time of vesting, the executive will receive the shares of stock and will be liable for his or her portion of all federal and state income and payroll taxes
based on the fair market value of the shares awarded on the vesting date.
Timing of Grants
. Grants of performance-contingent restricted stock were made on
January 3, 2016. It is expected that this timing of
granting awards will continue for consistency and planning purposes. Except in unusual circumstances, we typically do not grant equity awards to the Named Executives at other dates. The grant
price of our performance-contingent restricted stock grants is the closing market price on the grant date.
Vesting of 2015 Awards:
|
|
The ROIC Performance-Contingent Restricted Stock Award issued in 2015 vested in early 2017 at 87% of target as a result of Company ROIC during the
two-year
performance period
ending December 31, 2016 exceeding Company WACC by 322 basis points.
|
|
|
The
TSR-Based
Performance-Contingent Restricted Stock Award issued in 2015 vested in early 2017 at 0% of target as a result of the rankings of the companys TSR from
January 1, 2015 through each of the last four quarters in calendar 2016, placing below the 30
th
percentile of the TSR Peer Group companies. We ended the
two-year
performance period with TSR of 10.9%.
|
Recoupment
(Clawback) Policy
The Omnibus Plan provides for the recoupment of grants and bonuses awarded under it. The recoupment policy provides that if
the board of directors has reliable evidence of knowing misconduct by a participant that results in an overstatement of the companys earnings or other financial measurements that were taken into consideration in awarding
grants or bonuses and, as a result of such overstatement, the participant (i) received a bonus and/or (ii) either received a grant or had a prior grant vest or become nonforfeitable,
the participant shall be required to reimburse (or forfeit, as the case may be) the full amount of any grants or bonuses that resulted from the overstatement.
Anti-Hedging Policy
The companys insider trading policy generally prohibits short-term, speculative trading practices and hedging by executive officers, including any Named
Executives, and directors.
Retirement & Other Post-Employment Benefits
We provide retirement benefits to our Named Executives and other executives as noted below. The objective is to provide a
competitive array of benefits that is affordable to the company. Retirement benefits reward continued employment and indirectly reward achievement of the metrics in the Omnibus Plan. We choose to pay them to remain competitive in the marketplace and
to provide compensation that extends into employees
non-earning
years.
Pension benefits are provided to executives under the Flowers Foods, Inc. Retirement Plan No. 1 (the Retirement
Plan). The company also provides a defined contribution benefit to executives through the 401(k) Plan and the EDCP.
Retirement Plan
The Retirement Plan is a qualified defined benefit pension plan that provides a pension upon retirement to eligible
employees of participating subsidiaries (but not to employees of the company) that is based upon each year of service with the participating subsidiary until December 31, 2005. Additionally, the Retirement Plan provides a pension upon
retirement to eligible employees (including employees of
non-participating
subsidiaries and of the company) who were participants under the Flowers Industries, Inc. Retirement Plan No. 1 prior to the
companys
spin-off
from Flowers Industries, Inc., which is based upon each year of service with Flowers Industries, Inc. and/or certain of its subsidiaries. No additional years of credited service have
been granted other than for actual years of credited service in the Retirement Plan.
Participation in the Retirement Plan was closed to new employees beginning January 1, 1999, and effective
December 31, 2005 benefits under the Retirement Plan were frozen and no additional benefits will accrue under the Retirement Plan. The frozen pension benefit is the sum of annual credits earned during eligible employment. The basic credit
formula at the time the Retirement Plan was frozen was 1.35% of the first $10,000 of
W-2
earnings (subject to certain exclusions) plus 2% of
W-2
earnings (subject to
certain exclusions) in excess of $10,000 for each year of service up to 35 years. For each year of service in excess of 35 years, 1.8% of
W-2
earnings (subject to certain exclusions) was credited. Earnings in
any calendar year may not exceed the maximum limitations for that year as defined in the Internal Revenue Code. Certain additional fixed benefit amounts were provided for a limited group of participants in the Retirement Plan, including certain of
the Named Executives.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
33
EXECUTIVE COMPENSATION
Benefits can be paid in many forms under the terms of the Retirement Plan, including a life annuity option, joint and
survivor option, period certain and life options, and a level income option. Participants who terminate or retire on or after January 1, 2016 may elect an unlimited lump sum. The payout option must be elected by the participant before benefit
payments begin. Each available payout option is actuarially equivalent. Early retirement benefit payments are available to participants upon attainment of age 55 and completion of five years of vesting service. A participants full benefit
under the Retirement Plan is payable at age 65. Benefits are reduced by 1/15 for each of the first five
years and 1/30 for each of the next five years by which benefit commencement precedes age 65. The same benefits are payable upon retirement, termination, or disability with the adjustments
described above for commencement before age 65 but on or after age 55. A 50% survivor annuity is payable to a participants spouse upon death prior to retirement. All Named Executives have fulfilled the required service period and are either
eligible for early retirement benefit payments currently or will become eligible upon attainment of age 55. No payments were made to the Named Executives under the terms of the Retirement Plan during the 2016 fiscal year.
Executive Deferred
Compensation Plan
The EDCP provides additional deferred compensation opportunities to certain members of management. In particular, the EDCP
allows these members of management to defer the receipt of a percentage of their salary and bonus. The EDCP is not a
tax-qualified
plan.
The participants deferrals are credited to a book keeping account established for the participant that is deemed to be credited with interest until paid.
Additionally, the company allocates matching contributions pursuant to the plan on behalf of the participant that are also deemed to be credited with interest until paid.
Interest credited on deemed participant deferrals and company contributions to the EDCP are based on the Merrill Lynch U.S. Corp.,
BBB-rated
Fifteen-Year Bond Index plus 150 basis points. Interest is considered above-market if earned at a rate which is 120% or more of the applicable federal long-term rate. Earnings in the EDCP are
interest-based credits that exceed this threshold. The company credits interest at above market rates because participants EDCP accounts are unfunded and unsecured and therefore subject to substantial risk of
loss should events ever befall the company causing it to reorganize or liquidate. Amounts deemed to be credited to the EDCP on behalf of the Named Executives amounted to $307,174 in fiscal 2016.
Generally, the deemed deferrals and company contributions plus interest are paid to the participant upon termination of employment. Distributions from the EDCP are
made from the companys general assets. During 2008, participants were given a
one-time,
irrevocable opportunity to convert their EDCP deemed cash account for some or all prior years deferrals to an
account that tracks the performance of our common stock. Balances as of the end of the fiscal year for participants making such an election were converted, based on the closing price of our common stock on January 2, 2009. The EDCP tracking
account will be distributed in shares of our common stock at the time elected by the participant for the deferral year(s) in question. The EDCP tracking account will be credited with dividends paid on company common stock for the number of shares
deemed held in such account, and such dividends will then be deemed to be invested in the cash account and will earn interest as described above.
