BF.B Brown Forman Corp

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant

Filed by a Party other than the Registrant

 

Check the appropriate box:
	Preliminary Proxy Statement
	CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
	Definitive Proxy Statement
	Definitive Additional Materials
	Soliciting Material Pursuant to §240.14a-12

 

 

Brown-Forman Corporation

 

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):
	No fee required.
	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1) Title of each class of securities to which transaction applies:
	(2) Aggregate number of securities to which transaction applies:
	(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4) Proposed maximum aggregate value of transaction:
	(5) Total fee paid:
	Fee paid previously with preliminary materials.
	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
	(1) Amount Previously Paid:
	(2) Form, Schedule or Registration Statement No.:
	(3) Filing Party:
	(4) Date Filed:

 

 

 

 

 

 

TABLE OF CONTENTS

PROXY SUMMARY

ANNUAL MEETING INFORMATION

ANNUAL MEETING INFORMATION • VOTING

 

How to Vote

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

 

•  over the telephone by calling a toll-free number (1-800-652-8683);

•  online (www.investorvote.com/BFB); or

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

 

Even if you plan to attend the meeting, we encourage you to submit a proxy in advance. We must receive your proxy by 1:00 a.m., Eastern Daylight Time, on Thursday, July 27, 2017, to ensure your vote is recorded. You may override a proxy by following the applicable procedure outlined below in “Changing Your Vote.”

 

The telephone and online voting procedures have been set up for your convenience and are designed to authenticate your identity, enable you to give voting instructions, and confirm that those instructions are recorded properly. If you are a stockholder of record and wish to vote by telephone or online, please refer to the instructions on the enclosed proxy card.

 

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

 

If you are a stockholder of record and you sign and return your proxy card (or give your proxy by telephone or online) without specifying how you want your shares to be voted, our proxy holders will vote your shares “FOR” the election of each of the nominees to the Board (Proposal 1), “FOR” the advisory resolution to approve our executive compensation (Proposal 2), and for “EVERY THREE YEARS” as the frequency of future advisory votes on executive compensation (Proposal 3). With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote your shares as recommended by the Board or, if no recommendation is given, using their own discretion.

 

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

 

If you are a street name stockholder and you do not instruct your broker how to vote, your broker is not permitted to vote your shares on any of the proposals we will address at the Annual Meeting. This is known as a “broker non-vote.”

 

Changing Your Vote

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

 

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

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

5

ANNUAL MEETING INFORMATION • ANNOUNCEMENT OF VOTING RESULTS

 

Quorum Requirements

Business can be conducted at the Annual Meeting only if a quorum consisting of a majority of the outstanding shares of Class A common stock is present in person or represented by proxy. Abstentions and broker non-votes, if any, will be counted as present for purposes of establishing a quorum.

 

Votes Needed For Approval

 

Proposal		Vote required to pass		Effect of abstentions and broker non-votes
Election of directors		Nominees who receive a majority of the Class A votes cast (the number of shares voted “for” the nominee exceeds the number of shares voted “against” that nominee) will be elected.		No effect.
Advisory resolution to approve executive compensation		Approval requires an affirmative vote of the majority of the Class A shares present (in person or represented by proxy) and entitled to vote.		Abstentions are equivalent to votes against the proposal.   Broker non-votes will have no effect.
Advisory resolution on the frequency of future advisory votes on executive compensation		The frequency receiving the greatest number of votes (every one, two, or three years) will be considered the recommendation of the stockholders.		No effect.
Any other matter		Approval requires an affirmative vote of the majority of the Class A shares present (in person or represented by proxy) and entitled to vote.		Abstentions are equivalent to votes against the proposal.   Broker non-votes will have no effect.

 

Dividend Reinvestment and Employee Stock Purchase Plan Shares

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

 

ANNOUNCEMENT OF VOTING RESULTS

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

 

PROXY SOLICITATION EXPENSES

Brown-Forman bears the cost of soliciting proxies. Beginning on June 27, 2017, which is the mailing date for these proxy materials, our directors, officers, and other employees may solicit proxies in person or by regular or electronic mail, phone, fax, or online. These individuals will not receive additional compensation for soliciting proxies. We will reimburse banks, brokers, nominees, and other fiduciaries for their reasonable charges and expenses incurred in forwarding our proxy materials to the beneficial owners of our stock held in street name. In addition, we have retained Proxy Express, Inc. to assist with the distribution of proxy materials for a fee of approximately $15,000, plus expenses.

 

6

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

CORPORATE GOVERNANCE

CORPORATE GOVERNANCE • BOARD COMPOSITION

 

BOARD COMPOSITION

 

How Our Controlled-Company Status Affects Our Board

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

 

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

 

Our Independent Directors

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

 

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

 

Our Brown Family Directors

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

 

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

 

8

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

CORPORATE GOVERNANCE • BOARD COMPOSITION

 

Our Management Directors

 

We also believe it is important, from a corporate governance standpoint, for management to be represented on the Board. Currently, Campbell P. Brown, Marshall B. Farrer, and Paul C. Varga serve in dual roles as Board members and Brown-Forman executives.

 

BROWN-FORMAN BOARD OF DIRECTORS

 

PATRICK BOUSQUET-CHAVANNE			CAMPBELL P. BROWN			GEO. GARVIN BROWN IV
	Executive Director of Customer, Marketing and M&S.com, Marks and Spencer Group PLC			President and Managing Director of Old Forester, Brown-Forman Corporation			Chairman of the Board, Brown-Forman Corporation
STUART R. BROWN			BRUCE L. BYRNES			JOHN D. COOK
	Managing Partner, Typha Partners, LLC			Retired Vice Chairman of the Board, The Procter & Gamble Company			Lead Independent Director; Director Emeritus of McKinsey & Company
MARSHALL B. FARRER			LAURA L. FRAZIER			KATHLEEN M. GUTMANN
	Vice President and Managing Director of Global Travel Retail, Brown-Forman Corporation			Owner and Chairman, Bittners LLC			Chief Sales and Solutions Officer, United Parcel Service, Inc. and Senior Vice President, The UPS Store and UPS Capital
AUGUSTA BROWN HOLLAND			MICHAEL J. RONEY			MICHAEL A. TODMAN
	Founding Partner, Haystack Partners LLC			Retired Chief Executive, Bunzl plc			Retired Vice Chairman, Whirlpool Corporation

PAUL C. VARGA			INDEPENDENT			RECENT CHANGES TO OUR BOARD As previously disclosed, Kathleen M. Gutmann joined the Board on May 24, 2017, as an independent director.
	Chairman & CEO, Brown-Forman Corporation		BROWN FAMILY
			MANAGEMENT
			BROWN FAMILY & MANAGEMENT

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

9

CORPORATE GOVERNANCE • LEADERSHIP STRUCTURE

 

LEADERSHIP STRUCTURE

 

Chairman of the Board

Our Board believes that the determination of whether to separate or combine the roles of Chairman of the Board and Chief Executive Officer should depend largely upon the identity of the Chief Executive Officer and the composition of the Board at the time. For this reason, it does not have a policy on separation of these roles, but rather evaluates the situation on a case-by-case basis. Currently, these roles are separate, although they have been combined in the past. Geo. Garvin Brown IV, a Brown family member, serves as Chairman of the Board.

 

Company Chairman and CEO

Paul C. Varga serves as the Chairman and Chief Executive Officer of Brown-Forman. Mr. Varga is our highest ranking executive officer and is responsible for Brown-Forman’s strategy, operations, and performance.

 

Lead Independent Director

When a non-independent director holds the office of Chairman of the Board or Presiding Chairman of the Board, as is currently the case, the Board may select one independent director (after considering the recommendation of the Corporate Governance and Nominating Committee) to serve as Lead Independent Director. The Lead Independent Director, if any, will be elected annually. John D. Cook has served in this role since 2012.

 

As Lead Independent Director, Mr. Cook’s responsibilities are to:

 

•	call meetings of the independent or non-management directors, when necessary or advisable;
•	chair executive sessions attended solely by independent directors;
•	facilitate open communications among directors and with management between Board meetings and help directors reach consensus on important matters;
•	serve as liaison, when necessary or advisable, between the Chairman of the Board or Presiding Chairman of the Board and the independent and non-management directors;
•	be available for consultation and direct communication upon the reasonable request of major and/or long-term stockholders;
•	play a leadership role in contingency and succession planning, if and as needed; and
•	perform such other duties as the Board may from time to time delegate to assist the Board in the fulfillment of its responsibilities.

 

Mr. Cook chaired one executive session of non-management directors in fiscal 2017. Also, because our non-management director group includes directors who are not “independent” under NYSE listing standards, Mr. Cook called and presided over one executive session in fiscal 2017 that was attended solely by our independent directors.

 

Why the Board Chose this Leadership Structure

The Board has determined that this leadership structure currently serves the best interests of Brown-Forman and its stockholders. Having a Brown family member serve as Chairman of the Board promotes the Brown family’s active oversight of, and engagement and participation in, the Company and its business and reflects the fact that Brown-Forman is controlled by the Brown family. In addition, because Mr. Brown handles the responsibilities associated with the position of Chairman of the Board, Mr. Varga can concentrate on strategy and operations, while the Board still has access to his comprehensive knowledge of the Company’s business. The Lead Independent Director position provides leadership to, and fosters coordination among, our independent directors, enabling them to fulfill their role of bringing outside perspectives to the Board.

 

10

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

CORPORATE GOVERNANCE • BOARD GUIDELINES AND PROCEDURES

 

BOARD GUIDELINES AND PROCEDURES

 

Corporate Governance Guidelines

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

 

Board and Committee Self-Assessment

The Corporate Governance Guidelines require the Board to conduct an annual self-assessment. Each Board committee (except the Executive Committee) also annually assesses how it performed during the preceding twelve-month period. These assessment procedures vary, from requiring members to complete questionnaires that call for both quantitative responses and free-ranging comments, to having an independent third party interview each member and then synthesize themes that emerge.

 

Director Service

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

 

Board Meetings

The Board held six regular meetings and no special meetings during fiscal 2017. Absent an appropriate reason, all directors are expected to attend the Annual Meeting, all Board meetings, and all meetings of each committee on which they serve. All directors attended 90% or more of the aggregate meetings of the Board and committees on which they served during fiscal 2017. All directors then serving attended the 2016 Annual Meeting of Stockholders.

 

Board Committees

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

 

AUDIT COMMITTEE
The Board has delegated to the Audit Committee responsibility for overseeing Brown-Forman’s financial statements; audit process; system of internal controls; enterprise risk assessment and risk management policies and processes; compliance with legal and regulatory requirements; and internal audit functions. In addition, the Audit Committee oversees the independent auditor’s qualifications, independence, and performance. The Audit Committee’s responsibilities include preparing the Audit Committee Report that appears in this Proxy Statement on page 56.		MET 10 TIMES IN FISCAL 2017
		Committee Members:
		•	Michael A. Todman (Chair)
		•	Bruce L. Byrnes
		•	John D. Cook

 

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

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

11

CORPORATE GOVERNANCE • BOARD GUIDELINES AND PROCEDURES

 

COMPENSATION COMMITTEE
The Compensation Committee’s responsibilities include determining the compensation of the Chief Executive Officer; recommending market-competitive compensation for the Board; approving incentive compensation plan design and changes thereto for the Chief Executive Officer and other senior executive officers; assisting the Board in its oversight of risk related to compensation policies and practices; overseeing the preparation of the Compensation Discussion and Analysis section of this Proxy Statement; preparing the Compensation Committee Report that appears in this Proxy Statement on page 39; and leading the evaluation of the performance of the Chief Executive Officer.		MET 6 TIMES IN FISCAL 2017
		Committee Members:
		•	Michael J. Roney (Chair)
		•	Patrick Bousquet-Chavanne
		•	John D. Cook
The Compensation Committee has retained Frederic W. Cook & Co. (FWC) to provide independent advice on executive and director compensation matters. For additional information on the services provided by FWC, as well as the Compensation Committee’s processes and procedures for considering and determining executive compensation, please see the Compensation Discussion and Analysis section of this Proxy Statement, which begins on page 24.
Each member of the Compensation Committee qualifies as an independent director under NYSE listing standards (including the heightened independence standards for compensation committee members of non-controlled companies), as a “non-employee director” under SEC rules, and as an “outside director” under regulations adopted pursuant to Section 162 of the Internal Revenue Code. The Board specifically considered factors relevant to the ability of these directors to be independent from management in connection with Compensation Committee service.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
The Corporate Governance and Nominating Committee’s responsibilities include helping the Board identify, recruit, and recommend appropriate candidates to serve as directors; reviewing periodically our corporate governance principles in light of developments in corporate governance and best practices, taking into account our controlled-company status; coordinating and overseeing Chief Executive Officer and Chairman of the Board succession planning; and assisting the Board with its annual self-assessment. All of the Corporate Governance and Nominating Committee members are independent under NYSE listing standards, except Geo. Garvin Brown IV.		MET 8 TIMES IN FISCAL 2017
		Committee Members:
		•	John D. Cook (Chair)
		•	Patrick Bousquet-Chavanne
		•	Geo. Garvin Brown IV
		•	Bruce L. Byrnes
EXECUTIVE COMMITTEE
The Executive Committee consists of the Chief Executive Officer, the Chairman of the Board (if separate from the Chief Executive Officer), and one or more other directors as determined by the Board from time to time. The Board can change the Executive Committee membership, fill vacancies, and dissolve the committee at any time. The Executive Committee may exercise all of the powers of the Board, subject to certain exceptions specified in our By-laws or Delaware law. However, traditionally, the Executive Committee acts only when exercising a power the Board has specifically delegated, when there is an emergency, or when the issue does not warrant the full Board’s attention.		MET ONCE IN FISCAL 2017
		Committee Members:
		•	Geo. Garvin Brown IV (Chair)
		•	John D. Cook
		•	Paul C. Varga

 

12

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

CORPORATE GOVERNANCE • BOARD GUIDELINES AND PROCEDURES

 

Board’s Role in Risk Oversight

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

 

While the Board has ultimate oversight responsibility for the risk management process, certain committees have important supplementary roles in that process. During fiscal 2017, the Board tasked its committees to assist with the responsibilities outlined below:

 

•	Audit Committee — overseeing our most significant financial reporting and accounting control risks and management’s monitoring and management of those risks.
•	Compensation Committee — overseeing risks related to compensation policies and practices.
•	Corporate Governance and Nominating Committee — overseeing risks related to corporate governance, board composition, and succession planning for the Chief Executive Officer and the Chairman of the Board.

