UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

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THE ODP CORPORATION

(Name of Registrant as Specified In Its Charter)

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

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		THE ODP CORPORATION

2021 ANNUAL MEETING NOTICE

and PROXY STATEMENT

March 12, 2021

 

 

 

NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS

To the Shareholders of The ODP Corporation:

 

Wednesday, April 21, 2021                      9:00 a.m. Eastern Time		The ODP Corporation www.virtualshareholdermeeting.com/ODP2021		Record Date Close of business February 25, 2021

Items of Business:

1. To elect ten (10) members of the Company’s Board of Directors named in, and for the term, described in the Proxy Statement;

2. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal year 2021;

3. To approve The ODP Corporation 2021 Long-Term Incentive Plan;

4. To approve, in a non-binding, advisory vote, the Company’s executive compensation; and

5. To consider such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

Only shareholders of record at the close of business on February 25, 2021 (“Record Date”) are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.

Pursuant to rules promulgated by the U.S. Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials by notifying you of the availability of our proxy materials on the Internet. Instead of mailing paper copies of our proxy materials, we sent shareholders the Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on April 21, 2021, with instructions for accessing the proxy materials and voting via the Internet (the “Notice”). The Notice, which was mailed on or around March 12, 2021, also provides information on how shareholders may obtain paper copies of our proxy materials if they so choose. The Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 26, 2020 (“2020 Annual Report”) may be accessed at www.proxyvote.com. If requested, certain shareholders were sent a full set of printed proxy materials or an email with instructions on how to access the proxy materials electronically based on their previously indicated delivery preferences.

Your vote is important. To ensure your shares are voted, you may vote your shares over the Internet, by telephone or by requesting a proxy card to complete, sign and return by mail. Internet and telephone voting procedures are described in the section “Questions and Answers About Our Annual Meeting” beginning on page 94 of the Proxy Statement and on the proxy card.

Due to the COVID-19 pandemic, for the safety of our associates, including our shareholders, and in accordance with federal, state and local guidance, we have determined that the 2021 Annual Meeting will be held in a virtual meeting format only, via a live webcast, with no physical in-person meeting. If you plan to participate in the virtual meeting, please see “Questions and Answers About Our Annual Meeting” beginning on page 94. Shareholders will be able to attend, vote, submit questions and view the shareholder list during the Annual Meeting from any location via the Internet. A technical support phone number will be posted on the virtual meeting log-in page if you experience technical difficulties during the check-in process or during the webcast.

 

By Order of the Board of Directors,

Lorna R. Simms

Corporate Secretary

Boca Raton, Florida

March 12, 2021

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON APRIL 21, 2021. Financial and other information concerning The ODP Corporation is contained in our 2020 Annual Report. The Proxy Statement and 2020 Annual Report are available free of charge at www.proxyvote.com, a site that does not have “cookies” that identify visitors to the site.

		TABLE OF CONTENTS

 

TABLE OF CONTENTS

 

 

The ODP Corporation  |  2021 Proxy Statement

Proxy Statement Summary

 

 

Proxies are being solicited by the Board of Directors of The ODP Corporation (“ODP,” the “Company,” “we,” or “our”) to be voted at our Annual Meeting of Shareholders to be held virtually on Wednesday, April 21, 2021 at 9:00 a.m. Eastern Time (“Annual Meeting”). The proxy materials were first made available to shareholders on or about March 12, 2021. This summary provides an overview of selected information in the Proxy Statement. We encourage you to read the entire Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 26, 2020 (“2020 Annual Report”) before voting. Questions and Answers about our Annual Meeting can be found beginning on page 94.

Annual Meeting Agenda and Voting Recommendations

 

Agenda Item		Board Vote Recommendation		Page Reference
Proposal 1: Election of ten Directors named in, and for the term, described in the Proxy Statement		✓ FOR ALL NOMINEES		7
Proposal 2: Ratification of the appointment of the independent registered public accounting firm		✓ FOR		39
Proposal 3: Approval of The ODP Corporation 2021 Long-Term Incentive Plan		✓ FOR		41
Proposal 4: Approval, in a non-binding advisory vote, of the Company’s executive compensation		✓ FOR		93

Casting your vote:

 

•

Your vote is very important. Please cast your vote immediately, but no later than 11:59 p.m. Eastern Time on April 20, 2021.

 

•

For more information on how to cast your vote, please see page 95:

 

INTERNET		PHONE		MAIL		VIA LIVE WEBCAST
Visit www.proxyvote.com. You will need the control number in your notice, proxy card or voting instruction form.		Dial toll-free (1-800-690-6903) or the telephone number on your voting instruction form. You will need the control number in your notice, proxy card or voting instruction form.		If you received a paper copy of your proxy materials, send your completed and signed proxy card or voting instruction form using the enclosed postage-paid envelope.		Participate in the Annual Meeting and vote your shares electronically by visiting www.virtualshareholdermeeting.com/ODP2021. Online access begins at 8:45 a.m. Eastern Time. You will need the control number in your notice, proxy card or voting instruction form.

 

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1

Strong Board Diversity

Our Board of Directors values a board that reflects diverse perspectives. While we do not have a specific diversity policy for our Board, our Corporate Governance Guidelines provide for selecting Directors who reflect a diverse set of skills, professional and personal backgrounds, perspectives and experiences. We are proud to have Directors who are highly diverse, including with respect to gender, ethnicity and experience.

Our Board of Directors consists of individuals with diverse and complementary business, leadership and financial expertise. Many of our Directors have leadership experience at major U.S. and multinational companies, as well as experience on the boards of other companies and organizations, which provide an understanding of different business processes, challenges and strategies. In addition, many of our Directors have industry and public policy experience that provides insight into issues faced by public companies.

 

 

90%				40%				40%
9 of 10 director nominees are independent				4 director nominees are women 3 women Board committee chairs				4 director nominees are ethnically diverse

Relevant Skills and Experience of our Board of Directors

 

Strategic Leadership		Operations Management Expertise
Experience driving strategic direction and growth of an organization		Expertise in managing operations of a business or organization
Industry Background		Public Company Board Service
Knowledge of or experience in one or more of the Company’s business segments		Experience as a board member of other public-traded companies
Financial Acumen and Literacy		Finance and Capital Allocation
Experience in financial accounting and reporting or financial management of a company or major organization		Experience in corporate borrowing, capital allocation, mergers or acquisitions, capital markets transactions or investment banking
Senior Management Leadership		Technology Background/Expertise
Experience serving in executive or senior leadership role of a company or major organization		Experience in information technology/the use of digital media or technology to facilitate business objectives, generate disruptive innovation and extend or create new business models
Sales & Marketing		Talent Development & Succession Planning
Experience in developing strategies to grow sales and market share, build brand awareness and equity, and enhance enterprise reputation		Experience and insight into how companies attract, develop and retain talent and overseeing succession planning for both the Board and management

 

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2

The ODP Corporation At-A-Glance

The ODP Corporation (NASDAQ:ODP) is a leading provider of business services, supplies, products and digital workplace technology solutions to small, medium and enterprise businesses, through an integrated business-to-business (B2B) distribution platform, which includes world-class supply chain and distribution operations, dedicated sales professionals and technicians, online presence, and approximately 1,100 stores.

 

u		OUR   CULTURE PERMEATES EVERYTHING WE DO

Our 5C Culture

Customer:

We relentlessly focus on serving our

customers to ensure their success.

Commitment:

We do what we say we will do with

transparency and integrity.

Change:

We seek and embrace change in the pursuit

of excellence.

Caring:

We challenge ourselves to be our best, treating

each other, our customers and communities

as we want to be treated.

Creativity:

We are innovators, disrupting to deliver new ways of

doing business that drive sustainable, profitable growth.

 

u	KEY LEADERSHIP APPOINTMENTS AND HIRES IN 2020

 

•

D. Anthony Scaglione was appointed as Executive Vice President and Chief Financial Officer (“CFO”) of the Company and as a member of the Company’s Executive Committee. Mr. Scaglione is responsible for overseeing all financial aspects of the Company, including financial planning and analysis, financial reporting and accounting, as well as leading investor relations, internal audit, tax, and treasury functions. Mr. Scaglione brings extensive financial, operational and strategic experience to our executive team and is a key asset to the Company as we continue to build upon our B2B platform and create value for our shareholders. During his eleven-year tenure with ABM Industries Incorporated, Mr. Scaglione was instrumental in the development and implementation of ABM’s successful, long-term strategic transformation.

 

•

Terry Leeper was appointed as Executive Vice President and Chief Technology Officer of the Company. Mr. Leeper is responsible for setting our technical vision and leading our technological advancement, ensuring that we align our product and service platforms and architecture with business priorities and growth initiatives. With his extensive technology background and experience, Mr. Leeper is playing a key role in the acceleration of our pivot toward a broader business and technology platform.

 

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3

CREATING VALUE FOR OUR SHAREHOLDERS

Highlights as of the end of fiscal 2020 include the following:

 

Strong Balance Sheet		$1.7B available Liquidity		$743M in Cash		$1B available under Credit Facility
Reinstated Share Buyback Program

Leverage Broad B2B Ecosystem		Global Sourcing & Supply Chain		Multiple Routes to Market
		Go-to-Market Engine		Broad Products & Services

Advanced Key Operational Initiatives		Initiated Maximize B2B Plan generating resources to fuel B2B pivot & growth
		Drive Low-Cost Business Model

 

OUR COMMITMENT TO ESG

 

•

We believe that environmental, social and governance (“ESG”) issues play an essential role in the success of our Company, our industry and our communities, now and for future generations.

 

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We are committed to conducting our business in a sustainable manner and maintain policies and procedures that establish the foundation of our environmental responsibility program. We are committed to empowering our employees and suppliers at all levels to promote safe and environmentally responsible practices.

 

•

In this regard, we focus on initiatives such as the reduction of facility energy consumption, reduction in transmission emissions in our private fleet, increasing sales of high-quality, sustainable products with greener attributes, improved recycling programs, and the responsible use of chemicals in compliance with all laws and regulations.

 

•

We utilize a “triple bottom line” approach as the framework for our sustainability initiatives: Planet (environmental), People (social) and Prosperity (economic). While the environmental and social aspects help us lower emissions, capture community impacts, and quantify other metrics, they ultimately impact our success by creating greater business value.

 

•

We provide substantial information about our sustainability practices and goals on our website and in our annual Sustainability Report. These efforts are visible in the following areas among others:

 

•

Achieved 44% (kWh) facilities’ energy consumption reduction between 2016 and 2020, exceeding our 10% energy reduction goal1;

 

•

100% of electricity used in the Company’s corporate headquarters offset by Green-e Energy® certified Wind Renewable Energy Credits;

 

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Achieved an 18% increase in miles per gallon in our private fleet between 2018 and 2020, exceeding our 15% fuel efficiency goal;

 

•

Achieved an 11% reduction in greenhouse gas (GHG) emissions from 2019 (MT CO2e Scopes 1 and 2);

 

•

Recycled 40% of waste generated at our facilities, diverting over 15,000 mt of waste from landfills; and

 

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Recycled more than 6 million pounds of e-waste from customers.

 

1

Our energy consumption in 2020 has been impacted by the COVID-19 pandemic. Specifically, since March 2020, we have temporarily closed certain offices (including our corporate headquarters) and we temporarily reduced our retail location hours which continues to be in effect in some of our retail locations. As such, our energy consumption in 2020 may not be indicative of our energy consumption in future years.

 

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4

Corporate Governance Highlights

Our Board of Directors is committed to strong governance practices, which promote the long-term value of the Company for its shareholders. The Board of Directors regularly reviews our governance practices to ensure they reflect the evolving governance landscape and appropriately support and serve the best interests of the Company and its shareholders. The Corporate Governance section beginning on page 23 describes our governance framework in further detail, which includes the following highlights:

 

☑ Separation of Chairman and CEO positions; with independent Chairman		☑ Directors possess deep and diverse skills set and expertise relevant to oversee business operations and strategy
☑ 9 of 10 Directors are independent		☑ Shareholder right to call a special meeting and act by written consent
☑ Annual election of Directors		☑ 100% independent Board committees
☑ Annual say-on-pay shareholder vote		☑ Shareholder right to amend bylaws by majority vote
☑ Majority voting for Directors in uncontested elections; resignation policy for Directors who do not receive a majority of the votes cast		☑ Any director or entire Board of Directors may be removed by a shareholders’ majority vote
☑ Stock ownership guidelines for executive officers and Directors; Directors are required to hold shares of Company common stock until they leave the Board		☑ Regular executive sessions of non-management Directors at Board meetings (chaired by independent Chairman) and committee meetings (chaired by independent committee chairs)
☑ Active Board and committee oversight of the Company’s strategy and risk management		☑ Annual assessment of Director skills and commitment to Director refreshment to ensure Board meets the Company’s evolving oversight needs
☑ Ongoing Director education		☑ Proxy access right for shareholders
☑ Anti-pledging and anti-hedging policies in place		☑ Executive compensation driven by pay for performance
☑ Clawback policy to recapture incentive payments		☑ Annual Board and Committee self-evaluations

 

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5

Snapshot of Director Nominees

All Director nominees meet The NASDAQ Stock Market governance standards (“Nasdaq rules”) for director independence except for Gerry P. Smith, who is not independent due to his position as our Chief Executive Officer (“CEO”).

