UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

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☐		Soliciting Material Under Rule 14a-12

PriceSmart, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

  

 

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2020 PROXY STATEMENT

 

 

ANNUAL MEETING OF STOCKHOLDERS

 

PRICESMART, INC.

9740 Scranton Road

San Diego, California 92121

 

 

PRICESMART, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT

 

TO THE STOCKHOLDERS OF PRICESMART, INC.:

Notice is hereby given that the Annual Meeting (the “Annual Meeting”) of the Stockholders of PriceSmart, Inc. (the “Company”), will be held at 10:00 a.m. P.S.T. on Thursday, February 4, 2021. As a result of the public health and travel risks and concerns due to the COVID-19 pandemic, the Annual Meeting will be held via live audio webcast on the internet. You will be able to participate, vote and submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/PSMT2021. You will not be able to attend the Annual Meeting physically. The Annual Meeting will be held for the following purposes:

 

1.	To elect directors for the ensuing year, to serve until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified. The Board of Directors of the Company has nominated and recommends for election as directors the following ten persons:

 

 

2.	To approve, on an advisory basis, the compensation of the Company’s executive officers for fiscal year 2020;

 

3.	To approve a proposed amendment to the Company’s 2013 Equity Incentive Award Plan, as amended, to increase the number of shares of Common Stock available for the grant of awards by 500,000 shares;

 

4.	To ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending August 31, 2021; and

 

5.	To transact such other business as may be properly brought before the Annual Meeting or any adjournment thereof.

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. The Board of Directors has fixed the close of business on December 7, 2020 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting. A list of such stockholders shall be open to the examination of any stockholder for a period of ten days prior to the date of the Annual Meeting at the Company’s corporate headquarters, 9740 Scranton Road, San Diego, California 92121. During the Annual Meeting, any stockholder attending the Annual Meeting may access a list of the stockholders entitled to vote at the Annual Meeting at www.virtualshareholdermeeting.com/PSMT2021.

Accompanying this Notice is a Proxy. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY, OR YOU MAY VOTE YOUR SHARES BY TELEPHONE OR OVER THE INTERNET, AS DESCRIBED IN THE ENCLOSED PROXY. If you plan to attend the Annual Meeting and wish to vote your shares personally, you may do so at any time before the Proxy is voted.

All stockholders are cordially invited to attend the meeting.

BY ORDER OF THE BOARD OF DIRECTORS

 

Francisco J. Velasco

Secretary

San Diego, California

December 18, 2020

Table of Contents

 

 

		Page
Important Information about the Annual Meeting			3
Proposal 1 Election of Directors			5
Information Regarding the Board of Directors			11
Securities Ownership of Certain Beneficial Owners and Management			15
Executive Officers of the Company			17
Executive and Director Compensation			20
Equity Compensation Plan Information			47
Certain Transactions			48
Proposal 2 Approval of the Compensation of the Named Executive Officers			49
Proposal 3 Approval of an Amendment to Increase the Number of Shares of Common Stock Available for the Grant of Awards Under the 2013 Equity Incentive Award Plan, as Amended			50
Proposal 4 Ratification of Selection of Independent Registered Public Accounting Firm			61
General			63
Appendix A: Reconciliation of Non-GAAP Financial Measures			A-1
Appendix B: Amended and Restated 2013 Equity Incentive Award Plan			B-1

 

PRICESMART, INC.

9740 Scranton Road

San Diego, California 92121

 

 

PROXY STATEMENT

for

ANNUAL MEETING OF STOCKHOLDERS

February 4, 2021

The Board of Directors of PriceSmart, Inc., a Delaware corporation (the “Company”), is soliciting the enclosed Proxy for use at the Annual Meeting of Stockholders of the Company to be held on February 4, 2021 (the “Annual Meeting”), and at any adjournments thereof. The Annual Meeting will be a virtual meeting via live audio webcast on the internet. You will be able to attend the Annual Meeting, vote and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/ PSMT2021 and entering the 16-digit control number included in the Notice of Internet Availability or proxy card that you receive. For further information about the Annual Meeting, please see “Important Information about the Annual Meeting and Voting” beginning on page 3.

This Proxy Statement will be first sent to stockholders on or about December 18, 2020. You can submit your Proxy by mail or you may provide voting instructions for your shares by telephone or via the internet. Instructions for voting by telephone, by using the internet or by mail are described on the enclosed Proxy. If you plan to attend the virtual Annual Meeting and wish to vote your shares personally, you may do so. Unless contrary instructions are indicated on the Proxy, all shares represented by valid Proxies received pursuant to this solicitation (and not revoked before they are voted) will be voted for the election of the Board of Directors’ nominees for directors, or for a substitute or substitutes selected by the Board of Directors in the event a nominee or nominees are unable to serve or decline to do so; for the approval, on an advisory basis, of the compensation of the Company’s executive officers for fiscal year 2020; for the approval of an increase in the number of shares of Common Stock available for the grant of awards under the Company’s 2013 Equity Incentive Award Plan, as amended; and for the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending August 31, 2021. As to any other business that may properly come before the Annual Meeting and be submitted to a vote of the stockholders, Proxies received by the Board of Directors will be voted in accordance with the best judgment of the holders thereof.

A Proxy may be revoked by written notice to the Secretary of the Company at any time prior to the Annual Meeting by executing a later Proxy or by attending the virtual Annual Meeting and voting in at the meeting.

The Company will bear the cost of solicitation of Proxies. In addition to the use of mails, Proxies may be solicited by personal interview, telephone, facsimile or e-mail, by officers, directors and other employees of the Company. The Company also will request persons, firms and corporations holding shares in their names, or in the names of their nominees, which are beneficially owned by others, to send, or cause to be sent, proxy material to, and obtain Proxies from, such beneficial owners and will reimburse such holders for their reasonable expenses in so doing.

The Company’s mailing address is 9740 Scranton Road, San Diego, California 92121.

Voting

Stockholders of record at the close of business on December 7, 2020 (the “Record Date”) will be entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof.

As of December 7, 2020, 30,738,334 shares of the Company’s common stock, $0.0001 par value per share (“Common Stock”), were outstanding, representing the only voting securities of the Company. Each share of Common Stock is entitled to one vote.

Votes cast by Proxy or at the Annual Meeting will be counted by the person appointed by the Company to act as Inspector of Election for the Annual Meeting. The Inspector of Election will treat shares represented by Proxies that reflect abstentions or include “broker non-votes” as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		1

 

Because directors are elected by a plurality of the votes of the shares present or represented by Proxy at the Annual Meeting and entitled to vote on the election of directors, the ten director nominees who receive the greatest number of votes cast will be elected directors.

The non-binding advisory vote on executive compensation, the proposed amendment to the Company’s 2013 Equity Incentive Award Plan, as amended, to increase the number of shares of Common Stock available for the grant of awards, and the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending August 31, 2021 require the affirmative vote of a majority of the aggregate votes present, in person or by proxy, and entitled to vote at the Annual Meeting.

Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the stockholder’s behalf.

 

2		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Important Information About the Annual Meeting and Voting

 

 

Why Is the Company Soliciting My Proxy?

The Board of Directors is soliciting your proxy to vote at the Annual Meeting to be held at 10:00 a.m. P.S.T. on Thursday, February 4, 2021. The Annual Meeting will be held via live audio webcast on the internet. You will be able to participate, vote and submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/ PSMT2021. You will not be able to attend the Annual Meeting physically. This Proxy Statement, along with the accompanying Notice of Annual Meeting of Stockholders, summarizes the purposes of the meeting and the information you need to know to vote at the Annual Meeting.

We have made available to you on the internet or have sent you this Proxy Statement, the Notice of Annual Meeting of Stockholders, the Proxy and a copy of our Annual Report on Form 10-K for the fiscal year ended August 31, 2020 because you owned shares of PriceSmart, Inc. Common Stock on the Record Date. This Proxy Statement will be first sent to stockholders on or about December 18, 2020.

Why are you holding a Virtual Annual Meeting?

Due to the continuing public health impact of COVID-19 and to support the health and well-being of our stockholders, the Annual Meeting will be held in a virtual meeting format only. We have designed our virtual format to enhance, rather than constrain, stockholder access, participation and communication. For example, the virtual format allows stockholders to communicate with us in advance of, and during, the Annual Meeting so they can ask questions of our Chairman or Chief Executive Officer, as time permits. It is the present expectation of the Board of Directors that future annual meetings will have an in-person format.

How Do I Vote?

Whether you plan to attend the Annual Meeting or not, we urge you to vote by proxy. If you vote by proxy, the individuals named on the Proxy, or your “proxies,” will vote your shares in the manner you indicate. For example, you may specify whether your shares: should be voted for or withheld for each nominee for director; should be voted for, against or abstained with respect to the approval, on an advisory basis, of compensation of the Company’s named executive officers; should be voted for, against or abstained with respect to approval of the proposed amendment to the Company’s 2013 Equity Incentive Plan; and should be voted for, against or abstained with respect to the ratification of the appointment of the Company’s independent registered public accountant, as disclosed in this Proxy Statement. Voting by proxy will not affect your right to attend the Annual Meeting. If your shares are registered directly in your name through our transfer agent, or you have stock certificates registered in your name, you may submit a proxy to vote:

 

•

By internet or by telephone. Follow the instructions attached to the Proxy to submit a proxy to vote by internet or telephone.

 

•

By mail. If you received one or more Proxies by mail, you can vote by mail by completing, signing, dating and returning the enclosed Proxy in the enclosed postage prepaid envelope. Your Proxy will be voted in accordance with your instructions. If you sign the Proxy but do not specify how you want your shares voted, they will be voted as recommended by our Board of Directors.

 

•

At the meeting. You may vote your shares electronically through the portal at the Annual Meeting (if you satisfy the admission requirements, as described below). Even if you plan to attend the Annual Meeting virtually, we encourage you to vote in advance by telephone, through the internet or by mail so that your vote will be counted in the event you later decide not to attend.

The Annual Meeting will be a virtual meeting of stockholders conducted via a live audio webcast that provides stockholders the same rights and opportunities to participate as they would have at an in-person meeting. We believe that a Annual Meeting will provide expanded stockholder access and participation and improved communications. You will be able to vote your shares

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		3

Important Information About the Annual Meeting and Voting (continued)

 

 

electronically at the Annual Meeting. To attend and submit your questions during the Annual Meeting, please visit www.virtualshareholdermeeting.com/PSMT2021. To participate and vote during the Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability or on your Proxy. Beneficial stockholders who do not have a control number may gain access to and vote at the meeting by logging in to their broker, brokerage firm, bank or other nominee’s website and selecting the stockholder communications mailbox to access the meeting; instructions should also be provided on the voting instruction card provided by your broker, bank, or other nominee. If you encounter any difficulties accessing the Annual Meeting during check-in or the meeting, please call the technical support number that will be posted on the virtual stockholder meeting log-in page.

What happens if there are technical difficulties during the Annual Meeting?

We will have technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting, voting at the Annual Meeting or submitting questions at the Annual Meeting. If you encounter any difficulties accessing the Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual stockholder meeting log-in page.

Is Voting Confidential?

We will keep all the Proxies, ballots and voting tabulations private. We only let our Inspector of Election and our Secretary examine these documents. Management will not know how you voted on a specific proposal unless it is necessary to meet legal requirements. We will, however, forward to management any written comments you make on the Proxy or otherwise provide.

Attending the Annual Meeting

This year, the Annual Meeting will be held in a virtual meeting format only. To attend the Annual Meeting, go to www.virtualshareholdermeeting.com/PSMT2021 shortly before the meeting time, and follow the instructions for downloading the webcast. You need not attend the Annual Meeting in order to vote.

 

4		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Proposal 1   Election of Directors

 

 

Based on the recommendation of the Nominating/Corporate Governance Committee, the Board of Directors of the Company has nominated and recommends for election as directors the ten persons named herein to serve until the next Annual Meeting of Stockholders and until their respective successors shall have been duly elected and qualified. In accordance with the Company’s Second Amended and Restated Bylaws, the size of the Board will be increased from nine to ten members immediately prior to the Annual Meeting pursuant to a resolution adopted by the Board. Following the Annual Meeting, there will be no vacancies on the Board. Each of the nominees has consented to serving as a nominee and being named as a nominee in this Proxy Statement and to serving as a director if elected. Directors are elected by a plurality of the votes of the shares present in person or represented by Proxy at the Annual Meeting and entitled to vote on the election of directors. The enclosed Proxy will be voted in favor of the persons nominated unless otherwise indicated. If any of the nominees should be unable to serve or should decline to do so, the discretionary authority provided in the Proxy will be exercised by the proxy holders to vote the shares represented by the Proxies for one or more substitute nominees selected by the present Board of Directors. The Board of Directors does not believe at this time that any substitute nominee or nominees will be required.

Nominations Process

Identification and Evaluation of Nominees for Directors

The Nominating/Corporate Governance Committee identifies nominees for director by first evaluating the current members of our Board of Directors willing to continue in service. Current members with qualifications and skills that are consistent with the Nominating/Corporate Governance Committee’s criteria for board service, as set forth in the section below entitled “Director Qualifications,” and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of our Board of Directors with that of obtaining a new perspective.

