UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934
(Amendment No.)

Check the appropriate box:

Payment of Filing Fee (Check all boxes that apply):

PRELIMINARY COPY SUBJECT TO COMPLETION DATED APRIL 21, 2022

May 11, 2022

Dear Shareholder:

On behalf of the Board of Directors and management, we wish to extend an invitation to you to attend our 2022 annual meeting of shareholders (the “Annual Meeting”) to be held on Thursday, June 23, 2022 at the Hyatt Regency Jacksonville Riverfront located at 225 East Coastline Drive, Jacksonville, Florida.  The Annual Meeting will begin at 9:00 a.m. EDT.

You will find information regarding the business to be conducted at the Annual Meeting in the Notice of Annual Meeting of Shareholders and Proxy Statement, including information you should consider when you vote your shares. As allowed by the rules of the Securities and Exchange Commission, we are furnishing this Proxy Statement, our 2021 Annual Report to Shareholders and our other proxy materials to our shareholders primarily via the Internet. This electronic process gives you fast, convenient access to the materials, diminishes the impact on the environment and reduces our printing and mailing costs. A paper copy of these materials can be requested using one of the methods described in the materials.

At the Annual Meeting, in addition to the matters described in the Notice of Annual Meeting of Shareholders and the Proxy Statement, I will be providing a report on the financial position of the Company and opening the floor for questions from shareholders.

The members of the Board of Directors and management look forward to your attendance.  However, whether or not you plan to attend personally, and regardless of the number of shares you own, representation of our shares is important.  We encourage you to vote your shares via the Internet, by telephone, or, if you received a paper copy of the proxy materials, by signing, dating and returning your proxy card or voting instruction form as soon as possible to ensure your shares are voted regardless of whether you attend the Annual Meeting.

Thank you for your ongoing support of and continued interest in Shoe Carnival.

Sincerely,

Mark J. Worden

President and Chief Executive Officer

SHOE CARNIVAL, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 23, 2022

The annual meeting of shareholders of Shoe Carnival, Inc. (the “Company,” “we,” “us” and “our”) will be held at the Hyatt Regency Jacksonville Riverfront located at 225 East Coastline Drive, Jacksonville, Florida *, on Thursday, June 23, 2022, at 9:00 a.m., EDT, for the following purposes:

(1)    To elect three directors to serve until the 2025 annual meeting of shareholders and until their successors are elected and have qualified, as set forth in the accompanying proxy statement;

(2)    To approve, in an advisory (non-binding) vote, the compensation paid to the Company’s named executive officers;

(3)    To ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the Company for fiscal 2022;

(4)    To approve amendments to our articles of incorporation to allow shareholders to amend our by-laws; and

(5)    To transact such other business as may properly come before the meeting, or any adjournment or postponement thereof.

All shareholders of record at the close of business on April 22, 2022 will be eligible to vote.

As allowed by the rules of the Securities and Exchange Commission (“SEC”), we are furnishing proxy materials to our shareholders primarily via the Internet.  Accordingly, on or about May 11, 2022, we mailed a majority of our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials and vote via the Internet, and mailed a printed copy of this proxy statement, a proxy card and our 2021 annual report to shareholders to our other shareholders.

Whether or not you plan to attend the meeting, your vote is important, and we urge you to vote promptly as described below and in the accompanying materials.

If a bank, broker or nominee holds your shares, please review the voting options provided by them on your voting instruction form and act accordingly.  For your vote to be counted, you will need to communicate your voting decisions to your bank, broker or nominee.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on June 23, 2022

The notice of annual meeting of shareholders, proxy statement, form of proxy card and 2021 annual report to shareholders are available at www.envisionreports.com/SCVL.

*We intend to hold our annual meeting in person. However, we are actively monitoring the COVID-19 pandemic, and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that governments may impose. In the event that holding our annual meeting in person or at the scheduled date, time or location is not possible or advisable, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication in a virtual meeting format, by issuing a press release and filing the press release as definitive additional soliciting materials with the Securities and Exchange Commission. If you are planning to attend our annual meeting, please monitor the “Proxy Information” section of our website at investors.shoecarnival.com/ financials/proxy-information prior to the meeting date for updated information regarding our annual meeting and the health and safety protocol for those attending.  As always, we encourage you to vote your shares prior to the annual meeting.  

TABLE OF CONTENTS

SHOE CARNIVAL, INC.
7500 East Columbia Street
Evansville, Indiana 47715

PROXY STATEMENT

Annual Meeting of Shareholders

June 23, 2022

Why am I receiving these proxy materials?

We are providing these proxy materials to you in connection with the solicitation by the Board of Directors (the “Board”) of Shoe Carnival, Inc. (the “Company,” “we,” “us” or “our”) for proxies to be voted at our annual meeting of shareholders and at any adjournment or postponement thereof.  We are holding this annual meeting at 9:00 a.m., EDT, on Thursday, June 23, 2022, at the Hyatt Regency Jacksonville Riverfront located at 225 East Coastline Drive, Jacksonville, Florida.  Directions to the annual meeting can be obtained by calling 812-867-4034.

We intend to hold our annual meeting in person. However, we are actively monitoring the COVID-19 pandemic, and we are sensitive to the public health and travel concerns our shareholders may have and the protocols that governments may impose. In the event that holding our annual meeting in person or at the scheduled date, time or location is not possible or advisable, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication in a virtual meeting format, by issuing a press release and filing the press release as definitive additional soliciting materials with the Securities and Exchange Commission (the “SEC”).  If you are planning to attend our annual meeting, please monitor the “Proxy Information” section of our website at investors.shoecarnival.com/financials/proxy-information prior to the meeting date for updated information regarding our annual meeting and the health and safety protocol for those attending.  As always, we encourage you to vote your shares prior to the annual meeting.

As allowed by the rules of the SEC, we are furnishing our proxy materials to our shareholders primarily via the Internet.  This electronic process diminishes the impact on the environment and reduces our printing and mailing costs. Accordingly, on or about May 11, 2022, we mailed a majority of our shareholders a Notice of Internet Availability of Proxy Materials (the “E-Proxy Notice”) containing instructions on how to access our proxy materials and vote via the Internet, and mailed a printed copy of this proxy statement, a proxy card and our 2021 annual report to shareholders to our other shareholders.  If you received an E-Proxy Notice and would like to receive a paper copy of our proxy materials, please follow the instructions included in the E-Proxy Notice. 

What proposals will be voted on at the annual meeting?

There are four proposals scheduled to be voted on at the annual meeting:

In addition, any other business that may properly come before the annual meeting will be considered and a vote will be taken.  The Board currently knows of no additional business that is to be brought before the meeting.  However, if other matters properly come before the meeting, the persons indicated on the enclosed proxy will vote that proxy based on their judgment on such matters.

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How does the Board recommend that I vote on the proposals?

The Board recommends that you vote your shares:

Who may vote?

You may vote at the annual meeting or by proxy if you were a shareholder of record at the close of business on April 22, 2022, the record date for the meeting.  As of April 22, 2022, there were __ shares of our common stock outstanding and entitled to vote at the annual meeting.  On all matters, including the election of directors, each shareholder will have one vote for each share held.

What constitutes a quorum for the annual meeting?

In order to constitute a quorum, a majority of the votes entitled to be cast at the annual meeting must be present either in person or by proxy.  Abstentions and broker non-votes will be considered as present for determining a quorum.

A proxy might indicate that not all shares represented by it are being voted for specific proposals.  For example, a broker cannot vote shares held in street name on certain proposals when the owner of those shares has not provided instructions on how he or she would like them to be voted, which are called “broker non-votes.”  The election of directors, the proposal relating to executive compensation and the proposal to amend our articles of incorporation to allow shareholders to amend our by-laws fall into this category.  Accordingly, if you hold your shares in street name and wish your shares to be voted on Proposals 1, 2 and 4, you must give your broker voting instructions.

What vote is required for each of the proposals to be approved?

For Proposal 1, to be elected, each director nominee must receive the affirmative vote of a majority of the votes cast with respect to the director, which for this proposal means that the number of shares voted “FOR” the director’s election must exceed the number of shares voted “AGAINST” the director’s election.  Shareholders will not be allowed to cumulate their votes in the election of the directors.  Abstentions and broker non-votes will not be considered as votes cast on this proposal and therefore will not affect the outcome of this proposal.

Proposal 2 will be approved if more shares are voted “FOR” the proposal than “AGAINST.”  Neither abstentions nor broker non-votes will affect the outcome of this proposal.

Proposal 3 will be approved if more shares are voted “FOR” the proposal than “AGAINST.”  Abstentions will not affect the outcome of this proposal.

Proposal 4 will be approved if more shares are voted “FOR” the proposal than “AGAINST.”  Neither abstentions nor broker non-votes will affect the outcome of this proposal.

How do I vote my shares?

Voting of Shares Registered Directly in the Name of the Shareholder.  If you hold shares of our common stock in your own name as the holder of record, you may vote your shares by using any of the following methods:

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Voting of Shares Registered in the Name of a Brokerage Firm or Bank.  If your shares of our common stock are held in “street name” through a brokerage account or by a bank or other nominee, you may vote your shares by using any of the following methods:

What if I return my proxy but do not provide voting instructions?

Your shares will be voted in accordance with your instructions as specified.  If you are a shareholder of record and you submit your proxy via the Internet, by telephone or by signing and returning your proxy card but do not give voting instructions, your shares will be voted “FOR” the election of each of the nominees listed under Proposal 1 and “FOR” Proposals 2, 3 and 4.  If any other matters properly come before the meeting, the persons indicated as proxies will vote that proxy based on their judgment on such matters.  If your shares are held in “street name” and you do not provide your broker, bank or other nominee with specific voting instructions, your broker, bank or other nominee may vote on Proposal 3, the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2022. However, your broker, bank or other nominee cannot vote your shares without specific instructions on Proposals 1, 2 and 4.  If your broker, bank or other nominee does not receive instructions from you on how to vote your shares on Proposal 1, 2 or 4, your broker, bank or other nominee will inform the inspector of election that it does not have the authority to vote on those proposals with respect to your shares.