 

Nominee and Principal Occupation		Age		Director            Since		Committee Membership
Quincy L. Allen   Former Executive Officer and Chief Marketing   Officer IBM Corporation		61		2020		Audit
Kristin A. Campbell   Executive Vice President and General Counsel   Hilton Worldwide Holdings Inc.		59		2016		Compensation & Talent     Corporate Governance & Nominating (C)
Marcus B. Dunlop   Partner   HG Vora Capital Management, LLC		34		2021		None
Cynthia T. Jamison   Former Executive Officer and Chief Financial   Officer   AquaSpy, Inc.		61		2013		Audit (C)     Compensation & Talent
Francesca Ruiz de Luzuriaga   Former Executive Officer   Mattel Interactive, a business unit of Mattel,   Inc.		67		2013		Compensation & Talent (C)     Corporate Governance & Nominating
Shashank Samant   President and Chief Executive Officer   GlobalLogic Inc.		52		2020		Corporate Governance & Nominating
Wendy L. Schoppert   Former Executive Officer and Chief Financial   Officer   Sleep Number Corporation		54		2020		Audit
Gerry P. Smith   Chief Executive Officer   The ODP Corporation		57		2017		None
David M. Szymanski   President and Professor of Marketing   University of North Florida		64		2013		Audit     Compensation & Talent
Joseph S. Vassalluzzo   Consultant   Non-Executive Chairman of the Board		73		2013		None

  C = Committee Chair

   = Financial Expert

 

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6

PROPOSAL No. 1: ELECTION OF DIRECTORS

 

 

The Role of the Board of Directors

Our Board of Directors is currently comprised of ten (10) talented directors, four (4) of whom are women, with diverse skill sets and professional backgrounds as reflected in their biographies beginning on page 12. Under our Amended and Restated Bylaws (the “Bylaws”), the Board of Directors has the authority to determine its size and to fill any vacancies. On February 3, 2020, the Board of Directors, upon recommendation of the Corporate Governance & Nominating Committee, increased its size from eight (8) to ten (10) members, and, as part of its focus on refreshment and diversity, appointed Quincy L. Allen and Shashank Samant, effective as of February 6, 2020, to fill the newly created vacancies for terms which expired at the Company’s annual meeting of shareholders held on May 11, 2020 (the “2020 Annual Meeting”). On February 14, 2020, Messrs. V. James Marino and Nigel Travis notified the Company of their separate decisions not to stand for reelection at the expiration of their current terms at the 2020 Annual Meeting. Messrs. Allen and Shashank were elected, along with the reelection of the other Director nominees, at the 2020 Annual Meeting and the size of the Board consisted of eight (8) members. On July 27, 2020, the Board of Directors, upon recommendation of the Corporate Governance & Nominating Committee, increased its size from eight (8) to nine (9) members, and, in connection with its efforts to continually refresh itself, appointed Wendy L. Schoppert, effective as of July 27, 2020, to fill the newly created vacancy for a term to expire at the Company’s 2021 Annual Meeting or any postponement or adjournment thereof. Ms. Schoppert was recommended to the Board of Directors by a third-party independent search firm retained by the Corporate Governance & Nominating Committee to assist it in identifying director candidates for consideration. On January 25, 2021, the Company entered into a Cooperation Agreement (the “Cooperation Agreement”) with HG Vora Capital Management, LLC (“HG Vora”) pursuant to which the Board, upon recommendation of the Corporate Governance & Nominating Committee, agreed to increase its size from nine (9) to ten (10) members, and appointed Marcus B. Dunlop to the Board to fill the resulting vacancy effective as of January 26, 2021. Pursuant to the Cooperation Agreement, the Company agreed to nominate Mr. Dunlop for election at the 2021 Annual Meeting or any postponement or adjournment thereof. Currently, there are no vacancies on the Board.

The Board of Directors, elected annually by our shareholders, oversees the business and management of the Company. Members of the Board monitor and evaluate the Company’s business performance and advise on strategic direction through regular communication with the CEO, other key members of management, and by participating in Board and Board committee meetings. Corporate review sessions are also provided to Directors to give them more detailed views of specific areas of our business, including targeted presentations, operational visits and facility tours. The Board is committed to sound and effective corporate governance policies and high ethical standards.

Director Nomination Process

Board Membership Criteria

We believe that a director should possess the highest professional ethics, integrity and values, and be committed to representing the long-term interests of our shareholders. He or she should have an inquisitive and objective perspective, practical wisdom and mature judgment. We endeavor to have a board representing a range of experiences in business and in areas that are relevant to our business operations. We believe that directors with significant leadership experience, especially those serving in CEO positions, provide the Company with special insights.

As such, in identifying Director nominees, we seek individuals with:

 

•

experience as senior executives, directors or in other leadership roles;

 

•

an understanding of finance and financial reporting processes;

 

•

qualifications to be designated as financially literate for those being considered for the Audit Committee;

 

•

a strong corporate governance background;

 

•

an exemplary reputation and record for honesty in his or her personal dealings and business or professional activity;

 

● ● ●

7

•

qualities of independence in thought and action;

 

•

strong collaboration skills, with the potential to influence management; and

 

•

the ability to dedicate time to serve on the Board of Directors while being committed to the interests of all shareholders.

Director Independence and Independence Determinations

The Corporate Governance Guidelines require that a majority of the Board of Directors must be “independent” under the Nasdaq rules, and all Directors who are members of the Company’s Audit, Compensation & Talent and Corporate Governance & Nominating committees, must also be independent. To maintain its objective oversight of management, the Board of Directors consists, currently, of all independent Directors, with the exception of Gerry P. Smith, the current CEO of the Company.

The Board of Directors evaluates the independence of each Director nominee in accordance with the Corporate Governance Guidelines, which incorporate the Nasdaq rules and the SEC rules. The Board considered transactions and relationships between the Company and its subsidiaries and affiliates on the one hand and, on the other hand, Directors, immediate family members of Directors, or entities of which a Director or an immediate family member is an executive officer, general partner or significant equity holder. Specifically, the Board of Directors considered that Mr. Dunlop is an employee of HG Vora, affiliates of which own approximately 9.5% of ODP’s common stock as of January 19, 2021. However, the Board determined that this relationship does not impair the independence of Mr. Dunlop under the Nasdaq rules and SEC rules. The Board also considered whether there were any transactions or relationships between any of these persons or entities and any members of the Company’s senior management or their affiliates.

Based on an annual evaluation performed, and recommendations made, by the Corporate Governance & Nominating Committee, the Board of Directors affirmatively determined that each of the following Directors who served in fiscal year 2020 was, or is a current Director nominee is, independent of the Company and its management under the standards set forth in the Corporate Governance Guidelines.

 

Quincy L. Allen		Cynthia T. Jamison		Wendy L. Schoppert
Kristin A. Campbell		Francesca Ruiz de Luzuriaga		David M. Szymanski
Marcus B. Dunlop		Shashank Samant		Joseph S. Vassalluzzo

The only member of the Board of Directors who is not independent is Gerry P. Smith. Mr. Smith, our CEO, is the only employee member of the Board.

The Board of Directors also affirmatively determined that, none of its members has a material relationship with the Company that would impair independence from management, and that all members serving on the Audit, Compensation & Talent and Corporate Governance & Nominating committees have been determined by the Board to be comprised of independent Directors. The Board of Directors’ evaluation included consideration that a relative by marriage of Ms. Campbell is a managing director of Deloitte Consulting LLP, which is a separate legal entity from the Company’s independent registered public accounting firm Deloitte & Touche LLP, and such relative does not personally perform any audit or other services for the Company while working at Deloitte Consulting LLP. In addition, none of the Directors serve as an executive officer of a charitable organization to which the Company made contributions during fiscal year 2020.

Board Diversity

Pursuant to the Corporate Governance Guidelines, the Corporate Governance & Nominating Committee seeks to create a board of directors that represents diversity as to skills, experiences, age, race, gender and ethnicity. While the Board of Directors does not have a formal diversity policy, the Board is committed to a diversified membership. The Corporate Governance & Nominating Committee considers the Board’s overall composition when seeking a potential new candidate, including whether the Board has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds in light of the Company’s current and future business needs. The Corporate Governance & Nominating Committee also considers, among others, the character, expertise, sound judgement, ability to make

 

● ● ●

8

independent analytical inquires, business experiences, understanding of the Company’s business environment, ability to make time commitments to the Company, demonstrated teamwork, and the ability to bring unique and diverse perspectives and understandings to the Board. In identifying prospective Director candidates, the Corporate Governance & Nominating Committee may seek advice and recommendations from other Board members, management, shareholders or outside advisors. In addition, the Corporate Governance & Nominating Committee may, but need not, retain a third-party independent search firm in order to assist it in identifying candidates to serve as Directors of the Company.

In 2020, the Corporate Governance & Nominating Committee engaged a third-party independent search firm to help identify, evaluate, and conduct due diligence on potential director candidates. Using an independent search firm helps the Corporate Governance & Nominating Committee ensure that it is conducting a broad search and helps it consider a diverse slate of candidates with the qualifications and expertise that are needed to provide effective oversight of management and assist in long-term value creation. The firm identifies Director candidates who meet the criteria of our search, provides requested background and other relevant information regarding Director candidates, and coordinates arrangements for interviews as necessary. Three non-incumbent Directors nominated for election at the Annual Meeting, Ms. Schoppert and Messrs. Allen and Samant, were identified by the third-party independent search firm engaged by the Corporate Governance & Nominating Committee, while Mr. Dunlop was appointed pursuant to the Cooperation Agreement.

After considering the many skills and attributes that each of Ms. Schoppert and Messrs. Allen, Dunlop and Samant would bring to the Board, including their professional backgrounds, leadership experience, public company governance, technology, financial and operational expertise, and their diverse perspectives, our Corporate Governance & Nominating Committee recommended Ms. Schoppert and Messrs. Allen, Dunlop and Samant be nominated for election to the Board. In addition to the diverse set of skills that these four new, non-incumbent Directors bring to the Board, they also serve to further enhance our Board’s diversity as one is a female and the other three identify as ethnic minorities.

Service on Other Public Company Boards

Each member of the Board of Directors must have the time and ability to make constructive contributions to the Board as well as a clear commitment to fulfilling the fiduciary duties required of directors and serving the interest of the Company’s shareholders. To that end, the CEO and any independent Directors who serve as the chief executive officer of a publicly traded company may not serve on more than two public company boards in addition to our Board, and other independent Directors should not sit on more than four public company boards in addition to our Board.

Candidates Recommended by Shareholders

The Corporate Governance & Nominating Committee will consider Director candidates recommended by shareholders using proxy access. Proxy access permits a shareholder, or group of up to 20 shareholders, owning at least 3% of the Company’s outstanding common stock continuously for at least three years as of both the date of nomination to nominate and include in the proxy statement director nominees and the record date for determining shareholders eligible to vote at the applicable annual meeting and through the date of the annual meeting, constituting up to the greater of two individuals and 20% of the number of directors then serving. The shareholder(s) and the nominee(s) must satisfy the requirements specified in our Bylaws, including that written notice of a nomination be provided to the Corporate Secretary at the Company’s address not less than 120 days nor more than 150 days prior to the first anniversary of the date on which the Company’s definitive proxy statement was released to shareholders in connection with the prior year’s annual meeting. Additional information, including Company address, and submission of non-proxy access director nominations and other shareholder proposals can be found under the caption “2022 Shareholder Proposals.”

All nominations received by the Corporate Secretary that satisfy our Bylaw requirements relating to director nominations will be presented to the Corporate Governance & Nominating Committee for consideration. Shareholders also must satisfy the notification, timeliness, consent and information requirements set forth in this Proxy Statement and in our Bylaws. The Corporate Governance & Nominating Committee’s evaluation of shareholder-proposed director candidates will be the same as for any other proposed candidates.

 

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9

Majority Vote Standard for Election of Directors

Each Director nominee must be elected by a majority of the votes cast in an uncontested election. This means that the number of votes cast “FOR” a Director nominee must exceed the number of votes cast “AGAINST” the Director nominee. If a nominee who currently serves as a Director is not re-elected, Delaware law provides that the Director would continue to serve on the Board until his or her successor has been elected and qualified.

Director Resignation Policy

Under our Bylaws, if a nominee for Director who is an incumbent Director is not re-elected and no successor has been elected at such meeting, the Director is required to promptly tender his or her resignation to the Board of Directors. In that situation, the Corporate Governance & Nominating Committee would make a recommendation to the Board of Directors about whether to accept or reject the resignation, or whether to take other action. Within ninety (90) days from the date that the Director submitted his or her resignation, the Board of Directors would act on the Corporate Governance & Nominating Committee’s recommendation and publicly disclose its decision and the rationale behind it. If the Board of Directors determines that there is a compelling reason for such incumbent Director to remain on the Board and does not accept the resignation, the Director will continue to serve until the next annual meeting or until his or her successor is duly elected, or his or her earlier resignation or removal. If a Director’s resignation is accepted by the Board of Directors, then the Board, in its sole discretion, may fill any resulting vacancy. The Director who tenders his or her resignation will not participate in the Board’s decision.

Retirement Age and Term Limits

As stated in our Corporate Governance Guidelines, the Board of Directors recommends, but does not require, that a Director not be nominated for re-election or reappointment to the serve on the Board after having attained the age of 75 years. The Board of Directors recognizes, however, that a Director who has attained the age of 75 years may continue to be involved in activities, positions or relationships which are compatible with continued service on the Board and the Corporate Governance & Nominating Committee will review annually such Director’s fitness to serve on the Board.