If any member of the Board of Directors does not wish to continue in service or if the Board of Directors decides not to re-nominate a member for re-election, the Nominating/Corporate Governance Committee identifies the desired skills and experience of a new nominee in light of the criteria set forth below in “Director Qualifications.” The Nominating/Corporate Governance Committee generally consults with other members of the Board of Directors and may seek input from management, independent counsel, industry experts or advisors that the Nominating/Corporate Governance Committee believes to be desirable and appropriate. The Nominating/Corporate Governance Committee reviews the qualifications, experience and background of any candidates who are identified. Final candidates are interviewed by the members of the Nominating/Corporate Governance Committee. In making its determinations, the Nominating/Corporate Governance Committee evaluates each individual in the context of the Board of Directors as a whole, with the objective of assembling a group that can best perpetuate the success of the Company and represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the Nominating/Corporate Governance Committee makes its recommendation to the Board of Directors.

Pursuant to the Nominating/Corporate Governance Committee Charter, stockholders of the Company who have held shares of the Company’s Common Stock for at least one year and who hold a minimum of 1% of the Company’s outstanding shares of Common Stock may suggest a candidate for director by writing to the Secretary of the Company. In order to be considered, the recommendation for a candidate must include the following written information: (1) a detailed resume of the recommended candidate; (2) an explanation of the reasons why the stockholder believes the recommended candidate is qualified for service on the Board of Directors; (3) such other information that would be required by the rules of the SEC to be included in a proxy statement; (4) the written consent of the recommended candidate; (5) a description of any arrangements or undertakings between the stockholder and the recommended candidate regarding the nomination; and (6) proof of the recommending stockholder’s stock holdings in the Company. In addition, we may require any candidate to furnish such other information as may reasonably be required by the Company to determine the eligibility of such candidate to serve as an independent director in accordance with the Company’s corporate governance guidelines or that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such candidate. In order to give the Nominating/Corporate

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		5

Proposal 1   Election of Directors (continued)

 

 

Governance Committee sufficient time to evaluate a recommended candidate and/or include the candidate in the Company’s proxy statement for the annual meeting to be held in 2022, the recommendation should be received by the Secretary of the Company at the Company’s principal executive offices no later than August 20, 2021. In the event that the Company receives director candidate recommendations from stockholders, those recommendations are evaluated in the same manner that potential nominees suggested by Board members, management or other parties are evaluated. The Company does not intend to treat stockholder recommendations in any manner different from other recommendations.

Director Qualifications

In evaluating director nominees, the Nominating/Corporate Governance Committee considers, among other things, the following factors:

 

•

personal and professional integrity, ethics and values;

 

•

experience in corporate management, such as serving as an officer or former officer of a publicly held company, and a general understanding of marketing, finance and other elements relevant to the success of a publicly traded company in today’s business environment;

 

•

experience in the Company’s industry and with relevant social policy concerns;

 

•

experience as a board member of another publicly held company;

 

•

academic or professional expertise in one or more aspects of the Company’s current or planned operations; and

 

•

practical and mature business judgment, including ability to make independent analytical inquiries.

While the Company does not have a specific policy regarding board diversity, in connection with its evaluation of director nominees, the Nominating/Corporate Governance Committee also considers diversity of expertise and experience in substantive matters pertaining to our business relative to other members of the Board of Directors. The Nominating/Corporate Governance Committee also considers diversity of background (including diversity of gender, race and ethnicity) and life experience. The Board of Directors and Nominating/Corporate Governance Committee are committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which new candidates are selected. The Nominating/Corporate Governance Committee’s objective is to assemble a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience.

The Board of Directors does not believe that directors should expect to be re-nominated annually. In determining whether to recommend a director for re-election, the Nominating/Corporate Governance Committee considers the director’s participation in and contributions to the activities of the Board of Directors, the results of the most recent Board evaluation, and meeting attendance.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating/Corporate Governance Committee may also consider such other facts as it may deem are in the best interests of the Company and its stockholders. The Nominating/Corporate Governance Committee also believes it is appropriate for at least one, and, preferably, several, members of the Board of Directors to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that a majority of the members of the Board of Directors be independent as required under the Nasdaq Stock Market listing standards applicable to the Company. The Nominating/Corporate Governance Committee also believes it is appropriate for the Company’s chief executive officer to serve as a member of the Board of Directors. Directors’ performance and qualifications are reviewed annually by the Nominating/Corporate Governance Committee.

A copy of the Nominating/Corporate Governance Committee Charter is available on the Company’s website at www.pricesmart.com.

 

6		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Proposal 1   Election of Directors (continued)

 

 

Independent Directors

The Company’s Board of Directors has determined that the following nominees for director are “independent” under the Nasdaq Stock Market listing standards applicable to the Company: Jeffrey Fisher, Gordon Hanson, Beatriz Infante, Leon Janks, Mitchell Lynn, Patricia Márquez, Robert Price, David Snyder and Edgar Zurcher.

Information Regarding Nominees

The table below indicates the name, current position with the Company and age as of November 30, 2020 of each nominee for director.

 

Name		Position			Age
Robert E. Price		Chairman			78
Sherry S. Bahrambeygui		Chief Executive Officer and Director			56
Mitchell G. Lynn		Vice Chairman			72
Jeffrey Fisher		Director			62
Gordon H. Hanson		Director			56
Beatriz V. Infante		Director			66
Leon C. Janks		Director			71
Edgar Zurcher		Director			69
Patricia Márquez		Director Nominee			55
David Snyder		Director Nominee			71

Robert E. Price has been Chairman of the Board of Directors since 1997, the position he has held since the Company’s spin-off from Price Enterprises, Inc. Mr. Price served as Executive Chairman from October 2018 to February 2020. Mr. Price served as Chief Executive Officer and President of the Company at various times during the Company’s history, most recently as Chief Executive Officer from April 2006 until July 2010. Mr. Price was a founder of The Price Company, which operated the Price Club, and served as its Chief Executive Officer and a member of its board of directors from the time of The Price Company’s founding in 1976 until The Price Company’s merger with Costco Wholesale Corp. in 1993. Mr. Price was Chairman of the Board of Price/Costco, Inc. from October 1993 until December 1994 and Chairman of Price Enterprises from July 1994 until September 1997. Mr. Price currently serves as a Manager of The Price Group, LLC and as President of Price Philanthropies Foundation and Price Charities. Price Philanthropies is a private family foundation that supports charitable activities in the Company’s markets and San Diego, California. Mr. Price also serves as President of the Aaron Price Fellows Foundation, the sponsor of the Aaron Price Fellows Program. Mr. Price’s 44-year experience in the warehouse club merchandising business as well as his extensive knowledge of the Company’s business, history and culture, support the Board of Directors’ conclusion that he should serve as a director of the Company.

Sherry S. Bahrambeygui has served as Chief Executive Officer since January 2019, after serving as interim Chief Executive Officer from November 2018 to January 2019. She also has been a director of the Company since November 2011. She served as Vice Chairman of the Board from October 2016 to October 2017. Ms. Bahrambeygui previously served as President and Managing Member of The Price Group, LLC, an investment management firm, from September 2006 to January 2019. Additionally, Ms. Bahrambeygui served as Executive Vice President, Secretary and Vice Chairman of the Boards of Price Charities, Price Philanthropies Foundation and the Aaron Price Fellows Foundation, and as the Chief Executive Officer of PS Ivanhoe, LLC, a commercial real estate investment company. Ms. Bahrambeygui was a licensed stockbroker and a partner in multiple law firms, including a founding partner in the law firm Hosey & Bahrambeygui, LLP. She practiced law with an emphasis on complex international business and corporate matters and also in the areas of employment and compensation.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		7

Proposal 1   Election of Directors (continued)

 

 

Ms. Bahrambeygui’s service as Chief Executive Officer, her experience in strategic acquisitions, her demonstrated ability to lead the Company through digital transformation and the launch of e-commerce and her thorough understanding of the business and operations of the Company contribute to the Board of Directors’ conclusion that she should serve as a director of the Company.

Mitchell G. Lynn has been a director of the Company since November 2011 and Vice Chairman of the Board since February 2020. Mr. Lynn served in several senior executive positions and as the President and a director of The Price Company prior to its merger in 1993 with Costco, Inc., and from 1993 until 1994, he served as an executive officer, director and member of the Executive Committee of Price/Costco. Mr. Lynn also was a member of The Price Group, LLC from 2005 to 2008. Mr. Lynn is a founding and continuing director of Bodega Latina Corporation, dba El Super and Fiesta Mart, a 120+ store warehouse-style grocery retailer that targets the Hispanic market in the southwestern United States. Mr. Lynn is a founding and continuing director of Origin International Inc., which is focused on recycling, redistributing and servicing waste oils. Mr. Lynn is also the founder and a partner of CRI 2000, LP, dba Combined Resources International, and Lightspeed Outdoors, LP, dba Lightspeed, which designs, develops and manufactures consumer products under various brand names for domestic and international wholesale distribution, primarily through warehouse clubs and online platforms. Mr. Lynn also is a founder and a partner of ECR4Kids LP dba ECR4Kids, which designs, manufactures, imports and sells educational/classroom products to wholesale dealers and online platforms. Mr. Lynn is a certified public accountant (inactive) and a licensed real estate broker in California. Mr. Lynn’s extensive prior experience in both the warehouse club business and general retailing and his significant knowledge relating to financial matters contribute to the Board of Directors’ conclusion that he should serve as a director of the Company.

Jeffrey Fisher has been a director of the Company since November 2019. Since 2011, Mr. Fisher has served as the Chief Financial Officer of The Price Group, LLC, a private investment and management company, and Price Philanthropies Foundation, a private non-profit organization. He also has been a director of Price Philanthropies Foundation since May 2019. Since 2004, Mr. Fisher has also served as the Chief Financial Officer of PS Ivanhoe, LLC, a real estate holding company. He is also Chief Financial Officer of Aaron Price Fellows Foundation, La Jolla Fay, LLC, IvanFay, LLC, and RARSD, LLC. From January 2004 through December 2004, Mr. Fisher served as Chief Financial Officer of Price Legacy Corporation, a publicly traded Real Estate Investment Trust with approximately $1.2 billion in real estate assets. From October 2000 until joining Price Legacy, Mr. Fisher served as Chief Financial Officer of National Retail Partners, LLC, a private real estate company which owned and operated approximately $2.0 billion in real estate assets. From August 1993 to September 2000, Mr. Fisher served in various financial capacities of Burnham Pacific Properties, Inc., a publicly traded Real Estate Investment Trust. Prior to joining Burnham Pacific Properties, Mr. Fisher was a senior manager at Deloitte & Touche LLP, having started with them in 1983. Mr. Fisher is a certified public accountant. Mr. Fisher brings over 36 years of finance, accounting and investment experience, with an emphasis on real estate finance, and specific experience with public companies. Mr. Fisher’s extensive experience with finance and real estate matters, his experience as an executive of publicly traded companies and his accounting background contributed to the Board of Directors’ conclusion that he should serve as a director of the Company.

Gordon H. Hanson has been a director of the Company since April 2014. Mr. Hanson has been a tenured member of the faculty at the Harvard Kennedy School of Harvard University since January 2020. From 2001 through 2019, he was a tenured member of the economics faculty at the University of California, San Diego. From 1998 to 2001, he was a tenured member of management faculty at the University of Michigan, and from 1992 to 1998, he was on the economics faculty of the University of Texas. From 2009 until 2014, he served as a director of the Washington Office on Latin America, a non-profit organization working to promote civic advancement in the region, chairing their development committee. Mr. Hanson’s extensive background in the analysis of the economies of Latin America, including over 25 years of experience in consulting for international financial organizations, contribute to the Board of Directors’ conclusion that he should serve as director of the Company.

Beatriz V. Infante has been a director of the Company since January 2018. Since 2009, Ms. Infante has served as Chief Executive Officer of BusinessExcelleration LLC, a business consultancy specializing in corporate transformation and renewal, and since 2008 has been a limited partner in Tandem Capital, a Silicon Valley venture capital firm. From 2010 until its acquisition by

 

8		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Proposal 1   Election of Directors (continued)

 

 

Infor in 2011, Ms. Infante was the Chief Executive Officer and a director of ENXSUITE Corporation, from 2006 until its acquisition by Voxeo Corporation in 2008 she was the Chief Executive Officer and a director of VoiceObjects Inc., and from April 2000 until October 2003 was Chief Executive Officer and President of Aspect Communications Corporation and was additionally named Chair in February 2001. Since May 2014, she has served on the board of directors and as a member of the audit committee of Liquidity Services Inc., an online marketplace for retail goods and capital assets, and has additionally served as chair of the compensation committee since November 2015. Since October 2017, she has served as director and chair of the compensation and member of the audit and technology committees of Ribbon Communications, a cloud communications company formed from the merger of Sonus Networks and Genband, and more recently the acquisition of ECI. From January 2010 until October 2017, she served as director and member of the compensation committee of Sonus Networks, and additionally became chair of the compensation committee in June 2017. Ms. Infante also served on the board of directors and member of the Nominating and Corporate Governance committee of Ultratech, Inc. from July 2016 until its acquisition by Veeco in May 2017. From May 2012 until its acquisition by Broadcom in May 2015, she served on the board of directors and member compensation committee of Emulex Corporation, and additionally became chair of the Nominating and Corporate Governance Committee in February 2014. From 1994 to 2019, she served on the Advisory Committee to the Princeton University School of Engineering and Applied Science. Ms. Infante has also served as a director of a number of privately held companies, and currently serves on the board of directors or advisory boards of private companies in the areas of cloud infrastructure, cybersecurity, intelligent automation and bank fraud detection. Additionally, Ms. Infante is a National Association of Corporate Directors Board Leadership Fellow, and in 2016 was named to the 2016 “NACD Directorship 100,” which honors the most influential boardroom leaders each year. Ms. Infante holds a bachelor of science and engineering degree in electrical engineering and computer science from Princeton University and holds a master of science degree in engineering science from California Institute of Technology. Ms. Infante’s executive leadership experience, including from her service as a chief executive officer of various companies, along with extensive operational expertise and experience in digital transformation, engineering, sales and marketing, contribute to the Board of Directors’ conclusion that she should serve as a director of the Company.

