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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x Filed by a Party other than the Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Ascena Retail Group, 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):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Fee previously paid with preliminary materials.
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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.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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933 MacArthur Boulevard
Mahwah, New Jersey 07430
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Meeting Date:
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Tuesday, December 10, 2019
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Meeting Time:
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3:00 p.m. local time
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Location:
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Corporate Headquarters
Stage Street Café
933 MacArthur Boulevard
Mahwah, New Jersey 07430
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The Annual Meeting will be held for the following purposes:
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(1)
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to consider the election of four directors to serve on the board of directors for three-year terms and until their successors are duly elected and qualified (Proposal One);
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(2)
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to consider the approval, by non-binding advisory vote, of the compensation paid to our named executive officers during fiscal 2019 (commonly known as a “say-on-pay” proposal) (Proposal Two);
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(3)
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to approve an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock, at a ratio to be determined by the Board, and a corresponding reduction in the Company’s authorized shares of common stock (Proposal Three);
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to ratify the appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for the fiscal year ending August 1, 2020 (Proposal Four); and
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to transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.
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The board of directors has fixed the close of business on October 15, 2019 as the record date for the determination of the stockholders entitled to vote at the Annual Meeting or any adjournments or postponements thereof. Only stockholders of record at the close of business on the record date will be entitled to notice of, and to vote at, the Annual Meeting.
In order to conserve natural resources and reduce the cost of printing and distributing the proxy materials, while providing our stockholders with access to the proxy materials in a fast and efficient manner, we are pleased to be able to take advantage of the Securities and Exchange Commission rule allowing companies to use a “Notice and Access” model to provide their stockholders with access to proxy materials via the Internet. On or about October 30, 2019, we will begin mailing a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our stockholders informing them that our notice of annual meeting and proxy statement, Annual Report on Form 10-K and voting instructions are available on the Internet at https://proxyvote.com. As more fully described in the Notice of Internet Availability, all stockholders may choose to access our materials at https://proxyvote.com or may request to receive paper copies of the proxy materials.
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BY ORDER OF THE BOARD OF DIRECTORS
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By:
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/s/ Carrie W. Teffner
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Carrie W. Teffner
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Interim Executive Chair of the Board
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Dated: October 30, 2019
YOUR VOTE IS VERY IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, WE HOPE THAT YOU WILL READ THE PROXY STATEMENT AND VOTE ON THE MATTERS TO BE CONSIDERED IN ADVANCE OF THE MEETING. YOU MAY VOTE YOUR PROXY BY TELEPHONE OR VIA THE INTERNET OR BY REQUESTING A PRINTED COPY OF THE PROXY MATERIALS AND RETURNING THE PROXY CARD ENCLOSED THEREIN.
PROXY STATEMENT
In this proxy statement, the terms “we,” “us” and “our” refer to Ascena Retail Group, Inc., a Delaware corporation (“Ascena” or the “Company”), and its consolidated subsidiaries, ANN INC., referred to as “ANN”, Tween Brands, Inc., referred to as “Justice”, Lane Bryant, Inc., referred to as “Lane Bryant”, The Dress Barn, Inc., referred to as “dressbarn”, and Catherines Stores Corporation, referred to as “Catherines”.
GENERAL
The enclosed proxy is solicited by the board of directors (the “Board”) of Ascena for use at our 2019 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at 3:00 p.m. local time, on Tuesday, December 10, 2019 at our Corporate Headquarters, Stage Street Café, 933 MacArthur Boulevard, Mahwah, New Jersey 07430, and any and all adjournments or postponements thereof. This proxy statement and form of proxy, along with our Annual Report on Form 10-K for the fiscal year ended August 3, 2019, are being made available to our stockholders on or about October 30, 2019. The proxy statement and proxy card are being made available to you because our records indicate that you owned shares of our common stock at the close of business on October 15, 2019, the record date for the Annual Meeting.
Our Board is soliciting your proxy to be used at the Annual Meeting. When you sign the proxy card, you appoint two of our directors, Linda Yaccarino and John Welborn, Jr., as your representatives at the Annual Meeting. One or both of these individuals, or a substitute if necessary, will vote your shares at the Annual Meeting as you have instructed them on the proxy card. If you sign and deliver your proxy card, but you do not provide voting instructions, your proxy representative will vote in favor of the four nominees for director (Proposal One), in favor of Proposals Two, Three and Four, and with respect to any other matter that may be properly presented at the Annual Meeting, in the discretion of the proxy representative. This way, your shares will be voted whether or not you attend the Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that you complete, sign and return your proxy card in advance of the Annual Meeting as your plans may change.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 10, 2019
The rules of the Securities and Exchange Commission (the “SEC”) allow us to make our proxy statement and other Annual Meeting materials available to you over the Internet. On or about October 30, 2019, we will begin mailing a notice, called the Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”), to our stockholders advising them that our proxy statement, Annual Report on Form 10-K and voting instructions can be accessed via the Internet at https://proxyvote.com. You may then access these materials and vote your shares over the Internet or you may request that a printed copy of the proxy materials be sent to you. You will not receive a printed copy of the proxy materials unless you request one in the manner set forth in the Notice of Internet Availability. This allows us to conserve natural resources and reduces the cost of printing and distributing the proxy materials, while providing our stockholders with access to the proxy materials in a fast and efficient manner via the Internet. Copies of this proxy statement and our Annual Report on Form 10-K for the fiscal year ended August 3, 2019 are also available online at https://proxyvote.com.
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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QUESTIONS AND ANSWERS ABOUT OUR ANNUAL MEETING
When and where will the Annual Meeting take place?
The Annual Meeting will be held on Tuesday, December 10, 2019, at 3:00 p.m., at our Corporate Headquarters, Stage Street Café, 933 MacArthur Boulevard, Mahwah, New Jersey 07430.
What is the purpose of the Annual Meeting?
At our Annual Meeting, holders of our common stock will be asked to vote on the following proposals:
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(1)
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election of four directors to serve on the Board for three-year terms and until their successors are duly elected and qualified (Proposal One);
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(2)
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to consider the approval, by non-binding advisory vote, of the compensation paid to our named executive officers during fiscal 2019 (commonly known as a “say-on-pay” proposal) (Proposal Two);
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(3)
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to approve an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company's common stock, at a ratio to be determined by the Board, and a corresponding reduction in the Company's authorized shares of common stock (Proposal Three);
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ratification of the appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm for the fiscal year ending August 1, 2020 (Proposal Four); and
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to transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.
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What are the Board’s voting recommendations?
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE FOUR NOMINATED DIRECTORS, FOR THE SAY-ON-PAY PROPOSAL, FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, TO EFFECT A REVERSE STOCK SPLIT AND A CORRESPONDING REDUCTION IN THE COMPANY’S AUTHORIZED SHARES, AND FOR THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
Unless you give other instructions on your proxy card, the persons referred to as proxy holders on the proxy card will vote in accordance with the recommendations of the Board or, with respect to any other matter that may be presented at the Annual Meeting for which no recommendation is given, in their own discretion.
Could other matters be decided at the Annual Meeting?
Our by-laws require prior notification of a stockholder’s intent to request a vote on other matters at the Annual Meeting. The deadline for notification has passed, and we are not aware of any other matters that could be brought before the Annual Meeting. However, if any other business is properly presented at the Annual Meeting, your vote by proxy gives authority to Linda Yaccarino and John Welborn, Jr., the persons referred to as proxy holders on the proxy card (or a substitute, if necessary), to vote your shares on such matters in their discretion.
Who is entitled to attend the Annual Meeting?
All stockholders who owned our common stock at the close of business on October 15, 2019 (the “Record Date”), or their duly appointed proxies, may attend the Annual Meeting or any adjournments or postponements thereof. Registration begins at 2:45 p.m. on the date of the Annual Meeting. If you attend, please note that you may be asked to present valid photo identification, such as a driver’s license or passport. Please note that if you hold your shares in “street name” (that is, through a broker, bank or other nominee), you must obtain a signed and properly executed proxy from your broker, bank or other nominee to vote your shares held in street name at the Annual Meeting, and such proxy, together with a broker statement evidencing your ownership, must be presented at the Annual Meeting.
Who is entitled to vote at the Annual Meeting?
Subject to the foregoing, all stockholders who owned our common stock at the close of business on the Record Date are entitled to attend and vote at the Annual Meeting or at any adjournments or postponements thereof.
How many votes do I have?
You have one vote for each share of our common stock that you owned on the Record Date.
How many votes must be present to hold the Annual Meeting?
The presence in person or by proxy of the holders of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting will constitute a quorum for the transaction of business at the Annual Meeting. Once a share of the Company’s common stock is represented for any purpose at the Annual Meeting, it is deemed present for quorum purposes for the Annual Meeting and for
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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any adjournment of the Annual Meeting. Abstentions and broker “non-votes” are counted as present and entitled to vote for purposes of determining the presence or absence of a quorum for the transaction of business. A broker “non-vote” occurs when a broker or nominee holding shares for a beneficial owner does not vote on a proposal because the broker or nominee does not have the necessary voting power for that proposal and has not received instructions from the beneficial owner. In order for us to determine that enough votes will be present to hold the Annual Meeting, we urge you to vote in advance by proxy even if you plan to attend the Annual Meeting.
Assuming a quorum is present, how many votes will be required to approve each proposal?
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A majority of the votes cast at the Annual Meeting will elect the four nominees to serve as directors. A “majority of the votes cast” means that the number of shares voted “FOR” a nominee for director exceeds the number of votes cast “AGAINST” such nominee;
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The say-on-pay proposal will be approved, by non-binding advisory vote, if the votes cast in favor of the proposal exceed the votes cast in opposition to the proposal;
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The proposal to approve an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company's common stock, at a ratio to be determined by the Board, and a corresponding reduction in the Company's authorized shares of common stock, will be approved if the holders of at least a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting vote in favor of the proposal; and
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The proposal to ratify the appointment of the Independent Registered Public Accounting Firm will be approved if the votes cast in favor of the proposal at the Annual Meeting exceed the votes cast in opposition to the proposal.
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A note about broker non-votes: Under NYSE rules, brokers are not permitted to vote uninstructed shares for non-routine matters, which include director elections and executive compensation matters. As a result, if your shares are held by a brokerage firm for you as beneficial owner and you do not instruct your broker how to vote your shares on Proposal One (election of directors) or Proposal Two (the say-on-pay proposal), your brokerage firm cannot vote them for you. Please make sure that you provide instructions to your broker regarding Proposals One and Two. The ratification of the appointment of independent accountants and the proposal to approve an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to effect a reverse stock split and a corresponding reduction in the Company’s authorized shares of common stock are both routine items under NYSE rules. As a result, brokers who do not receive instructions as to how to vote on Proposal Three and Four may vote on those matter in their discretion.
What is the effect of a “broker non-vote” or abstention on the proposals to be voted on at the Annual Meeting?
Abstentions and broker non-votes will be considered as present for quorum purposes, but will have no impact on the vote on Proposal One, Two, or Four. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” Proposal Three. Because Proposal Three and Proposal Four are both routine items under NYSE rules, we do not anticipate any broker non-votes with respect to either Proposal Three or Proposal Four.
How many votes may be cast by all stockholders?
A total of 199,247,000 votes may be cast at the Annual Meeting, consisting of one vote for each share of our common stock outstanding on the Record Date.
How do I vote?
You can vote your shares in one of two ways: either by proxy or in person at the Annual Meeting by written ballot. If you choose to vote by proxy, you may do so via the Internet or by telephone, or by requesting a printed copy of the proxy materials, and signing and returning the proxy card enclosed therein. Each of these procedures is explained below. Even if you plan to attend the Annual Meeting, the Board recommends that you vote by proxy so your shares of common stock will be voted as directed by you if you are unable to attend the Annual Meeting.
Because many stockholders cannot attend the Annual Meeting in person, it is necessary that a large number of stockholders be represented by proxy. By following the procedures for voting via the Internet or by telephone, or by requesting a printed copy of the proxy materials and signing and returning the proxy card enclosed therein, you will enable Ms. Yaccarino and/or Mr. Welborn, each of whom is named on the proxy card as a “proxy holder,” to vote your shares at the Annual Meeting in the manner indicated. If you sign and return your proxy card, but do not specify how you want your shares to be voted, they will be voted, in accordance with the Board’s recommendation, “FOR” the four director nominees named in Proposal One, in favor of Proposals Two, Three and Four, and with respect to any other matter that may be presented at the Annual Meeting, in the discretion of the proxy holders named in your proxy card.
Voting via the Internet
You can vote your shares via the Internet by following the instructions in the Notice of Internet Availability or by accessing www.proxyvote.com and following the instructions contained on that website. The Internet voting procedures are designed to authenticate your identity and to allow you to vote your shares and confirm that your voting instructions have been properly recorded. If you vote via the Internet, you do not need to mail a proxy card.
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Ascena Retail Group, Inc.
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Voting by Telephone
You can vote your shares by telephone by calling the number provided on the voting website (www.proxyvote.com) and on the proxy card. The telephone voting procedures are designed to authenticate your identity and to allow you to vote your shares and confirm that your voting instructions have been properly recorded. If you vote via the telephone, you do not need to mail a proxy card.
Voting by Mail
You can vote by mail by requesting that a printed copy of the proxy materials be sent to your home address. Upon receipt of the materials, you may fill out the proxy card enclosed therein and return it per the instructions on the card.
May I change or revoke my vote after I submit my proxy?
Yes. To change your vote previously submitted by proxy, you may:
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Cast a new vote by mailing a new proxy card with a later date or by voting via the Internet or telephone on a later date; or
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If you hold shares in your name, attend the Annual Meeting and vote in person.
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If you wish to revoke rather than change your vote, written revocation must be received by our Corporate Secretary prior to the Annual Meeting.
What if I participate in the Company’s 401(k) Savings Plan?
If you are a participant in the Company’s 401(k) Savings Plan (the “401(k) plan”) and own shares of the Company’s common stock in your 401(k) plan account as of the Record Date, you will receive, with respect to the number of shares held for your account under the 401(k) plan as of the Record Date, a proxy card that will serve as a voting instruction to the trustee of the 401(k) plan with respect to shares held for your account. Unless the proxy card is signed and returned, shares held in your account under the 401(k) plan will not be voted.
How can I attend the Annual Meeting?
Stockholders as of the close of business on the Record Date may attend the Annual Meeting. You may obtain directions to the location of the Annual Meeting by contacting Ascena’s Investor Relations Department at (551) 777-6895 or via email at asc-ascenainvestorrelations@ascenaretail.com.
What happens if the Annual Meeting is postponed or adjourned?
If the Annual Meeting is postponed or adjourned and no new record date is set, your proxy will remain valid and may be voted when the Annual Meeting is convened or reconvened. You may change or revoke your proxy until it is voted.
Will your independent registered public accounting firm participate in the Annual Meeting?
Yes. Our independent registered public accounting firm is Deloitte & Touche LLP. A representative of Deloitte & Touche LLP is expected to be present at the Annual Meeting and make any statements he or she deem necessary and to respond to appropriate stockholder questions.
Are members of the Board required to attend the Annual Meeting?
Directors are encouraged, but not required, to attend the Annual Meeting. All of the Company’s directors that were directors at the time of the 2018 Annual Meeting of Stockholders attended the 2018 Annual Meeting of Stockholders.
Who will pay the expenses incurred in connection with the solicitation of my vote?
We pay all costs and expenses related to preparation of these proxy materials and solicitation of your vote and all Annual Meeting expenses. None of our directors, officers or employees will be specially compensated for these activities. We reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of our common stock, but we will not pay any compensation for their services.
Why did I receive more than one Notice of Internet Availability?
You may receive multiple Notices of Internet Availability if you hold your shares of our common stock in multiple accounts (such as through a brokerage account and an employee benefit plan, such as the 401(k) plan). To ensure all of your shares are represented at the Annual Meeting, please vote your shares as instructed in each Notice of Internet Availability you receive.
If your household is receiving multiple Notices of Internet Availability and you wish to request delivery of a single copy or wish to enroll in electronic (email) delivery of the proxy materials, you may send a written request to Ascena Retail Group, Inc., 933 MacArthur Boulevard, Mahwah, New Jersey 07430, Attention: Investor Relations or via email at asc-ascenainvestorrelations@ascenaretail.com.
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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How do I obtain a separate Notice of Internet Availability if I share an address with other stockholders?
In order to reduce printing and postage costs, only one Notice of Internet Availability is being delivered to multiple stockholders sharing an address unless we received contrary instructions from one or more of the stockholders sharing that address. If your household has received only one Notice of Internet Availability, we will promptly deliver an additional Notice of Internet Availability to any stockholder (as of the close of business on the Record Date) who sends a written request to: Ascena Retail Group, Inc., 933 MacArthur Boulevard, Mahwah, New Jersey 07430, Attention: Investor Relations or via email at asc-ascenainvestorrelations@ascenaretail.com. If you wish to receive a separate Notice of Internet Availability in the future, you can notify us by mailing a written request to the address above, by calling our Investor Relations Department at (551) 777-6895 or via email at asc-ascenainvestorrelations@ascenaretail.com.
Can I view these proxy materials electronically?
Yes. You may access the proxy statement and Annual Report on Form 10-K at https://proxyvote.com. In addition to the fiscal 2019 proxy statement and Annual Report on Form 10-K, you can view all of our other filings with the SEC on our website at the “investors” page at www.ascenaretail.com, accessible through the “Corporate Governance” tab.
How can I receive copies of the Company’s year-end SEC filings?
We will furnish without charge to any stockholder who requests, in writing, a copy of our Annual Report on Form 10-K, including financial statements and related schedules, for the fiscal year ended August 3, 2019, as filed with the SEC. Any such request should be directed to Ascena Retail Group, Inc., 933 MacArthur Boulevard, Mahwah, New Jersey 07430, Attention: Investor Relations or via email at asc-ascenainvestorrelations@ascenaretail.com.
How do stockholders submit proposals for the Company’s 2020 Annual Meeting of Stockholders?
Proposals of stockholders intended to be presented at the 2020 Annual Meeting of Stockholders and desired to be included in our proxy statement for that meeting must be received by our Corporate Secretary and General Counsel, c/o Ascena Retail Group, Inc., 933 MacArthur Boulevard, Mahwah, New Jersey 07430 by no later than July 2, 2020 in order to be included in such proxy statement. Any such proposal must also meet the other requirements of the rules of the SEC relating to stockholder proposals. Generally, if written notice of any stockholder proposal intended to be presented at the 2020 Annual Meeting of Stockholders, and not included in our proxy statement for that meeting, is not delivered to the Corporate Secretary and General Counsel at the above address between July 2, 2020 and August 1, 2020, or if such notice does not contain the information required by Section 7 of Article II of our by-laws, the chair of the meeting may declare that such stockholder proposal be disregarded.
Can I see a list of stockholders entitled to vote at the Annual Meeting?
A complete list of the stockholders entitled to vote at the Annual Meeting is available for inspection at the principal office of the Company upon written request to the Company by a stockholder, and at all times during the Annual Meeting at the place of the Annual Meeting.
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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PROPOSAL ONE — ELECTION OF DIRECTORS
Our Third Amended and Restated Certificate of Incorporation provides for a classified Board divided into three classes, each with a staggered three-year term of office and each class of directors as nearly equal in number as possible. At the Annual Meeting, four directors are to be elected for three-year terms. On the recommendation of the Leadership and Corporate Governance Committee (the “Governance Committee”), the Board has nominated Katie J. Bayne, Paul Keglevic, Kay Krill and Stacey Rauch, current directors whose terms of office expire at the Annual Meeting, for election for three-year terms expiring at the 2022 Annual Meeting of Stockholders. Each nominee has indicated that he or she will serve if elected. We do not anticipate that any Board nominee will be unable or unwilling to stand for election, but should any such nominee be unavailable for election for any reason, your proxy, to the extent permitted by applicable law, may be voted with discretionary authority in connection with the nomination by the Board and the election of any substitute nominee. On September 30, 2019, the Board was expanded by two, and the Board appointed Mr. Keglevic to the Board as a member of the class of directors whose terms of office will expire at the 2019 Annual Meeting of Stockholders, and appointed Gary D. Begeman to the Board as a member of the class of directors whose terms of office will expire at the 2021 Annual Meeting of Stockholders.
