Table of Contents
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 Under Rule
14a-12 |
The Gap, Inc.
(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
NOTICE
OF ANNUAL MEETING OF GAP INC. SHAREHOLDERS
PROXY
STATEMENT |
|
May 22, 2018
San Francisco, California |
Table of Contents
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE AND TIME
Tuesday, May 22, 2018
10:00 a.m., San Francisco Time |
ITEMS OF BUSINESS
·
Elect to the Board of Directors the ten nominees
named in the attached Proxy Statement;
·
Ratify the selection of Deloitte & Touche
LLP as our independent registered public accounting firm for the fiscal year ending on February 2, 2019;
·
Hold an advisory vote to approve the overall compensation
of the named executive officers; and
·
Transact such other business as may properly come
before the meeting.
INTERNET AVAILABILITY
In accordance with U.S. Securities and Exchange Commission
rules, we are using the Internet as our primary means of furnishing our proxy materials to most of our shareholders. Rather than
sending those shareholders a paper copy of our proxy materials, we are sending them a notice with instructions for accessing the
materials and voting via the Internet. We believe this method of distribution makes the proxy distribution process more efficient,
less costly and limits our impact on the environment. This Proxy Statement and our 2017 Annual Report to Shareholders are available
at: www.gapinc.com (follow the Investors, Annual Reports & Proxy links).
PROXY VOTING
Whether or not you plan to attend the Annual Meeting,
please vote as soon as possible. As an alternative to voting in person at the Annual Meeting, you may vote via the Internet, by
telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card.
ADMISSION TO THE ANNUAL MEETING
You are entitled to attend the Annual Meeting only
if you were a Gap Inc. shareholder as of the close of business on March 26, 2018 or you hold a valid proxy for the Annual Meeting.
Photo identification is required for admittance. In addition, if you are not a shareholder of record but hold shares through
a broker, bank, trustee or nominee (i.e., in street name), you will be required to provide proof of beneficial ownership as of
the Record Date. Proof of beneficial ownership can take the form of your most recent account statement prior to the Record
Date, a copy of the voting instruction card provided by your broker, bank, trustee or nominee, a copy of the Notice of Internet
Availability of Proxy Materials if one was mailed to you, or similar evidence of ownership.
By
Order of the Board of Directors,
Julie Gruber
Corporate Secretary
April 10, 2018 |
|
PLACE
Gap Inc. Headquarters
Two Folsom Street
San Francisco, California 94105 |
|
RECORD DATE
You must have been a shareholder of record at the close of business
on March 26, 2018 to vote at the Annual Meeting. |
|
WEBCAST
You may listen to our Annual Meeting by webcast at www.gapinc.com
(follow the Investors, Webcasts links). The webcast will be recorded and available for replay on www.gapinc.com for at least 30
days following the Annual Meeting. |
|
Table of Contents
PROXY SUMMARY
References in this Proxy Statement to “Gap
Inc.,” “the Company,” “we,” “us,” and “our” refer to The Gap, Inc.
These proxy materials are being delivered in
connection with the solicitation of proxies by the Board of Directors of The Gap, Inc. for use at our Annual Meeting of Shareholders
to be held on May 22, 2018, at 10:00 a.m., San Francisco Time, at Gap Inc. Headquarters, Two Folsom Street, San Francisco, California
94105 and at any adjournment or postponement thereof (the “Annual Meeting”).
On or about April 10, 2018, we commenced distribution
of this Proxy Statement and the form of proxy to our shareholders entitled to vote at the Annual Meeting.
The holders of common stock at the close of business
on March 26, 2018 (the “Record Date”) are entitled
to one vote per share on each matter voted upon at the Annual Meeting or any adjournment or postponement thereof. As of the Record
Date, there were 389,311,065 shares of common stock outstanding. You may vote your shares by:
|
|
|
|
By Internet
www.proxyvote.com |
|
|
|
By Mail
Sign and return a proxy card (for shareholders of record)
or voting instruction card (for beneficial owners of shares) |
|
|
|
By Phone
1-800-690-6903
|
|
|
|
In Person
At the meeting: May 22, 2018,
10:00 a.m. San Francisco Time
Gap Inc. Headquarters
Two Folsom Street
San Francisco, California 94105 |
Items of Business |
|
Management
Recommendation |
|
Page No. |
Elect to the Board of
Directors the ten nominees
named in the attached
Proxy Statement. |
|
The Board
recommends you vote
“FOR” each of the ten
nominees. |
|
Page 5 |
Ratify the selection of
Deloitte & Touche LLP as
our independent registered
public accounting firm for
the fiscal year ending on
February 2, 2019. |
|
The Board
recommends you vote
“FOR” the selection of
the independent
registered public
accounting firm. |
|
Page 16 |
Hold an advisory vote
to approve the overall
compensation of the
named executive officers. |
|
The Board
recommends you vote
“FOR” the approval of
the overall
compensation of the
Company’s named
executive officers.
|
|
Page 19 |
If you vote by Internet or by phone, you will
need to have a proxy card or voting instruction card, or the Notice of Internet Availability, in hand when you access the voting
website or call to vote by phone. And if you vote by Internet or phone, you do not need to return anything by mail. Specific voting
instructions are found on the proxy card, voting instruction card, or the Notice of Internet Availability of Proxy Materials.
Table of Contents
TABLE OF CONTENTS
Table of Contents
PROPOSALS REQUIRING
YOUR VOTE
PROPOSAL NO. 1 — ELECTION OF DIRECTORS
Nominees for Election as Directors
ELECTION PROCESS
Directors will be elected at the Annual Meeting to serve until
the next Annual Meeting and until their successors are elected. The Governance and Sustainability Committee of the Board of Directors
has nominated the persons whose names are set forth below, all of whom are current directors.
DIRECTOR NOMINATIONS
The Board of Directors has no reason to believe that any of
the nominees will be unable to serve. However, if any nominee should for any reason be unavailable to serve, the Board of Directors
may reduce the number of directors fixed in accordance with our Bylaws, or the proxies may be voted for the election of such other
person to the office of director as the Board of Directors may recommend in place of the nominee. Set forth below is certain information
concerning the nominees, including age, experience, qualifications and principal occupation during at least the last five years,
based on data furnished by each nominee.
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE FOLLOWING NOMINEES. |
Robert J. Fisher |
|
Age: 63
Director since 1990.
Committee Membership: Governance & Sustainability
(Chair) |
Non-executive Chairman of the Board since February 2015.
Managing Director, Pisces, Inc., an investment group, since 2010. Interim President and Chief Executive Officer of Gap Inc., January
2007-August 2007. Non-executive Chairman of Gap Inc., 2004-August 2007. Executive of Gap Inc., 1992-1999. Various positions with
Gap Inc., 1980-1992. Former director of Sun Microsystems, Inc., 1995-2006.
Mr. Fisher has vast retail business experience specific
to Gap Inc. and its global operations, as a result of his many years serving in a variety of high-level Gap Inc. positions. His
previous leadership and oversight roles at the Company provide him with a deep understanding and unique insight into our organizational
and operational structure. Mr. Fisher brings strong leadership to the Board based on perspective gained from his management roles
and experience as a key member of the founding family and significant shareholder. |
William S. Fisher |
|
Age: 60
Director since 2009.
Committee Membership: None |
Founder and Chief Executive Officer of Manzanita Capital
Limited, a private equity fund, since 2001. Various positions with Gap Inc., 1986-1998.
Mr. Fisher brings extensive global retail and business
experience to the Board as a result of his many years serving in a variety of high-level positions across Gap Inc., including President
of the International Division. In addition, as a director on the boards of a number of private retail companies, including Space
NK and Diptyque, he brings extensive knowledge of the global retail industry and risk oversight expertise. |
Table of Contents
Tracy Gardner |
|
Age: 54
Director since 2015.
Committee Membership: None |
Principal of Tracy Gardner Consultancy, since 2010. Chief
Executive Officer of dELiA*s Inc., an omni-channel retail company primarily marketing to teenage girls, 2013- 2014. dELiA*s Inc.
filed voluntary petitions for relief under Chapter 11 in December 2014. Former executive of J. Crew Group, Inc., 2004-2010. Various
positions with Gap Inc., 1999-2004. Former director of Lands' End, 2014-2015.
With over 30 years of experience, Ms. Gardner is a retail
industry veteran who brings deep product expertise, and vast experience as a merchant, creative director and leader in growing
multi-channel brands. In addition, her experience as a former senior executive within Gap Inc., and more recently as an advisor
to Gap brand, provides Ms. Gardner with an in-depth understanding of the Company's global business structure and operations. |
Brian Goldner |
|
Age: 55
Director since 2016.
Committee Membership: Compensation & Management
Development |
Chairman, President and CEO of Hasbro Inc., an American
multinational toy and board game company, since 2015. President and CEO of Hasbro Inc. from 2008 to 2015. Various positions with
Hasbro Inc. from 2000 to 2008 including Chief Operating Officer, President of Toy Segment and U.S. Toys. Former Chief Operating
Officer of Bandai America Inc. from 1997 to 2000. Director of Molson Coors from 2010 to 2016.
Mr. Goldner’s experience on the board of directors
of two other public companies, as Chairman, President and CEO of Hasbro Inc., and as the former chief operating officer of a consumer
products manufacturer, provides him with extensive knowledge and expertise in leadership and governance. He also possesses vast
expertise in risk oversight and strategic and operational issues facing global retail companies. |
Isabella D. Goren |
|
Age: 57
Director since 2011.
Committee Membership: Audit & Finance |
Chief Financial Officer of AMR Corporation and American
Airlines, Inc., 2010-2013. AMR Corporation and American Airlines, Inc. successfully completed a reorganization under Chapter 11
in 2013, for which a voluntary petition was filed in 2011. Senior Vice President of Customer Relationship Marketing of American
Airlines, 2006-2010. Various positions with AMR Corporation and American Airlines, Inc., 1986-2006, including President of AMR
Services, previously a subsidiary of AMR, 1996-1998. Director of LyondellBasell Industries N.V. and MassMutual Financial Group.
Ms. Goren has broad experience in a number of key corporate
functions, including finance, marketing, human resources and international operations. She brings extensive expertise in leadership
of complex business functions, customer loyalty programs and online marketing, talent development, financial functions and global
strategies. |
Bob L. Martin |
|
Age: 69
Director since 2002.
Committee Membership: Compensation & Management
Development (Chair); Governance & Sustainability |
Lead Independent Director from 2003 to 2015.
Operating Partner of Stephens Group, Inc., a private equity group, since 2003. Chief Executive Officer (part-time) of Mcon Management
Services, Ltd., a consulting company, since 2002. Independent Consultant, 1999-2002. President and Chief Executive Officer of Wal-Mart
International, a division of Wal-Mart Stores, Inc., 1984-1999. Director of Conn’s Inc. Former director of Dillard’s,
Inc., 2003-2004, Edgewater Technology, Inc., 1999-2005, Furniture Brands International, Inc., 2003-2010, Guitar Center, 2004-2007,
Sabre Holdings Corporation, 1997-2007, and SolarWinds, Inc., 2009-2010.
Mr. Martin is a retail industry veteran with
over 35 years of work experience. As the former chief executive officer of Wal-Mart International, during which he ran operations
in 12 countries across four continents, Mr. Martin brings extensive global governance and executive management experience, as well
as a vast knowledge of international consumer brands and markets. As the former executive vice president and chief information
officer for Wal-Mart Stores, Inc., Mr. Martin also has extensive insight into the areas of information technology and supply chain
capabilities and strategies specific to a global retail company. |
Table of Contents
Jorge P. Montoya |
|
Age: 71
Director since 2004.
Committee Membership: Audit & Finance |
President, Global Snacks & Beverages, and President,
Latin America, of The Proctor & Gamble Company, a consumer products company, 1999-2004. Director of The Kroger Co. Former director
of Rohm & Haas Company, 1996-2007.
With over 30 years of leadership at large consumer products
companies, including The Proctor & Gamble Company, Mr. Montoya possesses a deep knowledge of Hispanic markets, as well as extensive
experience in management, international growth, consumer products, and marketing. |
Chris O'Neill |
|
Age: 45
Director since 2018.
Committee Membership: None |
Chairman, President and Chief Executive Officer of Evernote
Corporation, a global cloud-based technology company, since 2016. President and Chief Executive Officer, Evernote Corporation,
2015-2016. Various positions with Google Inc., 2005-2015, including Managing Director, Google Canada, 2010-2014, and Head of Business
Operations, Google [x], 2014-2015.
Mr. O’Neill's experience as Chairman, President and
Chief Executive Officer of Evernote Corporation, and decade-long experience at Google Inc., provides him with extensive expertise
in leading high-growth, innovative companies and understanding the strategic role technology plays in business.
|
Arthur Peck |
|
|
|
Age: 62
Director since 2015.
Committee Membership: None |
President and Chief Executive Officer of Gap Inc. since
February 2015. President, Growth, Innovation and Digital division of Gap Inc., November 2012 to January 2015. President, Gap North
America, February 2011 to November 2012. Executive Vice President of Strategy and Operations of Gap Inc., May 2005 to February
2011. President, Gap Inc. Outlet, October 2008 to February 2011. Acting President, Gap Inc. Outlet, February 2008 to October 2008.
Senior Vice President of The Boston Consulting Group, a business consulting firm, 1982 to 2005.
As a result of his service as Gap Inc.’s Chief Executive
Officer, as well as his service in other senior positions at Gap Inc. and his experience as a Senior Vice President of The Boston
Consulting Group, Mr. Peck has extensive risk oversight, management, talent development, and leadership experience, as well as
a deep knowledge of the complex technological, financial, and operational issues facing global retail companies. |
Mayo A. Shattuck III |
|
|
Age: 63
Director since 2002.
Committee Membership: Audit & Finance (Chair); Governance &
Sustainability |
Non-Executive Chairman of Exelon Corporation,
an energy company, since 2013. Executive Chairman of Exelon Corporation, 2012-2013. Chairman, Chief Executive Officer, and President
of Constellation Energy Group, 2002-2012. Chief Executive Officer and President of Constellation Energy Group, 2001-2002. Director
of Capital One Financial Corporation and Alarm.com Holdings, Inc.
With his experience on the boards of directors of two other
public companies, as the former chief executive officer of an investment bank and Constellation Energy Group and as non-executive
Chairman of Exelon Corporation, Mr. Shattuck brings extensive expertise in risk oversight, financial literacy and reporting, corporate
governance, and compliance, as well as leadership experience. |
|
|
|
Robert J. Fisher and William S. Fisher are brothers. Information
concerning our executive officers who are not also directors is set forth in our Annual Report on Form 10-K for the fiscal year
ended February 3, 2018.
Table of Contents
DIRECTOR INDEPENDENCE
The Board of Directors has determined that the following directors
are independent under the New York Stock Exchange (“NYSE”) rules and have no direct or indirect material relationships
with the Company:
Robert J. Fisher
William S. Fisher
Brian Goldner |
Isabella D. Goren
Bob L. Martin
Jorge P. Montoya |
Chris O'Neill
Mayo A. Shattuck III
Katherine Tsang* |
* Ms. Tsang is not standing for
reelection.
In particular, the Board has determined that none of these directors
has relationships that would cause them not to be independent under the specific criteria of Section 303A.02 of the NYSE Listed
Company Manual. In making this determination with respect to Robert and William Fisher, the Board considered the following factors:
(i) with the exception of Robert Fisher’s brief period of service during 2007 as Interim President and Chief Executive Officer
(“CEO”) of the Company during a CEO transition, neither Robert nor William Fisher has served as an officer of the Company
in over 15 years; and (ii) NYSE guidance indicates that ownership of even a significant amount of stock does not preclude a finding
of independence. After consideration of these factors, the Board concluded that there is no material relationship between the Company
and Robert and William Fisher that would impact their independence under NYSE rules.
Corporate Governance
CORPORATE GOVERNANCE GUIDELINES
We have adopted Corporate Governance Guidelines that outline,
among other matters, the role and functions of the Board, the responsibilities of the various Board committees, and the procedures
for reporting concerns to the Board.
|
Our Corporate Governance Guidelines are available at www.gapinc.com (follow the Investors, Governance, Corporate Governance Guidelines links). |
ADDITIONAL CORPORATE GOVERNANCE INFORMATION
If you would like further information regarding our corporate
governance practices, please visit the Governance and Corporate Compliance sections of www.gapinc.com (follow the Investors link).
Those sections include:
| · | Our Corporate Governance Guidelines (available in
print on request to our Corporate Secretary); |
| · | Our Code of Business Conduct (available in print
on request to our Corporate Secretary); |
| · | Our Certificate of Incorporation; |
| · | A method for interested parties to send direct communications
to our Board of Directors (through our Chairman and Corporate Secretary) by email to board@gap.com; and |
| · | Methods for employees and others to report suspected
violations of our Code of Business Conduct, including accounting or auditing concerns, to our Global Integrity team by confidential
email to global_integrity@gap.com, through our Code Hotline (866) GAP-CODE or online at speakup.gapinc.com. Callers from outside
North America must dial their country’s AT&T Direct Access Code which can be found at speakup.gapinc.com. Code Hotline
calls are answered by a live operator 24 hours a day/7 days a week by an outside company, and are free and confidential and may
be made anonymously. Accounting, auditing, and other significant concerns are escalated by the Global Integrity team, as appropriate,
including to the Audit and Finance Committee, as required. |
Table of Contents
RISK OVERSIGHT
BOARD OVERSIGHT OF RISK
The Board has an active role in overseeing the management of
the Company’s risks. Annually, the Company’s Internal Audit department performs a comprehensive enterprise risk assessment
encompassing a number of significant areas of risk identified using a risk framework, including strategic, operational, compliance,
financial, and reputational risks. The Company recently established a Risk Committee, which includes the heads of Finance, Legal,
Strategy, Human Resources, Supply Chain, and Internal Audit, as well as a brand president. The Risk Committee is responsible for
overseeing the assessment process designed to gather data regarding key enterprise risks that could impact the Company’s
ability to achieve its objectives and execute its strategies. Primary assessment methods include interviews (either in-person or
via the use of technology-enabled collaboration sessions) with employees, key executives and Board members, review of critical
Company strategies and initiatives, and monitoring of emerging industry trends and issues. The assessment results are reviewed
by the CEO and the Risk Committee, and are presented to the Board to facilitate discussion of high risk areas. The results provide
the foundation for the annual Internal Audit plan, management’s monitoring and risk mitigation efforts, and ongoing Board
oversight. The Risk Committee meets periodically to monitor key enterprise risks and review and adjust the risk mitigation plans
accordingly. In addition, on a regular basis, management communicates with the Board, both formally and informally, about key initiatives,
strategies and industry developments, in part to assess and manage the potential risks.
While the Board of Directors has the ultimate oversight responsibility
for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the
Audit and Finance Committee focuses on financial and compliance risks, and the Compensation and Management Development Committee
sets employee incentives with the goal of encouraging an appropriate level of risk-taking, consistent with the Company’s
business strategies.
COMPENSATION RISK ASSESSMENT
On an annual basis, management conducts a comprehensive overall
review of each of the Company’s compensation policies and practices for the purpose of determining whether any risks arising
from those policies and practices are reasonably likely to have a material adverse effect on the Company. As a part of this review,
each of the Company’s compensation policies and practices were compared to a number of specific factors that could potentially
increase risk, including the specific factors that the SEC has identified as potentially triggering disclosure. The Company balanced
these factors against a variety of mitigating factors. Examples of some of the mitigating factors are:
| · | Compensation policies and practices are structured
similarly across business units; |
·
The risk of declines in performance in our largest
business units is well understood and managed;
·
Incentive compensation expense is not a significant
percentage of any unit’s revenues;
·
For executives, a significant portion of variable
pay is delivered through long-term incentives, which carry vesting schedules over multiple years;
·
A mix of compensation vehicles and performance
measures is used;
·
Stock ownership requirements for executives are
in place;
·
Significant incentive plans are capped at all
levels;
·
Threshold levels of performance must be achieved
for the bulk of variable pay opportunities; and
| · | A clawback policy with respect to financial restatements
is in place. |
Management’s assessment was also presented to the Company’s
Chief Compliance Officer and the Chair of the Board’s Compensation and Management Development Committee. As a result of management’s
review, the Company determined that any risks arising from its compensation policies and practices are not reasonably likely to
have a material adverse effect on the Company.
COMMUNICATION WITH DIRECTORS
|
Interested parties can send direct communications to our Board of Directors (through our Chairman and Corporate Secretary) by email to: board@gap.com. |
CODE OF BUSINESS CONDUCT
Our Code of Business Conduct is designed to promote a responsible
and ethical work environment for all Gap Inc. employees and directors. The Code contains guidelines on conflicts of interest, legal
compliance, Company information and assets, and political contributions and activities.
|
Our Code of Business Conduct is available at www.gapinc.com (follow the Investors, Corporate Compliance, Code of Business Conduct links). |
Table of Contents
Policies and Procedures with Respect to Related Party Transactions
The Board is committed to upholding the highest legal and ethical
conduct in fulfilling its responsibilities and recognizes that related party transactions can present a heightened risk of potential
or actual conflicts of interest. The Compensation and Management Development Committee’s charter requires that the members
of that Committee, all of whom are independent directors, approve all of the Company’s executive compensation policies and
programs and all compensation awarded to executive officers. The Audit and Finance Committee’s charter requires that the
members of the Audit and Finance Committee, all of whom are independent directors, review and approve transactions with the Company
involving management and/or members of the Board of Directors that are not otherwise subject to the approval of the Compensation
and Management Development Committee and would require disclosure under SEC rules. In the event a transaction involves a committee
member, that member will recuse him or herself from the approval of the transaction.