Change of Control
Severance
We maintain change of control severance arrangements with our executives, including the Named Executives, as set forth in
the Flowers Foods, Inc. Change of Control Plan (the Change of Control Plan). Such arrangements have several business objectives important to the company, including stability of the executive team in the event of a threatened or pending
change of control, and post-employment restrictive covenants
(non-competition,
non-solicitation
and trade secret protection, among others). The Change of Control Plan
rewards executives for remaining employed with the company on a timetable
convenient to the company rather than to the executive. We choose to make such payments to obtain the business objectives mentioned. The Change of Control Plan provides double-trigger severance
at market-level amounts, has no excise tax
gross-up
provisions and is consistent with current corporate governance norms (see section entitled Potential Payments upon Termination or Change of
Control in this proxy statement for additional details). In 2015, the compensation committee adopted a policy that, without shareholder approval, future cash severance arrangements may not exceed 2.99 times salary and bonus.
Executive Share
Ownership Guidelines
Based on the view of the compensation committee that the ownership of an equity interest in the company by executives,
including Named Executives, is a component of good corporate governance and aligns executive and shareholder interests, share ownership guidelines were adopted that require key members of the companys management team to directly own minimum
amounts of the companys common stock. All direct holdings of our common stock, certain indirect holdings, and all vested and unvested shares of deferred stock are included for purposes of determining compliance. The guidelines for the Named
Executives, which were amended by the board of directors in February 2016, are set forth below:
|
|
President and Chief Executive Officer: 6 times base salary
|
|
|
Executive Vice President and Chief Financial Officer: 3 times base salary
|
|
|
Executive Vice President and Chief Operating Officer: 3 times base salary
|
|
|
Executive Vice President, Secretary and General Counsel: 2 times base salary
|
|
|
President, Flowers Bakeries: 2 times base salary
|
The holdings of each of the Named Executives are currently either at the
guideline or on track to meet it, and progress toward the guidelines is reviewed annually by the nominating/corporate governance committee.
Executives subject to the
guideline must hold at least 75% of all net shares received through vesting or realized through stock option exercises until the applicable guidelines are achieved.
34 FLOWERS FOODS, INC.
- 2017 Proxy Statement
EXECUTIVE COMPENSATION
Tax Deductibility of Executive Compensation
Companies are not allowed a federal income tax deduction for compensation paid to certain executive officers in excess of
$1 million, except to the extent that such compensation constitutes performance-based compensation (as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code)). The compensation committee
retains the ability to consider factors, including tax
deductibility, as it structures coordinated compensation packages of current and long-term compensation, to retain flexibility in rewarding efforts which prove to be of immediate or future
benefit to the company and its shareholders. Certain incentive opportunities in 2016 were structured with the intention to qualify as performance-based compensation under Code Section 162(m).
COMPENSATION
COMMITTEE REPORT
The compensation committee is responsible for evaluating and approving the companys compensation plans, policies and programs. The
compensation committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with the companys management and, based on this review and discussion, recommended to the board of directors that the
Compensation Discussion and Analysis be included in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2016 filed with the SEC and proxy statement for the 2017 annual meeting of
shareholders.
The Compensation Committee of the Board of Directors:
David
V. Singer,
Chairman
Benjamin H. Griswold, IV
Joseph V. Shields, Jr.
Melvin T. Stith, Ph.D.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
35
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table
summarizes the compensation of the Named Executives, which include the chief executive officer, chief financial officer and each of the three other most highly compensated executive officers of Flowers Foods for the fiscal years ended
December 31, 2016, January 2, 2016 and January 3, 2015 with the exception of Messrs. Avera and Wheeler, as 2015 was the first year they were one of the other three most highly compensated executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
(1)
|
|
|
Stock
Awards
($)
(2)
|
|
|
Non-Equity
Incentive
Plan Comp.
($)
(3)
|
|
|
Change in
Pension Value
and Nonqualified
Deferred Comp.
Earnings
($)
(4)
|
|
|
All
Other
Comp.
($)
(5)
|
|
|
Total
($)
|
|
Allen L. Shiver
|
|
|
2016
|
|
|
|
1,000,000
|
|
|
|
3,975,616
|
|
|
|
536,800
|
|
|
|
52,212
|
|
|
|
84,366
|
|
|
|
5,648,994
|
|
President and Chief
|
|
|
2015
|
|
|
|
974,615
|
|
|
|
3,091,213
|
|
|
|
735,835
|
|
|
|
45,896
|
|
|
|
73,137
|
|
|
|
4,920,696
|
|
Executive Officer
|
|
|
2014
|
|
|
|
847,885
|
|
|
|
2,680,960
|
|
|
|
413,768
|
|
|
|
93,207
|
|
|
|
66,959
|
|
|
|
4,102,779
|
|
R. Steve Kinsey
|
|
|
2016
|
|
|
|
531,923
|
|
|
|
842,428
|
|
|
|
207,663
|
|
|
|
32,259
|
|
|
|
40,361
|
|
|
|
1,654,634
|
|
Executive Vice President
|
|
|
2015
|
|
|
|
501,539
|
|
|
|
706,528
|
|
|
|
265,063
|
|
|
|
22,830
|
|
|
|
36,068
|
|
|
|
1,532,028
|
|
and Chief Financial Officer
|
|
|
2014
|
|
|
|
483,074
|
|
|
|
624,800
|
|
|
|
165,018
|
|
|
|
54,479
|
|
|
|
36,978
|
|
|
|
1,364,349
|
|
Bradley K. Alexander
|
|
|
2016
|
|
|
|
534,231
|
|
|
|
859,321
|
|
|
|
208,564
|
|
|
|
60,400
|
|
|
|
40,492
|
|
|
|
1,703,008
|
|
Executive Vice President and
|
|
|
2015
|
|
|
|
508,077
|
|
|
|
699,265
|
|
|
|
268,519
|
|
|
|
46,568
|
|
|
|
35,736
|
|
|
|
1,558,165
|
|
Chief Operating Officer
|
|
|
2014
|
|
|
|
454,232
|
|
|
|
483,936
|
|
|
|
149,772
|
|
|
|
112,645
|
|
|
|
33,281
|
|
|
|
1,233,866
|
|
Stephen R. Avera
|
|
|
2016
|
|
|
|
471,539
|
|
|
|
637,870
|
|
|
|
161,078
|
|
|
|
19,641
|
|
|
|
35,424
|
|
|
|
1,325,552
|
|
Executive Vice President
|
|
|
2015
|
|
|
|
456,538
|
|
|
|
545,128
|
|
|
|
224,046
|
|
|
|
20,029
|
|
|
|
32,409
|
|
|
|
1,278,150
|
|
Secretary and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Keith Wheeler
|
|
|
2016
|
|
|
|
410,592
|
|
|
|
520,067
|
|
|
|
140,258
|
|
|
|
14,400
|
|
|
|
25,726
|
|
|
|
1,111,043
|
|
President, Flowers Bakeries
|
|
|
2015
|
|
|
|
364,154
|
|
|
|
401,886
|
|
|
|
178,709
|
|
|
|
6,450
|
|
|
|
24,441
|
|
|
|
975,640
|
|
(1)
|
Named Executives may elect to defer amounts into the 401(k) Plan (up to IRS limits) and into the EDCP. Amounts of salary deferred during fiscal 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Salary Deferrals into
401(k) Plan
($)
|
|
|
Salary Deferrals
into EDCP
($)
|
|
|
Total
($)
|
|
Allen L. Shiver
|
|
|
24,000
|
|
|
|
100,000
|
|
|
|
124,000
|
|
R. Steve Kinsey
|
|
|
24,000
|
|
|
|
26,563
|
|
|
|
50,563
|
|
Bradley K. Alexander
|
|
|
24,000
|
|
|
|
120,340
|
|
|
|
144,340
|
|
Stephen R. Avera
|
|
|
24,000
|
|
|
|
14,138
|
|
|
|
38,138
|
|
D. Keith Wheeler
|
|
|
18,000
|
|
|
|
|
|
|
|
18,000
|
|
(2)
|
Grant date fair value of performance-contingent restricted stock (reported in the Stock Awards column) made under the 2001 Equity and Performance Incentive Plan (the EPIP) in fiscal year 2014,
and the Omnibus Plan in 2015 and 2016 and compiled in accordance with ASC 718. See Note 16 to the companys consolidated financial statements in our Annual Report on Form
10-K
for the fiscal year ended
December 31, 2016 for a description of the assumptions made in the valuation of stock awards under ASC 718. Based on the maximum allowable payout value of the ROIC-based performance-contingent restricted stock awards granted in 2016, if the
maximum number of shares are earned under the plan for the
two-year
performance period ending December 30, 2017, using the price of the companys common stock at December 30, 2016, the awards
would have the following values: Mr. Shiver, $2,173,495; Mr. Kinsey, $460,568; Mr. Alexander, $469,794; Mr. Avera, $348,736; and Mr. Wheeler, $284,333. Based on the maximum allowable payout value of the
TSR-based
performance-contingent restricted stock awards granted in 2016, if maximum performance is achieved under the plan for the
two-year
performance period ending
December 30, 2017, the awards would have the following values: Mr. Shiver, $3,477,576; Mr. Kinsey, $736,893; Mr. Alexander, $751,671; Mr. Avera, $557,962; and Mr. Wheeler, $454,917.