The charts below provide summary information about the composition of our Board, followed by the biographies of the director nominees and our current Board members. Please see the section below entitled “Questions and Answers About our Board and Corporate Governance Matters” for additional information about our Board and the committees of the Board.
BOARD COMPOSITION (as of October 15, 2019)
Gender Diversity:
Through our unique portfolio of fashion brands, Ascena’s core purpose is to provide all women and girls with fashion and inspiration for living confidently every day. We are honored that half of our Board is comprised of women, led by Kate Buggeln as our Lead Independent Director and Carrie W. Teffner as our recently appointed Interim Executive Chair of the Board. According to the Gender Diversity Index issued by Equilar for the first quarter of calendar 2019, the percentage of women on Russell 3000 boards increased for the sixth consecutive quarter to approximately 19%; however, it was also noted that less than 40 Russell 3000 companies have achieved gender parity. We are honored to have achieved gender parity on our Board.
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Ascena Retail Group, Inc.
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Board Refreshment:
The Governance Committee and the Board also believe that it is important for the Board to be “refreshed” by adding new directors with fresh perspectives from time to time. In that regard, since 2015 we have added ten new directors, resulting in an average director tenure of less than five years, with an average director age of 57.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE NOMINEES LISTED BELOW TO SERVE AS DIRECTORS.
Information about Director Nominees:
Following is information regarding the director nominees and the other continuing directors.
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Name of Director Nominee and Age
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Director
Since
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Katie J. Bayne, 53
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2015
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Paul Keglevic, 65
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2019
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Kay Krill, 64
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2015
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Stacey Rauch, 61
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2017
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KATIE J. BAYNE
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Age: 53
Director Since: 2015 Committees:
Leadership and Corporate Governance
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Background:
KATIE J. BAYNE serves as a Senior Advisor with Guggenheim Securities, the investment banking and capital markets division of Guggenheim Partners. Concurrently, Ms. Bayne serves as founder and President of Bayne Advisors, an advisory firm that helps brands and businesses find their strategic identities, drive sustained consumer engagement and innovate for transformative results. Ms. Bayne began her career with The Coca-Cola Company in 1989 in brand management and has since held roles of increasing responsibility, which focused on consumer strategy, retail marketing and consumer marketing in the U.S., Australia and globally. She eventually became Chief Marketing Officer and then President, North American Brands. Ms. Bayne brings extensive strategic marketing and brand management experience to the Company. Throughout her career in leadership roles at Coca-Cola, Ms. Bayne acquired vast managerial and operational knowledge of the retail industry both domestically and internationally. Ms. Bayne currently serves on the board of directors of The Honest Company, Inc. Ms. Bayne previously served on the board of directors of ANN until its acquisition by the Company in August 2015, as well as Beazer Homes USA. Ms. Bayne is also a member of the board of trustees of the American Film Institute and the Fuqua School of Business at Duke University.
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Qualifications:
The Board selected Ms. Bayne to serve as a director based on her strong background in consumer strategy, retail and consumer marketing and brand management.
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PAUL KEGLEVIC
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Age: 65
Director Since: 2019
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Background:
PAUL KEGLEVIC has served on several boards of directors and related committees with experience across multiple industries, including retail. Mr. Keglevic currently serves on the boards of directors of PetSmart, Inc., Stellus Capital Investment Corp., and Bonanza Creek Energy Inc. Prior to his retirement in April 2018, Mr. Keglevic served as Chief Executive Officer (2016 to 2018) and Chief Financial Officer (2008 to 2016) of Energy Future Holdings Corp. Mr. Keglevic was a partner at PricewaterhouseCoopers (“PWC”) from 2002 to 2008 and a member of their U.S. Leadership team. Prior to PWC, Mr. Keglevic was a partner and member of the U.S. Leadership team for Arthur Andersen.
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Qualifications:
The Board selected Mr. Keglevic to serve as a director based on his finance, merger and acquisition, transactional and governance experience.
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Ascena Retail Group, Inc.
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7
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2019 Proxy Statement
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KAY KRILL
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Age: 64
Director Since: 2015
Committees:
Compensation
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Background:
KAY KRILL served as Chief Executive Officer of ANN, which was acquired by the Company in August 2015, from 2005 through October 31, 2015, and as President of ANN from 2004 through October 31, 2015. Ms. Krill also served as a member of the Board of Directors of ANN from 2004 until the date that it was acquired by the Company. From 2001 to 2004, Ms. Krill served as President of ANN’s LOFT Division. From 1998 to 2001, Ms. Krill was Executive Vice President, Merchandise and Design of ANN’s LOFT Division. From 1996 to 1998, Ms. Krill served as Senior Vice President, General Merchandise Manager of ANN’s LOFT Division and, from 1994 to 1996, she was Vice President of Merchandising for Ann Taylor. Prior to joining ANN, Ms. Krill held various management positions at several retailers including The Talbots, Inc. and Hartmarx Corporation. Ms. Krill is also on the Breast Cancer Research Foundation Board of Directors, and previously served on the Boards of the National Retail Federation and St. Luke’s School in New Canaan, CT.
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Qualifications:
The Board selected Ms. Krill to serve as a director based on her experience as the Chief Executive Officer and board member of a publicly-held specialty retailer, and her extensive experience in the apparel industry.
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STACEY RAUCH
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Age: 61
Director Since: 2017
Committees:
Leadership and Corporate Governance (Chair)
Audit
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Background:
STACEY RAUCH has served as the non-executive Chairman of the board of directors of Fiesta Restaurant Group, Inc. since February 2017, as a director of Fiesta Restaurant Group since 2012, Chair of Fiesta Restaurant Group’s Corporate Governance & Nominating Committee, and as a member of its Compensation Committee. Ms. Rauch is a Director (Senior Partner) Emeritus of McKinsey & Company, from which she retired in September 2010. Ms. Rauch was a leader in McKinsey’s Retail and Consumer Goods Practices, served as the head of the North American Retail and Apparel Practice, and acted as the Global Retail Practice Convener. A 24-year veteran of McKinsey, Ms. Rauch led engagements for a wide range of retailers, apparel wholesalers and consumer goods manufacturers in the U.S. and internationally. Her areas of expertise include strategy, organization, marketing, merchandising, omnichannel management, global expansion, and retail store operations. Ms. Rauch was a co-founder of McKinsey’s New Jersey office, and was the first woman at McKinsey appointed as an industry practice leader. Prior to joining McKinsey, Ms. Rauch spent five years in product management for the General Foods Corporation. Ms. Rauch also serves as a director of Heidrick & Struggles International, Inc., a global provider of executive search, leadership assessment and development services, where she sits on its Audit and Finance Committee, and as a non-executive director of Land Securities, PLC, the UK’s largest commercial property company, where she sits on its Audit, Nomination and Remuneration Committees. Previously, Ms. Rauch served on the board of directors of CEB, Inc., a leading member-based advisory company, ANN (which was acquired by the Company in August 2015), and Tops Holding Corporation, the parent company of Tops Markets LLC, a U.S. grocery retailer.
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Qualifications:
The Board selected Ms. Rauch to serve as a director based on her extensive background in business strategy, marketing, merchandising and operations in the retail industry.
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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Directors with Terms Expiring in 2020
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Name of Director and Age
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Director
Since
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Kate Buggeln, 58
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2004
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David Jaffe, 60
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2001
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Carl “Chuck” Rubin, 60
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2015
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John L. Welborn, Jr., 42
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2018
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KATE BUGGELN
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Age: 58
Director Since: 2004
Committees:
Leadership and Corporate Governance
Compensation
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Background:
KATE BUGGELN was appointed as Ascena’s Lead Independent Director on September 28, 2018. Currently, Ms. Buggeln serves as a member of the Board for publicly-traded Five Below, Inc., and is a member of its Compensation Committee and Nominating and Corporate Governance Committee. She also is on the Board of Noble Biomaterials, Scoop Holdings (parent company of cabi) and the nonprofit, Bpeace. Previously, Ms. Buggeln serves as a Senior Advisor with Irving Place Capital, L.P., and prior to that position was Senior Vice President of Strategy and Business Development for Coach, Inc., where she created and led strategies to enter new markets and new categories. Ms. Buggeln also spent many years as a retail consultant at LakeWest Group Ltd. and Coopers & Lybrand LLP, where she advised retail companies on business strategy, operations, e-commerce and supply chain. Previously, Ms. Buggeln served as a Director at Vitamin Shoppe, Stuart Weitzman and Timberland Company.
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Qualifications:
The Board selected Ms. Buggeln to serve as a director based on her strong background in strategic planning, marketing and new business development.
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DAVID JAFFE
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Age: 60
Director Since: 2001
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Background:
DAVID JAFFE presently serves as a member of the Board, and served as Ascena’s Chief Executive Officer from 2002 to May 2019 and as Chairman of the Board from 2016 to 2019. Previously, he had been President from 2002 to 2017, and Vice Chairman and Chief Administrative Officer from 2000 to 2002. Mr. Jaffe joined Ascena in 1992 as Vice President, Business Development and became Senior Vice President in 1995, Executive Vice President in 1996 and Vice Chairman in 2000. David is the son of Elliot S. and Roslyn S. Jaffe. Elliot S. Jaffe is a co-founder and Chairman Emeritus. Roslyn S. Jaffe is a co-founder and Director Emeritus for Life. David Jaffe is the brother of Elise Jaffe, a former non-executive officer and a more than 5% stockholder, and Richard Jaffe, a significant holder of Ascena’s stock. Mr. Jaffe is a former member of the Board of Directors of The National Retail Federation.
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Qualifications:
The Board selected Mr. Jaffe to serve as a director based on his extensive retail and financial background.
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CARL “CHUCK” RUBIN
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Age: 60
Director Since: 2015
Committees:
Audit (chair)
Compensation
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Background:
CARL “CHUCK” RUBIN served as Chairman of the Board of The Michaels Companies, Inc. (“Michaels”) from 2015 to April 2019. He joined Michaels in 2013 and was its Chief Executive Officer from 2013 to February 2019. Prior to joining Michaels, from 2010 to 2013, Mr. Rubin was President and Chief Executive Officer of Ulta Salon, Cosmetics & Fragrances, Inc. Mr. Rubin held roles of increasing responsibility at Office Depot, serving as President beginning in 2006. Mr. Rubin spent six years in senior leadership roles, including Partner, at Accenture Consulting where he advised clients and led engagements across retail formats and ecommerce business. Prior to joining Accenture Consulting, Mr. Rubin held various management positions at several specialty retailers. Mr. Rubin was a member of the Executive Committee of the Board of Directors of The National Retail Federation from 2007 to 2010.
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Qualifications:
The Board selected Mr. Rubin to serve as a director based on his extensive managerial and operational knowledge of the retail industry and his experience as a board member of a specialty retailer.
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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JOHN L. WELBORN, JR.
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Age: 42
Director Since: 2018
Committees:
Leadership and Corporate Governance
Audit
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Background:
JOHN L. WELBORN, JR. serves as a Managing Director of Stadium Capital Management, LLC (“Stadium”), an investment advisory firm that focuses on smaller capitalized publicly-traded companies in the U.S., Canada and Western Europe. In his role at Stadium, Mr. Welborn has led or supported Stadium’s due diligence across many different industries, including financial services, retail, software and business services. Mr. Welborn joined Stadium in 2000 as an Associate. Prior to joining Stadium, from 1998 to 2000, Mr. Welborn was a Financial Analyst at The Beacon Group, LLC, an investment and advisory firm that is now part of J.P. Morgan Chase & Co. At Beacon, Mr. Welborn was a member of the Mergers & Acquisitions Group, focusing on financial services and consumer product companies and the Liquid Investments Committee. From 2012 to 2014, Mr. Welborn served as a director and member of the governance committee of Intermountain Community Bancorp and as a director of Panhandle State Bank, Inc. From 2009-2013, Mr. Welborn was a board observer of West Coast Bancorp.
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Qualifications:
The Board selected Mr. Welborn to serve as a director based on his strong background in capital markets and investment experience.
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Directors with Terms Expiring in 2021
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Name of Director and Age
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Director
Since
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Gary D. Begeman, 61
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2019
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Gary Muto, 60
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2019
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Carrie W. Teffner, 53
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2018
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Linda Yaccarino, 56
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2016
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GARY D. BEGEMAN
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Age: 61
Director Since: 2019
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Background:
GARY D. BEGEMAN has over 30 years of experience managing the legal support for a broad range of strategic, financing and commercial transactions for public and private companies. He has served as an independent director on boards of directors of a number of privately owned companies including SolAero Technologies Corp. (since November 2018), Toys “R” Us Property Company II, LLC (from August 2017 to December 2018) and Sequa Corporation (from February 2016 to May 2017). He is also Chair and a director of the University of South Dakota Foundation. He was previously Executive Vice President, General Counsel and Secretary of NII Holdings, Inc., a publicly-traded wireless telecommunications company operating in Latin America, from November 2006 to October 2015. From August 2003 to September 2006, Mr. Begeman was Senior Vice President and Deputy General Counsel at Sprint Corporation and before that, he was Vice President and Deputy General Counsel at Nextel Communications. Prior to that, Mr. Begeman was General Counsel at XO Communications, Inc., and was a Partner at the Jones Day law firm, focusing on capital formation and mergers and acquisitions.
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Qualifications:
The Board selected Mr. Begeman to serve as a director based on his strong legal background and work with public and private companies.
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GARY MUTO
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Age: 60
Director Since: 2019
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Background:
GARY MUTO serves as a director and our Chief Executive Officer (since 2019) and served as President and Chief Executive Officer - Ascena Brands from August 2017 to May 2019. Mr. Muto joined ANN INC. (Ascena Retail Group, Inc.) in 2008 as President of LOFT. In 2013, he assumed responsibility for leading the AnnTaylor, LOFT and Lou & Grey brands. During the period 1998 to 2007, Mr. Muto held several leadership roles at Gap, Inc., including President of Banana Republic and President of Gap brands. While at Gap, Inc., Mr. Muto also launched the specialty brand, Forth & Towne.
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Qualifications:
The Board selected Mr. Muto to serve as a director based on his extensive retail background.
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Ascena Retail Group, Inc.
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10
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2019 Proxy Statement
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CARRIE W. TEFFNER
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Age: 53
Director Since: 2018
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Background:
CARRIE W. TEFFNER currently serves as our Interim Executive Chair of the Board since May 2019. Ms. Teffner served as Executive Vice President Finance and Strategic Projects of Crocs, Inc. (“Crocs”) from August 2018 to April 2019, and served as Executive Vice President and Chief Financial Officer of Crocs from December 2015 to August 2018. Prior to joining Crocs, Ms. Teffner served as Executive Vice President and Chief Financial Officer of PetSmart, Inc. from 2013 to 2015 until it was sold to BC Partners, where she was responsible for finance and information technology. Ms. Teffner also served as Executive Vice President and Chief Financial Officer of Weber Stephen Products LLC from 2011 to 2013. From 2009 to 2011, Ms. Teffner served as Senior Vice President and Chief Financial Officer of The Timberland Company until it was sold to VF Corporation. Ms. Teffner spent the first 21 years of her career with Sara Lee Corporation where she held various domestic and international positions including divisional and segment Chief Financial Officer and Treasurer. Ms. Teffner also serves as a director and Audit Committee Chair for GameStop Corp. since August 2018. Ms. Teffner served as a director and the Audit Committee Chair for Banfield, The Pet Hospital, from 2014 to 2015, and as a director of Crocs for six months during 2015 prior to her appointment as its Executive Vice President and Chief Financial Officer. Ms. Teffner also served as a director of the nonprofit community revitalization organization, Rebuilding Together, from 2013 to 2019.
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Qualifications:
The Board selected Ms. Teffner to serve as a director based on her extensive strategic, financial and operational expertise and background in financial reporting and internal controls for large, publicly-held product and retail companies.
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LINDA YACCARINO
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Age: 56
Director Since: 2016
Committees:
Compensation (chair)
Leadership and Corporate Governance
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Background:
LINDA YACCARINO is Chairman, Advertising and Client Partnerships for NBCUniversal, LLC (“NBCUniversal”) since 2011. In this role Ms. Yaccarino oversees all market strategy and advertising revenue totaling nearly $10 billion, for NBCUniversal’s entire portfolio of broadcast, cable and digital assets. Prior to joining NBCUniversal in 2011, she held roles of increasing responsibility from 1996 to 2011 at Turner Broadcast System, Inc. (“Turner”), serving as Executive Vice President and Chief Operating Officer, Turner Entertainment Advertising, Sales and Marketing, and Acquisitions beginning in 2009. Prior to joining Turner, Ms. Yaccarino held various management positions at several media sales outlets.
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Qualifications:
The Board selected Ms. Yaccarino to serve as a director based on her extensive digital knowledge, multiplatform consumer engagement background and transformation experience.
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Compensation and Stock Incentive Committee Interlocks and Insider Participation
During fiscal 2019, Linda Yaccarino, Kay Krill, Carl Rubin, Carrie W. Teffner and Kate Buggeln served as members of our Compensation and Stock Incentive Committee (referred to as our “Compensation Committee”). No member of the Compensation Committee was an officer or employee of the Company during the portion of fiscal 2019 that he or she served as a member of the Compensation Committee or was formerly an officer or employee of the Company, except for Ms. Krill who previously served as President and CEO of ANN until her retirement on October 31, 2015. No executive officer of the Company served during fiscal 2019 as a director or member of a compensation committee of any entity at which any of its executive officers served on the Board, or the Compensation Committee, of the Company. On May 1, 2019, in connection with her appointment as Interim Executive Chair of the Board, Ms. Teffner stepped down as a member of the Compensation Committee, but continues to serve as a member of the Board.
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Ascena Retail Group, Inc.
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11
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2019 Proxy Statement
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QUESTIONS AND ANSWERS ABOUT OUR BOARD AND CORPORATE GOVERNANCE MATTERS
What is the makeup of the Board and how often are members elected?
Our Board currently has twelve members, divided into three classes, each with a staggered three-year term of office. Four directors, Katie J. Bayne, Paul Keglevic, Kay Krill and Stacey Rauch, whose terms are expiring as of the date of the Annual Meeting, shall stand for election this year.
How often did the Board meet in fiscal 2019?
The Board met seven times during fiscal 2019 and otherwise accomplished its business through the work of the committees described below. During fiscal 2019, each incumbent director attended at least 75% of the meetings of the Board and of the standing committees of which he or she was a member during his or her tenure.
Do the non-management directors meet in regularly scheduled executive sessions?
Yes. The non-management members of our Board meet in regularly scheduled executive sessions without any members of management present.
Does the Company have any formal policies or requirements concerning Board Leadership?
We do not have a formal policy regarding the separation of our Chairman of the Board (“Chairman”) and Chief Executive Officer (“CEO”) positions. Following David Jaffe’s retirement as CEO and Chairman on May 1, 2019, the Board appointed Gary Muto as CEO and a member of the Board, and Carrie W. Teffner as Interim Executive Chair of the Board. Our current leadership structure permits Mr. Muto to focus his attention on managing the Company’s business and its strategic priorities, while Ms. Teffner leads the Board.