 

These committees met regularly with members of management and outside advisors, as necessary, and reported to the Board regularly on their risk oversight and mitigation activities. In addition, management’s Disclosure Controls Committee and Enterprise Risk Management Committee both play an integral role in making sure that relevant risk-related information is reported to senior management and the Board as directly and quickly as possible. Further, our management Ethics, Compliance and Risk Team, comprising a number of senior executives and subject matter experts, meets throughout the year to address issues related to risk, ethics, and compliance; to coordinate the work of those areas; and to oversee the formulation and promulgation of company policies and the training of employees in compliance with them.

 

Communication with Our Board

Stockholders and other interested parties may communicate with our directors, including the non-management directors or the independent directors as a group, by writing to our Secretary, Matthew E. Hamel, at 850 Dixie Highway, Louisville, Kentucky 40210, or at Secretary@b-f.com. The Secretary’s office will forward written communications to the individual director or group of directors to whom they are addressed, with copies to all other directors.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

13

CORPORATE GOVERNANCE • BEST PRACTICES

 

BEST PRACTICES

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

 

Code of Conduct

The Brown-Forman Code of Conduct expresses its expectations of ethical behavior for all of our employees and directors. The Code of Conduct includes our Code of Ethics for Senior Financial Officers, which reflects the expectation that all of our financial, accounting, reporting, and auditing activities will be conducted in strict compliance with all applicable rules and regulations and will conform to the highest ethical standards. Brown-Forman encourages its employees to “speak up” when aware of a potential code of conduct violation and provides multiple channels for doing so, including anonymously. The Code of Conduct, including reporting channels, and the Code of Ethics for Senior Financial Officers can be found on our website at www.brown-forman.com/about/corporate-governance/code-of-ethics/ and www.brown-forman.com/about/corporate-governance/code-of-ethics-for-senior-financial-officers/.

 

Disclosure Controls Committee

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

 

Risk Committee

The mission of the Enterprise Risk Management (ERM) Committee, which is composed of members of management, is to ensure that all of Brown-Forman’s major risks are identified and evaluated. The ERM Committee also identifies the individuals and teams who are responsible for mitigating risks, and ensures that mitigation plans are in place to mitigate the Company’s significant risks. The ERM Committee reports to the Audit Committee regarding its policies and processes. In addition, the ERM Committee reports to the Board at least annually regarding the top risks facing Brown-Forman, and periodically updates the Board on the mitigation plans related to those risks.

 

14

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

CORPORATE GOVERNANCE • OUR CONTROLLING FAMILY STOCKHOLDERS

 

OUR CONTROLLING FAMILY STOCKHOLDERS

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

 

Brown-Forman/Brown Family Shareholders Committee

In 2007, Geo. Garvin Brown IV and Paul C. Varga organized the Brown-Forman/Brown Family Shareholders Committee, which they continue to co-chair. This committee provides a forum for frequent, open, and constructive dialogue between Brown-Forman and its controlling family stockholders. The Brown Family Shareholders Committee engages the Brown family on topics of mutual interest such as the Company and industry, governance, ownership, and philanthropy.

 

Director of Family Shareholder Relations

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

 

Brown Family Member Employees

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

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

15

	PROPOSAL 1:
	ELECTION OF DIRECTORS

 

ELECTION OF DIRECTORS • NOMINEES

 

GEO. GARVIN BROWN IV
Director since 2006   Age 48   Committees:   - Corporate Governance and Nominating - Executive (Chair)		CURRENT AND PAST POSITIONS   Positions with Brown-Forman and affiliates:   - Chairman of the Board since 2007 - Executive Vice President from 2011 to 2015 - Senior Vice President and Managing Director of Western Europe and Africa from 2009 to 2011 - Vice President and Jack Daniel’s Brand Director in Europe and Africa from 2004 to 2008 - Director of the Office of the Chairman and Chief Executive Officer from 2002 to 2004 - Founding member and Co-Chairman of Brown-Forman/Brown Family Shareholders Committee since 2007		QUALIFICATIONS AND SKILLS   - Business and industry experience gained by serving in operational, management, and executive positions within the Company - Deep knowledge of family corporate governance - Perspective as a fifth generation Brown family stockholder - A history of service on the Brown-Forman/ Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of shareholders

 

STUART R. BROWN
Director since 2015   Age 52		CURRENT AND PAST POSITIONS   Typha Partners, LLC (an early-stage private equity investment company), Managing Partner since 2010   DendriFund, Inc. (a charitable foundation established by Brown-Forman), President since 2011   Between the Covers Bookstore, Owner from 1998 to 2010   Positions with Brown-Forman and affiliates:   - Sales and Marketing Management from 1995 to 1998 - Founding member of Brown-Forman/Brown Family Shareholders Committee since 2007		QUALIFICATIONS AND SKILLS   - Extensive experience in family governance, entrepreneurial management, finance, and board leadership - Perspective as a fifth generation Brown family stockholder - A history of service on the Brown-Forman/ Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of shareholders

 

BRUCE L. BYRNES
Director since 2010   Age 69   Committees:   - Audit - Corporate Governance and Nominating		CURRENT AND PAST POSITIONS   Positions with The Procter & Gamble Company:   - Vice Chairman of the Board from 2002 to 2008 - Vice Chairman, Global Brand Building Training, from 2007 to 2008 - Vice Chairman, Global Household Care Division, from 2004 to 2007		QUALIFICATIONS AND SKILLS   - Executive leadership of a global consumer goods company - Expertise in brand building, brand management, and finance - Experience with international marketing and operations and corporate strategy   OTHER DIRECTORSHIPS   - Boston Scientific Corporation from 2009 to 2015 - Diebold, Incorporated from 2010 to 2015 - Cincinnati Bell, Inc. from 2003 to 2013

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

17

ELECTION OF DIRECTORS • NOMINEES

 

JOHN D. COOK
Director since 2008; Lead Independent Director since 2012   Age 64   Committees:   -Compensation -Corporate Governance and Nominating (Chair) -Audit -Executive		CURRENT AND PAST POSITIONS   Positions with McKinsey & Company:   - Director Emeritus - Director from 2003 to 2008		QUALIFICATIONS AND SKILLS   - Skills gained during a 40-year career advising and managing consumer products companies and creating shareholder value - Leadership and senior management experience - Financial and international expertise - Marketing skills - Experience with strategic acquisitions and integrations   OTHER DIRECTORSHIPS   - Winona Capital Management since 2007

MARSHALL B. FARRER
Director since 2016   Age 46		CURRENT AND PAST POSITIONS   Positions with Brown-Forman and affiliates:   - Vice President, Managing Director of Global Travel Retail, which includes Duty Free, Military, Cruise, and Transportation sales globally since 2015 - Led the global Jack Daniel’s Tennessee Honey brand team from 2014 to 2015 - Managing director of the Australia/Pacific region from 2010 to 2014 - Led the Latin America & Caribbean region from 2006 to 2009 - Various other positions over a 19-year career - Founding member of Brown-Forman/Brown Family Shareholders Committee since 2007 - Member of the Brown-Forman Management Executive Committee from 2007 to 2009		QUALIFICATIONS AND SKILLS   - Business and industry experience gained from serving in operational, management, and executive positions within the Company - Deep knowledge of family corporate governance - Perspective as a fifth generation Brown family stockholder - A history of service on the Brown-Forman Executive Committee and Brown-Forman/ Brown Family Shareholders Committee, which demonstrates his ability to represent the long-term interests of shareholders

LAURA L. FRAZIER
Director since 2016   Age 59		CURRENT AND PAST POSITIONS   Bittners (a more than 160-year-old interior and commercial design firm), Owner, Chairman, and past-CEO   Positions with Brown-Forman and affiliates:   - Member of the board of directors of Lenox, Inc., a former subsidiary, from 1999 to 2005 - Founding member of Brown-Forman/Brown Family Shareholders Committee since 2007		QUALIFICATIONS AND SKILLS   - Executive leadership and entrepreneurial management skills - Perspective as a fifth generation Brown family stockholder - A history of service on the Brown-Forman/ Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of shareholders

 

18

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

ELECTION OF DIRECTORS • NOMINEES

 

KATHLEEN M. GUTMANN
Director since May 2017   Age 48		CURRENT AND PAST POSITIONS   Positions with United Parcel Service:   - Chief Sales and Solutions Officer and Senior Vice President of The UPS Store and UPS Capital since 2015 - Senior Vice President of Worldwide Sales and Solutions from 2014 to 2015 - President of Worldwide Sales from 2011 to 2014		QUALIFICATIONS AND SKILLS   - Experience with directing long-term strategy as a member of the UPS Management Committee - Oversight of P&L for UPS Capital, a UPS subsidiary that provides supply chain, financial, insurance, and payment solutions, and The UPS Store, a franchise system of retail shipping, mailbox, print, and business service centers

AUGUSTA BROWN HOLLAND
Director since 2015   Age 41		CURRENT AND PAST POSITIONS   - Haystack Partners LLC (environmentally conscious real estate development), Founding Partner since 2006 - Founding member of Brown-Forman/Brown Family Shareholders Committee since 2007		QUALIFICATIONS AND SKILLS   - Extensive knowledge of urban planning and revitalization and environmentally friendly development - Experience serving on numerous civic boards - Perspective as a fifth generation Brown family stockholder - A history of service on the Brown-Forman/ Brown Family Shareholders Committee, which demonstrates her ability to represent the long-term interests of shareholders

MICHAEL J. RONEY
Director since 2014   Age 63   Committees:   - Compensation (Chair)		CURRENT AND PAST POSITIONS   Bunzl plc, Chief Executive Officer from 2005 to 2016		QUALIFICATIONS AND SKILLS   - Extensive senior management and executive leadership experience - Deep expertise in multinational production, distribution, and operations - Financial expertise - International mergers and acquisitions experience   OTHER DIRECTORSHIPS   - Next plc since February 2017, Deputy Chairman and Chairman Designate - Grafton Group plc since May 2016, Non-Executive Chairman since January 1, 2017 - Johnson Matthey plc from 2007 to 2014, Senior Independent Director - Bunzl plc from 2003 to 2005, Non-Executive Director

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

19

ELECTION OF DIRECTORS • NOMINEES

 

MICHAEL A. TODMAN
Director since 2014   Age 59   Committees:   - Audit (Chair)		CURRENT AND PAST POSITIONS   Positions with Whirlpool and affiliates:   - Vice Chairman, Whirlpool Corporation from 2014 to 2015 - President, Whirlpool International from 2009 to 2014 - President, Whirlpool North America from 2007 to 2009		QUALIFICATIONS AND SKILLS   - Extensive knowledge and experience in multinational operations, sales and distribution, and manufacturing - Executive leadership of large multinational organizations - Financial expertise   OTHER DIRECTORSHIPS   - Newell Rubbermaid, Inc. since 2007 - Prudential Financial, Inc. since 2016 - Whirlpool Corporation from 2006 to 2015

PAUL C. VARGA
Director since 2003   Age 53   Committees:   - Executive		CURRENT AND PAST POSITIONS   Positions with Brown-Forman and affiliates:   - Chief Executive Officer since 2005 - Chairman since 2007 - President and Chief Executive Officer of Brown-Forman Beverages from 2003 to 2005 - Global Chief Marketing Officer for Brown-Forman Spirits from 2000 to 2003		QUALIFICATIONS AND SKILLS   - In-depth knowledge of the Company’s business, operations, and strategy gained during his 30-year career - Extensive knowledge of the beverage alcohol industry - Sales and marketing and financial expertise - Strategic thinking, leadership, management, consensus-building, and communication skills   OTHER DIRECTORSHIPS   - Macy’s, Inc. since 2012

 

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

 

20

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

DIRECTOR COMPENSATION

DIRECTOR COMPENSATION  •  OVERVIEW

 

Deferred Stock Units

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

 

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

 

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

 

Employee Directors

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

 

Stock Ownership Guideline

Our stock ownership guideline for non-employee directors is equal to five times the annual board retainer, which in fiscal 2017 was $925,000. When considering whether a non-employee director has satisfied the stock ownership guideline, the Compensation Committee includes DSUs as well as Class A or Class B common stock held directly. The value of any unexercised stock-settled stock appreciation rights (SSARs) is not included. Any non-employee director who has not yet met the stock ownership guideline must elect to receive at least 60% of his or her annual equity board retainer in DSUs.

 

Expense Reimbursement

We reimburse all directors for reasonable and necessary expenses they incur in performing their duties as directors. In addition, we provide a travel stipend of $3,000 per meeting to directors who must travel to Board meetings from outside the United States.