Leon C. Janks has served as a director of the Company since July 1997. He served as Vice Chairman of the Board from October 2017 to October 2018 and as Lead Director from October 2018 to February 2020. Mr. Janks served as a director of Price Enterprises from March 1995 until July 1997. He has been a partner in the accounting firm of Green, Hasson & Janks LLP in Los Angeles, California since 1980 and serves as its Managing Partner Emeritus. Since December 2020, Mr. Janks has served on the board of directors of The Jewish Federation of Greater Los Angeles. Mr. Janks has extensive experience in domestic and international business, serving a wide variety of clients in diverse businesses. Mr. Janks is a certified public accountant. Mr. Janks’ experience, his significant accounting, financial and tax expertise which qualify him as an audit committee financial expert and his many years of service to the Company as a member of the Board of Directors contribute to the Board of Directors’ conclusion that he should serve as a director of the Company.

Edgar Zurcher has been a director of the Company since October 2009 and also served as a director of the Company from November 2000 to February 2008. Mr. Zurcher has been a partner in the law firm Zurcher, Odio & Raven in Costa Rica since 1980, which the Company uses as counsel for certain legal matters. Mr. Zurcher is also President of PLP, S.A., as well as a director of Payless ShoeSource Holdings, Ltd. (“Payless Shoes”). PLP, S.A. owns 40% of Payless Shoes. Additionally, Mr. Zurcher is a director of Molinos de Costa Rica Pasta and Roma S.A. dba Roma Prince S.A. and is a director of Promerica Financial Corporation, S.A. Mr. Zurcher’s background in legal matters and his significant experience in Central America business and legal affairs contribute to the Board of Directors’ conclusion that he should serve as a director of the Company.

Patricia Márquez is a director nominee. Since 2014, Dr. Márquez has served as Dean of the Joan B. Kroc School of Peace Studies at the University of San Diego (“USD”), and in July 2020 she started her dual role as Associate Provost for Academic Planning and Innovation and Dean of the Joan B. Kroc School of Peace Studies. Dr. Márquez joined the USD School of Business in 2007 teaching courses in “Business and Society,” “Global Social Entrepreneurship,” and “Business and Social Innovation.” Her research has focused on the intersection of business and social value creation, with an emphasis on poverty alleviation through

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		9

Proposal 1   Election of Directors (continued)

 

 

market mechanisms. Prior to joining USD, Dr. Márquez was a professor and dean at IESA, a School of Business in Caracas, Venezuela from 2003 to 2005. Dr. Márquez has a bachelor of arts from Bowdoin College, and received her master of arts and doctor of philosophy in socio-cultural anthropology from the University of California, Berkeley. Dr. Márquez’s executive leadership, research and academic experience and recognized expertise in environmental and social responsibility matters contribute to the Board of Directors’ conclusion that she should serve as a director of the Company.

David Snyder is a director nominee. Mr. Snyder has served as a senior counsel at Pillsbury Winthrop Shaw Pittman LLP since 2018 and previously served as a partner from 1993 until 2017 in the firm’s Corporate and Securities practice. During 25 years as a partner, Mr. Snyder also served as Pillsbury’s executive vice-chair for two years and on the firm’s managing board for 15 years. Mr. Snyder has been a practicing attorney for over 30 years, focusing on corporate finance and has significant experience representing public companies. Mr. Snyder presently serves on the board of directors of Orphagen Pharmaceuticals, Inc. He also serves as an advisory board member to Atticus, Inc. Mr. Snyder holds a law degree from Cornell University and a bachelor of arts from Michigan State University. Mr. Snyder’s background in legal matters and his significant experience with public companies contribute to the Board of Directors’ conclusion that he should serve as a director of the Company.

Recommendation of the Board of Directors

The Board of Directors recommends that stockholders vote FOR the slate of nominees set forth above. Proxies solicited by the Board of Directors will be so voted unless stockholders specify otherwise on the accompanying Proxy.

 

10		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Information Regarding the Board of Directors

 

 

Board Meetings

The Company’s Board of Directors held six meetings during fiscal year 2020. No nominee for director who served as a director during the past year attended fewer than 75% of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings of committees of the Board of Directors on which he or she served.

Board Leadership Structure

The positions of Chairman of the Board of Directors and Chief Executive Officer are separate. Mr. Price serves as Chairman of the Board of Directors and Ms. Bahrambeygui serves as Chief Executive Officer. The Board of Directors believes that the current leadership of the Board of Directors by the Chairman enhances the effectiveness of its oversight of management and provides a perspective that is separate and distinct from that of management.

Role of the Board of Directors in Risk Oversight

The Board of Directors oversees the Company’s risk management processes, either as a whole or through its committees. Committees of the Board of Directors review with management and the Company’s internal audit department the Company’s major risk exposures, their potential impact on the Company’s business and the steps the Company takes to manage such risk exposures. The Board of Directors’ risk oversight process includes receiving reports from committees of the Board of Directors and members of senior management.

Committees of the Board

Audit Committee. The Audit Committee, which currently consists of Mr. Janks, Ms. Infante and Mr. Malino, a current director not up for re-election at the Annual Meeting, held six meetings during fiscal year 2020. The Audit Committee oversees the Company’s accounting and financial reporting processes and the audits of its consolidated financial statements. The Committee reviews the annual audits conducted by the Company’s independent public accountants, reviews and evaluates internal accounting controls, is responsible for the selection of the Company’s independent public accountants, and conducts such reviews and examinations as it deems necessary with respect to the practices and policies of, and the relationship between, the Company and its independent public accountants. All committee members satisfy the Nasdaq Stock Market’s standards for “independence,” including applicable audit committee independence requirements, and the Board of Directors has determined that Mr. Janks qualifies as an “audit committee financial expert” within the meaning of the applicable SEC rules and regulations. The Audit Committee is governed by a written charter adopted by the Board of Directors, which is available on the Company’s public website at www.pricesmart.com.

Compensation Committee. The Compensation Committee, which currently consists of Ms. Infante, Mr. Janks and Mr. Malino, a current director not up for re-election at the Annual Meeting, held six meetings during fiscal year 2020. Each of the current members of the Compensation Committee satisfies the Nasdaq Stock Market’s standards for “independence,” including applicable compensation committee independence requirements. The Compensation Committee oversees the compensation philosophy for the Company and reviews and approves the compensation program for the Company’s executive officers. The Committee is authorized to evaluate and determine the compensation of the Company’s Chief Executive Officer and reviews and approves compensation for all other executive officers. The Committee also administers, interprets and makes grants under the Company’s equity incentive award plans. The Compensation Committee is governed by a written charter adopted by the Board of Directors, which is available on the Company’s public website at www.pricesmart.com.

Nominating/Corporate Governance Committee. The Nominating/Corporate Governance Committee, which currently consists of Mr. Janks, Mr. Hanson and Mr. Lynn, held two meetings during fiscal year 2020. The Nominating/Corporate Governance Committee considers the slate of nominees to be presented for reelection at annual meetings of stockholders. The Nominating/Corporate Governance Committee also may evaluate and recommend candidates to add expertise and fill vacancies on the

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		11

Information Regarding the Board of Directors (continued)

 

 

Board of Directors, which vacancies may be created by the departure of any directors or the expansion of the number of members of the Board of Directors. The Nominating/Corporate Governance Committee approved the nomination of the candidates reflected in Proposal 1. The Nominating/Corporate Governance Committee also assists the Board of Directors as needed in establishing corporate governance guidelines and other policies and procedures pertaining to corporate governance matters. The Nominating/Corporate Governance Committee is governed by a written charter adopted by the Board of Directors, which is available on the Company’s public website at www.pricesmart.com.

Executive Committee. The Executive Committee, which currently consists of Mr. Price, Mr. Janks, Mr. Lynn and Ms. Bahrambeygui, held eight meetings during fiscal year 2020. The Executive Committee has all powers and rights necessary to exercise the full authority of the Board of Directors in the management of the business and affairs of the Company, except as provided in the Delaware General Corporation Law or the Bylaws of the Company.

Finance Committee. The Finance Committee, which currently consists of Mr. Janks, Ms. Bahrambeygui, Mr. Fisher, Mr. Lynn and Mr. Malino, a current director not up for re-election at the Annual Meeting, held seven meetings during fiscal year 2020. The Finance Committee reviews and makes recommendations with respect to (1) annual budgets, (2) investments, (3) financing arrangements and (4) the creation, incurrence, assumption or guaranty by the Company of any indebtedness, obligation or liability, except, in each case, for any such transactions entered into in the ordinary course of business of the Company.

Real Estate Committee. The Real Estate Committee, which currently consists of Mr. Price, Ms. Bahrambeygui, Mr. Fisher, Mr. Lynn and Mr. Zurcher, held seven meetings during fiscal year 2020. The Real Estate Committee reviews and approves the material terms of real estate-related transactions entered into by the Company, consistent with the applicable annual budget of the Company previously approved by the Board of Directors.

Digital Transformation Committee. The Digital Transformation Committee, which currently consists of Ms. Infante, Ms. Bahrambeygui, Mr. Hanson and Mr. Janks, held four meetings during fiscal year 2020. The Digital Transformation Committee is charged with oversight of the Company’s omni-channel development and digital transformation to enhance membership and stockholder value.

Policy Governing Stockholder Communications with the Board of Directors

The Board of Directors welcomes communications from stockholders of the Company. Any stockholder who wishes to communicate with the Board of Directors or one or more members of the Board of Directors should do so in writing in care of the General Counsel of the Company, at the principal office of the Company, 9740 Scranton Road, San Diego, California 92121. The General Counsel is directed to forward each communication to the director or directors of the Company for whom it is intended.

Policy Governing Director Attendance at Annual Meetings of Stockholders

The Company encourages, but does not require, the members of its Board of Directors to attend the Annual Meeting. All nine members then-serving on the Board of Directors attended the Annual Meeting of Stockholders held on February 6, 2020.

Environmental and Social Responsibility Matters

The Company recognizes that environmental and social responsibility issues are of increasing importance to our investors, members, employees and the communities in which we operate. The Company is committed to becoming a corporate leader in environmental responsibility, and we believe that our work in the areas of environmental sustainability, social responsibility, diversity, equity and inclusion creates value for all of our stakeholders.

 

12		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Information Regarding the Board of Directors (continued)

 

 

PriceSmart’s long-standing commitment to environmental and social responsibility matters is reflected in, among other things:

 

•

The Company’s mission statement since its founding, pursuant to which the Company always has taken into account the interests of our members, employees and communities in addition to our stockholders;

 

•

Our efforts to promote sustainability and reduce CO2 output, which include installing solar panels in a majority of our warehouse clubs, designing buildings to maximize use of natural light, employing climate controls and energy efficient refrigeration and utilizing eco-friendly building materials;

 

•

Our payment of fair wages and benefits to our employees;

 

•

Our Direct Farm Program, which simultaneously supports local farmers and allows us to provide high quality and healthy fresh products to our members, while reducing expenses and waste; and

 

•

The Company supports a school supply program, Aprender y Crecer, to provide school supplies to children in PriceSmart communities, with support from Price Philanthropies Foundation and the cash donations of thousands of PriceSmart members.

Despite its accomplishments to date, the Company is seeking to increase its level of commitment to social engagement and sustainability in fiscal year 2021. The Company has delegated responsibility for these programs to its new Environmental and Social Responsibility Department, led by our Executive Vice President—Environmental Responsibility, Construction and Facilities and our Vice President of Social and Environmental Responsibility. This team works with departmental leaders across the Company to determine optimal strategies to implement its goals and will engage with, and seek input from, the Board of Directors. The Board of Directors plans to form an Environmental and Social Responsibility Committee of the Board, which will begin meeting after the Annual Meeting.

Audit Committee Report

The Audit Committee oversees the Company’s financial accounting and reporting process and the audits of the financial statements of the Company. All committee members satisfy the definition of independent director set forth in Rule 5605(a)(2) and Rule 5605(c)(2) of the Nasdaq Stock Market’s listing standards. The Audit Committee is governed by a written charter adopted by the Board of Directors, which is available on the Company’s public website at www.pricesmart.com.