The Company believes that strong, independent Board leadership is a critical aspect of effective corporate governance. In September 2018, Ms. Buggeln was appointed to serve as the Company’s Lead Independent Director. As specified in our Corporate Governance Guidelines, the responsibilities of the Lead Independent Director are as follows:
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consult with the Chairman as to an appropriate schedule of Board meetings;
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consult with the Chairman regarding, and approve the information, agenda and schedules of, the meetings of the Board and its committees;
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call meetings of the independent directors, as appropriate;
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serve as chairman of the executive sessions of the independent directors;
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serve as liaison between the independent directors and the Chairman and between the independent directors and senior management;
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ensure that independent directors have adequate opportunities to meet and discuss issues in sessions of the independent directors without management present;
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chair the meetings of the Board when the Chairman or CEO is not present;
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recommend to the Board the retention of advisors and consultants who report directly to the Board; and
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respond to questions and comments from major stockholders that are directed to the Lead Independent Director or to the independent directors as a group, with such consultation with the Chairman and other directors as may be appropriate.
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We believe that the Company’s new leadership structure, with Ms. Teffner serving as Interim Executive Chair of the Board and Mr. Muto serving as CEO, is the best governance model for our Company, its stockholders and stakeholders at this time.
How does the Board determine which directors are independent?
Our Board determines whether an individual director satisfies all of the independence standards of the SEC and the Nasdaq Global Select Market, as such standards may be amended from time to time, and also that the director has no material relationship with us (either directly or as a partner, stockholder or officer of any entity) that would be inconsistent with a finding of independence.
Which directors have been designated as independent?
The Board affirmatively determined that Katie J. Bayne, Gary D. Begeman, Kate Buggeln, Paul Keglevic, Kay Krill, Marc Lasry, Randy L. Pearce, Carl Rubin, Stacey Rauch, Carrie W. Teffner (prior to Ms. Teffner’s appointment as Interim Executive Chair of the Board on May 1, 2019), John L. Welborn, Jr. and Linda Yaccarino are “independent,” as defined under Rule 5605(a)(2) of The Nasdaq Stock Market. Mr. Pearce resigned from the Board effective as of October 4, 2018, and Mr. Lasry resigned from the Board effective as of June 30, 2019.
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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What are the standing committees of the Board?
Our Board has three standing committees: the Audit Committee, the Governance Committee and the Compensation Committee.
Who are the current members of the standing committees?
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Audit
Committee
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Compensation and Stock
Incentive
Committee
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Leadership and
Corporate Governance
Committee
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Katie J. Bayne
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Gary D. Begeman
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Kate Buggeln
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David Jaffe
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Paul Keglevic
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Kay Krill
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Gary Muto
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Stacey Rauch
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Carl Rubin
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Carrie W. Teffner
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John L. Welborn, Jr.
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Linda Yaccarino
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Chairperson
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Member
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Lead Independent Director
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Financial Expert
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Are all of the members of the standing committees independent?
Yes. The Board has determined that the members of each of the standing committees are independent pursuant to applicable SEC and Nasdaq Stock Market rules.
Do all of the standing committees operate under a written charter?
Yes. The charters of each of the standing committees are posted on the “Investors” page of the Company’s website at www.ascenaretail.com, accessible through the “Corporate Governance” tab.
What are the functions of the standing committees?
Audit Committee
It is the responsibility of the Audit Committee to assist the Board in its oversight of our financial accounting and reporting practices. The duties of the Audit Committee include reviewing the quality and integrity of the financial statements, reports and other financial information provided by the Company to the public, the Company’s systems of internal controls regarding financial reporting, the internal audit function, the processes for monitoring enterprise risk, and the Company’s auditing, accounting and financial reporting processes generally. The Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct access to our independent registered public accounting firm as well as our internal auditors. The Audit Committee has the ability to retain, at our expense, special legal, accounting or other consultants or experts it deems necessary in the performance of its duties. The Audit Committee also prepared the Audit Committee Report for inclusion in the proxy statement. See “Audit Committee Report.” The Board has determined that all members of the Audit Committee are “independent,” as required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the listing standards of The Nasdaq Stock Market and meet the “financial sophistication” requirement within the meanings of The Nasdaq Stock Market rules, and has also determined that Mr. Rubin and Mr. Welborn qualify as “audit committee financial experts,” as defined in Item 407(d)(5) of Regulation S-K.
Leadership and Corporate Governance Committee
The function of the Governance Committee is to assist the Board by (i) identifying qualified individuals to become Board members, and recommending for selection by the Board the director nominees to stand for election at the next annual meeting of the Company’s
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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stockholders, (ii) recommending the composition of the Board and its committees, (iii) reviewing and recommending changes to the Board, as may be required, with respect to the Company’s Corporate Governance Guidelines and the corporate governance policies and practices of the Company, (iv) leading the Board in its annual review of the Board’s performance, (v) reviewing the succession planning recommendations for certain of the Company’s senior officers, and (vi) advising the Board regarding diversity and inclusion matters.
The responsibilities and duties of the Governance Committee also include advising the Board with respect to the charters, structure and operations of the various committees of the Board and qualifications for membership thereon, including any independence standards for committee membership.
The Governance Committee utilizes a variety of methods for identifying and evaluating director candidates. Candidates may come to the attention of the Governance Committee through current directors, members of management, stockholders or other persons. From time to time, the Governance Committee may also engage a search firm to assist in identifying potential Board candidates, although no such firm was used to identify any of the director nominees proposed for election at the Annual Meeting. Once the Governance Committee has identified a prospective nominee, the Governance Committee evaluates the prospective nominee against the standards and qualifications set out in the Governance Committee’s charter and the Company’s Corporate Governance Guidelines, including the individual’s potential contributions in providing advice and guidance to the Board and management. The Governance Committee seeks to identify nominees who possess a wide range of experience, skills, areas of expertise, knowledge and business judgment. The Governance Committee evaluates all candidates for director, regardless of the person or firm recommending such candidate. In considering director nominees to stand for election or to fill any vacancy, the Governance Committee and the Board take into account, in addition to such other factors as they deem relevant, such factors as the desirability of selecting directors who are accomplished in their respective fields, with superior credentials and reputation, are believed to have (i) relevant expertise and experience upon the basis of which such person could offer advice and guidance to management and (ii) sufficient time available to devote to the affairs of the Company, are believed to be able to work with the other members of the Board, are believed to be able to represent the long-term interests of the Company’s stockholders as a whole, and are selected with a view to the Board being diverse and representing a range of backgrounds and experience. The Governance Committee and the Board also consider all applicable legal and regulatory requirements, as well as any requirements under the Company’s Third Amended and Restated Certificate of Incorporation, and by-laws that govern the composition of the Board as from time to time in effect.
The Board, with the advice and recommendation of the Governance Committee, determines the total number of directors and selects nominees with a view to maintaining a Board that is strong in its collective knowledge and has a diversity of not only skills and experience, but also diversity in gender, culture and geography. The Board and Governance Committee assess the effectiveness of the Company’s diversity policies by reviewing the nominees for director to determine if such nominees satisfy the Company’s then-current needs.
The Board, the Governance Committee and the Company are committed to diversity and inclusion and recognize the benefits diversity and inclusion can contribute to achieving the Company’s goals. Accordingly, the Governance Committee is responsible for advising the Board regarding diversity and inclusion matters in an effort to promote, foster and nurture a diverse and inclusive workforce, culture and provision of services at the Company.
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines, a copy of which is posted on the “Investors” page of the Company’s website at www.ascenaretail.com, accessible through the “Corporate Governance” tab. The Governance Committee assists the Board in carrying out the Corporate Governance Guidelines, monitors the compliance by the Board and its committees with the Corporate Governance Guidelines, and, from time to time as it deems appropriate, reviews and reassesses the adequacy of the Corporate Governance Guidelines and recommends any proposed revisions to the Corporate Governance Guidelines to the Board for approval. The Corporate Governance Guidelines address topics such as (i) Board size, (ii) Board meetings and agendas, (iii) committees, (iv) Board leadership structure, (v) lead independent director, (vi) executive sessions of independent directors, (vii) director qualifications and attributes, (viii) director independence, (ix) director selection, (x) majority approval vote in uncontested director elections, (xi) director orientation, (xii) director access to officers and employees, (xiii) director responsibilities, (xiv) changes in directors’ principal occupation, position or responsibility, (xv) outside directorships, (xvi) stockholder communications with the Board, (xvii) consideration of director candidates nominated by stockholders, (xviii) director compensation, (xix) restrictions on hedging and pledging transactions, (xx) annual evaluation of the Company’s CEO and succession planning, and (xxi) annual evaluation of the Board.
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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Compensation Committee
The function of the Compensation Committee is to assist the Board by: (i) evaluating and determining all matters relating to the compensation (including base salary, incentive compensation and equity-based awards) of the CEO, Interim Executive Chair of the Board and our other executive officers (including the named executive officers and our former Chairman and CEO until his retirement) and certain other key executives and employees; (ii) administering and functioning as the committee that is authorized to grant stock options, restricted stock and/or restricted stock units (“RSUs”) and other equity-based and incentive awards to executive officers and such other key executives and employees as the Compensation Committee shall determine under our stock and cash incentive plans, including the Company’s 2016 Omnibus Incentive Plan, as amended (the “Omnibus Incentive Plan”) and as the committee authorized to grant awards under other incentive plans applicable to the executive officers of the Company as in effect from time to time; and (iii) reviewing and reporting to the Board on such other matters as may be appropriately delegated by the Board for the Compensation Committee’s consideration.
The Compensation Committee has sole authority to retain and obtain the advice of compensation consultants, outside legal counsel and other advisers, each referred to herein as an “Adviser,” to assist it with the execution of its duties and responsibilities. The Compensation Committee has the authority to set the compensation and other terms and conditions and oversee the work of the Advisers, to receive appropriate funding from the Company for the payment of compensation to the Advisers and to terminate the services of an Adviser. In selecting Advisers, the Compensation Committee will take into account factors it considers appropriate or as may be required by law, regulation or under the Nasdaq listing standards.
In fiscal 2018, following an extensive search process, the Compensation Committee selected and engaged Semler Brossy Consulting Group, LLC (“SBCG”) as the Compensation Committee’s independent compensation consultant. SBCG continues to serve as the Compensation Committee’s independent compensation consultant. The Compensation Committee determined that SBCG did not have any conflict of interest in its dealings with the Compensation Committee (or the Company). The Compensation Committee made this determination, in part, by reviewing and considering the factors set out by the applicable SEC rules and Nasdaq listing standards addressing compensation advisor conflicts of interest.
The Compensation Committee regularly evaluates the nature and scope of the services provided by SBCG. In order to ensure that SBCG remains independent, SBCG is only engaged by, takes direction from, and reports to the Compensation Committee and, accordingly, only the Compensation Committee has the right to terminate or replace SBCG at any time.
How many times did each standing committee meet in fiscal 2019?
During fiscal 2019, the Audit Committee met eight times, the Compensation Committee met nine times and the Leadership and Corporate Governance Committee met six times.
What is the Board’s role in the risk oversight process?
It is management’s responsibility to manage risk and bring to the Board’s attention risks that are material to the Company. The Board exercises its oversight of the Company’s risks through regular reports to the Board from our CEO, our Interim Executive Chair of the Board and other members of senior management on areas of material risk, actions and strategies to mitigate those risks and the effectiveness of those actions and strategies. The Board also administers its risk oversight function through its Audit and Compensation Committees.
The Audit Committee discusses with management the Company’s policies with respect to risk assessment and risk management, including the Company’s major financial risk exposures and the steps management has taken to monitor and control those risks. Members of senior management with responsibility for oversight of particular risks report to the Audit Committee periodically throughout the year. The Company’s chief internal audit executive annually prepares a comprehensive risk assessment report which identifies the material business risks (including strategic, operational, financial reporting and compliance risks) for the Company as a whole, as well as for each operating segment, and identifies the controls that address and mitigate those risks. The chief internal audit executive reviews that report with the Audit Committee each year. The Audit Committee reports to the full Board annually, or more frequently as required, on its review of the Company’s risk management.
The Compensation Committee establishes our executive compensation programs in a balanced and diversified manner while also creating significant, yet appropriate, incentives for strong performance based on our business and strategic plan. In most cases, each component of our performance-based compensation program is subject to a limit on the cash paid or the number of shares delivered. We believe that our compensation programs reflect an appropriate balance of short-term, long-term, guaranteed and performance-based compensation in order not to encourage excessive risk-taking. A significant portion of our compensation program includes performance-based compensation and equity-based compensation. We believe that this helps to ensure that our NEOs and other employees focus on the health of our business and the success of broad performance metrics that will deliver stockholder value over time and discourages excessive risk-taking by our NEOs and other employees. The Compensation Committee also evaluates on a regular basis our overall mix of equity-based incentive awards relative to cash-based incentive awards to align our executives’ incentives with stockholder interests and long-term value.
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How does the Board evaluate director candidates recommended by stockholders?
The Governance Committee does not evaluate stockholder nominees differently than any other nominee. Pursuant to policies set forth in our Leadership and Corporate Governance Committee Charter and Corporate Governance Guidelines, our Governance Committee will consider stockholder nominations for directors if we receive timely written notice, in proper form, of the intent to make a nomination at a meeting of stockholders. To be timely for the 2019 Annual Meeting, the notice must be received within the time frame discussed above under the heading “How do stockholders submit proposals for the Company’s 2019 Annual Meeting of Stockholders?” To be in proper form, the notice must, among other things, include each nominee’s written consent to be named as a nominee and to serve as a director if elected, the number of shares held of record and beneficially owned by the nominee, and any other information relating to the nominee that is required to be disclosed in solicitations of proxies for the election of directors, or is otherwise required pursuant to Regulation 14A under the Exchange Act.
How are directors compensated?
General Philosophy
For fiscal 2019, total compensation for our non-employee Board members was within a competitive range of the peer group median. The peer group used to assess the competitiveness of non-employee director compensation is identified under “Peer Group” in the Compensation Discussion and Analysis. During fiscal 2019, our non-employee directors received an annual cash retainer, committee fees, and an annual equity retainer.
The Board, in consultation with SBGC, the Compensation Committee’s compensation consultant, analyzes the Company’s Board compensation in comparison to its peer group, and determines on an annual basis whether to recommend any adjustments in Board compensation to the Board. No changes were made to the structure or design of the Company’s Board compensation for fiscal 2019.
David Jaffe, our former Chairman and CEO, and Gary Muto, our current CEO and director, did not receive any additional cash or equity compensation for their service as directors in fiscal 2019 while serving as executive officers of the Company and members of the Board. Following her appointment as Interim Executive Chair of the Board on May 1, 2019, Ms. Teffner did not receive any additional compensation for her service as a director in fiscal 2019. Compensation paid to Mr. Jaffe and Ms. Teffner for their service non-employee directors during fiscal 2019 is reflected in the Summary Compensation Table in the Compensation and Discussion Analysis, along with compensation paid to them for their service as executive officers during fiscal 2019.
Cash Compensation
For fiscal 2019, we paid our non-employee Board members as follows:
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Fee
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Annual Board Cash Retainer
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$80,000
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Annual fees to each committee member (excluding committee chairs) are as follows:
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Audit Committee
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$15,000
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Compensation Committee
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$12,500
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Leadership and Corporate Governance Committee
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$10,000
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Annual fees to the committee chairs and lead independent director are as follows:
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Audit Committee Chair
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$25,000
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Compensation Committee Chair
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$20,000
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Leadership and Corporate Governance Committee Chair
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$15,000
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Lead Independent Director
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$30,000
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Equity Compensation
The Company generally makes equity grants of RSUs to our directors on an annual cycle in September or October, which vest on the one-year anniversary of the grant date. We generally provide an annual equity retainer of $130,000 for service on our Board; however, for a second consecutive year, the value of RSU awards to directors was reduced by 30% to align with actions taken for our NEOs (other than Ms. Hufford), who also received a 30% reduction to their annual long-term incentive grants for fiscal 2019 (as described in the “Compensation Discussion and Analysis” below). We discounted the RSU grants to our directors in order to conserve shares during a period of depressed share price. The following RSU grants were made to our non-employee directors in fiscal 2019:
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Director
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Number of Restricted
Stock Units Granted(1)
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Katie J. Bayne
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24,138
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Kate Buggeln
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24,138
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Steven Kirshenbaum(2)
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24,138
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Katherine Krill
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24,138
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Marc Lasry(2)
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24,138
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Randy Pearce(3)
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24,138
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Stacey Rauch
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24,138
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Carl Rubin
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24,138
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Carrie W. Teffner
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24,138
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John L. Welborn, Jr.(4)
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34,067
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Linda Yaccarino
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24,138
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(1)
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RSUs granted to non-employee directors in fiscal 2019 vest one year from the grant date.
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(2)
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Messrs. Kirshenbaum and Lasry resigned as members of the Board effective as of June 30, 2019.
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(3)
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Mr. Peace retired as a member of the Board on October 4, 2018.
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(4)
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Mr. Welborn received a pro-rated portion of the reduced fiscal 2018 RSU award, in addition to the reduced fiscal 2019 RSU award.
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Changes for Fiscal 2020
For fiscal 2020, non-employee directors will receive an equity award of 24,000 stock options, which is approximately equal to the number of RSUs granted to non-employee directors in fiscal 2019. The equity award for our directors was changed to a fixed grant of stock options to align with the actions taken for our NEOs, who will receive a fixed number of stock options in fiscal 2020 (as described in the “Compensation Discussion and Analysis” below). The decision to grant a fixed number of stock options, rather than calculate awards based on a grant date fair value, is intended to preserve shares under the Omnibus Incentive Plan. In a depressed share price environment, it is critical that we control share usage and dilution as well as avoid granting potential windfall awards to our directors and NEOs. Further, granting stock options to our non-employee directors is intended to align actual pay with Company performance, as our non-employee directors will only realize value if we achieve strong stock price performance and deliver value to our stockholders. Cash compensation for our directors is unchanged for fiscal 2020. The Board also determined that the compensation for Messrs. Begeman and Keglevic, who joined the Board in September 2019, would consist of a $250,000 cash retainer and no equity award.
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FISCAL 2019 DIRECTOR COMPENSATION TABLE
The following table provides each element of non-employee director compensation for fiscal 2019.
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Name(1)
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Fees Earned or
Paid in Cash
($)
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RSU Awards
($)(2)
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All Other
Compensation
($)
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Total
($)
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Katie J. Bayne
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90,000
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91,000
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—
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181,000
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Kate Buggeln
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129,863
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91,000
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—
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220,863
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Steven Kirshenbaum(3)
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72,444
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91,000
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—
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163,444
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Kay Krill
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86,250
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91,000
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—
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177,250
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David Jaffe(4)
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—
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—
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—
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—
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Marc Lasry(3)
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72,444
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91,000
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—
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163,444
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Randy L. Pearce(5)
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23,819
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—
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—
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23,819
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Stacey Rauch
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106,374
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91,000
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—
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197,374
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Carl Rubin
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115,653
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91,000
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—
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206,653
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Carrie W. Teffner(6)
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—
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—
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—
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—
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John L. Welborn, Jr.(7)
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98,956
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128,432
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—
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227,388
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Linda Yaccarino
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104,458
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91,000
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—
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195,458
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(1)
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Messrs. Begeman and Keglevic joined the Board effective September 30, 2019.
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(2)
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Reflects the aggregate grant date fair value of RSU awards calculated in accordance with ASC Topic 718. Assumptions used in the valuation of equity based awards are discussed in “Stock-Based Compensation” in Note 17 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 3, 2019.
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(3)
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Messrs. Kirshenbaum and Lasry resigned as members of the Board effective as of June 30, 2019.
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(4)
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Compensation received by Mr. Jaffe for his service as a non-employee director during fiscal 2019 following his retirement as an employee of the Company effective June 28, 2019 is reported in the Summary Compensation Table.
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(5)
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Mr. Pearce retired as a member of the Board on October 4, 2018.