 

Continuing Education Allowance

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

 

Events

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

 

22

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

DIRECTOR COMPENSATION  •  FISCAL 2017 DIRECTOR COMPENSATION

 

FISCAL 2017 DIRECTOR COMPENSATION

The following table shows the compensation paid to non-employee directors for their service in fiscal 2017.

FISCAL 2017 DIRECTOR COMPENSATION TABLE

 

Name		Fees Earned or Paid in Cash(1)				DSU Awards(2)(3)				All Other Compensation(4)				Total
Joan C. Lordi Amble(5)			$13,615				$—				$—				$13,615
Patrick Bousquet-Chavanne			59,394				185,000				15,000				259,394
Geo. Garvin Brown IV			517,727				312,500				18,000				848,227
Martin S. Brown Jr.(5)			45,066				—				—				45,066
Stuart R. Brown			185,227				—				—				185,227
Bruce L. Byrnes			116,477				115,000				—				231,477
John D. Cook			115,158				185,000				—				300,158
Laura L. Frazier			172,567				—				—				172,567
Sandra A. Frazier(5)			45,066				—				—				45,066
Augusta Brown Holland			85,227				115,000				—				200,227
Michael J. Roney			26,061				185,000				18,000				229,061
Michael A. Todman			115,133				115,000				—				230,133

 

(1)	Amounts in this column reflect fees earned during fiscal 2017 and include: annual Board retainer, if paid in cash; Lead Independent Director fee; annual committee chair and committee member retainers; non-employee chair of the Board retainer, if paid in cash; and any Board and committee meeting fees.
(2)	DSUs represent the right to receive one share of Class A or Class B common stock, and are determined by dividing the cash value of the compensation being paid in DSUs by the closing price of Class A or Class B common stock on the date of grant. DSU awards for the 2017 Board Year were granted on July 28, 2016. The closing price of our Class A stock on that date was $105.14. On dividend payment dates, outstanding DSUs are credited with dividend-equivalent DSUs.
(3)	The aggregate number of SSARs, DSUs, and Restricted Stock Units (RSUs) outstanding for each of our non-employee directors as of April 30, 2017, is set forth below. All SSARs shown are fully vested and exercisable. Annual grants of DSUs vest over the course of the Board Year. Outstanding SSARs and RSUs for Geo. Garvin Brown IV represent awards granted to him while he was an executive for Brown-Forman. Mr. Brown’s outstanding time-based RSUs will vest as follows, assuming his continued service on the Board: 6,852 RSUs vest on April 30, 2018, and 760 RSUs vest on April 30, 2019.

 

Name		DSUs Outstanding Class A as of April 30, 2017		DSUs Outstanding Class B as of April 30, 2017		Class B SSAR Outstanding as of April 30, 2017		Class B Time-Based Restricted Stock Units as of April 30, 2017
Joan C. Lordi Amble		9,179		4,252		—		—
Patrick Bousquet-Chavanne		15,773		10,526		—		—
Geo. Garvin Brown IV		12,485		—		12,512		7,612
Martin S. Brown, Jr.		—		3,163		24,494		—
Stuart R. Brown		—		—		—		—
Bruce L. Byrnes		9,747		6,831		—		—
John D. Cook		15,773		10,526		43,504		—
Laura L. Frazier		—		—		—		—
Sandra A. Frazier		—		3,163		24,494		—
Augusta Brown Holland		3,424		—		—		—
Michael J. Roney		11,909		—		—		—
Michael A. Todman		8,259		—		—		—

 

(4)	Reflects taxable travel stipend amounts paid during fiscal 2017 to directors who traveled to Board meetings from outside of the United States.
(5)	Ms. Joan C. Lordi Amble, Mr. Martin S. Brown Jr., and Ms. Sandra A. Frazier’s service as directors ended on July 28, 2016, at the 2016 Annual Meeting. The amounts set forth under “Fees Earned or Paid in Cash” represent the fees earned for their service for part of fiscal 2017.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

23

COMPENSATION DISCUSSION AND ANALYSIS

 

COMPENSATION DISCUSSION AND ANALYSIS  •  OVERVIEW OF OUR COMPENSATION PROGRAM

 

As a result of the Committee’s annual review process, it was determined that the total target direct compensation for our NEOs was below market median when compared to our compensation peer group listed on page 28. In light of this review we believe our executive compensation program delivers exceptional value to our stockholders, particularly considering the combination of strong returns and financial performance that Brown-Forman and its management team have delivered over multiple years.

 

Performance-Based Payouts for Fiscal 2017

Brown-Forman performance in fiscal 2017 reflected the alignment between executive compensation and Brown-Forman’s performance.

 

CASH INCENTIVES

•

We reported 7% growth in underlying operating income, above our predicted growth target for industry peers of 5%. As a result, short-term cash incentives paid out at 127% of target.

•

Our long-term cash incentives measure three-year performance of 1) absolute underlying operating income (40% weighting), 2) relative underlying operating income compared to industry peers (40% weighting), and 3) achievement of key long-term strategic objectives in our BF 150 corporate strategy (20% weighting). Our performance on these measures for the fiscal 2015–2017 performance period resulted in a payout of 143% of target.

 

EQUITY-BASED INCENTIVES

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

 

•

Performance-based restricted stock awards for the fiscal 2015–2017 performance period were converted into restricted shares shortly after the conclusion of fiscal 2017. The conversion was based on the cumulative total shareholder return of our Class B common stock compared to that of the companies constituting the Standard & Poor’s Consumer Staples Index. Our relative performance against this group over the performance period was at the 11th percentile, resulting in a threshold payout at 50% of target.

•

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

 

Advisory Votes on Executive Compensation

In our first “say-on-pay” vote in our 2014 Annual Meeting, our stockholders expressed overwhelming support for the compensation of our NEOs, with more than 99% of the votes cast approving the advisory resolution. The Committee considered these results as one of many factors in its executive compensation decisions for fiscal 2015, 2016, and 2017, and did not make any material changes to the executive compensation program.

 

Following the expressed preference of our stockholders, Brown-Forman expects to continue to conduct advisory votes on executive compensation every three years, but reserves the right to conduct votes more frequently in order to seek additional feedback from our stockholders. As in past years, the Committee will consider the results of this year’s “say-on-pay” advisory vote (Proposal 2 on page 51) in its future executive compensation decisions.

 

OVERVIEW OF OUR COMPENSATION PROGRAM

 

Compensation Objectives and Principles

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

 

As a family-controlled company, our history guides our perspective on executive compensation. Members of the Brown family have historically served as our senior leadership, and their compensation was modest by competitive market standards. While this was not a major concern at the time given their significant stock holdings, in recent years employees other than Brown family members have more frequently held our most senior executive positions. These individuals have less substantial ownership in the Company and, as a result, our compensation structure has evolved over time to better reflect the competitive landscape for executive talent. In order to remain competitive, as well as ensure our alignment with the interests of the Brown Family and our stockholders, we have established programs that remain focused on creating long-term value, reinforcing financial accountability, and delivering outstanding operational outcomes to drive sustained performance of Brown-Forman’s stock.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

25

COMPENSATION DISCUSSION AND ANALYSIS  •  OVERVIEW OF OUR COMPENSATION PROGRAM

 

 

 

26

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION DISCUSSION AND ANALYSIS  •  TARGET COMPENSATION

 

THE ROLE OF OUR COMPENSATION COMMITTEE

The Committee serves a critical role in our compensation governance. Through providing independent oversight and thought leadership on executive compensation and its relationship to Company performance, the Committee establishes performance objectives that correlate pay and performance. The Committee, with the assistance of its independent compensation consultant, FWC, establishes compensation for our NEOs and other designated executive officers, and helps the Board fulfill its duties relating to the compensation of our directors, officers, and employees. The Committee also has the sole authority, on behalf of the Board, to determine the compensation of our CEO.

 

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

 

The Committee’s deliberations and decisions are informed by the diverse experience of its members, input from certain members of management, advice from FWC, and access to functional experts in our human resources department.

 

Sound Pay Practices

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

 

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

 

The Compensation Consultant

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

 

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

 

TARGET COMPENSATION

 

How We Set Target Compensation for Our NEOs

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

 

To ensure our pay is competitive, we compare NEO compensation with the compensation for executives in similar positions within a comparator group of high-performing, brand-building consumer products companies with financial characteristics similar to those of Brown-Forman. FWC prepares a market analysis comparing the target value of each element of compensation for Brown-Forman’s NEOs to the compensation paid by the comparator group. This analysis produces a range of market-competitive levels of target compensation as one consideration in determining pay for our

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

27

COMPENSATION DISCUSSION AND ANALYSIS  •  TARGET COMPENSATION

 

NEOs. While we do not set target compensation to meet specific benchmarks, we do consider the median of the comparator group as a guide to appropriate target pay ranges for our NEOs.

 

To determine the pay elements that make up each NEO’s target compensation, we begin by reviewing a preferred “pro-forma” mix of pay developed and recommended by FWC. The objective of this practice is to have a pay mix that aligns from an internal perspective and supports our goal of promoting shareholder value. FWC and the Committee periodically review the “pro-forma” mix to ensure this continued alignment.

 

BROWN-FORMAN NEO PAY MIX VS. COMPENSATION COMPARATOR GROUP

 

 

 

(1)	This represents a recommended target pay mix by FWC.

 

 

Compensation Comparator Group

During fiscal 2017, the Committee reviewed the compensation comparator group to ensure continued alignment with the characteristics of Brown-Forman. As a result of this review, Keurig Green Mountain Inc. was removed as they were recently acquired.

 

Campari S.p.A.		Harley Davidson Inc.		Mead Johnson Nutrition Co.		The Hain Celestial Group, Inc.
Church & Dwight Co., Inc.		Hershey Co.		Molson Coors Brewing Co.		The WhiteWave Foods Company
Constellation Brands, Inc.		J.M. Smucker Co.		Monster Beverage Corp.
Diageo Plc.		lululemon athletica inc.		Pernod Ricard SA
Dr. Pepper Snapple Group, Inc.		McCormick & Co., Inc.		Remy Cointreau SA

 

28

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION DISCUSSION AND ANALYSIS  •

AWARDS AND PAYOUTS IN FISCAL 2017: FIXED AND SHORT-TERM COMPENSATION

 

Target Total Direct Compensation for Fiscal 2017

The chart below shows the annualized target total direct compensation for each of our NEOs in fiscal 2017 versus fiscal 2016, and the percentage increase of each component.

 

FISCAL 2017 VERSUS FISCAL 2016 NEO TARGET TOTAL DIRECT COMPENSATION

 

				■ Salary and		■ Short-Term		■ Long-Term		Target Total		Percent
Name		Year		Holiday Bonus(1)		Incentive Target		Incentive Target		Direct Comp		Increase		Pay Mix at Target
Paul C. Varga		2017		1,145,870		1,455,000		4,400,000		7,000,870		4%
		2016		1,133,370		1,400,000		4,200,000		6,733,370
Jane C. Morreau		2017		598,978		420,000		900,000		1,918,978		5%
		2016		572,935		400,000		850,000		1,822,935
Mark I. McCallum		2017		661,480		450,000		860,000		1,971,480		2%
		2016		645,854		440,000		850,000		1,935,854
Jill A. Jones		2017		614,603		440,000		840,000		1,894,603		4%
		2016		598,978		430,000		800,000		1,828,978
Lawson E. Whiting		2017		494,808		300,000		650,000		1,444,808		9%
		2016		447,931		275,000		600,000		1,322,931

 

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

 

AWARDS AND PAYOUTS IN FISCAL 2017: FIXED AND SHORT-TERM COMPENSATION

 

Fixed Compensation

Base salary. Salaries are typically adjusted each July following completion of our annual performance review process, though an NEO’s salary may be adjusted during the fiscal year if he or she experiences a change in role or responsibility.

 

Holiday bonus. One of our longstanding traditions is to offer a majority of our employees, including our NEOs, a lump-sum cash bonus during the holiday season. The intent of this bonus is to promote continued service and likewise to recognize our employees. The holiday bonus, which we consider to be part of base salary, is guaranteed and based solely on the employee’s length of service with Brown-Forman.

 

The table below shows the total amount of fixed compensation that each of our NEOs received in fiscal 2017.

 

FIXED COMPENSATION FOR 2017(1)
Name	Amount
Paul C. Varga	$1,143,865
Jane C. Morreau	594,799
Mark I. McCallum	658,973
Jill A. Jones	612,096
Lawson E. Whiting	487,287

 

(1)	Reflects fiscal year fixed compensation from May 1, 2016 to April 30, 2017, which includes base salary and holiday bonus.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

29

COMPENSATION DISCUSSION AND ANALYSIS •

AWARDS AND PAYOUTS IN FISCAL 2017: FIXED AND SHORT-TERM COMPENSATION

 

Short-Term Incentive Compensation

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

 

For fiscal 2017, 80% of the target award was tied to Brown-Forman’s Company performance and 20% was tied to individual performance. We believe basing the majority of short-term incentive awards for NEOs on Company performance appropriately reflects the collective accountability of our most senior executives for the performance of the enterprise. We also believe that basing a lesser, but meaningful, portion of the short-term incentive on individual performance provides flexibility to differentiate awards among NEOs based on their individual achievements during the fiscal year.

 

Both the corporate and individual portions of our short-term incentives are subject to a performance factor of 0% to 200%. After adjusting for performance, the two components are added together to determine the total short-term incentive payment. As a result, the total value of short-term incentives may vary between 0% and 200% of target, which is a range we believe to be sufficient in recognizing our varying levels of performance while not encouraging excessive risk-taking.