In addition, the Audit and Finance Committee oversees the Company’s
Corporate Compliance Program, which includes procedures for the (i) receipt, retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters, and (ii) confidential, anonymous submission by employees and others of concerns
regarding questionable accounting or auditing matters and other matters under the Company’s Code of Business Conduct.
BOARD LEADERSHIP STRUCTURE AND SUCCESSION
Our Amended and Restated Bylaws provide that our Chairman of
the Board shall not be an officer or employee of the Company. Robert Fisher, an independent director, has served as our Chairman
of the Board since February 2015.
We believe in the importance of independent oversight. We
ensure that this oversight is truly independent and effective through a variety of means, including:
- We have separated the positions of CEO and Chairman of the Board.
We believe this provides the most appropriate leadership structure at this time. Our CEO is responsible for day-to-day leadership
and for setting the strategic direction of the Company, while the Chairman of the Board presides over Board meetings, including
non-management and independent director sessions, and shareholder meetings.
- Our Corporate Governance Guidelines provide that at least two-thirds
of our directors should be independent. Currently, all of our directors other than Mr. Peck and Ms. Gardner are independent.
- Our Corporate Governance Guidelines provide that in the event that
the Chairman of the Board is not an independent director, the Board shall designate an independent director to serve as Lead Independent
Director.
- At each regularly scheduled Board meeting, all non-management directors
are typically scheduled to meet in an executive session without the presence of any management directors.
- At least annually, the independent directors meet in executive
session.
- The charters for each of our standing committees of the Board described
below (Governance and Sustainability, Audit and Finance, and Compensation and Management Development) require that all of the members
of those committees be independent.
GOVERNANCE AND SUSTAINABILITY COMMITTEE
The Board’s Governance and Sustainability Committee is
composed solely of independent directors, as defined under NYSE rules.
This Committee assists the Board of Directors in fulfilling
its oversight responsibilities relating to the Company’s corporate governance matters, including the development of corporate
governance guidelines, annual evaluation of the Board, its committees and individual directors, identification and selection of
director nominees, oversight of the Company’s programs, policies and practices relating to social and environmental issues,
impacts and strategies, and such other duties as directed by the Board of Directors.
|
The Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Governance and Sustainability Committee Charter links). |
NOMINATION OF DIRECTORS
The Governance and Sustainability Committee has the responsibility
to identify, evaluate, and recommend qualified candidates to the Board. The Chairman, CEO, and at least two independent directors
interview any qualified candidates prior to nomination. Other directors and members of management interview each candidate as requested
by the Chairman, CEO, or chair of the Committee. Mr. O'Neill was identified as a potential candidate by a third-party search firm.
The Committee identifies desired attributes and experience –
classifying those that are prioritized and mandatory versus those that are ideal but not mandatory – and engages third-party
search firms as independent consultants to identify potential director nominees based on these criteria and a needs assessment.
The Committee, in collaboration with the
Table of Contents
consultant, may develop targeted search specifications. These
consultants have assisted the Committee in identifying a diverse pool of qualified candidates and in evaluating and pursuing individual
candidates at the direction of the Committee.
The Committee will also consider director nominees recommended
by shareholders. Our Bylaws provide that a shareholder may propose director nominations at the meeting of shareholders in 2019
by giving written notice to our Corporate Secretary by no later than the close of business (San Francisco Time) on February 21,
2019, and no earlier than January 22, 2019 (i.e., not less than 90 days nor more than 120 days prior to the first anniversary of
the date of our 2018 Annual Meeting). The notice must contain information required by our Bylaws about the identity and background
of each nominee and the shareholder making the nomination, including interests in derivative securities or arrangements with persons
holding derivative securities, relationships or arrangements between the nominee and the shareholder making the nomination, and
information that would enable the Board to determine a nominee’s eligibility to serve as an independent director. The notice
also must contain other information that must be disclosed in proxy solicitations for election of directors under the proxy rules
of the SEC (including information regarding the director nominee’s experience, qualifications, attributes and/or skills),
the nominee’s consent to the nomination and to serve if elected, and certain other information required by our Bylaws. If
a shareholder fails to submit the notice by February 21, 2019, then the proposed nominee(s) of the shareholder will not be considered
at our Annual Meeting in 2019 in accordance with our Bylaws. Notifications must be addressed to our Corporate Secretary at Gap
Inc., Two Folsom Street, San Francisco, California 94105.
|
A copy of the full text of the Bylaw provisions relating to our advance notice procedure may be obtained at www.gapinc.com (follow the Investors, Governance links) or by any shareholder on request by writing to our Corporate Secretary at the above address. |
QUALIFICATIONS AND DIVERSITY OF BOARD MEMBERS
All director nominees must possess certain core competencies,
some of which include experience in retail, consumer products, international business/markets, real estate, store operations, logistics,
product design, merchandising, marketing, general operations, strategy, human resources, technology, media or public relations,
finance or accounting, or experience as a CEO or CFO. In addition to having one or more of these core competencies, director nominees
are identified and considered based on knowledge, experience, integrity, leadership, reputation, background, qualifications, gender,
race/ethnicity, personal characteristics, and ability to understand the Company’s business, as well as their integrity, inclination
to engage and intellectual approach. The Board believes that varying tenures and backgrounds create a balance between directors
with a deeper knowledge of the Company's business, operations and history, and directors who bring new and fresh perspectives,
and that this overall tenure, professional, personal, gender, and racial/ethnic diversity is important to the effectiveness of
the Board’s oversight of the Company. Accordingly, diversity is a factor that is considered in the identification and recommendation
of potential director candidates. In this regard, of the ten nominees for director, two are women and one is ethnically diverse.
In addition, all director nominees are pre-screened to ensure that each candidate has qualifications and experience that complement
the overall core competencies of the Board. The screening process also includes conducting a background evaluation and an independence
determination. The Board believes that its criteria for selecting board nominees are effective in promoting overall diversity.
EVALUATION OF DIRECTORS
The Governance and Sustainability Committee is responsible for
overseeing a formal evaluation process to assess the composition and performance of the Board, each committee, and each individual
director on an annual basis. The assessment is conducted to identify opportunities for improvement and skill set needs, as well
as to ensure that the Board, committees, and individual members have the appropriate blend of diverse experiences and backgrounds,
and are effective and productive. As part of the process, each member completes a survey, or participates in an interview or other
method the Committee utilizes to seek feedback. While results are aggregated and summarized for discussion purposes, individual
responses are not attributed to any individual and are kept confidential to ensure honest and candid feedback is received. The
Committee discusses opportunities and makes recommendations for improvement as appropriate to the full Board, which implements
agreed upon improvements. The Committee Chair also meets privately with individual Board members to provide feedback specific to
each director received during the evaluation process. A director will not be nominated for reelection unless it is affirmatively
determined that he or she is substantially contributing to the overall effectiveness of the Board.
SUSTAINABILITY
The Governance and Sustainability Committee is also responsible
for reviewing and evaluating Company programs, policies and practices relating to social and environmental issues, and impacts
and strategies to support the sustainable growth of the Company’s businesses. The Committee regularly discusses social and
environmental issues at its meetings, and oversees the Company’s development of industry-leading programs and initiatives.
|
For more information regarding our commitment to sustainability, please see our website and most recent Sustainability Report available at www.gapinc.com (follow the Sustainability link). |
Table of Contents
AUDIT AND FINANCE COMMITTEE
The Board’s Audit and Finance Committee is composed solely
of independent directors, as defined under SEC and NYSE rules.
This Committee assists the Board of Directors in fulfilling
its oversight responsibilities relating to the integrity of our financial statements, adequacy of internal controls, compliance
with legal and regulatory requirements, the qualifications and independence of the registered public accounting firm and the performance
of their audits, the performance of the Internal Audit function, the effectiveness of the corporate compliance program, finance
matters, and such other duties as directed by the Board of Directors. In addition, the Committee is directly responsible for the
appointment, compensation, retention and oversight of the independent registered public accounting firm.
|
The Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Audit and Finance Committee Charter links). |
AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that the Audit and Finance
Committee has two members who are “audit committee financial experts” as determined under Regulation S-K Item 407(d)(5)
of the Securities Exchange Act of 1934: Mr. Shattuck and Ms. Goren, both of whom are independent directors as determined under
applicable NYSE listing standards. See Mr. Shattuck’s and Ms. Goren’s biographies on pages 6-7 for information regarding
their relevant experience.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
The Board’s Compensation and Management Development Committee
is composed solely of independent directors, as defined under SEC and NYSE rules.
This Committee assists the Board of Directors in fulfilling
its oversight responsibilities relating to executive officer and director compensation, succession planning for senior management,
development and retention of senior management, and such other duties as directed by the Board of Directors.
|
The Committee’s charter is available at www.gapinc.com (follow the Investors, Governance, Compensation and Management Development Committee Charter links). |
The Committee approves all of the Company’s executive
compensation policies and programs and all compensation awarded to executive officers. Our CEO evaluates each executive officer
and discusses with the Committee his assessment and recommendations for compensation. The CEO is not present during the Committee’s
deliberations about his own compensation. The Committee also oversees senior management development, retention, and succession
plans. The Committee approves grants of stock units and stock options to employees at the Vice President level or above, and has
delegated authority, within defined parameters, to the CEO or Committee Chair to approve grants of stock units to employees below
the Vice President level (see “Long-Term Incentives” beginning on page 27 for more details). The Committee has also
delegated authority, within defined parameters, to the Company’s Human Resources personnel to make certain non-material changes
to the Company’s employee benefit plans.
The Committee has engaged Frederic W. Cook & Co. as its
independent executive compensation consultant. The consultant provides advice to the Committee from time to time on the compensation
program structure and specific individual compensation arrangements (see the “Role of the CEO and Compensation Consultant”
section on page 31 for more details). In addition, under NYSE rules, the Committee can only retain a compensation advisor after
considering six independence factors: (a) whether the advisor’s firm provides other services to the Company, (b) the fees
received by the advisor’s firm from the Company as a percentage of the firm’s overall revenue, (c) the policies and
procedures of the advisor’s firm designed to prevent conflicts of interest, (d) any business or personal relationship between
the advisor and a member of the Committee, (e) any stock of the Company owned by the advisor, and (f) any business or personal
relationship of the advisor or advisor’s firm with an executive officer of the Company. Based on a review of the Committee’s
relationship with its compensation consultant and an assessment considering these six independence factors, the Committee has identified
no conflicts of interest and confirmed the independence of Frederic W. Cook & Co.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2017, Mr. Goldner, Mr. Martin, Ms. Tsang (who
is not standing for reelection), and Mr. De Sole (who did not stand for reelection in May 2017) served on the Compensation and
Management Development Committee of the Board of Directors. No member of the Committee was at any time during fiscal 2017 or at
any other time an officer or employee of the Company, and no member of the Committee had any relationship requiring disclosure
under Item 404 of Regulation S-K. During fiscal 2017, none of our executive officers served on the board of directors or compensation
committee of any company where one of that company’s executive officers served as one of our directors.
Table of Contents
BOARD MEETINGS
The Board met six times during fiscal 2017. The following table
lists the current members of each of the committees and the number of committee meetings held during fiscal 2017:
|
|
|
|
Compensation & |
|
|
|
|
Audit & |
|
Management |
|
Governance & |
Name |
|
Finance |
|
Development |
|
Sustainability |
Robert J. Fisher |
|
|
|
|
|
Chair |
William S. Fisher |
|
|
|
|
|
|
Tracy Gardner |
|
|
|
|
|
|
Brian Goldner |
|
|
|
· |
|
|
Isabella D. Goren |
|
· |
|
|
|
|
Bob L. Martin |
|
|
|
Chair |
|
· |
Jorge P. Montoya |
|
· |
|
|
|
|
Chris O'Neill |
|
|
|
|
|
|
Arthur Peck |
|
|
|
|
|
|
Mayo A. Shattuck III |
|
Chair |
|
|
|
· |
Katherine Tsang (not standing for reelection) |
|
|
|
· |
|
|
Number of Meetings |
|
7 |
|
8 |
|
5 |
Each director nominee attended at least 75% of the meetings
of the Board and committees on which he or she served. In addition, individual Board members often work together and with management
outside of formal meetings.
The non-management directors are typically scheduled to meet
without the presence of management during each regularly scheduled Board meeting. Our Chairman, Robert Fisher, is responsible for
organizing, managing and presiding over the non-management and independent director sessions of the Board, and reporting on outcomes
of the sessions to the CEO, as appropriate.
ATTENDANCE OF DIRECTORS AT ANNUAL MEETINGS OF SHAREHOLDERS
Our policy regarding attendance by directors at our Annual Meeting
of Shareholders states that our Chairman and committee chairs should attend and be available to answer questions at our Annual
Meeting, if reasonably practicable. Our policy also encourages all other directors to attend. All of our current director nominees
attended our 2017 Annual Meeting in person, with the exception of Mr. O'Neill, who joined the Board of Directors in February 2018,
after our 2017 Annual Meeting.
STOCK OWNERSHIP GUIDELINES FOR DIRECTORS
We have adopted minimum stock ownership guidelines for our directors.
Each non-management director should, within three years of joining the Board of Directors, hold stock (which includes deferred
stock units) of the Company worth at least five times the annual base retainer then in effect. Management directors are required
to own stock of the Company in accordance with our stock ownership requirements for executives, described on page 29. Our insider
trading policy, which is applicable to directors, prohibits speculation in the Company’s stock, including short sales, hedging
or publicly-traded option transactions, and holding the Company’s stock in a margin account as collateral for a margin loan
or otherwise pledging Company stock as collateral.
Table of Contents
Compensation of Directors
RETAINER AND MEETING FEES
The table below shows the annual retainer, attendance fees,
and committee chair retainer we paid to our non-employee directors in fiscal 2017, as well as the amounts payable for fiscal 2018:
FISCAL YEAR 2017 AND 2018 DIRECTOR CASH COMPENSATION(1)
|
|
2017 |
|
2018 |
Annual Retainer |
|
$ |
80,000 |
|
$ |
80,000 |
Annual Retainer for Committee Members |
|
|
|
|
|
|
Audit and Finance Committee |
|
|
16,000 |
|
|
16,000 |
Compensation and Management Development Committee |
|
|
12,000 |
|
|
12,000 |
Governance and Sustainability Committee |
|
|
8,000 |
|
|
8,000 |
Additional Annual Retainer for Committee Chairs |
|
|
|
|
|
|
Audit and Finance Committee |
|
|
20,000 |
|
|
20,000 |
Compensation and Management Development Committee |
|
|
20,000 |
|
|
20,000 |
Governance and Sustainability Committee |
|
|
15,000 |
|
|
15,000 |
Additional Annual Retainer for Chairman of the Board |
|
|
200,000 |
|
|
200,000 |
| (1) | Non-employee directors who reside primarily outside
of North America receive an additional fee of $2,000 for each trip to the United States for Board and/or committee meetings. |
Employee directors are not eligible for the annual retainer
fees and are not eligible to serve on committees.
EQUITY COMPENSATION
Non-employee directors receive the following under our 2016
Long-Term Incentive Plan:
·
Each new non-employee director automatically receives
stock units with an initial value of $160,000 based on the then-current fair market value of the Company’s common stock;
and
·
Each continuing non-employee director automatically
receives, on an annual basis, stock units with an initial value of $160,000 at the then-current fair market value of the Company’s
common stock; provided that newly-appointed non-employee directors who were appointed after the Company’s last annual shareholders’
meeting will receive their first annual stock unit grant on a prorated basis based on the number of days that the director has
served between his or her appointment and the date of the first annual stock unit grant.
The annual stock units granted to continuing non-employee directors
following the Company’s annual shareholders’ meeting, as well as the initial grant made to any non-employee director
who is first elected to the Board at the Company’s annual shareholders’ meeting, are granted on June 30 of each year;
provided, however, that if the Company’s annual shareholders’ meeting takes place after June 30, then the related stock
unit grants will be granted on the first business day following that meeting. All initial stock units to new non-employee directors
who are appointed other than at the annual shareholders’ meeting are granted on the date of appointment. The number of stock
units is rounded down to the nearest whole share. These stock units are fully-vested but are subject to a three-year deferral period.
During the deferral period, the stock units earn dividend equivalents which are reinvested in additional units annually. Following
the deferral period, shares in an amount equal in value to the stock units, including units acquired through dividend equivalent
reinvestment, will be issued to each non-employee director unless a further deferral election has been made; provided, however,
that shares and accumulated dividend equivalents will be issued immediately upon ceasing to be a director of the Company.
EXPENSE REIMBURSEMENT AND OTHER BENEFITS
We also pay for or reimburse directors for approved educational
seminars and for travel expenses related to attending Board, committee, and approved Company business meetings. Additionally, we
provide non-employee directors access to office space and administrative support for Company business from time to time.
Directors and their spouses are eligible to receive discounts
on our merchandise on terms similar to the Gap Inc. corporate employee merchandise discount policy.
We established The Gap, Inc. Deferred Compensation Plan (“DCP”)
whereby highly compensated employees, including executive officers and non-employee directors, may elect to defer receipt of certain
eligible income. The DCP allows eligible employees to defer a percentage of their salary and bonus on a pre-tax basis, and allows
non-employee directors to defer their retainers and meeting fees. The deferred amounts are indexed to reflect the performance of
the participant’s choice of
Table of Contents
approved investment funds. Non-employee director deferrals are
not matched, and above-market or preferential interest rate options are not available on deferred compensation.
Directors are eligible to participate in our Gift Match Program
available to all employees, under which we match contributions to eligible nonprofit organizations, up to certain annual limits.
In calendar year 2017, the annual limit for non-employee directors was $15,000 under the Gift Match Program. Art Peck, our CEO,
had an annual matching limit of $100,000.
DIRECTOR COMPENSATION SUMMARY
The following table sets forth certain information regarding
the compensation of our directors in fiscal 2017, which ended February 3, 2018.
Name(1) |
|
Fees
Earned
or Paid
in Cash
($) |
|
Stock
Awards
($)(2) |
|
Option
Awards
($)(3) |
|
Change in
Pension Value and
Nonqualified Deferred
Compensation Earnings
($) |
|
All Other
Compensation
($)(4) |
|
Total
($) |
Domenico De Sole |
|
46,000 |
|
0 |
|
0 |
|
0 |
|
34,120 |
|
80,120 |
Robert J. Fisher |
|
303,000 |
|
159,999 |
|
0 |
|
0 |
|
0 |
|
462,999 |
William S. Fisher |
|
80,000 |
|
159,999 |
|
0 |
|
0 |
|
0 |
|
239,999 |
Tracy Gardner |
|
80,000 |
|
159,999 |
|
0 |
|
0 |
|
0 |
|
239,999 |
Brian Goldner |
|
92,000 |
|
141,132 |
|
0 |
|
0 |
|
0 |
|
233,132 |
Isabella D. Goren |
|
96,000 |
|
159,999 |
|
0 |
|
0 |
|
14,371 |
|
270,370 |
Bob L. Martin |
|
120,000 |
|
159,999 |
|
0 |
|
0 |
|
15,000 |
|
294,999 |
Jorge P. Montoya |
|
106,000 |
|
159,999 |
|
0 |
|
0 |
|
10,000 |
|
275,999 |
Mayo A. Shattuck III |
|
124,000 |
|
159,999 |
|
0 |
|
0 |
|
15,000 |
|
298,999 |
Katherine Tsang |
|
100,000 |
|
159,999 |
|
0 |
|
0 |
|
0 |
|
259,999 |
| (1) | Mr. De Sole retired as a director on May 17, 2017. |
Mr. Peck was compensated as our CEO and
received no additional compensation as a director. Mr. Peck’s compensation is reported in the Summary Compensation Table
and related executive compensation tables, beginning on page 33.
Mr. O'Neill joined as a director on February
4, 2018, the first day of fiscal 2018, and is therefore not included in the table.
| (2) | This column reflects the aggregate grant date fair value for awards of stock during fiscal 2017, computed in accordance with
FASB ASC 718. All stock awards reported in this column were granted in fiscal 2017. The following directors had outstanding stock
awards as of fiscal 2017 year-end: Mr. Robert Fisher (17,540), Mr. William Fisher (17,540), Ms. Gardner (16,726), Mr. Goldner (12,020),
Ms. Goren (17,540), Mr. Martin (17,540), Mr. Montoya (17,540), Mr. Shattuck (25,462), and Ms. Tsang (17,540). For the period during
which the payment of these units is deferred (see page 14), they will earn dividend equivalents which are reinvested in additional
units annually. Please refer to Note 10, “Share-Based Compensation,” in the Notes to Consolidated Financial Statements
included in our Annual Report on Form 10-K filed on March 20, 2018 for the relevant assumptions used to determine the valuation
of our stock awards. |
| (3) | No stock options were granted to our directors in fiscal 2017. None of our non-employee directors had outstanding option awards
as of fiscal 2017 year-end. |
| (4) | Amounts in this column include any Company matching contributions under the Company’s Gift Match Program (see “Expense
Reimbursement and Other Benefits,” on page 14). The amount in this column for Mr. De Sole also includes the value of a gift
he received in connection with his retirement as a director, as well as the related tax gross-up amount of $11,240. |
Table of Contents
PROPOSAL NO. 2 — RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit and Finance Committee of the Board of Directors has
selected Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 2,
2019. Deloitte & Touche LLP (or its predecessor firm) has been retained as our independent registered public accounting firm
since 1976. If shareholders fail to ratify the selection of Deloitte & Touche LLP, the Audit and Finance Committee will reconsider
the selection. If the selection of Deloitte & Touche LLP is approved, the Audit and Finance Committee, in its discretion, may
still direct the appointment of a different independent auditing firm at any time and without shareholder approval if the Audit
and Finance Committee believes that such a change would be in the best interests of the Company and our shareholders.
|
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE SELECTION OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. |
Representatives of Deloitte & Touche LLP are expected to
be present, available to make statements, and available to respond to appropriate shareholder questions at the Annual Meeting.