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(6)
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Ms. Teffner was appointed Interim Executive Chair of the Board effective May 1, 2019. As of that date, Ms. Teffner receives no additional compensation for her service as a member of the Board. Compensation received by Ms. Teffner in respect of her service as a non-employee director (including the “Teffner Director RSU” discussed in the Summary Compensation Table below) and in respect of her service as Interim Executive Chair of the Board is reported in the Summary Compensation Table.
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(7)
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Mr. Welborn received a pro-rated portion of the reduced fiscal 2018 RSU award, in addition to the reduced fiscal 2019 RSU award.
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As of August 3, 2019, the aggregate number of RSUs and stock options held by each non-employee director was:
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Name
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Number of
RSUs
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Number of
Options
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Katie J. Bayne
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24,138
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—
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Kate Buggeln
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24,138
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—
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David Jaffe(1)
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—
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—
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Steven Kirshenbaum
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24,138
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—
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Kay Krill
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24,138
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—
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Marc Lasry
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—
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—
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Randy L. Pearce
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—
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—
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|
Stacey Rauch
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24,138
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—
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Carl Rubin
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24,138
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—
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John L. Welborn, Jr.
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34,067
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—
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Linda Yaccarino
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24,138
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—
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(1)
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The aggregate number of outstanding stock options held by Mr. Jaffe are reported in the “Outstanding Equity Awards at Fiscal Year End” table below.
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Are directors and executive officers required to own a minimum amount of the Company shares of common stock?
Our Board believes it is important that our non-employee directors and executive officers have, and are recognized both internally and externally as having, long-term financial interests that are aligned with those of our stockholders. In fiscal 2012, pursuant to the recommendation of the Compensation Committee, the Board adopted stock ownership guidelines for our CEO and non-employee directors (the “Ownership Guidelines”). In June 2016, the Ownership Guidelines were amended and restated to, among other things, expand the group of persons subject to the Ownership Guidelines to include all members of our leadership team, including each of the Company’s executive officers and presidents of each of the Company’s brands. The Ownership Guidelines with respect to our CEO became effective in September 2011, with respect to our non-employee directors, became effective on December 7, 2011, and with respect to all such other members of Company leadership, became effective on June 2, 2016. See “Executive Compensation — Compensation Discussion and Analysis — Stock Ownership Guidelines for Executive Officers” below for a discussion of the Ownership Guidelines as amended and restated, with regard to our CEO and all such other members of Company leadership, and each NEO’s current progress towards achieving the guidelines.
Under the Ownership Guidelines, non-employee directors are required to hold (determined annually as of the last day of the prior fiscal year) three times their annual cash retainer (currently $80,000 per annum, for a total of $240,000).
The Ownership Guidelines authorize a transition period for non-employee directors to achieve the three-time ownership level of five years from the later of December 7, 2011 and the date the director commences service on our Board. As of August 3, 2019, Mr. Jaffe, Ms. Bayne, Ms. Buggeln and Ms. Krill satisfied the Ownership Guidelines. The remaining non-employee directors are still within the transition period to satisfy the Ownership Guidelines.
Ownership includes: (i) shares of our stock acquired on the open market or purchased through the exercise of stock options or settlement of any other type of equity award (such as restricted stock, RSUs, deferred stock or a deferred stock unit); (ii) vested equity awards (other than stock options or stock appreciation awards); (iii) vested shares of our stock allocated under any tax-qualified plan (although non-employee directors may not participate in the 401(k) plans, if a director previously was an employee and participated in the plan, such shares would count as “owned”); and (iv) unvested RSUs (but excluding unvested performance-based equity awards). Shares held individually or jointly or by a “family member” (as defined in the securities laws which would include certain trusts, family partnerships and foundations) would count as “owned” by the non-employee director. Vested and unvested stock option awards do not count towards the stock ownership requirement. The Ownership Guidelines, as amended and restated, are posted on the “investors” page of the Company’s website at www.ascenaretail.com, accessible through the “Corporate Governance” tab.
Does the Company maintain Indemnification Agreements with the members of the Board and Executive Officers?
Yes, the Company has entered into indemnification agreements (collectively, the “Indemnification Agreements”) with each of the members of the Board. Ascena also entered into Indemnification Agreements with Gary Muto, CEO, Carrie W. Teffner, Interim Executive Chair of the Board, Dan Lamadrid, Executive Vice President and Chief Financial Officer (“CFO”), and Wendy Hufford, Senior Vice President and General Counsel. The Indemnification Agreements supplement the Company’s Third Amended and Restated Certificate of Incorporation, the Company’s by-laws and Delaware law in providing certain indemnification rights to these individuals. The Indemnification Agreements provide, among other things, that we will indemnify these individuals to the fullest extent permitted by Delaware law and to any greater extent that Delaware law may in the future permit, including the advancement of attorneys’ fees and other expenses incurred by such individuals in connection with any threatened, pending or completed action, suit or other proceeding,
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whether of a civil, criminal, administrative, regulatory, legislative or investigative nature, relating to any occurrence or event before or after the date of the Indemnification Agreements, by reason of the fact that such individuals are or were our directors or officers, subject to certain exclusions and procedures set forth in the Indemnification Agreements.
Does the Company have a written Code of Ethics?
Yes, our “Code of Ethics for Senior Financial Officers” is posted on the “investors” page of the Company’s website at www.ascenaretail.com, accessible through the “Corporate Governance” tab. This code of ethics complies with the requirements of the Sarbanes-Oxley Act of 2002 pertaining to codes of ethics for chief executives and senior financial and accounting officers. If we amend or waive a provision of our “Code of Ethics for Senior Financial Officers” that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, we will post such information at this location on our website. A copy of the code of ethics will be provided to any stockholder upon request.
Does the Company have a Whistleblower Policy?
Yes, as required by the Sarbanes-Oxley Act of 2002, we have established a confidential hotline for employees to call with any information regarding concerns about accounting or auditing matters. All calls are referred to the Chair of the Audit Committee. Our “Whistleblower Policy” is posted on the “investors” page of the Company’s website at www.ascenaretail.com, accessible through the “Corporate Governance” tab.
How can I communicate with members of the Board?
You may contact any member of the Board by writing to our Board at:
Ascena’s Board of Directors
c/o Chair of the Audit Committee
Ascena Retail Group, Inc.
933 MacArthur Boulevard
Mahwah, New Jersey 07430
To the extent reasonably practical under the circumstances, all such communications are treated confidentially and you can remain anonymous when communicating your concerns.
When does the Company’s fiscal year end?
Historically, our fiscal years have ended on the last Saturday in July. However, in June 2018, the Board approved a change in the Company’s fiscal 2018 year end to August 4, 2018, and for each year thereafter, to the Saturday closest to July 31. References in this proxy statement to a “fiscal year” are to the calendar year in which the fiscal year ends. For example, the fiscal year ended August 3, 2019 is referred to as “fiscal 2019” and the fiscal year ended August 1, 2020 is referred to as “fiscal 2020.”
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EXECUTIVE COMPENSATION — COMPENSATION DISCUSSION AND ANALYSIS
OVERVIEW
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Ascena Retail Group, Inc.
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This Compensation Discussion and Analysis describes the compensation philosophy, objectives, policies and practices with respect to our named executive officers (the “NEOs”). The NEOs for fiscal 2019 are comprised of our principal executive officer, principal financial officer, the three other most highly compensated officers serving at the end of fiscal 2019, in addition to two former executive officers based upon their pre-separation compensation, are as follows:
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Gary Muto,
CEO
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Carrie W. Teffner,
Interim Executive Chair of the Board
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Dan Lamadrid,
EVP and CFO
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Wendy Hufford,
SVP, General Counsel and Secretary
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David Jaffe,
Former Chairman and CEO
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Robb Giammatteo,
Former EVP and CFO
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Brian Lynch,
Former President and
Chief Operating Officer
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EXECUTIVE SUMMARY
Financial Results and Portfolio Realignment
Our financial results for fiscal 2019 fell short of our expectations, and we struggled to efficiently respond to broader headwinds in the retail industry. Specific factors impacting our fiscal 2019 enterprise operational results included increased competition and pricing pressure, our product portfolio that failed to reflect evolving consumer tastes and preferences across all of our brands, and the relatively high overhead costs embedded in our multi-brand portfolio strategy. We, as a team, understand the imperative of returning to profitability, and we take seriously our commitments to our customers, vendors, and stockholders.
The disappointing enterprise-level results in fiscal 2019 culminated in a review of our segment and brand portfolio and overall enterprise structure. During the second half of fiscal 2018 and the first half of fiscal 2019, we identified our Value segment as being particularly vulnerable to secular trends towards multi-channel retail platforms and evolving consumer tastes. As a result, we made the decision in the second half of fiscal 2019 to sell the maurices brand to an affiliate of OpCapita LLP and use the proceeds to pay down existing loan balances and/or to reinvest in our other brands that we view as having greater potential in the current retail environment. In addition to cash proceeds, we received an approximately 49.6% interest in the OpCapita LLP affiliate that is now the owner of maurices. Following the sale of maurices, we also made the difficult decision to wind-down the operations of dressbarn, which was the first brand of Ascena and which was started by our Founder, Roslyn Jaffe, in 1962. The decisions to sell maurices and wind-down dressbarn’s operations were difficult and effectively removed us from the value fashion market; that said, we believe that each decision streamlines our operations, allows for further investment of financial and human capital in higher growth opportunities, and better positions us to deliver long-term value to our stockholders.
Despite our disappointing and unacceptable enterprise-level results in fiscal 2019, we believe that our remaining brand portfolio contains positive growth opportunities for us to leverage in fiscal 2020. In particular, our Premium Fashion segment continues to perform well and achieved positive comparable sales year-over-year, and Justice remains the number one specialty player in girls’ apparel. Our transformation initiatives are leading to a stronger product that resonates with our customers by providing assortment versatility. One strong example of this is our Premium segment at Ann Taylor, where we are shifting the perception toward more wearing occasions relevant to our customers’ daily life. We are optimistic that this shift in the merchandising strategy for Ann Taylor and LOFT will translate into winning strategies across our portfolio. Our remaining brands-Justice in the Kids Fashion segment and Lane Bryant and Catherines in the Plus Fashion segment-had mixed results across fiscal 2019 and are seen as key growth platforms to lift our enterprise-level results for fiscal 2020. Our successes across these three brands hinge on our ability to execute on our three key priorities: (i) driving sustainable growth, (ii) improving operating margins, and (iii) optimizing our capital structure.
We will also look towards fiscal 2020 as an opportunity to continue right-sizing our brand support staff and identifying areas for cost savings. As an output of our portfolio realignment, we have re-focused our efforts on creating a more nimble organization and optimizing our existing human capital across our brands. Initiatives focused on reducing our structural costs are expected to contribute an additional $150 million in cumulative realized savings, most of which will be realized in fiscal 2020. This focus on nimbleness and efficiency better positions us to deliver on our commitments to our customers, vendors, and stockholders.
New Leadership Team
The Company implemented several significant leadership transitions during fiscal 2019. In connection with the aforementioned portfolio realignment, David Jaffe retired as Chairman and CEO from those positions on May 1, 2019 and Gary Muto was elevated to the role of CEO and appointed to the Board of Directors. Mr. Muto had previously served as President and CEO-Ascena Brands since August 2017.
Given the challenging and rapidly evolving retail market, we also appointed Carrie W. Teffner as Interim Executive Chair of the Board on May 1, 2019. In her role as Interim Executive Chair of the Board, Ms. Teffner works as a thought partner with Mr. Muto in formulating the Company’s go-forward strategy and stabilizing business operations.
Among other factors, the appointments of Mr. Muto and Ms. Teffner make our leadership structure more efficient and optimize brand leadership and integration under our “one ascena” philosophy, which we believe will be a core driver in stabilizing our business. The appointments of Mr. Muto and Ms. Teffner are described in more detail in the section titled “Year of Significant Transition in Company Leadership.”
Additionally, Brian Lynch, our former President and Chief Operating Officer, and John Pershing, our former Chief Human Resources Officer, departed the Company during fiscal 2019. Robb Giammatteo, our former CFO, departed the Company at the conclusion of fiscal 2019. These departures are described in more detail in the section titled “Year of Significant Transition in Company Leadership.”
Dan Lamadrid was elevated to the role of CFO, effective on the first day of fiscal 2020. Mr. Lamadrid had previously served as Chief Accounting Officer. Additionally, Wendy Hufford was appointed as SVP and General Counsel in October 2018.
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Ascena Retail Group, Inc.
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2019 Proxy Statement
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Below we provide a timeline of leadership transitions and significant events for our business during 2019:
Key Fiscal 2019 Executive Compensation Outcomes
We believe the executive compensation-related decisions made for fiscal 2019, and the associated outcomes of our programs, highlight our ongoing focus on aligning our executives’ interests and pay opportunities with those of our stockholders. In fiscal 2019:
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•
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Our former CEO, Mr. Jaffe, did not receive a seasonal cash incentive payout for either the fall or spring 2019 season due to Consolidated Ascena Enterprise Operating Income falling below our threshold goals;
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•
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We achieved segment/brand Operating Income results between threshold and target goals for the fall 2019 season that resulted in a fall season incentive compensation (“IC”) payout at 31.0% of target for our other then-serving NEOs (other than Ms. Hufford);
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•
|
We did not achieve threshold Operating Income goals for the spring season, and as such, our NEOs (other than Ms. Hufford) did not receive a spring season IC payout;
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•
|
Ms. Hufford received an IC payout at 100% of target for both the fiscal 2019 fall and spring seasons in accordance with her offer letter;
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•
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The Compensation Committee again discounted the target value of annual long-term incentive awards to each of the NEOs (other than Ms. Hufford) by 30% (as was the practice in fiscal 2018) to better align pay opportunities with recent Company performance and to conserve shares. As such, these NEOs, including our CEO, were granted only 70% of their typical long-term incentive award target. Ms. Hufford received a “steady state” long-term incentive award with no discount in accordance with her offer letter;
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•
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Annual long-term incentive ("LTI") opportunities in fiscal 2019 were granted in the form of:
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•
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Performance-based cash long-term incentive plan ("LTIP") awards that vest after 3 years based on our Comparable Sales and Adjusted EBITDA performance with a modifier for TSR performance relative to a select group of peers (60% of “steady-state” target weighting; 86% of actual awards for fiscal 2019). LTIP awards are intended to encourage growth to fund our business and increase stockholder returns; and
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•
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Time-vesting stock options that vest over a 2-year period (20% of “steady-state” weighting; 14% of actual annual awards to all NEOs in fiscal 2019). Stock options are intended to encourage a long-term focus on value creation given their 7-year exercise term.
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•
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Similar to last year, in conjunction with the 30% reduction in long-term incentive opportunities for the NEOs (other than Ms. Hufford), time-based RSUs were not granted to any of our NEOs (other than Ms. Hufford) during the annual grant cycle to further
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the link between long-term pay opportunities and stockholder value creation (time-based RSUs otherwise represent 20% of the “steady-state” weighting); and
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•
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In October 2019, the Compensation Committee terminated the Company’s Transformation Bonus Program and all outstanding awards under the Transformation Bonus Program. Additional information about the Transformation Bonus Program and the decision to terminate it is provided below under the heading “Transformation Bonus Opportunity”.
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COMPENSATION PROGRAM OBJECTIVES AND PHILOSOPHY
We design our executive compensation program to attract and retain highly skilled, performance-oriented executives. In doing so, we structure incentives to motivate strong financial performance and align with stockholder interests. The following core principles guide the achievement of our stated objectives:
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PRINCIPLE
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IMPACT
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Provide market-competitive opportunities to attract and retain key talent
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• Offer total compensation opportunities that are competitive with those offered by similarly-situated companies with which we compete for executive talent. In practice, this results in salary compensation for senior management positions being positioned within a competitive range of the compensation peer group median
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Encourage and reward performance at the individual, brand, and corporate levels
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• Balances all aspects of an executive’s responsibilities: base salary for day-to-day responsibilities; seasonal cash incentive bonuses for shorter-term returns linked to annual financial performance; and long-term cash and/or equity incentive awards to align executives’ focus with stockholder value creation and the future performance of the Company
• For fiscal 2019, this resulted in compensation delivered in three primary forms: base salary, seasonal cash IC bonuses, and LTIP awards and equity incentives. The mix of vehicles is intended to ensure that a significant portion of the total compensation opportunities for our executives are “at risk” based on Company and individual performance
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Align executives’ interests with those of stockholders
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• Explicitly ties a portion of long-term incentives to the performance of our stock price over a period of several years
• Encourages retention and a longer-term performance focus though vehicles that carry multi-year performance periods and service-based vesting requirements
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With respect to the total direct compensation paid to our NEOs, the Compensation Committee, with the recommendations and advice of its independent compensation consultant, utilizes and reviews data from peer companies and survey data provided by Equilar for the purposes of analyzing the pay positioning of key roles within the organization. Industry-based compensation studies and data inform our general understanding of current compensation practices and serve as one input into our compensation decision-making process. Additional points of reference for the Compensation Committee include a role’s scope of responsibilities, the criticality of an individual to the organization, and an individual’s potential to influence and drive future business results.
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KEY FEATURES OF THE EXECUTIVE COMPENSATION PROGRAM
The Compensation Committee reviews our executive compensation and benefits programs on an ongoing basis to evaluate whether these programs support the Company’s compensation philosophy and objectives and serve the interests of our stockholders. The Company’s practices include the following, each of which the Compensation Committee believes reinforces our executive compensation philosophy and objectives:
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What We Do:
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• Linkage Between Performance Measures and Long-Term Growth — Our executive compensation program is designed to attract and retain talent with an emphasis on pay-for-performance and creating long-term value through sustainable net income growth (resulting in increased stockholder returns).
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• Performance-Based Long-Term Incentive Awards — Performance-based long-term cash LTIP awards represent 60% of the Company’s annual LTI mix for the NEOs on a “steady-state” basis (and represented 86% of the LTI mix for NEOs other than Ms. Hufford in fiscal 2019). For the three-year period beginning in fiscal 2019, cash LTIP award payouts are tied to Comparable Sales (25%) and Adjusted EBITDA (75%) with a modifier based on TSR performance relative to a select group of peers.
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• Market Comparison of Executive Compensation Against a Relevant Peer Group — The Compensation Committee annually reviews competitive market data provided by its independent compensation consultant and Company management.
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• “Double Trigger” Change in Control Severance — In the event of a change in control, cash severance benefits are predominantly payable or vest upon a “double trigger” for our executive officers (i.e., upon an involuntary termination that occurs 90 days prior to or within 2 years following a change in control), and there are no “walk rights” following a change in control (i.e., the ability for executives to receive change in control-related payments without the loss of their job or substantial diminution of job duties).
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• Independent Compensation Consultant — The Compensation Committee retains its own compensation consultant to review and advise on the Company’s executive compensation program and practices.
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• Maximum Payout Caps for Executive Officer Incentive Compensation Programs — Payouts under our short-term IC and long-term cash LTIP programs are capped at 200% of target.
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• Stock Ownership Guidelines — Our CEO is required to hold 6x his base salary, and our other executive officers and brand presidents are required to hold 1x their base salaries, each to be achieved within five years of the adoption of the guidelines or, if later, promotion or hire.
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• Hedging/Pledging Policy — Our executive officers or non-employee directors are prohibited from engaging in hedging or pledging transactions with respect to our stock.