|
(3)
|
Non-equity
incentive plan compensation includes all performance-based cash awards under the Omnibus Plan earned by the Named Executives during the fiscal year.
|
(4)
|
Amounts reported in the Change in Pension Value and Nonqualified Deferred Comp. Earnings column for 2016 are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Change in
Pension Value
($)
|
|
|
Above-Market Nonqualified
Deferred Comp. Earnings
($)
|
|
|
Total
($)
|
|
Allen L. Shiver
|
|
|
18,958
|
|
|
|
33,254
|
|
|
|
52,212
|
|
R. Steve Kinsey
|
|
|
11,279
|
|
|
|
20,980
|
|
|
|
32,259
|
|
Bradley K. Alexander
|
|
|
24,045
|
|
|
|
36,355
|
|
|
|
60,400
|
|
Stephen R. Avera
|
|
|
15,977
|
|
|
|
3,664
|
|
|
|
19,641
|
|
D. Keith Wheeler
|
|
|
13,094
|
|
|
|
1,306
|
|
|
|
14,400
|
|
36 FLOWERS FOODS, INC.
- 2017 Proxy Statement
EXECUTIVE COMPENSATION
(5)
|
Amounts reported in the All Other Comp. column for 2016 are reported in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Employer
Contributions to
Section 401(k) Plan
($)
|
|
|
Employer Contributions to
Nonqualified Deferred
Comp. Plan
($)
|
|
|
Total
($)
|
|
Allen L. Shiver
|
|
|
15,900
|
|
|
|
68,466
|
|
|
|
84,366
|
|
R. Steve Kinsey
|
|
|
15,900
|
|
|
|
24,461
|
|
|
|
40,361
|
|
Bradley K. Alexander
|
|
|
15,900
|
|
|
|
24,592
|
|
|
|
40,492
|
|
Stephen R. Avera
|
|
|
15,900
|
|
|
|
19,524
|
|
|
|
35,424
|
|
D. Keith Wheeler
|
|
|
15,900
|
|
|
|
9,826
|
|
|
|
25,726
|
|
GRANTS OF PLAN-BASED AWARDS
The following table details grants made during the fiscal year ended December 31, 2016 pursuant to incentive plans in place at Flowers Foods as of that date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
for Equity-
Based Awards
|
|
|
Estimated Future Payouts
Under
Non-Equity
Incentive Plan Awards
(1)
|
|
|
Estimated Future Payouts
Under Equity
Incentive Plan Awards
(2)
|
|
|
Grant Date Fair
Value of
Equity Incentive
Plan Awards
($)
(3)
|
|
Name and Grant
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
Allen L. Shiver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Award
|
|
|
|
|
|
|
|
|
|
|
1,100,000
|
|
|
|
1,650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROIC-Based Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,070
|
|
|
|
108,838
|
|
|
|
1,871,134
|
|
TSR-Based
Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,070
|
|
|
|
174,140
|
|
|
|
2,104,482
|
|
R. Steve Kinsey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Award
|
|
|
|
|
|
|
|
|
|
|
425,539
|
|
|
|
638,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROIC-Based Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,450
|
|
|
|
23,063
|
|
|
|
396,491
|
|
TSR-Based
Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,450
|
|
|
|
36,900
|
|
|
|
445,937
|
|
Bradley K. Alexander
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Award
|
|
|
|
|
|
|
|
|
|
|
427,385
|
|
|
|
641,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROIC-Based Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,820
|
|
|
|
23,525
|
|
|
|
404,442
|
|
TSR-Based
Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,820
|
|
|
|
37,640
|
|
|
|
454,879
|
|
Stephen R. Avera
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Award
|
|
|
|
|
|
|
|
|
|
|
330,077
|
|
|
|
495,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROIC-Based Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,970
|
|
|
|
17,463
|
|
|
|
300,215
|
|
TSR-Based
Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,970
|
|
|
|
27,940
|
|
|
|
337,655
|
|
D. Keith Wheeler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Award
|
|
|
|
|
|
|
|
|
|
|
287,415
|
|
|
|
431,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROIC-Based Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,390
|
|
|
|
14,238
|
|
|
|
244,771
|
|
TSR-Based
Performance
Contingent Restricted
Stock Grant
|
|
|
1/3/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,390
|
|
|
|
22,780
|
|
|
|
275,296
|
|
FLOWERS FOODS, INC.
- 2017 Proxy Statement
37
EXECUTIVE COMPENSATION
(1)
|
Under the terms of the Omnibus Plan, bonuses are awarded based on the achievement of a specified EBITDA goal.
|
(2)
|
Under the terms of the Omnibus Plan and the Performance Restricted Stock Agreement, receipt of this award requires that the company meet certain performance requirements. Amounts shown under threshold,
target and maximum headings above represent the minimum, expected and maximum possible number of shares of stock transferred to the Named Executive assuming that such requirements are met.
|
(3)
|
Calculated in accordance with ASC 718 at (i) 112% of the companys stock price on the grant date ($24.17) for the
TSR-based
performance contingent restricted stock award
under the Omnibus Plan and (ii) the companys grant date stock price of $21.49 for the ROIC-based performance contingent restricted stock award under the Omnibus Plan.