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May I revoke my proxy?

If you have submitted your proxy via the Internet, by telephone or by mail, you may still revoke it at any time as long as it has not been exercised.  Your proxy may be revoked by giving written notice of revocation to us, delivering a subsequently dated proxy via the Internet, by phone or by mail or attending the annual meeting and voting in person.

How are votes counted?

Votes cast by proxy or in person at the annual meeting will be counted and certified by representatives of our transfer agent, Computershare Trust Company, N.A.

Where can I find the voting results of the annual meeting?

We will announce preliminary voting results at the annual meeting and publish the voting results in a Current Report on Form 8-K to be filed with the SEC within four business days of the annual meeting.

Who pays for the cost of proxy preparation and solicitation?

The cost of this solicitation of proxies will be borne by us.  Proxies may also be solicited personally or by telephone, facsimile transmission or other electronic means of communication by our employees acting without additional compensation.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Nominee and Director Information

Our Board is divided into three classes, and generally, each director holds office for a three-year term expiring at the annual meeting of shareholders held in the year that is three years after the director’s election and thereafter until his or her successor is elected and qualified.

At the annual meeting, our shareholders will be asked to elect three directors.  James A. Aschleman, Andrea R. Guthrie, and Clifton E. Sifford have been nominated by the Board, upon the recommendation of the Nominating and Corporate Governance Committee (the “Nominating Committee”), for election as directors for a term to expire at the 2025 annual meeting of shareholders and until their successors are elected and qualified. Mr. Aschleman has served as a director since 2012 and is Chair of the Compensation Committee, and also serves on the Audit Committee and Nominating Committee.  Ms. Guthrie has served as a director since 2015 and is Chair of the Nominating Committee, and also serves on the Compensation Committee and Audit Committee.  Mr. Sifford has served as a director since 2012 and is Vice Chairman of the Board.

To be elected, a director nominee must receive the affirmative vote of a majority of the votes cast, which means that the number of shares voted “for” the director’s election must exceed the number of shares voted “against” the director’s election.  This majority vote standard is in effect because this is an uncontested election (i.e., the number of nominees for director does not exceed the number of directors to be elected as of the record date of the annual meeting). For any contested election, the director would be elected by a plurality of the votes cast by the shares entitled to vote on the election of directors.  

If a director nominee who is serving as a director is not elected at the annual meeting, under Indiana law the director would continue to serve on the Board as a “holdover director.”  However, under our by-laws, any incumbent director who fails to be elected must immediately tender his or her resignation to the Board, subject to acceptance by the Board.  The Nominating Committee would then make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken.  The Board, taking into account the recommendation of the Nominating Committee, would determine the appropriate responsive action with respect to the tendered resignation.  The director who tenders his or her resignation may not participate in the Board’s decision.  If a nominee who was not already serving as a director is not elected at the annual meeting, under Indiana law that nominee would not become a director and would not serve on the Board as a “holdover director.”  The nominees for election as directors at the annual meeting are currently serving on the Board.

The Nominating Committee is responsible for recommending to the Board the director nominees that collectively have the complementary experience, qualifications, skills and attributes to guide us and function effectively as a Board.  Each nominee for election as a director is selected based on his or her experience, judgment, integrity, ability to make independent inquiries, an understanding of our business environment and a willingness to devote adequate time to Board duties.  The Nominating Committee's general view is to re-nominate an incumbent director who continues to satisfy the criteria for membership on the Board, continues to make important contributions to the Board and consents to continue his or her service on the Board.  However, as the Board and Nominating Committee continue to assess the long-term succession planning of the Board and the diversity of its collective skill set, incumbent directors may not be re-nominated in future years and the size of the Board is subject to change.  In fiscal 2021 and 2020, two total board members exited our Board as their terms expired, creating space for new directors who have enhanced our diversity.

Set forth below are the current nominees for director as well as our other continuing directors and information regarding each person's service as a director, business experience, director positions held currently or at any time in the last five years, and the experiences, qualifications, attributes or skills that caused the Nominating Committee and the Board to recommend the director nominees and to determine that the continuing directors should serve as members of our Board.  Unless otherwise indicated, the principal occupation of each director has been the same for the last five years. There is no family relationship between any of our directors or executive officers.

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The Board recommends a vote FOR each of the director nominees listed above.

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INFORMATION REGARDING THE BOARD OF

DIRECTORS AND COMMITTEES

The primary functions of our Board are:

Annual Meeting of Shareholders and Board Meetings

Our directors are expected attend the annual meeting of shareholders each year, and each of our directors then in office attended our 2021 annual meeting of shareholders.  During fiscal 2021, the Board held seven meetings.  Each of our directors attended at least 75% of the aggregate of the Board meetings and the meetings of the respective committees on which he or she served that were held during the period for which he or she was a director or committee member, other than Kent A. Kleeberger.  Mr. Kleeberger passed away in March 2022 and was not able to attend Board and committee meetings held in late fiscal 2021 due to health reasons.  Mr. Kleeberger was a director of the Company since 2003.  During his tenure on the Board, he had served as Lead Independent Director, Chair of the Audit Committee, and a member of the Compensation Committee and Nominating and Corporate Governance Committee.  

Board Leadership Structure

Our Corporate Governance Guidelines provide that the Board should be free to choose its Chairman based upon the Board’s view of what is in the best interests of the Company at a particular point in time, based on the recommendation of the Nominating Committee. Our Board does not have a policy on whether the role of Chairman and Chief Executive Officer should be separate or combined and, if separate, whether the Chairman should be selected from the non-employee directors or be an employee.

The Board has determined at this time that the separation of the offices of Chairman of the Board and Chief Executive Officer enhances Board independence and oversight.  Moreover, the separation of these positions allows the Chief Executive Officer to better focus on running the Company, enhancing shareholder value and expanding and strengthening our brand while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management.  

A majority of our directors are “independent directors” as defined by the listing rules of The Nasdaq Stock Market LLC (“Nasdaq”), and the Board has determined that such independent directors have no relationship with us that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director.  The independent directors are Mr. Aschleman, Ms. Guthrie, Ms. Randolph, and Mr. Tomm.  In addition, none of our directors are a party to any agreement or arrangement that would require disclosure pursuant to Nasdaq Rule 5250(b)(3).  To facilitate communication between our management and our non-employee directors, Mr. Tomm has been designated as the Lead Independent Director and presides at executive sessions of the non-employee directors.  Following an executive session, the Lead Independent Director discusses any issues or requested actions to be taken with the Chief Executive Officer.  The Lead Independent Director is also responsible for disseminating information to the rest of the Board in a timely manner, for scheduling and preparing agendas for meetings of our non-employee directors and, together with our Chairman of the Board, our Vice Chairman of the Board, and our President and Chief Executive Officer, for scheduling and preparing agendas for meetings of our Board.

The Board evaluates its leadership structure on an ongoing basis and may change it as circumstances warrant.  On March 18, 2021, we announced that the Board unanimously elected Mark J. Worden, our President and Chief Customer Officer, as our next President and Chief Executive Officer, effective September 30, 2021.  Mr. Worden succeeded Mr. Sifford, who stepped down as our Chief Executive Officer effective September 30, 2021, but continues to serve in the role of Vice Chairman of the Board and, in such role, is an employee and executive officer of the Company.  As part of this transition, Mr. Worden was appointed to the Board upon becoming our Chief Executive Officer.  

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Board Committees

The Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.  Each of the committees operates pursuant to a written charter, which can be viewed on our website at investors.shoecarnival.com/governance/governance-documents.

Audit Committee

The Audit Committee is solely responsible for the selection and hiring of the independent registered public accounting firm to audit our financial statements and records and pre-approves audit and permitted non-audit services undertaken by the independent registered public accounting firm.  It is also responsible for the review of our (i) financial reports, (ii) systems of internal controls regarding finance, accounting, legal compliance and ethics, (iii) auditing, accounting and financial reporting processes, and (iv) financial and enterprise risk exposures.  See “Board and Committee Role in Risk Oversight and ESG Initiatives” for additional information. The Audit Committee approves all related person transactions and meets with management and our independent registered public accounting firm as necessary.

The Audit Committee consists of three non-employee directors: Mr. Tomm (Chair), Mr. Aschleman, and Ms. Guthrie.  The Board and the Audit Committee believe the current member composition satisfies the Nasdaq Listing Rules governing audit committee composition, including the requirement that the audit committee members all be “independent” directors, as that term for audit committee members is defined in the Nasdaq Listing Rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Board has also determined that Mr. Tomm qualifies as an “audit committee financial expert” as defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002.  The Audit Committee met eight times during fiscal 2021.  

Compensation Committee

The Compensation Committee is responsible for evaluating and approving our director and officer compensation plans, policies and programs.  The Compensation Committee also administers our equity compensation and retirement plans and reviews the risks related to our compensation policies and programs.  For a detailed description of the roles of the Compensation Committee and management in setting compensation, see “Executive Compensation – Compensation Discussion and Analysis.”  

In January 2022, the Compensation Committee engaged Pearl Meyer, LLC (“Pearl Meyer”) as its compensation consultant.  Pearl Meyer has assisted the Compensation Committee in establishing a new peer group utilized by the Compensation Committee in setting fiscal 2022 Executive compensation and in reviewing our Executive and non-employee director compensation programs and practices, including a comparison to companies in our new peer group.  The Compensation Committee did not engage a compensation consultant to provide peer group data or to otherwise advise the Compensation Committee in setting Executive compensation for fiscal 2021.

Pearl Meyer reports directly to the Compensation Committee and does not provide any other services to the Company.  Prior to engaging Pearl Meyer, the Compensation Committee assessed the independence of Pearl Meyer pursuant to SEC rules and the Nasdaq Listing Rules and concluded that no conflict of interest exists.  