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What We Don’t Do:
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x No Guaranteed Salary Increases
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x No Change in Control or Perquisite Tax Gross-Ups
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x No Employment Agreements
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x No Significant Executive Perquisites
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x No Excessive Severance Benefits
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x No Service-Based Defined Benefit Pension Plan or Other Similar Benefits
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x No Repricing of Underwater Stock Options Without Stockholder Approval
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x No Executive Officer is Entitled to Termination Bonus in Excess of Market Standard
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KEY ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM
Our executive compensation program is designed to attract and retain quality leaders with an emphasis on pay-for-performance and creating sustainable long-term stockholder returns. Our compensation program includes significant performance-based elements which are intended to create a meaningful incentive for outstanding performance and serves as an effective retention tool. For fiscal 2019, our annual executive compensation program generally consisted of the following elements:
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Element
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Purpose
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Base salary
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Provide a fixed component of pay that is aligned with our compensation philosophy and intended to attract and retain executives with the necessary skills and experience to execute on our strategic priorities.
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Seasonal cash incentive bonuses
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Provide a bonus opportunity linked to our seasonal Operating Income performance to drive executives’ focus on our ongoing financial success.
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Equity awards
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Create an ownership culture among employees, provide an incentive to contribute to the continued growth and development of our business and align the interests of executives with stockholders over a long-term period.
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Cash LTIP Awards
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Focus our executives on the long-term goals and strategic initiatives of the organization and align the interests of executives with stockholders over a long-term period.
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FISCAL 2019 PAY MIX & PERFORMANCE FOCUS
The following features of our compensation program for executive officers underscore our performance-based compensation philosophy:
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•
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Our fiscal 2019 Annual Cash Incentive Plan was tied entirely to performance against pre-established, seasonal Operating Income (“OI”) goals.
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•
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86% of the actual fiscal 2019 annual long-term incentive grants to each of our NEOs (other than Ms. Hufford and Ms. Teffner) were in the form of a three-year cash LTIP award with payout contingent on achieving pre-established Comparable Sales and Adjusted EBITDA goals with a relative TSR overall payout modifier.
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•
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Nonqualified stock option awards comprised 14% of the annual LTI grants to our NEOs (other than Ms. Hufford and Ms. Teffner) in fiscal 2019. NEOs only “realize” value from stock options to the extent that our share price increases above the exercise price.
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•
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Approximately 88% of total target compensation for Mr. Muto, our CEO, was tied to the achievement of corporate performance objectives and share price performance.
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•
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We did not grant time-based RSUs to our NEOs (other than Ms. Hufford) as part of our ongoing pay program in fiscal 2019.
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We allocate compensation between short-term and long-term components and between cash and equity in order to maximize executive performance and retention. Long-term cash compensation and equity awards comprise an increasingly larger percentage of overall total compensation opportunities for our executives as position levels increase based on our belief that these elements of compensation more closely align their interests with our financial performance and with our stockholders’ interests.
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For fiscal 2019, the targeted mix of base salary, annual cash incentive bonuses, and long-term incentives for our NEOs employed at the end of fiscal 2019 was:
Other NEOs
OPPORTUNITY FOR STOCKHOLDER FEEDBACK
Each year, the compensation of our NEOs, as disclosed in our annual proxy statement, is submitted to our stockholders for a non-binding advisory vote (commonly known as a “say-on-pay” proposal). In response to a significant decline in stockholder support for our say-on-pay vote at our 2015 annual meeting, we initiated significant stockholder outreach in order to obtain input from our stockholders regarding the Company’s executive compensation program and as a result, made several changes to our compensation programs. We continue to consider stockholder input when making decisions regarding our executive compensation programs. In each of the last three years, our say-on-pay proposal has received above 90% support.
We value a strong dialogue with our stockholders and discuss pay-related topics from time-to-time in order to solicit stockholder feedback during the program design process. Stockholders are invited to express their views or concerns directly to the Compensation Committee or the Board in the manner described above under “How can I communicate with members of the Board”.
FREQUENCY OF SAY-ON-PAY VOTE
Consistent with the preference expressed by our stockholders at the 2017 Annual Meeting of Stockholders in our frequency of say-on-pay vote, we currently hold our say-on-pay vote on an annual basis.
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DETERMINATION OF COMPENSATION
When reviewing and evaluating our executive compensation for fiscal 2019, we relied on the significant prior experience of our Compensation Committee in establishing compensation programs and levels across many companies in multiple industries, the input of our former Chairman and CEO (except with regard to his own compensation) and the Compensation Committee’s independent consultant. The following is an overview of the roles of the various participants in our executive compensation process:
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PARTICIPANTS
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ROLE IN THE EXECUTIVE COMPENSATION PROCESS
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Compensation
Committee
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• Our Compensation Committee reviews and approves salaries and other compensation of all senior executives of the Company (including the NEOs).
• Our Compensation Committee also administers the Omnibus Incentive Plan, and establishes and reviews the achievement of performance goals and other matters relating to the Company’s annual, semi-annual and long-term bonus and incentive plans for senior executives (including the NEOs).
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Executive Officers
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• Our CEO annually reviews the performance of each NEO with the Compensation Committee and makes recommendations with respect to each key element of executive compensation for each NEO (excluding himself), as well as other senior executives at the Company. Mr. Jaffe was our Chairman and CEO at the start of fiscal 2019 and was responsible for making these recommendations for fiscal 2019.
• The CFO and HR leadership also prepare and submit information during the course of the year for the consideration of the Compensation Committee, including information relevant to annual, semi-annual and long-term performance measures, proposed financial targets, proposed recommendations for salary increases and proposed equity award allocations.
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Bonus Review
Committee
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• The Company and Segment/ Brand financial goals under the Omnibus Incentive Plan (which was amended in December 2015 to incorporate the Amended and Restated Executive 162(m) Bonus Plan) are developed by the applicable Bonus Review Committee, which then presents the goals to the Compensation Committee for review and approval.
• For the fiscal 2019 fall season, Messrs. Jaffe, Giammatteo, and Pershing served as the Bonus Review Committee. For the fiscal 2019 spring season, Messrs. Muto and Lamadrid and Ms. Teffner served as the Bonus Review Committee.
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Compensation
Consultants
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• In fiscal 2018, following an extensive search process, the Compensation Committee selected and engaged SBCG as its independent compensation consultant. SBCG continued to serve the Compensation Committee in fiscal 2019.
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PEER GROUP
Each year, the Compensation Committee reviews and confirms the appropriateness of our compensation peer group in light of any changes to the Company’s size, business direction or strategic vision. The peer group generally serves as the primary reference in reviewing competitive pay practices and compensation levels for our NEOs. The peer group reflects our status as a multi-brand retailer and includes companies with annual revenues generally between one-half and two times the Company’s.
The Company uses the proxy peer group for:
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•
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Executive compensation market reviews, particularly for our CEO and CFO;
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•
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Director compensation benchmarking; and
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•
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Incentive design review and consideration of governance factors relative to the market.
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The following companies served as our peer group when on-cycle pay decisions were made for fiscal 2019:
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Fiscal 2019 Peer Group
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Abercrombie & Fitch
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JC Penney
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American Eagle Outfitters
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L Brands
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Bed Bath & Beyond
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Ross Stores
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Burlington Coat Factory
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Signet Jewelers
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Dick’s Sporting Goods
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Tailored Brands
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Foot Locker
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Urban Outfitters
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Gap
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Williams-Sonoma
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In addition to the companies listed above, the Compensation Committee also considered pay levels at several other retailers when establishing Mr. Muto’s pay as CEO. The additional companies listed below were also referenced as relevant data points given their retail focus, multi-brand/ mall-based emphasis, and their relevant size following our sale of maurices and wind-down of dressbarn.
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Additional Companies Considered When Establishing Mr. Muto’s Pay as CEO
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Carter’s
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lululemon athletica
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Chico’s FAS
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PVH
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Express
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Ralph Lauren
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Guess?
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Tapestry
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Levi Strauss
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The companies referenced when establishing Mr. Muto’s pay upon promotion were also used in establishing Ms. Teffner’s target pay for her role as Interim Executive Chair of the Board. In particular, the ratios of target pay between CEOs and other named executive officers at the companies listed above were used as a guiding post in establishing Interim Executive Chair of the Board pay.
Following significant changes to the Company’s portfolio of brands and the Company’s reduced size, the Compensation Committee is in the process of reviewing the peer group for fiscal 2020.
YEAR OF SIGNIFICANT TRANSITION IN COMPANY LEADERSHIP
The Company experienced several significant leadership transitions during fiscal 2019 and in connection with the aforementioned portfolio realignment. David Jaffe retired as Chairman and CEO on May 1, 2019 and Gary Muto was elevated to the role of CEO and appointed to the Board of Directors. Mr. Muto had previously served as President and CEO-Ascena Brands since August 2017.
Given the challenging and rapidly evolving retail market, we also appointed Carrie W. Teffner as Interim Executive Chair of the Board on May 1, 2019. The Interim Executive Chair of the Board works as a thought partner with the CEO in formulating the company’s go-forward strategy and stabilizing business operations.
Among other factors, the appointments of Mr. Muto and Ms. Teffner make our leadership structure more efficient and optimize brand leadership and integration under our “one ascena” philosophy, which we believe will be a core driver in stabilizing our business.
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Below we provide a timeline of leadership transitions and significant events for our business during 2019:
Mr. Jaffe served as our Chairman and CEO from 2002 until his retirement from those positions on May 1, 2019. Mr. Jaffe’s pay as CEO was established at the beginning of fiscal 2019, similar to our other NEOs that were employed on the first day of the fiscal year. Key elements of his fiscal 2019 compensation include:
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•
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Base salary was maintained at $1,000,000 (which is positioned near the 25th percentile of the peer benchmarking references); Mr. Jaffe’s base salary had not been not increased since fiscal 2013 and was positioned near the 25th percentile of our peer group;
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•
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Mr. Jaffe’s target seasonal bonus opportunities as a percentage of salary did not change in fiscal 2019. Consolidated Ascena Enterprise Operating Income achievement below threshold for the fall and spring seasons resulted in no annual IC payout for Mr. Jaffe in fiscal 2019. Further, he did not realize any value from the vesting of performance-based long-term cash incentives as the FY19 cash LTIP award threshold goals were not achieved; and
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•
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As with our other NEOs that received an annual long-term incentive grant (other than Ms. Hufford), Mr. Jaffe’s long-term incentive opportunity was reduced by 30%. As a result, 86% of Mr. Jaffe’s fiscal 2019 long-term incentive opportunity was a multi-year, performance-based award tied to Comparable Sales and Adjusted EBITDA with a payout modifier for relative TSR, and his target pay opportunity was positioned below the 25th percentile of our peers.
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Following Mr. Jaffe’s retirement as Chairman and CEO on May 1, 2019, Mr. Jaffe remained an employee of the Company to serve as a senior advisor through June 28, 2019, at which time Mr. Jaffe retired as an employee. While serving as a senior advisor, Mr. Jaffe was paid a salary at an annualized rate of $250,000.
In connection with Mr. Jaffe’s retirement as CEO, the Company appointed Gary Muto as the Company’s CEO and a member of the Board, effective May 1, 2019. Mr. Muto’s offer letter provides the following compensatory terms:
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•
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Mr. Muto's base salary remained $1,000,000 for fiscal 2019 and his target opportunity under the Company's IC program was increased to 150% of base salary for the remainder of fiscal 2019, up from his previous target of 125%;
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•
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Mr. Muto’s annual LTI opportunity for fiscal 2019 was unchanged; and his LTI opportunity for fiscal 2020 will be established as discussed in the “Key NEO Compensation Program Changes for Fiscal 2020” section;
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•
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In addition, Mr. Muto received a one-time long-term incentive award of performance-based equity (the “Promotion Grant”) in order to align his incentive opportunity directly with the value realized by our stockholders. The Promotion Grant had a target grant date value of $3,850,000, with approximately 60% of the value granted in the form of performance-based RSUs and 40% in the form of performance-based stock options. Both vehicles are tied to the achievement of $3, $5, and $7 stock price hurdles. The Promotion Grant is discussed in further detail in the “Long-Term Incentive Award Section”.
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Given the appointment of Mr. Muto as CEO during a time of significant change in our business and a challenging and competitive retail environment, the Company also appointed Carrie W. Teffner as Interim Executive Chair of the Board, effective May 1, 2019. In her new role, Ms. Teffner will work with Mr. Muto in guiding the Company to achieve our operational milestones and deliver value to our stockholders. Ms. Teffner’s offer letter provides the following compensatory terms:
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•
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Ms. Teffner will receive a base salary of $1,000,000 for fiscal 2019 and a target opportunity under the Company’s IC program of 150% of base salary. Ms. Teffner’s fiscal 2019 IC payout was pro-rated for her partial year of service as an employee;
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•
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In addition, Ms. Teffner received a one-time long-term incentive award of performance-based equity (the "Appointment Grant") that had a grant date value of $1,050,000, with approximately 60% of the value granted in the form of performance-based RSUs and 40% in the form of performance-based stock options. The Appointment Grant will vest in accordance with the same vesting schedule that applies to Mr. Muto's Promotion Grant. Similar to our CEO, the Appointment Grant is intended to align Ms. Teffner's incentive opportunity directly with the value realized by our stockholders. The Appointment Grant is discussed in further detail in the ”Long-Term Incentive Award Section”.
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The changes to the Company leadership structure, and the accompanying pay actions, are aimed to lead our Company’s turnaround and ensure that our full executive team’s interests and incentive opportunities are aligned with our stockholders’ interests.
00BASE SALARY
The base salaries of our NEOs are an important element of their total compensation packages, and are intended to reflect their respective positions, duties and responsibilities. Each year, the Compensation Committee reviews NEO salaries and, if appropriate, approves merit-based increases based on a number of factors including:
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•
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The market competitiveness of salaries;
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•
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The individual performance and potential of each NEO; and
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•
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The overall performance of the organization.
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The Compensation Committee determined not to adjust Mr. Muto’s base salary in connection with his appointment as CEO in May 2019. Mr. Muto’s base salary at the end of fiscal 2019 remained $1,000,000, which is positioned near the 25th percentile of the peer benchmarking references. The base salaries of Ms. Teffner ($1,000,000) and Ms. Hufford ($400,000) were established in connection with their commencement of employment with us in fiscal 2019. The Compensation Committee did not make any adjustments to Mr. Lamadrid’s base salary for fiscal 2019, which remained $425,000. In connection with Mr. Lamadrid’s promotion to Executive Vice President and CFO, Mr. Lamadrid’s base salary increased to $600,000 effective August 4, 2019 (the first day of fiscal 2020). Prior to his retirement as CEO in May 2019, Mr. Jaffe’s base salary was $1,000,000, which was unchanged since fiscal 2013. While serving as an advisor following his retirement as CEO, Mr. Jaffe received a salary of $250,000 at an annualized rate. For fiscal 2019, the Compensation Committee increased Mr. Giammatteo’s base salary to $600,000 (from $500,000 at the end of fiscal 2018) in order to align his cash compensation within a competitive range for CFOs within our peer group. Mr. Lynch’s salary of $1,000,000 remained unchanged in fiscal 2019.
ANNUAL CASH INCENTIVE PROGRAM
The Compensation Committee believes that a substantial percentage of each executive officer’s annual compensation should be tied directly to the financial performance of the Company. Our annual cash incentive compensation (IC) program is a critical element of our executive compensation package, because it is entirely “at-risk” and any earned payouts are solely dependent on Company performance. The IC program in effect for fiscal 2019 was designed to encourage the achievement of our seasonal performance objectives whereby payouts under the program are earned based on the achievement of challenging seasonal financial goals. The performance goals established for the fiscal 2019 seasonal IC programs were intended to focus our NEOs on key financial objectives and business drivers, which we believe will improve our overall operations and increase stockholder value. Each of our NEOs participated in the IC program in fiscal 2019.
We establish the target amount of an NEO’s IC opportunity as a percentage of base salary for the performance period based on the NEO’s position and level within the organization. The seasonal IC payout is equal to their seasonal IC target modified based on performance (adjusted to reflect extraordinary and other special items, including exclusion of the financial effects of any unbudgeted disposal of a business or acquisition, start-up, new joint venture or disposition of an asset) relative to the pre-determined targeted financial performance goals.
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Key mechanics of the program include:
Operating Income serves as the sole metric in the plan because the Compensation Committee believes it is a core driver of retail business performance and a leading indicator of stockholder value creation. Additionally, the plan’s seasonal structure allows for mid-year development of performance targets and provides an incentive for our NEOs to focus on meeting goals in the second half of the fiscal year in circumstances when business performance and macro-economic conditions change relative to our budgeted plan.
The Compensation Committee approved modifications to the measurement of Operating Income goals for fiscal 2019 as follows:
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Participants
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Operating Income Weighting
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Measurement Detail
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David Jaffe (until retirement)
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100% Consolidated Ascena Enterprise
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Consolidated Operating Income for the overall business (“Consolidated Ascena Enterprise” results)
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Gary Muto, Rob Giammatteo, Brian Lynch
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50% Consolidated Ascena Enterprise;
50% Segment/ Brand
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Blend of Consolidated Ascena Enterprise results and the weighted average of Segment/ Brand results (“Segment/ Brand” results)
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Dan Lamadrid
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100% Segment/ Brand
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Weighted average of Segment/ Brand results
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Wendy Hufford
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N/A
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Receives 100% IC payout for both seasons in fiscal 2019 in accordance with offer letter
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Mr. Jaffe, our former CEO, continued to be measured only on Consolidated Operating Income for the entire organization in fiscal 2019. The Compensation Committee introduced the Segment/ Brand measurement component for our other NEOs (other than Ms. Hufford) to (i) eliminate the potential that a single segment or brand performing below threshold might “zero out” the IC payout for Ascena Corporate employees; and (ii) to maintain accountability for individual segment and brand leaders. Additionally, the Segment/ Brand component payout is capped at 100% if any individual segment or brand results are achieved below threshold to ensure that payouts do not exceed target in the event that a portion of the business underperforms.
The Compensation Committee sets the applicable performance goals for our seasonal IC program at the beginning of the fall and spring seasons after considering historical operating trends (particularly prior year results), the external market environment, and the Company’s financial plans approved by our Board. Despite the significant headwinds in our business, target Operating Income goals for each fiscal 2019 season were set above actual fiscal 2018 performance. The Compensation Committee believes that the fiscal 2019 goals were sufficiently rigorous and motivational.
As shown in the tables below, achievement of a threshold level of performance would have resulted in a payout equal to 25% of the seasonal incentive targets for each season. The Compensation Committee established a threshold payout of 25% of target for fiscal 2019, which was lower than the one-time threshold payout of 50% of target used in fiscal 2018. A 25% payout at threshold for our NEOs
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more closely aligns with our historical practice and approach to goal-setting. Additionally, in both seasons, a maximum level of performance would yield an incentive payout equal to 200% of the seasonal incentive targets for each season, with interpolation between the threshold and target levels and target and maximum levels.
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Named Executive Officer
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Threshold Payout Opportunity (as a % of Base Salary)
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Annual
Target
Opportunity
(as a % of
Base Salary)
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Annual Maximum Opportunity (as a % of Base Salary)
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Portion Allocated
to Fall
Season
(50% of
Target)
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Portion Allocated to Spring Season (50% of Target)
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Gary Muto
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37.50
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150
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300
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75%
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75%
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Carrie W. Teffner
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37.50
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150
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300
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75%
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75%
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Dan Lamadrid
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15
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60
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120
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30%
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30%
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Wendy Hufford
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15
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60
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120
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30%
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30%
|
|
David Jaffe
|
37.50
|
150
|
300
|
75%
|
75%
|
|
Robb Giammatteo
|
18.75
|
75
|
150
|
37.50%
|
37.50%
|
|
Brian Lynch
|
31.25
|
125
|
250
|
62.50%
|
62.50%
|
Fiscal 2019 — Fall Performance
Our fall performance resulted in no payout for our former CEO, Mr. Jaffe, due to Consolidated Ascena Enterprise results falling short of the threshold performance level. Segment/ Brand Operating Income for the fall was achieved between threshold and target performance levels, and when combined with the below-threshold Consolidated Ascena Enterprise results, resulted in a payout just above threshold for the rest of our NEOs (other than Ms. Hufford). Ms. Hufford received a payout of 100% of target for the fall season in accordance with her offer letter.