The Board of Directors does not believe that it should establish term limits. Term limits could result in the loss of Directors who have been able to develop, over a period of time, increasing insight into the Company and its business and operations, and an institutional memory that benefits the entire Board as well as management. As an alternative to term limits, the Corporate Governance & Nominating Committee annually reviews with each Director his or her desire to continue as a member of the Board which allows the Company the opportunity to conveniently replace Directors who are no longer interested or effective.

Board Oversight of Risk

Risk is an inherent part of ODP’s business activities and risk management is critical to the Company’s innovation and success. The Board of Directors has overall responsibility for risk oversight and focuses on the most significant risks facing the Company. The Board of Directors discharges its risk oversight responsibilities, directly and through delegation to its committees, and is responsible for evaluating the Company’s major risks for determining that appropriate risk management and control procedures are in place ensuring that management takes the appropriate steps to manage all major risks. The Board oversees a formal enterprise-wide approach to risk management, designed to support the achievement of organizational and strategic objectives, to improve long-term performance and enhance shareholder value. A fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company.

For example, in response to the COVID-19 global pandemic, the Board regularly received reports from a cross-functional team of executive officers and members of management to assess risks to the Company’s business and to implement the steps necessary to navigate the impact of the pandemic on the Company’s employees, customers, and the communities in which the Company operates. The Board had regularly scheduled informal update calls throughout the COVID-19 crisis in 2020 (24 in total) and actively counseled management on strategies to position the Company to weather the impacts of the global pandemic and emerge in a strong position post-COVID-19. The involvement of the Board of Directors in setting ODP’s business strategy is a key part of its assessment of management’s appetite for risk and determination of what constitutes an appropriate level of risk for the Company. The Company’s risk governance is facilitated through a top-down

 

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10

and bottom-up approach, with the tone established at the top by Mr. Smith, our CEO, and other members of senior management, specifically the Senior Leadership Team. The senior leadership team utilizes an Enterprise Risk Management (ERM) steering committee as described below. For additional information see “Corporate Governance” under subheading “Role of the Board Committees in Risk Oversight.”

2021 Director Nominees

The Board of Directors has nominated ten (10) individuals listed below for election as Directors to each serve a one-year term of office to expire at the 2022 annual meeting of shareholders, or until their successors have been elected and qualified, or until their resignation or removal. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the ten nominees named in this Proxy Statement. Each of the nominees is an incumbent Director of ODP recommended for election or re-election by the Corporate Governance & Nominating Committee. Biographical information regarding each of the Director nominees is set forth below.

The Board of Directors has determined that nine (9) Director nominees satisfy the definition of independent director under the Nasdaq rules. In making these nominations, the Board reviewed the backgrounds, qualifications, attributes, experiences and contributions to the Board of the Director nominees and determined to nominate each of the current Directors for re-election. See “Director Independence and Independence Determinations” above for more information.

Pursuant to our Bylaws, should any of the Director nominees be unavailable or unable to serve at the time of the Annual Meeting, the Corporate Governance & Nominating Committee may propose a substitute nominee. If a substitute nominee is named, all proxies voting FOR the Director nominee who is unable to serve will be voted for the substitute nominee so named. If a substitute nominee is not named, all proxies will be voted for the election of the remaining Director nominees (or as directed on your proxy). Each individual nominated for election has agreed to serve if elected and the Board has no reason to believe that any Director nominee would be unavailable or unable to serve. Pursuant to the Cooperation Agreement, except in the event HG Vora (together with any affiliates of HG Vora) ceases to own at least five percent (5%) of the Company’s then outstanding shares of common stock (the “Company Ownership Level Minimum”) or HG Vora has materially breached the Cooperation Agreement and failed to cure such breach within five (5) business days of notice thereof, the Board of Directors has agreed to nominate Marcus B. Dunlop for election as one of the Directors of the Company at the Annual Meeting.

Pursuant to the Cooperation Agreement, in the event that Marcus B. Dunlop (or any replacement director appointed in accordance with the provisions of the Cooperation Agreement) is unable to serve, resigns or is removed as a Director during the term of the Cooperation Agreement, HG Vora has the ability to recommend a replacement director who is a “Partner” or a more senior member of HG Vora and meets the conditions set forth in the Cooperation Agreement (a “Replacement Director”), so long as HG Vora (together with any affiliates of HG Vora) satisfies the Company Ownership Level Minimum and HG Vora has not materially breached the Cooperation Agreement and failed to cure such breach within five (5) business days of notice thereof.

The Cooperation Agreement provides that Mr. Dunlop, or the Replacement Director, as the case may be, must offer to resign from the Board on December 31, 2021, or earlier if (a) HG Vora (together with any affiliates of HG Vora) ceases to satisfy the Company Ownership Level Minimum, (b) HG Vora otherwise ceases to comply with or breaches any material provision of the Cooperation Agreement, or (c) HG Vora submits a notice of director nominations in connection with the 2022 annual meeting of shareholders of the Company (the “2022 Annual Meeting”).

 

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11

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH NAMED DIRECTOR NOMINEE.
GERRY P. SMITH
Age 57     Director since: 2017     Executive		BIOGRAPHY: Mr. Smith was appointed as Chief Executive Officer and a Director effective February 27, 2017. Mr. Smith has been leading the Company’s transformation from a tactical, product-based transactions company to a services-driven B2B platform. Prior to joining the Company and since 2006, Mr. Smith was at Lenovo Group Limited (“Lenovo”) and previously served as Lenovo’s Executive Vice President and Chief Operating Officer since 2016 where he was responsible for all operations across Lenovo’s global product portfolio. Prior to assuming this role, also in 2016, Mr. Smith was Executive Vice President and President, Data Center Group. From 2015 to 2016, he served as Chief Operating Officer of the Personal Computing Group and Enterprise Business Group, and from 2013 to 2015 he served as President of the Americas. In these roles, Mr. Smith oversaw Lenovo’s fast-growing enterprise business worldwide and Lenovo’s overall business in the America’s region. Prior to that, Mr. Smith was President, North America and Senior Vice President, Global Operations of Lenovo from 2012 to 2013, and Senior Vice President of Global Supply Chain of Lenovo from 2006 until 2012 where he was responsible for end-to-end supply chain management. Prior to Lenovo, Mr. Smith held a number of executive positions at Dell Inc. from 1994 until 2006, as the company became a global leader in personal computers.
		QUALIFICATIONS AND EXPERIENCE: •   Extensive leadership experience and strong track record in increasing operating profit and managing complex integrations for corporations.   •   Strategic, operational, and managerial expertise gained through a more than 25-year career with Lenovo and Dell Inc.   •   Expertise in corporate turnarounds and positioning companies for future growth and success.
		OTHER PUBLIC DIRECTORSHIPS: •   Arrow Electronics, Inc. (since 2020); currently Corporate Governance Committee member

 

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12

QUINCY L. ALLEN
Age 60     Director since: 2020     Independent     Committees: •  Audit		BIOGRAPHY: Mr. Allen joined our Board in February 2020. Mr. Allen has over 35 years of leadership experience in the technology services industry, most recently serving as IBM Corporation’s (“IBM”) Go-To-Market Leader of Cognitive Process Services and Chief Marketing Officer for IBM Cloud from 2015 to 2018. Prior to joining IBM, Mr. Allen served as Chief Marketing and Strategy Officer at Unisys Corporation, a global information technology company, from 2012 to 2015. From 2009 to 2010, Mr. Allen served as Chief Executive Officer for Vertis Communications, a direct marketing and advertising company. Vertis Communications filed for voluntary bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in November 2010 and emerged from bankruptcy in March 2012. In October 2012, Vertis Communications filed for bankruptcy protection again. Prior to Vertis Communications, Mr. Allen held several leadership positions with Xerox Corporation, including serving as President of the Global Services and Strategic Marketing Group and President of Production Systems Group, as well as Senior Vice President, North American Services and Solutions and Vice President, Worldwide Customer Services Strategy of Xerox Corporation. Mr. Allen previously served as a board member of NCR Corporation and Gateway, Inc.
		QUALIFICATIONS AND EXPERIENCE: •   Significant executive management experience as a technology executive, chief executive officer, and public company board member.   •   Expertise in enterprise technology, supply chain, sales and marketing and product development.   •   Financial, operational and organizational expertise gained as executive management at several public corporations.
		OTHER PUBLIC DIRECTORSHIPS: •   ABM Industries Incorporated (since 2021)

 

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13

KRISTIN A. CAMPBELL
Age 59     Director since: 2016     Independent     Committees: •  Compensation & Talent •  Corporate Governance & Nominating (Chair)		BIOGRAPHY: Ms. Campbell has served as the Executive Vice President and General Counsel for Hilton Worldwide Holdings Inc., a global hospitality company, since June 2011, and since February 2021 has been appointed as its Chief ESG Officer. Prior to Hilton Worldwide, Ms. Campbell spent 18 years at Staples, Inc., where she served as Senior Vice President, General Counsel and Corporate Secretary from 2007 to 2011. Before joining Staples in 1993, Ms. Campbell worked at law firms Goodwin Procter LLP and Rackemann, Sawyer & Brewster. Ms. Campbell is an Advisory board member of each of New Perimeter and LegalMation.
		QUALIFICATIONS AND EXPERIENCE: •  Extensive corporate retail experience in the office products and services industry, operational as well as consumer business experience.   •  Expertise in strategic development and execution, mergers and acquisitions, and integration.   •  Executive management experience with a large global company, including legal, regulatory, risk management, crisis management, and relevant board and governance experience.
MARCUS B. DUNLOP
Age 34     Director since: 2021     Independent		BIOGRAPHY: Mr. Dunlop has served as an investment professional at HG Vora since 2009. Mr. Dunlop became a partner and member of the Investment Committee at HG Vora in 2018 and is involved in idea generation, fundamental research and portfolio risk management. Prior to joining HG Vora, he was an analyst at Goldman Sachs Group, Inc. in the Bank Debt Portfolio Group with focus on credit analysis for bank loan sales and trading desk, and debt restructurings of non-investment grade companies from 2008 to 2009.
		QUALIFICATIONS AND EXPERIENCE: •  Financial expertise and extensive experience in corporate finance, capital structure optimization and capital allocation strategy.   •  Significant experience evaluating strategic alternatives including mergers and acquisitions, divestitures and spin-offs.   •  Industry experience in consumer, retail and real estate-oriented businesses.

 

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14

CYNTHIA T. JAMISON
Age 61     Director since: 2013     Independent Financial Expert     Committees: •  Audit (Chair) •  Corporate Governance & Nominating		BIOGRAPHY: Ms. Jamison was a partner with Tatum, LLC, an executive services firm focused exclusively on providing chief financial officer support to public and private companies from 1999 to 2009, and from 2005 to 2009, she led the CFO Services practice and was a member of Tatum’s Operating Committee. After retiring from Tatum, Ms. Jamison joined AquaSpy, Inc., a provider of soil moisture sensors to monitor soil moisture levels, and served as its Chief Financial Officer from 2009 to 2012. Prior to joining Tatum, she served as Chief Financial Officer of Chart House Enterprises (food retailer) and previously held various financial positions at Allied Domecq Retailing USA, Kraft General Foods, and Arthur Andersen LLP. Ms. Jamison’s experience also includes her service, from 2004 to 2015, as a director of B&G Foods, Inc., including chair of its audit committee.
		QUALIFICATIONS AND EXPERIENCE: •  Extensive experience in financial and accounting matters, including public company reporting, strategy and capitalization expertise.   •  Served as Chief Financial Officer or on the board of directors in leadership positions of many public and private companies.   •  Brings key senior management, leadership, financial and strategic planning, corporate governance and public company executive and board experience.
		OTHER PUBLIC DIRECTORSHIPS: •  Tractor Supply Company (since 2002); currently Chairman of the Board   •  Darden, Inc. (since 2014); currently Audit Committee Chair, Compensation Committee member, and Finance Committee member   •  Big Lots, Inc. (since 2015); currently Nominating/Corporate Governance Committee Chair, Capital Allocation Planning Committee member, and Compensation Committee member

 

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15

FRANCESCA RUIZ DE LUZURIAGA
Age 67     Director since: 2013     Independent     Committees: •  Compensation & Talent (Chair) •  Corporate Governance & Nominating		BIOGRAPHY: Ms. Luzuriaga was a director of OfficeMax from 1998 to November 2013. From 1999 to 2000, Ms. Luzuriaga served as the Chief Operating Officer of Mattel Interactive, a business unit of Mattel, Inc., one of the major toy manufacturers in the world. Prior to holding this position, she served Mattel as its Executive Vice President, Worldwide Business Planning and Resources, from 1997 to 1999, and as its Chief Financial Officer from 1995 to 1997. Since leaving Mattel in 2000, Ms. Luzuriaga worked as an independent business development consultant, and is currently retired. From 2002 until 2005, she served as a director of Providian Financial Corporation, and as a director of the formerly public corporation SuperValu, Inc. from 2015 until its acquisition by United Natural Foods, Inc. in 2018. Since January 2012, she has been a director of SCAN Health Plan, a not-for-profit Medicare Advantage health plan (“SCAN”), and currently serves as chairperson of its governance committee. Ms. Luzuriaga previously served as SCAN’s board chairperson from January 2017 to 2020. Ms. Luzuriaga has been a board member of the SCAN Foundation since 2017. In June 2020, Ms. Luzuriaga joined the board of directors of Alive Ventures, an affiliate of the SCAN Foundation, which is a startup innovation studio that markets brands to older adults. As of January 2021, she was appointed as board chairperson of Alive Ventures.
		QUALIFICATIONS AND EXPERIENCE: •  Substantial prior leadership experience in the operations and strategy side of businesses, both in the United States and internationally.   •  Financial expertise and experience in corporate finance and accounting matters and strategy development and execution.   •  Extensive experience as a board member for public and private companies.
SHASHANK SAMANT
Age 52     Director since: 2020     Independent     Committees: •  Corporate Governance & Nominating		BIOGRAPHY: Mr. Samant joined our Board in February 2020. Mr. Samant brings over 30 years of technology, product development and services experience, and has served as President and Chief Executive Officer of GlobalLogic Inc., since 2011. GlobalLogic is a leader in digital product engineering helping enterprises design and develop innovative products, platforms and digital experiences. Prior to joining GlobalLogic, Mr. Samant was President of Ness Technologies, an IT services company, where he founded and built their product engineering services business. Prior roles include leading professional services for Hewlett-Packard’s Verifone business and establishing IBM’s first India-based engineering lab, globalizing the company’s R&D and software engineering efforts.
		QUALIFICATIONS AND EXPERIENCE: •  Significant experience as a technology services senior executive at both small and large companies.   •  Extensive experience in strategic development and execution and operations.   •  Industry expertise in enterprise technology, product development and services.