The Compensation Committee consists of four non-employee directors: Mr. Aschleman (Chair), Ms. Guthrie, Ms. Randolph and Mr. Tomm.  Each of the members meets the independence requirements of the Nasdaq Listing Rules and Rule 10C-1(b)(1) promulgated under the Exchange Act and is a “Non-Employee Director” as defined in Rule 16b-3 under the Exchange Act.  During fiscal 2021, none of the members were involved in a relationship requiring disclosure as an interlocking executive officer/director or as a former officer or employee.  In addition, none of the members were involved in a relationship requiring disclosure under Item 404(a) of Regulation S-K. The Compensation Committee held six meetings during fiscal 2021.

Nominating and Corporate Governance Committee

The Nominating Committee exercises a leadership role in shaping our corporate governance and recommends to the Board corporate governance principles on a number of topics, including (i) Board organization, membership and function, (ii) committee structure and membership, (iii) oversight of the annual performance evaluation of the Board, the committees of the Board and individual directors, and (iv) oversight of matters that involve our image, reputation

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and standing as a responsible corporate citizen, including our environmental, social and governance (“ESG”) related initiatives and activities.  As the nominating body of the Board, it also interviews, evaluates, nominates and recommends individuals for membership on the Board and on the various committees of the Board.  Nominees will be evaluated based on their experience, judgment, integrity, ability to make independent inquiries, understanding of our business environment and willingness to devote adequate time to Board duties.

Our Corporate Governance Guidelines provide that in identifying potential director nominees, our Nominating Committee is to take into account geographic, occupational, gender, race/ethnicity and age diversity and the board diversity objectives set forth in Nasdaq’s corporate governance requirements.  Broadly defined, diversity means diversity of viewpoints, background, experience and other demographics.  The Nominating Committee implements that policy, and assesses its effectiveness, by examining the diversity of all of the directors on the Board when it selects nominees for directors.  The diversity of directors is one of the factors that the Nominating Committee considers, along with the other selection criteria described above.

Director candidates may come to the attention of the Nominating Committee through current Board members, management, professional search firms or other persons. The Nominating Committee also will consider director candidates recommended by shareholders.  A shareholder who wishes to recommend a director candidate for consideration should send such recommendation to our Secretary at 7500 East Columbia Street, Evansville, Indiana 47715, who will forward it to the Nominating Committee.  Any such recommendation should include a description of the candidate's qualifications for Board service, the candidate's written consent to be considered for nomination and to serve if nominated and elected, and addresses and telephone numbers for contacting the shareholder and the candidate for more information.  A shareholder who wishes to nominate an individual as a director candidate at an annual meeting of shareholders, rather than recommend the individual to the Nominating Committee as a nominee, must comply with the advance notice requirements set forth in our by-laws, a copy of which may be obtained from our Secretary.  A summary of such requirements is provided in this proxy statement under “Shareholder Proposals for 2023 Annual Meeting.”  The Nominating Committee’s process for identifying and evaluating nominees for director will be the same whether the nominee is from the Nominating Committee’s search for a candidate or whether the nominee was recommended by a shareholder.

The Nominating Committee consists of three non-employee directors: Ms. Guthrie (Chair), Mr. Aschleman, and Ms. Randolph.  Each member is “independent,” as such term for nominating committee members is defined in the Nasdaq Listing Rules.  The Nominating Committee met four times during fiscal 2021.  

Board and Committee Role in Risk Oversight and ESG Initiatives

Our Board has ultimate oversight responsibility for our risk management process, and its various committees assist the full Board in fulfilling these oversight responsibilities in certain areas of risk.  In particular, the Audit Committee focuses on financial and enterprise risk exposures, including internal controls.  The Audit Committee discusses with management, internal audit, and the independent registered public accounting firm our major financial risk exposures, including risks related to fraud, liquidity and regulatory compliance, our policies with respect to risk assessment and risk management, and the steps management has taken to monitor and control such exposures.  The Board also periodically receives information about our risk management activities and the most significant risks we face, principally through Audit Committee reports to the Board and summary briefings provided by management.  Risks associated with technology are a particular focus, and our Information Technology department makes regular presentations to the Audit Committee and the Board regarding risks inherent in the information technology area, including cybersecurity risks.  The Audit Committee members, as well as each other Board member, also have access to our Chief Financial Officer and any other members of our management for discussions between meetings as warranted.

In alignment with our increasing effort and attention on ESG-related matters, the charter of the Nominating Committee was amended in December 2019 to include specific authority to assist the Board in its oversight of matters relating to our image, reputation, and standing as a responsible corporate citizen, including ESG initiatives and activities.  The Nominating Committee has embraced this role and the importance of sustainability relative to value creation.  Beginning in fiscal 2020, our management has provided regular progress reports on the development of our ESG strategy.  These reports address our human capital resources, including our diversity and inclusion initiatives, and initiatives that reduce our impact on the environment as well as the impact these critical areas might have on our public image.  

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With respect to this increased focus, management recommended and the Nominating Committee and full Board approved, subject to shareholder approval, the alignment of our governance protocols with best practices by providing our shareholders with the ability to amend our By-Laws (see Proposal 4 on page 44 of this proxy statement).  In addition, the Nominating Committee and full Board approved the appointment of Diane Randolph to our Board, which has increased the Board’s overall diversity.

The Compensation Committee regularly reviews the risks associated with how we compensate our executive officers and Board members. The Compensation Committee and full Board recently approved a compensation recoupment (or clawback) policy for our current and former executive officers.  As further noted on page 25 of this proxy statement, the policy applies to both accounting restatements and fraud or intentional misconduct resulting in a violation of law that causes significant financial or reputational harm to us.  For a description of the Compensation Committee’s role in overseeing compensation-related risks, see “Executive Compensation – Compensation-Related Risk Assessment” on page 27 of this proxy statement.  

Social and Environmental Responsibility

We recognize and embrace the importance of being a good corporate citizen who values our associates, meaningfully gives back to our communities and actively addresses the impact our operations have on the environment.  We understand that accomplishing these goals, along with delivering strong financial performance, drives long-term shareholder value.  

Culture and Human Capital Management

We have intentionally built an employee-centric, customer-focused organization designed to compete at the highest levels in the retail industry. Our commitment to, and investment in, a strong performance culture is paramount to our long-term sustainability and success.  Annually we survey a cross-section of employees on matters involving policy and procedure, organizational structure, operating style, commitment to hiring a competent workforce, and commitment to integrity and ethical values. Since 2004, responses to this survey have an average score of 4.2 to 4.3, with 5 being “strongly agree.” We surveyed 200 plus employees in fiscal 2021 and over 85% of responses to individual questions received were either an “agree” or “strongly agree” response.  We are proud of these results and the consistency of them.

Our employee-centric culture aided us during the COVID-19 pandemic. As non-essential retailers were required to close to the public, many of our competitors decided to furlough a significant number of employees. We, however, took a different route, finding innovative ways to keep our associates in full employment. This strategy positively impacted our associates, their families, and the communities we serve. In addition, this decision enabled us to rapidly reopen our stores in a safe manner as soon as we were permitted to do so.

Workforce Diversity and Inclusion

We serve a diverse customer base and seek diversity in and among our workforce in all areas, from our stores to our distribution center and our corporate office. We believe that the diversity of our workforce and management is a tremendous asset. We are firmly committed to providing equal opportunities in all aspects of employment and believe that all individuals should be treated with respect and dignity. Diversity is an important element in our ongoing annual mandatory training for all employees and managers. We do not tolerate harassment or unlawful discrimination of any kind.

We have clear policies encouraging strong relationships and protecting open lines of communication with management at every level. This, coupled with our non-retaliation policy, encourages employees to raise issues and seek immediate redress of those issues if they should arise.‌

We understand the value of diversity at all levels, whether of gender, race, ethnicity, background or experience. As of January 29, 2022, our workforce identified as 63% female and 37% male. Our broad-based leadership team, including those who manage and lead our stores and those who lead our Company, identified as 60% female and 40% male. With respect to ethnicity, our leadership team identified as 60% Caucasian and 40% non-Caucasian. The diversity of our leadership team trends with the diversity of our customer base, which based on recent data

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from our Shoe Perks customer loyalty program, approximates two-thirds Caucasian and one-third African American, Hispanic, or Asian and is more female than male.

In our corporate leadership roles (senior director-level employees through our Chief Executive Officer), the portion identifying as female has significantly increased over the last four years from 5% to 27%. Our human resources, marketing, and supply chain departments, as well as portions of our merchandising and technology departments, are led by those who identify as female.

At the Board level, we are also focused on increasing our diversity. Currently 50% of our non-employee Board members are female, up from 20% last year.  We are continuing to refresh our Board and assess long-term succession as well as the diversity of the Board’s collective skill set. In fiscal 2021 and 2020, two total board members exited our Board as their terms expired, creating space for new directors who have enhanced our diversity.

The following matrix summarizes the diversity of our Board as of April 22, 2022:

Retention

We believe our employee-centric culture not only supports higher levels of execution and performance, but also has led to increased retention of key talent. We take great pride in our store-level training programs that provide the foundation for long-term careers and our ability to promote from within. We are proud to support the first-time jobs for many of our associates where they gain workforce experiences that may grow into long-term careers with us, with others, or the skills to open their own business.

Currently, all of the general managers who operate our Shoe Carnival bannered stores and 90% of our district managers who oversee those general managers were trained, developed, and promoted from within. As of January 29, 2022, of our 28 district managers, 64% have been employed with us for more than 20 years. The average tenure of the general managers who operate our Shoe Carnival bannered stores was 13 years as of our fiscal 2021 year end.

Individuals who comprise our leadership team, which includes our named executive officers, vice presidents and senior director-level employees, have been employed by Shoe Carnival or Shoe Station for an average of 18 years.

Employee Benefits

Among the many ways we seek to serve our employees, we offer a complete range of benefits. These include competitive wages and incentives, including stock appreciation rights for mid-level managers; an employee stock purchase plan with a discount off the fair value of our common stock; employer-subsidized medical plans with dental and vision benefits; qualified and unqualified defined contribution plans with employer matching contributions; and merchandise discounts, among other benefits.