In fulfilling its oversight responsibilities, the committee reviewed and discussed with management the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020, including a discussion of the quality, and not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

The Company’s independent registered public accounting firm, Ernst & Young LLP (“EY”), is responsible for expressing an opinion on the conformity of its audited financial statements with generally accepted accounting principles. EY met with the committee and expressed its judgment as to the quality, not just the acceptability, of the Company’s accounting principles and discussed with the committee other matters as required under generally accepted auditing standards, including those matters required to be discussed by Public Company Accounting Oversight Board Statement on Auditing Standards No. 16 Communications with Audit Committees. In addition, EY discussed the accountants’ independence from the Company and from the Company’s management and delivered to the committee those matters to be set forth in written disclosures as required by applicable requirements of the Public Company Accounting Oversight Board regarding independent registered public accounting firm’s communications with the Audit Committee concerning independence.

The committee discussed with the Company’s independent registered public accounting firm the overall scope and plan of their audit. The committee meets with the independent registered public accounting firm, with and without our management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		13

Information Regarding the Board of Directors (continued)

 

 

In reliance on the reviews and discussions referred to above, the committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020 for filing with the SEC.

This report of the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such acts.

Leon C. Janks

Beatriz Infante

Gary Malino

 

14		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Securities Ownership of Certain Beneficial Owners and Management

 

 

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of November 30, 2020 by (1) each of its directors and nominees for director, (2) each of its Named Executive Officers, (3) each person or group known by it to own beneficially more than 5% of the Common Stock and (4) all directors and executive officers as a group.

 

Name and Address(1)			Number of Shares of Common Stock Beneficially Owned(2)				Percentage of Shares of Common Stock Beneficially Owned
Robert E. Price(3)(4)			7,004,040				22.8%
Sherry S. Bahrambeygui(5)			244,406				*
Jeffrey Fisher(6)			39,900				*
Gordon H. Hanson			1,367				*
Beatriz V. Infante			2,243				*
Leon C. Janks			28,601				*
Mitchell G. Lynn(7)			7,933				*
Gary Malino			4,246				*
Edgar A. Zurcher			7,311				*
Patricia Márquez			—				*
David Snyder			—				*
Michael McCleary(8)			12,585				*
Maarten O. Jager			15,994				*
William J. Naylon(9)			35,383				*
Francisco Velasco(10)			20,505				*
John Hildebrandt(11)			13,290				*
All executive officers and directors as a group (20 persons)			7,540,645				24.5
BlackRock, Inc. 55 East 52nd Street New York, NY 10055			3,388,751				11.0
EdgePoint Investment Group Inc.(12) 150 Bloor Street West, Suite 500 Toronto, Ontario M5S 2X9, Canada			3,778,267				12.3
Kayne Anderson Rudnick Investment Management LLC 1800 Avenue of the Stars, Second Floor Los Angeles, CA 90067			3,232,324				10.5
The Vanguard Group(13) 100 Vanguard Blvd. Malvern, PA 19355			2,412,578				7.8

 

*	Less than 1%.

(1)	Except as indicated, the address of each person named in the table is c/o PriceSmart, Inc., 9740 Scranton Road, San Diego, California 92121.

(2)	Beneficial ownership of directors, executive officers and 5% or more stockholders includes shares of restricted stock subject to vesting, regardless of vesting date, and shares issuable upon vesting of restricted stock units and performance stock units that vest

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		15

Securities Ownership of Certain Beneficial Owners and Management (continued)

 

 

within 60 days after the date of this table. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and dispositive power with respect to all shares of stock beneficially owned by them.

(3)

Mr. Price is manager of The Price Group, LLC (“The Price Group”). As such, for purposes of this table, he is deemed to beneficially own 150,511 shares of Common Stock held by The Price Group. Mr. Price is manager of RARSD, LLC (“RARSD”). As such, for purposes of this table, he is deemed to beneficially own 8,314 shares of Common Stock held by RARSD. Mr. Price has shared voting and dispositive power with respect to, and disclaims beneficial ownership of, the shares held by The Price Group and RARSD. In addition, Mr. Price is Chairman of the Board and President of Price Philanthropies Foundation. As such, for purposes of this table, he is deemed to beneficially own 4,165,055 shares of Common Stock held by Price Philanthropies Foundation. Mr. Price has shared voting and dispositive power with respect to, and disclaims beneficial ownership of, the shares held by Price Philanthropies Foundation. If the percentages of shares of Common Stock beneficially owned by Mr. Price were calculated without regard to the shares held by The Price Group, Price Philanthropies Foundation and RARSD, he would own 8.7% of the Common Stock.

(4)

Includes 1,197,187 shares of Common Stock held by the Robert & Allison Price Charitable Remainder Trust, of which Mr. Price is a trustee, 1,407,402 shares of Common Stock held by the Robert and Allison Price Trust, of which Mr. Price is a trustee, 38,805 shares of Common Stock held by trusts for the benefit of Mr. Price’s son, of which Mr. Price is a trustee, and 45,000 shares of Common Stock held by family trusts, of which Allison Price, Mr. Price’s wife, is the sole trustee.

(5)	Includes 69,728 shares owned by the Hosey Family Trust, of which Ms. Bahrambeygui is a trustee and 2,000 shares owned by Ms. Bahrambeygui’s children. Includes 77,133 shares of restricted Common Stock that are subject to vesting restrictions.

(6)	Includes 39,900 shares held by the Fisher Family Trust.

(7)	Includes 5,945 shares held by the Lynn Family Trust.

(8)	Includes 11,823 shares of restricted Common Stock that are subject to vesting restrictions.

(9)	Includes 18,156 shares of restricted Common Stock that are subject to vesting restrictions.

(10)	Includes 11,303 shares of restricted Common Stock that are subject to vesting restrictions.

(11)	Includes 9,620 shares of restricted Common Stock that are subject to vesting restrictions.

(12)	Includes 1,877,194 shares held by EdgePoint Global Portfolio, for which EdgePoint Investment Group Inc. acts as investment manager.

(13)	Includes 21,069 shares held by Vanguard Fiduciary Trust Company and 6,411 shares held by Vanguard Investments Australia, Ltd., both of which are wholly owned subsidiaries of The Vanguard Group, Inc.

 

16		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive Officers of the Company

 

 

The executive officers of the Company and their ages as of December 18, 2020 are as follows:

 

Name		Position			Age
Sherry S. Bahrambeygui		Chief Executive Officer and Director			56
Michael McCleary		Executive Vice President & Chief Financial Officer			55
William J. Naylon		Executive Vice President and Chief Operating Officer			58
Francisco Velasco		Executive Vice President, General Counsel, Chief Ethics & Compliance Officer and Secretary			49
Ana Luisa Bianchi		Executive Vice President—Chief Merchandising Officer			53
Juan Ignacio Biehl		Executive Vice President—Digital Experience and Chief Technology Officer			55
Rodrigo Calvo		Executive Vice President—Real Estate			49
Frank Diaz		Executive Vice President—Logistics and Distribution			52
Brud E. Drachman		Executive Vice President—Environmental Responsibility, Construction and Facilities			66
John D. Hildebrandt		Executive Vice President—Operations			62
Laura Santana		Executive Vice President—Information Technology			53
Jesus Von Chong		Executive Vice President—Local/Regional Merchandising			54

Sherry S. Bahrambeygui has served as Chief Executive Officer since January 2019, after serving as interim Chief Executive Officer from November 2018 to January 2019. She also has been a director of the Company since November 2011. She served as Vice Chairman of the Board from October 2016 to October 2017. Ms. Bahrambeygui previously served as President and Managing Member of The Price Group, LLC, an investment management firm, from September 2006 to January 2019. Additionally, Ms. Bahrambeygui served as Executive Vice President, Secretary and Vice Chairman of the Boards of Price Charities, Price Philanthropies Foundation and the Aaron Price Fellows Foundation, and as the Chief Executive Officer of PS Ivanhoe, LLC, a commercial real estate investment company. Ms. Bahrambeygui was a licensed stockbroker and a partner in multiple law firms, including a founding partner in the law firm Hosey & Bahrambeygui, LLP. She practiced law with an emphasis on complex international business and corporate matters and also in the areas of employment and compensation.

Michael McCleary has served as Executive Vice President and Chief Financial Officer since April 2020, after serving as Senior Vice President and Interim Chief Financial Officer from December 2019 to March 2020. He joined the Company as Vice President and Corporate Controller in 2003 and was subsequently promoted to Senior Vice President and Corporate Controller. Mr. McCleary has over 30 years of international finance, tax and accounting experience. Mr. McCleary is a certified public accountant and has a bachelor of arts degree in business economics from the University of California, Santa Barbara. Prior to joining PriceSmart, Mr. McCleary worked for 14 years in various international companies based in Madrid, Spain.

William J. Naylon has been Executive Vice President and Chief Operating Officer of the Company since January 2002. Mr. Naylon served as Executive Vice President—Merchandising of the Company from July 2001 until January 2002 and as Senior Vice President of the Company from March 1998 until July 2001. From September 1995 through February 1998, Mr. Naylon was Managing Director for the Company’s licensee warehouse club operation in Indonesia. Prior to joining the Company, Mr. Naylon was a General Manager for Price/Costco and served in various management roles for The Price Company.

Francisco Velasco has been Executive Vice President, General Counsel and Secretary of the Company since July 2016 and Chief Ethics & Compliance Officer since October 2016. From March 2009 to June 2016, Mr. Velasco served as Division Counsel Latin America for AbbVie Inc., a publicly traded global biopharmaceutical company. Previously, he held in-house legal roles at

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		17

Executive Officers of the Company (continued)

 

 

Abbott Laboratories, Hanes Brands Inc. and Sara Lee Corporation, and he began his career in private practice specializing in the Latin America region. Mr. Velasco attended law school in Mexico, has a Masters of Law degree from Georgetown University and has an MBA degree from Duke University.

Ana Luisa Bianchi has been Executive Vice President—Chief Merchandising Officer since August 2018 and was Senior Vice President—Merchandising—Latin America Local from October 2016 through July 2018. From 2010 to October 2016, Ms. Bianchi was Vice President—Merchandising, overseeing the local side of the Colombia business. Ms. Bianchi previously served as regional buyer for the Central America operations from 2007 to 2010. From 2005 to 2007, Ms. Bianchi was local buyer for the Guatemala operations. In 2004, Ms. Bianchi was a consultant to PriceSmart’s St. Thomas operations. In 2003, Ms. Bianchi served as Merchandising Director for U.S. food purchases. From 1999 to 2003, Ms. Bianchi served as the food and candy buyer in the Miami corporate office. Ms. Bianchi joined PriceSmart in 1998 as a local buyer for the Guatemala operations. Ms. Bianchi has a law degree in Guatemala from Universidad Rafael Landívar.

Juan Ignacio Biehl has been Executive Vice President—Digital Experience and Chief Technology Officer since September 2020. Mr. Biehl joined PriceSmart in March 2018 as part of the acquisition of Aeropost, Inc. He joined as the Chief Technology Officer of Aeropost, a position he held since February 2013, and was promoted to Senior Vice President of Digital Experience of the Company in 2019. Over the preceding 25 years, Mr. Biehl has been an entrepreneur in the technology sector working in diverse areas of information systems with companies such as Apple, Inter@america and Naysat.

Rodrigo Calvo has been Executive Vice President—Real Estate since June 2015 and served as Senior Vice President of Real Estate from February 2009 after joining PriceSmart in October 2004 as Director of Real Estate. Before coming to the Company, he led Grupo Promerica’s real estate development division. Before that, he worked for McDonald’s Corporation’s real estate area and for CSU (now Walmart Central America) in special projects. This combined background allowed him to develop a deep understanding of the commercial real estate field in Central America and the Dominican Republic. He holds a bachelor of science degree in civil engineering from the University of Costa Rica and an MBA from INCAE Business School.

Frank Diaz has been Executive Vice President—Logistics and Distribution since November 2015. Mr. Diaz previously served as Senior Vice President of Distribution and Logistics from February 2010 until November 2015. He joined PriceSmart in September 2008 as Vice President of Logistics. Prior to joining the Company, Mr. Diaz worked more than 20 years in progressively responsible positions in the areas of operations, strategic planning and commercial development with top-tier logistics companies including UPS, FedEx and CS Integrated LLC. With DHL, Mr. Diaz was head of transformational programs involving international tradelane development and improved customer experience. Mr. Diaz has a bachelor of science degree in industrial engineering from the New Jersey Institute of Technology and a logistics management certification from the Georgia Institute of Technology.

Brud E. Drachman has been Executive Vice President—Environmental Responsibility, Construction and Facilities since August 2019, served as Executive Vice President—Construction Management of the Company from November 2005 until July 2013, as Executive Vice President—Real Estate and Construction of the Company from February 2005 through October 2005 and as Executive Vice President—Construction and Private Label Merchandising from November 2004 until January 2005. Mr. Drachman served as Executive Vice President—Real Estate and Construction of the Company from November 2002 until October 2004 and served as Senior Vice President—Real Estate and Construction of the Company from August 1998 to October 2002. Mr. Drachman previously served as Vice President—Real Estate and Construction at Price Enterprises from August 1994 to August 1997. Prior to joining Price Enterprises in 1994, Mr. Drachman served as Project Manager at The Price Company beginning in 1987.