 

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16

WENDY L. SCHOPPERT
Age 54     Director since: 2020     Independent Financial Expert     Committees: •  Audit		BIOGRAPHY: Ms. Schoppert joined our Board in July 2020. Ms. Schoppert has over 30 years of diverse finance and operational leadership experience, and has been serving as a professional director since her retirement from Sleep Number Corporation in 2014. Ms. Schoppert served as Executive Vice President and Chief Financial Officer of Sleep Number from 2011 to 2014. During her tenure at Sleep Number, Ms. Schoppert served as Senior Vice President and Chief Information Officer from 2008 to 2011 and Senior Vice President, International and New Channel Development from 2005 to 2008. Prior to joining Sleep Number, Ms. Schoppert led U.S. Bank’s Private Asset Management team and served as Head of Product, Marketing & Corporate Development for U.S. Bank’s Asset Management division from 2002 to 2005. Ms. Schoppert began her career in the airline industry, serving in various financial, strategic and general management leadership positions with increasing roles and responsibilities at American Airlines, Northwest Airlines and America West Airlines. Ms. Schoppert is a director of Bremer Financial Corporation, a Minnesota-based financial services firm, and chairs its audit committee and serves on its compensation committee. Ms. Schoppert also serves and has served as a member of not-for-profit and professional organizations.
		QUALIFICATIONS AND EXPERIENCE: •  Broad based experience in business, including extensive retail and B2B experience, information technology, digital, marketing, international, and corporate development.   •  Financial expertise and extensive experience leading all finance functions such as financial planning and analysis, accounting, tax, treasury, investor relations, decision support and IT.   •  Executive and senior leadership positions at various corporations.
		OTHER PUBLIC DIRECTORSHIPS: •  Big Lots, Inc. (since 2015); currently Capital Allocation Planning Committee Chair, Audit Committee member, and Nominating/Corporate Governance Committee member   •  The Hershey Company (since 2017); currently Audit Committee member and Finance and Risk Management Committee member

 

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17

DAVID M. SZYMANSKI
Age 64     Director since: 2013     Independent     Committees: •  Audit •  Corporate Governance & Nominating		BIOGRAPHY: Dr. Szymanski was a director of OfficeMax from 2004 to November 2013. Dr. Szymanski became the President of and Professor of Marketing at the University of North Florida in May 2018. Prior to that, Dr. Szymanski was Dean of and a Professor of Marketing at the University of Cincinnati Lindner College of Business from 2010 to 2018. Prior to that, Dr. Szymanski was a Professor of Marketing and holder of the JC Penney Chair of Retailing Studies at Texas A&M University, where he served from 1987 until 2010. Dr. Szymanski served as the Director of the Center for Retailing Studies at Texas A&M University from 2000 to 2006. From 2004 to 2010, Dr. Szymanski was a director of Zale Corporation, and from 2004 to 2006, Dr. Szymanski was a director of the National Retail Federation Foundation Board.
		QUALIFICATIONS AND EXPERIENCE: •  Significant leadership positions held at major universities.   •  Extensive knowledge regarding marketing, business strategy, and all aspects of the retail industry arising from his academic focus, extensive business engagements, and significant financial experience.   •  Experience spearheading strategic plans for growth within a major organization through his experience as President of the University of North Florida.
JOSEPH S. VASSALLUZZO
Age 73     Director since: 2013     Independent     Non-executive Chairman of the Board		BIOGRAPHY: Mr. Vassalluzzo was appointed as the independent non-executive Chairman of the Board in February 2017. Since 2002, he has served as a director of the Federal Realty Investment Trust, where he is chairman of the board of trustees. Mr. Vassalluzzo was previously a director of LifeTime Fitness, from 2006 to 2015, where he was its lead director and chair of the compensation committee. Mr. Vassalluzzo also served on the board of directors of iParty Corp. from 2004 to 2013 and on the board of directors of Commerce Bancorp from 2005 to 2008 where he chaired various committees of both companies. He also operates a retail consulting business. Previously, Mr. Vassalluzzo was employed by Staples, Inc. from 1989 until 2005 and his duties included worldwide responsibility for all of Staples’s real estate activities, including, but not limited to, the development and management of all retail stores; distribution; office and warehouse centers; engineering, construction and design activities; facilities management; M&A activities; and the Legal Department function. Mr. Vassalluzzo also served as Staples’ vice chairman.
		QUALIFICATIONS AND EXPERIENCE: •  Broad based experience in business, including extensive experience in retail businesses and the office supplies business.   •  Board service to a number of retailers, with retail and retail real estate expertise that is essential to our core business.   •  Executive and senior leadership positions at numerous retailers.
		OTHER PUBLIC DIRECTORSHIPS: •  Federal Realty Investment Trust (since 2002); currently Non-Executive Chairman of the Board of Trustees

 

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The Right Board at the Right Time

The Corporate Governance & Nominating Committee and the Board believe that the Director nominees for 2021 provide the Company with the right mix of skills and experience necessary for an optimally functioning Board. The following reflects Board demographics of our Director nominees. Further information on each Director nominee’s qualifications and relevant experience is provided in the individual biographical descriptions above.

 

Allen

Campbell

Dunlop

Jamison

Ruiz de Luzuriaga

Samant

Schoppert

Smith

Szymanski

Vassalluzzo

Demographics

Race/Ethnicity:

African American

X

X

Asian/Pacific Islander

X

X

White

X

X

X

X

X

X

Hispanic/Latino

X

Native American

Gender:

Male

X

X

X

X

X

X

Female

X

X

X

X

 

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DIRECTOR COMPENSATION

The Compensation & Talent Committee, together with its independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), regularly reviews our non-management Directors’ compensation program to ensure that it is appropriate in light of market circumstances and prevailing “best practices” for corporate governance and to determine its competitiveness against the compensation of the boards of directors of our peer group (as shown in the Compensation Discussion and Analysis or “CD&A” section of this Proxy Statement). In May 2020, FW Cook presented its review to the Compensation & Talent Committee and after consideration the Compensation & Talent Committee determined that the compensation elements reflect the Board’s view that compensation to our non-management Directors should consist of an appropriate mix of cash and equity awards and did not recommend any changes to the compensation of our non-management Directors at that time.

Compensation for our non-management Directors consists of an annual retainer fee in the amount of $210,000 per year, of which $75,000 is payable in cash in equal installments on a quarterly basis during which the Director served. The non-Executive Chairman receives an additional $200,000 retainer fee. No deferrals of cash payments are permitted by the Directors. The remaining $135,000 of the annual retainer fee is granted as stock unless the Director elects to defer his/her stock in the form of Restricted Stock Units (“RSUs”) to be distributed in shares following termination of service on the Board, with such election made by the end of the prior tax year for existing Directors and prior to appointment to the Board for new Directors. The equity portion is typically granted in a lump sum as soon as administratively practicable following the release of voting results from the annual shareholders’ meeting.

For fiscal year 2020, the following compensation for services as a chair or as a member of the Board committees was paid in cash on a pro-rated, quarterly basis to the incumbent Directors:

 

Board Committee		Annual Fee for Chair		Annual Fee for Committee Members (excludes Chair)
Audit Committee		$25,000		$12,500
Compensation & Talent Committee		$20,000		$10,000
Corporate Governance & Nominating Committee		$15,000		$ 7,500

In connection with his appointment as a director, Mr. Dunlop is entitled to receive the pro rata portion of the standard compensation for service on the Board of Directors by the Company’s non-management Directors for the period from January 26, 2021 through the date of the next annual meeting of shareholders. Mr. Dunlop has waived his right to compensation as a member of the Board of Directors.

Effective January 1, 2021, the Compensation & Talent Committee approved an increase in the annual retainer fee for our non-management Directors by $25,000, for a total of $235,000 per year. Total cash payments were increased by $10,000 to a total of $85,000 per year and equity compensation was increased by $15,000 to a total of $150,000 per year. The Compensation & Talent Committee did not approve any other changes to Director compensation at that time. The increase in Director compensation was recommended by FW Cook to reflect current market practice and in recognition of the time commitment of the Directors.

Director Stock Ownership Guidelines

Non-management Directors are required to own five times the directors’ cash portion of the annual retainer fee (equal to $425,000) in shares of our common stock. Directors must also retain 100% of net shares awarded until termination of their service on the Board.

The Compensation & Talent Committee reviews these ownership guidelines, on an annual basis, with the assistance from its independent compensation consultant, to ensure that such guidelines align with best market practices, including the practices of a majority of our peer group, and with management’s ownership guidelines. In addition, the Compensation & Talent Committee annually reviews each Director’s progress toward meeting the ownership guidelines.

 

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Indemnification Agreements

The Company has entered into indemnification agreements with its Directors and certain of its officers. The indemnification agreements require the Company to indemnify these Directors and officers to the full extent permitted by Delaware law against any and all expenses (including advances of expenses), judgments, fines, penalties, and amounts paid in settlement incurred in connection with any claim against the indemnified person arising out of services as a director, officer, employee, trustee, agent, or fiduciary of the Company or for another entity at the request of the Company, and maintain directors and officers liability insurance coverage.

DIRECTOR COMPENSATION TABLE FOR FISCAL YEAR 2020

 

Director Compensation Table for Fiscal Year 2020
(a)		(b)		(c)				(d)				(e)				(f)				(g)		(h)
Name		(1)    Fees Earned      or Paid in    Cash ($)		(2)(3)(4) Stock Awards ($)				(5) Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Change in Pension Value and NQ Deferred Compensation Earnings ($)				(6) All Other Compensation Total Other ($)		Total
Quincy L. Allen		$75,549			$169,664				-				-				-			-		$245,213
Kristin A. Campbell		$107,500			$135,002				-				-				-			-		$242,502
Cynthia T. Jamison		$121,593			$135,002				-				-				-			-		$256,595
V. James Marino (7)		$42,610			-				-				-				-			$114,927		$157,537
Francesca Ruiz de Luzuriaga		$105,247			$135,002				-				-				-			-		$240,249
Shashank Samant		$72,363			$169,664				-				-				-			-		$242,027
Wendy L. Schoppert		$37,568			$107,270				-				-				-			-		$144,838
David M. Szymanski		$96,593			$135,002				-				-				-			-		$231,595
Nigel Travis (7)		$35,357			-				-				-				-			$6,027		$41,384
Joseph S. Vassalluzzo		$275,000			$135,002				-				-				-			-		$410,002

 

 

(1)        Since February 2017, Mr. Vassalluzzo has served as the independent non-executive Chairman of the Board to lead the Board of Directors and receives an annual cash retainer of $200,000 to serve as non-Executive Chairman. For fiscal year 2020, the Directors, excluding Mr. Vassalluzzo, receive annual compensation of: (a) $75,000 in cash, prorated for time in position, and (b) fees paid in cash for both serving as the Chair of a Committee and as the member of a Committee prorated for time in position.

(2)        The dollar amounts in column (c) reflect the aggregate grant date fair value of equity awards granted within the fiscal year in accordance with the FASB Accounting Standards Codification Topic 718 for stock-based compensation. These amounts reflect the total grant date fair value for these awards, and do not correspond to the actual cash value that will be recognized by each of the Directors when received. See Notes 1 and 14 of the consolidated financial statements in our 2020 Annual Report regarding the underlying assumptions used in the valuation of equity awards.

(3)        The “Equity Compensation Paid to Directors for Fiscal Year 2020” table that follows represents the aggregate grant date fair value of stock or RSUs granted to our Directors under the Company’s 2019 Long-Term Incentive Plan (the “2019 Plan”). Annual awards are calculated by a dollar value that is then translated into stock or RSUs based on the closing stock price of our common stock on the date of grant.

(4)        As of December 26, 2020, the aggregate number of RSUs convertible into shares of our common stock, outstanding for our Directors is set forth as follows: Quincy Allen 8,168, Kristin Campbell 24,239, Francesca Ruiz de Luzuriaga 50,348, Cynthia Jamison 28,380, Shashank Samant 8,168, Wendy Schoppert 4,832, David Szymanski 49,994, and

 

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21

Joseph Vassalluzzo 29,799. The number of shares reflects the number of shares after adjustment for our reverse stock split. All RSUs are fully vested as of December 28, 2019, but distribution is deferred until either the Director’s separation date or six months following the Director’s separation date, as applicable. Please see the “Equity Compensation Paid to Directors for Fiscal Year 2020” table that follows for all equity awards granted in fiscal year 2020.