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Training and Code of Business Conduct and Ethics

We are dedicated to strengthening our culture and execution through ongoing training for all associates. We are uniquely focused on training within our store-level, customer-facing operations. Employees must obtain necessary certifications in order to be responsible for the keys to a store and eventually to become a general manager. Our broad-based training program also engages and educates our employees on the following key topics:

More information regarding our approach to conducting business responsibly, including our guidelines on discrimination and harassment, can be found in our Code of Ethics. Our Code of Ethics applies to all of our Board members, officers and employees, including our principal executive officer, our principal financial officer, and our principal accounting officer.

Our Code of Ethics is posted on our website at investors.shoecarnival.com/governance/governance-documents. We intend to disclose any amendments to the Code of Ethics by posting such amendments on our website. In addition, any waivers of the Code of Ethics for our Board members or executive officers will be disclosed in a Current Report on Form 8-K.  

Safety of our Employees and Security of our Data

We strive to provide our associates with a safe and healthy work environment. We measure OSHA recordable incidents to gauge the success of our safety protocol. During calendar year 2021, we recorded 51 non-COVID related OSHA recordable incidents, an approximate 20% reduction in incidents compared to three years ago.‌

Our strategies to address the ever-expanding complexities of protecting customer and employee data and executing our business strategies in an increasingly digital world continue to advance. Our technology department monitors and regularly tests compliance with our protocols, provides regular updates to employees and management, and conducts annual training.

Community and Nonprofit Support Initiatives

We are committed to helping build stronger communities by giving back to the areas where we do business.  Throughout our history, we have demonstrated that commitment through sponsored events, educational programs, charitable donations, and volunteerism all focused on assisting the communities where we operate.  We support both national and local chapters of nonprofit organizations such as the Two Ten Foundation, United Way, Junior Achievement, National CASA/GAL Association, Youth First, the American Red Cross, Ronald McDonald House Charities, and Habitat for Humanity.

In addition, every year each store is provided funds to support local nonprofits in communities where the store is located.  Further, corporate associates can request and receive an annual financial stipend to support family-related nonprofit initiatives important to their families.

Our stores serve as a platform for our customers to contribute to causes by providing the option for customers to “round up” transactions to the nearest dollar, among other initiatives.  Organizations that have benefited from our ability to perform this critical function include St. Jude’s Research Hospital, the Boys and Girls Club, the American Cancer Society, and the Toys for Tots Foundation.  

We are fully committed to accessibility for our disabled customers, whether at our physical stores or through our e-commerce platforms.  Our partnership with eSSENTIAL Accessibility allows all customers, regardless of ability, to shop via our website.  Through an assistive technology app, customers who have trouble typing, moving a mouse, gesturing or reading a screen are able to navigate our website using hands-free face tracking, voice activated controls, visual click assist, an on-screen keyboard, and speech-to-text.

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Environmental Initiatives

We seek to minimize our impact on the environment and reduce our carbon footprint by actively implementing environmentally-friendly processes throughout our business, including energy efficiency initiatives, waste minimization, and the use of recycled materials within our supply chain.  Our most significant areas of focus are fuel and packaging material used to deliver merchandise to our distribution center and stores; the HVAC and lighting systems in our stores, distribution center, and corporate office; and recycling methods.  

Fuel Consumption

Working closely with our dedicated transportation provider, we optimize the routing efficiency of trucks transporting product from our centralized distribution center to our retail stores.  Further fuel efficiency is achieved as we maximize the amount of product placed in each truck in a “load floor to ceiling” approach, resulting in fewer outbound shipments required to support our stores.  

Recycle and Reuse of Corrugated Boxes, Paper and Wooden Pallets  

In our distribution center, we have established a reuse and recycle program with the corrugated boxes we receive in shipments from vendors, reusing those boxes to ship product to our stores.  Where further reuse is not practicable, all corrugate across our operations is recycled.  In addition, we recycle wooden pallets when they are no longer useable.  This emphasis on responsible recycling of wood-based material extends across all of our operations, where a single stream recycling practice and policy has been established.

Energy Management  

We have several important initiatives underway that reflect our commitment to responsibly minimize our use of energy.

At our corporate headquarters, we have implemented a wide range of energy reduction initiatives that have lowered energy consumption by nearly 45%.  These include reconfiguration of the HVAC, installation of UV window coverings, and use of LED lighting and occupancy sensors.

At our distribution center, energy-efficient lighting systems are also installed with occupancy sensors. “Opportunity chargers” are in place, providing a more efficient battery-charging process for material handling equipment throughout the facility.

This focus on minimizing environmental impact extends to our retail stores.  Whenever a store is newly constructed or relocated, it is equipped with LED lighting and an Energy Management System (“EMS”).  The EMS monitors and regulates HVAC, lighting, and storefront sign lighting, reducing energy consumption by 25%.  This program currently extends to one-third of our stores.  As we remodel our stores, we intend to install LED lighting and an EMS at each location.  We expect to have another one-third of our stores equipped with EMS within the next 12 months.  For those stores awaiting future implementation of the EMS, specialized thermostats reduce overall energy use.

We are proud of our ongoing sustainability accomplishments and our foundation for future energy management across our real estate portfolio.  

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Proposal No. 2

Advisory Vote on the Compensation Paid to our Executives

We are providing shareholders the opportunity to cast advisory votes on named executive officer compensation as required by Section 14A of the Exchange Act. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on the compensation of our Executives.  The “Executives” are our President and Chief Executive Officer, our Senior Executive Vice President – Chief Financial and Administrative Officer and Treasurer, and our other executive officers (and former executive officers) named in the Summary Compensation Table on page 28 of this proxy statement.

This vote is not intended to address any specific item of compensation but rather the overall compensation of our Executives and the philosophy, policies and practices described in this proxy statement.  Accordingly, we are asking our shareholders to approve the following resolution at the annual meeting:

“RESOLVED, that the Company's shareholders approve, on an advisory basis, the compensation of the Executives, as disclosed in the Company's Proxy Statement for the 2022 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the other related disclosure.”

We encourage our shareholders to read the Compensation Discussion and Analysis section, along with the compensation tables and narrative discussion contained in this proxy statement.  We believe that our fiscal 2021 Executive compensation aligned with the objectives of our pay-for-performance compensation philosophy and with our financial performance and was effective in fulfilling the Compensation Committee’s compensation objectives.  

Although the outcome of this annual vote is not binding on the Company, our Board or our Compensation Committee, our Board and our Compensation Committee value the opinion of our shareholders and will consider the results of the vote on this proposal when setting future compensation for our Executives.

The Board recommends that our shareholders vote FOR the approval, on an advisory basis, of the compensation paid to our Executives, as disclosed in this proxy statement.

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Executive Compensation

Compensation Discussion and Analysis

Overview

The “Compensation Discussion and Analysis” section of this proxy statement is intended to help our shareholders understand our overall executive compensation programs, objectives, framework and elements and to discuss and analyze the compensation paid to our named executive officers shown in the Summary Compensation Table and in the other tables and narrative discussion that follow (the “Executives”), as determined and approved by the Compensation Committee (the “Committee”).  The Committee maintains the following executive compensation governance practices, each of which reinforces our compensation philosophy and objectives:

As a result of the planned and previously disclosed leadership transitions that occurred during fiscal 2021, our executive officers at the end of fiscal 2021 include:

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Target Pay Mix

Total compensation for our Executives is primarily comprised of a mix of base salary, annual cash incentives and long-term equity-based compensation.  The following charts show, with respect to our Chief Executive Officer and our other Executives, (i) base salary, (ii) target annual cash incentives under our Executive Incentive Compensation Plan (the “EICP”), and (iii) the grant date fair value of the PSUs and service-based RSUs granted to our Executives under our 2017 Equity Incentive Plan (the “2017 Equity Plan”), each as a percentage of total target direct compensation, for fiscal 2021:

Target CEO pay mix utilizes Mr. Worden’s annual base salary, as in effect on October 1, 2021, the date of his appointment as Chief Executive Officer, his target cash incentive payout percentage as in effect on October 1, 2021, and the grant date fair value of his long-term equity grant received on March 17, 2021.  The other Executives include Mr. Jackson, Mr. Scibetta, Mr. Chilton and Mr. Edwards.

Fiscal 2021 Financial Highlights

The following table highlights the year-over-year comparison of some of the key financial metrics that we use to evaluate our performance for the purposes of making compensation decisions. ($ amounts in thousands except per share data)  

Fiscal 2021 was a record-breaking year for the Company.  Results in fiscal 2021 were the highest in terms of net sales, gross profit, operating income and net income per diluted share in our history, surpassing any previous records by wide margins.  Our net income per diluted share of $5.42 exceeded the net income per diluted share earned during the last six fiscal years combined.  

Our fiscal 2021 financial results, along with our financial results from fiscal 2020, are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

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Compensation Philosophy and Objectives of the Overall Compensation Program

The Committee is responsible for establishing our compensation philosophy and strategies and has overall responsibility for approving and evaluating our executive compensation plans, policies and programs.  Regarding most compensation matters, including Executive compensation, our Chief Executive Officer provides recommendations to the Committee. However, the Committee is solely responsible for setting Executive compensation and does not delegate this function.

Our compensation philosophy is to closely align the interests of our Executives with the interests of our shareholders.  To accomplish this, we enact programs to attract, retain and motivate the finest talent possible at all levels of the organization.  Our compensation programs are designed to reward our Executives for the achievement of short-term and long-term strategic and operational goals and the attainment of increased total shareholder return.  We strive for our compensation program to be competitive, treat all employees fairly, consider the appropriate proportions of rewarding management and shareholders, and balance the perception of other stakeholders regarding the competitiveness and reasonableness of our Executive compensation.  The Committee does not have a specific policy for the allocation of compensation between short-term and long-term components or cash and equity-based compensation or a specific competitive pay positioning percentile.  Our compensation programs emphasize financial stability and liquidity while increasing net sales, operating income, and net income per share.  

Our compensation programs have the following characteristics:

The Committee, along with management, recognizes that the challenges faced by a retail organization require compensation programs to remain flexible to meet prevailing market conditions for key management roles.  Determination of appropriate compensation for our Executives is subjective because the Committee does not believe that a purely formula-driven approach to compensation can adequately take into account all of the various aspects that will lead to our long-term success.  We believe our management team continues to be driven to a higher level of performance by the pay-for-performance compensation philosophy embedded in our compensation programs.