John D. Hildebrandt has been Executive Vice President—Operations of the Company since February 2010. Mr. Hildebrandt served as Executive Vice President—Central America and Trinidad Operations from March 2009 through January 2010, as

 

18		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive Officers of the Company (continued)

 

 

Executive Vice President—Central America Operations from August 2003 until February 2009, as Executive Vice President—Caribbean and Asia Operations from July 2001 until July 2003 and as Senior Vice President of the Company from September 2000 until July 2001. Mr. Hildebrandt previously served as Vice President of the Company from September 1998 until August 2000, overseeing operations in Central America. Mr. Hildebrandt served as the Company’s Country Manager in the Philippines and Panama from August 1997 until August 1998, and as Price Enterprises’ Country Manager in the Philippines and Panama from 1996 until the Company was spun off from Price Enterprises in August 1997. Prior to joining Price Enterprises as Country Manager in 1996, Mr. Hildebrandt was a Senior Operations Manager of Price/Costco from 1994 through 1996, and served in various management roles for The Price Company beginning in 1979.

Laura Santana has been Executive Vice President—Information Technology since March 2017. Ms. Santana has served in progressively responsible positions relating to the Company’s IT systems since joining the Company in 1995. Ms. Santana previously worked at The Price Company from 1987 to 1995 in operations and information technology. Ms. Santana is a graduate of the University of San Diego.

Jesus Von Chong has been Executive Vice President—Local/Regional Merchandising since August 2018. He previously served as Executive Vice President—Chief Merchandising Officer from September 2016 through July 2018 and was Executive Vice President—Foods Merchandising from November 2015 through August 2016. Mr. Von Chong served as Senior Vice President of Merchandising for Central America beginning in 2003, added Colombia to his responsibilities in March 2011 and the Caribbean Region in April 2015. He served as a Regional Merchandising Director for Panama, Costa Rica and Dominican Republic from 2000 to 2003. He was first employed by the Company as a buyer in the Company’s operations in Panama in 1996. Mr. Von Chong progressed to head Buyer in 1998, Warehouse Manager for Via Brasil Operations in 1999 and to Panama’s Country Manager in 2000.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		19

Executive and Director Compensation

 

 

Compensation Discussion and Analysis

The Compensation Committee of our Board of Directors, comprised entirely of independent directors, administers the Company’s executive compensation program. The role of the Compensation Committee is to oversee compensation and benefit plans and policies, administer stock plans, and review and approve annually all compensation decisions relating to all executive officers. The Compensation Committee is authorized to retain the services of one or more executive compensation advisors, in its discretion, in order to assist with the establishment and review of our compensation programs and related policies. The Committee has engaged an independent national compensation consulting firm to provide executive compensation advisory services, help evaluate our compensation philosophy and objectives and provide guidance in administering our compensation program.

Fiscal Year 2020 Company Initiatives

Our Chief Executive Officer, Sherry Bahrambeygui, is driving strategic investments to strengthen our core business and to build and incorporate into the core business an omni-channel platform, diversify our club base with smaller format clubs, and enhance and streamline our sourcing and inventory models. Underpinning these investments, Ms. Bahrambeygui and the PriceSmart leadership team have re-committed to the “Six Rights of Merchandising,” with the objective of enhancing technological tools and capabilities available today to increase efficiencies and fully support the guiding principles in our current business and our business going forward.

 

•

The Right Merchandise: basic, seasonal, and exciting new items

 

•

The Right Time: merchandise must be “fresh” and in tune with current seasons and trends

 

•

The Right Place: flow and position merchandise to maximize sales

 

•

The Right Condition: sell only first quality merchandise

 

•

The Right Quantity: purchase merchandise in quantities that allow for efficient handling and lowest acquisition cost

 

•

The Right Price: price merchandise as low as possible to provide consistently low prices every day

The Company is endeavoring to create a more nimble, competitive and customizable platform from which it can respond to the fast-changing retail environments where we operate. Our members expect a low-cost, seamless and tailored buying experience through both our physical and digital channels. We are also analyzing our member data to better inform decisions related to buying, services and inventory flow.

During the COVID pandemic, the Company has traversed an extraordinary arc that started with responding to unexpected challenges and quickly evolved to strengthening our business for the future. With our top priority firmly placed on the well-being of our employees and members, we immediately focused on precautionary and safety measures for our front-line employees in-country and in our distribution centers internationally. The Company also made a rapid transition to remote-work for office employees without compromising effectiveness. Management focused on collaborating with our vendors and suppliers to protect the supply chain and maximize availability of essential goods needed by our members. Most importantly, the Company accelerated development of technology-enabled shopping. The Company now provides Click & Go^™ contactless shopping, online visibility of inventory, online payment platforms, and the ability to sign up and renew memberships online in every one of our markets. The Company launched its Click & Go^™ program in the third quarter of fiscal year 2020, which currently enables online orders with curbside pick-up and delivery in all markets, to meet the immediate demands of our members. We believe the technology, business infrastructure, processes, and platforms that support the Click & Go^™ program strengthens our foundation for growth.

 

20		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

Compensation Philosophy

The Compensation Committee believes that the Company’s compensation program must be:

 

1.	Fair—a compensation package that is applied consistently across the organization and is cost effective. The fairness applies to everyone on equal terms, regardless of gender, age, background, national origin, sexual orientation, sexual identity and race;

 

2.	Flexible—a comprehensive approach designed to meet our business objectives and market demands;

 

3.	Competitive—offering a total compensation package that is equitable and based on strong labor market positioning;

 

4.	Performance based—sharing success through pay programs tied to personal, team (where applicable) and company performance; and

 

5.	Understood—clearly communicated to explain the value and to motivate.

Beginning in fiscal year 2017, the Compensation Committee, which, at the time, was led by our current Chief Executive Officer, Sherry Bahrambeygui, began a review of the Company’s compensation practices. This review focused, in particular, on the extent to which executive compensation should include performance incentives. As a result of the review of compensation practices continued under the current Chair of the Compensation Committee, Beatriz Infante, and consistent with the core values set forth above, the Compensation Committee modified the Company’s pay philosophy and compensation practices to incorporate performance-driven incentives for the Chief Executive Officer and throughout the Company. To ensure retention of top talent as the compensation practices evolve, the Committee determined that it was in the best interests of stockholders to begin the transition with the Chief Executive Officer’s compensation to lead by example for the executive team and to stage the changes to the compensation programs over a multi-year period.

From fiscal year 2016 to fiscal year 2018, our executive compensation was comprised primarily of base salary and restricted stock awards with time-based vesting. Beginning in late fiscal year 2018 and early fiscal year 2019, the Company introduced performance stock units with vesting tied to achievement of Adjusted Sales or Adjusted Operating Income targets. In fiscal year 2019, the Compensation Committee reintroduced performance-based cash bonuses in connection with the hiring of Sherry Bahrambeygui, first as interim Chief Executive Officer, and later as permanent Chief Executive Officer. In fiscal year 2020, the Compensation Committee determined to incorporate annual cash bonuses as well as long-term performance-based equity into its executive compensation program for executives going forward, in addition to the practice updated in fiscal year 2018 of smaller annual grants of time-based equity with multi-year vesting. The Company’s Chief Executive Officer and Compensation Committee believe that creation of stockholder value requires accountability for the achievement of specific company objectives, both short-term and long term, and that performance-based cultures are correlated with increased stockholder value. Accordingly, the Chief Executive Officer and the Compensation Committee have sought to gradually increase the portion of compensation that is performance-based to provide incentives for achievement of annual objectives. The Company’s Chief Executive Officer and Compensation Committee also believe that direct linkages of executive pay with the Company’s stock price performance encourages and rewards an owner-operator mindset among the Company’s executives and incentivizes executives to take actions that generate long-term sustainable benefits to the Company, which are aligned with stockholders’ interests.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		21

Executive and Director Compensation (continued)

 

 

The chart below compares the components of target compensation for our Chief Executive Officer for fiscal year 2020 to the components of target compensation for our Chief Executive Officer for fiscal year 2021.

 

 

The chart below compares the components of target compensation for our Named Executive Officers other than our Chief Executive Officer for fiscal year 2020 to the components of target compensation for our Named Executive Officers other than our Chief Executive Officer for fiscal year 2021.

 

 

Purposes and Structure of the Executive Compensation Program

The objectives of the Company’s executive compensation program are to:

 

•

Attract, motivate and retain superior talent;

 

•

Encourage and reward high performance, collaboration and accountability; and

 

•

Align executive pay opportunities with Company performance and stockholder returns.

To achieve these objectives, the Compensation Committee evaluates the appropriate mix of cash and stock-based compensation and the appropriate weighting of performance-based and fixed compensation. In determining specific amounts and components of compensation, the Compensation Committee considers each officer’s role, position, performance, level of responsibility, skills and experience, and prior compensation awards, as well as market data, as more fully described below under “Elements of Compensation.”

 

22		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

The following table sets forth executive compensation and governance policies and practices we have implemented to advance the objectives of our executive compensation program and to align our practices and policies with industry best practices.

 

Practice						PriceSmart Policy
Alignment of Compensation and Stockholder Returns			✓			A material proportion of the total target compensation opportunity of our Named Executive Officers is long-term equity incentive awards.
Stock Ownership Requirements			✓			All of our executive officers and outside directors are subject to stock ownership requirements.
Extended Vesting for Performance Stock Units			✓			PSUs vest over three years with a one-year performance period.
Clawback Policy			✓			All of our executive officers are subject to a compensation clawback policy.
Independent Compensation Consultant			✓			The Compensation Committee engages an independent compensation consultant that reviews and advises the Compensation Committee on executive compensation. The consultant performs services solely for the Compensation Committee.
Anti-Hedging and Pledging Policy			✓			We do not allow executive officers or directors to enter into any hedging or pledging transactions relating to our common shares.
No Excise Tax Gross-Ups			✓			We do not pay excise tax gross ups under our employment agreements in the event of a change in control.
No Pension Plans or SERPs			✓			We do not sponsor any qualified or non-qualified defined benefit plans or supplemental executive retirement plans (SERPs) for our executive officers.
No Guaranteed Bonuses or Salary Increases			✓			We do not guarantee salary increases or provide guaranteed bonuses to any of our executive officers.
No Change in Control Severance Arrangements			✓			We have no severance arrangements specific to a change in control.
No Evergreen Provision in 2013 Equity Incentive Plan			✓			The 2013 Equity Incentive Plan does not provide for automatic share additions during its term.

Compensation Determination Process

The Compensation Committee reviews the compensation for our Chief Executive Officer and makes a recommendation to the full Board, which has ultimate authority for approval of such compensation. The Compensation Committee reviews and approves all compensation for our executive officers. Each year the Compensation Committee relies on multiple data points to assess the competitiveness of our executive compensation program and the individual compensation of our executives. Information the Compensation Committee uses to perform this analysis includes:

 

•

The Company’s performance against its financial and operational goals;

 

•

The mix of short-term and long-term compensation in the form of cash and equity-based compensation achieved in the prior year;

 

•

A review of information on the competitive market, with input from the Compensation Committee’s independent consultant;

 

•

The anticipated level of complexity and responsibility assigned to the executives given the Company’s strategic objectives; The expense to the Company of the proposed compensation for the following fiscal year relative to the Company’s budget; and

 

•

The dilution to stockholders from equity awards.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		23

Executive and Director Compensation (continued)

 

 

Use of Independent Compensation Consultant

In fiscal year 2020, the Compensation Committee retained Radford, which is part of the Rewards Solutions practice at Aon plc, as its independent executive compensation consultant. The consultant has no other business relationship with the Company and receives no payments from us other than the fees for services to the Compensation Committee. The consultant reports directly to the Compensation Committee, and the Compensation Committee may replace the consultant or hire additional consultants at any time.

During fiscal year 2020, the scope of the compensation consultant’s engagement included:

 

•

Conducting a review of competitive market information for our executive officers, including our Chief Executive Officer, for use in determining fiscal year 2020 compensation levels;

 

•

Reviewing and commenting, as requested by the Compensation Committee, on our executive compensation programs and opportunities;

 

•

Advising the Compensation Committee regarding the selection of the executive pay peer group discussed below under the heading “—Peer Group”;

 

•

Advising the Compensation Committee regarding performance-based components of our compensation program; and

 

•

Reviewing and commenting on the Compensation Committee’s report for the proxy statement.

Radford made recommendations regarding compensation for our Chief Executive Officer and also made recommendations with respect to our other Named Executive Officers. After gathering this input and receiving these recommendations, the Compensation Committee determined the compensation of our Named Executive Officers in executive session.

The Compensation Committee believes that long-term compensation plays an important role in encouraging positive results through collaboration, aligning the compensation of the senior management team to stockholder returns and in retaining key executives. In particular, the Compensation Committee believes that the Chief Executive Officer’s compensation should be more heavily weighted towards long-term incentives as compared to other members of senior management given her greater ability to affect the results of the Company and the importance of retaining her services.