(5)        As of December 26, 2020, the aggregate number of option awards outstanding for our Directors is set forth as follows: Francesca de Luzuriaga 1,213. All options are fully vested. There were no options granted to Directors in fiscal year 2020.

(6)        The dollar amounts in column (g) represent the dividend equivalents that were paid to Messrs. Marino and Travis following each Director’s separation from service with the Company. Dividend equivalents are paid without interest, at the same time the corresponding RSU’s are distributed. Messrs. Marino and Travis were paid $6,027 for dividend equivalents associated with a RSU Grant dated May 7, 2019 that was distributed on May 12, 2020. Mr. Marino was paid $108,900 for dividend equivalents associated with RSU grants dated October 19, 2011, July 25, 2012, and July 24, 2013 that were distributed on November 11, 2020.

(7)        Messrs. V. James Marino and Nigel Travis elected not to stand for reelection to the Board of Directors at the 2020 Annual Meeting, so their terms expired on May  11, 2020.

EQUITY COMPENSATION PAID TO DIRECTORS FOR FISCAL YEAR 2020

 

Equity Compensation Paid to Directors for Fiscal Year 2020
(a)		(b)		(c)		(d)		(e)
Directors		Grant Date		(1)            Stock            Awards		(2)              Grant Date Fair              Value of Stock            Awards		Total Value of              Equity Awards for              2020
Quincy L. Allen (3)		5/12/20		8,440		$20.10		$169,664
Kristin A. Campbell		5/12/20		6,716		$20.10		$135,002
Cynthia T. Jamison		5/12/20		6,716		$20.10		$135,002
V. James Marino (4)		-		-		-		-
Francesca Ruiz de Luzuriaga		5/12/20		6,716		$20.10		$135,002
Shashank Samant (3)		5/12/20		8,440		$20.10		$169,664
Wendy L. Schoppert (5)		7/29/20		4,832		$22.20		$107,270
David M. Szymanski		5/12/20		6,716		$20.10		$135,002
Nigel Travis (4)		-		-		-		-
Joseph S. Vassalluzzo		5/12/20		6,716		$20.10		$135,002

 

 

(1)        The number of shares reflect the number of shares after adjustment for our reverse stock split.

(2)        Amounts are determined using the closing stock price of our common stock on the grant date. See footnote 2 in the previous “Director Compensation Table for Fiscal Year 2020” for additional information. The Grant Date Fair Value of Stock Awards has been adjusted for our reverse stock split.

(3)        Messrs. Allen and Samant were appointed as new directors effective as of February 6, 2020 and received prorated Restricted Stock Awards for the period from February 6, 2020 to February 20, 2020, and prorated RSU awards for the period from February 21, 2020 through May 10, 2020 as well as an annual grant on May 12, 2020.

(4)        Messrs. Marino and Travis elected not to stand for reelection to the Board of Directors at the 2020 Annual Meeting and their terms expired on May 11, 2020.

(5)        Ms. Schoppert was appointed as a new director effective as of July 27, 2020 and was granted a prorated RSU award on July 29, 2020.

 

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CORPORATE GOVERNANCE

Corporate Governance Guidelines

Strong corporate governance principles and practices are a long-standing priority at ODP. The Board of Directors is committed to sound governance policies and practices that are designed and routinely assessed to enable the Company to operate its business responsibly, with integrity, and to position ODP to operate more effectively, sustain its success, and build long-term shareholder value. The Board of Directors has adopted Corporate Governance Guidelines, which set forth a framework within which the Board, assisted by its three standing committees, directs the affairs and business of the Company and engages in meaningful discussions with management to ensure long-term growth for the benefit of the shareholders and other stakeholders, becomes informed of the Company’s operating plans and strategic objectives, promotes public trust in the Company, and strengthens management accountability. The Corporate Governance & Nominating Committee reviews the Corporate Governance Guidelines annually to reflect evolving corporate governance standards identified by shareholders and other stakeholders, and any changes to these Guidelines are recommended to the Board of Directors for review and approval.

Board Leadership Structure

The Corporate Governance Guidelines specify that the Corporate Governance & Nominating Committee review the Board’s leadership structure periodically, considering the Company’s circumstances from time to time. After such review and evaluation, the Corporate Governance & Nominating Committee will make its recommendation to the full Board which will approve the leadership structure of the Board.

The Board of Directors annually elects one of its own members to serve as the Chairman of the Board of Directors. Our Bylaws provide that the Chairman of the Board may also serve as the CEO. The Board of Directors believes that there is a wide array of leadership structures that could apply to many different business models and, therefore, the Board should have the flexibility to consider the appropriate leadership structure for the Company, which leadership structure may change over time.

The Corporate Governance Guidelines provide that in the event that the offices of the CEO and the Chair of the Board of Directors are not separate, or the Chair of the Board has been determined by the non-management Directors to no longer satisfy the independence qualifications under the Nasdaq rules, the non-management Directors shall select a Director to serve as the “Lead Director” of the Board. The Lead Director must be a non-management Director. If applicable, upon recommendation by the Corporate Governance & Nominating Committee, the Board of Directors annually elects the Lead Director.

Since 2017, the roles of Chairman and CEO have been separated, enabling the Chairman to focus on leading the Board of Directors in its responsibilities and helping the Board ensure that management is acting in the best interests of the Company and its shareholders, and the CEO to lead the Company’s transformation from a tactical, product-based transactions company to a services-driven B2B platform and focus on the Company’s day-to-day business operations. In February 2021, the Board of Directors determined that the designation of Mr. Vassalluzzo as an independent, non-executive Chairman is the current optimal leadership structure for the Company because it provides the Board of Directors with independent leadership and meaningful coordination between management and the non-management Directors. This leadership structure has no impact on the Board of Directors’ oversight of risk.

Role of the Board Committees in Risk Oversight

The Board of Directors delegates oversight of certain specific risks to each Board committee based on the risk categories relevant to the subject matter of the Board committee. Below is a summary of the key risk oversight responsibilities that the Board has delegated to the Board committees.

 

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23

AUDIT

COMPENSATION & TALENT

CORPORATE GOVERNANCE & NOMINATING

•    Oversees risks related to the Company’s major financial risk exposures, including cybersecurity, legal, regulatory and compliance, internal controls, financial statements and financial reporting and controls, and the steps taken by management to monitor and control such exposures   •    Receives an annual risk assessment report from the Company’s internal audit team

•    Oversees risks related to executive and employee compensation policies and programs, including by designing compensation plans that promote prudent risk management   •    Reviews management recommendations of executive compensation including retention risks to create incentives that encourage a level of risk-taking behavior consistent with ODP’s business strategy   •    Oversees risks related to compensation of the non- management Directors

•    Oversees risks related to the Company’s governance structure   •    Oversees risks related to director independence and potential risks arising from person transactions   •    Oversees risks related to ESG matters and our operations, products and services   •    Oversees risks related to public policy and political activities

In addition, the Audit and Compensation & Talent Committees annually have a joint meeting to review the Company’s incentive compensation plans for a risk assessment conducted by the Company’s internal audit team and the Compensation & Talent Committee’s independent compensation consultant. See “Compensation Programs Risk Assessment” on page 68.

Annual Risk Assessment

The Company conducts an enterprise risk management (ERM) process, led by the Company’s senior internal audit executive, where risk is assessed periodically by a steering committee, comprised of members of the senior leadership team from each business unit and corporate function, and is tasked with championing risk management practices and integrating them into their functional business unit or function. The steering committee discusses and monitors the most significant enterprise risks in a cross-functional setting and evaluates and prioritizes company-wide risks. The results of the enterprise risk assessment help the steering committee focus on and select the key risks that are first presented to, and evaluated by, the Company’s executive officers, and then presented to the Board of Directors. In addition to this annual presentation made to the full Board, the Audit Committee receives periodic updates on certain risk areas the Board has identified for focus, and the independent Directors periodically discuss risk management during executive sessions without management present.

Director Attendance

The Board of Directors held 14 meetings during fiscal year 2020. The non-management Directors met in 14 executive sessions during fiscal year 2020. In fiscal year 2020, each of the current Directors attended at least 75% of the total number of Board and applicable committee meetings on which each member served (and held during the periods they served). Pursuant to the Corporate Governance Guidelines, each Director is expected to attend the Annual Meeting. All incumbent Directors who are up for re-election attended the 2020 Annual Meeting of Shareholders, except for Ms. Schoppert whose appointment to the Board of Directors was effective on July 27, 2020 and Mr. Dunlop whose appointment to the Board of Directors was effective on January 26, 2021.

 

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24

Board and Committee Responsibilities

The Board of Directors has established three (3) standing committees — (i) Audit, (ii) Compensation & Talent and (iii) Corporate Governance & Nominating. The Board of Directors delegates various responsibilities and authority to its Board committees. The Board committees regularly report on their activities and actions to the full Board.

Each of the Board committees operates under a written charter and annually reviews such charter in light of new developments in applicable regulations and may make additional recommendations to the Board to reflect evolving best practices. Each Board committee can engage outside experts, advisors and counsel to assist each committee in its work. Each charter of the Board committees is posted to our website at http://investor.theodpcorp.com under the heading “Corporate Governance/Committee Charters.” We will also provide a printed copy of the Board committee charters to shareholders upon written request to our Corporate Secretary at The ODP Corporation, 6600 North Military Trail, Boca Raton, Florida 33496.

 

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25

The following describes the responsibilities and current membership of the standing committees of the Board and the number of times each committee met in regular and executive sessions in fiscal year 2020.

 

Audit Committee		Primary Responsibilities
(6 Meetings; 6 Executive Sessions in fiscal year 2020)   Cynthia T. Jamison (Chair)   Quincy L. Allen   Wendy L. Schoppert   David M. Szymanski   •  All members are financially literate and independent under the applicable Nasdaq and SEC requirements •  Mmes. Jamison and Schoppert have been determined to be audit committee financial experts under the definitions provided by the SEC •  No member serves on the audit committee of more than three public boards		•   Oversees the financial reporting process, including the integrity of our financial statements, compliance with legal and regulatory requirements and our Code of Ethical Behavior, and the independence and performance of our internal and external auditors.   •   Oversees the work of the independent registered public accounting firm (including appointment and compensation).   •   Reviews the annual audited financial statements and quarterly financial information with management and the independent registered public accounting firm.   •   Reviews with management the Company’s major financial risk exposures and the steps management has taken to monitor and control the exposures, including the Company’s risk assessment and business risk management process and policies.   •   Conducts an annual risk assessment (jointly with the Compensation & Talent Committee) of the Company’s compensation policies and practices.   •   Oversees the Company’s internal audit function, including its audit scope and plan, and reviews the systems of internal controls.   •   Reviews the scope and planning of the annual audit with both the independent registered public accounting firm and internal auditors.   •   Reviews the findings and recommendations of both internal auditors and the independent registered public accounting firm and management’s response to those recommendations.   •   Reviews policies and procedures with respect to officers’ expense accounts and perquisites, including their use of corporate assets.

 

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26

Compensation & Talent Committee		Primary Responsibilities
(7 Meetings; 7 Executive Sessions in fiscal year 2020)   Francesca Ruiz de Luzuriaga (Chair)   Kristin A. Campbell   Cynthia T. Jamison   David M. Szymanski   •  All members meet the Nasdaq requirements for independence •  All members are “outside directors” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and “non-employee” directors under the SEC requirements		•   Sets and reviews overall compensation philosophy, strategies, plans, policies and programs.   •   Reviews and proposes to the non-management Directors incentive compensation plans and equity-based plans, including performance objectives and metrics associated with these plans, on an annual basis for the CEO.   •   Reviews annually CEO’s performance and proposes to the non-management Directors CEO compensation (including salary, bonus, equity-based grants and any other long-term cash compensation).   •   Reviews annual performance of the other executive officers and approves their compensation (including salary, bonus, equity-based grants and any other long-term cash compensation).   •   Reviews and approves employment, retirement, severance, benefit and perquisite practices and change-in-control agreements/arrangements for our executive officers.   •   Reviews and approves the peer group companies for benchmarking compensation levels and pay practices, as well as performance, for the CEO, executive officers and non-management Directors.   •   Reviews annually talent development and succession plans for executive officers other than the CEO and makes recommendations to the Board.   •   Administers the Company’s equity incentive plans, including the review and grant of stock option and other equity incentive grants to executive officers.   •   Responsible for enforcing the compensation clawback policy.   •   Conducts an annual risk assessment (jointly with the Audit Committee) of the Company’s compensation policies and practices.   •   Monitors compliance by executive officers and Directors with the Company’s stock ownership guidelines.