Determination of Compensation Amounts

In fiscal 2017 and fiscal 2018, Frederic W. Cook & Co., Inc. (“FW Cook”) served as the Committee’s independent consultant on Executive and director compensation matters. The advice and recommendations provided by FW Cook, and the peer group established by the Committee with the advice of FW Cook, served as the foundation of the Committee’s approach to Executive compensation in setting fiscal 2021 awards, targets and vesting periods.  

In setting fiscal 2021 compensation, the Committee reviewed tally sheets for each Executive and other compensation information specific to each Executive.  The Committee also reviewed compensation information for individuals in comparable positions at the companies in our peer group, as set forth in the proxy statements for such companies available prior to the Committee’s meeting in March 2021, which was compiled by management at the Committee’s request.  Although the Committee reviewed the compensation data of the peer group companies in setting fiscal 2021 compensation, it did not benchmark the compensation of the Executives utilizing the peer group data.  

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The peer group utilized in setting fiscal 2021 compensation was the same peer group utilized in setting fiscal 2020 compensation, with the exception of removing RTW Retailwinds, Inc., which filed for bankruptcy.  This peer group of similarly sized retailers, with an emphasis on footwear retailers, includes the following companies:

Impact of Say-on-Pay Vote on our Executive Compensation Decisions in Fiscal 2021

At our 2021 annual meeting of shareholders, the annual say-on-pay vote received more than 95% shareholder approval.  As a result of this strong shareholder support, the Committee made no material changes to our Executive compensation programs as a result of the 2021 say-on-pay vote.  The Committee continues to work with our investor relations professionals to ensure that our Executive compensation programs and governance oversight protocols are responsive to our shareholders’ needs.

When determining how often to hold say-on-pay votes, the Board takes into account the strong preference for an annual vote expressed by our shareholders at our 2017 annual meeting.  Accordingly, the Board determined that we will hold say-on-pay votes on an annual basis until the next say-on-pay frequency vote, which will be held at our 2023 annual meeting.

Compensation Program Components, Why Each Component is Chosen, How Each Component Relates to Our Compensation Philosophy and Objectives and Fiscal 2021 Outcomes

On March 17, 2021, the Committee set Executive compensation levels for fiscal 2021, taking into account the planned successions and promotions that occurred during fiscal 2021. The Committee completed its review and approval of the fiscal 2021 corporate goals and objectives relevant to Executive compensation, evaluated each Executive’s individual performance as well as their collective performance in light of the prior year internal goals and the impact of the COVID-19 pandemic on our business and operating results, and set Executive compensation for fiscal 2021 based on this evaluation.  

Base Salary

Base salary provides for fixed compensation and rewards the core competencies of each Executive relative to job responsibilities, skill set, industry experience, tenure and individual performance.  The Committee also considers the Company’s overall performance and peer group data for comparable positions when setting base salaries.  Base salary serves as the base amount from which other compensation elements are determined, such as target annual cash incentives.  

The fiscal 2021 base salary for each Executive was approved as follows:

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Annual Cash Incentives under the EICP

The EICP is a performance-based cash incentive program, which is designed to reward members of our management team, including our Executives, for meeting financial goals.  Performance targets may be based on one or more specified business criteria and performance periods may be for one or more full fiscal years or for a spring or fall season.    

On March 17, 2021, the Committee established the performance criteria and targets for a cash bonus that all of our officers, including the Executives, could earn under the EICP based on our operating income for fiscal 2021, calculated in accordance with U.S. generally accepted accounting principles (“Operating Income”).  At that time, the Committee also established the threshold, target and maximum performance levels, with payout for performance between threshold and target and between target and maximum Operating Income to be interpolated.

The Operating Income business criteria was first selected by the Committee in 2017, and after considering our current business strategy, the Committee determined that using Operating Income remained appropriate for evaluating our performance for fiscal 2021.  

When setting the threshold, target and maximum performance levels, the Committee utilized financial projections prepared by management.  These projections incorporated various assumptions related to targeted comparable store sales, gross profit, new store openings, store closings and selling, general and administrative expense levels.  These projections also incorporated known risk factors inherent with the economic retail climate and reflected both the challenges and opportunities facing the Company.  Such uncertainties specifically considered in March 2021 when the performance criteria and performance targets were set included the lingering and unknown effects of the COVID-19 pandemic, emerging supply chain disruption, and emerging direct-to-consumer initiatives by certain of our vendors.

Given these projections and uncertainties, the Committee determined that the target Operating Income for fiscal year 2021 should be set at 246% of our fiscal 2020 Operating Income, which had been significantly impacted by the COVID-19 pandemic.  Upon the attainment of target Operating Income for fiscal 2021, or $53.9 million, each Executive would earn the target bonus.  

The following table sets forth the percentage of salary each Executive could earn based upon the attainment of the various levels of Operating Income in fiscal 2021, and the resulting EICP payouts:

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Additional Bonuses

No discretionary bonuses were awarded by the Committee to Executives during fiscal 2021.

Long-Term Equity-Based Incentives under the 2017 Equity Plan

Equity compensation is an important element in the overall compensation of our Executives and other key employees. These awards vest over time and/or upon the attainment of performance measures, help to retain Executives and encourage them to manage through difficult periods and to improve our long-term performance. Since June 2017, long-term equity-based incentive awards have been granted pursuant to the 2017 Equity Plan, at the discretion of the Committee.  

On March 17, 2021, the Committee granted a combination of PSUs and service-based RSUs as equity-based incentive compensation to members of our management, including our Executives.  The Committee determined that for Messrs. Worden, Jackson, Scibetta, Chilton and Sifford, approximately 75% of the total target dollar value of the equity awards granted to them would be PSUs and approximately 25% would be service-based RSUs.  For Mr. Edwards approximately 67% of the total target dollar value of the equity awards granted to him were PSUs and approximately 33% were service-based RSUs.  The target number of PSUs and the service-based RSUs granted to our Executives were as follows (as adjusted for the two-for-one stock split that occurred on July 19, 2021):

PSUs

The Committee determined to use net income per diluted share as the performance measure for the PSUs.  Given the continued volatility and uncertainty in the retail industry, the Committee decided to use fiscal 2021 as the measurement period. After taking into consideration the potential dilutive effect of the PSUs on our shareholders, the Committee authorized a range of goals at threshold, target, and maximum levels of performance, and set the percentage of the number of PSUs that may be earned at 25% for threshold performance and at 125% for maximum performance.

The net income per diluted share target of $1.41 was set by the Committee at approximately 250% of the net income per diluted share earned in fiscal 2020 (which was impacted by the COVID-19 pandemic). The financial projections and related risk factors considered by the Committee when establishing the performance criteria and range of potential outcomes for the PSUs were the same as those used in its determination of annual cash incentives under the EICP.  

The Committee authorized that a payout for performance between threshold and target and between target and maximum net income per diluted share would be interpolated.  Performance below the threshold level would result in forfeiture of all PSUs and any dividend equivalents accrued on such PSUs.

With respect to the issuance of the PSUs, the following were consistent with past practice: 1) the use of net income per diluted share as the performance metric; 2) the use of a one fiscal-year performance period; 3) the range of payout percentages; and 4) the use of interpolation.  

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The following table sets forth the percentage of target PSUs each Executive would receive based upon the attainment of the various levels of fiscal 2021 net income per diluted share and the resulting PSU award payout:

Also consistent with past practice, one-half of the PSUs (and any associated accrued dividend equivalents) that were determined by the Committee to be earned based on our net income per diluted share for fiscal 2021 vested on March 31, 2022 and the remaining one-half vest on March 31, 2023, provided that the Executive maintains continuous service with us through such date.

RSUs

The service-based RSUs granted on March 17, 2021 to Messrs. Worden, Jackson, Scibetta and Sifford vest over three years, with one-third vesting on each of the following dates:  March 31, 2022, March 31, 2023 and March 31, 2024, provided that the Executive maintains continuous service with us through such dates.  The Committee moved to a three-year vesting period for our Executives in fiscal 2020 and determined to keep this best practice going forward.  As a result of their promotions during the fiscal year, the service-based awards granted to Messrs. Chilton and Edwards have a different vesting period and cliff vest on March 31, 2023.

Treatment of Dividend Equivalents

For any cash dividends that we pay on the shares of our common stock while the PSUs and RSUs are outstanding and unvested, as of each dividend payment date, a dollar amount of dividend equivalents is credited to the respective Executive’s account.  If the PSUs are earned, and when the PSUs and RSUs vest, the amount of the accrued dividend equivalents is paid in cash to the Executives.

Aggregate Size of the Long-Term Equity Incentive Awards

In approving equity awards granted to all participants for fiscal 2021, which includes the Executives and other members of management, the Committee considered the dilutive effect of the proposed grant and determined that the total number of shares issued be approximately 0.75% of the then outstanding shares (at the target level of performance for the PSUs).  Recommendation of the allocation of shares amongst members of management was made based on the individual’s potential for making significant contributions in the future and the relative importance of the individual’s position to others in our organization.

Other Benefits

We provide the Executives with health and welfare programs, a 401(k) retirement plan and employee benefit plans, programs and arrangements generally available to all employees.  We also provide the Executives, along with all of our other officers, other executive benefit programs and perquisites in order to provide a competitive executive compensation program and to foster executive retention, including an executive life insurance program, an executive long-term disability program, additional medical benefits and a nonqualified deferred compensation plan. In addition, we provide for an automobile allowance for certain Executives and our Chief Executive Officer is eligible for limited personal utilization of the Company-provided aircraft.  These other executive benefit programs and perquisites were not changed from fiscal 2020. On October 1, 2021, Mr. Sifford began receiving a monthly stipend of $2,957 for his service as Vice Chairman of the Board.  Details of our perquisites are contained in footnote 6 to the Summary Compensation Table.  