Comparison of Short-Term Compensation and Long-Term, Equity-Based Compensation

The charts below show the percentage breakdown of short-term target compensation (comprised of salary, annual cash incentives, dividends paid on restricted stock, 401(k) contribution by the Company and miscellaneous perquisites) and long-term, equity-based target compensation (comprised of the dollar value of restricted stock awards and performance stock units that vested during the fiscal year based on the market value on the vesting date) for fiscal year 2020 for our Chief Executive Officer and for the other Named Executive Officers (other than Maarten Jager who resigned during the fiscal year).

 

 

 

24		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

Elements of Compensation

The compensation of our Named Executive Officers is comprised of base salaries, cash bonuses and long-term, equity-based incentives in the form of restricted stock awards and performance stock units.

Base Salary. Base salaries for the Named Executive Officers were initially established either when they were hired into the position from outside the Company or as they were promoted to increasing levels of responsibility within the Company. Base salaries for the Named Executive Officers are generally established based on the scope of their responsibilities, level of experience and individual performance, taking into account both external competitiveness and internal equity considerations. While the goal for the base salary component is to compensate executives at a level that is competitive with the salaries of executives in comparable positions among our peer group, the Compensation Committee does not attempt to set base salaries at a certain target percentile within the peer group. Instead, the Compensation Committee considers external market information only to confirm that its base salary determinations based on the other factors described above are competitive.

The Compensation Committee annually evaluates the base salary levels of the Named Executive Officers to ensure that there is consistency within the Company based upon scope of responsibility and also to ensure that the base salaries are appropriate relative to the peer companies listed below. In establishing changes to base salaries, the Compensation Committee may consider the overall financial condition of the Company but does not make changes to executive salaries based on the achievement of any particular financial criteria.

Annual Cash Incentive Awards. Each of our named executive officers participates in our annual cash incentive award program. The amount of the annual cash incentive award earned by named executive officers is based on corporate performance and, in some cases, achievement of pre-determined and quantifiable set of individual performance objectives set at the beginning of the performance period. On an annual basis with respect to our annual cash incentive award program, the Compensation Committee (1) selects one or more performance measures, (2) establishes threshold, target and maximum performance goals for each performance measure and (3) establishes for each named executive officer a target bonus amount that is earned at the threshold, target and maximum performance levels (with linear interpolation between the specified payout percentages). No annual cash incentive award based on corporate performance is earned if the Company does not meet the threshold performance goal. However, the Compensation Committee may consider the effect of the global pandemic and other linked economic and environmental pressures that may negatively impact results.

Fiscal 2020 Target Annual Cash Incentives

At the beginning of fiscal year 2020, the Compensation Committee set the target annual cash incentive amounts for fiscal year 2020 for each of our named executive officers set forth in the following table.

 

Named Executive Officer		Target Bonus				Actual Bonus
Sherry Bahrambeygui		$	1,000,000			$	1,032,500
Michael McCleary(1)			100,000				106,500
Maarten Jager(2)			120,000				46,218
William Naylon			120,000				127,800
Francisco Velasco			110,000				117,150
John Hildebrandt			94,800				100,962

(1)

Mr. McCleary’s target annual cash incentive was set in April 2020 upon his promotion to Executive Vice President and Chief Financial Officer but was structured to compensate him for service for the full fiscal year.

(2)

Represents pro rata annual cash incentive paid for the period beginning September 1, 2019 and ending January 10, 2020, the effective date of Mr. Jager’s resignation.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		25

Executive and Director Compensation (continued)

 

 

Fiscal 2020 Performance Measures

The Compensation Committee selected growth in Adjusted Sales or growth in Adjusted Operating Income as the sole performance measures for our executive officers other than Ms. Bahrambeygui. For Ms. Bahrambeygui, it was determined that 50% of her bonus would be based on achievement in growth of Adjusted Sales or Adjusted Operating Income and 50% based on key performance indicators approved by the Compensation Committee.

The Compensation Committee selected growth in Adjusted Sales and growth in Adjusted Operating Income as alternative performance measures for the annual cash incentive awards for fiscal 2020 because they believe they represent key indicators of the strength of our operating results and incentivizes the participants in our annual cash incentive award program to achieve strong revenue and earnings growth. It was determined that executives’ payouts would be based on the highest achievement under either growth in Adjusted Sales or growth in Adjusted Operating Income, not both. “Adjusted Sales” are measured as total revenues less revenues generated by the legacy businesses of our Aeropost subsidiary. “Adjusted Operating Income” is measured as reported operating income excluding revenues and expenses associated with our Aeropost subsidiary, including its legacy businesses; costs associated with development of PriceSmart.com and other technology development and digital transformation initiatives above and beyond the Company’s standard IT budget; and severance payments.

In the case of metrics based on growth in Adjusted Sales, if Adjusted Sales measured in U.S. dollars did not meet minimum or target growth percentages, executives could still achieve the same bonus percentage payouts if sales on a constant-currency basis achieve those minimum or target growth percentages. However, achievement of greater than target bonuses based on Adjusted Sales required achievement of greater than target growth in Adjusted Sales measured in U.S. dollars; there was no option for receiving greater than target bonuses based on Adjusted Sales measured on a constant-currency basis. Likewise, there was no metric based on growth in Adjusted Operating Income on a constant-currency basis. As used here, the term “constant-currency basis” refers to the calculation of revenues excluding the impact of foreign currency exchange rate fluctuations. We believe this measure provides a valuable means of evaluating period-to-period Adjusted Sales growth before the impact of foreign currency exchange issues that are outside our executive officers’ control.

In our audited financial statements for the year ended August 31, 2020, Total revenues is the most directly comparable GAAP financial measure to Adjusted Sales and Adjusted Sales determined on a constant-currency basis, and Operating income is the most directly comparable GAAP financial measure to Adjusted Operating Income. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure is contained in Appendix A.

The tables set forth below show payout levels as a percentage of target bonus based on minimum, target and overachievement levels for growth in Adjusted Sales (in U.S.$ or on a constant currency basis) and growth in Adjusted Operating Income. Maximum payout was set at 150% of target.

 

		GROWTH IN ADJUSTED SALES Over FY19																--OR--				GROWTH IN ADJUSTED OPERATING INCOME Over FY19
		in Constant Currency								in US $$												In US $$
		Growth				Payout				Growth				Payout								Growth				Payout
Min			1.50%				50%				1.50%				50%								1.50%				50%
Target			3.00%				100%				3.00%				100%								3.00%				100%
Overachievement possible only if target is met			n/a				n/a				4.00%				125%								5.00%				125%
			n/a				n/a				5.00%				150%								6.00%				150%

 

26		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

Fiscal 2020 Annual Cash Incentive Awards

To calculate the amount of the annual incentive awards earned under the 2020 bonus plan, if any, we first calculated Adjusted Sales and Adjusted Operating Income. We then determined the highest payout level achieved under either metric. For fiscal year 2020, growth in Adjusted Sales resulted in the highest payout percentages. We achieved growth in Adjusted Sales of 3.26%, resulting in payouts equal to 106.5% of target for our executive officers other than Ms. Bahrambeygui and 106.5% of 50% of target for Ms. Bahrambeygui.

For fiscal year 2020, the Compensation Committee established the following individual performance metrics:

 

•

Increase long-term stockholder returns by achieving specific strategic objectives in support of a long-term corporate strategy of creating a nimble, digitally enabled retailer that can respond to the fast-changing retail environments where we operate and enhancing the member experience, leading to increased member reliance on our services; and

 

•

Increase short-term stockholder returns by simplifying organization and streamlining operations and supply chains.

Following the end of the fiscal year, the Compensation Committee assessed each of the individual performance goals for Ms. Bahrambeygui against the specific, quantifiable targets established for each goal. The Committee determined that Ms. Bahrambeygui’s weighted average achievement level was 103%, despite the significant business disruptions introduced by the COVID pandemic, resulting in her receiving 100% of the portion of her target bonus based on individual achievement.

The following table sets forth for fiscal 2020 the target annual cash incentive amount and the actual annual cash incentive earned by each named executive officer:

 

Named Executive Officer		Target Amount				Corporate Performance				Individual Performance				Amount Earned
Sherry Bahrambeygui		$	1,000,000			$	532,500			$	500,000				$1,032,500
Michael McCleary			100,000				106,500				N/A				106,500
Maarten Jager			200,000				46,218				N/A				46,218	(1)
William Naylon			120,000				127,800				N/A				127,800
Francisco Velasco			110,000				117,150				N/A				117,150
John Hildebrandt			94,800				100,962				N/A				100,962

 

(1)	Represents pro rata annual cash incentive paid for the period beginning September 1, 2019 and ending January 10, 2020, the effective date of Mr. Jager’s resignation.

Long-Term Incentive Compensation and Performance-based Equity Compensation. We believe that long-term incentives for higher-level executives are consistent with the values and culture of the Company and therefore should be an integral and heavily weighted part of the overall executive compensation program. Direct linkages of executive pay with the Company’s stock price performance encourages and rewards an owner-operator mindset among the Company’s executives and incentivizes executives to take actions that generate long-term sustainable benefits to the Company.

PriceSmart uses restricted stock and performance stock units as long-term incentive vehicles because:

 

•

restricted stock and the related vesting period help attract and retain executives;

 

•

the value received by the recipient of an award of restricted stock or performance stock units is enhanced as our stock price increases; therefore, restricted stock and performance stock units promote teamwork and collaboration and enhance the executives’ incentives to increase the stock price consistent with stockholders’ interests; and

 

•

restricted stock and performance stock units help to provide a balance to the overall executive compensation program as restricted stock rewards executives for increases in stockholder value over the longer term.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		27

Executive and Director Compensation (continued)

 

 

PriceSmart historically has awarded restricted stock with time-based vesting to its Named Executive Officers, but the Compensation Committee determined that performance-based equity is an important tool alongside grants of restricted stock with time-based vesting. The Compensation Committee believes that these two equity instruments—performance stock units and restricted stock—will work together to provide the Company’s executives a competitive pay opportunity that focuses executives on maximizing stockholder value over the long term.

In fiscal year 2017, the Compensation Committee decided that the Company should make smaller annual grants of restricted stock vesting over a period of three years instead of the larger, periodic grants vesting over five or more years the Compensation Committee had previously made. In moving to annual awards, the Compensation Committee noted that moving to smaller, but more frequent, awards would give the Compensation Committee greater flexibility to adjust awards to take into account:

 

•

an individual’s value to the Company, including any extraordinary skills or characteristics which might warrant special consideration;

 

•

changes in external benchmarks;

 

•

changes in internal benchmarks, addressing morale and fairness issues;

 

•

an individual’s trend in compensation relative to changes in the financial performance of the Company; and

 

•

fiscal responsibility and appropriateness given the short- and long-term performance of the Company.

The Compensation Committee also noted that annual awards would allow the Company to have better fiscal control of the compensation program; would more easily allow for the implementation of pay-for-performance metrics; and would help prevent hardship or windfall scenarios in future.

In determining the number of shares of restricted stock and performance stock units to be granted to our Named Executive Officers, the Compensation Committee takes into account the individual’s position, scope of responsibility, ability to affect profits and stockholder value, and the value of restricted stock in relation to other elements of the individual executive’s total compensation and market competitive data. All awards of restricted stock and performance stock units to our executive officers are made by the Compensation Committee.

For fiscal year 2020, the Compensation Committee used the same performance criteria for performance stock units for all executive officers, including Ms. Bahrambeygui, as it did for cash bonuses for executive officers other than Ms. Bahrambeygui—growth in Adjusted Sales or growth in Adjusted Operating Income. The table below shows minimum, target and overachievement amounts for PSU awards. Maximum payout was 150% of target.

 

		GROWTH IN ADJUSTED SALES Over FY19																--OR--				GROWTH IN ADJUSTED OPERATING INCOME Over FY19
		in Constant Currency								in US $$												In US $$
		Growth				Payout				Growth				Payout								Growth				Payout
Min			1.50%				50%				1.50%				50%								1.50%				50%
Target			3.00%				100%				3.00%				100%								3.00%				100%
Overachievement possible only if target is met			n/a				n/a				4.00%				125%								5.00%				125%
			n/a				n/a				5.00%				150%								6.00%				150%

To calculate the amount of PSUs awards earned under the fiscal year 2020 awards, if any, we first calculated Adjusted Sales and Adjusted Operating Income. We then determined the highest payout level achieved under either metric. For fiscal year 2020,

 

28		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

growth in Adjusted Sales resulted in the highest payout percentages. We achieved growth in Adjusted Sales of 3.26%, resulting in payouts equal to 106.5% of target. Following satisfaction of performance targets, PSUs effectively become time-vested RSUs that vest over a three-year period from the date of the award.

Our Named Executive Officers recognize taxable income from restricted stock and performance stock units when and as shares vest. On each vesting date, the Company repurchases a portion of the shares vesting on such vesting date from the participant to cover the tax obligations triggered by the vesting. The Company repurchases the shares at their fair market value on the date of vesting and pays this amount directly to the taxing authorities. The Company generally receives a corresponding tax deduction for compensation expense in the year of vesting, subject to limits on the deductibility of compensation in excess of $1.0 million paid to certain executives under Internal Revenue Code Section 162(m). The amount included in the participant’s wages upon such vesting, and, subject to Section 162(m), the amount we may deduct, is equal to the fair market value of a share of Common Stock on the date the shares vest, multiplied by the number of shares vesting.