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table details all equity awards granted and outstanding as of December 31, 2016, the companys most recent fiscal year end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name and Grants
|
|
Number of
Securities
Underlying
Unexercised
Options: (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options: (#)
Unexercisable
|
|
|
Equity Incentive
Plan Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not
Vested
(#)
|
|
|
Equity Incentive
Plan Awards:
Market
or
Payout Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
($)
(1)
|
|
Allen L. Shiver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Nonqualified
Stock Option Award
(2)
|
|
|
226,125
|
|
|
|
|
|
|
|
|
|
|
|
10.87
|
|
|
|
2/10/2018
|
|
|
|
|
|
|
|
|
|
2015 Performance-Contingent
Restricted Stock Award
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,220
|
|
|
|
3,059,803
|
|
2016 Performance-Contingent
Restricted Stock Award
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174,140
|
|
|
|
3,477,576
|
|
Time- Based
Restricted Stock Award
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,500
|
|
|
|
1,168,245
|
|
R. Steve Kinsey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Nonqualified
Stock Option Award
(2)
|
|
|
149,400
|
|
|
|
|
|
|
|
|
|
|
|
10.87
|
|
|
|
2/10/2018
|
|
|
|
|
|
|
|
|
|
2015 Performance-Contingent
Restricted Stock Award
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,020
|
|
|
|
699,349
|
|
2016 Performance-Contingent
Restricted Stock Award
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,900
|
|
|
|
736,893
|
|
Bradley K. Alexander
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Nonqualified
Stock Option Award
(2)
|
|
|
110,362
|
|
|
|
|
|
|
|
|
|
|
|
10.87
|
|
|
|
2/10/2018
|
|
|
|
|
|
|
|
|
|
2015 Performance-Contingent
Restricted Stock Award
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,660
|
|
|
|
692,160
|
|
2016 Performance-Contingent
Restricted Stock Award
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,640
|
|
|
|
751,671
|
|
Stephen R. Avera
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Nonqualified
Stock Option Award
(2)
|
|
|
115,200
|
|
|
|
|
|
|
|
|
|
|
|
10.87
|
|
|
|
2/10/2018
|
|
|
|
|
|
|
|
|
|
2015 Performance-Contingent
Restricted Stock Award
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,020
|
|
|
|
539,589
|
|
2016 Performance-Contingent
Restricted Stock Award
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,940
|
|
|
|
557,962
|
|
D. Keith Wheeler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Nonqualified
Stock Option Award
(2)
|
|
|
25,987
|
|
|
|
|
|
|
|
|
|
|
|
10.87
|
|
|
|
2/10/2018
|
|
|
|
|
|
|
|
|
|
2015 Performance-Contingent
Restricted Stock Award
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,920
|
|
|
|
397,802
|
|
2016 Performance-Contingent
Restricted Stock Award
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,780
|
|
|
|
454,917
|
|
38 FLOWERS FOODS, INC.
- 2017 Proxy Statement
EXECUTIVE COMPENSATION
(1)
|
Based on December 31, 2016 closing market price of $19.97 for Flowers Foods common stock.
|
(2)
|
Nonqualified stock options granted in 2011 under the EPIP fully vested on February 10, 2014.
|
(3)
|
The performance-contingent restricted stock award granted in 2015 under the Omnibus Plan vested on February 23, 2017.
|
(4)
|
The performance-contingent restricted stock award granted in 2016 under the Omnibus Plan will vest in 2018 upon the filing of our 2017 Annual Report on Form
10-K,
subject to
the achievement of applicable performance goals.
|
(5)
|
The time-based restricted stock award granted in 2013 under the EPIP will vest on June
2, 2017.
|
STOCK VESTED AND OPTION EXERCISES
The following table details vesting of all restricted stock and all exercises of option awards during the fiscal year ended December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Restricted Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on
Exercise
(#)
|
|
|
Value
Realized
on Exercise
($)
|
|
|
Number of Shares
Acquired on
Vesting
(#)
|
|
|
Value
Realized on
Vesting
($)
|
|
Allen L. Shiver
(1)
|
|
|
152,100
|
|
|
|
1,201,590
|
|
|
|
72,570
|
|
|
|
1,240,947
|
|
R. Steve Kinsey
(2)
|
|
|
113,400
|
|
|
|
940,086
|
|
|
|
16,913
|
|
|
|
289,212
|
|
Bradley K. Alexander
(3)
|
|
|
88,200
|
|
|
|
448,938
|
|
|
|
13,100
|
|
|
|
224,010
|
|
Stephen R. Avera
(4)
|
|
|
96,862
|
|
|
|
829,139
|
|
|
|
13,530
|
|
|
|
231,363
|
|
D. Keith
Wheeler
(5)
|
|
|
11,475
|
|
|
|
90,653
|
|
|
|
3,875
|
|
|
|
66,263
|
|
(1)
|
Mr. Shiver was granted 118,000 shares of performance-contingent restricted stock on January 1, 2014 under the EPIP. This award vested on February 24, 2016. Because the company did not meet certain
performance criteria at 100% of target, this award was decreased to 72,570 shares. Mr. Shiver also received 152,100 nonqualified stock options on February 9, 2010 with an exercise price of $11.11 per share. On December 14, 2016,
Mr. Shiver exercised the options to purchase shares trading at $19.01 per share. The net value realized per share was $7.90 per share, or $1,201,590.
|
(2)
|
Mr. Kinsey was granted 27,500 shares of performance-contingent restricted stock on January 1, 2014 under the EPIP. This award vested on February 24, 2016. Because the company did not meet certain
performance criteria at 100% of target, this award was decreased to 16,913 shares. Mr. Kinsey also received 113,400 nonqualified stock options on February 9, 2010 with an exercise price of $11.11 per share. On December 21, 2016,
Mr. Kinsey exercised the options to purchase shares trading at $19.40 per share. The net value realized per share was $8.29 per share, or $940,086.
|
(3)
|
Mr. Alexander was granted 21,300 shares of performance-contingent restricted stock on January 1, 2014 under the EPIP. This award vested on February 24, 2016. Because the company did not meet certain
performance criteria at 100% of target, this award was decreased to 13,100 shares. Mr. Alexander also received 88,200 nonqualified stock options on February 9, 2010 with an exercise price of $11.11 per share. On November 14, 2016,
Mr. Alexander exercised the options to purchase shares trading at $16.20 per share. The net value realized per share was $5.09, or $448,938.
|
(4)
|
Mr. Avera was granted 22,000 shares of performance-contingent restricted stock on January 1, 2014 under the EPIP. This award vested on February 24, 2016. Because the company did not meet certain
performance criteria at 100% of target, this award was decreased to 13,530 shares. Mr. Avera also received 96,862 nonqualified stock options on February 9, 2010 with an exercise price of $11.11 per share. On December 15, 2016,
Mr. Avera exercised the options to purchase shares trading at $19.67 per share. The net value realized per share was $8.56, or $829,139.