 

Please see the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for Fiscal 2017 found on page 40 for the amounts paid to NEOs in short-term incentive compensation for fiscal 2017.

 

COMPANY PERFORMANCE (80% OF TARGET AWARD)

Company performance goals for fiscal 2017 were based on Brown-Forman’s underlying operating income growth compared to the expected performance of our industry peers. We aspire to outperform these peers consistently and sustainably, and consider our historic underlying operating income growth trends, and outlook for fiscal 2017 performance, when setting these objectives.

 

The Committee determined that, for purposes of the short-term incentive compensation plan, Brown-Forman achieved underlying operating income of $1,006 million for fiscal 2017 (on an as-reported basis, fiscal 2017 operating income was $989 million) resulting in a payout of 127% of target.

 

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

 

•	foreign currency changes;
•	estimated net changes in distributor inventories for our brands; and
•	acquisitions and divestitures.

 

We explain why the Company uses underlying operating income in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-GAAP Financial Measures,” in our Annual Report on Form 10-K for fiscal 2017.

 

The fiscal 2017 short-term performance goal, our actual performance, and the resulting payout percentage of 127% of target is shown in the chart below:

 

FISCAL 2017 SHORT-TERM INCENTIVE COMPENSATION PERFORMANCE GOAL (IN $MM)

 

 

 

30

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION DISCUSSION AND ANALYSIS • AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION

 

INDIVIDUAL PERFORMANCE (20% OF TARGET AWARD)

Individual performance objectives for the NEOs consist of qualitative and quantitative goals that support the achievement of our strategic priorities, such as individual job responsibilities, diversity leadership, talent development, development of profit-driving ideas, implementation of BF 150 strategies, and overall contributions to Brown-Forman as a senior leader. For fiscal 2017, final individual scores were adjusted to ensure a weighted average reflecting overall Company performance, as we believe the organization’s performance is a reflection of the performance of our people. Payout levels for the individual portion of the short-term incentive are based on the following guidelines for aligning performance and compensation:

 

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

 

AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION

 

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

 

The Committee initially determines the target dollar value of the total long-term incentive award for each NEO. We then structure our long-term incentives as follows:

 

•	25% of total target: in the form of a performance-based cash incentive;
•	25% of total target: in the form of performance-based restricted stock;
•	25% of total target: in the form of stock-settled stock appreciation rights; and
•	25% of total target: in the form of any combination of the above, based on the NEO’s preference, subject to Committee discretion.

 

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

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

31

COMPENSATION DISCUSSION AND ANALYSIS • AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION

 

Long-Term Performance-Based Cash Incentive (For the Fiscal 2017–2019 Performance Period)

We provide our NEOs with an opportunity to earn a cash-based incentive award that is linked to Brown-Forman’s achievement of long-term performance goals. The graphic below shows how we tie this incentive to those goals, utilizing the same performance metrics since fiscal 2013. In fiscal 2016, the Committee changed the weightings of the performance metrics to focus more on strategic initiatives and measures relating to underlying net sales. These revised weightings were used for the awards granted in fiscal 2016 and 2017.

 

LONG-TERM CASH INCENTIVES FORMULA⁽¹⁾

 

To calculate the final payout, we:

 

1.	Assess performance under the three metrics below and calculate a payout percentage for each.
2.	Weight these payout percentages using the weightings shown below.
3.	Add the three weighted percentages to arrive at the final payout percentage.
4.	Multiply each NEO's target award by the final payout percentage.

 

 

(1)

Weightings for our long-term cash incentives were adjusted for grants beginning in fiscal 2016. Please see page 25 for more information about the previous weightings.

(2)

Underlying net sales is a non-GAAP measure and is detailed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-GAAP Financial Measures,” in our Annual Report on Form 10-K for fiscal 2017. Before a long-term cash incentive may be earned, the Company must achieve a minimum underlying operating income objective during the three-year performance period.

 

32

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION DISCUSSION AND ANALYSIS • AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION

 

AWARDS GRANTED IN FISCAL 2017 (FOR THE FISCAL 2017–2019 PERFORMANCE PERIOD)

Long-term cash incentives granted in fiscal 2017 have a three-year performance period and will be paid shortly following the completion of fiscal 2019. The table below shows the target awards granted to each NEO in fiscal 2017.

 

TARGET LONG-TERM CASH AWARDS FOR FISCAL 2017–2019 PERFORMANCE PERIOD

 

Name	Amount
Paul C. Varga	$1,540,000
Jane C. Morreau	306,000
Mark I. McCallum	430,000
Jill A. Jones	420,000
Lawson E. Whiting	325,000

 

AWARDS EARNED IN FISCAL 2017 (FOR THE FISCAL 2015–2017 PERFORMANCE PERIOD)

Our long-term cash awards for the three-year performance period beginning in fiscal 2015 were paid out shortly after fiscal 2017 ended. Based on our performance, the payout was 143% of the target award, calculated as shown in the graphic below:

 

ACTUAL PERFORMANCE AND PAYOUT FOR FISCAL 2015–2017 PERFORMANCE PERIOD

 

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

33

COMPENSATION DISCUSSION AND ANALYSIS • AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION

 

The table below shows the long-term cash award that each NEO earned in fiscal 2017 based on the 143% payout for the fiscal 2015–2017 performance period.

 

LONG-TERM CASH AWARDS PAID FOR FISCAL 2015–2017 PERFORMANCE PERIOD

 

Name	Amount
Paul C. Varga	$2,002,000
Jane C. Morreau	377,520
Mark I. McCallum	405,191
Jill A. Jones	354,998
Lawson E. Whiting	357,500

 

Performance-Based Restricted Stock

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

 

AWARDS GRANTED IN FISCAL 2017 (FOR THE FISCAL 2017–2019 PERFORMANCE PERIOD)

Performance-based restricted stock units granted in fiscal 2017 have a three-year performance period. These awards are initially expressed as a dollar value and converted to a specific number of units. At the end of the three-year performance period, units are adjusted for performance and converted to shares that are subject to an additional one-year holding requirement.

 

TARGET PERFORMANCE-BASED RESTRICTED STOCK AWARDS FOR FISCAL 2017–2019 PERFORMANCE PERIOD

 

Name	Amount
Paul C. Varga	$1,320,000
Jane C. Morreau	297,000
Mark I. McCallum	215,000
Jill A. Jones	210,000
Lawson E. Whiting	158,750

 

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

 

34

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION DISCUSSION AND ANALYSIS • AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION

 

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARDS:

PAYOUT SCALE AND POTENTIAL PAYOUTS FOR FISCAL 2017–2019 PERFORMANCE PERIOD

 

 

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

 

 

AWARDS EARNED IN FISCAL 2017 (FOR THE FISCAL 2015–2017 PERFORMANCE PERIOD)

Performance-based restricted stock awards for the fiscal 2015–2017 performance period were subject to a three-year performance period followed by a one-year vesting period. Performance was measured by comparing the three-year cumulative total shareholder return of Brown-Forman’s Class B common stock with the three-year cumulative total shareholder return of the companies that constituted the S&P Consumer Staples Index when the performance period ended. Performance-adjusted stock awards earned in fiscal 2017 will vest on April 30, 2018, subject to certain events that may cause an award to vest earlier.

 

The following companies constituted the comparative S&P Consumer Staples Index:

 

Altria Group Inc.		Coty, Inc.		Kimberly-Clark Corp.		Philip Morris International Inc.
Archer Daniels Midland Co.		CVS Health Corp.		Kraft Heinz Co.		Procter & Gamble Co.
Brown-Forman Corp. (Cl B)		Dr. Pepper Snapple Group Inc.		Kroger Co.		Reynolds American Inc.
Campbell Soup Co.		Estee Lauder Cos., Inc. (Cl A)		McCormick & Co. Inc.		Sysco Corp.
Church & Dwight Co., Inc.		General Mills Inc.		Mead Johnson Nutrition Co.		The Coca-Cola Co.
Clorox Co.		Hershey Co.		Molson Coors Brewing Co. (Cl B)		Tyson Foods Inc. (Cl A)
Colgate-Palmolive Co.		Hormel Foods Corp.		Mondelez International Inc. (Cl A)		Wal-Mart Stores Inc.
ConAgra Foods Inc.		J.M. Smucker Co.		Monster Beverage Corp.		Walgreens Boots Alliance Inc.
Constellation Brands Inc. (Cl A)		Kellogg Co.		PepsiCo Inc.		Whole Foods Market Inc.
Costco Wholesale Corp.

 

The Committee chose a range of payouts (50% to 150% of target) to support our goals of pay for performance and increased NEO equity ownership, while at the same time discouraging unnecessary risk-taking. Based on performance over the three-year period ending in fiscal 2017, the awards paid out at 50% of target.

 

This performance level was used to determine the number of restricted shares issuable to our NEOs, as shown below.

 

PERFORMANCE-BASED RESTRICTED STOCK AWARDS: PERFORMANCE FOR FISCAL 2015–2017 PERFORMANCE PERIOD

 

 

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

 

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

35

COMPENSATION DISCUSSION AND ANALYSIS • AWARDS AND PAYOUTS IN FISCAL 2017: LONG-TERM COMPENSATION

 

The resulting value was adjusted upward to account for dividends paid during the second and third years of the performance period. The number of restricted shares issued was then calculated using the closing price of Class A common stock on the date of grant (at the beginning of the three-year performance period). The Committee chose this calculation method to ensure that our NEOs remain exposed to changes in stock price and dividends issued during the performance period, consistent with the goals of our long-term incentive plan. These restricted shares were issued on June 1, 2017, and are subject to a one-year vesting period that ends on April 30, 2018. For more information on the performance-based restricted stock awards granted during fiscal 2017, please see the Grants of Plan-Based Awards Table and the Outstanding Equity Awards at 2017 Fiscal Year-End Table, set forth on pages 42 and 43, respectively.

 

The table below shows the number of shares of performance-based restricted stock that were issued on June 1, 2017, for the fiscal 2015–2017 performance period.

 

SHARES ISSUED FOR FISCAL 2015–2017 PERFORMANCE PERIOD

 

Name	Amount
Paul C. Varga	15,920
Jane C. Morreau	3,094
Mark I. McCallum	3,059
Jill A. Jones	2,668
Lawson E. Whiting	1,351

 

Stock Appreciation Rights

We award stock-settled stock appreciation rights (SSARs) that allow our NEOs to receive the value of the appreciation of our Class B common stock between the grant date and the exercise date. Unless the Committee determines otherwise, SSARs are granted annually on the date of the Annual Meeting of Stockholders. The number of Class B common SSARs awarded to our NEOs for fiscal 2017 was determined by dividing the dollar value of each SSAR award by the value of one SSAR (determined by the Black-Scholes method) at the close of trading on the grant date. SSARs become exercisable on the first day of the third fiscal year following the grant date and are generally exercisable for seven fiscal years thereafter. The SSARs granted in July 2016 (for fiscal 2017) therefore become exercisable on May 1, 2019, and expire on April 30, 2026.

 

SSAR GRANTS IN FISCAL 2017 (IN CLASS B SHARES)

 

Name	SSARs Granted
Paul C. Varga	215,084
Jane C. Morreau	41,482
Mark I. McCallum	30,028
Jill A. Jones	29,330
Lawson E. Whiting	22,696

 

36

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION DISCUSSION AND ANALYSIS • OTHER COMPENSATION ELEMENTS

 

OTHER COMPENSATION ELEMENTS

 

Post-Termination Compensation and Benefits

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

 

Employee Benefits and Perquisites

We provide our NEOs with certain benefits that are available to nearly all of our salaried employees in the United States, including term life insurance (equal to two times target cash compensation), travel accident insurance, matching contributions to a 401(k) savings plan, medical and dental insurance, and a pension that grows with each additional year of service and pay. NEOs and certain other executives receive additional benefits, including a leased automobile, automobile insurance, and limited reimbursement of financial planning expenses.

 

We purchase tickets to sporting and entertainment events for business outings with customers and suppliers. If the tickets are not used for business purposes, employees (including the NEOs) may use the tickets at no incremental cost to Brown-Forman. In addition, we occasionally invite the NEOs and their spouses to certain events, including retirement celebrations, award dinners, and similar functions. We believe these events provide valuable opportunities for our senior executives to establish and develop relationships with our directors, long-term stockholders, employees, and each other, furthering our objectives of retention and having a strong and cohesive management team. For more detail on these employee benefits, please see the “All Other Compensation” column of the Summary Compensation Table for Fiscal 2017 found on page 40.