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Fiscal 2019 Fall Bonus
|
Threshold OI Performance (25% Payout)
($000)
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Target OI Performance (100% Payout)
($000)
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Maximum OI Performance (200% Payout) ($000)
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Actual OI Achieved ($000)
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% of Target Achieved
|
Payout (% Target)
|
|
Consolidated Ascena Enterprise Performance
(100% of IC for Mr. Jaffe and 50% of IC for all other NEOs)
|
6,600
|
31,800
|
47,500
|
6,200
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0
|
0
|
Fiscal 2019 — Spring Performance
Due to rapidly changing customer expectations and significant organizational changes with our portfolio of brands, our Consolidated Ascena Enterprise results and Segment/ Brand results fell short of threshold Operating Income performance levels during the spring season. As such, none of NEOs (other than Ms. Hufford) received a payout under the spring seasonal plan. Ms. Hufford received a payout of 100% of target for the spring season in accordance with her offer letter.
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|
|
|
|
|
|
|
|
|
|
Fiscal 2019 Spring Bonus
|
Threshold OI Performance (25% Payout)
($000)
|
Target OI Performance (100% Payout)
($000)
|
Maximum OI Performance (200% Payout)
($000)
|
Actual OI Achieved ($000)
|
% of Target Achieved
|
Payout (% Target)
|
|
Consolidated Ascena Enterprise Performance (100% of IC for Mr. Jaffe and 50% of IC for all other NEOs)
|
41,200
|
80,200
|
124,700
|
(43,900)
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0
|
0
|
As a result of the Fall and Spring 2019 OI achievement, the NEOs received the following annual incentive payments for fiscal 2019 performance. Spring 2019 threshold, target, and maximum goals were adjusted to reflect the sale of maurices in May 2019.
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Ascena Retail Group, Inc.
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34
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2019 Proxy Statement
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Fiscal 2019 Bonus Payments
|
Fall OI Earned Payment
($)
|
Spring OI Earned Payment
($)
|
Total Fiscal 2019 Seasonal Bonus Payments
|
|
Gary Muto
|
193,443
|
—
|
193,443
|
|
Carrie W. Teffner
|
N/A
|
—
|
—
|
|
Dan Lamadrid
|
98,850
|
—
|
98,850
|
|
Wendy Hufford
|
120,000
|
120,000
|
240,000
|
|
David Jaffe
|
—
|
—
|
—
|
|
Robb Giammatteo
|
69,640
|
—
|
69,640
|
|
Brian Lynch
|
193,443
|
—
|
193,443
|
Mr. Jaffe’s payout reflects the achievement of Consolidated Ascena Enterprise OI results. Payouts for the other NEOs (other than Ms. Hufford) reflect the blended payout for the achievement of Consolidated Ascena Enterprise results and Pro-Rata results. Ms. Hufford received a target IC payout for both the fall and spring seasonal plans in accordance with her offer letter.
LONG-TERM INCENTIVE COMPENSATION
We endeavor to align executive compensation with the achievement of operational and financial results and increases in stockholder value. Our long-term incentive compensation directly links payout opportunities with stock and financial performance. This design is intended to ensure that, in combination with the IC opportunity described above, a majority of each NEO’s total compensation is “at risk” based on Company financial and/or stock performance. However, as described in greater detail below under “Risk Mitigation,” these incentives are designed in a manner that the Compensation Committee believes does not encourage excessive risk taking.
Award Determination for Messrs. Jaffe, Muto, Giammatteo, Lynch, and Lamadrid
Our “steady-state” long-term incentive program contains three primary vehicles, which are each described in greater detail below. However, as described above, and consistent with awards granted in fiscal 2018, the value of annual long-term incentive awards to our NEOs (other than Ms. Hufford) who were employed at the time fiscal 2019 annual awards were granted was reduced by 30% by: (i) halving the target value of stock options and (ii) eliminating RSUs. The resulting long-term incentive mix was formulated to link all long-term pay opportunities with our stock price and/ or financial performance and conserve shares during a period in which our share price was depressed.
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Ascena Retail Group, Inc.
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35
|
2019 Proxy Statement
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Restricted Stock Units, 20% Stock Options, 20% Stock Options, 10% Perf.-Based LTIP, 60% 30% LTI “Discount” Perf.-Based LTIP, 60% “Steady State” LTI Awards “Steady State” LTI Awards Reduction of Options FY18 Actual LTI Awards Planning process to actual grant
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Reward Vehicle
|
Key Program Components
|
|
Performance-Based Cash LTIP Awards
86% of fiscal 2019 LTI awards
|
• Cash-settled performance-based awards with a three-year performance cycle
• Payout is contingent on the attainment of predetermined performance goals that, for awards granted in fiscal 2019, consisted 25% of Comparable Sales and 75% of Adjusted EBITDA growth, with a payout modifier for TSR performance relative to a select group of peers
|
|
Nonqualified Stock Options
14% of fiscal 2019 LTI awards
|
• Time-vested stock options, generally vesting 50% per year over 2 years
• Exercise price is equal to the fair market value of our common stock on the grant date (defined as the average of the high and low Company stock price on the date of grant)
• Value realized at exercise depends on stock price appreciation
• 7-year term (for stock options granted on or after December 11, 2012)
|
Award Determination for Ms. Hufford
In accordance with Ms. Hufford’s offer letter, the Compensation Committee determined that the fiscal 2019 long-term incentive awards granted to her would not be discounted by 30%. Ms. Hufford received the “steady state” long-term incentive compensation award mix, which delivered her award 60% in the form of a performance-based cash LTIP award, 20% in the form of stock options, and 20% in the form of RSUs. The cash LTIP award granted to Ms. Hufford has the same performance and vesting criteria as the cash LTIP awards granted to the other NEOs and the stock options and RSUs granted to Ms. Hufford vest 50% in each of the next two years.
Promotion and Appointment Grants for Mr. Muto and Ms. Teffner in Fiscal 2019
In connection with Mr. Muto’s promotion to CEO on May 1, 2019, Mr. Muto received a one-time long-term incentive award of performance-based equity (the “Promotion Grant”) with grant date value of $3,850,000. Approximately 60% of the Promotion Grant value was delivered in the form of performance-based RSUs and approximately 40% of the Promotion Grant value was delivered in the form of performance-based stock options. Subject to Mr. Muto’s continued employment (except as provided in his offer letter), the performance-based RSUs and performance-based stock options subject to the Promotion Grant will be eligible to vest as follows:
|
|
|
|
•
|
25% of each of the performance-based RSUs and performance-based stock options will be eligible to vest if the closing price of the Company’s stock equals or exceeds $3.00 per share for a 20-consecutive trading day period on or prior to the third anniversary of the grant date (the “$3 Hurdle”);
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|
|
|
|
•
|
an additional 25% of each of the performance-based RSUs and performance-based stock options will be eligible to vest if the closing price of the Company’s stock equals or exceeds $5.00 per share for a 20-consecutive trading day period on or prior to the third anniversary of the grant date (the “$5 Hurdle”); and
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|
|
|
|
•
|
the remaining 50% of each of the performance-based RSUs and performance-based stock options will be eligible to vest if the closing price of the Company’s stock equals or exceeds $7.00 per share for a 20-consecutive trading day period on or prior to the third anniversary of the grant date (the “$7 Hurdle” and with the $3 Hurdle and $5 Hurdle, the “Hurdles”).
|
The Compensation Committee granted performance-based RSUs and performance-based stock options tied to share price hurdles, rather than operational or strategic metrics, given the scale and scope of the Company’s transformation, which will require nimbleness in an ever-changing retail environment and achievement against a wide variety of financial and strategic indicators (some of which are already included as metrics in the Company’s other incentive plans). As a result, the Compensation Committee felt that stock price appreciation was and will be a reflective indicator of a successful turnaround effort and that Hurdle goals of $3.00, $5.00, and $7.00 per share, or more than double the stock price on the date of grant at the lowest Hurdle, represented meaningful steps towards our ultimate goal of delivering value to our stockholders. The Compensation Committee also felt that the back-loaded vesting of the Promotion Grant, in combination with the 20-consecutive trading day requirement for the performance conditions of any Hurdle to be deemed satisfied, further aligns the realizable value of the Promotional Grant with the experience of our stockholders.
If a Hurdle is achieved prior to the second anniversary of the grant date of the Promotion Grant, the portion of the performance-based RSUs and performance-based stock options related to the Hurdle that was achieved prior to the second anniversary will vest on the second anniversary, generally subject to Mr. Muto’s continued employment. Any portion of the performance-based RSUs and performance-based stock options related to a Hurdle that is not actually achieved by the third anniversary of the grant date will be forfeited for no consideration.
In connection with Ms. Teffner’s appointment as Interim Executive Chair of the Board on May 1, 2019, Ms. Teffner received a one-time long-term incentive award of performance-based equity (the “Appointment Grant”) with a grant date value of $1,050,000. Approximately 60% of the Appointment Grant value was delivered in the form of performance-based RSUs and approximately 40% of the Appointment Grant value was delivered in the form of performance-based stock options. Subject to Ms. Teffner’s continued employment as Interim Chair or service as a member of the Board (except as provided in her offer letter), the performance-based RSUs and performance-based stock options subject to the Appointment Grant will be eligible to vest in accordance with the same vesting schedule that applies to Mr. Muto’s Promotion Grant.
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Ascena Retail Group, Inc.
|
36
|
2019 Proxy Statement
|
EQUITY AWARDS UNDER THE COMPANY’S OMNIBUS INCENTIVE PLAN
NEOs generally receive annual grants of equity awards under our Omnibus Incentive Plan as set forth below. For annual equity grants made to each NEO (other than Ms. Hufford), stock options comprised 14% of the total long-term incentive grant value, with the remaining 86% made in performance-based cash LTIP awards. Ms. Hufford received a “steady state” annual equity grant in accordance with her offer letter that was comprised of 60% in the form of a performance-based cash LTIP award, 20% stock options, and 20% time-vesting RSUs.
The Compensation Committee generally determines the value of each grant in accordance with pre-established grant guidelines (which are primarily based on level of responsibility with the Company or respective brand). Our CEO may exercise discretion in his recommendations to the Compensation Committee for grants of long term incentives for all executives (excluding himself) based on individual performance. All grants to employees are made by the Compensation Committee.
The Compensation Committee has a practice of not granting any stock options until at least one business day after the Company has issued its quarterly and/or annual earnings release, as well as the public release of any other pending material non-public information.
If an employee ceases to be an employee of the Company for any reason (other than for Cause, as defined under the Omnibus Incentive Plan) and the employee has achieved the “Total Years Test” (as described in further detail below) as of his or her last day of employment, then all of such employee’s unvested stock options will continue to vest and remain exercisable after the date of termination through the one year anniversary of the vesting date of the last unvested stock option under the applicable stock option award, but not longer than the original term of each stock option.
In addition, all of an employee’s unvested RSUs will become fully vested upon achievement of the Total Years Test. Any RSUs granted to the employee who has achieved the Total Years Test will be fully vested upon grant, and the employee’s RSUs will become fully vested upon the employee’s death, disability, termination (other than for Cause) or upon a change in control of the Company on or after achievement of the Total Years Test.
The “Total Years Test” means 75 years, based on the sum of (i) the total number of years of employment with the Company or an affiliate, plus (ii) the employee’s age, which must be at least age 60. The Company believes that the Total Years Test encourages retention as our executive officers approach retirement age, while also incentivizing our executive officers to drive stockholder value. The Total Years Test does not apply to LTIP awards, which the employee to be employed through the end of the applicable performance period to be eligible to receive a payout. At the time Mr. Jaffe ceased employment with the Company in June 2019, he satisfied the Total Years Test and his outstanding and unvested RSUs became fully vested and his outstanding stock options will continue to vest in accordance with their terms.
The Compensation Committee may also make other equity grants from time to time during the year (“special equity grants”), such as when a new employee is hired (as was the case with Ms. Hufford and Ms. Teffner), a current employee is promoted (as was the case with Mr. Muto ) or in recognition of special achievement.
Fiscal 2019 Equity Awards Granted
|
|
|
|
|
|
|
|
NEO
|
Stock Options Granted(1)
|
Restricted Stock Units Granted(2)
|
Performance-Based Restricted Stock Unit Granted(3)
|
|
Gary Muto
|
2,874,337(3)
|
—
|
1,957,627
|
|
Carrie W. Teffner
|
750,000(4)
|
24,138
|
533,898
|
|
Dan Lamadrid
|
14,175
|
—
|
—
|
|
Wendy Hufford
|
13,731
|
30,239
|
—
|
|
David Jaffe
|
311,383
|
—
|
—
|
|
Robb Giammatteo
|
37,301
|
—
|
—
|
|
Brian Lynch
|
124,337
|
—
|
—
|
|
|
|
|
(1)
|
Represents a stock option award made pursuant to the Company’s annual equity grant program, as described above in the Compensation Discussion and Analysis under “Long Term Incentive Compensation” and “Equity Awards Under the Company’s Omnibus Incentive Plan.”
|
|
|
|
|
(2)
|
For Ms. Teffner, represents the number of RSUs granted to her in respect of her service as a non-employee director prior to her appointment as Interim Executive Chair of the Board. For Ms. Hufford, represents the number of RSUs awarded pursuant to the Company’s annual equity grant program, as described above in the Compensation Discussion and Analysis under “Long-Term Incentive Compensation” and “Equity Awards Under the Company’s
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Ascena Retail Group, Inc.
|
37
|
2019 Proxy Statement
|
Omnibus Incentive Plan.”
|
|
|
|
(3)
|
Performance-based RSUs granted on May 1, 2019 to Mr. Muto in connection with his promotion as CEO and to Ms. Teffner in connection with her appointment as Interim Executive Chair of the Board, as described above in the Compensation Discussion and Analysis under “Long-Term Incentive Compensation - Promotion and Appointment Grants for Mr. Muto and Ms. Teffner in Fiscal 2019.”
|
(4) Includes Stock options granted on October 3, 2018 as part of the annual LTI grant (124,337 stock options with a grant price of $3.92) and performance-based stock options granted on May 1, 2019 in connection with Mr. Muto’s promotion (2,750,000 stock options with a grant price of $1.17).
|
|
|
|
(5)
|
Performance-based stock options granted on May 1, 2019 in connection with Ms. Teffner’s appointment as Interim Executive Chair of the Board.
|
PERFORMANCE-BASED LONG-TERM INCENTIVE AWARDS
In fiscal 2019, the Company granted the NEOs cash-settled performance-based awards to be paid following the end of the three-year performance period and the Compensation Committee’s certification of the achievement of pre-established performance goals. Cash LTIP award performance goals are established annually. The cash LTIP awards are intended to tie NEO pay opportunities to our long-term financial and stock price performance.
The following section summarizes cash LTIP award grants made in fiscal 2019 as well as the results of the cash LTIP awards vesting following the conclusion of fiscal 2019. Please see prior years’ proxies for descriptions of other outstanding LTIP grants.
Grants made in Fiscal 2019: FY21 LTIP
In fiscal 2019, each NEO (other than Ms. Teffner) received an annual long-term incentive plan grant under the Omnibus Incentive Plan (the “FY21 LTIP”). The performance period for the FY21 LTIP is fiscal years 2019 through 2021. Vesting of the FY21 LTIP grants is contingent upon our average achievement of three one-year Comparable Sales goals over a three-year performance period (25% weighted) and our average achievement of three one-year Adjusted EBITDA growth goals over a three-year performance period (75% weighted) and is subject to a relative TSR overall payout modifier.
The Compensation Committee established the three one-year goals for Comparable Sales and Adjusted EBITDA growth at the beginning of the performance period. The goals for the first year of the performance period were established based upon prior year actual results. The goals for subsequent years are determined based on increases over the prior year’s actual results (i.e., goals for the second year are determined based on actual results from the first year of the performance period). The cash LTIP award payout is subject to adjustment based upon the Company’s achievement of TSR relative to a select group of peers (“TSR Peer Group”). The modifier provides that payouts be adjusted to 80% of earned dollars for threshold relative TSR achievement, 100% of earned dollars for target relative TSR achievement, and 120% of earned dollars for maximum TSR achievement, with linear interpolation for results that fall between threshold and target, and target and maximum. Our TSR Peer Group includes several of the companies in our benchmarking peer group as well as additional apparel retailers that are business competitors.
The Compensation Committee established the FY21 LTIP goals after considering the macro-economic environment, prior year actual performance, and our long-range plan. The Compensation Committee transitioned to establishing one-year goals that are based off prior year results due to the challenges of setting 3-year goals during a period of significant change in our business and brand portfolio. The Comparable Sales and Adjusted EBITDA growth goals tie our executive’s incentive opportunities to top-line growth as well as profitability, while the TSR modifier ensures alignment with our stockholders’ realization of value over the three-year performance period.
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Ascena Retail Group, Inc.
|
38
|
2019 Proxy Statement
|
FY21 LTIP grants will vest at 50% of target for performance at threshold, 100% at target performance level, and 200% of target for performance achieving or exceeding maximum level; performance between these levels will be calculated using linear interpolation, and are subject to modification based on relative TSR achievement as described above. If performance targets are achieved, any payouts under the FY21 LTIP will be made following the end of fiscal FY21. Subject to achievement of performance conditions, the FY21 LTIP awards will be settled in cash.
|
|
|
|
|
|
|
|
|
|
Performance Measure
|
|
Performance Range
|
Performance
Achieved
|
|
|
Threshold
|
Target
|
Maximum
|
|
FY Comparable Sales (as % of Prior FY’s Actual Comparable Sales for each of the three one-year period) (25% Weight)
|
100%
|
102%
|
104%
|
101.9%
|
|
EBITDA Growth (75% Weight)
|
FY2019 EBITDA (as % of prior FY’s actual EBITDA)
|
100%
|
103%
|
111%
|
0%
|
|
FY2020 and FY2021 EBITDA (as % of prior FY’s actual EBITDA)
|
100%
|
107%
|
115%
|
Calculated following the completion of applicable fiscal year
|
Grants vesting after Fiscal 2019: FY19 LTIP
The fiscal 2019 cash LTIP award (“FY19 LTIP”) was designed by the Compensation Committee to give eligible executives, including each of our NEOs at the time grants were made in 2016 (Ms. Teffner, Ms. Hufford and Mr. Lamadrid were not employed with us at the time of the FY19 LTIP grant), a substantial incentive to maximize our long-term financial performance. Grants were scheduled to vest after the completion of fiscal 2019, subject to performance at or above threshold levels. The target payout opportunities for the FY19 LTIP are shown below:
|
|
|
|
|
|
NEO(1)
|
Target
Value of
Award
|
|
Gary Muto
|
$2,750,000
|
|
Dan Lamadrid
|
$115,000
|
|
David Jaffe
|
$3,780,000
|
|
Robb Giammatteo
|
$345,000
|
|
Brian Lynch
|
$856,800
|
|
|
|
|
(1)
|
Neither Ms. Hufford nor Ms. Teffner was employed at the time of the FY19 LTIP grant. Mr. Lamadrid received a pro-rated FY19 LTIP grant.
|
The FY19 LTIP award was contingent upon the achievement of a one-year adjusted Net Income goal (covering fiscal year 2017) and a 3-year relative TSR goal measuring Company TSR relative to a broader index of companies in the “Specialty Stores” Global Industry Classification Standard Group (covering fiscal years 2017, 2018, and 2019).