Other Benefits. PriceSmart’s Named Executive Officers are eligible to participate in all of our employee benefit plans, such as our 401(k) plan and our medical, dental, vision, long and short-term disability and life insurance plans, in each case on the same basis as other employees. We also provide LifeLock identity theft protection services for our executive officers. We reimbursed moving expenses and provided a two-year housing allowance of $60,000 per year for our former Chief Financial Officer. The Compensation Committee believes that these perquisites are no greater than competitors’ practices.

Fiscal Year 2020 Compensation of Named Executive Officers

Salary. Except for Mr. McCleary, the Named Executive Officers did not receive salary increases in fiscal year 2020. In April 2020, in recognition of pay reductions being implemented for U.S.-based rank and file employees, members of the executive team agreed to voluntary salary reductions for May, June and July 2020, including reductions of 30% for such period in the case of Ms. Bahrambeygui, and 15% for such period for the other Named Executive Officers.

Effective April 1, 2020, the Board of Directors promoted Mr. McCleary to Executive Vice President and Chief Financial Officer. Mr. McCleary had held the CFO position in an interim role since December 10, 2019. Mr. McCleary joined the Company as Vice President and Corporate Controller in 2003 and was subsequently promoted to Senior Vice President and Corporate Controller. In connection with his promotion to Executive Vice President and Chief Financial Officer, the Company increased Mr. McCleary’s salary to $500,000 per year, effective April 1, 2020.

Bonus. In September 2019 (fiscal year 2020), the Compensation Committee set Ms. Bahrambeygui’s target bonus under the 2020 bonus plan at 100% of Ms. Bahrambeygui’s salary and set other executive officers’ (other than Mr. McCleary) target bonuses at 20% of their salaries. In April 2020, the Compensation Committee set a fiscal year 2020 target bonus of $100,000 for Mr. McCleary, which will not be pro-rated for Mr. McCleary’s period of service as Executive Vice President and Chief Financial Officer. As noted above, the Company achieved Adjusted Sales of 3.26%, resulting payouts equal to 106.5% of target for our executive officers other than Ms. Bahrambeygui and 106.5% of 50% of target for Ms. Bahrambeygui.

As discussed above, with respect to the 50% portion of Ms. Bahrambeygui’s bonus based on individual achievement, the Compensation Committee assessed each of the individual performance goals for Ms. Bahrambeygui against the specific, quantifiable targets established for each goal. The Committee determined that Ms. Bahrambeygui’s weighted average achievement level was 103%, despite the significant business disruptions introduced by the COVID pandemic, resulting in her receiving 100% of 50% of her target bonus.

Please see the tables on page 25 above for information about the target bonus amounts and actual payouts for our executive officers.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		29

Executive and Director Compensation (continued)

 

 

In addition, to recognize Ms. Bahrambeygui’s extraordinary efforts and achievements leading the Company through the COVID-19 pandemic, the Compensation Committee also awarded her a special bonus of $500,000.

Equity Incentive Awards. In September 2019 (fiscal year 2020), the Compensation Committee made grants of performance stock units and restricted stock to the Named Executive Officers other than Mr. McCleary. The grants to these Named Executive Officers were comprised of approximately 2/3 restricted stock and 1/3 performance stock units with a three-year vesting schedule and the same performance criteria described above. In April 2020, the Compensation Committee awarded Mr. McCleary a special grant of 6,672 shares of restricted stock and 2,736 performance stock units.

To calculate the amount of PSUs awards earned under the fiscal year 2020 awards, if any, we first calculated Adjusted Sales and Adjusted Operating Income. We then determined the highest payout level achieved under either metric. For fiscal year 2020, growth in Adjusted Sales resulted in the highest payout percentages. We achieved growth in Adjusted Sales of 3.26%, resulting in achievement of performance criteria with respect to 106.5% of the target shares subject to the PSUs.

In July 2020, the Compensation Committee made special restricted stock awards to the Named Executive Officers, with a 15-month vesting schedule, in recognition of the extraordinary efforts and sacrifices they made in leading the Company during the COVID-19 pandemic. These awards were extraordinary grants, which were not intended to be counted against executives’ target compensation or to offset the amount of their voluntary salary reductions.

Peer Group

The Compensation Committee establishes individual executive compensation at levels the Compensation Committee believes are comparable with those of executives in other companies of similar size and stage of development operating in retail industries, taking into account our own strategic goals and our relative performance. Management utilized the Aon TCM (Total Compensation Measurement) Survey, the Mercer Benchmark Database and additional competitive information provided by our compensation consultant.

PriceSmart is the largest operator of membership warehouse clubs in Latin America and the Caribbean. We are incorporated and headquartered in the U.S., but the large majority of our retail and operational footprint is international. The Company operates in 13 different countries and territories, each with unique characteristics and a variety of currencies, and tax and legal regimes, and sometimes in challenging geopolitical markets. We seek to maximize the value of PriceSmart membership to members by operating a low-margin model focused on providing the best possible value on high-volume products, which are tailored to a large and exclusively international member base. This requires our management team to focus on purchasing, supply chain and other operational efficiencies.

There are few publicly traded companies in the U.S. that have a similar profile to PriceSmart’s in terms of operating model, customer focus and geographic footprint. The complexities of our business show up in our daily operations in navigating different local and international laws, local customs and preferences, political changes and foreign currency conversions. We are not like many traditional retailers, which is evidenced to a degree by the fact that only one public company in the U.S.—BJ’s Wholesale Club—names PriceSmart as a peer company in its proxy. The other most directly comparable company to PriceSmart is Costco Wholesale Corporation, whose size relative to PriceSmart’s makes comparisons impractical for executive compensation purposes.

In developing a peer group for executive pay purposes, we started with a premise that a diverse set of US-based retailers and grocers would be most reflective—though not fully reflective—of our Company’s business focus and managerial complexity, as well as the market within which we compete for executive-level talent. In July 2020, the Compensation Committee, with advice from its independent executive compensation consultant, approved an executive pay peer group made up of the 21 US-based retailers and grocers listed below. The Company will use the peer group to monitor competitive pay levels for executives and as a

 

30		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

reference when evaluating our effectiveness and appropriateness of our executive compensation programs and practices. However, the Compensation Committee noted that no single company identified as a peer has all of the key characteristics of PriceSmart, but each has some of the attributes. As a result, the Compensation Committee will monitor and adjust this peer group from time to time to ensure continuing relevance with our company size, the complexities associated with our international footprint, our business strategy and our executive talent needs.

The executive pay peer group consists of the following companies:

 

Abercrombie and Fitch		Five Below		Sprouts Farmers Market
Big Lots		Fossil		StitchFix
BJ’s Wholesale Club		Fresh Del Monte Produce		The Andersons
Burlington Stores		Guess?		The Chefs’ Warehouse
Chewy		Ingles Market		ULTA
Dillard’s		Mercado Libre		Village Super Market
DSW		Revlon		Weis Markets

These companies were identified based on the following criteria:

 

•

Consumer staples and consumer durables. The Compensation Committee assigned priority to companies in the consumer staples and consumer durables sectors.

 

•

Comparable scale by revenue and market capitalization. At the time the Compensation Committee established the peer group, the 21 companies reported annual revenue ranging roughly from 0.3x to 3.0x PriceSmart’s trailing twelve months revenue as of July 2020 of $3.3 billion and had market capitalizations of 0.3 to 3.0x PriceSmart’s 30-day average market capitalization of $1.8 billion as of July 3, 2020. The Compensation Committee also assigned priority to companies with sustained financial performance in terms of annual growth rates and profitability.

 

•

Comparable companies used by proxy advisors. In identifying the peer group, the Compensation Committee took note of the criteria proxy advisors will apply when determining their “Say on Pay” recommendations.

 

•

Sustainable growth. The Compensation Committee assigned priority to comparable companies that demonstrated opportunities for growth without over- or under-extending.

 

•

Significant international presence. The peer group shows a preference for retailers and grocers with a strong international presence to reflect the complexities that PriceSmart faces in its international operations. PriceSmart’s international orientation is among the highest of its peer group at 100% of sales from outside the U.S.

 

•

Comparability to PriceSmart’s membership-based, club model. The Compensation Committee assigned priority to potential peers that have membership-based or loyalty-type programs. Consideration is also given to operating margins and the intensiveness of supply chain and logistics, more broadly.

 

•

Comparability in store format. Companies with larger store formats were prioritized over those retailers with more, but smaller store formats.

This peer group for fiscal year 2020 is the same as the group the Compensation Committee used for fiscal year 2019, except that Neiman Marcus Group and Smart & Final Stores, which were included in the peer group for fiscal year 2019, are no longer included because they ceased to be SEC reporting companies in 2019. Based on the recommendation of Radford, the Compensation Committee added Chewy and Revlon to its peer group to replace the two companies that dropped out. These companies were selected because they were deemed to be the “best fit” in terms of financial profile and business/product focus.

 

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Executive and Director Compensation (continued)

 

 

Radford also provided to the Compensation Committee published survey data capturing public cash and equity compensation data. Survey data is collected from the Aon TCM (Total Compensation Measurement) Survey with the following data cuts—consumer staples and durables companies with between $1 billion and $10 billion in annual revenues and market capitalizations between $600 million and $5.3 billion.

To determine market-competitive executive pay levels, Radford weighted named peer proxy data at 50% and broad survey data at 50% to create a competitive market composite.

For fiscal year 2020, as a part of its compensation program review process, the Compensation Committee assessed base salary, target annual incentive opportunity, target total cash compensation, annual long-term incentive delivery, retention analysis and the Company’s current aggregate equity usage compared to peer group and survey data. The Compensation Committee noted substantial variation between the compensation levels and pay mix of similarly situated executives, particularly when evaluating the competitiveness of the Company’s long-term incentive awards. After evaluating PriceSmart’s target pay opportunities against these external benchmarks, the Compensation Committee determined that salaries are competitive at market median (with some individual variation), annual incentive opportunity significantly lags the market, long-term incentives are at the low end of the competitive market and total direct compensation (i.e., cash plus equity) is at the low end of the competitive market. The Compensation Committee made this assessment prior to the special stock awards to executive officers to recognize their efforts in connection with the COVID-19 pandemic.

Additionally, the Compensation Committee evaluated Ms. Bahrambeygui’s target pay opportunity against the competitive market composite and found that her base salary, target total cash, long-term incentive and target total direct compensation were less than the median. The Compensation Committee’s assessment did not take into account Ms. Bahrambeygui’s special stock award and cash bonus relating to her efforts leading the Company through the COVID-19 pandemic.

The Compensation Committee believes that where it is reasonable and practical, the competitiveness of the Company’s executive compensation should be determined by comparing total remuneration to average performance at approximately the 50th percentile of a peer group and general market survey. However, the Compensation Committee recognizes that it is in PriceSmart’s interest to recognize the complexities of the retail global market and compensate accordingly. Our compensation needs to reflect that we need to draw and retain superior talent to address the complexities of our markets. Further, to the extent individual and company performance exceeds expectations, compensation should follow. For example, if top quartile performance is achieved, compensation should likewise be in the top quartile.

Compensation data for the peer group of companies and survey data are among only two of the many factors the Compensation Committee considers in setting compensation for PriceSmart’s Named Executive Officers, and actual compensation may vary based on the Compensation Committee’s review of other considerations, including the Company’s and the individual Named Executive Officer’s performance and the value of the executive’s leadership and other skills to the Company.

Severance and Change in Control Payments

We have entered into agreements and maintain plans that require us to make payments and/or provide benefits to our Named Executive Officers under specified circumstances in the event of a termination of their employment without cause or a change in control. We provide for certain severance benefits in the event that a Named Executive Officer’s employment is involuntarily terminated. Such severance benefits are designed to alleviate the financial impact of an involuntary termination through salary continuation and are intended to provide for a stable work environment. We believe that reasonable severance benefits for our Named Executive Officers are important because it may be difficult for our executive officers to find comparable employment within a short period of time following certain qualifying terminations. In addition to normal severance, we provide for accelerated vesting of the time-based component of all equity awards for all employees in the event of a change in control as a means of reinforcing and encouraging the continued attention and dedication of our employees to their duties of employment without

 

32		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

personal distraction or conflict of interest in circumstances which could arise from the occurrence of a change in control. We believe that the interests of stockholders will be best served if the interests of our senior management are aligned with them, and providing these change-in-control benefits should eliminate, or at least reduce, the reluctance of senior management to pursue potential change in control transactions that may be in the best interests of stockholders.

The Company provides severance, continuity and change-in-control benefits because they are essential to help us fulfill our objectives of attracting and retaining key managerial talent. These agreements are intended to be competitive with those of similarly sized companies in our industry and company size and to attract and retain highly qualified individuals. While these arrangements form an integral part of the total compensation provided to these individuals and are considered by the Compensation Committee when determining executive officer compensation, the decision to offer these benefits did not influence the Compensation Committee’s determinations concerning other direct compensation or benefit levels.