 

Brown-Forman Corporation Non-qualified Savings Plan

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

 

In the event a participant’s deferrals into the Savings Plan reduce the participant’s taxable compensation that would otherwise be considered 401(k)-eligible pay upon which a company matching contribution is calculated, Brown-Forman will contribute to the Savings Plan to make up for any lost match under the 401(k) plan. All deferrals to the Savings Plan, and Brown-Forman’s contributions to it, are 100% vested when made, as are any deemed earnings related to those contributions. The benefits owed under the Savings Plan are general unsecured obligations of Brown-Forman, though we have chosen to set aside assets in a trust for the purpose of paying plan benefits. Brown-Forman is not entitled to an income tax deduction on the benefits owed under the Savings Plan until the benefits become taxable to the participants, which generally will be when the benefits are actually paid. Benefits accumulated under the Savings Plan are payable at either a participant-selected date at least two years after a contribution is made or after a participant’s employment terminates. Amounts accumulated are payable in a lump sum six months after termination, except in the case of retirement, where the form of payment (lump sum or installments of up to ten years) and the time of payment (up to ten years after retirement) will be chosen by the participant. The Non-qualified Deferred Compensation Table for Fiscal 2017 on page 47 contains information about NEO activity in the Savings Plan during fiscal 2017, including employee contributions, gains and losses attributable to the change in market value of the notional investments, and any payments to our NEOs.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

37

COMPENSATION DISCUSSION AND ANALYSIS • COMPENSATION POLICIES AND PRACTICES

 

COMPENSATION POLICIES AND PRACTICES

 

Incentive Compensation Recoupment Policy

The Committee oversees our Incentive Compensation Recoupment Policy. If Brown-Forman restates its reported financial results due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws within three years after the date the results are first publicly issued or filed, or if we discover an error in the calculation of any incentive compensation that was awarded or paid within the preceding three years, then Brown-Forman will, at the direction of the Committee, seek to recover all or part of the incentive compensation awarded or paid to executive officers that would not have been awarded or paid based upon the restated financial results or correct incentive calculation. If the Committee determines that any executive officer engaged in fraud or intentional misconduct in connection with any such material noncompliance or error in incentive calculation, the Committee can direct Brown-Forman to seek to recover incentive compensation awarded or paid to that executive officer that would not have been awarded or paid based upon the restated financial results or correct calculation for a period of six years after the date such financial results were first publicly issued or filed or six years prior to the date such fraud or misconduct was discovered.

 

Deductibility of Compensation

Section 162(m) of the Internal Revenue Code limits to $1 million the amount of annual compensation Brown-Forman may deduct for tax purposes when paid to an NEO (other than the Chief Financial Officer) unless the compensation is “performance-based” and paid under a formal compensation plan that meets the Internal Revenue Code’s requirements. To maintain flexibility, we have no policy requiring that all NEO compensation be fully deductible, but the Committee takes this factor into account when making compensation decisions.

 

Compensation Risk Assessment

To determine the level of risk arising from our compensation policies and practices, we conduct an annual risk assessment, with oversight by the Committee and its independent advisor, FWC, and by our internal auditors. The assessment is based on a framework provided by FWC and examines the risk associated with the compensation programs applicable to all of our employees. The assessment also considers the features of our compensation programs that are designed to mitigate risk. We believe our compensation programs encourage and reward an appropriate level of risk taking. Management and the Committee concluded, based upon the results of the assessment for fiscal 2017, that our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

Equity Award Grants

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

 

Source of Plan Shares

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

 

Margin Sales, Derivative Transactions Prohibited

Our Code of Conduct prohibits employees and directors from selling Brown-Forman securities that they do not own (a “short sale”), purchasing shares on margin, or holding shares in a margin account. Employees and directors also are prohibited from engaging in transactions involving exchange-traded options, puts, calls, or other derivative securities based on Brown-Forman securities.

 

38

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION DISCUSSION AND ANALYSIS • COMPENSATION COMMITTEE REPORT

 

Our Policy on Stock Ownership Guidelines

We do not have stock ownership guidelines for our employees. Due to our family-controlled status, we do not feel that encouraging employees to accumulate large quantities of Brown-Forman stock is a top priority. However, the Committee does review the stock ownership status of our NEOs before granting additional stock-based compensation each year to ensure that such grants are necessary and to assess potential retention risk. We list the stock beneficially owned by our NEOs on page 54.

 

Conclusion

We believe our executive compensation program continues to successfully attract, motivate, reward, and retain a team of talented and diverse executives and key employees, both in the United States and around the world, who will lead us to achieve our goal of being the best brand builder in the spirits industry and enable us to deliver sustainable and superior value to our stockholders over time.

 

COMPENSATION COMMITTEE REPORT

 

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

 

COMPENSATION COMMITTEE

Michael J. Roney, Chairman
Patrick Bousquet-Chavanne
John D. Cook

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

39

COMPENSATION TABLES

COMPENSATION TABLES • SUMMARY COMPENSATION

 

(6)

Amounts listed for fiscal 2017 include short-term cash incentive compensation paid for the one-year performance period ending on April 30, 2017, and long-term cash incentive compensation paid for the three-year performance period ending on April 30, 2017, as approved by the Compensation Committee in May 2017 and paid on June 15, 2017. These amounts are shown below.

 

	Short-Term Cash	Long-Term Cash	Total
Paul C. Varga	$1,862,400	$2,002,000	$3,864,400
Jane C. Morreau	537,600	377,520	915,120
Mark I. McCallum	576,000	405,191	981,191
Jill A. Jones	560,560	354,998	915,558
Lawson E. Whiting	384,000	357,500	741,500

 

(7)

Amounts represent changes between fiscal years in the actuarial present value of the accumulated pension benefits of each of the NEOs under the applicable pension or savings plan. Pension values may fluctuate significantly from year to year depending on a number of factors, including age, years of service, average annual earnings, and the assumptions used to determine the present value, such as the discount rate and mortality tables. Please see the Pension Benefits Table on page 45 for the assumptions used in calculating the change in pension value. None of the NEOs received above-market or preferential earnings (as these terms are defined by the SEC) on their nonqualified deferred compensation accounts.

 

	Qualified	Non-Qualified	Total
Paul C. Varga	$63,045	$981,748	$1,044,793
Jane C. Morreau	78,016	699,859	777,875
Mark I. McCallum	73,572	357,693	431,265
Jill A. Jones	47,281	411,567	458,848
Lawson E. Whiting	43,676	304,656	348,332

 

(8)	The following table sets forth each component of the “All Other Compensation” column.

 

Name	401(k) Matching Contribution(a)	Cost of Company- Provided Life Insurance	Cost of Company- Leased Car(b)	Other(c)	Total
Paul C. Varga	$13,590	$3,216	$15,057	$4,000	$35,863
Jane C. Morreau	13,487	3,189	11,595	3,970	32,241
Mark I. McCallum	13,469	3,216	12,645	1,755	31,085
Jill A. Jones	12,586	3,216	12,618	2,724	31,144
Lawson E. Whiting	15,160	2,432	10,396	750	28,738

 

(a)	For the period May 1, 2016 through April 30, 2017.
(b)	Values based on the cost to Brown-Forman during the fiscal year, including lease payments, maintenance, registration, and insurance premiums.
(c)	Reimbursement of financial planning expenses up to a limit of $4,000 for the fiscal year.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

41

COMPENSATION TABLES • GRANTS OF PLAN-BASED AWARDS

 

GRANTS OF PLAN-BASED AWARDS

The following table contains information regarding the equity and non-equity awards granted to our NEOs during fiscal 2017 under our 2013 Omnibus Compensation Plan. For additional information on the fiscal 2017 awards, please see the Compensation Discussion and Analysis, which begins on page 24.

 

FISCAL 2017 GRANTS OF PLAN-BASED AWARDS TABLE

 

																		All Other
																		Option Awards:				Grant Date
																		Number of		Exercise or		Fair Value
						Estimated Possible Payouts Under						Estimated Possible Payouts Under						Securities		Base Price		of Stock
		Grant		Award		Non-Equity Incentive Plan Awards(2)						Equity Incentive Plan Awards(3)						Underlying		of Option		and Option
Name		Date		Type(1)		Threshold		Target		Maximum		Threshold		Target		Maximum		Options(4)		Awards(5)		Awards(6)
Paul C. Varga				STC		$0		$1,455,000		$2,910,000
				LTC		0		1,540,000		3,080,000
		7/28/2016		PBRS								12,555		25,110		37,665						$1,236,048
		7/28/2016		SSAR														215,084		$49.01		1,540,031
Jane C. Morreau				STC		0		420,000		840,000
				LTC		0		306,000		612,000
		7/28/2016		PBRS								2,825		5,650		8,475						278,111
		7/28/2016		SSAR														41,482		$49.01		297,019
Mark I. McCallum				STC		0		450,000		900,000
				LTC		0		430,000		860,000
		7/28/2016		PBRS								2,045		4,090		6,135						201,326
		7/28/2016		SSAR														30,028		$49.01		215,034
Jill A. Jones				STC		0		440,000		880,000
				LTC		0		420,000		840,000
		7/28/2016		PBRS								1,998		3,996		5,994						196,644
		7/28/2016		SSAR														29,330		$49.01		210,035
Lawson E. Whiting				STC		0		300,000		600,000
				LTC		0		325,000		650,000
		7/28/2016		PBRS								1,546		3,092		4,638						152,165
		7/28/2016		SSAR														22,696		$49.01		162,501

 

(1)	“STC” represents short-term (or annual) incentive compensation payable in cash. “LTC” represents long-term incentive compensation payable in cash at the end of a three-year performance period. “PBRS” represents Class A common performance-based restricted stock. “SSAR” represents Class B common stock-settled stock appreciation rights.
(2)	Amounts represent potential value of the short-term incentive compensation opportunity for the fiscal 2017 performance period plus the cash component of the long-term incentive compensation opportunity for the fiscal 2017 through fiscal 2019 performance period. No amounts are payable if threshold underlying operating income performance levels are not achieved. STC and LTC are capped at 200% of target. Please see the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 40 for amounts actually paid. These amounts include the short-term cash incentive compensation paid for the one-year performance period ending on April 30, 2017, and the long-term cash incentive compensation paid for the three-year performance period ending on April 30, 2017. The maximum awards providing for cash settlement that may be granted to any NEO in fiscal 2017 were capped at $6,000,000.
(3)	Amounts represent the estimated payouts of the PBRS awards granted in fiscal 2017. PBRS awards are initially determined as a cash value, converted to units, and then subject to a three-year performance period followed by a one-year holding period. The final number of shares earned will be determined by multiplying the number of units by the three-year performance percentage, and adjusting upwards to account for dividends paid during the second and third years of the performance period. PBRS awards granted in fiscal 2017 will vest on April 30, 2019. The estimated possible payouts assume Brown-Forman continues to issue dividends at the current rate during the performance period.
(4)	The number of SSARs awarded for fiscal 2017 was determined by dividing the cash value of each SSAR award by the Black-Scholes value ($14.32) of our Class B common stock as of the close of trading on the date of grant, July 28, 2016. SSARs become exercisable on the first day of the third fiscal year following the fiscal year of grant, and generally are exercisable for seven fiscal years thereafter (barring certain events that may cause an award to become exercisable earlier). SSARs granted July 28, 2016, become exercisable on May 1, 2019, and expire April 30, 2026.
(5)	The exercise price for the SSARs represents the closing price of our Class B common stock on the grant date.
(6)	Calculated in accordance with FASB ASC Topic 718. Awards subject to performance conditions are calculated based on the probable outcome of the performance condition as of the grant date. Assumptions used in the calculation of these amounts appear in Note 10 to our audited financial statements for the fiscal year ended April 30, 2017, which are included in our Annual Report on Form 10-K for fiscal 2017.

 

42

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION TABLES • OUTSTANDING EQUITY AWARDS

 

OUTSTANDING EQUITY AWARDS

The following table lists the outstanding equity awards held by our NEOs as of April 30, 2017. The year-end values shown in the table are based on the April 30, 2017, closing prices for our Class A common stock, $48.06, and our Class B common stock, $47.32.

 

OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR END TABLE

 

				SSAR Awards(1)								Stock Awards(2)
Name		Grant Date		Number of Securities Underlying Unexercised SSARs Exercisable		Number of Securities Underlying Unexercised SSARs Unexercisable		SSAR Exercise Price		SSAR Expiration Date		Number of Shares or Units of Stock That Have Not Vested(3)		Market Value of Shares or Units of Stock That Have Not Vested(3)(4)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5)(6)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(7)
Paul C. Varga		7/28/2011		191,522				$23.20		4/30/2021
		7/26/2012		185,028				29.35		4/30/2022
		7/25/2013		124,664				36.21		4/30/2023
		7/24/2014				122,046		45.99		4/30/2024
		7/23/2015				154,250		51.13		4/30/2025
		7/28/2016				215,084		49.01		4/30/2026
		7/25/2013														140,022		$6,729,457
		7/24/2014										15,920		$765,115
		7/23/2015														29,047		1,395,999
		7/28/2016														38,657		1,857,855
Jane C. Morreau		7/23/2009		22,926				$13.53		4/30/2019
		7/22/2010		25,180				19.22		4/30/2020
		7/28/2011		28,730				23.20		4/30/2021
		7/26/2012		22,196				29.35		4/30/2022
		7/25/2013		18,532				36.21		4/30/2023
		7/24/2014				26,850		45.99		4/30/2024
		7/23/2015				26,758		51.13		4/30/2025
		7/28/2016				41,482		49.01		4/30/2026
		7/24/2014										3,094		$148,698
		7/23/2015														8,231		$395,582
		7/28/2016														8,699		418,074
Mark I. McCallum		7/23/2009		46,874				$13.53		4/30/2019
		7/22/2010		40,910				19.22		4/30/2020
		7/28/2011		46,288				23.20		4/30/2021
		7/26/2012		49,718				29.35		4/30/2022
		7/25/2013		31,942				36.21		4/30/2023
		7/24/2014				27,354		45.99		4/30/2024
		7/23/2015				22,300		51.13		4/30/2025
		7/28/2016				30,028		49.01		4/30/2026
		7/24/2014										3,059		$147,016
		7/23/2015														5,880		282,593
		7/28/2016														6,298		302,682

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

43

COMPENSATION TABLES • OUTSTANDING EQUITY AWARDS

 

OUTSTANDING EQUITY AWARDS

The following table lists the outstanding equity awards held by our NEOs as of April 30, 2017. The year-end values shown in the table are based on the April 30, 2017, closing prices for our Class A common stock, $48.06, and our Class B common stock, $47.32.