Table of Contents
Principal Accounting Firm Fees
The following table sets forth the aggregate fees paid and accrued
by us for audit and other services for the fiscal years ended February 3, 2018 and January 28, 2017 provided by our principal accounting
firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates (collectively
“Deloitte & Touche”).
FISCAL YEAR 2017 AND 2016 ACCOUNTING FEES
|
|
Fiscal Year |
|
Fiscal Year |
Fees (see notes below) |
|
2017 |
|
2016 |
Audit Fees |
|
$ |
5,046,200 |
|
$ |
4,793,300 |
Audit-Related Fees |
|
|
226,396 |
|
|
209,079 |
Tax Fees |
|
|
984,400 |
|
|
111, 271 |
All Other Fees |
|
|
7,392 |
|
|
6,886 |
Total |
|
$ |
6,264,388 |
|
$ |
5,120,536 |
“Audit Fees” consists of fees for professional
services rendered in connection with the integrated audit of our consolidated annual financial statements and internal controls
over financial reporting, the review of our interim condensed consolidated financial statements included in quarterly reports,
and the audits in connection with statutory and regulatory filings or engagements.
“Audit-Related Fees” consists primarily of
fees for professional services rendered in connection with the audit of our employee benefit plans, audit procedures required by
store leases and capital verification reports.
“Tax Fees” consists of fees billed for professional
services rendered for tax compliance and tax advice. These services include assistance regarding federal, state and international
tax compliance, and competent authority proceedings.
“All Other Fees” consists of subscription
fees for the Deloitte Accounting Research Tool.
The Audit and Finance Committee approves the terms, including
compensation, of the engagement of our independent registered public accounting firm on an annual basis, and has a policy requiring
pre-approval of all services performed by the firm. This policy requires that all services performed by Deloitte & Touche,
whether audit or non-audit services, must be pre-approved by the Audit and Finance Committee or a designated member of the Audit
and Finance Committee, with any such services reported to the entire Audit and Finance Committee at the next scheduled meeting.
Rotation
The Audit and Finance Committee periodically reviews and evaluates
the performance of Deloitte & Touche’s lead audit partner, oversees the required five-year rotation of the lead audit
partner responsible for our audit and, through the Committee’s Chair as representative of the Audit and Finance Committee,
reviews and considers the selection of the lead audit partner. In addition, the Audit and Finance Committee periodically considers
whether there should be a rotation of the independent registered public accounting firm. At this time, the Audit and Finance Committee
and the Board believe that the continued retention of Deloitte & Touche to serve as our independent registered public accounting
firm is in the best interests of the Company and our shareholders.
Table of Contents
Report of the Audit and Finance Committee
The Audit and Finance Committee assists the Board of Directors
in fulfilling its oversight responsibilities relating to the integrity of our financial statements, adequacy of internal controls,
compliance with legal and regulatory requirements, the qualifications and independence of the independent registered public accounting
firm and the performance of their audits, the performance of the Internal Audit function, the effectiveness of the corporate compliance
program, finance matters, and such other duties as directed by the Board of Directors. The Committee operates under a written charter
(available at www.gapinc.com, follow the Investors, Governance, Audit and Finance Committee Charter links) adopted by the Board
of Directors. The Committee is composed exclusively of directors who are independent under New York Stock Exchange listing standards
and Securities and Exchange Commission rules.
The Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended February 3, 2018 with the Company’s management. In addition, the Committee
has discussed with Deloitte & Touche LLP, the Company’s independent registered public accounting firm, the matters required
to be discussed by the applicable Public Company Accounting Oversight Board and Securities and Exchange Commission requirements.
The Committee also has received the communications, including
written disclosures and the letter from Deloitte & Touche LLP, required by the applicable requirements of the Public Company
Accounting Oversight Board regarding the independent accountant’s communications with the Committee concerning independence,
and the Committee has discussed the independence of Deloitte & Touche LLP with that firm.
Based on the Committee’s review and discussions noted
above, the Committee recommended to the Board of Directors that the Company’s audited financial statements be included in
the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018 for filing with the Securities and Exchange
Commission.
Mayo A. Shattuck III (Chair)
Isabella D. Goren
Jorge P. Montoya
Notwithstanding anything to the contrary in any of the Company’s
previous or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that
might incorporate this Proxy Statement or future filings with the Securities and Exchange Commission, in whole or in part, this
report shall not be deemed to be incorporated by reference into any such filing.
Table of Contents
PROPOSAL NO. 3 — ADVISORY VOTE ON THE OVERALL COMPENSATION
OF THE GAP, INC.’S NAMED EXECUTIVE OFFICERS
Pursuant to Section 951 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the Company is providing shareholders with an advisory (non-binding) vote on the overall compensation
of our named executive officers. Accordingly, the following resolution will be submitted for a shareholder vote at the 2018 Annual
Meeting:
“RESOLVED, that the shareholders of The
Gap, Inc. (the ”Company“) approve, on an advisory basis, the overall compensation of the Company’s named executive
officers, as described in the Compensation Discussion and Analysis section, the accompanying compensation tables, and the related
narrative disclosure pursuant to Item 402 of Regulation S-K, set forth in the Proxy Statement for this Annual Meeting.”
The Board and the Compensation and Management Development Committee,
which is comprised entirely of independent directors, will consider the outcome of the shareholders’ non-binding advisory
vote when making future executive compensation decisions to the extent they can determine the cause or causes of any significant
positive or negative voting results.
As described in detail under the section entitled “Compensation
Discussion and Analysis,” our executive compensation program is designed to provide the level of compensation necessary to
attract and retain talented and experienced executives, and to motivate them to achieve short-term and long-term goals, thereby
enhancing shareholder value and creating a successful company. We are committed to tie pay to performance and continue to believe
our executive compensation program meets each of our compensation objectives.
We were pleased to have received over 97% of all votes cast
in support of the overall compensation of our executives at our 2017 Annual Meeting of Shareholders. The Compensation and Management
Development Committee continued to apply the same philosophy and protocol it used in prior years to determine fiscal 2017 compensation.
In addition, as described on page 23, we have several compensation governance programs in place to manage compensation risk and
align the Company’s executive compensation with long-term shareholder interests.
Shareholders are encouraged to read the “Compensation
Discussion and Analysis” section of this Proxy Statement, the accompanying compensation tables, and the related narrative
disclosures, which more thoroughly discuss how our compensation policies and procedures implement our compensation philosophy.
|
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE, ON AN ADVISORY BASIS, THE OVERALL COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS BY VOTING “FOR” THIS RESOLUTION. |
Table of Contents
EXECUTIVE COMPENSATION
AND RELATED INFORMATION
Compensation Discussion and Analysis
This Compensation Discussion & Analysis explains the key
elements of our executive compensation program and compensation decisions for our named executive officers (“Executives”).
The Compensation and Management Development Committee of our Board of Directors (the “Committee”) oversees these programs
and determines compensation for our Executives.
INTRODUCTION
In this Compensation Discussion and Analysis, we discuss the
following:
Executive Summary |
page 20 |
Compensation Objectives |
page 24 |
Elements of Compensation |
page 24 |
New Hire and Retention Actions |
page 29 |
Compensation Analysis Framework |
page 30 |
EXECUTIVE SUMMARY
In fiscal 2017, we embarked upon a balanced growth strategy
while continuing our transformation efforts to bring our customers the world’s best clothing through creativity and innovation.
At a glance:
The Transformation of our Operating Model and Balanced Growth
Strategy
| · | In 2017 we focused on investing strategically in
the business, while also maintaining operating discipline. |
Our strategic pillars include:
| · | offering products that are consistently brand-appropriate
and on-trend with high customer acceptance, with a focus on expanding our advantage in loyalty categories, |
| · | investing in digital and customer capabilities to
support growth, |
| · | creating a unique and differentiated customer experience
that builds loyalty, with focus on both the physical and digital expressions of our brands, and |
| · | attracting and retaining great talent in our businesses
and functions. |
| · | During the year, we hired Mark Breitbard as President
and CEO of Banana Republic, an experienced leader in retail and Gap Inc. veteran who brings extensive leadership, management and
product experience, as well as a clear vision and drive for transformation and innovation. |
| · | We also announced our Balanced Growth Strategy, which
leverages our iconic brands and significant scale to deliver sustainable growth. |
Table of Contents
EXECUTIVES
|
|
|
|
|
|
|
|
|
|
Arthur Peck,
President & Chief
Executive Officer,
Gap Inc.
|
Teri List-Stoll,
Executive Vice
President & Chief
Financial Officer,
Gap Inc. |
Mark Breitbard,
President & Chief
Executive Officer,
Banana Republic |
Jeff Kirwan,
President & Chief
Executive Officer,
Gap (until
March 2018) |
Sonia Syngal,
President & Chief
Executive Officer,
Old Navy |
Business Performance & CEO Pay
Despite challenges for
much of the retail industry in 2017, we delivered top and bottom line results above expectations throughout the year.
·
Old Navy delivered strong positive comp sales
growth throughout the year with broad-based strength across nearly every merchandise category.
·
We continue to see significant growth at Athleta,
outpacing the industry, while also delivering operating margin expansion. Gap and Banana Republic both saw an improvement in comp
and net sales growth as they continue to move forward in their transformation.
·
Gap Inc. delivered a total shareholder return
of 46% in fiscal 2017.
The charts on the right show the directional alignment between
Company performance, based on Net Sales and Diluted EPS, and our CEO’s year-over-year reported compensation. Reported compensation
includes only the portion of the grant associated with the current year, which is a third of the grant. As a new CEO, Mr. Peck’s
performance shares were not fully reflected in his reported compensation until 2017.
Pay for Performance
Payouts under our incentive plans for fiscal 2017 were varied
based on each organization’s performance. We believe outcomes reflect our continued commitment
to pay for performance. Annual bonuses earned were at 169 – 185% of target for all Executives, except Mr. Breitbard,
who earned 75% of target, and Mr. Kirwan, who was terminated in March 2018 and received no annual bonus.
Our Long-Term Growth Program (“LGP”) awards
with a 2015-2017 performance period paid out at 70%, 0% and 115% of target for Mr. Peck, Mr. Kirwan and Ms. Syngal, respectively.
For our 2017-2019 LGP awards, based on our fiscal 2017 performance, if target is achieved in future periods, the actual awards
earned would not exceed 67% of the target shares for Mr. Breitbard and would exceed the target shares for other Executives except
Mr. Kirwan, whose shares were forfeited. |
|
CEO REPORTED COMPENSATION
($ MILLIONS)
NET SALES
($ BILLIONS)
DILUTED EARNINGS
PER SHARE
|
Table of Contents
LISTENING TO OUR SHAREHOLDERS
Our Committee is comprised solely of experienced independent
directors and has established effective means for communicating with shareholders. Our shareholders also have the opportunity to
cast a non-binding advisory vote on executive compensation at our Annual Meeting.
The Committee is very interested in the ideas and any concerns
of our shareholders regarding executive compensation. An advisory vote on executive compensation was presented to our shareholders
at last year’s Annual Meeting and approved by over 97% of shareholder votes, consistent with prior favorable advisory votes
by our shareholders on executive compensation. In evaluating our compensation practices in fiscal 2017, the Committee was mindful
of the support our shareholders expressed for the Company’s philosophy of linking compensation to operational objectives
and the enhancement of shareholder value. As a result, the Committee retained its general approach to executive compensation, and
continued to apply the same general principles and philosophy as in the prior fiscal year in determining executive compensation
and made no material structural changes during fiscal 2017 other than to our annual bonus plan, which was modified to incorporate
operating model transformation objectives. We also continue to put executive compensation to an advisory shareholder vote annually. |
|
Say On Pay– 97% APPROVAL
At the 2017 Annual Meeting, shareholders were very supportive of the structure and philosophy of our pay program during fiscal 2016. Consequently, we made no material structural changes during fiscal 2017 other than to our annual bonus plan, which was modified to incorporate operating model transformation objectives, as further described on page 25. We continued to set rigorous goals and align pay delivery with performance. |
|
CEO COMPENSATION SUMMARY
The structure of our CEO’s compensation package is similar
to our other Executives. The package is intended to reward him for sustained improvement of the Company’s financial performance
and returns to shareholders while helping to promote alignment of interests across the executive team. The Committee used the same
factors outlined under “Compensation Analysis Framework” below, as well as its judgment, in its determinations. Over
50% of the target long-term incentive compensation is in the form of performance shares and most of the total compensation opportunity
requires achievement of performance goals or share price appreciation. Mr. Peck receives essentially the same benefits and limited
perquisites provided to our other Executives, except that he is provided limited personal use of a Company airplane. The package
is described more fully below:
·
Base salary was increased by 3%, an amount equal
to the budgeted percentage increase for U.S. headquarters employees, to $1,375,000.
·
Annual bonus target remained unchanged at 175%
of base salary and based 50% on financial performance and 50% on achievement against operating model
transformation goals. For fiscal year 2017, annual bonus was earned at 168% of target based on financial performance, which
was above our expectations, and at 170% of target based on strong performance against our operating model transformation goals.
·
We granted multi-year performance shares to Mr.
Peck under the LGP. For LGP shares granted in 2015 to Mr. Peck, and based on financial performance during fiscal years 2015 –
2017, 99,747 shares, or 70% of the target amount, were earned based on strong financial performance in 2017 despite below target financial performance in 2015 and 2016. This further demonstrates alignment of executive pay to performance.
·
We granted stock options, with an exercise price
of $23.54, to Mr. Peck covering 600,000 shares, which will vest over a four-year period subject to continued service through each
vesting date. |
|
CEO Pay – Total Reported &
Realized Pay(1)
Mr. Peck’s pay since appointment
to CEO on February 1, 2015
(2015 – 2017) is set forth below:
Average Annual Reported Pay
$10,211,383
Average Annual Realized Pay
$5,146,432
(1)
Average Annual Reported Pay derived from the Summary Compensation Table on page 33. Realized Pay is compensation actually received by the CEO, including salary, net spread on stock option exercises, vested full value awards, and all other compensation amounts realized during the period. For comparison purposes, Realized Pay includes annual incentive payouts for the year earned as in Reported Pay. Realized Pay excludes the value of unearned and unvested performance shares, including outstanding LGP awards, which will not actually be received, if earned, until a future date. |
Table of Contents
The chart below shows the proportion of each component of
our CEO’s fiscal 2017 compensation, as reported in the Summary Compensation Table on page 33, the majority of which is weighted
toward incentive compensation tied to rigorous goals and aligned with the long-term return to shareholders.
FISCAL 2017 CEO COMPENSATION
COMPENSATION GOVERNANCE
Overall, we believe that our executive compensation program met
each of our compensation objectives and continues to demonstrate our strong commitment to pay for performance. The table below
highlights key compensation practices – both the practices we believe support strong governance principles and the practices
we have not implemented because we do not believe they would serve our shareholders’ long-term interests.
What we do |
|
What we don’t do |
ü
Pay for Performance
We tie pay to performance. Our compensation programs
are heavily weighted toward performance with limited perquisites.
ü
Tally Sheets
We review tally sheets, which are intended to summarize
key elements of total compensation and potential wealth accumulation, for our Executives prior to making annual compensation decisions.
ü
Recoupment Policy
We have an incentive compensation recoupment (“clawback”)
policy covering our Executives.
ü
Culture of Ownership
We have executive stock ownership requirements which
we review on a regular basis and revise as needed.
ü
No Hedging
We prohibit Executives from engaging in any hedging or
publicly-traded derivative transactions in Company stock.
ü
No Pledging
We prohibit Executives from pledging Company stock as
collateral for a loan or for any other purpose.
ü
Independent Compensation Consultant
The Committee utilizes an independent compensation consulting
firm, Frederic W. Cook & Co., Inc. The firm does not provide any other services to the Company.
ü
Maximum Award Amounts
The Committee establishes caps on incentive payouts
with an appropriate balance between long-term and short-term objectives. |
|
û
No Long-Term Employment Agreements with Guarantees
We do not have employment contracts of defined length
with our Executives or multi-year guarantees for base salary increases, bonuses or equity compensation.
û
No Golden Parachute Tax Gross-Ups
None of our Executives are entitled to tax gross-up payments
other than for relocation and international assignment related payments or services that are business-related and also generally
available to other employees.
û
No Repricing or Cash-out of Underwater Options
We have not repriced or cashed-out underwater stock options
nor are we able to do so without shareholder approval.
û
No SERP or Executive Pension Plan
We do not have a supplemental executive retirement plan
(“SERP”) or executive pension plan.
û
No Change in Control Arrangements
We do not have severance arrangements specific to a change
in control.
û
No Material Compensation Risk
We do not have incentive compensation arrangements for
Executives that create potential material risk for the Company, based on a risk assessment conducted by the Company.
û
No Dividends on Unearned Performance Awards
We do not pay dividends on unearned performance awards. |
Table of Contents
COMPENSATION OBJECTIVES
Our compensation program is intended to align total compensation
for executives with the short and long-term performance of the Company, while enabling us to attract and retain executive talent.
Specifically, the program is designed to:
·
Support a performance-oriented culture;
·
Support our business strategy by motivating and
rewarding achievement of short and long-term objectives, as well as individual contributions;
·
Attract and retain executive talent;
·
Link executive rewards to shareholder returns;
and
·
Promote a culture of executive stock ownership. |
Our program rewards executives for the achievement of corporate
and divisional financial and non-financial objectives, for their individual contributions to these results, and for optimizing
long-term returns to shareholders. The majority of each executive’s total compensation opportunity is weighted toward incentive
compensation tied to the financial performance of the Company and aligned with the long-term return to our shareholders. When we
do not achieve targeted performance levels and/or our stock price does not appreciate, compensation that can be realized by our
executives is substantially reduced. When we exceed targeted performance levels and/or our stock price appreciates, compensation
that can be realized by our executives is substantially increased. We believe that this is the most effective means of aligning
executive pay with our shareholders’ interests.
ELEMENTS OF COMPENSATION
The main elements of our executive compensation program are:
| · | Annual cash incentive bonus; |
| · | Long-term incentives; and |
| · | Benefits and limited perquisites. |
We have chosen these elements because we believe each supports
achievement of one or more of our compensation objectives, and that together they have been and will continue to be effective in
this regard. The use and weight of each compensation element is based on the judgment of the Committee regarding the importance
of each compensation objective in supporting our business and talent strategies, as well as the structure of these elements for
executives at other companies. Base salary, benefits and perquisites represent less than half of each Executive’s potential
compensation at target performance levels, to emphasize the importance of performance-based compensation.
BASE SALARY
Base salaries are set at a level that the Committee believes
will effectively attract and retain top talent, considering the factors described below under “Compensation Analysis Framework.”
In addition, the Committee considers the impact of base salary changes on other compensation components where applicable. The Committee
reviews base salaries for Executives in the first fiscal quarter, and as needed in connection with promotions or other changes
in responsibilities. The table below summarizes base salaries during fiscal 2017, and changes that occurred during the year.
|
|
Base Salary |
|
Base Salary |
|
|
Name |
|
on 1/28/2017 |
|
on 2/3/2018 |
|
Comments |
Arthur Peck |
|
$ |
1,335,000 |
|
$ |
1,375,000 |
|
Salary was increased in March 2017 as part of the annual review by an amount equal to the budgeted percentage increase for U.S. headquarters employees. |
Teri List-Stoll |
|
$ |
875,000 |
|
$ |
875,000 |
|
|
Mark Breitbard |
|
|
N/A |
|
$ |
950,000 |
|
Mr. Breitbard joined the Company in May 2017 as President & CEO, Banana Republic. |
Jeff Kirwan |
|
$ |
900,000 |
|
$ |
950,000 |
|
Salary was increased in March 2017 as part of the annual review to improve competitiveness and position Mr. Kirwan appropriately relative to other executives. |
Sonia Syngal |
|
$ |
875,000 |
|
$ |
950,000 |
|
Salary was increased in March 2017 as part of the annual review to improve competitiveness and position Ms. Syngal appropriately relative to other executives. |
Table of Contents
ANNUAL CASH INCENTIVE BONUS
Fiscal 2017 Annual Bonus
In setting the fiscal 2017 annual bonus structure, the Committee
considered our business and talent priorities, as well as the factors described below under “Compensation Analysis Framework.”
Notably, we focused on the strategic importance of the Company’s transformation initiatives and the need to further incent
achievement of our objectives for fiscal 2017 in this area, in addition to our financial objectives, to successfully position the
Company for success in a rapidly evolving retail industry environment. To support this goal, the Committee approved changes to
the annual cash incentive bonus structure to more equally emphasize financial results for the fiscal year and accomplishments related
to our operating model transformation. In addition, the potential target and maximum bonus amounts for Brand President & CEO
positions were increased to further incentivize these Executives to achieve our financial and transformation objectives, as well
as help ensure retention. The table below describes the target annual bonus and potential payout range for each Executive. The
annual incentive bonus was based on two components:
| 1. | Financial Performance Component. 50% of the
total opportunity was based on the financial performance of the Company or a division of the Company (of this, 75% was based on
earnings, given the importance of accountability for operating results, and 25% on net sales, to drive top-line focus). |
| 2. | Operating Model Transformation Component.