Compensation Decisions Impacting Timothy T. Baker, our former Chief Retail Operations Officer

As a result of Mr. Baker’s planned departure from the Company, at its meeting on March 17, 2021, the Committee approved no base salary increase for Mr. Baker, determined he would not participate in the EICP for fiscal 2021, and granted no equity awards to him in fiscal 2021 under the 2017 Equity Plan. 

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Decisions Regarding our Executive Compensation Programs for Fiscal 2022

In January 2022, the Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) to serve as its independent compensation consultant.  Pearl Meyer advised the Committee with respect to the peer group utilized in setting Executive compensation and the design and structure of our annual cash incentive program and our long-term equity-based incentive compensation program, including a comparison of such programs to companies in the new peer group.  

With the assistance of Pearl Meyer, the Committee approved the following new peer group for fiscal 2022:

On March 9, 2022, the Committee approved our Executive compensation for fiscal 2022 after taking into consideration Pearl Meyer’s advice and recommendations. Material decisions regarding our compensation programs effective for fiscal 2022 include the following:

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Recoupment Policy

On March 10, 2022, the Board, based on the recommendation of the Committee, adopted a policy providing for the recoupment of any annual or long-term incentive compensation, including cash-based or equity-based compensation, awarded to our “officers,” as defined in Section 16a-1(f) of the Exchange Act, which includes all of our Executives. The policy applies to an accounting restatement due to material noncompliance with any financial reporting requirements. To the extent deemed appropriate by the Committee, the Company will seek to recover or cancel the amounts by which a current or former Executive’s incentive compensation that was awarded, vested or paid during a three-fiscal-year lookback period exceeded the amount that would have been awarded, vested or paid based on the restated financial results.  The policy also applies to fraud or intentional misconduct committed by a current or former Executive that results in a violation of law and that causes significant financial or reputational harm to the Company.  To the extent deemed appropriate by the Committee, the Company will seek to recover or cancel an Executive’s incentive compensation that is awarded, vested or paid, is scheduled to be vested or paid or is currently in a performance measurement period.  The time period for such recoupment includes the fiscal year in which the fraud or illegal misconduct occurred, the three fiscal years preceding such fiscal year and any fiscal years subsequent to such fiscal year.  

In addition to our internal policy, the Sarbanes-Oxley Act of 2002 subjects our Chief Executive Officer and our Chief Financial Officer to forfeiture of incentive compensation and profits from the sale of stock in the event of an accounting restatement associated with non-compliance, as a result of misconduct, with any financial reporting requirement under the securities laws.  

Termination and Change in Control Arrangements

We have entered into an employment and noncompetition agreement with each of Messrs. Worden, Jackson, Scibetta and Chilton, which specifies various payments to be made to these Executives in the event that employment is terminated, including upon a qualifying termination following a change in control. We believe the severance benefits payable under these agreements are competitive with general industry practices and that these agreements serve to ensure the continued dedication of the Executive team and minimize the likelihood of the transfer of trade secrets to our direct competitors. 

We have not utilized an “excise tax gross-up” provision in our employment agreements for some time and have no intention of reintroducing one.  The employment agreements with our Executives state that, in the event of an “excess parachute payment,” the aggregate payments and benefits otherwise constituting a parachute payment may be reduced in order to eliminate the impact of the excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), if such reduction would result in a higher net payment to the Executive.  

Mr. Sifford’s employment and noncompetition agreement with the Company was mutually terminated effective September 30, 2021.  A letter agreement entered between Mr. Sifford and the Company on September 30, 2021 does not provide for any payments upon his termination or upon a change in control, but does contain non-competition, non-solicitation and non-disparagement provisions to which Mr. Sifford is subject during the term of the letter agreement and for 12 months after the termination of his employment with the Company for any reason, as well as customary confidentiality provisions.

Further information on our termination and change in control arrangements is contained under the section “Termination and Change in Control Arrangements” beginning on page 34 of this proxy statement.

Stock Ownership Guidelines

Under our stock ownership guidelines, our Chairman of the Board, our Vice Chairman and our Chief Executive Officer are each required to own shares valued at three times their annual base salary, with all other executive officers required to own shares valued at two times their annual base salary.  Unvested and vested shares of restricted stock, RSUs or PSUs awarded as a new hire inducement are not counted toward the ownership requirements except for the Chief Executive Officer, who can elect to have such inducement award count toward the requirements.

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Unless otherwise determined by the Committee, until an executive officer has reached the ownership requirement, he or she must retain 50% of the net-after tax shares received upon the exercise, vesting or settlement of any form of equity-based compensation award. The value of stock holdings is determined based on the average daily closing price of our common stock during the 30-day period ending on the date of valuation determination.  

The Committee is responsible for monitoring the application of the stock ownership guidelines and evaluating whether each executive officer has met his or her ownership goal annually.  The Committee reviewed the current ownership valuation for each of our executive officers at its March 2022 meeting, using a valuation date of January 29, 2022, our fiscal 2021 year end.  Of our executive officers, Messrs. Weaver, Sifford, Jackson, and Scibetta met the ownership requirements, as amended, as of that valuation date.  

Policy on Hedging and Pledging of Common Stock

Pursuant to our Corporate Governance Guidelines, our directors and executive officers are prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan.  In addition, our directors and executive officers are prohibited from (a) purchasing any financial instruments, or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company securities that such individual holds, directly or indirectly; and (b) conducting short sales of Company securities. This restriction does not preclude our directors and executive officers from engaging in general portfolio diversification or investing in broad-based index funds.

Other Compensation-Related Matters

Section 409A of the Internal Revenue Code provides certain requirements for deferred compensation arrangements.  Those requirements, among other things, limit flexibility with respect to the time and form of payment of deferred compensation.  We made modifications to our plans and our employment and noncompetition agreements with our Executives such that payments or awards under those arrangements either are intended to not constitute “deferred compensation” for Section 409A purposes (and will thereby be exempt from Section 409A’s requirements) or, if they constitute “deferred compensation,” are intended to comply with the Section 409A statutory provisions and final regulations.

Compensation Committee Report

We have reviewed and discussed with Company management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K under the Exchange Act.  Based on the review and discussion referred to above, we recommended to the Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022 and our proxy statement for the 2022 annual meeting of shareholders for filing under the Exchange Act.

Compensation Committee

James A. Aschleman (Chair)

Andrea R. Guthrie

Diane Randolph

Charles B. Tomm

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Compensation-Related Risk Assessment

In March 2022, our Compensation Committee reviewed our compensation policies and practices for all employees, including our Executives, and the risks that could arise from our compensation policies and practices.  As part of the Compensation Committee’s review, it noted the following factors that reduce the likelihood of excessive risk-taking:

Some of our non-executive employees are eligible to receive bonuses and equity awards.  With respect to the non-executive officer employees who receive bonus awards or performance-based equity awards, the performance criteria and targets are not unreasonable or clearly unattainable without excessive risk-taking.  For those non-executive employees who are eligible to receive service-based equity awards, the equity awards typically vest in full after two years or, in the case of the service-based RSUs granted in fiscal 2020 and fiscal 2022, one-third after two years and two-thirds after three years.

Based on these factors, the Compensation Committee believes that our compensation policies and practices encourage behaviors that are aligned with the Company’s long-term interests, and that any short-term incentives do not make up a significant portion of compensation and do not encourage our employees to take risks for short-term gain.  As a result, the Compensation Committee determined that any risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

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Summary Compensation Table

The following table sets forth a summary of the compensation paid by us for services rendered in all capacities to us by each of our Executives for fiscal 2021 and, as applicable, fiscal 2020 and fiscal 2019.

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Grants of Plan-Based Awards

The following table sets forth information with respect to the non-equity and equity grants of plan-based awards made during the last fiscal year to each Executive.

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Outstanding Equity Awards at Fiscal Year End

The following table sets forth information with respect to the outstanding equity awards for each Executive at the end of the fiscal year ended January 29, 2022, as adjusted for the two-for-one stock split completed on July 19, 2021.

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Option Exercises and Stock Vested

The following table sets forth for each Executive information with respect to the value realized upon the vesting of stock and stock units during the fiscal year ended January 29, 2022.

Equity Compensation Plan Information

The following table sets forth information regarding outstanding grants and shares available for grant under our existing equity compensation plans, including our 2017 Equity Plan and our Employee Stock Purchase Plan.  All information is as of January 29, 2022.

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Equity Based Compensation – Narrative Discussion

On March 22, 2017, our Board of Directors approved the 2017 Equity Plan, subject to shareholder approval, and on June 13, 2017, our shareholders approved the 2017 Equity Plan.  Upon approval of the 2017 Equity Plan by our shareholders, no further awards were permitted to be made under any predecessor plans. The Compensation Committee administers and grants equity incentive awards under the 2017 Equity Plan. The 2017 Equity Plan provides for the grant of incentive awards in the form of stock units, restricted stock, stock appreciation rights (“SARs”), stock options, and other equity-based awards to our employees, consultants, advisors and non-employee directors.  A maximum of 2,000,000 shares of our common stock are available for issuance under the 2017 Equity Plan, as adjusted for the 2-for-1 stock split that occurred in July 2021. Any shares of our common stock subject to an award under the 2017 Equity Plan, or to an award granted under a predecessor plan that was outstanding when the 2017 Equity Plan was approved, that expires, is canceled or forfeited, or is settled for cash will, to the extent of such cancellation, forfeiture, expiration or cash settlement, automatically become available for future awards under the 2017 Equity Plan. However, any shares tendered or withheld to pay the exercise price of an option award or to satisfy a tax withholding obligation in connection with any award, any shares repurchased by us using option exercise proceeds and any shares subject to a SAR award that are not issued in connection with the stock settlement of the SAR award on its exercise may not be used again for future awards under the 2017 Equity Plan. Each share of common stock that again becomes available for awards will correspondingly increase the share reserve by the same number of shares by which the share reserve was decreased upon the grant of the applicable award.