 

● ● ●

27

Compensation & Talent Committee		Primary Responsibilities
		•   Oversees the design, participation, adequacy, competitiveness, internal equity and cost effectiveness for the Company’s broadly applicable benefit programs.
		•   Oversees the disclosure regarding executive compensation, including approving the report to be included in our annual proxy statement on Schedule 14A.   •   Oversees the Company’s strategies and policies related to human capital development matters, including diversity and inclusion, pay equity, recruiting, retention, training and development, and workplace environment and safety consistent with the Company’s culture and strategy.
Corporate Governance & Nominating Committee		Primary Responsibilities
(6 Meetings; 6 Executive Sessions in fiscal year 2020)   Kristin A. Campbell (Chair)   Francesca Ruiz de Luzuriaga   Shashank Samant   •  All members meet the Nasdaq requirements for independence		•   Develops and recommends to the Board our corporate governance principles, policies and practices and takes a leadership role in shaping our corporate governance.   •   Reviews and evaluates the adequacy of and recommends to our Board amendments to our Bylaws, Certificate of Incorporation, committee charters and other governance documents.   •   Evaluates Board leadership structure and makes recommendations to the Board.   •   Reviews and makes recommendations to our Board regarding membership of the Board committees.   •   Recommends to the Board criteria and qualifications for Board membership, including assessing independence.   •   Identifies, reviews and recommends to our Board individuals for election or re-election to the Board, consistent with criteria approved by the Board.   •   Oversees the CEO succession planning process, including any emergency succession plan, and makes recommendations to our Board.   •   Monitors compliance with the Company’s Related Person Transactions Policy.   •   Oversees the Board and committees’ annual self-evaluations.

 

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28

Corporate Governance & Nominating Committee		Primary Responsibilities
		•   Reviews shareholders’ proposals for inclusion in the Company’s annual proxy materials and recommends appropriate action to the Board.   •   Oversees the Company’s strategy on ESG matters including sustainability.

Delegation of Authority; Subcommittees

Beginning in December 2011 and from time to time, the Compensation & Talent Committee has delegated certain of its responsibilities to the Company’s internal compensation and benefits committee (the “CBC”) and employee benefits committee (the “EBC,” and together with CBC, the “subcommittees”). The subcommittees are comprised of certain senior executives of the Company. The Compensation & Talent Committee provides oversight for the establishment and termination, amendment, participating employers, administration, claims review and service provider functions of the qualified retirement, non-qualified deferred compensation and health and welfare benefit plans sponsored by the Company or its subsidiaries for eligible employees of the Company or its subsidiaries who work in North America, with the exception of all such plans sponsored separately by entities acquired by the Company or its subsidiaries other than such plans sponsored by CompuCom Systems, Inc. During fiscal year 2020, the Compensation & Talent Committee delegated authority to the CBC to make certain amendments to and carry out certain administrative responsibilities regarding the tax-qualified retirement plans, health and welfare benefit plans and nonqualified deferred compensation plans sponsored by the Company or its subsidiaries. Day-to-day administration and the authority to make certain other amendments to such plans were further delegated to the EBC.

Certain Relationships and Related Person Transactions Policy

The ODP Corporation Related Person Transactions Policy sets forth the policies and procedures governing the review and approval or ratification by the Corporate Governance & Nominating Committee of transactions between the Company, on the one hand, and (i) an executive officer; (ii) Director; (iii) an immediate family member of an executive officer or Director; (iv) any security holder who is known by the Company to own of record or beneficially more than five percent of any class of ODP’s voting securities at the time of the transaction; or (v) an immediate family member of such five percent security holder, on the other hand. Persons in the categories described above are collectively referred to as “related persons.”

This Policy applies to all related person transactions, and under the Policy a “related person transaction” is any transaction:

 

•

in which ODP was or is to be a participant;

 

•

in which the amount exceeds $120,000 (including any contribution of $120,000 or more to a charitable organization in which a related person is a trustee, director, executive officer or has a similar relationship); and

 

•

in which any related person has, or will have, a direct or indirect material interest.

No related person transaction shall be approved or ratified if such transaction is contrary to the best interests of the Company and its stakeholders. Unless different terms are specifically approved or ratified by the Corporate Governance & Nominating Committee, any approved or ratified transaction must be on terms that are no less favorable to the Company than would be obtained in a similar transaction with an unaffiliated third party under the same or similar circumstances. All related person transactions or series of similar transactions must be presented to the Corporate Governance & Nominating Committee for review and pre-approval or ratification. A copy of the Policy is available for review on our website at http://investor.theodpcorp.com under the headings “Corporate Governance/Governance Documents.”

On an annual basis, each Director and executive officer of the Company is required to complete a questionnaire which requires disclosure of any related person transaction. The Company’s Chief Legal & Administrative Officer (“CLAO”) is

 

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29

responsible for determining whether any related person transaction is required to be disclosed in the Company’s applicable SEC filings and will ensure that such transaction or any series of similar transactions required to be disclosed will be presented to the Corporate Governance & Nominating Committee for pre-approval or ratification if required under the Policy. During fiscal year 2020, all transactions that were potentially subject to the Policy were reviewed and approved or ratified by the Corporate Governance & Nominating Committee and, there were no related person transactions that were required to be disclosed pursuant to Item 404(a) of Regulation S-K or affected our Directors’ independence.

Executive Sessions

The non-management Directors of the Company meet in executive sessions without management on a regular basis. The non-executive Chairman of the Board presides at such executive sessions. In the absence of the non-executive Chairman of the Board, the non-management Directors will designate another Director to preside over such executive sessions.

Board and Committee Evaluations

The Board of Directors is committed to continuous improvement and recognizes the importance of a rigorous evaluation process to enhance Board performance and effectiveness. The evaluations focus on the Board’s and each committee’s and their respective members’ performances and contributions to the Company as well as provide constructive feedback. The Corporate Governance & Nominating Committee is responsible for overseeing a formal evaluation process to assess the composition and performance of the Board and each committee on an annual basis. The assessment is conducted to identify opportunities for improvement and skill set needs, as well as to ensure that the Board, committees, and individual members have the appropriate blend of diverse experiences and backgrounds and are effective and productive. As part of the process, each Director completes an evaluation form, or participates in an interview or other method the Corporate Governance & Nominating Committee utilizes to seek feedback. While results are aggregated and summarized for discussion purposes, individual responses are not attributed to any individual and are kept confidential to ensure honest and candid feedback is received.

 

Our board evaluations are designed to solicit input and perspective on various topics, including:
•   board structure, size and composition, including director skills and experience;   •   committee structure and allocation of responsibilities;   •   conduct of meetings, including cadence, length and opportunity for director input and meaningful discussion;   •   materials and information, including quality, timeliness and relevance;   •   director orientation and continuing education;   •   director performance, including attendance, preparation and participation;		•   access to management and internal and external experts, resources, and support;   •   key areas of focus for the board, including strategy, sustainability, crisis management and shareholder engagement;   •   committee structure and process, member and chair performance, duties and functions and management support; and   •   performance of the board chair, including communication, relationship with management, availability, focus on appropriate issues and inclusiveness.

The Corporate Governance & Nominating Committee discusses opportunities and makes recommendations for improvement as appropriate to the full Board, which implements agreed upon improvements. A Director will not be nominated for reelection unless it is affirmatively determined that he or she is substantially contributing to the overall effectiveness of the Board.

Director Orientation and Continuing Education

In accordance with the Corporate Governance Guidelines, the Corporate Governance & Nominating Committee will arrange an orientation program for newly elected Directors and, together with the CEO, determine the content of such orientation. The orientation enables new Directors to become familiar with the Company’s business and strategic plans; significant financial matters; core values, including ethics; compliance programs; corporate governance practices; and other key policies and practices.

 

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30

It is important for Directors to stay abreast and informed on developments in corporate governance best practices in order to effectively discharge their duties. Our Directors are provided updates on corporate governance developments at regularly scheduled Board meetings, and Directors are encouraged to participate in programs that specialize in director education on a regular basis but at least one session every two (2) years. The Company pays for attendance fees to participate in such programs and reimburses the Directors for their reasonable out-of-pocket costs associated with attending these programs.

Code of Business Conduct (Code of Ethical Behavior)

The Board of Directors has adopted a Code of Ethical Behavior which is applicable to all Company employees, including the principal executive officer, the principal financial officer, the principal accounting officer, and the Board of Directors. If the Board amends or waives the Code of Ethical Behavior with respect to the executive officers of the Company, the Company will post the amendment or waiver on its website at http://investor.theodpcorp.com, under the headings “Corporate Governance/Governance Documents.”

The Company has established a confidential hotline to assist its employees in complying with their ethical and legal obligations and to report suspected violations of applicable laws or Company policies or procedures. The hotline enables employees, vendors and the public to express their concerns about possible violations of law or Company policies by the Company and/or management without fear of retribution or retaliation of any kind. It is the Company’s express policy that no retaliatory action be taken against any employee for using the hotline procedure. The hotline is operated by an independent third party, not by Company personnel. The hotline can be accessed by either calling the following toll-free number or visiting the following website:

1-866-634-6854

www.odhotline.com

The Corporate Governance Guidelines and the Code of Ethical Behavior are available on the Company’s website at http://investor.theodpcorp.com, under the heading “Corporate Governance/Governance Documents.” In addition, a printed copy of such documents will be provided to any shareholder upon written request to the Corporate Secretary at The ODP Corporation, 6600 North Military Trail, Boca Raton, Florida 33496.

Shareholder Engagement and Investor Outreach

Management and the Board of Directors are committed to a proactive shareholder engagement program. We believe that strong corporate governance should include meaningful dialogue with our shareholders and key stakeholders to understand their perspectives on corporate governance, executive compensation, ESG and sustainability matters and other issues that are important to them. Engagement with shareholders builds mutual understanding and a basis for progress, and the feedback we receive from them impacts our corporate governance practices. Senior management from Legal and Investor Relations and subject matter experts from the Company communicate with institutional investors throughout the year to gain their perspectives on current issues and address any questions or concerns. We also respond to individual shareholders and other stakeholders who provide feedback about our business. Our Vice President of Investor Relations and/or our CFO provide feedback from the investor and analyst meetings formally to the Board and its committees, where applicable, on a quarterly basis.

During fiscal year 2020, we sought feedback from our top 20 shareholders representing approximately 70% of the Company’s outstanding common stock to discuss risk management, governance practices, executive compensation, board composition, ESG issues, and other matters that the shareholders wished to discuss.

We will continue our shareholder engagement and investor outreach during fiscal year 2021, including our regular participation at analyst meetings and industry conferences and communication of the Company’s strategy to continue to roll out its B2B integrated distribution platform providing high value products and services. We remain committed to these ongoing discussions and welcome feedback from all shareholders, who may reach our Investor Relations team by calling (561) 438-4629 or visiting http://investor.theodpcorp.com or can contact our Directors or executive officers as described below.

 

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31

Communicating with our Board of Directors

As stated in the Corporate Governance Guidelines, shareholders and other interested parties who wish to communicate with the Board of Directors may contact any member (or all members) of the Board of Directors, or the non-management Directors as a group, any committee of the Board or any chair of any such committee by mail. The Corporate Secretary reviews all communications sent to the Board related to the duties and responsibilities of the Board and its committees and provides these communications to the non-executive Chairman of the Board, the applicable committee chair or the full Board as necessary.

In addition, any person who desires to communicate a confidential specific matter to the Audit Committee may do so by addressing a letter to the Chair of the Audit Committee, c/o Corporate Secretary, at the corporate headquarters address below. Mark “Confidential” on the outside of the envelope. Any confidential communications submitted anonymously will not be opened for any purpose other than for appropriate security inspections. Such communications will be reviewed by the Chair of the Audit Committee with follow-up action as he or she deems appropriate.

Correspondence should be sent “c/o Corporate Secretary,” The ODP Corporation, 6600 North Military Trail, Boca Raton, Florida 33496.

Corporate Responsibility and Sustainability

The ODP Corporation, together with its subsidiaries Office Depot, LLC (“Office Depot”), Grand & Toy Limited and CompuCom Systems, Inc. (collectively, the “Company”), provides business services, products and digital workplace technology solutions aligned around the shared purpose of being exceptional corporate citizens. The Company is focused on managing environmental, social, and governance (“ESG”) factors that support its “5C” culture based on Customer, Commitment, Change, Caring and Creativity. We aim to incorporate the 5Cs into every aspect of our work, integrate sustainability solutions into our operations and support causes that align with our business and speak to who we are as an organization.

Our Response to the COVID-19 Pandemic

From the beginning of the COVID-19 pandemic, our focus at ODP has been and continues to be on two key priorities: the health, safety and well-being of our associates and customers; and providing our customers and communities with the products they need at this time. Due to the nature of products sold in our retail locations and integrated business-to-business distribution platform, our business was considered essential commerce by most local jurisdictions and has remained open and operational. Based upon the guidance of the U.S. Centers for Disease Control (“CDC”) and local health authorities, we have put appropriate measures in place to help reduce the spread of infection to our associates and customers, including the institution of social distancing protocols and increased frequency of cleaning and sanitizing in those facilities. Since March 2020, associates who are able to, have been working from home, with only essential employees in our retail stores, customer support and distribution centers working on site at our facilities, as well as technicians and field support on-site at customer locations, as necessary. We have also limited employee business travel to only essential business needs.

ODP’S Sustainability Strategy

Governance

The Board of Directors recognizes the increasing importance of sustainability and ESG issues and seeks to integrate sustainability considerations into the Company’s business strategies, products, services, thought leadership and operations. The oversight, management, and program implementation of the Company’s sustainability and ESG efforts are structured to ensure these topics are integrated into the foundation of its strong governance framework. In 2020, the charter of the Corporate Governance & Nominating Committee was amended to explicitly state that the committee’s responsibilities include oversight of the Company’s strategy and programs on corporate social responsibility, the environment and sustainability. The Company’s sustainability strategy focuses on conducting its business to ensure that it preserves the environment for future generations and provides a safe and healthy working environment for all its employees. The Company’s Sustainability Governance Council (the “Council”) consists of Company-wide leaders representing key departments across the organization. Working under the Corporate Governance & Nominating

 

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32

Committee, the Council implements and supports the Company’s vision and mission by identifying the sustainability issues most critical to our business and our stakeholders, recommends initiatives to advance the Company’s public facing goals and identifies the metrics needed to measure and report progress. In 2020, the Council created a cross-functional subcommittee, the Sustainability Operating Committee (“SOP”) comprised of members of management representing a broad cross-section of our business to further operationalize and execute on these initiatives.