50% of their total opportunity was based on achievement against the operating model transformation goals of the Company or a division
of the Company. |
|
Target Percentage of |
|
Potential Payout Range as a |
|
Name |
Base Salary |
|
Percentage of Target |
|
Arthur Peck |
175 |
% |
0 – 200 |
% |
Teri List-Stoll |
100 |
% |
0 – 200 |
% |
Mark Breitbard |
125 |
% |
0 – 200 |
% |
Jeff Kirwan |
125 |
% |
0 – 200 |
% |
Sonia Syngal |
125 |
% |
0 – 200 |
% |
Bonus payments are generally made under the Executive Management
Incentive Compensation Award Plan (“Executive MICAP”), which has been approved by our shareholders. For fiscal 2017,
the Committee set a minimum performance goal that needed to be achieved before payment of any bonus. Satisfaction of this goal
established the maximum bonus that could be paid to each Executive (equal to the maximum set forth in the table above), subject
to downward adjustment by the Committee based on achievement of the financial and transformation goals and other factors determined
by the Committee in its sole discretion. For fiscal 2017, this goal was positive net income, as adjusted for certain objective
and nondiscretionary items relating to changes in accounting principles, acquisitions and dispositions, employee termination benefits,
termination of real estate leases, legal claims, and certain business interruptions, as applicable. The Committee determined that
the minimum performance goal for fiscal 2017 had been achieved. The Committee then used negative discretion to determine the actual
payout to each Executive based on performance against the financial and transformation goals as described below, as well as a qualitative
assessment of individual performance. Actual bonuses were paid in March 2018.
Financial Performance Component
The Committee approves threshold, target and maximum performance
goals at the beginning of each performance period. Payouts are made under the financial performance component only if threshold
goals are achieved.
Bonuses for fiscal 2017 financial performance were based on
earnings before interest and taxes (“earnings”), weighted 75%, and net sales, weighted 25%. Earnings and net sales
were used to measure both Company and division performance, in both cases subject to potential adjustment for certain pre-established
items that are unusual in nature or infrequently occur. The earnings measure was selected for fiscal 2017 and weighted more heavily
because the Committee believed that earnings should continue to be a focus of Executives and is a good measure of actual operating
performance within their control and accountability. The net sales measure is intended to drive top-line focus and to promote continued
focus on growing market share. Measuring both earnings and net sales diversifies performance metrics and we believe it provides
an appropriate balance between cost management and top line performance. For fiscal 2017, a range of earnings and sales targets
was used in light of heightened uncertainty from macroeconomic factors and our transformation activities.
Table of Contents
The following table shows fiscal 2017 earnings and net sales
goals expressed as a percentage of fiscal 2016 actual results. Goals for fiscal 2017 were set at realistic levels given our expected
performance at the time they were established and were intended to provide a meaningful incentive for Executives to improve performance.
Also shown are the actual weighted percentages achieved expressed as a percentage of fiscal 2016 actual results after adjustments
to exclude restructuring costs. No other adjustments to the results were made other than neutralization of foreign exchange rate
fluctuations.
|
|
|
|
2017 Earnings / Net Sales Goals as a |
|
Actual Fiscal 2017 |
|
|
|
|
Percentage of Fiscal 2016 |
|
Percentage Achieved |
|
|
|
|
Actual Earnings / Net Sales |
|
After Adjustments |
|
|
Company / |
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Division |
|
Threshold |
|
Target Range |
|
Maximum |
|
Earnings |
|
Net Sales |
|
Arthur Peck |
|
Gap Inc. |
|
100.0% / 98.7% |
|
111.0-116.2% / |
|
125.4% / 102.2% |
|
121.6 |
% |
102.2 |
% |
|
|
|
|
|
|
100.8-101.7% |
|
|
|
|
|
|
|
Teri List-Stoll |
|
Gap Inc. |
|
100.0% / 98.7% |
|
111.0-116.2% / |
|
125.4% / 102.2% |
|
121.6 |
% |
102.2 |
% |
|
|
|
|
|
|
100.8-101.7% |
|
|
|
|
|
|
|
Mark Breitbard |
|
Banana |
|
98.1% / 97.5% |
|
113.3-121.4% / |
|
133.5% / 101.0% |
|
87.6 |
% |
96.4 |
% |
|
|
Republic |
|
|
|
99.5-100.5% |
|
|
|
|
|
|
|
Jeff Kirwan |
|
Gap Global |
|
86.2% / 98.5% |
|
100.4-102.9% / |
|
123.4% / 102.1% |
|
78.8 |
% |
98.5 |
% |
|
|
|
|
|
|
100.6-101.6% |
|
|
|
|
|
|
|
Sonia Syngal |
|
Old Navy |
|
98.3% / 99.9% |
|
109.2-111.7% / |
|
117.2% / 103.4% |
|
116.9 |
% |
106.2 |
% |
|
|
|
|
|
|
101.8-102.8% |
|
|
|
|
|
|
|
Operating Model Transformation Component
Executives were eligible to receive bonuses based on achievement
of seven operating model transformation goals in four areas critical to the long-term success of the Company, including 1) our
product operating model; 2) customer acquisition, retention and purchase frequency; 3) cost savings, and 4) talent. Goals were
measured at the division or corporate level and were weighted equally, with maximum achievement set at 175% for this component.
Individual Performance Adjustment
Prior to determining the final bonus payout for each Executive,
individual performance is assessed to determine if an adjustment is warranted. The CEO makes recommendations to the Committee for
adjustments, if any, for Executives that report to him, and the Committee decides whether any adjustment is warranted for the CEO
in a private session. In assessing each Executive’s individual performance, any additional initiatives outside those described
above, challenges that the Executive faced over the course of the year, and financial performance are considered in determining
final payouts.
Actual Bonuses
For fiscal 2017, performance against operating model transformation
goals applicable to each Executive was above target levels. We observed notable progress against our FY17 transformation goals.
In 2017, all of our brands leveraged responsive capabilities that allowed us to test new products and adjust investments to drive
strong results and exceed customer expectations, our customer database grew and we embedded a talent management and succession
planning process in every business and function that we have already put to use. Performance against earnings and net sales goals
applicable to each Executive was above target levels for all Executives, except Mr. Breitbard and except Mr. Kirwan, who was terminated
in March 2018 and received no annual bonus.
The following table describes the calculation of the actual
bonus for fiscal 2017 for each eligible Executive, except for Mr. Kirwan.
|
|
|
|
|
|
|
Actual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
Actual |
|
|
|
|
|
|
|
|
|
|
|
Target |
|
Achieved: |
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
Financial |
|
|
|
Achieved: |
|
|
|
|
|
|
|
|
|
Base |
|
of Base |
|
Performance |
|
|
|
Transformation |
|
|
|
|
|
Actual |
Name |
|
|
Salary(1) |
x |
Salary |
x ( |
Component(2) |
x |
Weight |
+ |
Component(2) |
x |
Weight) |
|
|
= |
Bonus |
Art Peck |
|
$ |
1,369,717 |
x |
175% |
x ( |
168% |
x |
50% |
+ |
170% |
x |
50%) |
|
|
= |
$4,045,859 |
Teri List-Stoll |
|
$ |
875,000 |
x |
100% |
x ( |
168% |
x |
50% |
+ |
170% |
x |
50%) |
|
|
= |
$1,476,896 |
Mark Breitbard |
|
$ |
714,420 |
x |
125% |
x ( |
0% |
x |
50% |
+ |
150% |
x |
50%) |
|
|
= |
$669,769 |
Sonia Syngal |
|
$ |
940,094 |
x |
125% |
x ( |
195% |
x |
50% |
+ |
175% |
x |
50%) |
|
|
= |
$2,175,093 |
| (1) | Base salaries are prorated based on any changes during the fiscal year. |
| (2) | Actual percentages achieved are rounded for presentation. |
Table of Contents
LONG-TERM INCENTIVES
Stock-based long-term incentives align executive compensation
and shareholder returns. Unlike some of the members of our peer group, we do not have a pension plan, and we rely on long-term
incentives to provide a substantial percentage of each Executive’s potential retirement savings. Long-term incentives have
typically consisted of stock options, stock units or performance shares. We have a mix of different grant types for executives
to balance performance focus and potential compensation-related risk, but at least half of our regular annual grant value is intended
to be in the form of performance shares for performance-based long-term pay delivery and shareholder value alignment.
It has been our practice to grant long-term incentives to
Executives on an annual basis, usually in the first quarter of each fiscal year. This timing was selected because it follows the
release of our annual financial results and completion of annual compensation reviews. We also grant long-term incentives on other
dates to newly hired Executives and periodically in connection with promotions or for special recognition and retention. Grants
are typically approved by the Committee at a meeting and are effective on the meeting date or, if approved by unanimous written
consent, the date of the last signature on the consent. However, the effective date for new hires is no earlier than the first
day of employment. Stock-based awards are granted under our 2016 Long-Term Incentive Plan, which was approved by our shareholders.
In determining the long-term incentive structure and award amounts,
the Committee considered the factors described below under “Compensation Analysis Framework,” including a review of
market data for comparable positions and each individual’s accumulated vested and unvested awards, current and potential
realizable value over time using stock appreciation assumptions, vesting schedules, comparison of individual awards between Executives
and in relation to other compensation elements, shareholder dilution and accounting expense.
Stock Options
We believe stock options focus Executives on managing the Company
from the long-term perspective of an owner. Stock options provide value to the recipient only if the price of our stock increases.
All stock options granted to employees during fiscal 2017 had an exercise price equal to the closing price of our stock on the
date of grant. The stock option grants received by our Executives are described in more detail in the Grants of Plan-Based Awards
table on page 36.
Stock options typically vest based on continued service at a
rate of 25% annually beginning one year from the grant date, which we have determined helps meet our retention objectives. We have
also used other vesting schedules to align with timing of compensation being forfeited at a prior employer for new hires or to
align with critical retention periods. Stock options are typically granted with a maximum term of ten years, and vested options
are normally exercisable for three months following employment termination. Vesting is generally accelerated upon death, disability
or retirement if the stock options are held for at least one year.
Stock Units and Performance Shares
A portion of long-term incentives is delivered in units representing
full-value shares of our stock to drive performance, promote retention and foster a long-term ownership perspective. Unlike stock
options, full-value share awards, in combination with stock ownership requirements, subject Executives to the same downside risk
experienced by shareholders but still encourage retention if our stock price does not appreciate, and help to focus Executives
on sustaining the value of the Company. In general, we believe the grant or vesting of a significant percentage of full-value shares
for Executives should be based on performance against annual or long-term objectives unless they are made to offset compensation
from prior employment in the case of new hires. However, to balance our performance, retention, and ownership objectives, in the
past we have granted stock units or other full-value shares that vest only for continued service with the Company, and we may do
so in the future. The stock unit grants received by our Executives are described in more detail in the Grants of Plan-Based Awards
table on page 36.
Stock units that are granted to Executives other than the CEO
are normally scheduled to vest over three or four years, although the schedule may differ based on critical retention or performance
periods, or the vesting of compensation being forfeited at a prior employer for new hires. Executives generally must be employed
on the vesting date or awards are forfeited. Vesting is generally accelerated upon death or retirement if the awards are held for
at least one year and any performance conditions have been previously satisfied. Additional circumstances under which vesting of
long-term incentives may be accelerated are described on pages 42-43 of this Proxy Statement.
LGP (Long-Term Growth Program)
Executives are eligible to participate in the LGP, which is
intended to promote sustained improvement in financial performance and long-term value creation for shareholders, while recognizing
the inherent difficulty in setting long-term performance goals in the volatile retail industry. The key features of the program
are described below:
·
Each Executive is eligible to receive an annual
performance share award. Performance shares give the Executive the right to receive a number of shares of our stock based on achievement
against performance goals during a specified three-year performance period, subject to certain service requirements. Actual shares
paid out, if any, will vary based on achievement of the performance goals.
·
The number of actual shares that an Executive
may earn after the end of three years is based on two performance metrics: (i) average attainment of separate annual earnings goals
that are established each year over three years,
Table of Contents
measured at the division level for those with division
responsibilities and the corporate level for those with Company-wide responsibilities, and (ii) attainment of a three-year cumulative
Company earnings goal set at the beginning of the same three-year period. The potential payout range as a percentage of the target
award based on average annual earnings attainment is 0% to 250%. The award is modified up or down by up to 20% (for a maximum opportunity
of 300% of target) based on the level of attainment of the cumulative Company earnings goal.
·
50% of the award is payable at the end of the
three-year performance period, generally subject to continued service with the Company through the date that the Committee determines
the number of shares that are earned, if any, and the remaining 50% will vest on the one-year anniversary of such determination
date based on continued service with the Company.
The table below describes the potential payout range as a percentage
of the target award for the fiscal 2017-2019 performance period. The target number of shares was determined using our closing stock
price on the date of grant and a percentage of base salary. Targets for the President & CEO and those Executives in Brand President
& CEO positions were increased for fiscal 2017 to further incent them to improve performance and for retention after considering
relevant factors described below under “Compensation Analysis Framework.” Mr. Breitbard joined the Company in May 2017
as President & CEO, Banana Republic and received a prorated LGP grant for fiscal 2017. The performance share grants represent
only an opportunity to earn actual shares of our stock for achievement of performance goals over three years. The associated
amount listed in the Summary Compensation Table under Stock Awards is the grant date fair value for accounting purposes, which
is the required disclosure under SEC rules, not necessarily the compensation that will be actually realized by each Executive.
The same threshold, target range, maximum earnings goals, and adjustments described above under “Fiscal 2017 Annual Bonus”
applied to the 2017 performance year under the LGP. The same minimum performance goal used for the fiscal 2017 annual bonus was
also used for the LGP and established the maximum number of shares that could be paid to each Executive, subject to downward adjustment
by the Committee based upon the achievement of the financial performance goals and other factors determined by the Committee in
its sole discretion. We use earnings for both annual cash awards and performance-based long-term incentives because we believe
that it is the best metric to drive shareholder value. The use of annual goals over a three-year period maintains our ability to
set realistic goals while creating focus on results over a longer time horizon and a strong linkage to overall long-term Company
results. All payments are made in shares at vesting and dividends are not paid or accrued on unvested shares.
|
|
Fiscal 2017 Award Potential Payout |
Name |
|
Target
Percentage
of Base Salary |
|
|
Target
Number of
Performance Shares |
|
Potential Payout
Range as
Percentage
of Target Shares |
|
Arthur Peck |
|
550 |
% |
|
321,261 |
|
0 – 300 |
% |
Teri List-Stoll |
|
180 |
% |
|
66,907 |
|
0 – 300 |
% |
Mark Breitbard |
|
275 |
% |
|
83,759 |
|
0 – 300 |
% |
Jeff Kirwan |
|
275 |
% |
|
110,981 |
|
0 – 300 |
% |
Sonia Syngal |
|
275 |
% |
|
110,981 |
|
0 – 300 |
% |
The following table describes the actual achievement levels
and actual shares for the LGP awards for the completed fiscal 2015-2017 performance period for each eligible Executive.
|
|
Fiscal 2015 Award Achievement |
Name |
|
Target
Shares |
|
Year 1, Year 2, & Year 3
(2015-2017)
Actual Percentage
Achieved |
|
|
Three
Year
Average |
|
|
Actual
Cumulative
Company
Earnings
Goal
Modifier |
|
|
Actual
Percentage
Achieved(1) |
|
|
Actual
Shares(1) |
Arthur Peck |
|
141,749 |
|
0 |
% |
|
76 |
% |
|
188 |
% |
|
88 |
% |
|
20 |
% |
|
70 |
% |
|
99,747 |
Jeff Kirwan |
|
30,894 |
|
0 |
% |
|
0 |
% |
|
0 |
% |
|
0 |
% |
|
20 |
% |
|
0 |
% |
|
0 |
Sonia Syngal |
|
18,173 |
|
0 |
% |
|
191 |
% |
|
240 |
% |
|
144 |
% |
|
20 |
% |
|
115 |
% |
|
20,884 |
| (1) | Actual percentage achieved is rounded for presentation
and is the three-year average, decreased by the cumulative Company earnings goal modifier. Actual shares is the product of the
target shares and the actual percentage achieved. |
Table of Contents
The table below describes, for each eligible Executive, the
actual percentage achievement levels for the completed fiscal years under the LGP awards for the fiscal 2016-2018 and fiscal 2017-2019
performance periods. Final achievement and actual shares for these outstanding awards are still subject to the remaining performance
periods and the cumulative Company earnings goal over the same three-year performance period. Mr. Kirwan, who was terminated in
March 2018, is no longer eligible to receive LGP awards for the fiscal 2016-2018 and fiscal 2017-2019 performance periods and,
therefore, has been excluded from the table below.
|
|
Fiscal 2016 Award
Achievement |
|
Fiscal 2017 Award
Achievement |
Name |
|
Target
Shares |
|
Year 1
(2016)
Actual
Percentage
Achieved |
|
|
Year 2
(2017)
Actual
Percentage
Achieved |
|
|
Target
Shares |
|
Year 1
(2017)
Actual
Percentage
Achieved |
|
Arthur Peck |
|
221,172 |
|
76 |
% |
|
188 |
% |
|
321,261 |
|
188 |
% |
Teri List-Stoll |
|
N/A |
|
N/A |
|
|
N/A |
|
|
66,907 |
|
188 |
% |
Mark Breitbard |
|
N/A |
|
N/A |
|
|
N/A |
|
|
83,759 |
|
0 |
% |
Sonia Syngal |
|
52,186 |
|
191 |
% |
|
240 |
% |
|
110,981 |
|
240 |
% |
NEW HIRE AND RETENTION ACTIONS
Mr. Kirwan received an extraordinary bonus of $750,000 in May
2017 in recognition of his unique contributions toward our operating model transformation and to promote short-term retention.
The bonus is repayable in full to the Company in the case of a voluntary termination or termination for cause within one year of
the payment date, and half must be repaid should such a termination occur between one and two years from the payment date.
Mr. Breitbard was paid a $1,000,000 signing bonus to recruit
him from his prior employer. The bonus is repayable in full to the Company in the case of a voluntary termination or termination
for cause within one year of his hire date, and half must be repaid should such a termination occur between one and two years from
his hire date. Mr. Breitbard also received an initial stock option grant covering 300,000 shares and an initial stock unit grant
covering 150,000 shares to induce him to join the Company. Both the options and stock units vest based on continued service at
a rate of 25% annually beginning one year from the grant date.
BENEFITS AND PERQUISITES
Executives generally are eligible for the same health and welfare
plans as other full-time Gap Inc. employees, including medical, dental, life and disability insurance, and retirement plans. Although
not a significant part of total compensation, we also provide limited additional benefits and perquisites to our Executives, which
we believe are reasonable and consistent with our overall compensation objectives. These perquisites and benefits include: financial
planning services or an allowance to cover these services, as Executives typically have more complex financial planning requirements;
participation in a deferred compensation plan that is offered to all highly compensated employees, as a means to help meet retirement
savings goals; and matching charitable donations, up to certain annual limits, which are available to all employees. For Mr. Peck
only, we allow limited personal use of a Company airplane at an amount not to exceed $150,000 per year based on the incremental
cost to the Company in order to provide an efficient way for Mr. Peck to manage travel and time commitments.
The value of the benefits and perquisites received by our Executives
are described in more detail in the footnotes to the Summary Compensation Table beginning on page 35.
STOCK OWNERSHIP REQUIREMENTS FOR EXECUTIVE
OFFICERS / HEDGING AND PLEDGING PROHIBITIONS
We have minimum stock ownership requirements for certain executive
positions to more closely link executive and shareholder interests, to balance potential rewards and risks, and to encourage a
long-term perspective in managing the Company. Each executive has five years from the date of his or her appointment to reach the
requirement.
As of February 3, 2018, all Executives had either met the shares
requirement in the table below or had remaining time to do so.
|
|
Requirements
(shares) |
President & CEO, Gap Inc. |
|
300,000 |
Brand President & CEO |
|
75,000 |
Corporate Executive Vice President |
|
40,000 |
Table of Contents
Executives not meeting the requirement must retain 50% of their
after-tax shares acquired through stock compensation programs until the requirement is reached.
For purposes of determining stock ownership levels, in addition
to shares held directly, certain forms of equity interests in the Company count towards the stock ownership requirement, including
non-performance-based stock units (vested or unvested) and shares held within our 401(k) Plan. A complete description of the requirements,
including a complete list of accepted forms of ownership, is located at www.gapinc.com (follow the Investors, Governance, Executive
Stock Ownership links).
Our insider trading policy applicable to executives prohibits
speculation in our stock, including short sales, hedging or publicly-traded option transactions. We also prohibit executives from
pledging Company stock as collateral for a loan or for any other purpose.
TERMINATION PAYMENTS
Various agreements, as described in more detail beginning on
page 42, provide for severance benefits in the event of a termination of employment. These benefits were selected considering competitive
conditions and customary practices at the time of their implementation. We have no severance arrangements specific to a change
in control.
COMPENSATION ANALYSIS FRAMEWORK
The Committee reviews executive compensation at least annually.
The Committee’s review includes base salary, annual incentives, long-term incentives and the value of benefits and perquisites.
Each element is reviewed individually and in total using tally sheets, which are intended to summarize all elements of total actual
and potential compensation and wealth accumulation. The tally sheets present the dollar value of each compensation component, including
accumulated vested and unvested long-term incentive gains and potential gains using stock price assumptions, vesting schedules
for long-term incentive awards, accumulated deferred compensation and potential termination-related payments.
The Committee also uses a summary of compensation data covering
other companies to support its analysis. The Committee selected a broad spectrum of retail and consumer products companies for
purposes of comparing market compensation levels (the “peer group”) because we have both recruited from and lost executive
talent to these industries in the past, and to ensure appropriate scope and complexity relative to the Company. Because the size
of the peer group companies varies considerably, regression analysis is used where appropriate to adjust the compensation data
for differences in Company and division revenues.
The peer group is reviewed by the Committee each year. The peer
group used in 2017 was comprised of the companies listed below and reflects changes from the prior year (removal of Avon Products
and addition of Foot Locker) for continued relevance with Gap Inc.’s talent market.