|
(5)
|
Mr. Wheeler was granted 6,300 shares of performance-contingent restricted stock on January 1, 2014 under the EPIP. This award vested on February 24, 2016. Because the company did not meet certain
performance criteria at 100% of target, this award was decreased to 3,875 shares. Mr. Wheeler also received 11,475 nonqualified stock options on February 9, 2010 with an exercise price of $11.11 per share. On December 14, 2016,
Mr. Wheeler exercised the options to purchase shares trading at $19.01 per share. The net value realized per share was $7.90, or $90,653.
|
PENSION BENEFITS
The following table details
the number of years of service credited and the present value of the accumulated benefits as of the December 31, 2016 measurement date related to the Retirement Plan.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number of Years
Credited Service
(1)
|
|
|
Present Value of
Accumulated Benefit
($)
|
|
Allen L. Shiver
|
|
Retirement
|
|
|
24
|
|
|
|
474,477
|
|
R. Steve Kinsey
|
|
Retirement
|
|
|
13
|
|
|
|
213,573
|
|
Bradley K. Alexander
|
|
Retirement
|
|
|
25
|
|
|
|
508,913
|
|
Stephen R. Avera
|
|
Retirement
|
|
|
16
|
|
|
|
378,516
|
|
D. Keith Wheeler
|
|
Retirement
|
|
|
16
|
|
|
|
220,266
|
|
FLOWERS FOODS, INC.
- 2017 Proxy Statement
39
EXECUTIVE COMPENSATION
Amounts reported above as the actuarial present value of accumulated benefits under the Retirement Plan are computed using
the interest and mortality assumptions that the company applies to amounts reported in its financial statement disclosures, and are assumed to be payable at age 65. The discount rate assumption at December 31, 2016 is 3.99% (4.25% as of
January 2, 2016 and 4.0% as of January 3, 2015) and the mortality assumption is the
RP-2016
Annuitant Mortality Table with
130.0% multiplier and
MP-2016
mortality improvement scale (the
RP-2015
Annuitant Mortality Table with 115.0%
multiplier and
MP-2015
mortality improvement scale was used as of January 2, 2016).
No benefits or payments were made to
any of the Named Executives in 2016 under the Retirement Plan.
(1)
|
Credited service does not match actual service because the plan was frozen as of December
31, 2005.
|
NONQUALIFIED DEFERRED COMPENSATION
The following table provides details regarding Named Executive participation in the EDCP during the 2016 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Employee
Contributions
in FY 2016
($)
(1)
|
|
|
Employer
Contributions
in FY 2016
($)
(2)
|
|
|
Aggregate
Earnings
in FY 2016
($)
(3)
|
|
|
Aggregate
Withdrawals/
Distributions
in FY 2016
($)
|
|
|
Aggregate
Balance at
12/31/2016
($)
(4)
|
|
Allen L. Shiver
|
|
|
100,000
|
|
|
|
68,466
|
|
|
|
55,865
|
|
|
|
|
|
|
|
1,006,410
|
|
R. Steve Kinsey
|
|
|
26,563
|
|
|
|
24,461
|
|
|
|
35,111
|
|
|
|
|
|
|
|
595,038
|
|
Bradley K. Alexander
|
|
|
120,340
|
|
|
|
24,592
|
|
|
|
60,828
|
|
|
|
|
|
|
|
1,038,898
|
|
Stephen R. Avera
|
|
|
14,138
|
|
|
|
19,524
|
|
|
|
6,295
|
|
|
|
33,936
|
|
|
|
122,059
|
|
D. Keith Wheeler
|
|
|
0
|
|
|
|
9,826
|
|
|
|
2,206
|
|
|
|
|
|
|
|
44,568
|
|
(1)
|
Amounts shown are deferrals of 2016 salary earned.
|
(2)
|
Amounts are included in All Other Compensation in the Summary Compensation Table for the 2016 fiscal year.
|
(3)
|
Above-market interest on nonqualified deferred compensation is included in the Summary Compensation Table as Nonqualified Deferred Compensation Earnings for the 2016 fiscal year. Interest is above-market
if earned at a rate which is 120% or more of the applicable federal long-term rate. Earnings in the EDCP are interest-based credits which exceed this threshold. The amount of above-market interest for each executive included in the Summary
Compensation Table is as follows: Mr. Shiver $33,254; Mr. Kinsey $20,980; Mr. Alexander $36,355; Mr. Avera $3,664; and Mr. Wheeler $1,306.
|
(4)
|
The cumulative portion of the aggregate balance at December 31, 2016 reported in the Summary Compensation Table for all years prior to 2016 is as follows: Mr. Shiver $525,405; Mr. Kinsey $366,136;
Mr. Alexander $129,525; Mr. Avera $22,643; and Mr. Wheeler $9,715.
|
40 FLOWERS FOODS, INC.
- 2017 Proxy Statement
EXECUTIVE COMPENSATION
POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE OF CONTROL
Payments Made Upon
Termination Following a
Change of Control
The Change of Control Plan is designed to provide for stability and continuity of management and the companys
operations in the event of a change of control. The compensation committee may designate, in its sole discretion, additional executives that are eligible to participate in the Change of Control Plan. If the company experiences a change of control
and, during the protection period, (i) an executives employment is terminated for any reason other than for Cause (as defined in the Change of Control Plan), death or disability, or (ii) the executive terminates his employment for
Good Reason (as defined in the Change of Control Plan), the executive is entitled to the following payments:
|
|
an amount equal to three times (in the case of Mr. Shiver) and two times (in the case of Messrs. Kinsey, Alexander, Avera and Wheeler) the executives annual base salary and target bonus award under the
Omnibus Plan at the time of termination (subject to adjustment if base salary was reduced in connection with the change of control);
|
|
|
a lump sum amount equal to 18 times the monthly premium amount calculated as if the executive had continued participation in the companys medical plan using the executives coverage election at the time of
termination; and
|
|
|
up to $25,000 of outplacement services for up to one year following termination.
|
Pursuant to the terms of the Change of
Control Plan, upon the attainment of age 65, the multiples applicable to a Named Executives annual base salary and target bonus award under the Omnibus Plan are reduced to one times such amounts.
In the event that actual payments to an executive under the Change of Control Plan are determined in certain instances to be subject to excise taxes, the payments to be
paid will be set to the best net amount, representing either (i) the largest portion of the payments that would result in no portion being subject to excise taxes, or (ii) the entire payments, whichever amount, after taking
into account all applicable taxes, including excise taxes, results in the executive receiving, on an after tax basis, the greater amount of payments notwithstanding that all or a portion of the payments may be subject to excise taxes.
In 2015, the compensation committee adopted a policy that, without shareholder approval, future cash severance arrangements may not exceed 2.99 times salary and bonus.