 

 

A copy of our current sustainability report and our landing page are available for review on our website at http://investor.theodpcorp.com under the heading “Corporate Sustainability.” ²

Protecting Our Planet

The Company believes that sustainability plays an essential role in the success of our Company, our industry and our communities, and is committed to operating in a socially responsible manner. To that end, we are not only managing our own environmental footprint as we continue to grow, we also participate in initiatives to help our customers, suppliers and vendors achieve their own sustainability goals.

The Company has an environmental policy to buy greener, be greener and sell greener. We have adopted a “cradle to grave” approach with our products and services and offer several high-quality, long-lasting products with reduced life cycle costs, and when those products have met the end of their useful life, we assist with the correct disposal in an environmentally responsible way. As an example, under “buy greener,” we are committed to sourcing, using and selling paper products that reduce our impact on the world’s forests. We remain committed to using recycled fiber, supporting responsible forestry certification, increasing supply chain transparency and growing markets for greener paper products.

Some of our accomplishments in other areas include the following:

 

•

Achieved 44% (kWh) facilities’ energy consumption reduction between 2016 and 2020, exceeding our 10% energy reduction goal3;

 

•

100% of electricity used in the Company’s corporate headquarters is offset by Green-e Energy® certified Wind Renewable Energy Credits;

 

•

Achieved an 18% increase in miles per gallon in our private fleet between 2018 and 2020, exceeding our 15% fuel efficiency goal;

 

•

Achieved an 11% reduction in greenhouse gas (GHG) emissions from 2019 (MT CO2e Scopes 1 and 2);

 

•

Recycled 40% of waste generated at our facilities, diverting over 15,000 mt of waste from landfills; and

 

•

Recycled more than 6 million pounds of e-waste from customers.

 

2	Company goals are aspirational and may change. Statements regarding the Company’s goals are not guarantees or promises that they will be met.

3

Our energy consumption in 2020 has been impacted by the COVID-19 pandemic. Specifically, since March 2020, we have temporarily closed certain offices (including our corporate headquarters) and we temporarily reduced our retail location hours which continues to be in effect in some of our retail locations. As such, our energy consumption in 2020 may not be indicative of our energy consumption in future years.

 

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33

Supplier Guiding Principles

The Company requires its suppliers who produce private brand products for Office Depot to follow and adhere to its Supplier Guiding Principles. The Supplier Guiding Principles is our supplier code of conduct and represents the Company’s commitment to source from suppliers that strive to comply with all applicable laws and regulations. Office Depot endeavors to partner with suppliers who meet internationally recognized standards in dealing with its workers, the environment in which products are made as well as their supply chain operations.

ODP’S Social Responsibility Strategy

Investing in Our People

Diversity and Inclusion or “D&I”. We are committed to maintaining a diverse and inclusive workplace in which our associates from all backgrounds can fully contribute to the growth and success of our business. In 2020, the charter of the Compensation & Talent Committee was amended to explicitly state that the committee’s responsibilities include oversight with respect to diversity and inclusion, pay equity, recruiting, retention, training and development, and workplace environment and safety consistent with the Company’s culture, objectives and strategy. We create a culture of inclusion for associates regardless of gender, race, color, creed, religion, marital status, age, national origin, physical or mental disability, medical condition, veteran status, citizenship, sexual orientation, gender identity, or any other protected group status. The Company has been recognized in local communities and on a national level for its inclusion efforts and is committed to an inclusive work environment that values and respects the talents and contributions of every associate. The Company creates a diverse and inclusive workplace culture when it attracts and hires associates of all abilities and backgrounds. The Company’s commitment to equal opportunity is driven by its 5C Culture, and diversity and inclusion are intrinsic to the Company’s values and contribute to the Company’s success in the markets it serves. In addition to the Company’s values, it also lives by the following diversity values:

 

•

Employs a diverse workforce that reflects the communities in which the Company does business.

 

•

Offers equal opportunities for advancement and encourages all employees to develop to their full potential.

 

•

Embraces new ideas and perspectives and respects individual differences.

 

•

Does not tolerate harassment of any kind.

The Company’s Diversity Council is comprised of leaders from across the business, including the executive sponsors of our Associate Resource Groups (ARGs) as further described below. The Diversity Council provides oversight and counsel for the Company’s diversity and inclusion efforts and provides a platform for identifying and advising on areas of opportunity to continue evolving processes, policies and procedures in alignment with our 5C Culture.

In 2020, the Company was named Top Employer on the 2020 Best of the Best list by Black EOE Journal, Hispanic Network Magazine, and Professional Woman’s Magazine. The Company was also recognized as one of America’s Top Corporations for Women’s Business Enterprises by Women’s Business Enterprise National Council (WBENC), 2020 Top 50 Best Companies for Latinas to Work for in the U.S. by LATINA Style Magazine, 2020 Best of the Decade for Supplier Diversity by Minority Business News magazine, and Best Place to Work for LGBT Equality by the Human Rights Campaign Foundation.

The Company recognizes that disability inclusion is a fundamental value tightly interwoven into the Company’s everyday function and long-term goals. The Company devotes resources and efforts for disability training and hiring initiatives and works closely with local communities to maximize the benefits of these programs. In 2018, through its corporate citizen efforts, the Company and the LaunchAbility Academy Training program partnered with the Texas Department of Assistive and Rehabilitative Services to offer an eight-week program for disabled individuals to help them gain professional experience. In 2020, the Company celebrated its five-year anniversary of this program. In addition, the Company is an active participant and sponsor of Disability: In and has participated in Disability: In’s Disability Equality Index survey. We are proud to have received a 100% score on the Human Rights Campaign (HRC) Foundation’s Corporate Quality Index for the ninth consecutive year.

 

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34

The 2020 U.S. workforce data provided below is from EEO-1 Reports for Office Depot and CompuCom Systems, Inc. and is based on employees’ voluntarily self-disclosure of gender and race/ethnicity. The information below does not include data from certain regional office supply companies recently acquired by Office Depot, which continue to operate as separate entities, and may not be required to collect and compile such data.

Office Depot — Gender Representation:

 

MANAGEMENT		ALL OTHER EMPLOYEES

Office Depot — Racial/Ethnic Group Representation:

 

MANAGEMENT		ALL OTHER EMPLOYEES

CompuCom — Gender Representation:

 

MANAGEMENT		ALL OTHER EMPLOYEES

 

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35

CompuCom — Racial/Ethnic Group Representation:

 

MANAGEMENT		ALL OTHER EMPLOYEES

Employee Engagement. We maintain a robust and ongoing survey process to monitor employee engagement. In 2020, we added two D&I questions to our annual employee engagement survey to more formally assess associate perspectives on our commitment to driving an inclusive culture in which associates feel they belong and can bring their authentic selves to work. To further foster employee engagement and promote diversity and inclusion, we have encouraged the formation of ARGs. ARGs are voluntary, employee-led, and company-sanctioned organizations of employees who share similar backgrounds, such as age, gender, race, ethnicity, sexual orientation, military experience, life experiences, and other non-merit factors. ARGs work to foster a welcoming and inclusive work environment, drive awareness, and facilitate engagement, leadership, development and support within affinity groups. At the end of 2020, we had 13 ARGs representing various dimensions of diversity: Asian Professionals, Blacks in CompuCom, Men of Color, two LGBTQ+, two Military-Veterans, SOMOS Office Depot, Sustainability, Women in Leadership, Women in Technology, Women of Color, and Young Professionals. Our SOMOS ARG was selected as one of the top 16 employee resource groups of the year for 2020 by LATINA Style, Inc.

Supplier Diversity. We believe supplier diversity is an imperative business practice in today’s economic environment. It helps us identify and deliver quality products and services across all business channels, while driving value and economic development in the communities we serve. We are committed to supporting diverse suppliers and are proud to offer an exceptional choice of innovative products and services to our customers through our Supplier Diversity program. There are over 1,700 featured items in our Diverse Suppliers Catalog. We work continuously to increase sourcing opportunities with diverse businesses — including certified minority-, women-, disabled-, LGBT-, veteran-owned and small businesses.

During 2020, we worked with over 300 diverse suppliers and spent over $273 million dollars with diverse businesses. In 2020, Office Depot was recognized as America’s Top Corporation for Women’s Business Enterprises by Women’s Business Enterprise National Council for successfully driving sustainable inclusion of women-owned businesses within corporate and government supply chains and empowering local communities through economic growth and job creation. The Company was also named Best of the Best Top Supplier Diversity program by Professional Woman’s Magazine and as 2020 Best of the Decade for Supplier Diversity by Minority Business News magazine.

Health and Safety. We are committed to be an environmental steward that supports healthy communities and helps our customers do the same. ODP makes every effort to maintain a safe and healthy work environment. It is our intent to comply with all required U.S. Federal and state safety and health regulations and standards. Our Injury and Illness Prevention Program helps in eliminating or reducing the severity of job-related illnesses and injuries within our Company with the engagement of our leadership and associates by assigning responsibility, requiring ongoing training at all levels, driving a safety culture through constant communication, identifying and eliminating hazards, recognizing safe acts and correcting unsafe behaviors, and accurate incident reporting, investigations, and recordkeeping.

Community Investment. The Company including its subsidiaries believes that part of being responsible corporate citizens is improving the communities where its associates live and work. This commitment spans a wide variety of engagement and activities, both in terms of the Company’s associates’ volunteerism, in-kind contributions and monetary donations on behalf of the Company and by its associates, with the aim of strengthening our communities. We encourage associate

 

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36

volunteerism at all our locations through organized activities and by contributing to local charitable organizations and educational efforts. Our associates are passionate about their communities and enjoy working together for the greater good.

Examples of how the Company supported local communities in 2020 include:

 

•

Converted annual “Depot Day of Service” from a school makeover campaign into a Teacher Support Grant Program and donated separate grants in amounts of $20,000 to help teachers meet teach-from-home needs due to COVID-19

 

•

Launched $200,000 “slowing the summer slide” grant program to help low-income youth overcome the learning loss challenges caused by COVID-19

 

•

Donated $1.5 million dollars to Feeding America’s COVID-19 Response Fund

 

•

Partnered with 5 school districts to launch COVID-19 device drives for underserved students and virtual teaching supply drives for Title 1 schools

 

•

Partnered with 18 Title 1 school districts and donated 1,000 fully stocked backpacks, Office Depot gift cards, and teacher supplies in socially distant-compliant backpack distribution events

 

•

Transformed mentoring programs to virtual options to support at-risk youth throughout the 2020-21 school year

 

•

Launched In-Store point-of-sale “Customer Philanthropy” nationwide for various charities

 

•

Together with HP Canada repurposed and donated 125 laptops to students in need (versus being disposed of in landfills) as part of the HP Refresh Program

 

•

Donated $10,000 of protective personal equipment to help support seniors in long term care facilities

CEO and Executive Management Succession Planning

The Corporate Governance & Nominating Committee oversees CEO succession planning, which is formally reviewed at least annually, in executive session with only non-management Directors present. During these executive sessions, the non-management Directors evaluate the requirements for the CEO position and regularly review potential permanent and interim candidates for the CEO role.

The Compensation & Talent Committee annually evaluates the succession planning process for the executive management team (other than the CEO), including the professional development of senior and midlevel management employees identified as potential successors to the executive management team to ensure that plans are in place for orderly succession of executive management, whether arising from natural career growth and development, voluntary turnover, retirements, or other reasons.

The Board of Directors also established steps to address emergency CEO succession planning in extraordinary circumstances. Our emergency CEO succession planning is intended to enable the Company to respond in the event of our CEO’s termination of employment with the Company for any reason (including death or disability) or other sudden departure, to ensure the stability and accountability of the Company during periods of transition and minimizing potential disruption or loss of continuity to the Company’s business and operations. The Board of Directors reviews and discusses the emergency plan once at least annually.

Anti-Hedging and Anti-Pledging Policies

The Company maintains anti-pledging and anti-hedging policies. See Compensation Discussion and Analysis under subheading “Other Compensation and Governance Matters” for further information about these policies.

 

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37

AUDIT COMMITTEE REPORT

The Audit Committee assists the Board of Directors in its oversight of the Company’s financial reporting process. The Audit Committee operates pursuant to a written charter which is reviewed annually by the Audit Committee and approved by the Board of Directors. A brief description of the primary responsibilities of the Audit Committee is included in this Proxy Statement under the heading “Corporate Governance — Board and Committee Responsibilities.” Under the Audit Committee charter, management is responsible for the preparation, presentation and integrity of the Company’s financial statements, the application of accounting and financial reporting principles and our internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing our financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States of America.

To perform its oversight function, the Audit Committee has:

 

•

Reviewed and discussed the Company’s audited financial statements and related footnotes with management.

 

•

Discussed with the Company’s independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC.

 

•

Received the written disclosures and the letter from the Company’s independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit Committee concerning independence and has discussed with the independent auditors their independence.