Abercrombie & Fitch |
|
J. Crew |
|
Polo Ralph Lauren |
American Eagle Outfitters |
|
Kellogg |
|
PVH Corporation |
Best Buy |
|
Kimberly Clark |
|
Ross Stores |
Children’s Place Retail Stores |
|
Kohl’s |
|
Staples |
Coach |
|
Levi Strauss |
|
Starbucks |
Coca-Cola |
|
L Brands |
|
Target |
Costco Wholesale |
|
Macy’s |
|
TJX Companies |
Disney |
|
McDonald’s |
|
Under Armour |
Estee Lauder Companies |
|
Nike |
|
V.F. Corporation |
Foot Locker |
|
Nordstrom |
|
Williams-Sonoma |
General Mills |
|
PepsiCo |
|
YUM! Brands |
The majority of the peer group provides compensation data through
surveys conducted by Willis Towers Watson, an international consulting company. The surveys provide levels of base salary, annual
incentives, and long-term incentive grant values in a summarized form, and we believe that this data provides a reasonable indicator
of total compensation values for the peer group. This data is supplemented by information obtained through proxy statement disclosures
and other public sources. The Committee uses the peer group data along with the tally sheet data as a frame of reference to inform
compensation decisions, but compensation is not set to meet specific benchmarks or percentiles.
In conducting its analysis and determining compensation, the
Committee also considers the following factors where relevant:
·
Business and talent strategies;
·
The nature of each Executive’s role;
·
Individual performance (based on specific financial
and operating objectives for each Executive, as well as leadership behaviors);
Table of Contents
·
Future potential contributions by the Executive;
·
Internal comparisons to other Executives;
·
Comparisons of the value and nature of each compensation
element to each other and in total; and
·
Retention risk.
As described below, the Committee also considers management’s
recommendations and advice from the Committee’s independent compensation consultant when appropriate. The Committee periodically
reviews the accounting and tax implications of each compensation element, and shareholder dilution in the case of equity awards.
ROLE OF THE CEO AND COMPENSATION CONSULTANT
The CEO evaluates each Executive using relevant factors described
above under “Compensation Analysis Framework” and makes recommendations to the Committee about the structure of the
compensation program and individual arrangements. The CEO is generally present at Committee meetings when compensation, other than
his own, is considered and approved. However, approval rests solely with the Committee.
The Committee has engaged Frederic W. Cook & Co. as its
independent compensation consultant to advise the Committee periodically on the compensation program structure and individual compensation
arrangements. The consultant was selected by the Committee and does not provide any other services to the Company. In addition,
we have conducted a review of the Committee’s relationship with its compensation consultant, and have identified no conflicts
of interest. From time to time, the consultant attends Committee meetings, presents briefings on general and retail-industry compensation
trends and developments, and is also available to the Committee outside of meetings as necessary. The consultant reports directly
to the Committee, although the consultant meets with management from time to time to obtain information necessary to advise the
Committee.
ACCOUNTING AND TAX CONSIDERATIONS
Accounting, tax and related financial implications to the Company
and Executives are considered during the analysis of our compensation and benefits program and individual elements. Overall, the
Committee seeks to balance attainment of our compensation objectives with the need to maximize current tax deductibility of compensation
that may impact earnings and other measures of importance to shareholders. The Committee determined that the accounting and tax
impacts described below were reasonable in light of our objectives.
In general, base salary, annual cash incentive bonus payments,
and the costs related to benefits and perquisites are generally recognized as compensation expense at the time they are earned
or provided. Share-based compensation expense is recognized in our consolidated statements of income for stock options, stock units,
and performance shares.
Subject to the exceptions and limits below, we generally deduct
for federal income tax purposes all payments of compensation and other benefits to Executives. We do not deduct deferred compensation
until the year that the deferred compensation is paid to an Executive.
Section 162(m) of the Internal Revenue Code, prior to modification
by recent tax legislation as discussed below, generally did not allow a tax deduction to public companies for compensation over
$1,000,000 paid to “Covered Employees,” which included the principal executive officer or any of the other three most
highly compensated executive officers (other than the principal financial officer) unless the compensation was based on attainment
of pre-established objective performance goals and certain other requirements were met. It has been our preference to qualify executive
compensation as fully deductible under Section 162(m) where we determine it is consistent with our interests and compensation objectives.
However, to maintain maximum flexibility in achieving compensation objectives, the Committee, while considering company tax deductibility
as one of its factors in determining compensation, does not limit compensation to those levels or types of compensation that are
intended to be deductible.
Historically, our incentive plans have generally been designed
to permit awards that qualify as fully deductible under Section 162(m). However, new hire signing bonuses or other bonuses not
paid under our annual bonus plan were generally subject to the deduction limits of Section 162(m). In addition, stock units, other
than performance shares, that had vesting based only on continued service were also subject to the deduction limits of Section
162(m). Because of the fact-based nature of the performance-based compensation exception and the limited amount of guidance, however,
we do not guarantee that compensation that was intended to comply with the performance-based compensation exception under Section
162(m) will in fact so qualify.
The recently enacted Tax Cuts and Jobs Act eliminated the ability
to rely on the performance-based compensation exception for amounts deductible in fiscal years after fiscal 2017. In addition,
under the legislation, the definition of “Covered Employees” was expanded to include any person who served as the principal
executive officer or principal financial officer at any time during the fiscal year and any person who was a Covered Employee in
any prior fiscal year beginning with fiscal 2017. As a result, beginning in fiscal 2018, the Company may no longer take a deduction
for any compensation paid to “Covered Employees” in excess of $1,000,000, except to the extent that it is “performance
based” as defined in Section 162(m) and subject to a “written binding contract” in effect as of November 2, 2017
that is not later modified in any material respect. However, because of lack of guidance to date, the application of this transition
relief to any of the Company’s
Table of Contents
compensation arrangements is not certain. Therefore, no assurance
can be given that any compensation otherwise subject to a deduction limit under the legislation will qualify for an exception under
this transition rule.
Section 4999 and Section 280G of the Internal Revenue Code provide
that executives could be subject to additional taxes if they receive payments or benefits that exceed certain limits in connection
with a change in control of the Company and that the Company could lose an income tax deduction for such payments. We have not
provided any Executive with tax gross-ups or other reimbursement for tax amounts the Executive might be required to pay under Section
4999.
RECOVERY AND ADJUSTMENTS TO AWARDS
Subject to the approval of the Board, we will require reimbursement
and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, where all of the following
factors are present: (i) the award was predicated upon the achievement of certain financial results that were subsequently the
subject of a restatement, (ii) in the Board’s view, the Executive engaged in fraud or intentional misconduct that was a substantial
contributing cause to the need for the restatement, and (iii) a lower award would have been made to the Executive based upon the
restated financial results. In each such instance, we will seek to recover the individual Executive’s entire annual bonus
or award for the relevant period, plus a reasonable rate of interest. The Board is monitoring this policy to ensure that it is
consistent with applicable laws, including any requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Compensation Committee Report
The Compensation and Management Development Committee (the “Committee”)
has reviewed and discussed this Compensation Discussion and Analysis with management. Based on the review and discussions, the
Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our annual report
on Form 10-K for the fiscal year ended February 3, 2018 and the Proxy Statement for the 2018 Annual Meeting of Shareholders.
Bob L. Martin (Chair)
Brian Goldner
Katherine Tsang
Table of Contents
Summary Compensation Table
The following table shows compensation information for fiscal
2017, which ended February 3, 2018, for our CEO, CFO, and the three other most highly compensated executive officers at fiscal
year-end (“named executive officers”). The table also shows compensation information for fiscal 2016 and fiscal 2015,
which ended January 28, 2017 and January 30, 2016, respectively, for those named executive officers who were also named executive
officers in either of those years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Incentive Plan |
|
Deferred |
|
All Other |
|
|
Name and |
|
Fiscal |
|
Salary |
|
Bonus |
|
Awards |
|
Awards |
|
Compensation |
|
Compensation |
|
Compensation |
|
|
Principal Position(1) |
|
Year |
|
($)(2) |
|
($)(3) |
|
($)(4)(5) |
|
($)(5)(6) |
|
($)(7) |
|
Earnings ($)(8) |
|
($)(9) |
|
Total ($) |
Arthur Peck |
|
2017 |
|
1,396,058 |
|
0 |
|
6,762,235 |
|
3,275,460 |
|
4,045,859 |
|
0 |
|
107,574 |
|
15,587,186 |
President and CEO, |
|
2016 |
|
1,330,288 |
|
0 |
|
3,637,795 |
|
2,932,000 |
|
917,511 |
|
0 |
|
88,572 |
|
8,906,166 |
Gap Inc. |
|
2015 |
|
1,300,000 |
|
0 |
|
2,733,227 |
|
2,079,960 |
|
0 |
|
0 |
|
27,611 |
|
6,140,798 |
Teri List-Stoll |
|
2017 |
|
891,827 |
|
200,000 |
|
647,204 |
|
0 |
|
1,476,896 |
|
0 |
|
329,997 |
|
3,545,924 |
EVP and CFO |
|
2016 |
|
30,288 |
|
0 |
|
2,192,680 |
|
1,076,000 |
|
0 |
|
0 |
|
22,874 |
|
3,321,842 |
Mark Breitbard |
|
2017 |
|
730,769 |
|
0 |
|
4,361,174 |
|
1,549,290 |
|
669,769 |
|
0 |
|
29,178 |
|
7,340,180 |
President and CEO, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banana Republic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeff Kirwan |
|
2017 |
|
961,538 |
|
0 |
|
1,924,532 |
|
1,091,820 |
|
0 |
|
0 |
|
153,275 |
|
4,131,165 |
President and CEO, |
|
2016 |
|
893,269 |
|
0 |
|
771,499 |
|
1,319,400 |
|
133,990 |
|
0 |
|
65,394 |
|
3,183,552 |
Gap |
|
2015 |
|
850,000 |
|
0 |
|
3,642,268 |
|
555,728 |
|
127,500 |
|
0 |
|
1,061,541 |
|
6,237,037 |
Sonia Syngal |
|
2017 |
|
958,173 |
|
0 |
|
1,779,318 |
|
1,091,820 |
|
2,175,093 |
|
0 |
|
76,032 |
|
6,080,436 |
President and CEO, |
|
2016 |
|
850,000 |
|
0 |
|
729,630 |
|
1,081,720 |
|
992,501 |
|
0 |
|
70,603 |
|
3,724,454 |
Old Navy |
|
2015 |
|
750,000 |
|
0 |
|
3,378,237 |
|
243,131 |
|
90,000 |
|
0 |
|
67,541 |
|
4,528,909 |
| (1) | Ms. List-Stoll became our CFO in January 2017. Mr.
Breitbard became an executive officer of the Company in May 2017. Mr. Kirwan ceased to be an executive officer of the Company in
March 2018. |
| (2) | The amounts in this column for Ms. Syngal, Mr. Kirwan,
and Mr. Peck in 2016 reflect the prorated payment of their salaries based on changes during the year. Base salary changes in fiscal
2017 are further described on page 24 of the Compensation Discussion and Analysis section. |
| (3) | The amount in this column for Ms. List-Stoll reflects
the earned portion of a sign-on bonus with repayment provisions that she received when she joined the Company in January 2017.
|
| (4) | This column reflects the aggregate grant date fair
value for awards of stock during fiscal 2017, 2016 and 2015, computed in accordance with FASB ASC 718. These amounts reflect the
grant date fair value, and do not necessarily represent the actual value that may be realized by the named executive officers.
For 2015, this column includes (a) the grant date fair value of the target number of shares that may be earned under the Company’s
Long-Term Growth Program (LGP) with respect to year 3 of a three-year performance period beginning with fiscal 2013 (“LGP
1”), (b) the grant date fair value of the target number of shares that may be earned under the LGP with respect to year 2
of a three-year performance period beginning with fiscal 2014 (“LGP 2”), and (c) the grant date fair value of the target
number of shares that may be earned under the LGP with respect to year 1 of a three-year performance period beginning with fiscal
2015 (“LGP 3”). For 2016, this column includes (a) the grant date fair value of the target number of shares that may
be earned under the LGP with respect to year 3 of LGP 2, (b) the grant date fair value of the target number of shares that may
be earned under the LGP with respect to year 2 of LGP 3, and (c) the grant date fair value of the target number of shares that
may be earned under the LGP with respect to year 1 of a three-year performance period beginning with fiscal 2016 (“LGP 4”).
For 2017, this column includes (a) the grant date fair value of the target number of shares that may be earned under the LGP with
respect to year 3 of LGP 3, (b) the grant date fair value of the target number of shares that may be earned under the LGP with
respect to year 2 of LGP 4, and (c) the grant date fair value of the target number of shares that may be earned under the LGP with
respect to year 1 of a three-year performance period beginning with fiscal 2017 (“LGP 5”). See page 28 of the Compensation
Discussion and Analysis section for actual shares granted under LGP 3. Ms. List-Stoll and Mr. Breitbard each received their first
grant under the LGP in 2017. For executives other than Mr. Peck, this column also includes the aggregate grant date fair value
of any restricted stock units granted during fiscal 2017, 2016 and 2015. |
Table of Contents
Details on the figures included in this column for 2017
are reflected in the following table. Details on the figures included in this column for 2016 and 2015 are included in our 2017
and 2016 Proxy Statements.
|
|
LGP 3 |
|
LGP 4 |
|
LGP 5 |
|
|
|
Total Reported |
|
|
(FY 2015 Grant) |
|
(FY 2016 Grant) |
|
(FY 2017 Grant) |
|
|
|
in Stock Awards |
|
|
Year 3 Target |
|
Year 2 Target |
|
Year 1 Target |
|
Grant Date Fair |
|
Column (Rounded |
|
|
Shares Grant Date |
|
Shares Grant Date |
|
Shares Grant Date |
|
Value of Non-LGP |
|
to the nearest |
|
|
Fair Value ($) |
|
Fair Value ($) |
|
Fair Value ($) |
|
Stock Awards ($) |
|
dollar) ($) |
Arthur Peck |
|
1,452,434 |
|
2,202,136 |
|
3,107,665 |
|
0 |
|
6,762,235 |
Teri List-Stoll |
|
0 |
|
0 |
|
647,204 |
|
0 |
|
647,204 |
Mark Breitbard |
|
0 |
|
0 |
|
810,209 |
|
3,550,965 |
|
4,361,174 |
Jeff Kirwan (a) |
|
316,561 |
|
534,434 |
|
1,073,537 |
|
0 |
|
1,924,532 |
Sonia Syngal |
|
186,192 |
|
519,589 |
|
1,073,537 |
|
0 |
|
1,779,318 |
(a) Mr. Kirwan, who was terminated in March 2018, is
not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards.
The total grant date fair value of the LGP awards if
maximum performance conditions were achieved over the entire three-year period under LGP 3, LGP 4 and LGP 5 are detailed in the
following table. The grant date fair values per share used in calculating the total grant date fair values below were as follows:
(i) year 1 of LGP 3 ($38.13), year 2 of LGP 3 ($27.92), and year 3 of LGP 3 ($30.74), (ii) year 1 of LGP 4 ($27.05), and years
2 and 3 of LGP 4 ($29.87), and (iii) years 1, 2 and 3 of LGP 5 ($29.02). The grant date fair value for year 2 of LGP 4 was used
for year 3 of LGP 4, and the grant date fair value for year 1 of LGP 5 was used for years 2 and 3 of LGP 5. Ms. List-Stoll and
Mr. Breitbard did not receive LGP grants until they joined the Company in 2017. For a description of the Company’s Long-Term
Growth Program, please see pages 27-29 of the Compensation Discussion and Analysis section.
|
|
Maximum Shares Total Grant Date Fair Value ($) |
|
|
LGP 3 |
|
LGP 4 |
|
LGP 5 |
|
|
(FY 2015 Cycle) |
|
(FY 2016 Cycle) |
|
(FY 2017 Cycle) |
Art Peck |
|
13,719,886 |
|
19,195,518 |
|
27,968,983 |
Teri List-Stoll |
|
n/a |
|
n/a |
|
5,824,923 |
Mark Breitbard |
|
n/a |
|
n/a |
|
7,292,059 |
Jeff Kirwan (a) |
|
2,990,230 |
|
4,658,627 |
|
9,662,006 |
Sonia Syngal |
|
1,758,965 |
|
4,529,223 |
|
9,662,006 |
(a) Mr. Kirwan, who was terminated in March 2018, is
not eligible to receive a payout under any outstanding LGP 4 or LGP 5 awards.