The following events would constitute a change of control under the Change of Control Plan:
|
|
any person becomes the beneficial owner of securities representing 35% or more of the voting power of the company other than as a result of the following: (i) acquisitions from the company with prior approval of
the board of directors, (ii) acquisitions by the company, a subsidiary or an employee benefit plan of the company or a subsidiary, (iii) acquisitions as a result of stock dividends, splits or similar transactions, (iv) a reduction in
the number of shares outstanding pursuant to a board-approved transaction, or (v) acquisitions where the board of directors determines that beneficial ownership was acquired in good faith and the person promptly divests a number of shares
necessary to reduce his beneficial ownership below 35%;
|
|
|
all or substantially all of the companys assets are sold to another entity, or the company is merged or consolidated into or with another entity (other than a subsidiary of the company), with the result that upon
the conclusion of the transaction the companys shareholders immediately prior to the transaction will beneficially own less than 60% of the voting power of the surviving entity;
|
|
|
a majority of the board of directors are not directors who were (i) members of the board of directors on the effective date of the Change of Control Plan or (ii) nominated for election or elected to the board
of directors by at least 2/3 of the directors who were members of the board of directors on the effective date of the Change of Control Plan plus previously qualified successors serving as directors at the time of such nomination or election; or
|
|
|
approval by the companys shareholders of a complete liquidation or dissolution of the company.
|
For purposes of the
Change of Control Plan, the protection period includes:
|
|
the period beginning on the date of the change of control and continuing until the second anniversary thereof; and
|
|
|
the
six-month
period prior to the date of the change of control if an executive is terminated without Cause or terminates for Good Reason and, in either case, the termination
(i) was requested by the third party that effectuates the change of control, or (ii) occurs in connection with the change of control.
|
The
Change of Control Plan includes a
one-year
covenant not to compete with respect to the trade or business of the successor entity. The Change of Control Plan also includes, for all executives,
non-disclosure
covenants that do not expire, certain trade secret protections, two year
non-solicitation
covenants and
non-disparagement
covenants that do not expire. Payments under the Change of Control Plan are subject to the execution by the executive of a general release of the company. Breach of the release or of any
covenant may result in the forfeiture of any payments or benefits that the executive is entitled to under the Change of Control Plan.
Pursuant to the Change of
Control Plan, the only event that triggers cash payments and the provision of other benefits is a change of control followed by the termination of an executives employment, other than for death, disability or for Cause or voluntary resignation
other than for Good Reason, within the protection period. For awards prior to 2015, if a change of control occurs, regardless of whether the executives employment is terminated, all unvested performance-contingent restricted stock (at the
target level) and all unvested stock options held by the executive immediately vest, except that as to any
TSR-Based
Awards, if 12 months of the Performance Period have been completed, vesting will be
determined based on total shareholder return as of the date of the change of control without application of four-quarter averaging (see Executive Compensation Compensation Discussion and Analysis Long-Term Incentive Compensation
Equity and Performance Compensation Awards Vesting Upon Death, Disability, Retirement or Change of Control). In addition, any undistributed amounts under the companys deferred compensation plan will be distributed upon a
change of control.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
41
EXECUTIVE COMPENSATION
Payments Made Upon Death or Disability, Retirement or Change of Control
If a Named Executive dies, becomes permanently disabled or retires (at age 65 or after) he is generally entitled to the
following items:
|
|
immediate vesting in all unvested stock options, of which currently there are none;
|
|
|
in the cases of death or disability, immediate vesting in the 2015 and 2016 performance-contingent restricted stock awards at target amount;
|
|
|
in the case of retirement, for the 2015 and 2016 award of performance-contingent restricted stock, at the normal vesting date a prorated award based upon the retirement date and actual performance (for purposes of the
calculations that follow, if actual results are unknown, target values are used); and
|
|
|
in the event of a change of control, for equity awards granted prior to 2015 that are reflected in the table below, awards immediately vest at the target level (whether or not the Named Executive is terminated),
|
|
|
provided that as to
TSR-Based
Awards, if 12 months of the Performance Period have been completed, vesting is determined based on the total shareholder
return as of the date of the change of control without application of the fourth quarter averaging.
|
Beginning in 2015, all equity awards granted
under the Omnibus Plan include a double-trigger vesting mechanism upon a change of control.
Amounts shown in the table below represent estimated amounts payable (or
realizable) by the company to each Named Executive upon death, disability, or retirement, a change of control without termination or termination in connection with a change of control. Amounts shown in the tables below are the estimated payment
amounts assuming that the triggering event occurred on December 31, 2016, the last business day of fiscal 2016. Values in the tables for equity- based awards are calculated using the closing market price of $19.97 of the companys common
stock on December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Death/
Disability
($)
|
|
|
Retirement
($)
|
|
|
Change of
Control
Without
Termination
($)
|
|
|
Termination
Following
Change of
Control
(1)
($)
|
|
Allen L. Shiver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,300,000
|
|
Equity Payout
|
|
|
7,705,624
|
|
|
|
3,069,802
|
|
|
|
1,168,245
|
|
|
|
4,436,935
|
|
Other
Benefits
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,422
|
|
TOTAL
|
|
|
7,705,624
|
|
|
|
3,069,802
|
|
|
|
1,168,245
|
|
|
|
10,789,357
|
|
R. Steve Kinsey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,944,000
|
|
Equity Payout
|
|
|
1,436,242
|
|
|
|
672,663
|
|
|
|
|
|
|
|
718,121
|
|
Other
Benefits
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,606
|
|
TOTAL
|
|
|
1,436,242
|
|
|
|
672,663
|
|
|
|
|
|
|
|
2,715,727
|
|
Bradley K. Alexander
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,944,000
|
|
Equity Payout
|
|
|
1,443,831
|
|
|
|
676,925
|
|
|
|
|
|
|
|
721,916
|
|
Other
Benefits
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,415
|
|
TOTAL
|
|
|
1,443,831
|
|
|
|
676,925
|
|
|
|
|
|
|
|
2,715,331
|
|
Stephen R. Avera
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,615,000
|
|
Equity Payout
|
|
|
1,097,551
|
|
|
|
513,702
|
|
|
|
|
|
|
|
548,776
|
|
Other
Benefits
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,471
|
|
TOTAL
|
|
|
1,097,551
|
|
|
|
513,702
|
|
|
|
|
|
|
|
2,214,247
|
|
D. Keith Wheeler
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,432,318
|
|
Equity Payout
|
|
|
852,719
|
|
|
|
|
|
|
|
|
|
|
|
426,360
|
|
Other
Benefits
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,279
|
|
TOTAL
|
|
|
852,719
|
|
|
|
|
|
|
|
|
|
|
|
1,907,957
|
|
(1)
|
In addition to amounts payable under the Change of Control Plan, each Named Executive is entitled to his pro rata share of any award earned under the Omnibus Plan in the year of termination.
|
(2)
|
Other Benefits includes the estimated cost of outplacement services and a lump sum amount equal to 18 months of continued health and welfare benefits in accordance with the terms of the Change of Control Plan.
|
42 FLOWERS FOODS, INC.
- 2017 Proxy Statement
EXECUTIVE COMPENSATION
AUDIT COMMITTEE REPORT
The audit committee oversees, among other things, the accounting and financial reporting processes of the company, the
audit of the companys consolidated financial statements and internal control over financial reporting, the qualifications, independence and performance of the companys independent registered public accounting firm and the performance of
the companys internal auditor.