The 2017 Equity Plan also provides that participants receiving awards under the plan must adhere to certain confidentiality and non-solicitation terms set forth in the plan. If a participant violates any of the confidentiality, non-solicitation terms or other restrictive covenant obligations set forth in the 2017 Equity Plan or otherwise, any unvested equity awards will automatically be forfeited and canceled, and we have the sole discretion to claw back any value received by the participant from any restricted stock, stock units or other equity-based awards that vested or any options or SARs that were exercised within one year of the time of the violation.

Nonqualified Deferred Compensation

The following table sets forth, for each Executive that has chosen to participate in our nonqualified deferred compensation plan, information on the nonqualified deferred compensation plan with respect to deferrals, our match, earnings and distributions made during fiscal 2021, along with the ending account balance at January 29, 2022.  Mr. Worden has chosen not to participate in this plan.

Non-Equity Based Compensation – Narrative Discussion

The Pension Benefits Table has been excluded, as we do not have a defined benefit plan.  On February 24, 1994, our Board approved the Shoe Carnival Retirement Savings Plan.  The primary savings mechanism is a 401(k) plan.  Further information regarding the Shoe Carnival Retirement Savings Plan can be found in Note 12 of the Notes to

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Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

In fiscal 2000, we established a nonqualified deferred compensation plan for highly compensated employees who, due to Internal Revenue Service limitations, cannot defer an adequate level of replacement income for their retirement planning.

Features of the plan include:

Termination and Change in Control Arrangements

We have entered into employment and noncompetition agreements with certain of our Executives.  Mr. Worden’s amended and restated agreement is dated October 1, 2021; Mr. Jackson’s agreement is dated December 11, 2008, and was amended on April 5, 2021; Mr. Scibetta’s agreement is dated December 4, 2012; Mr. Chilton’s agreement is dated April 4, 2021.  The agreement with each Executive, as amended, is similar in form and content; however, payments can vary by Executive and the nature of the termination.  None of the agreements with our Executives obligate the Company to pay the Executives an excise tax gross-up payment upon a change in control.  

The terms of the agreements for Mr. Jackson and Mr. Scibetta are through January 31, 2023; the term of Mr. Chilton’s agreement is through April 3, 2023; and the term of Mr. Worden’s agreement is through September 30, 2024 (such terms, including any extension, are referred to as the “Terms”).  The agreements are subject to early termination as provided in the agreements.  The agreements shall be renewed automatically for successive terms of one year each unless either party provides written notice of non-renewal to the other party not more than 90 days and not less than 30 days before the end of the then current Term for Mr. Jackson and Scibetta, and at least 30 days before the end of the then current Term for Mr. Worden and Mr. Chilton.  No such notification has been given by any party.

The agreements provide for an annual base salary and entitle the Executive to participate in the EICP, and in any successor plan adopted by us from time to time.  Such Executives are also entitled to participate in any and all employee benefit plans.  Under each of the agreements, employment will terminate upon death, and may be terminated by us upon the disability of such Executive, or by us for cause or without cause.  Each such Executive may terminate employment voluntarily or with good reason.

Under the agreements with Mr. Worden and Mr. Chilton, “cause” is defined as any one or more of the following actions by the respective Executive:

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Under the agreements with Mr. Jackson and Mr. Scibetta, “cause” is defined as any one or more of the following actions by the respective Executive:

In addition, “good reason” under the agreements with Messrs. Jackson, Scibetta and Chilton is defined as the occurrence, without the Executive’s written consent, of a material reduction by us in the Executive’s base salary.  “Good reason” under the agreement with Mr. Worden is defined as the occurrence, without Mr. Worden’s consent, of any one or more of the following: (a) a material reduction by us in his base salary; (b) our assignment to him of a position or duties that constitute a material, adverse diminution of his title, authority or duties (other than temporarily while he is unable to perform his duties because of a physical or mental injury or illness); (c) our relocation of his principal place of employment to a location that is more than thirty (30) miles from the Company office at which he was principally based immediately prior to such relocation; (d) the failure of any successor or assign to assume the obligations as set forth in the agreement; or (e) a material breach of the agreement by us.

Mr. Sifford’s employment and noncompetition agreement with the Company was mutually terminated effective September 30, 2021, when he stepped down as our Chief Executive Officer.  A letter agreement entered between Mr. Sifford and the Company on September 30, 2021 does not provide for any payments upon his termination or upon a change in control, but does contain non-competition, non-solicitation and non-disparagement provisions to which Mr. Sifford is subject during the term of the letter agreement and for 12 months after the termination of his employment with the Company for any reason, as well as customary confidentiality provisions.

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The following tables set forth the estimated payments Messrs. Worden, Jackson, Scibetta and Chilton would receive from us under each of the specific triggering events and assumes that the triggering event took place on January 29, 2022, the last day of our most recently completed fiscal year.

Mark Worden

Kerry Jackson

Carl Scibetta

Marc Chilton

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Other factors material to the agreements and the 2017 Equity Plan are as follows:

Patrick C. Edwards

As of January 29, 2022, the following payments would be due to Mr. Edwards upon his death- $344,489; upon a termination by us after a change in control- $378,605; and upon his departure with or without cause or for good reason- $0.  These amounts represent the accelerated vesting of outstanding but unvested equity awards under his award agreements, valued at $33.04 per share, the closing price of our common stock on January 28, 2022.

Clifton E. Sifford

As of January 29, 2022, the following payments would be due to Mr. Sifford upon his death- $1,571,845; upon a qualifying termination after a change in control- $1,746,296; upon his departure without cause or for good reason- $1,281,093; and upon his departure for cause or without good reason- $0.  These amounts represent the accelerated vesting of outstanding but unvested equity awards under his award agreements, valued at $33.04 per share, the closing price of our common stock on January 28, 2022.

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CEO Pay Ratio

We are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mark J. Worden, who became our Chief Executive Officer (our “CEO”) on October 1, 2021.

Due to the in-year planned succession of our CEO, in calculating our pay ratio for fiscal 2021, we annualized the compensation of Mr. Worden as follows:

The above calculations resulted in annualized total compensation for Mr. Worden as our CEO of $2,442,034 for fiscal 2021.

For fiscal 2021, the median of the annual total compensation of all employees of our Company (other than our CEO) was $17,221.

Based on this information, for fiscal year 2021, we reasonably estimate that the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was 142:1. Our pay ratio estimate has been calculated in a manner consistent with Item 402(u) of Regulation S-K.

We identified our median employee based on the total taxable compensation during calendar year 2021 of 5,283 members of our workforce, including full-time, part-time, temporary and seasonal employees, other than our CEO, who were employed on December 25, 2021.  The date selected aligns with the period for which total taxable compensation used to identify our median employee was calculated.  The population of employees does not include 523 individuals who were leased employees in December 2021 and who became our employees on January 1, 2022 as part of our acquisition of substantially all of the assets of Shoe Station, Inc., which acquisition occurred on December 3, 2021.  

For purposes of determining the total taxable compensation for each employee, we included the amount of base salary or wages the employee received during the calendar year, the amount of any cash incentives paid to the employee in that year (which includes annual cash incentives that are generally paid in March for performance during the prior fiscal year) and the value of any equity grants that vested during the year based on the value of the shares on the date of vesting. We did not include any adjustments for the value of benefits provided, but we did annualize the pay for any full-time or part-time employees who were employed by us for only part of the year.

Once we identified our median employee, we then determined that employee’s total compensation, including any perquisites and other benefits, in the same manner that we determine the total compensation of our Executives for purposes of the Summary Compensation Table.  The total compensation of our median employee, a part-time store associate who began employment in November 2021, was determined to be $17,221 on an annualized basis.  This total compensation amount for our median employee was then compared to the total compensation of our CEO.  Our method for identifying the median employee was unchanged from fiscal 2020.

The pay ratio was calculated in accordance with SEC rules based upon our reasonable judgment and assumptions. The SEC rules do not specify a single methodology for identification of the median employee or calculation of the pay ratio, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to our pay ratio as disclosed above.  

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Supplemental Pay Ratio

Because of the nature of our business in the retail industry, many part-time, temporary and seasonal employees are hired for very short amounts of time during our peak sales periods.  The SEC rules do not allow for companies to annualize the compensation paid to temporary or seasonal employees or to make a full-time equivalent adjustment for part-time employees.  As of December 25, 2021, approximately 56% of the members of our workforce were part-time, temporary or seasonal employees.  As a result, we believe that measuring the compensation paid to our median full-time employee more accurately reflects our pay practices relative to the compensation of our CEO.  Excluding all part-time, temporary and seasonal employees, we had 2,346 full-time employees as of December 25, 2021.  Using the same methodology described above, we identified our median full-time employee for fiscal 2021.  The total annual compensation of our median full-time employee was $34,694 for fiscal 2021.  Based on this information, for fiscal year 2021, we reasonably estimate that the ratio of our CEO’s annual total compensation to the annual total compensation of our median full-time employee was 70:1.

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DIRECTOR COMPENSATION

Our non-employee directors receive the following:

All amounts paid to our non-employee directors are paid on a calendar quarter basis in arrears.  No separate fees are paid to our non-employee directors for attendance at Board or Committee meetings. In addition to these cash payments, our non-employee directors received restricted shares valued at approximately $60,000 as of the date of grant under the 2017 Equity Plan in calendar year 2021 and will receive restricted shares valued at approximately $80,000 as of the date of grant under the 2017 Equity Plan in calendar year 2022. These restricted shares are generally granted on the date of the annual meeting of shareholders.  The restrictions on the shares will lapse on January 2nd of the year following the year in which the grant was made.  

All directors receive reimbursement of reasonable out-of-pocket expenses incurred in connection with meetings of the Board.  No director who is our officer or employee receives compensation for services rendered as a director.

The following table sets forth information with respect to non-employee director compensation paid during the fiscal year ended January 29, 2022.