| (5) | Please refer to Note 10, “Share-Based Compensation,”
in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filed on March 20, 2018 for the relevant
assumptions used to determine the compensation cost of our stock and option awards. Please refer to the Grants of Plan-Based Awards
table in this Proxy Statement and in our 2017 and 2016 Proxy Statements for information on awards actually granted in fiscal 2016
and 2015. |
| (6) | This column reflects the aggregate grant date fair
value for awards of stock options during fiscal 2017, 2016 and 2015, computed in accordance with FASB ASC 718. These amounts reflect
the grant date fair value, and do not necessarily represent the actual value that may be realized by the named executive officers. |
| (7) | The amounts in this column reflect the non-equity amounts
earned by the named executive officers under the Company’s annual incentive bonus plan. |
| (8) | No above-market or preferential interest rate options
are available under our deferred compensation programs. Please refer to the Nonqualified Deferred Compensation table for additional
information on deferred compensation earnings. |
Table of Contents
| (9) | The amounts shown in the All Other Compensation column
are detailed in the following table. |
|
|
|
|
Personal |
|
|
|
|
|
Deferred |
|
401 (k) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of |
|
Financial |
|
Tax |
|
Compensation |
|
Plan |
|
Disability |
|
Life |
|
|
|
Gift |
|
|
|
|
|
|
Fiscal |
|
Airplane |
|
Counseling |
|
Payments |
|
Plan Match |
|
Match |
|
Plan |
|
Insurance |
|
Relocation |
|
Matching |
|
Other |
|
Total |
Name |
|
Year |
|
($)(a) |
|
($)(b) |
|
($)(c) |
|
($)(d) |
|
($)(e) |
|
($)(f) |
|
($)(g) |
|
($)(h) |
|
($)(i) |
|
($) |
|
($) |
Arthur |
|
2017 |
|
36,734 |
|
15,300 |
|
0 |
|
43,831 |
|
10,718 |
|
415 |
|
576 |
|
0 |
|
0 |
|
0 |
|
107,574 |
Peck |
|
2016 |
|
19,523 |
|
14,838 |
|
0 |
|
42,477 |
|
10,703 |
|
524 |
|
507 |
|
0 |
|
0 |
|
0 |
|
88,572 |
|
|
2015 |
|
0 |
|
14,800 |
|
0 |
|
0 |
|
11,261 |
|
650 |
|
900 |
|
0 |
|
0 |
|
0 |
|
27,611 |
Teri |
|
2017 |
|
0 |
|
12,892 |
|
87,616 |
|
22,402 |
|
12,888 |
|
415 |
|
576 |
|
178,208 |
|
15,000 |
|
0 |
|
329,997 |
List-Stoll |
|
2016 |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
16 |
|
48 |
|
22,810 |
|
0 |
|
0 |
|
22,874 |
Mark |
|
2017 |
|
0 |
|
0 |
|
0 |
|
0 |
|
13,435 |
|
311 |
|
432 |
|
0 |
|
15,000 |
|
0 |
|
29,178 |
Breitbard |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeff |
|
2017 |
|
0 |
|
15,300 |
|
0 |
|
26,738 |
|
8,992 |
|
415 |
|
576 |
|
101,254 |
|
0 |
|
0 |
|
153,275 |
Kirwan |
|
2016 |
|
0 |
|
14,838 |
|
0 |
|
24,938 |
|
10,342 |
|
527 |
|
507 |
|
14,242 |
|
0 |
|
0 |
|
65,394 |
|
|
2015 |
|
0 |
|
14,800 |
|
777,099 |
|
23,400 |
|
9,881 |
|
647 |
|
900 |
|
234,814 |
|
0 |
|
0 |
|
1,061,541 |
Sonia |
|
2017 |
|
0 |
|
15,300 |
|
0 |
|
26,508 |
|
7,975 |
|
415 |
|
576 |
|
11,558 |
|
13,700 |
|
0 |
|
76,032 |
Syngal |
|
2016 |
|
0 |
|
18,341 |
|
0 |
|
22,919 |
|
8,553 |
|
489 |
|
648 |
|
15,703 |
|
3,950 |
|
0 |
|
70,603 |
|
|
2015 |
|
0 |
|
10,627 |
|
0 |
|
18,823 |
|
8,774 |
|
650 |
|
900 |
|
23,272 |
|
4,495 |
|
0 |
|
67,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (a) | The Compensation and Management Development Committee
determined that it was appropriate to provide Mr. Peck use of a Company airplane for limited personal use (not to exceed $150,000
per fiscal year in incremental cost to the Company). As required by SEC rules, the amounts shown are the incremental cost to the
Company of personal use of the Company airplane and are calculated based on the variable operating costs to the Company, including
fuel costs, mileage, trip-related maintenance, and other miscellaneous variable costs. Since the Company airplane is primarily
used for business travel, fixed costs which do not change based on usage, such as the pilot’s salary and maintenance costs
unrelated to the trip, are excluded. |
| (b) | We provide certain executive officers access to financial
counseling services, which may include tax preparation and estate planning services. We value this benefit based on the actual
cost for those services. |
| (c) | For Ms. List-Stoll, these amounts reflect tax reimbursements
in connection with her relocation to San Francisco when she joined the Company in January 2017. For Mr. Kirwan, these amounts reflect
tax reimbursements in connection with his previous international assignments and relocation to the U.S. |
| (d) | These amounts reflect Company matching contributions
under the Company’s nonqualified Deferred Compensation Plan for base salary deferrals representing the excess of the participant’s
base pay over the current IRS qualified plan limit ($270,000 for calendar year 2017), which are matched at up to 4% of base pay,
the same rate as is in effect under the Company’s 401(k) plan. |
| (e) | These amounts reflect Company matching contributions
under the Company’s 401(k) Plan. |
| (f) | These amounts reflect premium payments for long-term
disability insurance, which is available to benefits-eligible employees generally. |
| (g) | These amounts reflect premiums paid for life insurance
provided to employees at the Director level and above. |
| (h) | For Ms. List-Stoll, the amounts reflect costs in connection
with her relocation to San Francisco when she joined the Company in January 2017. For Mr. Kirwan, the amounts reflect costs in
connection with his relocation from China to New York when he assumed the role of Global President, Gap brand. For Ms. Syngal,
the amounts reflect costs in connection with her relocation from the U.K. to San Francisco. |
| (i) | These amounts reflect Company matching contributions
under the Company’s Gift Match Program, available to all employees, under which contributions to eligible nonprofit organizations
are matched by the Company, up to certain annual limits. In calendar year 2017, the limit for the named executive officers was
$15,000, with the exception of Mr. Peck who had an annual matching limit of $100,000. The annual gift match eligibility limits
are based on the executive’s original donation date. |
Table of Contents
Grants of Plan-Based Awards
The following table shows all plan-based awards granted to the
named executive officers during fiscal 2017, which ended on February 3, 2018. The option awards and the unvested portion of the
stock awards identified in the table below are also reported in the Outstanding Equity Awards at Fiscal Year-End table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
All Other |
|
|
|
Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Option |
|
|
|
Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of |
|
Awards: |
|
Exercise |
|
Value of |
|
|
|
|
|
|
Estimated Future Payouts |
|
Estimated Future Payouts |
|
Shares |
|
Number of |
|
or Base |
|
Stock |
|
|
|
|
|
|
Under Non-Equity Incentive |
|
Under Equity Incentive Plan |
|
of |
|
Securities |
|
Price of |
|
and |
|
|
|
|
|
|
Plan Awards(1) |
|
Awards(2) |
|
Stock or |
|
Underlying |
|
Option |
|
Option |
|
|
Grant |
|
Approval |
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
Units |
|
Options |
|
Awards |
|
Awards |
Name |
|
Date |
|
Date |
|
($) |
|
($) |
|
($) |
|
(#) |
|
(#) |
|
(#) |
|
(#) |
|
(#) |
|
($) |
|
($)(3) |
Arthur |
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600,000 |
|
23.54 |
|
3,275,460 |
Peck |
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
21,262 |
|
47,249 |
|
141,749 |
|
|
|
|
|
|
|
1,452,434 |
|
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
33,175 |
|
73,724 |
|
221,172 |
|
|
|
|
|
|
|
2,202,136 |
|
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
48,189 |
|
107,087 |
|
321,261 |
|
|
|
|
|
|
|
3,107,665 |
|
|
N/A |
|
|
|
599,251 |
|
2,397,005 |
|
4,794,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Teri List- |
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
10,036 |
|
22,302 |
|
66,907 |
|
|
|
|
|
|
|
647,204 |
Stoll |
|
N/A |
|
|
|
218,750 |
|
875,000 |
|
1,750,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark |
|
5/1/17 |
|
2/21/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
25.90 |
|
1,549,290 |
Breitbard |
|
5/1/17 |
|
2/21/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
|
|
3,550,965 |
|
|
5/1/17 |
|
2/21/17 |
|
|
|
|
|
|
|
12,563 |
|
27,919 |
|
83,759 |
|
|
|
|
|
|
|
810,209 |
|
|
N/A |
|
|
|
223,256 |
|
893,026 |
|
1,786,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeff |
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
23.54 |
|
1,091,820 |
Kirwan |
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
4,634 |
|
10,298 |
|
30,894 |
|
|
|
|
|
|
|
316,561 |
|
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
8,051 |
|
17,892 |
|
53,677 |
|
|
|
|
|
|
|
534,434 |
|
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
16,647 |
|
36,993 |
|
110,981 |
|
|
|
|
|
|
|
1,073,537 |
|
|
N/A |
|
|
|
294,811 |
|
1,179,245 |
|
2,358,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sonia |
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,00 |
|
23.54 |
|
1,091,820 |
Syngal |
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
2,725 |
|
6,057 |
|
18,173 |
|
|
|
|
|
|
|
186,192 |
|
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
4,473 |
|
9,940 |
|
29,821 |
|
|
|
|
|
|
|
296,908 |
|
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
3,354 |
|
7,455 |
|
22,365 |
|
|
|
|
|
|
|
222,681 |
|
|
3/13/17 |
|
3/13/17 |
|
|
|
|
|
|
|
16,647 |
|
36,993 |
|
110,981 |
|
|
|
|
|
|
|
1,073,537 |
|
|
N/A |
|
|
|
293,779 |
|
1,175,118 |
|
2,350,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) | The amounts shown in these columns reflect the estimated
potential payment levels for the fiscal 2017 performance period under the Company’s annual incentive bonus plan, further
described on pages 25-26 of the Compensation Discussion and Analysis section. The potential payouts were performance-based and,
therefore, were completely at risk. The potential threshold payment amount assumes 25% achievement of the transformation goals
component and 25% achievement of the financial performance component. The potential target payment amount assumes 100% achievement
of the transformation goals component and 100% achievement of the financial performance component. The potential maximum payment
amount assumes 200% of target. The annual incentive bonus plan is further described on pages 25-26. Each named executive officer
received a bonus under the annual incentive bonus plan, which is reported in the Summary Compensation Table under the column entitled
“Non-Equity Incentive Plan Compensation.” |
Table of Contents
| (2) | The amounts shown in these columns for each of the named executive officers reflect, in shares, (a) the threshold, target and
maximum amounts for year 3 of a three-year performance period beginning in fiscal 2015 (“LGP 3”), (b) the threshold,
target and maximum amounts for year 2 of a three-year performance period beginning in fiscal 2016 (“LGP 4”) and (c)
the threshold, target and maximum amounts for year 1 of a three-year performance period beginning in fiscal 2017 (“LGP 5”)
under the Company’s Long-Term Growth Program, further described on pages 27-29 of the Compensation Discussion and Analysis
section. Potential payouts are based on the applicable interpolated award values between the threshold, target, and maximum payout
levels. The potential awards are performance-based and, therefore, completely at risk. The total number of shares that were actually
earned for the entire three-year performance period under LGP 3 for each named executive was as follows: Mr. Peck (99,747), Mr.
Kirwan (0), and Ms. Syngal (20,884). As of the end of fiscal 2017, the total number of shares that could be earned if the target
performance conditions are achieved over the entire three-year performance period under LGP 4 for each named executive is as follows:
Mr. Peck (221,172), Mr. Kirwan (53,677), and Ms. Syngal (52,186). As of the end of fiscal 2017, the total number of shares that
could be earned if the target performance conditions are achieved over the entire three-year performance period under LGP 5 for
each named executive is as follows: Mr. Peck (321,261), Mr. Breitbard (83,759), Mr. Kirwan (110,981), Ms. List-Stoll (66,907),
and Ms. Syngal (110,981). Ms. List-Stoll and Mr. Breitbard, who joined the Company in January 2017 and May 2017, respectively,
did not receive LGP grants in fiscal 2015 or 2016. Mr. Kirwan, who was terminated in March 2018, is not eligible to receive a payout
under any outstanding LGP 4 or LGP 5 awards. |
| (3) | The value of a stock award or option award is based on the fair value as of the grant date of such award determined pursuant
to FASB ASC 718. Please refer to Note 10, “Share-Based Compensation,” in the Notes to Consolidated Financial Statements
included in our Annual Report on Form 10-K filed on March 20, 2018 for the relevant assumptions used to determine the valuation
of our stock and option awards. For fiscal 2017, the grant date fair value of the Equity Incentive Plan Awards is based on the
closing price of a share of our stock on the last day of fiscal 2017 less future expected dividends during the vesting period,
multiplied by the target number of shares that may be earned. For year 3 of LGP 3, the grant date fair value is $30.74. For year
2 of LGP 4, the grant date fair value is $29.87. For year 1 of LGP 5, the grant date fair value is $29.02. For the total grant
date fair value of awards if maximum performance conditions are achieved over the entire three-year performance period under LGP
3, LGP 4, and LGP 5, see footnote 4 to the Summary Compensation Table. |
Table of Contents
Outstanding Equity Awards at Fiscal Year-End
The following table shows all outstanding equity awards held
by the named executive officers at the end of fiscal 2017, which ended on February 3, 2018.
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
Plan Awards: |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
Market or |
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
|
|
Payout |
|
|
|
|
|
|
|
Plan Awards: |
|
|
|
|
|
|
|
|
Market |
|
Number of |
|
|
Value of |
|
|
Number of |
|
Number of |
|
|
Number of |
|
|
|
|
|
Number of |
|
|
Value of |
|
Unearned |
|
|
Unearned |
|
|
Securities |
|
Securities |
|
|
Securities |
|
|
|
|
|
Shares or |
|
|
Shares or |
|
Shares, |
|
|
Shares, |
|
|
Underlying |
|
Underlying |
|
|
Underlying |
|
|
|
|
|
Units of |
|
|
Units of |
|
Units or |
|
|
Units or |
|
|
Unexercised |
|
Unexercised |
|
|
Unexercised |
|
Option |
|
|
|
Stock |
|
|
Stock |
|
Other Rights |
|
|
Other Rights |
|
|
Options |
|
Options |
|
|
Unearned |
|
Exercise |
|
Option |
|
That Have |
|
|
That Have |
|
That Have |
|
|
That Have |
|
|
(#) |
|
(#) |
|
|
Options |
|
Price |
|
Expiration |
|
Not Vested |
|
|
Not Vested |
|
Not Vested |
|
|
Not Vested |
Name |
|
Exercisable |
|
Unexercisable(1) |
|
|
(#) |
|
($) |
|
Date |
|
(#)(2) |
|
|
($)(3) |
|
(#)(4) |
|
|
($)(5) |
Arthur Peck |
|
25,000 |
|
|
|
|
|
|
23.07 |
|
3/15/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
21.79 |
|
3/14/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
|
|
|
25.09 |
|
3/12/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
80,000 |
|
|
|
|
|
|
36.45 |
|
3/18/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
20,000 |
(a) |
|
|
|
42.20 |
|
3/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
225,000 |
|
75,000 |
(b) |
|
|
|
41.19 |
|
2/1/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
375,000 |
(c) |
|
|
|
30.18 |
|
3/14/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600,000 |
(d) |
|
|
|
23.54 |
|
3/13/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,747 |
(a) |
|
3,200,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
378,855 |
(b) |
|
12,157,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
883,607 |
(c) |
|
28,354,949 |
Teri List-Stoll |
|
50,000 |
|
150,000 |
(e) |
|
|
|
24.15 |
|
1/17/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
(a) |
|
2,406,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184,023 |
(c) |
|
5,905,298 |
Mark |
|
|
|
300,000 |
(f) |
|
|
|
25.90 |
|
5/1/2027 |
|
|
|
|
|
|
|
|
|
|
Breitbard |
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
(b) |
|
4,813,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,503 |
(c) |
|
1,075,111 |
Jeff Kirwan |
|
15,000 |
|
|
|
|
|
|
36.45 |
|
3/18/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
18,750 |
|
6,250 |
(g) |
|
|
|
42.20 |
|
3/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
40,000 |
(h) |
|
|
|
41.27 |
|
3/16/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
31,250 |
|
93,750 |
(i) |
|
|
|
30.18 |
|
3/14/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
75,000 |
(j) |
|
|
|
30.18 |
|
3/14/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
(k) |
|
|
|
23.54 |
|
3/13/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,231 |
(c) |
|
135,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,946 |
(b) |
|
287,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,392 |
(c) |
|
1,424,539 |
Table of Contents
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
Plan Awards: |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
Market or |
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
|
|
Payout |
|
|
|
|
|
|
|
Plan Awards: |
|
|
|
|
|
|
|
|
Market |
|
Number of |
|
|
Value of |
|
|
Number of |
|
Number of |
|
|
Number of |
|
|
|
|
|
Number of |
|
|
Value of |
|
Unearned |
|
|
Unearned |
|
|
Securities |
|
Securities |
|
|
Securities |
|
|
|
|
|
Shares or |
|
|
Shares or |
|
Shares, |
|
|
Shares, |
|
|
Underlying |
|
Underlying |
|
|
Underlying |
|
|
|
|
|
Units of |
|
|
Units of |
|
Units or |
|
|
Units or |
|
|
Unexercised |
|
Unexercised |
|
|
Unexercised |
|
Option |
|
|
|
Stock |
|
|
Stock |
|
Other Rights |
|
|
Other Rights |
|
|
Options |
|
Options |
|
|
Unearned |
|
Exercise |
|
Option |
|
That Have |
|
|
That Have |
|
That Have |
|
|
That Have |
|
|
(#) |
|
(#) |
|
|
Options |
|
Price |
|
Expiration |
|
Not Vested |
|
|
Not Vested |
|
Not Vested |
|
|
Not Vested |
Name |
|
Exercisable |
|
Unexercisable(1) |
|
|
(#) |
|
($) |
|
Date |
|
(#)(2) |
|
|
($)(3) |
|
(#)(4) |
|
|
($)(5) |
Sonia |
|
3,750 |
|
|
|
|
|
|
25.09 |
|
3/12/2022 |
|
|
|
|
|
|
|
|
|
|
Syngal |
|
10,000 |
|
|
|
|
|
|
36.45 |
|
3/18/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
22,500 |
|
7,500 |
(l) |
|
|
|
42.20 |
|
3/17/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
17,500 |
|
17,500 |
(m) |
|
|
|
41.27 |
|
3/16/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
18,750 |
|
56,250 |
(n) |
|
|
|
30.18 |
|
3/14/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
12,500 |
|
37,500 |
(o) |
|
|
|
30.18 |
|
3/14/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
18,750 |
|
56,250 |
(p) |
|
|
|
23.93 |
|
4/13/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
(q) |
|
|
|
23.54 |
|
3/13/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,884 |
(a) |
|
670,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118,453 |
(b) |
|
3,801,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
328,673 |
(c) |
|
10,547,117 |
| (1) | The following footnotes set forth the vest dates for the outstanding option awards (vesting generally depends upon continued
employment): |
| (a) | Options vest 20,000 on 3/17/2018. |
| (b) | Options vest 75,000 on 2/1/2019. |
| (c) | Options vest 125,000 on 3/14/2018, 125,000 on 3/14/2019 and 125,000 on 3/14/2020. |
| (d) | Options vest 150,000 on 3/13/2018, 150,000 on 3/13/2019, 150,000 on 3/13/2020 and 150,000 on 3/13/2021. |
| (e) | Options vest 50,000 on 1/17/2019, 50,000 on 1/17/2020 and 50,000 on 1/17/2021. |
| (f) | Options vest 75,000 on 5/1/2018, 75,000 on 5/1/2019, 75,000 on 5/1/2020 and 75,000 on 5/1/2021. |
| (g) | Options vest 6,250 on 3/17/2018. |
| (h) | Options vest 20,000 on 3/16/2018 and 20,000 on 3/16/2019. |
| (i) | Options vest 31,250 on 3/14/2018, 31,250 on 3/14/2019 and 31,250 on 3/14/2020. |
| (j) | Options vest 25,000 on 3/14/2018, 25,000 on 3/14/2019 and 25,000 on 3/14/2020. |
| (k) | Options vest 50,000 on 3/13/2018, 50,000 on 3/13/2019, 50,000 on 3/13/2020 and 50,000 on 3/13/2021. |
| (l) | Options vest 7,500 on 3/17/2018. |
| (m) | Options vest 8,750 on 3/16/2018 and 8,750 on 3/16/2019. |
| (n) | Options vest 18,750 on 3/14/2018, 18,750 on 3/14/2019 and 18,750 on 3/14/2020. |
| (o) | Options vest 12,500 on 3/14/2018, 12,500 on 3/14/2019 and 12,500 on 3/14/2020. |
| (p) | Options vest 18,750 on 4/13/2018, 18,750 on 4/13/2019 and 18,750 on 4/13/2020. |
| (q) | Options vest 50,000 on 3/13/2018, 50,000 on 3/13/2019, 50,000 on 3/13/2020 and 50,000 on 3/13/2021. |
| (2) | The following footnotes set forth the vest dates for the outstanding stock awards (vesting generally depends upon continued
employment): |
| (a) | Awards vests 25,000 on 1/17/2019, 25,000 on 1/17/2020 and 25,000 on 1/17/2021. |
| (b) | Awards vests 37,500 on 5/1/2018, 37,500 on 5/1/2019, 37,500 on 5/1/2020 and 37,500 on 5/1/2021. |
| (c) | Award vests 4,231 on 3/16/2018. |
| (3) | Represents the number of stock awards multiplied by the closing price of our common stock as of February 2, 2018 ($32.09). |
| (4) | (a) Represents the number of shares earned under the Company’s Long-Term Growth Program (described on pages
27-29 of |
the Compensation Discussion and Analysis section) with respect
to year 1 (fiscal 2015), year 2 (fiscal 2016) and year 3 (fiscal 2017) of a three-year performance period (“LGP 3”) .
Mr. Kirwan did not earn any shares under the LGP 3 awards. Mr. Breitbard, who joined the Company in May 2017, did not receive an
LGP grant in fiscal 2015. Ms. List-Stoll, who joined the Company in January 2017, did not receive an LGP grant in fiscal 2015.
| (b) | Represents an estimate of the number of shares that may be earned under the Company’s Long-Term Growth Program (described
on pages 27-29 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2016), year 2 (fiscal 2017)
and year 3 (fiscal 2018) of a three-year performance period (“LGP 4”), based on a combination of actual and assumed
performance as required by SEC disclosure rules. Half of any award earned will vest on the date the Company’s Compensation
and Management Development Committee certifies attainment in 2019, and the remainder will vest on the anniversary of such certification
date, contingent on continued service with the Company. Mr. Breitbard, who joined the Company in May 2017, did not receive an LGP
grant in fiscal 2016. Ms. List-Stoll, who joined the Company in January 2017, did not receive an LGP grant in fiscal 2016. Mr.
Kirwan, who was terminated in March 2018, is not eligible to receive a payout under the LGP 4 awards. |
| (c) | Represents an estimate of the number of shares that may be earned under the Company’s Long-Term Growth Program (described
on pages 27-29 of the Compensation Discussion and Analysis section) with respect to year 1 (fiscal 2017), year 2 (fiscal 2018)
and year 3 (fiscal 2019) of a three-year performance period (“LGP 5”), based on a combination of actual and assumed
performance as required by SEC disclosure rules. Half of any award earned will vest on the date the Company’s Compensation
and Management Development Committee certifies attainment in 2020, and the remainder will vest on the first anniversary of such
certification date, contingent on continued service with the Company. Mr. Kirwan, who was terminated in March 2018, is not eligible
to receive a payout under the LGP 5 awards. |
| (5) | Represents the number of stock awards multiplied by the closing price of our common stock as of February 2, 2018 ($32.09). |
Table of Contents
Option Exercises and Stock Vested
The following table shows all stock options exercised and the
value realized upon exercise, and all stock awards vested and the value realized upon vesting, by the named executive officers
during fiscal 2017, which ended on February 3, 2018.
|
|
Option Awards |
|
Stock Awards(1) |
|
|
Number of |
|
|
|
Number of |
|
|
|
|
Shares |
|
Value |
|
Shares |
|
Value |
|
|
Acquired on |
|
Realized on |
|
Acquired on |
|
Realized on |
|
|
Exercise |
|
Exercise |
|
Vesting |
|
Vesting |
Name |
|
(#) |
|
($) |
|
(#) |
|
($) |
Art Peck |
|
0 |
|
0 |
|
13,180 |
|
311,390 |
Teri List-Stoll |
|
0 |
|
0 |
|
25,000 |
|
831,500 |
Mark Breitbard |
|
0 |
|
0 |
|
0 |
|
0 |
Jeff Kirwan (2) |
|
6,430 |
|
44,547 |
|
83,406 |
|
2,279,741 |
Sonia Syngal |
|
0 |
|
0 |
|
82,810 |
|
2,262,998 |
|
|
|
|
|
|
|
|
|
|
| (1) | The amounts reflected include performance awards that vested during fiscal 2017. |
| (2) | Mr. Kirwan ceased to be an executive officer of the Company in March 2018. |
Nonqualified Deferred Compensation
The table below provides information on the nonqualified deferred
compensation activity for the named executive officers in fiscal 2017, which ended on February 3, 2018.
|
|
|
|
|
|
|
|
Aggregate |
|
|
Aggregate |
|
|
Executive |
|
Registrant |
|
Aggregate |
|
Withdrawals/ |
|
|
Balance |
|
|
Contribution |
|
Contributions |
|
Earnings |
|
Distributions |
|
|
at Fiscal |
|
|
in Fiscal |
|
in Fiscal |
|
in Fiscal |
|
in Fiscal |
|
|
2017 |
|
|
2017 |
|
2017 |
|
2017 |
|
2017 |
|
|
Year-End |
Name |
|
($)(1) |
|
($)(2) |
|
($)(3) |
|
($) |
|
|
($)(4) |
Arthur Peck |
|
238,256 |
|
43,831 |
|
1,324,482 |
|
0 |
|
|
6,903,307 |
Teri List-Stoll |
|
43,758 |
|
22,402 |
|
(358) |
|
0 |
|
|
65,802 |
Mark Breitbard |
|
2,192 |
|
0 |
|
(39) |
|
0 |
|
|
2,153 |
Jeff Kirwan (5) |
|
205,514 |
|
26,738 |
|
156,154 |
|
0 |
|
|
1,333,103 |
Sonia Syngal |
|
37,538 |
|
26,508 |
|
58,522 |
|
0 |
|
|
380,611 |
| (1) | These amounts are included in the “Salary” column of the Summary Compensation Table. |
| (2) | Footnote 9 to the Summary Compensation Table shows matching contributions under the Company’s Deferred Compensation Plan
(“DCP”) for base salary deferrals representing the excess of the participant’s base pay over the current IRS
qualified plan limit ($270,000 for calendar year 2017), which are matched at up to 4%, the same rate as is in effect under the
Company’s 401(k) plan. |
| (3) | These amounts include earnings and dividends. In fiscal 2017, no above-market or preferential interest rate options were available
on notional investments in the DCP. |
| (4) | A portion of these amounts were previously reported as deferred compensation in the Summary Compensation table in the Proxy
Statements for prior Annual Meetings as follows: Mr. Peck ($2,963,064), Mr. Kirwan ($263,269), and Ms. Syngal ($48,131). |
| (5) | Mr. Kirwan ceased to be an executive officer of the Company in March 2018. |
The DCP allows eligible employees to defer up to 75% of their salary
and 90% of their bonuses (or such other percentages determined by the Company) on a pre-tax basis. Additional amounts are credited
annually to participants' accounts in the form of Company matching contributions of up to a specified percentage of the eligible
compensation deferred each year by participants. Contributions credited to a participant's account are credited or debited with
notional investment gains and losses, as well as appreciation and depreciation equal to the experience of selected investment funds
offered under the DCP and elected by the participant. Deferred compensation is payable upon a participant's termination of employment,
death, or on a date or dates selected by the participant in accordance with the terms of the DCP. Deferred compensation is generally
payable in the form of a lump sum distribution or installments at the election of the participant and subject to exceptions in
the case of death or termination of employment prior to age 50. Participants or, in the case of the participant's death, their
beneficiaries, may not sell, transfer, anticipate, assign, hypothecate or otherwise dispose of any right or interest in the DCP.