Given the many uncertainties in the retail industry, the Compensation Committee set FY19 LTIP targets it considered challenging but still achievable in an industry with significant competition for experienced executives. The adjusted Net Income target was established by placing a 10% premium on the prior fiscal year’s actual results (i.e., the target adjusted Net Income goal was equal to 110% of fiscal 2016 adjusted Net Income), while threshold performance was equal to fiscal 2016 actual adjusted Net Income and maximum performance was equal to 120% of fiscal 2016 actual adjusted Net Income. As shown in the charts below, the Company did not achieve the threshold adjusted Net Income goal and was below the threshold level for relative TSR.
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|
|
|
|
|
|
|
|
|
Performance Measure
|
Performance Range
|
Performance
Achieved(1)
|
Payout as % Target
|
|
Threshold
|
Target
|
Maximum
|
|
One Year Adjusted Net Income Goal (50% Weight)
|
$118.6M
|
$130.5M
|
$142.3M
|
$42.0M
|
0
|
|
Relative Total Shareholder Return Goal (50% Weight)
|
Top 75%
|
50%
|
Top 25%
|
93%
|
0
|
|
|
|
|
|
|
|
Ascena Retail Group, Inc.
|
39
|
2019 Proxy Statement
|
|
|
|
|
(1)
|
Represents adjusted Net Income achievement for fiscal 2017 and relative TSR achievement for the performance period (i.e., July 31, 2016 through July 27, 2019).
|
As a result of the below threshold performance on the One Year Adjusted Net Income and relative TSR targets, no payouts were made for the FY19 LTIP. The One Year Adjusted Net Income is defined as the Company’s net income for its 2017 fiscal year (i.e., July 31, 2016 to July 29, 2017) as reported on an adjusted non-GAAP basis in the Company’s year-end earnings release for such fiscal year in the non-GAAP reconciliation table(s), and adjusted to eliminate the effects of any integration, restructuring or purchase price accounting expenses.
ADDITIONAL COMPENSATION ACTIONS
Sign-on Cash Bonus for Ms. Hufford
Ms. Hufford received a one-time cash bonus of $100,000 in accordance with her offer letter upon the commencement of her employment in October 2018. The Compensation Committee determined to provide this inducement award in cash in order to conserve shares during a period of depressed share price. If, prior to the first anniversary of her start date, Ms. Hufford resigns or is terminated due to a violation of company policy or conduct giving rise to immediate discharge, she has to repay the cash bonus within 90 days of the cessation of her employment.
Retention Cash Bonuses for Messrs. Giammatteo and Lamadrid in Fiscal 2019
On May 1, 2019, the Company entered into retention agreements with Messrs. Giammatteo and Lamadrid. Mr. Giammatteo was eligible to receive a retention bonus of up to $700,000 in cash, payable in two equal installments on August 31, 2019 and August 31, 2020. Mr. Lamadrid is eligible to receive a retention bonus of up to $550,000 in cash, payable in two equal installments on May 17, 2019 and August 31, 2020, subject to his continued employment on each payment date. Mr. Giammatteo resigned as CFO prior to August 31, 2019, and thus did not receive any payout under the retention bonus. Mr. Lamadrid received the first installment payment of his retention bonus on May 17, 2019. In accordance with the terms of his retention letter agreement, Mr. Lamadrid is required to repay retention bonus amounts previously paid to him if he resigns for any reason or is terminated by the Company (including due to violation of company policy or for cause) prior to the date that the August 31, 2019 retention bonus installment is paid.
TRANSFORMATION BONUS OPPORTUNITY
In March 2017, the Compensation Committee adopted the Transformation Bonus Program (“TBP”) under the Company’s Omnibus Incentive Plan. The TBP was introduced to enhance Company performance and create long-term stockholder value by motivating key executives to deliver significant cost savings consistent with the Company’s “Change for Growth” enterprise transformation program and by encouraging retention of those key executives. The Compensation Committee identified eight executives to participate in the TBP, including each of our NEOs (other than our former CEO, Mr. Jaffe) who were employed at the time the TBP was adopted. Under the TBP, participants were eligible to earn bonus awards payable in cash based upon the achievement of cost reduction targets (“Realized Savings”) from January 1, 2017 to the end of fiscal 2021.
Following the conclusion of fiscal 2018, the Compensation Committee determined that the Company had met 100% of its tranche 1 goal of $150 million in cumulative Realized Savings and 45% of its tranche 2 goal of $250 million in cumulative Realized Savings. This level of performance resulted in a preliminary earned value equal to 1.56x each participant’s salary in effect as of January 1, 2017. However, the 2018 earned values were reduced by 50% to equal 0.78x each participant’s salary as in effect as of January 1, 2017 since the Company did not achieve its threshold annual Operating Income level under the IC plan for fiscal 2018. Under the TBP, these earned values were scheduled to be payable within 60 days following the end of fiscal 2019.
In June 2019, management and the Compensation Committee reviewed the TBP’s objectives in the context of the ongoing business and leadership transitions described above. At that time, management determined that the TBP was no longer aligned with the Company’s re-oriented transformation strategy following the sale of maurices and announced wind-down of dressbarn and that the Realized Savings goals under the TBP were no longer consistent with the Company’s strategy. Accordingly, in June 2019, the Compensation Committee, on the recommendation of management, canceled the TBP payments earned with respect to fiscal 2018 performance (and payable within 60 days following the end of fiscal 2019).
Following the conclusion of fiscal 2019, Gary Muto, our CEO and the only remaining participant of the TBP following the changes to our leadership team over fiscal 2019, recommended that the Compensation Committee exercise negative discretion and terminate all other recently completed, ongoing, and future tranches of the TBP. As a result, the Compensation Committee terminated the TBP in October 2019, including any payments that would have otherwise been paid with respect to fiscal 2019 performance.
EXECUTIVE PERQUISITES
We generally do not offer significant perquisites to our NEOs and they represent a relatively small portion of the NEOs’ total compensation. The cost of perquisites for our NEOs is included in the “All Other Compensation” column of the Summary Compensation
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Ascena Retail Group, Inc.
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40
|
2019 Proxy Statement
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Table. Our NEOs participate in the Company’s broad-based health and welfare programs that are available to our full-time employees generally.
KEY NEO COMPENSATION PROGRAM CHANGES FOR FISCAL 2020
Recognizing the impact of significant changes to our business during fiscal 2019 and the impact of financial performance on our stock price, the Compensation Committee approved several significant compensation changes for fiscal 2020.
Annual Incentive Compensation Program
Following significant organizational changes with our portfolio of brands, the Compensation Committee, with input from SBCG, reviewed the design of our executive compensation programs with a focus on how the programs can better support our commitments to our customers, vendors, and stockholders. We have identified a return to profitability as a significant operational milestone for our business, and we believe that collaboration across our organization under a “one ascena” mindset is critical to achieving this objective and creating value for our stockholders. In order to simplify the design of our IC program and focus on or operational priorities, we have made the following changes to our IC program for fiscal 2020:
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•
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Measure 100% Consolidated Ascena Enterprise results for all NEOs, including our CEO, to strengthen our enterprise foundation and further encourage cross-brand collaboration. Returning to full Enterprise profitability is critical to delivering value to our stockholders;
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•
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Change the performance metric to Adjusted EBITDA, which continues our focus on profitability and also serves as a measure of cash generation, which is critical to honoring our commitments to customers, vendors, and stockholders;
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•
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Shift to an annual performance cycle to holistically measure our longer-term trending performance over the full year. The annual cycle will provide a simplified payout structure while providing the ability to still set goals that account for the seasonality of our business.
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Long-Term Incentive Program
At the end of fiscal 2019, the Compensation Committee, with input from SBCG, reviewed the long-term incentive program design in the context of shares available under the Omnibus Incentive Plan during a period of depressed share price and the 30% discount that has been applied to the NEOs’ long-term incentive grants in fiscal 2018 and 2019. Given the challenging current business environment, the Compensation Committee aimed to (i) simplify long-term incentive compensation; (ii) manage share usage; and (iii) tie value realization for the NEOs more closely to stockholder value creation. As a result, the Compensation Committee approved the following long-term incentive compensation program changes for fiscal 2020:
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•
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Eliminate the cash-settled performance-based cash LTIP in order to simplify the long-term incentive program and ensure that payouts under the program are directly tied to stock price and stockholder value; and
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•
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Grant a fixed number of stock options by level. In October 2019, Mr. Muto was granted 350,000 stock options and each of Mr. Lamadrid and Ms. Hufford was granted 100,000 stock options. The grant-date fair value of these awards will represent a significant decline from the grant-date fair value of “steady state” long-term incentive awards as well as the discounted long-term incentive awards received in fiscal 2019 given the drop in our share price. Ms. Teffner will not receive an equity award in fiscal 2020.
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The decision to grant a fixed number of stock options by level is intended to manage shares under our Omnibus Incentive Plan. In a depressed share price environment, it is critical that we control share usage and dilution as well as avoid granting potential windfall awards to our executives. Further, making the grant entirely in stock options is intended to align our NEOs’ realizable pay opportunities with Company performance, and provides additional upside to our NEOs if we achieve strong stock price performance and deliver value to our stockholders.
Dan Lamadrid’s Promotion to Chief Financial Officer Starting in Fiscal 2020
On July 25, 2019, the Company announced the promotion of Dan Lamadrid to CFO, succeeding Mr. Giammatteo, effective August 4, 2019.
Pursuant to the offer letter, Mr. Lamadrid will receive a base salary of $600,000 per year and will be eligible to participate in the Company’s performance-based incentive compensation program at a target level of 75% of Mr. Lamadrid’s base salary.
Pursuant to the offer letter, in October 2019, Mr. Lamadrid will receive, subject to his continued employment and approval by the Compensation Committee, a promotion grant of 100,000 time-vesting stock options (the “Time-Based Options”) and a grant of 50,000 performance-vesting stock options (the “Performance-Based Options”). Subject to Mr. Lamadrid’s continued employment, the Time-Based Options will vest in equal installments on the first and second anniversaries of the grant date. Subject to Mr. Lamadrid’s continued employment, the Performance-Based Options will be eligible to vest in accordance with the same vesting schedule that applies to Mr. Muto’s Promotion Grant.
We believe that the decisions for fiscal 2020 will continue to: (i) reduce stockholder dilution; and (ii) align our NEOs’ payout opportunities with the performance of our stock and our stockholder’s ability to realize value.
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MANAGEMENT OF COMPENSATION-RELATED RISK
Management and the Compensation Committee utilize various procedures to mitigate the probability of our compensation programs resulting in excessive risk-taking:
Risk Assessment — Each year, the Compensation Committee’s independent compensation consultant conducts a risk-assessment of our incentive programs. The assessment is presented to and reviewed by the Compensation Committee.
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•
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Our Board has reviewed and considered whether our compensation programs and policies create risks that are reasonably likely to have a material adverse effect on us. In that regard, we design our programs in a balanced and diversified manner while also creating significant, yet appropriate, incentives for strong performance based on our business and strategic plan.
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•
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In most cases, each component of our performance-based compensation program is subject to a limit on the cash paid or the number of shares delivered.
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•
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We believe that our compensation programs reflect a balance of short-term, long-term, guaranteed and performance based compensation in order not to encourage excessive risk-taking.
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•
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A significant portion of our compensation program includes performance-based compensation and equity-based compensation. We believe that this helps to ensure that our NEOs and other employees focus on the health of our business and the success of broad performance metrics that will deliver stockholder value over time and discourages excess risk-taking by our NEOs and other employees.
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•
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The Compensation Committee also evaluates on a regular basis our overall mix of equity-based incentive awards relative to cash-based incentive awards to align our executives’ incentives with stockholder interests and long-term value.
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Clawback Policy — Pursuant to the executive compensation clawback policy approved by the Compensation Committee in fiscal 2016, if the Board determines that any cash or non-cash incentive compensation (excluding time-based stock options) awarded to, or received by, an executive officer (each a “covered person”) was based on any financial results or operating metrics that were misstated, we will seek to recover from the covered person such compensation (in whole or in part) as the Board deems appropriate under the circumstances and as permitted by law.
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•
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If a restatement occurs, the Board will look at the incentive compensation paid or awarded in each fiscal year in the three-year period prior to the date the Company is required to prepare the restatement (any year in such three-year period, a “Look-Back Year”).
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•
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If the Board determines that incentive compensation has been paid or awarded to a covered person in a Look-Back Year, the Board may, in its sole discretion, regardless of fault, cancel or require repayment of all or a portion of any excess incentive compensation (i.e., the excess of the amount that would have been paid or awarded had such incentive compensation been calculated based on the restatement results).
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STOCK OWNERSHIP GUIDELINES FOR EXECUTIVE OFFICERS
Our Board believes it is important that our executive officers and other members of our leadership team have, and are recognized both internally and externally as having, long-term financial interests that are aligned with those of our stockholders. In fiscal 2012, pursuant to the recommendation of the Compensation Committee, the Board adopted stock ownership guidelines that apply to the CEO (the “Ownership Guidelines”). In June 2016, the Ownership Guidelines were amended and restated to, among other things, expand the group of persons subject to the Ownership Guidelines to include all members of our leadership team, including each of the Company’s executive officers and presidents of each of the Company’s brands. The table below sets forth the ownership guidelines applicable to the CEO and other NEOs.
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NEO
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Stock Ownership Guidelines
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CEO
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6x base salary
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All Other NEOs
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1x base salary
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The Stock Ownership Guidelines are effective as of September 21, 2011 for the CEO and June 2, 2016 for our other NEOs and the rest of our leadership team that is subject to the Ownership Guidelines (the “Effective Date”). The Ownership Guidelines authorize a transition period for members of our leadership team to achieve their required ownership level of five years from the later of the Effective Date and the date the individual commences employment at Ascena. As of August 4, 2019, all of our NEOs are still within the transition period to satisfy the Ownership Guidelines based upon the date of their commencement of employment.
Ownership for purposes of the Ownership Guidelines includes: (i) shares of our stock acquired on the open market or purchased through the exercise of stock options or settlement of any other type of equity award (such as restricted stock, RSUs, deferred stock or
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a deferred stock unit); (ii) vested equity awards (other than stock options or stock appreciation awards); (iii) vested shares of our stock allocated under any tax-qualified plan; and (iv) unvested RSUs (but excluding unvested performance-based equity awards). Shares held individually or jointly or by a “family member” (as defined in the securities laws which would include certain trusts, family partnerships and foundations) would count as “owned” by the individual. Stock option awards do not count towards the stock ownership requirement. The Ownership Guidelines are posted on the “investors” page of the Company’s website at www.ascenaretail.com, accessible through the “Corporate Governance” tab.
PROHIBITION ON HEDGING AND PLEDGING OF COMPANY STOCK
Under our Corporate Governance Guidelines, our directors and executive officers are prohibited from engaging in hedging or monetization transactions with respect to our stock, including through the use of financial instruments such as exchange funds, prepaid variable forwards, equity swaps, puts, calls, collars, forwards and other derivative instruments, or through the establishment of a short position in our securities. Additionally, our non-employee directors and executive officers are prohibited from holding our stock in a margin account or otherwise pledging our stock as collateral for a loan.
TAX DEDUCTIBILITY CONSIDERATIONS
As a general matter, the Compensation Committee reviews and considers the various tax and accounting implications of compensation vehicles that we utilize. With respect to accounting matters, the Compensation Committee examines the accounting cost associated with equity compensation in light of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718.
The Compensation Committee considers the impact of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Prior to the enactment of the Tax Cuts and Jobs Act (“TCJA”), Section 162(m) denied a corporate tax deduction for annual compensation exceeding $1,000,000 paid to the chief executive officer and the three other most highly compensated executive officers of a public company (for purposes of this section only “Covered Employees”), other than the chief financial officer, subject to an exception for compensation payable based on achievement of pre-established objective performance goals if certain requirements are met. Prior to the effective date of the TCJA, we generally endeavored to structure our performance-based incentive compensation for our NEOs to qualify as performance-based under Section 162(m) of the Code where it was reasonable to do so while meeting our compensation objectives, although the Board and the Compensation Committee reserved the authority to award non-deductible compensation in circumstances where doing so was deemed appropriate and in the best interests of the Company and its stockholders. In addition, it is possible that some compensation paid pursuant to certain equity awards may be non-deductible under Section 162(m) of the Code.
The TCJA eliminated the ability to rely on the performance-based compensation exception for amounts deductible effective for tax years beginning after December 31, 2017. In addition, under the legislation, the definition of “Covered Employees” was expanded to include any person who served as the chief (principal) financial officer. An employee who is a Covered Employee for a taxable year beginning after December 31, 2016, and any time during the fiscal year, will remain a Covered Employee for all future years. As a result, beginning in fiscal 2019, the Company may no longer take a deduction for any compensation paid to Covered Employees (i.e., our NEOs) in excess of $1,000,000, except to the extent that it is subject to a “written binding contract” in effect as of November 2, 2017 (“transition relief”) that is not later modified in any material respect. No assurance can be given that any compensation otherwise subject to a deduction limit will qualify for an exception under this transition rule.
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Ascena Retail Group, Inc.
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COMPENSATION COMMITTEE REPORT
The following report of the Compensation Committee does not constitute soliciting material and will not be deemed to be filed with the SEC under the Securities Act or the Exchange Act or incorporated by reference into any document so filed except to the extent that the Company specifically incorporates this Compensation Committee Report by reference therein.
The Compensation Committee has reviewed and discussed with management the above Compensation Discussion and Analysis. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
This report is provided by the following directors, who currently comprise the Compensation Committee.
Compensation Committee:
Linda Yaccarino, Chair
Kate Buggeln
Kay Krill
Carl Rubin
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SUMMARY COMPENSATION TABLE
The table below summarizes information concerning compensation for fiscal 2019 (which reflects 53 week), fiscal 2018 and fiscal 2017 (which reflects 53 weeks) for our Named Executive Officers (NEOs).
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Name
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Year
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Salary
($)(1)
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Bonus
($)(2)
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Stock Awards
($)(3)
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Option Awards
($)(4)
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Non-Equity Incentive Plan Compensation
($)(5)
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All Other Compensation
($)(5)
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Total
($)
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Gary Muto
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2019
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1,038,462
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—
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998,390
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908,820
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193,443
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60,826
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3,199,941
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CEO
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2018
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1,016,026
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—
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3,445,000
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350,000
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1,104,000
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33,275
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5,948,301
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Carrie W. Teffner
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2019
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261,538
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—
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363,288
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187,500
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—
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77,754
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890,080
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Interim Executive Chair of the Board
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Dan Lamadrid
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2019
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429,807
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275,000
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—
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25,232
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98,851
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12,584
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841,474
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EVP and Chief Financial Officer
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Wendy Hufford
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2019
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338,461
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340,000
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55,611
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54,128
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—
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—
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788,200
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SVP and General Counsel
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David Jaffe
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2019
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837,500
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—
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—
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544,920
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—
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586,764
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1,969,184
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Former CEO
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2018
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1,000,000
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—
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1,890,000
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611,100
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387,300
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67,951
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3,956,351
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2017
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1,000,000
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—
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4,644,308
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917,574
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—
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121,895
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6,683,777
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Robb Giammatteo
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2019
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603,846
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—
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—
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66,396
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69,640
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21,192
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761,074
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Former EVP and Chief Financial Officer
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2018
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500,000
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—
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187,500
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62,500
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487,450
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20,600
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1,258,050
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2017
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500,000
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100,000
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423,888
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83,754
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—
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31,461
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1,139,103
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Brian Lynch
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2019
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876,923
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—
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—
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221,320
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193,443
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658,602
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1,950,288
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Former President and
Chief Operating Officer
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2018
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998,846
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—
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3,445,000
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350,000
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1,064,938
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48,700
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5,907,484
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2017
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936,394
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—
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1,153,413
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222,745
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—
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107,754
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2,420,306
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(1)
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Amounts shown reflect the retention bonus paid to Mr. Lamadrid in FY19 and to Ms. Hufford for a sign on bonus ($100,000) and guaranteed FY19 Fall ($120,000) and Spring bonus ($120,000) paid at target. Amounts shown reflect the discretionary bonus paid for fiscal 2017 to Mr. Giammatteo.