 

OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR END TABLE (CONTINUED)

 

				SSAR Awards(1)								Stock Awards(2)
Name		Grant Date		Number of Securities Underlying Unexercised SSARs Exercisable		Number of Securities Underlying Unexercised SSARs Unexercisable		SSAR Exercise Price		SSAR Expiration Date		Number of Shares or Units of Stock That Have Not Vested(3)		Market Value of Shares or Units of Stock That Have Not Vested(3)(4)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(5)(6)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(7)
Jill A. Jones		7/26/2012		22,196				$29.35		4/30/2022
		7/25/2013		19,542				36.21		4/30/2023
		7/24/2014				20,444		45.99		4/30/2024
		7/23/2015				25,184		51.13		4/30/2025
		7/28/2016				29,330		49.01		4/30/2026
		7/24/2014										2,668		$128,224
		7/23/2015														7,747		$372,321
		7/28/2016														6,152		295,665
Lawson E. Whiting		7/28/2011		17,156				$23.20		4/30/2021
		7/26/2012		15,518				29.35		4/30/2022
		7/25/2013		17,184				36.21		4/30/2023
		7/24/2014				12,078		45.99		4/30/2024
		7/23/2015				15,740		51.13		4/30/2025
		7/28/2016				22,696		49.01		4/30/2026
		7/24/2014										1,351		$64,929
		7/23/2015														4,152		$199,545
		7/28/2016														4,760		228,766

 

(1)	SSAR awards are exercisable for shares of Class B common stock. All SSARs vest and become fully exercisable on the first day of the third fiscal year following the fiscal year of grant, and generally are exercisable for seven fiscal years thereafter (barring certain events that may require an award to become exercisable earlier).
(2)	Represents Class A common performance-based restricted stock awards with a three-year performance period, followed by a one-year vesting period. The performance-based restricted stock awards granted on July 24, 2014, July 23, 2015, and July 28, 2016, will vest on April 30, 2018, April 30, 2019, and April 30, 2020, respectively.
(3)	Reflects the number of shares of restricted Class A common stock that were issued on June 1, 2017, upon satisfaction of the performance measures prescribed for the performance-based restricted stock awards granted on July 24, 2014. The number of shares issued was determined by multiplying the cash value of the target award by a three-year performance percentage (50%), adjusting upwards to account for dividends paid during the second and third years of the performance period, and then dividing that amount by $45.13, which was the split-adjusted closing price of our Class A common stock on the date of the grant. The restrictions on these shares will lapse on April 30, 2018.
(4)	The market value for the shares of restricted Class A common stock was determined by multiplying the number of shares of restricted Class A common stock by $48.06, the closing price of our Class A common stock on April 30, 2017.
(5)	Amounts shown represent the estimated maximum possible payout of PBRS units based on a performance multiplier of 150% of target for the awards granted in fiscal years 2016 and 2017. PBRS awards are initially determined as a cash value, converted to units, then subject to a three-year performance period followed by a one-year holding period. The number of shares of PBRS to be awarded is determined by multiplying the initial number of units by a three-year performance adjustment factor (150% in this instance) and adjusting to account for dividends paid during the second and third years of the performance period.
(6)	On July 25, 2013, Mr. Varga received a one-time performance-based special grant of 67,513 Class A shares of restricted stock. During the performance period, dividends accrued and were credited as additional restricted stock, subject to the same performance measures as the initial grant. The market value was determined by multiplying the outstanding number of restricted shares, 140,022, by $48.06, the closing price of Class A shares on April 30, 2017.
(7)	Market value for the PBRS awards was determined by multiplying the number of shares by $48.06, the closing price of our Class A common stock on April 30, 2017.

 

44

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION TABLES • PENSION BENEFITS

 

OPTION EXERCISES AND STOCK VESTED

The following table shows all SSAR awards exercised by the NEOs during fiscal 2017 and the value realized upon exercise, as well as all stock awards in which our NEOs vested during fiscal 2017 and the value realized upon vesting.

 

FISCAL 2017 OPTION EXERCISES AND STOCK VESTED TABLE

 

		Option/SSAR Awards(1)				Stock Awards(2)
		Number of Shares		Value Realized		Number of Shares		Value Realized
Name		Acquired on Exercise		on Exercise(3)		Acquired on Vesting(4)		on Vesting(5)
Paul C. Varga		—		—		26,776		$1,286,855
Jane C. Morreau(6)		14,262		$387,427		4,644		223,191
Mark I. McCallum		—		—		7,624		366,409
Jill A. Jones(7)		63,730		1,588,990		3,500		168,210
Lawson E. Whiting(8)		16,158		483,116		3,078		147,929

 

(1)	All SSAR awards are settled in Class B common stock.
(2)	All stock awards are in the form of Class A common stock.
(3)	Equals the difference between the SSAR exercise price and the market price of the underlying shares at time of exercise, multiplied by the number of SSAR awards exercised.
(4)	The grant date for all awards of Class A common performance-based restricted stock shown in the table was July 25, 2013. The vesting date was April 30, 2017.
(5)	Equals the closing price of the underlying securities on the vesting date multiplied by the number of shares that vested. The closing price of our Class A common stock on the vesting date, April 30, 2017, was $48.06.
(6)	Ms. Morreau exercised 14,262 SSAR awards on January 3, 2017.
(7)	Ms. Jones exercised 30,212 SSAR awards on July 8, 2016 and 33,518 SSAR awards on January 13, 2017.
(8)	Mr. Whiting exercised 16,158 SSAR awards on March 10, 2017.

 

PENSION BENEFITS

We maintain both tax-qualified and non-qualified supplemental excess retirement plans. The following table shows the present value of accumulated pension benefits payable to each of our NEOs under our tax-qualified plan (Brown-Forman Corporation Salaried Employees Retirement Plan) and under our non-qualified excess plan (Brown-Forman Supplemental Executive Retirement Plan), based on the pension earned as of our most recent FASB ASC Topic 715 measurement date, April 30, 2017. These plans are described below the table.

 

FISCAL 2017 PENSION BENEFITS TABLE

 

Name		Plan Name		Number of Years Credited Service		Present Value of Accumulated Benefit(1)		Payments During Last Fiscal Year
Paul C. Varga		Qualified		30.00		$1,041,931		—
		Non-Qualified		30.00		12,862,407		—
Jane C. Morreau		Qualified		25.58		1,106,364		—
		Non-Qualified		25.58		3,407,776		—
Mark I. McCallum		Qualified		13.75		692,000		—
		Non-Qualified		13.75		2,822,647		—
Jill A. Jones		Qualified		17.17		566,310		—
		Non-Qualified		17.17		1,954,251		—
Lawson E. Whiting		Qualified		19.83		566,291		—
		Non-Qualified		19.83		946,239		—

 

(1)

Actuarial present value of each NEO’s accumulated pension benefit as of our FASB ASC Topic 715 measurement date, April 30, 2017, using a 4.09% discount rate, age 65 expected retirement age, and RP-2014 mortality table adjusted to 2006 with MP-2015 for employees and healthy annuitants with a fully generational projection using scale MP-2015.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

45

COMPENSATION TABLES • PENSION BENEFITS

 

Brown-Forman Corporation Salaried Employees Retirement Plan

Most U.S. salaried employees, and all of our NEOs, participate in the tax-qualified Brown-Forman Corporation Salaried Employees Retirement Plan. This is a funded, non-contributory, defined benefit pension plan that provides monthly retirement benefits based on the participant’s age at retirement, years of service, and “Final Average Compensation” (described below). Retirement benefits are not offset by Social Security benefits and are assumed for actuarial purposes to be payable at age 65. Participants vest in the plan after five years of service.

 

Brown-Forman Corporation Supplemental Executive Retirement Plan

U.S. federal tax law limits the amount of compensation that may be used annually to accrue benefits under our tax-qualified Salaried Employees Retirement Plan. For employees whose compensation exceeds these limits, including our NEOs, we maintain a non-qualified supplemental executive retirement plan (SERP). The SERP restores the benefits that are lost due to U.S. federal tax law limitations. The SERP also provides faster vesting for certain key employees who join us mid-career. All NEOs are vested in the SERP.

 

Pension Formula

The formula to calculate the combined total pension benefit under both plans includes the following factors:

 

•	Final Average Compensation (FAC) is the average compensation of the highest consecutive five calendar years in the last ten calendar years of employment. For this purpose, compensation is considered to be salary, holiday bonus, and short-term incentive compensation (not long-term cash or equity compensation).
•	Social Security Covered Compensation (CC) is the average of the Social Security Taxable Wage Base in effect for each calendar year during the 35 years ending with the calendar year in which a participant reaches Social Security Retirement age.
•	Credited Service (Service) is the number of years and whole months during which the participant is employed by Brown-Forman at a location or division that participates in the pension plan, up to a maximum of 30 years.

 

The table below shows the pension formula and gives a sample calculation:

 

MONTHLY PENSION FORMULA FOR A PARTICIPANT RETIRING AT THE REGULAR RETIREMENT AGE OF 65

 

Generalized Formula	Sample calculation: assume FAC of $400,000, CC of $80,000, and Service of 30 years		Amount
1.3% multiplied by FAC up to CC	0.013 × $80,000	=	$1,040
1.75% multiplied by FAC above CC	0.0175 × $320,000	=	5,600
			6,640
The sum of the above multiplied by years of service	× 30	=	199,200
Divide by 12 to get the monthly pension (before reduction for early retirement or optional forms of payment).	÷ 12	=	$16,600

 

Early retirement is available at age 55 under both plans. Jane C. Morreau and Mark I. McCallum are the only NEOs who are currently eligible for early retirement.

 

Those who retire before age 65 under the final average pay formula have their pension payments reduced by 3% for each year (1/4 of 1% for each month) that payments start prior to age 65. Retirees also can reduce their pension payment to purchase optional forms of payment that protect their spouse or ensure a minimum payment period.

 

Once the final pension is determined, the federal rules that govern the maximum pension that can be paid under the qualified plan are applied to determine the portion to be paid under the qualified plan, and the remaining amount becomes payable under the non-qualified pension plan.

 

46

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION TABLES • NON-QUALIFIED DEFERRED COMPENSATION

 

NON-QUALIFIED DEFERRED COMPENSATION

Effective January 1, 2011, we adopted the Brown-Forman Corporation Non-qualified Savings Plan. Additional information on this plan may be found under “Brown-Forman Corporation Non-qualified Savings Plan” on page 37. The following table provides information on plan contributions and earnings for our NEOs for fiscal 2017:

 

FISCAL 2017 NON-QUALIFIED DEFERRED COMPENSATION TABLE

 

	Executive Contributions in Last FY(1)	Registrant Contributions in Last FY	Aggregate Earnings in Last FY(2)	Aggregate Withdrawals/ Distributions(3)	Aggregate Balance at Last FYE(4)
Paul C. Varga	$91,667	$ —	$1,200,021	$(1,750,963)	$6,345,436
Jane C. Morreau	291,846	—	75,616	—	1,077,414
Mark I. McCallum	—	—	154,574	(100,457)	1,242,589
Jill A. Jones	80,877	—	79,562	(34,297)	1,605,989
Lawson E. Whiting	—	—	—	—	—

 

(1)	Contributions shown in this column are included in each NEO’s compensation reported in the Summary Compensation Table, under “Salary” for the current fiscal year or under “Non-Equity Incentive Plan Compensation” in the previous fiscal year.
(2)	NEOs participating in the Savings Plan may notionally invest their plan balances in mutual funds within generally the same asset classes available to participants in our qualified 401(k) savings plan. The Savings Plan does not guarantee a return on deferred amounts. Earnings in this column represent deemed investment earnings or losses attributable to the change in market value of the notional investments. These amounts are not reported in the Summary Compensation Table because the Savings Plan does not provide for above-market or preferential earnings.
(3)	Mr. Varga, Mr. McCallum, and Ms. Jones each made a withdrawal from our non-qualified savings plan, as allowed under its terms and conditions.
(4)	Includes amounts previously reported as compensation to the NEOs in the Summary Compensation Table for fiscal years 2014 through 2016 (except for Mr. Whiting who was not an NEO until fiscal 2017): Mr. Varga: $4,924,495; Ms. Morreau: $657,992; Mr. McCallum: $809,530; and Ms. Jones: $926,932.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

47

COMPENSATION TABLES • POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

We do not provide our NEOs with any separate contract, agreement, or arrangement that allows for payments or benefits upon termination or a change in control or that discriminates in favor of an NEO in scope or terms of operation. We offer certain benefits to executives whose employment terminates before incentive awards are paid, depending upon the circumstances surrounding their termination. These benefits, shown in the table below, are intended to continue to link an executive’s compensation to Brown-Forman’s performance after the executive’s employment has ended and to avoid penalizing executives in situations where the termination was outside of their control.