A participant may designate one or more beneficiaries to receive any portion of his or her deferred compensation payable
in the event of the participant's death. The Company also reserves the right to amend the DCP at any time,
or to terminate the DCP in accordance with the restrictions under Section 409A of the Internal Revenue Code.
Table of Contents
Relationship Between CEO and Median
Employee Annual Total Compensation
Gap Inc. is one of the largest retailers in the United States.
While our employees work in a variety of roles and settings, the majority of our employees work in stores. Our store workforce
consists largely of part-time, hourly employees who weave their part-time schedule together with other life commitments such as
education or family responsibilities.
For fiscal year 2017, using the methodology described below,
we determined that the employee with the median annual total compensation of our employees (“median employee”) was
a part-time sales associate located in Alabama and the employee's total compensation in fiscal year 2017 was $5,375. This employee
did not work the full year and we did not annualize employee compensation. The annual reported compensation of our CEO for that
same period was $15,587,186. Accordingly, the ratio of the median employee pay to CEO pay for 2017 is 1 to 2,900, which was calculated
in compliance with the requirements set forth in Item 402(u) of SEC Regulation S-K.
To identify the median employee and determine the annual total
compensation of the median employee, we used the following methodology:
| 1. | As of February 3, 2018, our employee population, prior to excluding any non-U.S. employees, consisted of approximately 134,815
employees. As permitted by the SEC rules, we excluded 5,474 employees from the following countries: Bangladesh 29, Cambodia 10,
Dominican Republic 1, El Salvador 1, France 770, Guatemala 7, India 348, Indonesia 17, Ireland 125, Italy 306, Mexico 595, Pakistan
2, Philippines 2, Singapore 2, Sri Lanka 9, Turkey 8, United Kingdom 3,118, and Vietnam 124. In the aggregate, the total number
of excluded employees equaled 4.1% of the total employee population, resulting in a total U.S. and non-U.S. employee population
of approximately 129,341 that was used for our calculation. |
| 2. | For the non-excluded employees, we used total gross earnings paid for the fiscal year ending February 3, 2018 as a consistently
applied measure to determine the median employee. Total gross earnings were obtained from local payroll data. |
| 3. | We calculated the total compensation elements for both the CEO and the median employee for fiscal 2017 in accordance with the
requirements of Item 402(c)(2)(x) of SEC Regulation S-K. |
Table of Contents
Potential Payments Upon Termination
POST-TERMINATION BENEFITS
The Company entered into agreements with Mr. Peck, Ms. List-Stoll,
Mr. Breitbard, Mr. Kirwan and Ms. Syngal in 2017, which provide eligibility for post-termination benefits in the case of involuntary
termination without cause.
These agreements in total provide that, if the executive is
involuntarily terminated without cause (as specified in each respective agreement) prior to July 1, 2020, the executive is eligible
to receive (in exchange for a release of claims):
| i. | The executive’s then-current salary for eighteen months (the “post-termination period”). Post-termination
period payments will cease if the executive accepts other employment or professional relationship with another company primarily
engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $500 million annually,
or if the executive breaches his or her obligations to the Company (e.g., duty to protect confidential information, agreement not
to solicit Company employees). Post-termination period payments will be reduced by any compensation the executive receives during
the post-termination period from other employment or professional relationship with a non-competitor. |
| ii. | Should the executive elect to continue health coverage through COBRA, reimbursement for a portion of the COBRA premium during
the period in which the executive is receiving payments under paragraph (i) above. |
| iii. | During the period in which the executive is receiving payments under paragraph (i) above, reimbursement for his or her costs
to maintain the financial counseling program the Company provides to senior executives. |
| iv. | A prorated bonus for the fiscal year in which termination occurs if the executive worked at least 3 months of the fiscal year
and if earned based on actual financial results and 100% standard for any non-financial component. In the event termination occurs
after the end of the fiscal year but before the date of bonus payments, such bonus for the preceding fiscal year will be paid pursuant
to the terms of the bonus plan. |
| v. | Accelerated vesting (but not settlement) of restricted stock units and performance shares or units that remain subject only
to time vesting conditions scheduled to vest prior to April 1 following the fiscal year of termination. |
For Mr. Kirwan, the table below shows the amounts that he became
eligible to receive under the agreement described above as a result of his termination of employment with the Company in March
2018. For all other executives, the following table shows the amounts that each executive would have been eligible to receive under
the agreements described above assuming that they had been terminated without cause on February 3, 2018, the last day of our 2017
fiscal year.
|
|
Potential Post-Termination Payment Eligibility |
Description |
|
Mr. Peck |
|
Ms. List-Stoll |
|
Mr. Breitbard |
|
Mr. Kirwan |
|
Ms. Syngal |
Cash Payments |
|
|
|
|
|
|
|
|
|
|
related to salary(1) |
|
$2,062,500 |
|
$1,312,500 |
|
$1,425,000 |
|
$1,425,000 |
|
$1,425,000 |
Cash Payments |
|
|
|
|
|
|
|
|
|
|
related to bonus(2) |
|
4,045,859 |
|
1,476,896 |
|
669,769 |
|
0 |
|
2,175,093 |
Health Benefits |
|
27,486 |
|
20,106 |
|
27,486 |
|
20,376 |
|
27,486 |
Financial Counseling |
|
22,950 |
|
22,950 |
|
22,950 |
|
22,950 |
|
22,950 |
Stock Award Vesting |
|
|
|
|
|
|
|
|
|
|
Acceleration |
|
3,396,662 |
|
0 |
|
0 |
|
0 |
|
825,323 |
Total |
|
9,555,457 |
|
2,832,452 |
|
2,145,205 |
|
1,468,326 |
|
4,475,852 |
| (1) | Payments represent salary continuation for 18 months. The amounts do not include the deferred compensation these executives
would also be entitled to receive upon termination, as described in the Nonqualified Deferred Compensation section, above. |
| (2) | Payments represent fiscal 2017 bonus that was earned by each executive. |
Table of Contents
ACCELERATION OF EQUITY UPON CHANGE IN CONTROL
Under the 2016 Long-Term Incentive Plan (the “Plan”),
in the event of a change in control, any acquiror may assume or substitute outstanding awards with substantially equivalent awards
of the acquiror's stock. Except as set forth in an award agreement, outstanding awards which are neither assumed nor substituted
by the acquiror in the change in control become fully vested immediately prior to the change in control. The table below shows
the value of all unvested options and unvested stock awards that would have become vested in the event of a change in control on
February 3, 2018, the last day of our 2017 fiscal year, in the event that awards were not assumed or substituted as described above.
Description |
|
Mr. Peck |
|
Ms. List-Stoll |
|
Mr. Breitbard |
|
Mr. Kirwan |
|
Ms. Syngal |
Stock Option Vesting |
|
|
|
|
|
|
|
|
|
|
Acceleration(1) |
|
$5,846,250 |
|
$1,191,000 |
|
$1,857,000 |
|
$2,032,313 |
|
$2,348,063 |
Stock Award Vesting |
|
|
|
|
|
|
|
|
|
|
Acceleration(2) |
|
20,803,337 |
|
4,553,796 |
|
7,501,326 |
|
5,419,648 |
|
6,061,352 |
Total |
|
26,649,587 |
|
5,744,796 |
|
9,358,326 |
|
7,451,961 |
|
8,409,415 |
| (1) | Reflects the value of all unvested stock options that would have become vested assuming a change in control on February 3,
2018 in which awards were not assumed or substituted as described above, based on the difference between the option exercise price
and $32.09 per share, the last closing price of our common stock as of that date. |
| (2) | Reflects the value of all unvested stock awards that would have become vested assuming a change in control on February 3, 2018
in which awards were not assumed or substituted as described above, based on the last closing price of our common stock as of that
date, which was $32.09. For Ms. Syngal and Mr. Peck, amounts include the target number of shares that could be earned under the
Company's Long-Term Growth Program (LGP) for the following three-year performance periods: 2015-2017, 2016-2018, and 2017-2019.
For Ms. List-Stoll and Mr. Breitbard, amounts include the target number of shares that could be earned under the LGP for the following
three-year performance period: 2017-2019. For Mr. Kirwan, amounts include the target number of shares that could be earned under
the LGP for the 2015-2017 three-year performance period. Mr. Kirwan, who was terminated in March 2018, is not eligible to receive
a payout under the LGP for the 2016-2018 and 2017-2019 performance periods. |
DEATH, DISABILITY OR RETIREMENT
Each of our named executive officers is generally entitled to
the following additional death, disability or retirement benefits:
| i. | Executive supplemental long-term disability insurance, which increases income replacement to 50% of base salary up to a maximum
payment of $25,000 per month. |
| ii. | Life insurance, provided to employees at the Director level and above, which provides coverage of three times base salary up
to a maximum of $2 million. |
| iii. | Upon retirement, our standard forms of stock option and stock award agreements provide for accelerated vesting of any unvested
shares under awards that have been outstanding for at least a year and, for performance shares, for which the performance period
has been completed. For these purposes, “Retirement” means Employee’s Termination of Service for any reason (other
than due to Employee’s misconduct as determined by the Company in its sole discretion) after Employee has attained age 60
and completed at least five years of continuous service as an Employee of the Company or an Affiliate. Mr. Peck reached Retirement
age in September 2015. As a result, certain eligible grants were subject to accelerated vesting. Other than Mr. Peck, none of our
named executive officers was eligible for retirement-based accelerated vesting as of February 3, 2018, the last day of our 2017
fiscal year. In the event Mr. Peck retired on February 3, 2018, the last day of our 2017 fiscal year, the value of his unvested
options that would have become vested was $716,250, and the value of his unvested stock awards that would have become vested was
$3,396,662, based on the last closing price of our common stock as of that date. |
| iv. | Upon death (and, in the case of stock options, termination on account of disability), our standard forms of stock option and
stock award agreements provide for accelerated vesting of any unvested shares under awards that have been outstanding for at least
a year and, for performance shares, for which the performance period has been completed. The table below shows the value of all
unvested options and unvested stock awards that would have become vested in the event of the named executive’s death (and,
in the case of stock options, termination on account of disability) on February 3, 2018, the last day of our 2017 fiscal year. |
Description |
|
Mr. Peck |
|
Ms. List-Stoll |
|
Mr. Breitbard |
|
Mr. Kirwan |
|
Ms. Syngal |
Stock Option Vesting |
|
|
|
|
|
|
|
|
|
|
Acceleration(1) |
|
$716,250 |
|
$1,191,000 |
|
$0 |
|
$322,313 |
|
$638,063 |
Stock Award Vesting |
|
|
|
|
|
|
|
|
|
|
Acceleration(2) |
|
3,396,662 |
|
2,406,750 |
|
0 |
|
135,773 |
|
670,168 |
Total |
|
4,112,912 |
|
3,597,750 |
|
0 |
|
458,086 |
|
1,308,231 |
| (1) | Reflects the value of all unvested stock options that would have become vested assuming the named executive officers had died
(or terminated on account of disability) on February 3, 2018, based on the difference between the option exercise price and the
last closing price of our common stock as of that date. |
| (2) | Reflects the value of all unvested stock awards that would have become vested assuming the named executive officers had died
on February 3, 2018, based on the last closing price of our common stock as of that date. |
Table of Contents
Equity Compensation Plan Information
The following table provides information as of February 3, 2018
about shares of our common stock which may be issued upon the exercise of options, warrants and rights granted to employees, consultants
or members of our Board of Directors under all of our equity compensation plans, including the 2016 Long-Term Incentive Plan and
the Employee Stock Purchase Plan.
|
|
Equity Plan Summary |
|
|
Column (A) |
|
Column (B) |
|
Column (C) |
|
|
|
|
|
|
|
Number of Securities |
|
|
|
|
|
|
|
Remaining Available |
|
|
Number of |
|
Weighted-Average |
|
for Future Issuance |
|
|
Securities to be Issued |
|
Exercise Price of |
|
Under Equity |
|
|
Upon Exercise of |
|
Outstanding Options, |
|
Compensation Plans (#) |
|
|
Outstanding Options, |
|
Warrants and Rights |
|
(Excluding Securities |
Plan Category |
|
Warrants and Rights (#) |
|
($) |
|
Reflected in Column (A)) |
Equity Compensation Plans |
|
|
|
|
|
|
|
|
Approved by Security |
|
|
|
|
|
|
|
|
Holders(1) |
|
19,641,798 |
(2) |
|
$28.67 |
|
33,592,229 |
(3) |
Equity Compensation Plan |
|
|
|
|
|
|
|
|
Not Approved by Security |
|
|
|
|
|
|
|
|
Holders |
|
0 |
|
|
0 |
|
8,225 |
|
Total |
|
19,641,798 |
|
|
$28.67 |
|
33,600,454 |
|
|
|
|
|
|
|
|
|
|
|
| (1) | These plans consist of our 2016 Long-Term Incentive Plan (the “2016 Plan”) and Employee Stock Purchase Plan (the
“ESPP”). |
| (2) | This number excludes 257,881 shares that were issued at the end of the most recent ESPP purchase period, which began on December
1, 2017 and ended on February 28, 2018, after the end of our 2017 fiscal year. This number includes the number of shares that could
be earned under the Company’s Long-Term Growth Program (described on pages 27-29 of the Compensation Discussion and Analysis
section) if the maximum performance conditions were achieved over the entire three-year performance periods. |
| (3) | This number includes 8,144,190 shares that were available for future issuance under the ESPP at the end of our 2017 fiscal
year, including the 257,881 shares described in footnote 2 above. The number shown also reflects the deduction of three shares
from the Company’s share reserve for every one stock award granted prior to May 17, 2011, and the deduction of two shares
from the Company’s share reserve for every one stock award granted on or after May 17, 2011, pursuant to the terms of the
2016 Plan. |
EARNED PERFORMANCE-BASED AWARDS DATA
We granted performance-based awards under the LGP (Long-Term
Growth Program) in fiscal 2015 and 2016, which are granted at the beginning of the performance period and disclosed in our Form
10-K at maximum performance. A portion of these shares will be forfeited if maximum performance goals are not achieved. The table
below shows the LGP shares earned in each fiscal year for the purpose of burn rate calculation.
Fiscal Year |
|
Granted Shares |
|
Earned Shares |
2017(1) |
|
0 |
|
32,875 |
2016 |
|
896,469 |
|
50,356 |
2015 |
|
597,131 |
|
260,034 |
| (1) | In fiscal 2017, we changed our accounting treatment
and performance awards will not be considered granted until such performance conditions have been established. There were 1,470,938
shares of performance-based awards, which are at maximum, granted in 2017 for which the performance conditions had not yet been
established. As a result, these shares are not reflected as granted in our Form 10-K. |
Table of Contents
BENEFICIAL OWNERSHIP
OF SHARES
Beneficial Ownership Table
The following table sets forth certain information as of March
26, 2018 to indicate beneficial ownership of our common stock by (i) each person known by us to be the beneficial owner of more
than 5% of the outstanding shares of our common stock, (ii) each director and nominee and each executive officer and former executive
officer named in the “Summary Compensation Table” of this Proxy Statement, and (iii) all of our directors and executive
officers as a group. Unless otherwise indicated, beneficial ownership is direct and the person indicated has sole voting and investment
power. Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
|
Shares Beneficially Owned |
|
|
Name of Beneficial Owner |
Common
Stock |
Awards
Vesting Within
60 Days(1) |
Total |
% of
Class(2) |
|
Directors and Named Executive Officers |
|
|
|
|
|
Mark Breitbard |
0 |
112,500 |
112,500 |
* |
|
Robert J. Fisher(3) |
48,021,217 |
18,135 |
48,039,352 |
12.3 |
% |
William S. Fisher(4) |
69,109,689 |
18,135 |
69,127,824 |
17.8 |
% |
Tracy Gardner |
0 |
17,251 |
17,251 |
* |
|
Brian Goldner |
5,000 |
12,242 |
17,242 |
* |
|
Isabella D. Goren |
11,619 |
18,135 |
29,754 |
* |
|
Teri List-Stoll |
16,201 |
50,000 |
66,201 |
* |
|
Bob L. Martin |
40,148 |
18,135 |
58,283 |
* |
|
Jorge P. Montoya |
30,927 |
18,135 |
49,062 |
* |
|
Chris O'Neill |
0 |
4,985 |
4,985 |
* |
|
Arthur Peck |
242,048 |
935,000 |
1,177,048 |
* |
|
Mayo A. Shattuck III |
89,888 |
27,175 |
117,063 |
* |
|
Sonia Syngal |
35,657 |
220,000 |
255,657 |
* |
|
Katherine Tsang(5) |
783 |
18,135 |
18,918 |
* |
|
All directors and executive officers, as a group (19 persons)(6) |
117,653,414 |
1,970,801 |
119,624,215 |
30.6 |
% |
Former Executive Officers |
|
|
|
|
|
Jeff Kirwan(7) |
2,655 |
156,250 |
158,905 |
* |
|
Certain Other Beneficial Holders |
|
|
|
|
|
Doris F. Fisher(8) |
24,530,644 |
0 |
24,530,644 |
6.3 |
% |
John J. Fisher(9) |
64,069,166 |
0 |
64,069,166 |
16.5 |
% |
The Vanguard Group(10) |
25,421,798 |
0 |
25,421,798 |
6.5 |
% |
| (1) | Reflects stock options exercisable and stock units
vesting within 60 days after March 26, 2018. Also includes the outstanding stock units earned but unpaid to non-employee directors,
which are subject to a three-year deferral period but would be issued immediately upon the resignation or retirement of the non-employee
director, as described on page 14. |
| (2) | “*” indicates ownership of less than 1%
of the outstanding shares of our common stock. |
Table of Contents
| (3) | Includes (a) 18,135 shares to be issued upon settlement
of stock units (and related dividend equivalent rights) which are subject to a three-year deferral period but would be issued immediately
upon his resignation or retirement over which he has sole dispositive and voting power, (b) 8,279,029 shares beneficially owned
as a co-trustee of trusts for other beneficiaries of which Robert J. Fisher shares dispositive and voting power (including shares
held by the trusts through a limited liability company), (c) 2,721,010 shares owned as community property with his spouse with
shared dispositive and voting power, (d) 15,000 shares beneficially owned through Delaware limited partnerships over which Robert
J. Fisher has sole dispositive and voting power, (e) 6,131,087 shares beneficially owned as trustee of a trust for his benefit
with sole dispositive and voting power, (f) 2,385,304 shares beneficially owned as trustee of trusts for his benefit over which
Robert J. Fisher has sole dispositive power and other proxyholders have proxies granting sole voting power, (g) 616,487 shares
for which Robert J. Fisher has a proxy granting him sole voting power, (h) 873,300 shares beneficially owned as a co-trustee of
a trust organized exclusively for charitable purposes over which Robert J. Fisher shares dispositive and voting power, and (i)
27,000,000 shares owned by FCH TBME LLC of which Robert J. Fisher is the sole manager with sole dispositive power over 27,00,000
shares, sole voting power over 23,400,000 shares and an irrevocable proxy granting a proxyholder sole voting power over 3,600,000
shares. In addition to the shares identified in the table above, Robert J. Fisher’s spouse separately owns 125,195 shares
over which Mr. Fisher has no dispositive or voting control. Robert J. Fisher’s address is 1300 Evans Avenue, No. 880154,
San Francisco, California 94188. |
| (4) | Includes (a) 18,135 shares to be issued upon settlement
of stock units (and related dividend equivalent rights) which are subject to a three-year deferral period but would be issued immediately
upon his resignation or retirement over which he has sole dispositive and voting power, (b) 11,360,396 shares beneficially owned
as trustee of a trust for William S. Fisher’s benefit with sole dispositive and voting power, (c) 9,815,109 shares beneficially
owned as a co-trustee of trusts for other beneficiaries of which he shares dispositive and voting power (including shares held
by the trusts through a limited liability company), (d) 378,590 shares beneficially owned as trustee of trusts for other beneficiaries
with sole dispositive and voting power, (e) 15,624 shares beneficially owned and held in a 401(k) account with shared dispositive
and voting power, (f) 15,000 shares beneficially owned through Delaware limited partnerships over which William S. Fisher has sole
dispositive and voting power, (g) 367,014 shares beneficially owned as trustee of a trust for his benefit with sole dispositive
and voting power, (h) 616,487 shares beneficially owned as trustee of a trust for his benefit over which William S. Fisher has
sole dispositive power and another individual proxyholder has a proxy granting sole voting power, (i) 16,306,469 shares for which
William S. Fisher has proxies granting him sole voting power, (j) 3,235,000 shares beneficially owned as a co-trustee of a trust
organized exclusively for charitable purposes over which he shares dispositive and voting power, and (k) 27,000,000 shares owned
by FCH TBMS LLC of which William S. Fisher is the sole manager with sole dispositive power over 27,000,000 shares, sole voting
power over 23,400,000 shares and an irrevocable proxy granting a proxyholder sole voting power over 3,600,000 shares. In addition
to the shares identified in the table above, William S. Fisher’s spouse separately owns 163,999 shares over which Mr. Fisher
has no dispositive or voting control. William S. Fisher’s address is 1300 Evans Avenue, No. 880154, San Francisco, California
94188. |
| (5) | Ms. Tsang is not standing for reelection to the Board
of Directors. |
| (6) | Reflects the information above as well as information
regarding our unnamed executive officers; provided, however, that shares reflected more than once in the table above with respect
to Robert J. Fisher and William S. Fisher are only reflected once in this line. See the note regarding various Fisher family holdings
immediately following this table. |
| (7) | Mr. Kirwan ceased to be an executive officer of the
Company in March 2018. |
| (8) | Includes 5,000,000 shares beneficially owned as trustee
of a trust for her benefit over which Doris F. Fisher has sole dispositive power and another individual proxyholder has a proxy
granting sole voting power. Amounts shown do not include shares held directly or indirectly by Mrs. Fisher’s three adult
sons or their spouses, beneficial ownership of which is disclaimed because Mrs. Fisher does not have voting or dispositive control
over such shares. Doris F. Fisher's address is 1300 Evans Avenue, No. 880154, San Francisco, California 94188. |
| (9) | Includes (a) 4,563,553 shares owned through trusts
for which John J. Fisher is trustee and has sole dispositive and voting power, (b) 9,336,042 shares beneficially owned as a co-trustee
of trusts for other beneficiaries for which voting and dispositive power is shared (including shares held by the trusts through
a limited liability company), (c) 16,035,368 shares beneficially owned as trustee of trusts for his benefit over which John J.