Say-on-Pay Feedback from Stockholders

At our 2020 Annual Meeting of Stockholders, we sought an advisory vote from our stockholders regarding our executive compensation program and received a 96.2% favorable vote supporting the program, excluding abstentions and broker non-votes. For fiscal year 2020, the Compensation Committee considered the results of the advisory vote as part of its annual review of the compensation provided to our Named Executive Officers and other executives. The Compensation Committee will continue to consider the outcome of our say-on-pay votes when making future compensation decisions for the Company’s executive officers.

Stock Ownership Guidelines and Hedging and Pledging Prohibition

To further align executive and stockholder interests, we have adopted stock ownership guidelines for our executives and non-employee directors. The guidelines require our Chief Executive Officer to hold Common Stock with a value of at least five times his or her base salary and our other executive officers to hold Common Stock with a value of at least one times their respective base salaries. The guideline for non-employee directors is three times their annual cash compensation (excluding additional fees, if any, payable for service on any Board committee). Until such time as an executive or non-employee director satisfies the minimum ownership requirement set forth herein, such executive or non-employee directors is required to hold 50% of the equity awards granted by the Company on or after the date such executive or non-employee director becomes subject to these guidelines (“Covered Equity Awards”). All in-the-money vested stock options, time-based restricted stock, time-based restricted stock units, and earned performance awards that are then subject to time-based vesting shall satisfy the stock ownership guidelines without reduction for any portion of an award that may be subject to forfeiture to satisfy tax withholding that may be triggered upon vesting. The guidelines do not restrict an executive or non-employee director’s sale of shares that he or she held prior to becoming subject to these guidelines or that the executive or non-employee director acquired in any manner other than through Covered Equity Awards; provided that an executive or non-employee director may, at his or her sole option, elect to have the Company take into account shares that he or she held prior to becoming subject to the guidelines or that he or she acquired in any manner other than through Covered Equity Awards.

After an executive or non-employee director satisfies the minimum ownership requirement as of a measurement date, he or she will be deemed to be in compliance with the stock ownership guidelines notwithstanding subsequent changes in the value of his or her shares or any increase in his or her compensation. However, if after achieving the minimum ownership requirement, an executive or non-employee director drops below the minimum ownership requirement because of changes in the value of his or her stock ownership or an increase in his or her compensation, he or she will be expected to hold 50% of the Covered Equity Awards granted by the Company (net of amounts required to satisfy any applicable tax obligations arising in connection with the exercise or vesting of any equity award) that vest on or after the date he or she drops below the minimum ownership requirement until such time as he or she is then in compliance with the applicable minimum ownership requirement; provided, however, that

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		33

Executive and Director Compensation (continued)

 

 

executives and non-employee directors may immediately sell shares (i) acquired upon the exercise of stock options for the limited purposes of paying the exercise price of the stock option, and (ii) to satisfy any applicable tax obligations arising in connection with the exercise or vesting of any equity award.

The Compensation Committee has the discretion to waive compliance with these guidelines on a case-by-case basis for any executive officer, and the Board of Directors has the discretion to waive compliance with these guidelines on a case-by-case basis for any non-employee director, who, due to his or her particular financial circumstances or other special circumstances, would incur a hardship by complying with these guidelines.

In addition to the minimum stock ownership requirements, we do not allow our executive officers or non-employee directors to enter into any hedging, pledging or monetization transactions involving our Common Stock.

Recoupment Policy

We adopted a Compensation Recoupment Policy effective as of September 19, 2017. The recoupment (or “clawback”) policy provides the Compensation Committee with broad discretion to recoup certain incentive awards made to the Company’s executive officers when it determines that (1) an executive engaged in serious misconduct or failed to supervise a subordinate employee who engaged in serious misconduct which the executive knew, or was reckless in not knowing, was occurring, and (2) such misconduct resulted in a material violation of law or a written Company policy that caused significant financial or reputational harm to the Company. This clawback policy is broader than current and expected regulatory requirements. The policy can be found on the Corporate Governance section of our website.

Compensation Committee Report

We have reviewed and discussed with management the Compensation Discussion and Analysis required to be included in this Proxy Statement. Based on the reviews and discussions referred to above, we recommend to the Board of Directors that the Compensation Discussion and Analysis referred to above be included in our Proxy Statement.

The foregoing has been furnished by the Compensation Committee.

Beatriz Infante

Leon C. Janks

Gary Malino

 

34		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

Executive Compensation

Summary of Compensation

The following table sets forth the compensation for fiscal year 2020 by any person who served as our Chief Executive Officer or Chief Financial Officer during the fiscal year and the three other most highly compensated executive officers who were serving as executive officers at August 31, 2020. These persons are referred to as the Company’s “Named Executive Officers” elsewhere in this Proxy Statement.

 

Name and Principal Position			Fiscal Year				Salary ($)				Bonus ($)				Stock Awards ($)(1)				Non-Equity Incentive Plan Compensation ($)				All  Other Compensation ($)				Total ($)
Sherry Bahrambeygui
—Chief Executive Officer and President(2)
			2020				$925,000				$500,000				$3,718,415				$1,032,500				$70,161(4)				$6,246,076
			2019				755,208				729,300				4,428,493	(3)			—				68,195(4)				5,981,196
Michael L. McCleary
—Executive Vice President and Chief Financial Officer
			2020				371,754				150,000				804,235				106,500				25,705(5)				1,458,194
Maarten O. Jager
—Former Executive Vice President and Former Chief Financial Officer
			2020				218,462				115,000				—				46,218	(6)			460,609(6)				840,289
			2019				600,000				—				395,442				—				174,641(6)				1,170,083
			2018				186,538				—				2,462,887				—				124,189(6)				2,773,614
William J. Naylon
—Executive Vice President and Chief Operating Officer
			2020				577,500				—				881,882				127,800				28,573(7)				1,615,755
			2019				591,259				—				611,312				—				28,813(7)				1,231,384
			2018				543,526				—				—				—				35,277(7)				578,803
Francisco Velasco
—Executive Vice President, Secretary and General Counsel
			2020				529,375				—				711,430				117,150				23,086(8)				1,381,041
			2019				550,000				—				101,445				—				16,395(8)				667,840
			2018				427,579				—				422,369				—				16,422(8)				866,370
John Hildebrandt
—Executive Vice President
			2020				456,225				—				517,336				100,962				21,370(9)				1,095,893
			2019				465,698				—				101,765				—				18,883(9)				586,346
			2018				421,418				—				—				—				20,947(9)				442,365

(1)

Represents the aggregate grant date fair value of the restricted stock awards and performance stock units granted to the Named Executive Officers in the relevant fiscal year in accordance with FASB Accounting Standards Codification ASC 718, “Share-Based Payment” (“ASC 718”). For information regarding assumptions made in connection with this valuation, please see Note 7 Stock Based Compensation to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020, filed with the SEC on October 30, 2020. Restricted stock awards and restricted stock units have not been granted on an annual basis.

(2)	Ms. Bahrambeygui was appointed interim Chief Executive Officer effective November 16, 2018 and became Chief Executive Officer on January 30, 2019.

 

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Executive and Director Compensation (continued)

 

 

(3)

Excludes $1,549,676 in grant value of stock awards forfeited by Ms. Bahrambeygui in connection with her moving from interim to permanent Chief Executive Officer. In February 2019, Ms. Bahrambeygui and the Compensation Committee agreed to terminate continued vesting of the stock awards made to her in connection with her becoming interim Chief Executive Officer and replace such awards with new awards appropriate for her becoming permanent CEO. As a result, Ms. Bahrambeygui vested in only the pro rata portion of the awards made to her as interim Chief Executive Officer associated with the period during which she served in that role.

(4)

For fiscal year 2020, represents dividend payments of $53,061 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $17,100. For fiscal year 2019, represents dividend payments of $29,035 on unvested restricted stock awards, 401(k) contributions made by the Company totaling $11,200 and a transition payment of $27,960.

(5)	For fiscal year 2020, represents dividend payments of $5,556 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $20,149.

(6)

Mr. Jager resigned effective January 10, 2020. The non-equity incentive plan compensation was pro rated based on the period of his service ending as of the effective date of his resignation. For fiscal year 2020, represents severance of $375,000, payout of accrued vacation of $41,705, dividend payments of $1,850 on unvested restricted stock awards, 401(k) contributions made by the Company totaling $4,809, COBRA benefits for Mr. Jager’s spouse of $15,595 and a housing allowance of $21,650 on a grossed up basis. For fiscal year 2019, represents dividend payments of $13,084 on unvested restricted stock awards, 401(k) contributions made by the Company totaling $16,700, a housing allowance of $60,000 on a grossed up basis and a tax gross up payment of $84,857 related to reimbursement of relocation expenses. For fiscal year 2018, represents 401(k) contributions made by the Company totaling $4,400. Also includes, a housing allowance of $20,000 on a grossed up basis and reimbursement of relocation expenses of $99,789.

(7)

For fiscal year 2020, represents dividend payments of $15,673 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $12,900. For fiscal year 2019, represents dividend payments of $17,613 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $12,900. For fiscal year 2018, represents dividend payments of $24,277 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $11,000.

(8)

For fiscal year 2020, represents dividend payments of $7,561 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $15,525. For fiscal year 2019, represents dividend payments of $5,195 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $11,200. For fiscal year 2018, represents dividend payments of $5,422 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $11,000.

(9)

For fiscal year 2020, represents dividend payments of $7,995 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $13,375. For fiscal year 2019, represents dividend payments of $7,683 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $11,200. For fiscal year 2018, represents dividend payments of $9,947 on unvested restricted stock awards and 401(k) contributions made by the Company totaling $11,000.

 

36		PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement

Executive and Director Compensation (continued)

 

 

Grants of Plan-Based Awards

The following table sets forth certain information with respect to grants of plan-based awards for the fiscal year ended August 31, 2020 to the Named Executive Officers.

 

				Estimated Future Payouts under Non-Equity Incentive Plan Awards(1)												Estimated Future Payouts under Equity Incentive Plan Awards												All Other Stock Awards: Number of Shares				Grant Date Fair Value Stock and Option ($)(2)
Name		Grant Date		Threshold (#)				Target (#)				Maximum (#)				Threshold (#)				Target (#)				Maximum (#)
Sherry Bahrambeygui
		—			$500,000				$1,000,000				$1,250,000				—				—				—				—				$—
		9/27/2019(4)															—				—				—				32,739				2,352,625
		7/29/2019(4)															—				—				—				5,040				334,958
		10/16/19(5)															7,173				14,345				21,518				—				1,030,832
Michael L. McCleary
		—			50,000				100,000				150,000				—				—				—				—				—
		1/28/2020(4)															—				—				—				1,500				94,470
		3/6/2020(4)															—				—				—				947				51,877
		4/1/2020(5)															1,368				2,736				4,104				—				143,777
		4/1/2020(4)															—				—				—				6,672				350,614
		7/20/2020(4)															—				—				—				2,520				163,498
		10/16/19(5)															1,368				2,736				4,104				—				196,609
Maarten O. Jager(3)
		—			60,000				120,000				180,000				—				—				—				—				—
		10/16/19(5)															2,101				4,201				6,302				—				301,884
William J. Naylon
		—			60,000				120,000				180,000				—				—				—				—				—
		9/27/2019(4)															—				—				—				7,029				505,104
		7/20/2020(4)															—				—				—				2,520				163,498
		10/16/19(5)															1,484				2,968				4,452				—				213,280
Francisco Velasco
		—			55,000				110,000				165,000				—				—				—				—				—
		9/27/2019(4)															—				—				—				5,316				382,008
		7/20/2020(4)															—				—				—				2,520				163,498
		10/16/19(5)															1,155				2,309				3,464				—				165,925
John Hildebrandt
		—			47,400				94,800				142,200				—				—				—				—				—
		9/27/2019(4)															—				—				—				3,561				255,893
		7/20/2020(4)															—				—				—				2,520				163,498
		10/16/19(5)															682				1,363				2,045				—				97,945

 

(1)

The amounts in the columns under “Estimated Future Payouts under Non-Equity Incentive Plan Awards” represent our named executive officers’ threshold, target and maximum annual incentive award levels, respectively, for fiscal 2020 pursuant to the 2020 bonus plan, which annual incentive award levels are further described in the “Elements of Compensation” section of the “Compensation Discussion and Analysis.” In fiscal year 2020, the Company achieved growth in Adjusted Sales of 3.26%, resulting in satisfaction of the performance criteria at the 106.5% level.

(2)

Represents the aggregate grant date fair value of the restricted stock awards and performance stock units granted to the Named Executive Officers in the relevant fiscal year in accordance with FASB Accounting Standards Codification ASC 718, “Share-Based Payment” (“ASC 718”). For information regarding assumptions made in connection with this valuation, please see Note 7 Stock-Based Compensation to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020, filed with the SEC on October 30, 2020.

(3)	Mr. Jager resigned as Chief Financial Officer effective January 10, 2020. As a result, all of the awards referenced next to his name in this table were canceled prior to vesting.

(4)	Award of restricted stock with time-based vesting.

 

PriceSmart, Inc. Notice of Annual Meeting of Stockholders and 2020 Proxy Statement		37