 

TREATMENT OF ANNUAL AND LONG-TERM INCENTIVE AWARDS UPON TERMINATION OF EMPLOYMENT

 

Termination Event		Short-Term Cash Incentives		Long-Term Cash Incentives and Performance-Based Restricted Stock		SSARs
Retirement(1)		Awards granted in the fiscal year of termination are prorated based on the time worked during the fiscal year, adjusted for performance, and paid at the same time and in the same manner as to active employees.		Awards granted in the fiscal year of termination are prorated based on the time worked during the year, adjusted for performance, and paid at the end of or shortly following the performance period. Unpaid awards granted in prior fiscal years are not reduced, but are adjusted for performance and paid at the end of or shortly following the performance period.		Awards granted in the fiscal year of termination are prorated based on the time worked during the year. Awards granted in prior fiscal years are not reduced. All awards become exercisable at the same time and in the same manner as for active employees. Retirees must exercise awards by the earlier of the original expiration date or the end of seven years following the date of retirement.
Involuntary Not for Cause		Awards granted in the fiscal year of termination are prorated based on the time worked during the fiscal year, adjusted for performance, and paid at the same time and in the same manner as to active employees.		Awards granted in the fiscal year of termination are prorated based on the time worked during the year, adjusted for performance, and paid at the end of or shortly following the performance period. Unpaid awards granted in prior fiscal years are not reduced, but are adjusted for performance and paid at the end of or shortly following the performance period.		Awards granted in the fiscal year of termination are prorated based on the time worked during the year. Awards granted in prior fiscal years are not reduced. All awards become exercisable at the same time as for active employees. Awards must be exercised by the later of twelve months following the date of termination or twelve months following the first exercise date, but in no case beyond the original expiration date.
Death/Permanent Disability		Awards granted in the fiscal year of termination are prorated based on the time worked during the year and are paid upon termination at a target level of performance.		Awards granted in the fiscal year of termination are prorated based on the time worked during the year and become payable shortly after termination at a target level of performance. Unpaid awards granted in prior fiscal years are not reduced and become payable shortly after termination at a target level of performance.		Awards granted in the fiscal year of termination are prorated based on the time worked during the year. Unpaid awards granted in fiscal years prior to death or permanent disability are not reduced. All awards become exercisable upon date of death or permanent disability. Awards must be exercised by the earlier of the expiration date or the end of five years following the date of death or termination of employment due to disability.
Voluntary Termination or Involuntary for Poor Performance		Awards granted in the fiscal year of termination are forfeited.		All unearned or nonvested awards are forfeited.		Awards that are not vested at the time of termination are forfeited. Awards that are exercisable at the time of termination may be exercised for up to 30 days, but in no case beyond the original expiration date.
Involuntary for Cause		Awards granted in the fiscal year of termination are forfeited.		All unearned or nonvested awards are forfeited.		All outstanding awards are forfeited.

 

(1)	Retirement applies to those executives who leave Brown-Forman at or after age 55 with at least 5 years of service or at or after age 65 with any service.

 

Change in Control and Termination Upon Change in Control

In the event of a change in control, as defined in the Brown-Forman 2013 Omnibus Plan or the Brown-Forman 2004 Omnibus Plan, as applicable, short-term and long-term incentive compensation cycles continue unaffected, and outstanding options and SSARs become immediately vested but remain exercisable according to their original vesting schedule. In the event an executive’s employment is terminated by the Company without cause or by the executive within 60 days after a constructive discharge, in either case within one year following a change in control, all outstanding awards become immediately vested and exercisable, restriction periods lapse, and cash awards are paid out pro-rata based on target performance through the effective date of termination. In the event of a change in control that modifies the capital structure of Brown-Forman (or its successors), the realizable value on exercise of outstanding options and SSARs is subject to adjustment as described in the applicable Omnibus Plan.

 

48

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

COMPENSATION TABLES • POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

The following table illustrates the value of compensation available to our NEOs had their employment terminated on April 30, 2017, the last day of our 2017 fiscal year, under various scenarios. The compensation included is only amounts that would have been payable as a direct result of the specified triggering event. This table excludes the value of pension benefits that are disclosed in the Fiscal 2017 Pension Benefits Table on page 45 and the amounts payable under deferred compensation plans that are disclosed in the Fiscal 2017 Non-qualified Deferred Compensation Table on page 47.

 

FISCAL 2017 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE

 

Name		Death Benefit(1)		Holiday Bonus(2)		STC(3)		LTC(4)		SSARs(5)		PBRS(4)		SRS(7)		Total
Paul C. Varga
Voluntary Termination		—		—		—		—		—		—		—		—
Involuntary Termination for Cause		—		—		—		—		—		—		—		—
Involuntary Termination Not for Cause		—		$19,113		$1,847,850		$5,222,000		$162,931		$3,971,534		—		$11,223,428
Retirement		—		19,113		1,847,850		5,222,000		162,931		3,971,534		—		11,223,428
Death		$2,000,000		19,113		1,455,000		4,620,000		162,931		3,666,305		$5,383,566		17,306,915
Change in Control		—		—		—		—		162,931		—		—		162,931
Termination Upon Change in Control		—		19,113		1,455,000		4,620,000		162,931		3,666,305		6,729,457		16,652,806
Jane C. Morreau(6)
Voluntary Termination		—		$9,991		$537,600		$981,020		$35,845		$753,821		—		$2,318,277
Involuntary Termination for Cause		—		—		—		—		—		—		—		—
Involuntary Termination Not for Cause		—		9,991		537,600		981,020		35,845		753,821		—		2,318,277
Retirement		—		9,991		537,600		981,020		35,845		753,821		—		2,318,277
Death		$2,994,000		9,991		420,000		867,500		35,845		700,426		—		5,027,762
Change in Control		—		—		—		—		35,845		—		—		35,845
Termination Upon Change in Control		—		9,991		420,000		867,500		35,845		700,426		—		2,033,762
Mark I. McCallum(6)
Voluntary Termination		—		$11,033		$576,000		$1,260,191		$36,518		$583,232		—		$2,466,974
Involuntary Termination for Cause		—		—		—		—		—		—		—		—
Involuntary Termination Not for Cause		—		11,033		576,000		1,260,191		36,518		583,232		—		2,466,974
Retirement		—		11,033		576,000		1,260,191		36,518		583,232		—		2,466,974
Death		$2,000,000		11,033		450,000		1,157,100		36,518		584,650		—		4,239,301
Change in Control		—		—		—		—		36,518		—		—		36,518
Termination Upon Change in Control		—		11,033		450,000		1,157,100		36,518		584,650		—		2,239,301
Jill A. Jones
Voluntary Termination		—		—		—		—		—		—		—		—
Involuntary Termination for Cause		—		—		—		—		—		—		—		—
Involuntary Termination Not for Cause		—		$10,251		$560,560		$1,054,998		$27,293		$602,504		—		$2,255,606
Retirement		—		10,251		560,560		1,054,998		27,293		602,504		—		2,255,606
Death		$2,000,000		10,251		440,000		989,500		27,293		572,347		—		4,039,391
Change in Control		—		—		—		—		27,293		—		—		27,293
Termination Upon Change in Control		—		10,251		440,000		989,500		27,293		572,347		—		2,039,391
Lawson E. Whiting
Voluntary Termination		—		—		—		—		—		—		—		—
Involuntary Termination for Cause		—		—		—		—		—		—		—		—
Involuntary Termination Not for Cause		—		8,253		384,000		982,500		16,124		387,604		—		1,778,481
Retirement		—		8,253		384,000		982,500		16,124		387,604		—		1,778,481
Death		$2,536,000		8,253		300,000		912,500		16,124		344,782		—		4,117,659
Change in Control		—		—		—		—		16,124		—		—		16,124
Termination Upon Change in Control		—		8,253		300,000		912,500		16,124		344,782		—		1,581,659

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

49

COMPENSATION TABLES • POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

(1)	Death benefit includes amounts provided by Brown-Forman as an insurance benefit (generally available to all salaried employees) and additional amounts elected and paid for by each NEO as optional insurance coverage.
(2)	Prorated holiday bonus is provided in the event of retirement, death/permanent disability, involuntary termination not-for-cause, and termination upon change in control. Holiday bonus is calculated based on a December 1 to November 30 payment cycle.
(3)	Prorated short-term cash incentives are provided in the event of retirement, involuntary termination not-for-cause, death/permanent disability, or termination upon change in control. In the event of retirement or involuntary termination not-for-cause, awards are based on actual Company performance and paid at the same time and in the same manner as to active employees. Short-term cash incentives shown for retirement or involuntary termination not-for-cause are performance-adjusted awards paid for fiscal 2017. In the event of death/permanent disability or termination upon a change in control, awards are paid as soon as practicable after termination at a target level of performance. Short-term cash incentives shown for death/permanent disability or termination upon a change in control are shown at target. Awards shown are not prorated because termination is assumed to have occurred on the last day of our fiscal year.
(4)	Continued vesting of a prorated portion of long-term cash incentives and performance-based restricted stock is provided in the event of retirement, involuntary termination not-for-cause, death/permanent disability, or termination upon a change in control. In the event of retirement or involuntary termination not-for-cause, awards are based on actual Company performance and generally are paid at the same time and in the same manner as to active employees. Values shown for long-term cash incentives in situations of retirement or involuntary termination not-for-cause are based on actual payouts for the performance period that ended in fiscal 2017 and target performance for performance periods ending in future fiscal years. Values shown for performance-based restricted stock in instances of retirement or involuntary termination not-for-cause are based on the April 30, 2017, market value of restricted shares granted in fiscal 2015 and the estimated maximum possible payout of 150% of target for awards granted in fiscal years 2016 and 2017, respectively. In the event of death/permanent disability or termination upon a change in control, awards are paid as soon as practicable after termination at a target level of performance. Values shown for long-term cash incentives in situations of death/permanent disability or termination upon a change in control are based on target levels of performance. Values shown for performance-based restricted stock in instances of death/permanent disability or termination upon a change in control are based on the April 30, 2017, market value of restricted shares granted in fiscal 2015 and the estimated possible payout of 100% of target for awards granted in fiscal years 2016 and 2017. Awards granted in the year of termination are adjusted pro-rata based on the time worked during the fiscal year. Unpaid awards granted in prior fiscal years are not reduced. Awards shown are not prorated because termination is assumed to have occurred on the last day of our fiscal year.
(5)	Continued vesting of a prorated portion of SSARs is provided in the event of retirement, death/permanent disability, or involuntary termination not-for-cause. In the event of retirement or involuntary termination not-for-cause, SSARs become vested at the same time and in the same manner as they do for active employees. In the event of retirement, SSARs must be exercised by the sooner of the original expiration date or seven years following the date of retirement. Employees terminated not-for-cause must exercise their SSARs by the sooner of the original expiration date or twelve months following vesting or, if vested, twelve months following termination. In the event of death or permanent disability, SSARs vest immediately and must be exercised by the sooner of the original expiration date or five years following the date of death or termination due to disability. In the event of a termination following a change in control, SSARs vest immediately and remain exercisable until 30 days following the original scheduled vesting date. Awards granted in the year of termination are adjusted pro-rata based on the time worked during the fiscal year. Awards shown are not prorated because termination is assumed to have occurred on the last day of our fiscal year. Amounts shown represent the value realized upon vesting or non-forfeitability of nonvested SSARs based upon the difference between the exercise price and the closing price of our Class B common stock on April 30, 2017.
(6)	As retirement-eligible NEOs, each of Ms. Morreau and Mr. McCallum would be treated as a retiree in the event of voluntary termination.
(7)	On July 25, 2013, Mr. Varga received a one-time special restricted stock grant of 67,513 Class A shares. During the performance period, dividends accrued and were credited as additional restricted stock, subject to the same performance measures as the initial grant. In the event of death or disability this award will vest immediately and be prorated based on the number of months employed during the performance period, with the Committee retaining the discretion to reduce the award. In the event of a voluntary termination, involuntary termination for cause, or involuntary termination for poor performance, the award will be immediately forfeited. In instances of involuntary “no fault” termination or any other termination (with the exception of a change in control) the award will be immediately forfeited, but the Committee retains the discretion to provide a prorated portion of the award based on the number of months Mr. Varga was employed during the performance period. Termination without cause upon a change in control will result in the vesting of the award.

 

50

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

PROPOSAL 2:   ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

PROPOSAL 3:   ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

 

STOCK OWNERSHIP

 

STOCK OWNERSHIP • STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS

 

STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth, as of April 30, 2017, the amount of our Class A and Class B common stock beneficially owned by each current director, each director nominee, each named executive officer, and by all directors and executive officers as a group. Some shares shown below are beneficially owned by more than one person. As of the close of business on April 30, 2017, there were 169,051,360 shares of Class A common stock and 215,034,976 shares of Class B common stock outstanding. In calculating the aggregate number of shares and percentages owned by all directors and executive officers as a group, which includes shares owned by persons not named in this table, we counted each share only once.