Fisher has sole dispositive power and another individual proxyholder has proxies granting sole voting power, (d) 7,114,203 shares
for which John J. Fisher has proxies granting sole voting power, (e) 20,000 shares beneficially owned through Delaware limited
partnerships over which John J. Fisher has sole dispositive and voting power, and (f) 27,000,000 shares owned by FCH TBML LLC of
which John J. Fisher is the sole manager with sole dispositive power over 27,000,000 shares, sole voting power over 23,400,000
shares with an irrevocable proxy granting a proxyholder sole voting power over 3,600,000 shares. Mr. Fisher disclaims individual
beneficial ownership of shares owned by FCH TBML LLC except to the extent of his actual ownership interest therein. Also
see the note regarding various Fisher family holdings immediately following this table. Amounts shown do not include 43,790 shares
owned by Mr. Fisher's spouse, over which Mr. Fisher does not have voting or dispositive control. John J. Fisher’s address
is 1300 Evans Avenue, No. 880154, San Francisco, California 94188. |
| (10) | The Schedule 13G filed with the SEC by The Vanguard
Group on February 9, 2018 indicates that, as of December 31, 2017, The Vanguard Group has sole power to direct the voting of 317,467
shares, shared power to direct the voting of 48,639 shares, sole power to direct the disposition of 25,070,391 shares, and shared
power to direct the disposition of 351,407 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. |
Table of Contents
Note Regarding Various Fisher Family Holdings
SEC rules require reporting of beneficial ownership of certain
shares by multiple parties where voting and/or dispositive power over those shares is shared by those multiple parties. As a result,
the following shares are listed multiple times in the table above.
The shares described in footnotes (3), (4) and (9) above for
which voting and investment power is shared by Messrs. Robert J. Fisher, William S. Fisher, and/or John J. Fisher actually represent
an aggregate of 13,715,090 shares, rather than 27,430,180 shares, as a result of that shared voting and investment power.
In addition, the shares described in footnotes (3), (4) and
(9) above for which sole dispositive power is held by one person and, pursuant to irrevocable proxies, sole voting power is held
by a different person actually represent an aggregate of 21,537,159 shares, rather than 43,074,318 shares.
For purposes of the above table, removing the shares counted
multiple times (described above) results in an aggregate total beneficial ownership of 37.5% of the outstanding shares by Messrs.
John J. Fisher, Robert J. Fisher, William S. Fisher and charitable entities for which one or more Fishers is a trustee.
The aggregate total beneficial ownership of Mrs. Doris F. Fisher
and Messrs. John J. Fisher, Robert J. Fisher, and William S. Fisher, including charitable entities for which one or more of the
Fishers is a trustee, is 43.8% of the outstanding shares. Mrs. Doris F. Fisher, and Messrs. John J. Fisher, Robert J. Fisher, and
William S. Fisher each disclaim beneficial ownership over shares owned by other members of the Fisher family, except as specifically
disclosed in the footnotes above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s
directors and executive officers, and holders of more than 10% of the Company’s common stock, to file with the Securities
and Exchange Commission reports about their ownership of the Company’s common stock. Such directors, officers and 10% shareholders
are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
Securities and Exchange Commission regulations require us to
identify in this Proxy Statement anyone who filed a required report late during the most recent fiscal year. The Company notes
that due to a third-party administrative error, a sale by Mr. Martin of the Company’s common stock on March 18, 2013, and
a gift by Mr. Martin on December 31, 2014, were never reported on a Form 4 or Form 5. Mr. Martin reported these transactions on
a Form 5 on March 9, 2018. These transactions did not result in any liability under Section 16(b) of the Exchange Act. Based on
our review of forms we received, or written representations from reporting persons stating that they were not required to file
these forms, we believe that during fiscal 2017 all other Section 16(a) filing requirements were satisfied on a timely basis or
previously disclosed.
Table of Contents
OTHER INFORMATION
Questions and Answers About the Annual Meeting and Voting
Who are the proxyholders and how were they selected?
The proxyholders are Arthur Peck, Julie Gruber and Teri List-Stoll,
who were selected by our Board of Directors and are officers of the Company. The proxyholders will vote all proxies, or record
an abstention, in accordance with the directions on the proxy. If no contrary direction is given, the shares will be voted as recommended
by our Board of Directors.
How much did this proxy solicitation cost and who pays for
it?
The Company will pay all expenses in connection with the solicitation
of the proxies relating to this Proxy Statement, including the charges of brokerage houses and other custodians, nominees or fiduciaries
for forwarding documents to security owners. In addition to solicitation by mail, certain of our officers, directors and employees
(who will receive no extra compensation for their services) may solicit proxies by email, by telephone, by fax or in person. We
have also retained the services of D.F. King & Co. to solicit the proxies of certain shareholders for the Annual Meeting and
provide other consultation services. The cost of D.F. King’s services is estimated to be $8,000, plus reimbursement of out-of-pocket
expenses.
How can I electronically access the proxy materials?
We are using the Internet as our primary means of furnishing
our proxy materials to most of our shareholders. Rather than sending those shareholders a paper copy of our proxy materials, we
are sending a Notice of Internet Availability of Proxy Materials. That Notice contains instructions for accessing the materials
and voting via the Internet. The Notice also contains information on how to request a paper copy of the proxy materials by mail.
We believe this method of distribution makes the proxy distribution process more efficient, less costly and limits our impact on
the environment. This Proxy Statement and our 2017 Annual Report to Shareholders are available at: www.gapinc.com (follow the Investors,
Annual Reports and Proxy links).
Can I receive proxy materials for future annual meetings
by email rather than receiving a paper copy of the Notice?
If you are a Shareholder of Record or a Beneficial Owner, you
may elect to receive the Notice or other future proxy materials by email by logging into www.proxyvote.com. If you are a Beneficial
Owner, you can also contact your broker directly to opt for email delivery of proxy materials. If you choose to receive proxy materials
by email, next year you will receive an email with instructions on how to view those materials and vote before the next annual
meeting. Your choice to obtain documents by email will remain in effect until you notify us otherwise. Delivering future notices
by email will help us further reduce the cost and environmental impact of our shareholder meetings.
What is “householding”?
Under SEC rules, a single package of Notices may be sent to
any household at which two or more shareholders reside if they appear to be members of the same family, unless contrary instructions
have been received. Each shareholder continues to receive a separate Notice within the package. This procedure, referred to as
householding, reduces the volume of duplicate materials shareholders receive and reduces mailing expenses. Shareholders may revoke
their consent to future householding mailings or enroll in householding by contacting Broadridge toll free at 1-866-540-7095, or
by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Shareholders who wish to receive
a separate set of proxy materials should contact Broadridge at the same phone number or mailing address.
What is the difference between a shareholder of record
and a beneficial owner of shares?
Shareholder Of Record
If your shares are registered directly in your name with the
Company’s transfer agent, Equiniti Trust Company, you are considered the shareholder of record with respect to those shares.
Table of Contents
Beneficial Owner
If your shares are held in an account at a brokerage firm, bank,
broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name.” The
organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial
owner, you have the right to instruct that organization on how to vote the shares held in your account. Please note that the organization
is not allowed to vote your shares on most matters without your instructions, so it is important for you to provide direction to
the organization on how to vote.
May I attend the Annual Meeting?
All shareholders as of the close of business on the Record Date,
or holders of a valid proxy for the Annual Meeting, are entitled to attend the Annual Meeting. Shareholders who plan to attend
the Annual Meeting must present valid photo identification. In addition, if you are not a shareholder of record but hold shares
through a broker, bank, trustee, nominee, or other similar organization (i.e., in street name), you must provide proof of beneficial
ownership as of the Record Date. Proof of beneficial ownership can take the form of your most recent account statement prior to
the Record Date, a copy of the voting instruction form provided by your broker, bank, trustee, nominee, or other similar organization,
a copy of the Notice of Internet Availability of Proxy Materials, if one was mailed to you, or similar evidence of ownership. The
Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the Record Date.
How can I listen to the live webcast of the meeting?
We plan to offer an audio webcast of the Annual Meeting at www.gapinc.com.
If you choose to listen to the webcast, go to our website at www.gapinc.com (follow the Investors, Webcasts links) shortly before
the start of the meeting and follow the instructions provided. Please note that this webcast will be “listen only.”
If you would like to vote, ask questions, or otherwise interact with the meeting participants, you will need to attend the meeting
in person. The webcast will be recorded and available for replay on www.gapinc.com for at least 30 days following the Annual Meeting.
Are votes confidential? Who counts the votes?
Proxy instructions, ballots and voting tabulations that identify
individual shareholders are handled in a manner that protects the voting privacy of our shareholders. Your vote will not be disclosed
to anyone, except:
| · | As required to tabulate and certify the vote; |
| · | As required by law; and/or |
| · | If you provide written comments on your proxy card
(the proxy card and comments would then be forwarded to us for review). |
We retain an independent tabulator and inspector of election
to receive and tabulate the proxies and to certify the voting results.
What happens if I do not give specific voting instructions?
Shareholder Of Record
If you are a shareholder of record and you sign, date and return
a proxy card but do not specify how to vote, your shares will be voted in accordance with the recommendations of the Board of Directors
on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion regarding any other
matters properly presented for a vote at the Annual Meeting or any adjournments or postponements thereof.
Beneficial Owner
If you are a beneficial owner and hold your shares through a
broker, bank, or other similar organization, and you do not provide the broker or other nominee that holds your shares with voting
instructions, the broker or other nominee will determine if it has the discretionary authority to vote on a particular matter.
Brokers and other nominees have the discretion to vote on routine matters such as Proposal 2 (ratification of the selection of
independent registered public accounting firm), but do not have the discretion to vote on non-routine matters such as Proposal
1 (election of directors) and Proposal 3 (advisory vote on executive compensation). Therefore, your shares will not be voted on
non-routine matters without your voting instructions.
Table of Contents
What constitutes a “quorum” for the Annual Meeting?
The holders of a majority of the outstanding shares of our common
stock, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. The independent
inspector(s) of election appointed for the Annual Meeting will determine whether or not a quorum is present and will tabulate votes
cast by proxy or in person at the Annual Meeting.
Abstentions are included in the determination of shares present
for quorum purposes. Because abstentions represent shares entitled to vote, the effect of an abstention will generally be the same
as a vote against a proposal. However, abstentions will have no effect on the election of directors.
What are broker non-votes and how are they counted?
Broker non-votes occur when nominees, such as brokers and banks
holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial
owners who have not provided voting instructions. Brokers and other nominees may vote without instruction only on “routine”
proposals. On “non-routine” proposals, nominees cannot vote without instructions from the beneficial owner, resulting
in so-called “broker non-votes.” The proposal to ratify Deloitte & Touche LLP as the Company’s independent
registered public accounting firm is the only routine proposal on the agenda for our Annual Meeting. The other two proposals on
the agenda are non-routine. If you hold your shares with a broker or other nominee, they will not be voted on non-routine proposals
unless you give voting instructions.
So long as the broker has discretion to vote on at least one
proposal, broker non-votes are counted in determining a quorum but are not counted for purposes of determining the number of shares
present in person or represented by proxy on a voting matter.
What vote is required to approve each proposal?
Election Of Directors
Election of directors by shareholders will be determined by
a majority of the votes cast with respect to each director, in person or by proxy, at the Annual Meeting. Pursuant to the Company’s
Bylaws, a majority of the votes cast means that the number of shares voted “for” a director must exceed the number
of votes cast “against” that director. Votes cast shall include votes “for” and “against” a
nominee, and exclude “abstentions” and “broker non-votes” with respect to that nominee’s election.
Under our Corporate Governance Guidelines, at any meeting of shareholders where nominees are subject to an uncontested election
(the number of nominees is equal to the number of seats), any nominee for director who receives a greater number of votes “against”
his or her election than votes “for” such election, shall submit to the Corporate Secretary of the Company a letter
offering his or her resignation, subject to the Board of Directors’ acceptance. The Governance and Sustainability Committee
will consider the offer of resignation and will recommend to the Board the action to be taken. The Board of Directors will act
promptly with respect to each such letter of resignation and will promptly notify the director concerned of its decision. The Board
of Directors’ decision will be disclosed publicly.
Other Proposals
The other two matters on the agenda for shareholder approval
at the Annual Meeting will be decided by the affirmative vote of a majority of the shares present, in person or by proxy, at the
Annual Meeting and entitled to vote on the subject matter. Note that Proposal 2 (ratification of the selection of independent registered
public accounting firm) and Proposal 3 (advisory vote on executive compensation) are advisory only and will not be binding on the
Company, the Board or any committee of the Board. The results of the votes on these proposals will be taken into consideration
by the Company, the Board or the appropriate committee of the Board, as applicable, when making future decisions regarding these
matters.
How will any other items be voted upon at the Annual Meeting?
If any other matter not mentioned in this Proxy Statement is
properly brought before the meeting, including without limitation (i) matters about which the proponent failed to notify us on
or before February 16, 2018 (ii) shareholder proposals omitted from this Proxy Statement and the form of proxy pursuant to the
proxy rules of the SEC, and (iii) matters incidental to the conduct of the meeting, the proxyholders will vote upon such matters
in accordance with their best judgment pursuant to the discretionary authority granted by the proxy. As of the date of the printing
of this Proxy Statement, our management is not aware, nor has it been notified, of any other matters that may be presented for
consideration at the meeting.
Table of Contents
May I change my vote?
You may revoke your proxy at any time before its exercise by
writing to our Corporate Secretary at our principal executive offices as follows:
Corporate Secretary
Gap Inc.
Two Folsom Street
San Francisco, California 94105
You may also revoke your proxy by timely delivery of a properly
executed, later-dated proxy (including a telephone or Internet vote) or by voting in person at the Annual Meeting.
When are shareholder proposals for the 2019 Annual Meeting
due?
If a shareholder would like us to consider including a proposal
in our Proxy Statement and form of proxy for our Annual Meeting in 2019, the Company’s Corporate Secretary must receive it
no later than December 11, 2018. Proposals must be addressed to our Corporate Secretary at Gap Inc., Two Folsom Street, San Francisco,
California 94105.
Our Amended and Restated Bylaws provide that in order for a
shareholder to bring business before our Annual Meeting in 2019 (other than a proposal submitted for inclusion in the Company’s
proxy materials), the shareholder must give written notice to our Corporate Secretary by no later than the close of business (San
Francisco Time) on February 21, 2019, and no earlier than January 22, 2019 (i.e., not less than 90 days nor more than 120 days
prior to the first anniversary of the date of our 2018 Annual Meeting). The notice must contain information required by our Bylaws,
including a brief description of the business desired to be brought before the meeting, the reasons for conducting such business
at the Annual Meeting, the name and address of the shareholder proposing the business, the number of shares of the Company’s
stock beneficially owned by the shareholder, any material interest of the shareholder in the business proposed, any interests held
by the shareholder in derivative securities of the Company or arrangements with persons holding derivative securities of the Company,
and other information required to be provided by the shareholder pursuant to the proxy rules of the SEC. If a shareholder fails
to submit the notice by February 21, 2019, then the proposed business would not be considered at our Annual Meeting in 2019 due
to the shareholder’s failure to comply with our Bylaws. Additionally, in accordance with Rule 14a-4 (c)(1) of the Securities
Exchange Act of 1934, as amended, management proxyholders intend to use their discretionary voting authority with respect to any
shareholder proposal raised at our Annual Meeting in 2019 as to which the proponent fails to notify us on or before February 21,
2019. Notifications must be addressed to our Corporate Secretary at Gap Inc., Two Folsom Street, San Francisco, California 94105.
A copy of the full text of the Bylaw provisions relating to our advance notice procedure may be obtained by writing to our Corporate
Secretary at that address or at www.gapinc.com (follow the Investors, Governance links).
By Order of the Board of Directors,
Julie Gruber
Corporate Secretary
Table of Contents
|
|
|
This Proxy Statement is printed on paper manufactured from well-managed forests, controlled sources, and recycled wood or fiber. Soy ink, rather than petroleum-based ink, is used throughout. We encourage you to recycle this document when you are finished with it. |
Table of Contents
GAP INC.
ATTN: MARIE MA
TWO FOLSOM STREET
SAN FRANCISCO, CA 94105
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
|
E44430-P06435-Z72111 |
KEEP THIS PORTION FOR YOUR RECORDS |
|
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
DETACH AND RETURN THIS PORTION ONLY |
GAP INC.
The Board of Directors recommends you vote "FOR" Item 1. |
|
1. |
Election of Directors. |
|
|
|
|
|
|
|
Nominees: |
|
For |
|
Against |
|
Abstain |
|
1a. |
Robert J. Fisher |
|
☐ |
|
☐ |
|
☐ |
|
1b. |
William S. Fisher |
|
☐ |
|
☐ |
|
☐ |
|
1c. |
Tracy Gardner |
|
☐ |
|
☐ |
|
☐ |
|
1d. |
Brian Goldner |
|
☐ |
|
☐ |
|
☐ |
|
1e. |
Isabella D. Goren |
|
☐ |
|
☐ |
|
☐ |
|
1f. |
Bob L. Martin |
|
☐ |
|
☐ |
|
☐ |
|
1g. |
Jorge P. Montoya |
|
☐ |
|
☐ |
|
☐ |
|
1h. |
Chris O'Neill |
|
☐ |
|
☐ |
|
☐ |
|
1i. |
Arthur Peck |
|
☐ |
|
☐ |
|
☐ |
|
1j. |
Mayo A. Shattuck III |
|
☐ |
|
☐ |
|
☐ |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
|
|
|
|
|
|
|
The Board of Directors recommends you vote "FOR" Items 2 and 3. |
|
For |
|
Against |
|
Abstain |
2. |
Ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending on February 2, 2019. |
|
☐ |
|
☐ |
|
☐ |
3. |
Approval, on an advisory basis, of the overall compensation of the named executive officers. |
|
☐ |
|
☐ |
|
☐ |
4. |
Transact such other business as may properly come before the meeting. |
|
|
|
|
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX] |
Date |
|
Signature (Joint Owners) |
Date |
|
Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
E44431-P06435-Z72111 |
GAP INC. Annual Meeting of Shareholders May 22, 2018 10:00 AM This proxy is solicited by the Board of Directors
The undersigned hereby appoint(s) Arthur Peck, Julie Gruber and Teri List-Stoll, or any of them, each with full power of substitution, as proxies to vote, in accordance with the instructions, as designated on the reverse side of this proxy, all of the shares of common stock of GAP INC. that the undersigned is/are entitled to vote at the Annual Meeting of Shareholders to be held at 10:00 AM local time on May 22, 2018 at GAP INC. Headquarters, Two Folsom Street, San Francisco, CA 94105, and any adjournment or postponement thereof. The proxies are authorized in their discretion to vote upon such other business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations.
Continued and to be signed on reverse side
|
This regulatory filing also includes additional resources:
gps_courtesy-pdf.pdf
Gap (NYSE:GAP)
Historical Stock Chart
From Aug 2024 to Sep 2024
Gap (NYSE:GAP)
Historical Stock Chart
From Sep 2023 to Sep 2024