Messrs. Aschleman, Kleeberger, and Tomm and Ms. Guthrie were each awarded 1,840 shares of restricted stock under the 2017 Equity Plan on June 10, 2021, with a grant date fair value of $60,002 based on the closing market price of our common stock on that day.  Ms. Randolph was granted a pro-rated restricted stock award on September 16, 2021, the date of her appointment to the Board.  The restrictions on these restricted stock awards

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lapsed on January 2, 2022.  Mr. Wood was granted a pro-rated unrestricted stock award for this service on June 9, 2021.  Mr. Wood exited the Board when his Board term expired on June 10, 2021, the date of the 2021 annual meeting of shareholders.  As of January 29, 2022, no shares of restricted stock and no stock options were held by any of our non-employee directors.

On January 15, 1993, we entered into a noncompetition agreement with J. Wayne Weaver.  As long as Mr. Weaver is our executive officer or director, he may not engage directly or indirectly through any other company or entity in the retail shoe business without the prior approval of our Audit Committee.  Effective February 1, 1993, Mr. Weaver became our employee at an annual salary of $300,000 and is reimbursed for all travel expenses related to performing his duties as Chairman of the Board.  Although Mr. Weaver will continue to be involved in other business activities and will not devote his full time to the Company, he will devote such time to the Company as he deems necessary or appropriate to perform his duties as Chairman of the Board.

The compensation paid during the fiscal year ended January 29, 2022 to our President and Chief Executive Officer and director, Mark J. Worden, and our Vice Chairman of the Board, Clifton E. Sifford, is included in the Summary Compensation Table. Mr. Sifford’s compensation for fiscal 2022 is discussed in the Compensation Discussion and Analysis.

Stock Ownership Guidelines for Directors

Under our stock ownership guidelines, which were adopted by our Board effective in June 2013 and amended by our Board in March 2017 and March 2021, our non-employee directors are required to own shares valued at five times their annual Board cash retainer.  For the purposes of these guidelines, shares directly owned without any restrictions and shares owned directly by members of a non-employee director’s immediate family who share the same household or any trust for the benefit of a non-employee director’s immediate family members count toward ownership requirements.

Unless otherwise determined by the Compensation Committee, until a non-employee director has reached his or her ownership requirement, he or she must retain 50% of the net-after tax shares received upon the exercise, vesting or settlement of any form of equity-based compensation award.

The value of stock holdings is determined based on the average daily closing price of our common stock during the 30-day period ending on the date of the valuation determination.  The Compensation Committee is responsible for monitoring the application of the stock ownership guidelines and evaluating whether each non-employee director has met his or her ownership goal annually.  The Compensation Committee reviewed the current ownership valuation for each of our non-employee directors at its March 2022 meeting, using a valuation date of January 29, 2022, our fiscal 2021 year end.  Of our current non-employee directors, Ms. Guthrie and Messrs. Aschleman and Tomm met the ownership requirements, as amended, as of that valuation date.

We believe the stock ownership guidelines further serve to align the interests of our non-employee directors with those of our shareholders.

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PROPOSAL NO. 3

RATIFICATION OF OUR independent

registered public accounting firm

The ratification of the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for fiscal 2022 is recommended by the Audit Committee and will be submitted to a vote at the annual meeting in order to permit our shareholders to express their approval or disapproval.  In the event of a negative vote, a selection of another independent registered public accounting firm may be made by the Audit Committee.  A representative of Deloitte is expected to be present at the annual meeting, will be given an opportunity to make a statement if desired and will respond to appropriate questions.  Notwithstanding approval by our shareholders, the Audit Committee reserves the right to replace the independent registered public accounting firm at any time.

The Board and the Audit Committee recommend a vote FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2022.

AUDIT COMMITTEE MATTERS

Principal Accountant Fees and Services

The following represents fees for professional audit services rendered by Deloitte for the audit of our financial statements for fiscal 2021 and 2020 and fees billed for other services rendered by Deloitte.

Audit Committee Pre-Approval Policy

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm.  These services may include audit services, audit-related services, tax services and other services.  Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services, the Audit Committee is informed of each service and the pre-approval is generally subject to a specific budget.  The Audit Committee may also pre-approve particular services on a case-by-case basis.  In addition, the Chair of the Audit Committee may act to pre-approve services in interim periods and request ratification by the full Audit Committee at the next regularly scheduled committee meeting.

For fiscal 2021, all non-audit services included above were pre-approved.  The aggregate amount of all such non-audit services constituted approximately 0.3% of the total amount of fees paid by us to Deloitte.

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Report of the Audit Committee

Management of the Company is responsible for the financial reporting process, including the system of internal control over financial reporting, and for the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States.  Deloitte, the Company's independent registered public accounting firm, is responsible for performing the audit of the Company's consolidated financial statements and expressing an opinion on those statements, as well as auditing the effectiveness of the Company's internal control over financial reporting.  The Audit Committee is responsible for oversight of all aspects of the Company's financial reporting, internal control over financial reporting and audit processes.

In fulfillment of its responsibilities, the Audit Committee on a regular basis discusses with both management and Deloitte the adequacy and effectiveness of the Company's internal control over financial reporting.  The Audit Committee has reviewed and discussed the audited financial statements with the Company's management and Deloitte.  In addition, the Audit Committee has discussed with Deloitte all matters required to be discussed with audit committees by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the Securities and Exchange Commission.  This discussion included certain information relating to Deloitte’s judgments about the quality, not just the acceptability, of the Company’s accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements.

The Audit Committee also has received the written disclosures and the letter from Deloitte required by applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence, and has discussed with Deloitte its independence from the Company and the Company’s management. In addition, the Audit Committee considered whether Deloitte’s independence would be jeopardized by providing non-audit services to the Company.

Based on the Audit Committee's review and discussions referenced in this report, the Audit Committee recommended to the Board that the Company's audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2022, as filed with the Securities and Exchange Commission.

Audit Committee

Charles B. Tomm (Chair)

James A. Aschleman

Andrea R. Guthrie

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PROPOSAL NO. 4

APPROVAL OF PROPOSED AMENDMENTS TO OUR

ARTICLES OF INCORPORATION
TO ALLOW SHAREHOLDERS TO AMEND OUR BY-LAWS

Our Board has unanimously approved, and recommends that our shareholders adopt and approve, amendments to our Amended and Restated Articles of Incorporation (the “Articles”) to provide our shareholders with the ability to amend our By-Laws, as amended (the “By-Laws”).

Indiana law provides that, unless otherwise specified by the articles of incorporation, only a corporation’s board of directors may amend or repeal the by-laws. Currently, our Articles do not include any provisions regarding the making, amending or repealing of our By-Laws.

Our Board is committed to good corporate governance and has carefully considered the advantages and disadvantages of adopting the proposed amendments to our Articles to allow shareholders to amend our By-Laws. Our By-Laws establish a number of fundamental corporate governance principles, including rules for meetings of directors and shareholders and the election and duties of directors and officers, among other provisions.  In the past, our Board believed that the default position under Indiana law provided an effective means for our Board to ensure that any amendments to our By-Laws were prudent and designed to protect and maximize long-term value for shareholders.  More recently, and in light of the fact that the majority of the S&P 500 companies provide shareholders with the right to amend the by-laws, our Nominating Committee again considered the various positions for and against allowing shareholders to amend our By-Laws.  After careful deliberation, and upon the recommendation of our Nominating Committee, our Board has concluded that amending our Articles to allow shareholders to amend our By-Laws will enhance our corporate governance practices by giving shareholders a say in important governance principles.

The proposed amendments to the Articles would add a new Article IX to the Articles to allow a majority of the holders of the outstanding shares of all classes of our stock entitled to vote generally in the election of directors to make, amend or repeal our By-Laws, in addition to the Board’s power to do so. Our Board also approved certain typographical changes to our Articles. A form of amended and restated Articles, marked to reflect the changes contemplated by this Proposal No. 4, is attached to this proxy statement as Annex A.  This summary of the proposed amendments to the Articles is qualified in its entirety by reference to the text of the proposed amended and restated Articles set forth in Annex A.

Approval of this Proposal No. 4 requires that the votes cast “FOR” this proposal exceed the votes cast “AGAINST” this proposal.

If the proposed amendments to our Articles are approved by our shareholders, we will file the amended and restated Articles with the Indiana Secretary of State shortly following the annual meeting to incorporate the proposed amendments. The amended and restated Articles will become effective upon the acceptance of the filing by the Indiana Secretary of State. In addition, upon the effectiveness of the amended and restated Articles with the Indiana Secretary of State, corresponding amendments to our By-Laws would become effective.

If this proposal is not approved, the proposed amendments to our Articles will not be made, our Articles and our By-Laws will remain unchanged and the Board will retain the exclusive authority to amend our By-Laws.

The Board recommends that our shareholders vote “FOR” the approval of the proposed amendments to our Articles to allow shareholders to amend our By-Laws.

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TRANSACTIONS WITH RELATED PERSONS

Conflicts of Interest and Related Person Transaction Policies

Under our Code of Ethics, our directors, officers and employees are not permitted to conduct business on our behalf with a member of his or her family, or a business organization with which he or she or a family member has an interest or employment relationship that could be considered significant in terms of potential conflict of interest unless such business dealings have been disclosed to, and approved by, the Audit Committee (in the case of directors or executive officers), the Chief Financial Officer (in the case of officers) or the employee’s department head (in the case of other employees).

Further, under our Audit Committee’s charter, the Audit Committee must review and approve all related person transactions in which any executive officer, director, director nominee or more than 5% shareholder, or any of their immediate family members, has a direct or indirect material interest.  The Audit Committee may not approve a related person transaction unless it is in, or not inconsistent with, our best interests and, where applicable, the terms of such transaction are at least as favorable to us as could be obtained from an unrelated party.

During fiscal 2021, there were no transactions in which the Company was or is to be a participant, the amount involved exceeded $120,000 and a related person had or will have a direct or indirect material interest, and no such transactions are currently proposed.  

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PRINCIPAL SHAREHOLDERS

The following table sets forth, as of April 1, 2022, certain information with respect to beneficial ownership of our common stock by each person (or group of affiliated persons) who is known by management to own beneficially more than 5% of our common stock, by each Executive, by each non-employee director and director nominee and by all current directors and executive officers as a group.  Except as otherwise noted, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.  All percentages in the table are based on 27,857,250 shares of our common stock outstanding on April 1, 2022.

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