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(2)
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For fiscal 2019 stock award grants to Mr. Muto and Ms. Teffner, the amount reflects the aggregate grant date fair value calculated in accordance with FASB ASC Topic 718 of (i) performance-based RSUs granted to Mr. Muto in connection with his promotion to CEO on May 1, 2019 (the “Muto Promotion RSU”), (ii) performance-based RSUs granted to Ms. Teffner in connection with her appointment as Interim Executive Chair of the Board on May 1, 2019 (the “Teffner Appointment RSU”) having an aggregate grant date fair value of $272,288, (iii) time-vested RSUs granted to Ms. Teffner in October 2018 in respect of her service as a non-employee director prior to her appointment as Interim Executive Chair of the Board (the “Teffner Director RSU”) having an aggregate grant date fair value of $91,000 and (iv) time-vested RSUs granted to Ms. Hufford in October 2018 (the “Hufford Annual RSU”). For awards granted in fiscal 2018 and fiscal 2017, the amounts in this column reflect the aggregate grant date fair value calculation in accordance with FASB ASC Topic 718. Assumptions used in the valuation of the Teffner Director RSU, the Hufford Annual RSU and the equity awards granted in fiscal 2018 and fiscal 2017 equity based awards are discussed in “Stock Based Compensation” in Note 17 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 3, 2019. The grant date fair value of the Muto Promotion RSU and the Teffner Appointment RSU were derived using a Monte Carlo valuation simulation method, which used the following assumptions:
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Grant Date
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May 1, 2019
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Remaining Performance Period
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3.00 years
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Grant Date Closing Price
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$1.18
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Compounded Risk-Free Interest Rate (3.00-yr)
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2.25%
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Historical Volatility (3.00-yr)
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74.22%
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Cost of Equity (Used for Derived Service Period Only)
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13.01%
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(3)
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Reflects the aggregate grant date fair value calculation in accordance with FASB ASC Topic 718. Assumptions used in the valuation of equity based awards are discussed in “Stock Based Compensation” in Note 17 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 3, 2019. For Mr. Muto, this includes the aggregate grant date fair value ($221,320) calculated in accordance with FASB ASC Topic 718 of stock options granted to Mr. Muto on October 3, 2018 in connection with the Company’s annual equity award grants (the “Muto Annual Option”), as well as the aggregate grant date fair value ($687,500) calculated in accordance with ASC Topic 718 of performance-based stock options granted to him in connection with his promotion to CEO on May 1, 2019 (the “Muto Promotion Option”). For Ms. Teffner, this includes the aggregate grant date fair value calculated in accordance with FASB ASC Topic 718 of performance-based stock options granted to her in connection with her appointment as Interim Executive Chair of the Board on May 1, 2019 (the “Teffner Appointment Option”). Assumptions used in the valuation of the Muto Annual Option and all other stock option awards to NEOs (other than the Muto Promotion Option and Teffner Appointment Option) are discussed in “Stock Based Compensation” in Note 17 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 3, 2019. The grant date fair value of the Muto Promotion Option and the Teffner Appointment Option were derived using a Monte Carlo valuation simulation method, which used the following assumptions:
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Grant Date
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May 1, 2019
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Remaining Performance Period
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3.00 years
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Grant Date Closing Price
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$1.18
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Exercise Price
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$1.17
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Contractual Term
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7.00 Years
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Compounded Risk-Free Interest Rate (7.00-yr)
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2.39%
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Historical Volatility (7.00-yr)
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56.41%
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Cost of Equity (Used for Derived Service Period Only)
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13.01%
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(4)
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The amounts shown for fiscal 2017, 2018 and 2019 represent amounts earned by each NEO in respect of the Company's seasonal IC programs in effect for each of the fiscal years. For fiscal 2019, the amounts include seasonal IC payments received by the NEOs for the fall season. None of the NEOs received a payout under the seasonal IC program for the spring season of fiscal 2019.(5) We have no defined benefit pension plans. All earnings in our non-tax qualified Executive Retirement Plans are at market values and are therefore omitted from the table.
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(5) A detailed breakdown of “All Other Compensation” for fiscal 2019 is provided in the table below.
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Ascena Retail Group, Inc.
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ALL OTHER COMPENSATION
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Name
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Contributions to Executive Officer’s Defined Contribution Plan Accounts
($)
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Contributions to Executive Officer’s Non-Qualified Deferred Compensation Plan Accounts ($)
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Personal Use of Company Car Service
($)(1)
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Severance Payments
($)(2)
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Non-Employee Director Fees Paid in Cash
($)(3)
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Total
($)
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Gary Muto
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11,000
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38,807
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11,019
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—
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—
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60,826
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Carrie W. Teffner
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—
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—
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—
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—
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77,754
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77,754
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Dan Lamadrid
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12,884
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—
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—
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—
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—
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12,884
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Wendy Hufford
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—
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—
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—
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—
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—
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—
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David Jaffe
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11,000
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58,365
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15,434
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494,187
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7,778
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586,764
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Robb Giammatteo
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11,000
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10,192
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—
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—
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—
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21,192
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Brian Lynch
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11,000
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55,138
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21,951
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570,513
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—
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658,602
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(1)
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Represents the aggregate incremental cost to the Company for personal use of Company car service and other transportation for commuting purposes.
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(2)
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For Mr. Jaffe, amounts in this column include cash severance payments totaling $115,384 paid to Mr. Jaffe through the end of fiscal 2019 pursuant to his separation agreement and $31,549 representing the value of accelerated RSUs realized by Mr. Jaffe as of his last date of employment. For Mr. Lynch, amounts in this column represent a lump sum payment of $416,667 paid to Mr. Lynch upon his termination of employment in accordance with his offer letter and cash severance payments totaling $153,846 paid to Mr. Lynch through the end of fiscal 2019 pursuant to his separation agreement.
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(3) Amounts in this column represent cash fees paid to Ms. Teffner and Mr. Jaffe for their service as non-employee directors during
fiscal 2019. Ms. Teffner received cash fees for her service as a non-employee director until her appointment as Interim Executive Chair of the Board on May 1, 2019. Mr. Jaffe received cash fees for his service as a non-employee director following his retirement as an employee of the Company on June 28, 2019.
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GRANTS OF PLAN BASED AWARDS IN FISCAL 2019
The following table provides information regarding the grants of plan-based awards made to the NEOs during fiscal 2019:
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Grant Date or Performance Period
|
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Estimated Future Payouts Under Non-Equity Incentive Plan Awards
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Estimated Future Payouts Under Equity Incentive Plan Awards
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All Other Stock Awards:
Number of Shares of Stock or Units
(#)(3)
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All Other Option Awards:
Number of Securities Underlying Options
(#)(3)
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Exercise or Base Price of Option Awards ($/Sh)(4)
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Grant Date Fair Value of stock and option awards Equity Awards ($)
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Name
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Plan*
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Threshold ($)
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Target
($)
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Max
($)
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Thres-hold
($)
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Target
($)
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Max
($)
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Gary Muto
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10/3/2018
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NQ
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124,337
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3.92
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221,320
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5/1/2019
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NQ
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2,750,000
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1.17
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687,500
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5/1/2019
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RSU
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|
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1,957,627
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998,390
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FY19
|
Omnibus Incentive Plan(1)
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375,000
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1,500,000
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3,000,000
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10/29/2018
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FY21 LTIP(2)
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750,000
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1,500,000
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3,000,000
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Carrie W. Teffner
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5/1/2019
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NQ
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750,000
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1.17
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187,500
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5/1/2019
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RSU
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|
|
|
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533,898
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|
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272,288
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10/22/2018
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RSU
|
|
|
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24,138
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|
|
91,000
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FY19
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Omnibus Incentive Plan(1)
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96,575
|
386,301
|
772,603
|
|
|
|
24,138
|
|
|
91,000
|
|
Dan Lamadrid
|
10/3/2018
|
NQ
|
|
|
|
|
|
|
|
14,175
|
3.92
|
25,232
|
|
|
FY19
|
Omnibus Incentive Plan(1)
|
63,750
|
255,000
|
510,000
|
|
|
|
|
|
|
|
|
|
10/29/2018
|
FY21 LTIP(2)
|
85,500
|
171,000
|
342,000
|
|
|
|
|
|
|
|
|
Wendy Hufford
|
10/3/2018
|
NQ
|
|
|
|
|
|
|
|
30,239
|
3.92
|
54,128
|
|
|
10/3/2018
|
RSU
|
|
|
|
|
|
|
13,731
|
|
|
55,610
|
|
|
FY19
|
Omnibus Incentive Plan(1)
|
|
|
480,000
|
|
|
|
|
|
|
|
|
|
10/29/2018
|
FY21 LTIP(2)
|
91,200
|
182,400
|
364,800
|
|
|
|
|
|
|
|
|
David Jaffe(5)
|
10/29/2018
|
NQ
|
|
|
|
|
|
|
|
311,383
|
3.83
|
544,920
|
|
|
FY19
|
Omnibus Incentive Plan(1)
|
375,000
|
1,500,000
|
3,000,000
|
|
|
|
|
|
|
|
|
|
10/29/2018
|
FY21 LTIP(2)
|
1,890,000
|
3,780,000
|
7,560,000
|
|
|
|
|
|
|
|
|
Robb Giammatteo(6)
|
10/3/2018
|
NQ
|
|
|
|
|
|
|
|
37,301
|
3.92
|
66,396
|
|
|
FY19
|
Omnibus Incentive Plan(1)
|
112,500
|
450,000
|
900,000
|
|
|
|
|
|
|
|
|
|
10/29/2018
|
FY21 LTIP(2)
|
225,000
|
450,000
|
900,000
|
|
|
|
|
|
|
|
|
Brian Lynch(7)
|
10/3/2018
|
NQ
|
|
|
|
|
|
|
|
124,337
|
3.92
|
221,320
|
|
|
FY19
|
Omnibus Incentive Plan(1)
|
312,500
|
1,250,000
|
2,500,000
|
|
|
|
|
|
|
|
|
|
10/29/2018
|
FY21 LTIP(2)
|
750,000
|
1,500,000
|
3,000,000
|
|
|
|
|
|
|
|
* Plan
Omnibus Incentive Plan = the Ascena Retail Group, Inc. 2016 Omnibus Incentive Plan
NQ = Non-qualified stock option (granted under the Omnibus Incentive Plan)
RSU = Restricted Stock Units (granted under the Omnibus Incentive Plan)
FY21 LTIP= 2021 3-Yr Long-term Incentive Plan (granted under the Omnibus Incentive Plan)
|
|
|
|
(1)
|
Amounts represents the range of annual cash incentive awards under the spring and fall IC programs the NEO was potentially entitled to receive based on the achievement of performance goals during fiscal 2019 under the Omnibus Incentive Plan. For Ms. Teffner, the amounts are pro-rated for the portion of fiscal 2019 that she was employed as Interim Executive Chair of the Board. In accordance with the terms of Ms. Hufford's offer letter, she was entitled to an amount equal to her target annual incentive for each
|
|
|
|
|
|
|
|
Ascena Retail Group, Inc.
|
48
|
2019 Proxy Statement
|
of the fall and spring seasons of fiscal 2019. See "Omnibus Incentive Plan" under the "Compensation Discussion and Analysis" for more information regarding the bonus targets under the Omnibus Incentive Plan.
|
|
|
|
(2)
|
Amounts represent the range of dollar values of the FY21 LTIP award that each eligible NEO is entitled to receive based on the achievement of performance goals established for the three year FY21 LTIP. See “Performance Based Long Term Incentive Awards” under the Compensation Discussion and Analysis” for more information regarding the bonus targets under the Omnibus Incentive Plan. If earned, these awards settle in cash.
|
|
|
|
|
(3)
|
Represents stock option and RSU awards made during fiscal 2019 pursuant to the Company’s annual equity grant program, as described above in the Compensation Discussion and Analysis under “Long-Term Incentive Compensation” and “Equity Awards Under the Company’s Omnibus Incentive Plan.” In addition to the annual equity grants, Mr. Muto and Ms. Teffner received performance-based stock options and performance-based RSUs with their Promotion Grant and Appointment Grant, respectively. For Ms. Teffner, the amount also includes RSUs granted with respect to her services as a non-employer director prior to her service as Interim Executive Chair of the Board.
|
(4) The exercise price of stock options is based on the average of the high and low prices of the Company’s common stock on the date
of grant.
|
|
|
|
(5)
|
Upon his retirement as an employee of the Company effective June 28, 2019, Mr. Jaffe satisfied the Total Years Test, and as a result, his outstanding stock option awards, including the stock options granted to him on October 29, 2018, will continue to vest in accordance with their terms. Upon his retirement, Mr. Jaffe forfeited the FY21 LTIP award granted to him on October 29, 2018.
|
|
|
|
|
(6)
|
Upon his departure form the Company effective August 31, 2019, Mr. Giammatteo forfeited the stock option award granted to him on October 3, 2018 and the FY21 LTIP award granted to him on October 28, 2018.
|
|
|
|
|
(7)
|
Upon his departure from the Company effective May 1, 2019, Mr. Lynch forfeited the stock option award granted to him on October
|
3, 2018 and the FY21 LTIP award granted to him on October 28, 2018.
|
|
|
|
|
|
|
Ascena Retail Group, Inc.
|
49
|
2019 Proxy Statement
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2019
The following table provides information relating to outstanding equity awards held by the NEOs at August 3, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name and Plan(1)
|
Grant Date
|
Number of Securities Underlying Unexercised Options Exercisable
(#)
|
Number of Securities Underlying Unexercised Options Unexercisable
(#)
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
|
Option Exercise Price
($)
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)(2)
|
Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)(3)
|
|
Gary Muto
|
|
|
|
|
|
|
|
|
|
|
|
|
NQ(4)
|
10/23/2015
|
142,518
|
|
|
12.80
|
10/23/2022
|
|
|
|
|
|
|
NQ(5)
|
9/21/2016
|
150,943
|
75,472
|
|
5.56
|
9/21/2023
|
|
|
|
|
|
|
NQ(6)
|
9/27/2017
|
180,412
|
180,413
|
|
2.37
|
9/27/2024
|
|
|
|
|
|
|
NQ(7)
|
10/3/2018
|
|
124,337
|
|
3.92
|
10/3/2025
|
|
|
|
|
|
|
NQ(8)
|
5/1/2019
|
|
|
2,750,000
|
1.17
|
5/1/2026
|
|
|
|
|
|
|
RSU(9)
|
9/29/2015
|
|
|
|
|
|
|
53,334
|
17,600
|
|
|
|
RSU(10)
|
9/21/2016
|
|
|
|
|
|
|
24,629
|
8,128
|
|
|
|
RSU(11)
|
9/27/2017
|
|
|
|
|
|
|
500,000
|
165,000
|
|
|
|
RSU(12)
|
5/1/2019
|
|
|
|
|
|
|
|
|
1,957,627
|
646,017
|
|
FY19 LTIP(13)
|
9/21/2016
|
|
|
|
|
|
|
|
|
|
687,500
|
|
FY20 LTIP(14)
|
9/27/2017
|
|
|
|
|
|
|
|
|
|
537,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrie W. Teffner
|
|
|
|
|
|
|
|
|
|
|
|
|
NQ(8)
|
5/1/2019
|
|
|
750,000
|
1.17
|
5/1/2026
|
|
|
|
|
|
|
RSU(15)
|
10/22/2018
|
|
|
|
|
|
|
24,138
|
7,965
|
|
|
|
RSU(12)
|
5/1/2019
|
|
|
|
|
|
|
|
|
533,898
|
176,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dan Lamadrid
|
|
|
|
|
|
|
|
|
|
|
|
|
NQ(16)
|
9/27/2017
|
18,900
|
37,801
|
|
2.37
|
9/27/2024
|
|
|
|
|
|
|
NQ(7)
|
10/3/2018
|
|
14,175
|
|
3.92
|
10/3/2025
|
|
|
|
|
|
|
RSU(17)
|
9/27/2017
|
|
|
|
|
|
|
14,844
|
4,899
|
|
|
|
FY19 LTIP(13)
|
9/27/2017
|
|
|
|
|
|
|
|
|
|
28,750
|
|
FY20 LTIP(14)
|
9/27/2017
|
|
|
|
|
|
|
|
|
|
42,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wendy Hufford
|
|
|
|
|
|
|
|
|
|
|
|
|
NQ(7)
|
10/3/2018
|
|
30,239
|
|
3.92
|
10/3/2025
|
|
|
|
|
|
|
RSU(18)
|
10/3/2018
|
|
|
|
|
|
|
13,731
|
4,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Jaffe
|
|
|
|
|
|
|
|
|
|
|
|
|
NQ(4)
|
9/24/2009
|
160,000
|
|
|
8.84
|
9/24/2019
|
|
|
|
|
|
|
NQ(4)
|
12/9/2009
|
300,000
|
|
|
15.00
|
9/26/2019
|
|
|
|
|
|
|
NQ(4)
|
9/23/2010
|
160,000
|
|
|
11.70
|
9/26/2019
|
|
|
|
|
|
|
NQ(4)
|
9/23/2010
|
150,000
|
|
|
15.00
|
9/26/2019
|
|
|
|
|
|
|
NQ(4)
|
3/9/2011
|
88,644
|
|
|
15.55
|
9/26/2019
|
|
|
|
|
|
|
NQ(4)
|
9/21/2011
|
160,000
|
|
|
13.14
|
9/26/2019
|
|
|
|
|
|
|
NQ(4)
|
9/20/2012
|
250,000
|
|
|
20.79
|
9/26/2019
|
|
|
|
|
|
|
NQ(4)
|
9/25/2013
|
375,000
|
|
|
19.91
|
9/26/2019
|
|
|
|
|
|
|
NQ(4)
|
9/23/2014
|
465,000
|
|
|
14.12
|
9/26/2019
|
|
|
|
|
|
|
NQ(4)
|
9/16/2015
|
299,288
|
|
|
12.39
|
9/26/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Ascena Retail Group, Inc.
|
50
|
2019 Proxy Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name and Plan(1)
|
Grant Date
|
Number of Securities Underlying Unexercised Options Exercisable
(#)
|
Number of Securities Underlying Unexercised Options Unexercisable
(#)
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
|
Option Exercise Price
($)
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)(2)
|
Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)(3)
|
|
NQ(5)
|
9/21/2016
|
316,951
|
158,476
|
|
5.56
|
6/28/2023
|
|
|
|
|
|
|
NQ(6)
|
9/28/2017
|
315,000
|
315,000
|
|
2.44
|
6/28/2023
|
|
|
|
|
|
|
NQ(19)
|
10/29/2018
|
|
311,383
|
|
3.83
|
6/28/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robb Giammatteo
|
|
|
|
|
|
|
|
|
|
|
|
|
NQ(4)
|
12/11/2013
|
10,000
|
|
|
20.41
|
12/13/2020
|
|
|
|
|
|
|
NQ(4)
|
9/23/2014
|
15,000
|
|
|
14.12
|
9/23/2021
|
|
|
|
|
|
|
NQ(4)
|
9/29/2015
|
17,779
|
|
|
13.48
|
9/29/2022
|
|
|
|
|
|
|
NQ(5)
|
9/21/2016
|
28,930
|
14,466
|
|
5.56
|
9/21/2023
|
|
|
|
|
|
|
NQ(6)
|
9/27/2017
|
32,216
|
32,217
|
|
2.37
|
9/27/2024
|
|
|
|
|
|
|
NQ(7)
|
10/3/2018
|
|
37,301
|
|
3.92
|
10/3/2025
|
|
|
|
|
|
|
RSU(10)
|
9/21/2016
|
|
|
|