 

STOCK BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS AS OF APRIL 30, 2017

 

		Class A Common Stock(2)(3) Voting or Investment Power												Class B Common Stock(2)(3) Investment Power
Name(1)		Sole			Shared			Total		% of Class				Sole			Shared			Total		% of Class
Patrick Bousquet-Chavanne		—			—			—			*			53,332			—			53,332			*
Campbell P. Brown(4)		3,917,120			—			3,917,120			2.3	%		1,250,923	(5)(6)		72			1,250,995			*
Geo. Garvin Brown IV(4)		3,696,227			18,012			3,714,239			2.2	%		1,308,783	(6)(7)		5,946			1,314,729			*
Stuart R. Brown		720,620			2,160			722,780			*			281,936			6,858			288,794			*
Bruce L. Byrnes		—			—			—			*			—			—			—			*
John D. Cook		—			—			—			*			43,504			—			43,504			*
Marshall B. Farrer(4)		—			—			—			*			26,546			—			26,546			*
Laura L. Frazier		427,490			—			427,490			*			459,218			—			459,218			*
Kathleen M. Gutmann		—			—			—			*			—			—			—			*
Augusta Brown Holland(4)		1,290,556			487,317			1,777,873			1.1	%		251,924			115,210	(8)		367,134			*
Jill A. Jones		48,280			—			48,280			*			99,275	(6)		185			99,460			*
Mark I. McCallum		44,564			—			44,564			*			253,800			54			253,854			*
Jane C. Morreau		21,387			—			21,387			*			150,550			—			150,550			*
Michael J. Roney		—			—			—			*			—			—			—			*
Michael A. Todman		—			—			—			*			—			—			—			*
Paul C. Varga		487,859			—			487,859			*			825,126			—			825,126			*
Lawson E. Whiting		1,989			—			1,989			*			61,936			—			61,936			*
All Directors and Executive Officers as a Group (24 persons, including those named above)(9)		10,691,219			507,489			11,198,708	(10)		6.7	%		5,571,701			128,325			5,700,026	(11)		2.7	%

*	Represents less than 1% of the class.
(1)	The address for each person named in the table is 850 Dixie Highway, Louisville, Kentucky 40210.
(2)	Based upon Company information, information furnished to the Company by the named persons, and information contained in filings with the SEC. Under SEC rules, a person is deemed to beneficially own shares over which the person has or shares voting or investment power or as to which the person has the right to acquire beneficial ownership within 60 days (including shares underlying options or stock appreciation rights that are exercisable within 60 days).

 

54

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

STOCK OWNERSHIP • SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

(3)

Includes the following Class B SSARs that are currently exercisable or that will become exercisable on or before June 29, 2017 (60 days after April 30, 2017). Class A and B deferred stock units, which vest over the course of the Board Year and are paid out following a six-month waiting period (as defined under “Director Compensation” beginning on page 21), are not included in the main table. Performance-based restricted Class A common stock reflected below was issued on June 1, 2017, and also is not included in the main table.

		Class A				Class B
Name		Restricted Stock		Deferred Stock Units		SSARs		Deferred Stock Units
Patrick Bousquet-Chavanne		—		15,773		—		10,526
Campbell P. Brown		—		—		7,436		—
Geo. Garvin Brown IV		—		12,485		12,512		—
Bruce L. Byrnes		—		9,747		—		6,831
John D. Cook		—		15,773		43,504		10,526
Marshall B. Farrer		—		—		24,420		—
Laura L. Frazier		—		—		—		—
Augusta Brown Holland		—		3,424		—		—
Jill A. Jones		2,668		—		62,182		—
Mark I. McCallum		3,059		—		243,086		—
Jane C. Morreau		3,094		—		144,414		—
Michael J. Roney		—		11,909		—		—
Michael A. Todman		—		8,259		—		—
Paul C. Varga		15,920		—		623,260		—
Lawson E. Whiting		1,351		—		61,936		—

(4)	Campbell P. Brown, Geo. Garvin Brown IV, Marshall B. Farrer and Augusta Brown Holland each hold no voting power over any shares of Class A common stock. Each holds sole or shared investment power over the Class A shares presented in the table.
(5)	Includes 120,000 shares of Class B common stock pledged as security.
(6)	Includes Class B common stock held in the 401(k) plan as of the close of business on April 30, 2016, as follows: Campbell P. Brown, 16,161 shares; Geo. Garvin Brown IV, 26,263 shares; Jill A. Jones, 11,611 shares.
(7)	Includes 880,892 shares of Class B common stock pledged as security.
(8)	Includes 4,712 shares of Class B common stock pledged as security.
(9)	“All Directors and Executive Officers as a Group” includes 24 individuals, including those directors and officers named in the table. In calculating the aggregate number of shares and percentages owned by all directors and executive officers as a group, each share is counted only once.
(10)	Directors and executive officers as a group hold 77,370 Class A deferred stock units, which are not included in the main table.
(11)	Includes 1,687,388 Class B SSARs held by all directors and executive officers as a group that are exercisable on or before June 29, 2017 (60 days after April 30, 2017). Directors and executive officers as a group hold 27,882 Class B deferred stock units, which are not included in the main table.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (Securities Exchange Act) requires our executive officers, directors, and “beneficial owners” of more than 10% of our Class A common stock to file stock ownership reports and reports of changes in ownership with the SEC. Based on a review of those reports and written representations from the reporting persons, we believe that during fiscal 2017, all transactions were reported on a timely basis, except for the following late filings: one holding omitted from Form 3 by Ralph de Chabert; two holdings omitted from Form 3 by Lisa Steiner; Form 4 by Jill A. Jones reporting one transaction; Form 4 by Campbell P. Brown reporting two transactions; and Form 4 by Stuart R. Brown reporting one transaction.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

55

AUDIT MATTERS

 

AUDIT MATTERS • AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

 

FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The following table presents the fees Brown-Forman incurred for the professional services provided by PwC for fiscal years 2016 and 2017. All such fees were pre-approved by the Audit Committee in accordance with the policy described below.

 

	Fiscal Years
	2016		2017
Audit Fees	$1,597,000		$2,241,000
Audit-Related Fees	210,000		163,000
Tax Fees	385,000		637,000
All Other Fees	6,000		3,000
Total	$2,198,000		$3,044,000

 

Audit Fees

This category consists of the audit of Brown-Forman’s annual financial statements included in the Annual Report on Form 10-K, attestation services relating to the report on internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, review of interim financial statements included in quarterly reports on Form 10-Q, services normally provided in connection with statutory and regulatory filings or engagements, and statutory audits required by foreign jurisdictions.

 

Audit-Related Fees

This category consists principally of fees related to the audits of employee benefit plans. For fiscal 2017, this category also included fees for assurance and related services that are reasonably related to the audit or review of Brown-Forman’s financial statements but are not included in the Audit Fees category.

 

Tax Fees

This category consists principally of fees related to tax planning and transfer pricing services.

 

All Other Fees

This category consists of fees for an accounting research subscription.

 

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

It is the policy of the Audit Committee to pre-approve all audit services and permitted non-audit services (including an estimate of the fees or a range of fees) to be performed for Brown-Forman by its independent registered public accounting firm, subject to the de minimis exception for non-audit services described in the Securities Exchange Act. The Audit Committee pre-approved the fiscal 2017 audit and non-audit services provided by PwC. The non-audit services approved by the Audit Committee were also reviewed to ensure compatibility with maintaining PwC’s independence. The Audit Committee has delegated to its Chair the authority to pre-approve proposed audit and non-audit services that arise between meetings, with the understanding that any such decision will be reviewed at the next scheduled Audit Committee meeting. During the approval process, the Audit Committee considers the potential impact of the type of service on the independence of the registered public accounting firm. Services and fees must be deemed compatible with the maintenance of the registered public accounting firm’s independence, including compliance with SEC rules and regulations. The Audit Committee may not delegate to management the Audit Committee’s responsibility to pre-approve permitted services of our independent registered public accounting firm. Throughout the year, the Audit Committee reviews any revisions to the estimates of fees initially approved.

 

The Audit Committee has adopted other policies in an effort to ensure the independence of our independent registered public accounting firm. The Audit Committee must pre-approve PwC’s rendering of personal financial and tax advice to any of Brown-Forman’s designated executive officers. In addition, the Audit Committee has a policy that limits Brown-Forman’s ability to hire certain current and former employees of our independent registered public accounting firm.

 

2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  BROWN-FORMAN

57

AUDIT MATTERS • APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed PwC to serve as our independent registered public accounting firm for the fiscal year ending April 30, 2018. Through its predecessor Coopers & Lybrand L.L.P., PwC has served as Brown-Forman’s auditor continuously since 1933. A representative of PwC will attend the Annual Meeting, will have an opportunity to make a statement, and will be available to respond to appropriate questions. We know of no direct or material indirect financial interest that PwC has in Brown-Forman or any of our subsidiaries, or of any connection between Brown-Forman or any of our subsidiaries with PwC in the capacity of promoter, underwriter, voting trustee, director, officer, or employee.

 

58

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

OTHER INFORMATION

 

 

OTHER INFORMATION • STOCKHOLDER PROPOSALS FOR THE 2018 ANNUAL MEETING

 

STOCKHOLDER PROPOSALS FOR THE 2018 ANNUAL MEETING

To be considered for inclusion in the Proxy Statement for the 2018 Annual Meeting of Stockholders, stockholder proposals must be sent to 850 Dixie Highway, Louisville, Kentucky 40210, no later than February 27, 2018. Proposals should be sent to the attention of Matthew E. Hamel, our Secretary, and must comply with SEC requirements related to the inclusion of stockholder proposals in company-sponsored proxy materials. Any notice of a proposal submitted outside the process of Exchange Act Rule 14a-8, that a stockholder intends to bring at our 2018 Annual Meeting of Stockholders should be submitted by May 13, 2018, and the proxies solicited by us for next year’s Annual Meeting will confer discretionary authority to vote on any such matters without a description of them in the Proxy Statement for that Annual Meeting.

 

	By Order of the Board of Directors
	MATTHEW E. HAMEL
	Secretary
	Louisville, Kentucky
	June 27, 2017

 

60

BROWN-FORMAN  2017 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

		Electronic Voting Instructions   Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.   YOUR 15-DIGIT VALIDATION NUMBER IS PROVIDED IN THE CIRCLE BELOW.   Proxies submitted online or by telephone must be received by 1:00 a.m., Eastern Time, on Thursday, July 27, 2017.
			Vote online • Go to www.investorvote.com/BFB • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website

 

			Vote by telephone
			•	Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone (Stockholders based outside of the United States, its territories, and Canada must cast their votes online or by mail.)
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.	x		•	There is NO CHARGE to you for the call
			•	Follow the instructions provided by the recorded message

 

 

Annual Meeting Proxy Card

6 IF YOU HAVE NOT VOTED ONLINE OR BY TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6

 

 

You are encouraged to specify your choices by marking the appropriate boxes, but you need not mark any boxes if you wish to vote in accordance with the recommendation of the Board of Directors. The Proxies cannot vote your shares unless you vote either online or by telephone or sign and return this card.

 

Proposals —

The Board of Directors recommends a vote FOR the election of all the nominees listed, FOR Proposal 2, and for “EVERY THREE YEARS” on Proposal 3.

1.

Election of Directors:

For

Against

Abstain

For

Against

Abstain

For

Against

Abstain

01 - Patrick Bousquet- Chavanne

o

o

o

02 - Campbell P. Brown

o

o

o

03 - Geo. Garvin Brown IV

o

o

o

04 - Stuart R. Brown

o

o

o

05 - Bruce L. Byrnes

o

o

o

06 - John D. Cook

o

o

o

07 - Marshall B. Farrer

o

o

o

08 - Laura L. Frazier

o

o

o

09 - Kathleen M. Gutmann

o

o

o

10 - Augusta Brown Holland

o

o

o

11 - Michael J. Roney

o

o

o

12 - Michael A. Todman

o

o

o

13 - Paul C. Varga

o

o

o

 

For

Against

Abstain

1 Year

2 Years

3 Years

Abstain

2.

Nonbinding advisory vote to approve our executive compensation

o

o

o

3.

Nonbinding advisory vote on the frequency of future advisory votes on executive compensation

o

o

o

o

 

 

Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

Please sign exactly as your name(s) appear on this card. When signing as attorney, executor, administrator, trustee, or guardian, please give your full title. If a corporation, please have an authorized person sign in full corporate name. If a partnership, please have an authorized person sign in partnership name.

Date (mm/dd/yyyy) — Please print date below.		Signature 1 — Please keep signature within the box.		Signature 2 — Please keep signature within the box.
/      /

 

IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.

 

C 1234567890   1 U P X

J N T   3 3 6 8 8 8 1

MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND

 

02MLUE

YOUR VOTE IS IMPORTANT.

 

If you do not vote online or by telephone, please sign and date this proxy card
and return it promptly in the enclosed postage-paid envelope so your
shares may be represented at the Annual Meeting.

 

The Proxy Materials are available for review at:
www.brown-forman.com/investors/annual-report/

 

 

 

 

 

 

 

 

 

 

 

6 IF YOU HAVE NOT VOTED ONLINE OR BY TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6

 

 

 

 

PROXY – BROWN-FORMAN CORPORATION

 

This proxy is solicited on behalf of the Board of Directors for the Annual Meeting of Stockholders on July 27, 2017.

 

The undersigned hereby appoints Geo. Garvin Brown IV, Paul C. Varga, and Matthew E. Hamel, and each of them, proxies, with power of substitution, to vote all of the shares of Class A Common Stock of Brown-Forman Corporation (the “Company”) standing of record in the name of the undersigned at the close of business on June 19, 2017, at the Annual Meeting of Stockholders of the Company to be held on July 27, 2017, and at any adjournment or postponement thereof. The undersigned acknowledges receipt of the Notice of Annual Meeting and accompanying Proxy Statement and revokes any proxy heretofore given with respect to such meeting. The votes entitled to be cast by the undersigned will be cast as instructed.

 

This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is given, this proxy will be voted “FOR” each of the nominees for director on Proposal 1, “FOR” Proposal 2, and for “EVERY THREE YEARS” on Proposal 3. The votes entitled to be cast by the undersigned will be cast at the direction of the named proxy holders upon any other matter that may properly come before the meeting and any adjournment or postponement thereof.

 

If you vote online or by telephone, please do not send your proxy by mail.

 

IMPORTANT – THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE. 

 

Non-Voting Items

 

Change of Address — Please print new address below.

 

IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.

This regulatory filing also includes additional resources:
p56174.pdf