The audit committee operates under a written charter adopted by the board of directors. It is available on the companys
website at https://www.flowersfoods.com/Global/Content/ CorpGovernance/Documents/FlowersAuditCommitteeCharter.pdf. The charter, which was last amended effective November 20, 2015, is reviewed annually by the audit committee and is amended by
the board of directors, as appropriate, to reflect the evolving role of the committee. In 2016, the audit committee held nine meetings. Meeting agendas are established by the chairman of the audit committee, together with the following members of
management: R. Steve Kinsey, Executive Vice President and Chief Financial Officer; Stephen R. Avera, Executive Vice President, Secretary and General Counsel; Vandy T. Davis, Vice President and Corporate Controller; and Therese A. Fogarty, Vice
President of Internal Audit.
During 2016, the audit committee fulfilled its duties and responsibilities as outlined in the charter.
During 2016, among other things, the audit committee:
|
|
Met with the senior members of the companys financial management team at each regularly scheduled meeting.
|
|
|
Reviewed and discussed with management and the independent auditor our earnings releases and annual and quarterly reports on Form
10-K
and Form
10-Q
prior to filing with the SEC.
|
|
|
Received periodic updates on managements process to assess the adequacy of the companys system of internal control over financial
|
|
|
reporting and managements conclusions on the effectiveness of the companys internal control over financial reporting.
|
|
|
Reviewed and discussed with management, the internal auditor and the independent auditor managements assessment of the effectiveness of the companys internal control over financial reporting and the
independent auditors opinion about the effectiveness of the companys internal control over financial reporting.
|
|
|
Reviewed and discussed with management, the internal auditor and the independent auditor, as appropriate, the audit scopes and plans of both the internal auditor and the independent auditor.
|
|
|
Met in periodic executive sessions with certain members of management, the internal auditor, and the independent auditor to discuss the results of their examinations, their evaluations of internal controls, and the
overall quality of the companys financial reporting.
|
|
|
Reviewed with management significant risks identified by management, the steps management has taken to monitor and control these risks and the companys enterprise risk management activities generally.
|
|
|
Reviewed with management, the chief financial officer, the internal auditor and the independent auditor the overall adequacy and effectiveness of the companys legal, regulatory and ethical compliance programs,
including the code of business conduct and ethics.
|
|
|
Reviewed with management and the independent auditor the companys legal affairs, including, among other things, ongoing litigation and the U.S. Department of Labors compliance review under the Fair Labor
Standards Act.
|
|
|
Reviewed with management reports and disclosures of insider and affiliated party transactions.
|
|
|
Received regular updates from management regarding Project Centennial.
|
2016 Audited Financial
Statements
The audit committee has reviewed and discussed the companys audited consolidated financial statements for the year
ended December 31, 2016 with the companys management and PricewaterhouseCoopers LLP, the companys independent registered public accounting firm for the year ended December 31, 2016. Management represented to the audit committee
that the companys audited consolidated financial statements were prepared in accordance with GAAP. The audit committee has reviewed with the internal auditors and PricewaterhouseCoopers LLP the results of their examinations and their
assessment of the companys internal controls and discussed with senior officers of the company the processes undertaken to evaluate the accuracy and fair presentation of the companys financial statements and the effectiveness of the
companys system of disclosure controls and procedures. The audit committee has also discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the Auditing Standard No. 1301,
Communication with Audit
Committees
, issued by the Public Company Accounting Oversight Board (PCAOB), as amended from time to time, including the auditors judgment about the quality of the companys accounting principles as applied in its
financial reporting.
In addition, the audit committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP
required by PCAOB Ethics and Independence Rule 3526,
Communications with Audit Committees Concerning Independence
, and has discussed with PricewaterhouseCoopers LLP their independence from the company and its management.
Based on the reviews and discussions outlined above, the audit committee recommended to the board of directors that the companys audited consolidated financial
statements be included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2016, which was filed with the SEC on February 23, 2017.
The Audit Committee of the Board of Directors:
James T. Spear,
Chairman
Rhonda Gass
Richard Lan
Margaret G. Lewis
C. Martin Wood III
FLOWERS FOODS, INC.
- 2017 Proxy Statement
43
OVERVIEW OF PROPOSALS
This proxy statement contains five proposals requiring shareholder action. Proposal I proposes the election of twelve
director-nominees to the board of directors. Proposal II requests an advisory vote on the compensation of the Named Executives. Proposal III requests an advisory vote on the frequency of future advisory votes on the compensation on the Named
Executives. Proposal IV requests the
ratification of the appointment of PricewaterhouseCoopers LLP as the companys independent registered public accounting firm for fiscal 2017. Proposal V concerns a shareholder proposal
whether the chairman of the board of directors should be independent, if properly presented at the annual meeting. Each of the proposals is discussed in more detail below.
PROPOSAL I
|
ELECTION OF DIRECTORS
|
Formerly, our board of directors was divided into three classes with the directors in each class serving for a term of
three years. At the 2015 annual meeting, shareholders approved a proposal to declassify the companys board of directors and provide for the annual election of directors. Beginning with the 2015 annual shareholder meeting and continuing with
the 2016 annual shareholders meeting, directors will now be elected for
one-year
terms. The remaining directors who were elected in 2014 (formerly Class I directors whose terms expire in 2017) will also
be nominated for election to a
one-year
term at the 2017 annual shareholders meeting, resulting in the entire board of directors being elected annually beginning with this 2017 annual shareholders meeting.
Background information concerning each of our director-nominees is provided above under Directors and Corporate Governance.
The following nominees are proposed for election as directors to serve until the 2018 annual shareholder meeting:
|
|
Benjamin H. Griswold, IV
|
As described in the Corporate Governance section of this proxy statement, on February 17, 2017,
the board of directors voted to approve an amendment to the corporate governance guidelines eliminating the mandatory retirement age for directors. The elimination of the retirement age of 75 resulted in the following directors retaining eligibility
for reelection in 2017: Benjamin H. Griswold, IV, age 76, who has been a director of the company since 2005; Amos R. McMullian, age 79, who is chairman emeritus of the company and served as chairman of the board of directors from 2000 to 2006 and
chief executive officer of the company from 2000 to 2004; and J.V. Shields, Jr., age 79, who has been a director of the company since 2001. Messrs. Griswold, McMullian and Shields abstained from the vote of directors approving the amendment to the
corporate governance guidelines.
Unless instructed otherwise, the proxies will be voted for the election of the director-nominees named above to serve for the terms
indicated or until their successors are elected and have been duly qualified. If any nominee is unable to serve, proxies may be voted for a substitute nominee selected by the board of directors. However, the board of directors has no reason to
believe that any nominee will not be able to serve if elected.
Vote Required
Each of the twelve nominees for director who receive a majority of the votes cast at the meeting in person or by proxy will be elected (meaning the number of shares
voted for a director-nominee must exceed the number of votes cast against that director-nominee), subject to the board of directors existing policy regarding resignations by directors who do not receive a majority of
for votes, which is described in our corporate governance guidelines.
Recommendation of the Board
Your board of directors unanimously recommends that you vote FOR each of the above-named director-nominees.
44 FLOWERS FOODS, INC.
- 2017 Proxy Statement
PROPOSAL II
|
ADVISORY VOTE ON EXECUTIVE COMPENSATION
|
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and Section 14A of
the Exchange Act provide shareholders with the right to cast an advisory
(non-binding)
vote to approve the compensation of the Named Executives as disclosed pursuant to the compensation disclosure rules of the
SEC. This proposal is commonly known as the
say-on-pay
vote.
At our 2016
annual meeting of shareholders, more than 98% of the shares voted were cast in support of the companys executive compensation program.
As described in the
Compensation Discussion and Analysis section of this proxy statement, the compensation committee evaluates both performance and compensation to ensure that the company maintains its ability to attract and retain the most qualified executives while
motivating high company performance. Highlights of our executive compensation program, as described in the Compensation Discussion and Analysis section of this proxy statement, include:
|
|
pay opportunities that are:
|
|
|
appropriate to the size of the company when compared to peer companies; and
|
|
|
heavily performance-based using multiple internal and stock-based performance measures;
|
|
|
disclosure of the financial performance drivers used in our incentives, in numeric terms;
|
|
|
a long-term incentives program:
|
|
|
that is entirely performance-based and aligned with shareholder interests through links to stock performance and measurement of our return on invested capital performance versus our cost of capital; and
|
|
|
whose payout potentials are capped at conservative levels;
|
|
|
a clawback provision that allows for recoupment of incentives in certain situations;
|
|
|
beginning with 2015 grants, double-trigger equity vesting upon a change of control;
|
|
|
no backdating or repricing of stock options;
|
|
|
stock ownership guidelines for executives and directors;
|
|
|
no employment contracts.
|
The
say-on-pay
vote gives our shareholders the opportunity to express their views on the compensation of our Named Executives. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executives and
the compensation philosophy, policies and practices described in this proxy statement. Accordingly, we are asking shareholders to approve the following resolution:
RESOLVED, that the shareholders approve the compensation of the companys Named Executives, as disclosed pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, including the compensation discussion and analysis, compensation tables and any related material disclosed in this proxy statement.
Because this vote is advisory, it will not be binding on the compensation committee, the board of directors or the company. However, the compensation committee and the
board of directors value the opinions of the companys shareholders and will take into account the outcome of the vote when considering future compensation arrangements for the Named Executives.
Vote Required
Proposal II requires the affirmative vote of the holders of a majority of the shares of our common stock present at the annual meeting in person or by proxy.
Recommendation of the Board
Your board of directors unanimously recommends that you vote FOR Proposal II.
FLOWERS FOODS, INC.
- 2017 Proxy Statement
45
PROPOSAL III
|
ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
|
The Dodd-Frank Act and Section 14A of the Exchange Act also require us to provide shareholders the right to cast an
advisory
(non-binding)
vote regarding how frequently the company should include in its proxy materials a proposal similar to Proposal III regarding the approval of the compensation awarded to our executives.
Shareholders may vote for the proposal to be included in our proxy statement every one, two or three years.
The board of directors recommends that a
say-on-pay
shareholder advisory vote, similar to Proposal II be included in the companys proxy statement every year. The board of directors believes that a
say-on-pay
vote every year by shareholders provides the highest level of accountability and direct communication by enabling the
say-on-pay
vote to correspond to the majority of the information presented in the accompanying proxy statement for the applicable meeting of shareholders.
You may cast your vote on your preferred voting frequency by choosing the option of 1 year, 2 years, or 3 years, or abstaining from voting, when you vote in response to
the resolution set forth below.
RESOLVED, that the option of once every year, two years or three years that receives the highest number of votes cast
for this resolution will be determined to be the preferred frequency with which the company is to hold a shareholder vote to approve the compensation of the companys Named Executives, as disclosed pursuant to the compensation disclosure rules
of the Securities and Exchange Commission, including the compensation discussion and analysis, compensation tables and any related material disclosed in this proxy statement.
Because this vote is advisory, it will not be binding on the company or the board of directors and, notwithstanding the results of such vote, the board of directors may
decide that it is in the best interests of shareholders and the company to hold an advisory vote on executive compensation more or less frequently than the option approved by shareholders. If none of the options achieves the required vote, the board
of directors intends to use its discretion to conduct future advisory votes on executive compensation each year.
Vote Required
Proposal III requires the affirmative vote of the holders of a majority of the shares of our common stock present at the meeting in person or by proxy.
Recommendation of the Board
Your board of directors unanimously recommends that you vote 1 YEAR for Proposal III.
46 FLOWERS FOODS, INC.
- 2017 Proxy Statement
PROPOSAL IV
|
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
Our audit committee and board of directors have appointed PricewaterhouseCoopers LLP as our independent registered public
accounting firm for the fiscal year ending December 30, 2017. The board of directors recommends that this appointment be ratified.
Representatives of
PricewaterhouseCoopers LLP will be present at the 2017 annual meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.
We have been advised by PricewaterhouseCoopers LLP that neither the firm, nor any member of the firm, has any financial
interest, direct or indirect, in any capacity in the company or its subsidiaries.
If the shareholders of the company do not ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2017, the audit committee will reconsider the appointment.
Fiscal 2016 and
Fiscal 2015 Audit Firm Fee Summary
During fiscal 2016 and fiscal 2015, we retained our principal accountant, PricewaterhouseCoopers LLP, to provide services
in the following categories and amounts:
Audit Fees
. Fees for audit services totaled approximately $3,338,000 in 2016 and $3,322,000 in 2015, including fees
associated with annual audits, the reviews of our Quarterly Reports on Form
10-Q
and Annual Reports on Form
10-K
in both 2016 and 2015, and in 2016, comfort letter
procedures related to a public debt offering.
Audit Related Fees
. Fees for audit related services totaled approximately $140,000 in 2016 and $191,000 in 2015.
Audit related services principally include services related to audits of certain employee benefit plans and accounting consultations in both 2016 and 2015 and acquisition due diligence in 2015.
Tax Fees
. Fees for tax services, including tax compliance, tax advice and tax planning, totaled approximately $500,000 in 2016 and $347,000 in 2015.
All Other Fees
. Fees for all other services not described above totaled approximately $1,052,000 in 2016 and
$802,000 in 2015 related to consulting fees for a pricing and trade capabilities assessment in both 2016 and 2015 and a cybersecurity project in 2015.
All
non-audit
services were reviewed by the audit committee, which concluded that the provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firms independence in the
conduct of its auditing function. On an ongoing basis all audit and permissible
non-audit
services provided by PricewaterhouseCoopers LLP are
pre-approved
by the audit
committee on a
case-by-case
basis.
Vote Required
Proposal IV requires the affirmative vote of the holders of a majority of the shares of our common stock present at the annual meeting in person or by proxy.
Recommendation of the Board
Your board of directors unanimously recommends that you vote FOR Proposal IV.