 

•

Discussed with the Company’s independent auditors its independence from management and the Company and reviewed and pre-approved the services provided by the Company’s independent auditors other than their audit services and considered whether the provision of such other services by the Company’s independent auditors is compatible with maintaining their independence.

 

•

At least annually, discussed with the Company’s internal auditors and independent auditors the overall scope and plans for their respective audits for the fiscal year 2020, and then met with the internal auditors and the Company’s independent auditors, with and without 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.

Based on the foregoing reviews and discussions, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 26, 2020 filed with the SEC.

Submitted by the Audit Committee of the Board of Directors:

Cynthia T. Jamison (Chair)

Quincy L. Allen

Wendy L. Schoppert

David M. Szymanski

 

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38

PROPOSAL No. 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

The Audit Committee has appointed Deloitte & Touche LLP (“D&T”) to serve as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements and internal control over financial reporting for the fiscal year ending December 25, 2021. D&T has served as the Company’s independent auditors each year since 1990. Although ratification is not required by our Bylaws or otherwise, the Board of Directors is submitting the appointment of D&T to our shareholders for ratification because we value our shareholders’ views on the Company’s independent auditors. In the event the shareholders do not ratify the appointment of D&T as the independent auditors to audit our financial statements for fiscal year 2021, the Audit Committee, in its discretion, will consider the voting results and evaluate whether to select a different independent auditor. Representatives of D&T will attend the Annual Meeting and will be available to respond to appropriate questions. Although D&T has indicated that no statement will be made, an opportunity for a statement will be provided.

Audit and Non-Audit Fees

In connection with the audit of fiscal year 2020 consolidated financial statements and internal control over financial reporting, the Company entered into an agreement with D&T which sets forth the terms by which D&T will perform audit services for the Company.

The following table sets forth the aggregate fees for professional services rendered by D&T for the audit of the Company’s consolidated financial statements for fiscal years 2020 and 2019 and fees billed for other services rendered by D&T for those periods.

 

Fiscal Year		Annual Audit Fees(1)				Audit-Related Fees(2)				Tax   Fees(3)				All Other Fees(4)
2020		$	4,428,152			$	30,000			$	42,180			$	0
2019		$	4,552,736			$	58,000			$	98,363			$	0

 

 

(1)        Audit Fees — These amounts represent fees of D&T for professional services rendered in connection with: (i) the audits of our annual consolidated financial statements and the effectiveness of our internal controls over financial reporting for the fiscal years ended December 26, 2020 and December 28, 2019; (ii) the review of the consolidated financial statements included in each of our Quarterly Reports on Form 10-Q during those fiscal years; (iii) consultations on accounting matters; and (iv) SEC registration statements.

(2)        Audit Related Fees — Audit-Related Fees relate to assurance and related services that are reasonable related to the performance of the audit or review of our financial statements or other filings.

(3)        Tax Fees — Tax Fees consist of fees billed for professional services performed by D&T with respect to tax compliance and advisory services.

(4)        All Other Fees — All Other Fees consist of permitted services other than those that meet the criteria above and are primarily fees for advisory services.

 

● ● ●

39

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be separately approved in advance by the Audit Committee. The policy also provides that the Audit Committee has delegated pre-approval authority to the Chair of the Audit Committee for non-audit services provided that the pre-approval of each service permitted by the Chair is limited to a pre-established threshold of up to $250,000 and reported to the full Audit Committee at its next meeting. All audit and non-audit services provided in fiscal years 2020 and 2019 were pre-approved by the Audit Committee in accordance with these policies and procedures.

THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2021.

 

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40

PROPOSAL No. 3: TO APPROVE THE ODP CORPORATION 2021 LONG-TERM INCENTIVE PLAN

 

 

Overview

The Board of Directors unanimously recommends that shareholders approve The ODP Corporation 2021 Long-Term Incentive Plan (the “2021 Plan”) which will replace The ODP Corporation 2019 Long-Term Incentive Plan (the “2019 Plan”). The Board of Directors unanimously approved the 2021 Plan on March 10, 2021. The 2021 Plan will become effective on April 21, 2021 (the “Plan Effective Date”) if the Company’s shareholders approve the 2021 Plan on that date. No awards have been made under the 2021 Plan.

Awards are currently outstanding under the 2019 Plan as well as the prior The ODP Corporation 2017 and 2015 Long-Term Incentive Plans and the 2003 OfficeMax Incentive and Performance Plan (referred to in this Proxy Statement, respectively, as the “2017 Plan,” “2015 Plan” and “2003 OMIPP” and, together with the 2019 Plan, as the “Prior Plans”). Outstanding awards under the Prior Plans will continue to be governed by the Prior Plans and the agreements under which they were granted. No additional awards will be granted under the 2019 Plan after the Plan Effective Date and all remaining shares available for grant under the 2019 Plan will be cancelled on the Plan Effective Date, unless the 2021 Plan is not approved by the Company’s shareholders, in which case the 2019 Plan will continue in effect. No additional awards have been granted under the 2017 Plan since the Company’s shareholders approved the 2019 Plan on May 7, 2019; all remaining shares available for grant under the 2017 Plan were cancelled at that time. No additional awards have been granted under the 2015 Plan since the Company’s shareholders approved the 2017 Plan on July 20, 2017; all remaining shares available for grant under the 2015 Plan were cancelled at that time. No additional awards have been granted under the 2003 OMIPP since the Company’s shareholders approved the 2015 Plan on April 25, 2015; all remaining shares available for grant under the 2003 OMIPP were cancelled at that time.

No awards may be granted under the 2021 Plan after the tenth anniversary of the Plan Effective Date. However, awards outstanding under the 2021 Plan at that time will continue to be governed by the 2021 Plan and the agreements under which they were granted.

The 2021 Plan is substantially similar to the 2019 Plan and, like the 2019 Plan, reflects the following equity compensation plan best practices:

 

•

No grants of below-market stock options or stock appreciation rights (SARs);

 

•

No repricing of stock options or SARs and no cash buyout of underwater stock options or SARs;

 

•

No liberal share recycling of stock options or SARs;

 

•

No payment of dividends or dividend equivalents on stock options or SARs;

 

•

No payments of dividends or dividend equivalents on any award prior to the date on which the award vests;

 

•

Individual limits on annual cash and equity non-employee director compensation;

 

•

Minimum vesting requirement of one year for all equity-based awards except under certain limited circumstances, and with permitted exceptions up to 5% of the authorized shares;

 

•

No liberal change in control definition;

 

•

Double trigger treatment upon change in control except to the extent awards are not assumed or replaced in change in control;

 

•

No excise tax gross-ups on “parachute payments”; and

 

•

Awards are subject to The ODP Corporation recoupment/clawback policy.

 

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41

The full text of the 2021 Plan is attached as Annex 1 to this Proxy Statement, and the following summary of the 2021 Plan is qualified in its entirety by reference to Annex 1.

Why ODP Believes You Should Vote to Approve the 2021 Plan

The 2021 Plan authorizes the grant of equity-based compensation as described above for the purpose of providing the Company’s officers and other employees, and those of its subsidiaries, non-employee directors, and non-employees who perform consulting services, incentives and rewards for performance. The details of the key design elements of the 2021 Plan are set forth in the section entitled “Plan Summary” beginning on page 44 of this Proxy Statement. As further described in the section entitled “Compensation Discussion and Analysis” beginning on page 53 of this Proxy Statement, The ODP Corporation believes its future success depends in part on its ability to attract, motivate and retain high quality employees and non-employee directors.

The use of our common stock as part of the Company’s compensation program is also important to its continued success because the Company believes it fosters a pay-for-performance culture that is an important element of its overall compensation philosophy. The Company believes that equity-based compensation motivates employees to create shareholder value because the value employees realize from equity-based compensation is based on The ODP Corporation’s stock price performance. Equity-based compensation aligns the compensation interests of Company employees with the investment interests of its shareholders and promotes a focus on long-term value creation because the Company’s equity-based compensation awards can be subject to vesting and/or performance criteria.

If the 2021 Plan is not approved, the Company will continue to grant awards under the 2019 Plan until there are no longer any shares available for grant, following which the Company may be compelled to increase significantly the cash component of its employee compensation, which may not necessarily align employee compensation interests with the investment interests of its shareholders as well as the alignment achieved by equity-based awards. Replacing equity-based awards with cash payments would also increase cash compensation expense and use up cash that might be better utilized if reinvested in our business or returned to our shareholders. If the 2021 Plan is not approved, The ODP Corporation could also be at a severe competitive disadvantage as it would not be able to use stock-based awards to recruit and compensate its officers and other key employees.

Determination of Shares Available under 2021 Plan

We are requesting approval of 3,400,000 shares of common stock for awards under the 2021 Plan (the “share pool”), subject to adjustment as described in the 2021 Plan. In particular, under the terms of the 2021 Plan, the share pool will be reduced by one share for every one share subject to an award granted after December 26, 2020 under the 2019 Plan. The shares of common stock issued by the Company under the 2021 Plan will be currently authorized but unissued shares or shares currently held (or subsequently acquired) as treasury shares, including shares purchased on the open market or in private transactions. In determining the number of shares to request pursuant to the 2021 Plan, the Company evaluated its share availability under the 2019 Plan, recent share usage, historical burn rate, projected burn rate under the 2021 Plan, and the potential cost and dilution to shareholders associated with the new reserve and outstanding equity-based awards that the Company previously granted.

 

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42

Burn Rate for Fiscal 2018, 2019 and 2020

 

Fiscal Year		Options				Full Value Time Based Awards Granted				Performance Awards Earned				Weighted Average Number of Common Shares Outstanding				Unadjusted Burn Rate
2020			—				835,828				151,905				53,000,000				1.86	%
2019							740,236				284,366				54,000,000				1.90	%
2018			—				1,063,915				121,176				55,300,000				2.14	%

The Company anticipates that the total number of shares available for grant under the 2021 Plan will last approximately three years, based solely on the average rate at which it has granted equity awards over the past three fiscal years and assuming that it makes future awards under the 2021 Plan at this average rate. However, the amount of future awards is not currently known and will depend on various factors that cannot be predicted, including, but not limited to, the price of our common stock on the future grant dates, the volatility of the stock and the types of awards that will be granted.

Potential Dilution

The Company’s potential dilution, or “overhang,” from outstanding awards and its request for shares to be available for awards under the 2021 Plan is approximately 12.32%. The Board of Directors believes that the number of shares of common stock available under the 2021 Plan represents a reasonable amount of potential dilution that will allow The ODP Corporation to continue to award equity incentive compensation. This percentage was calculated as follows:

 

Select Data as of December 26, 2020
New Shares Requested under 2021 Plan*			3,400,000
Appreciation Awards Outstanding			137,762
Weighted Average Exercise Price		$	44.18
Weighted Average Remaining Term			6.39 years
Full Value Awards Outstanding			3,985,631
Shares Available under 2019 Plan after Effective Date**			0
Total Share Allocation (TSA)			7,523,393
Common Shares Outstanding as of December 26, 2020			53,524,445
Dilution (TSA / Common Shares Outstanding as of December 26, 2020 + TSA)			12.32%

 

*	The proposed share reserve is subject to reduction for any awards granted under the 2019 Plan after December 26, 2020. As of December 26, 2020, there were 2,669,187 shares available for future grants under the 2019 Plan.

 

**

No additional awards will be granted under the 2019 Plan after the Plan Effective Date and all remaining shares available for grant under the 2019 Plan will be cancelled on the Plan Effective Date, unless the 2019 Plan is not approved by shareholders, in which case the 2019 Plan will continue in effect.

Application of Share Pool

Each share subject to an award under the 2021 Plan will be deducted from the share pool on a one-for-one basis.

Each performance share under the 2021 Plan that may be settled in shares will be counted as a number of shares subject to an award based on the number of shares that would be paid for achievement of target performance and deducted from the share pool. Each performance unit under the 2021 Plan that may be settled in shares will be counted as a number of shares subject to an award (based on the number of shares that would be paid for achievement of target performance), with the number determined by dividing the value of the performance unit at the time of grant by the fair market value of a share at the time of grant and deducting the resulting number of shares from the share pool. If a performance share or performance unit under the 2021 Plan is later settled based on above-target performance, the number of shares corresponding to the above-target performance will be deducted from the share pool at the time of

 

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43

settlement; in the event that the award is later settled upon below-target performance, the number of shares corresponding to the below-target performance will be added back to the share pool.

If shares awarded or subject to issuance under the 2021 Plan or the Prior Plans are not issued or are returned to the Company, that number of shares will be added to the share pool. If the tax withholding obligation under an award granted under the 2021 Plan or a Prior Plan other than an option, SAR or other award in the nature of an appreciation right is satisfied after December 26, 2020 by the Company retaining shares or by the participant tendering shares, the number of shares so retained or tendered will be added to the share pool. If awards are issued under the 2021 Plan in respect of awards of an entity acquired (by merger or otherwise) by the Company or any of its subsidiaries, the shares subject to those awards will not increase or decrease the share pool.

Notwithstanding anything to the contrary, if the exercise price or tax withholding obligation under an option, SAR or other award in the nature of an appreciation right granted under the 2021 Plan or a Prior Plan, is satisfied by the Company retaining shares or by the participant tendering shares, the number of shares so retained or tendered will not be available for awards under the 2021 Plan and will not be added to the share pool. To the extent a SAR granted under the 2021 Plan or a Prior Plan that may be settled in shares of common stock is, in fact, settled in shares of common stock, the gross number of shares subject to such SAR will not be available for further awards under the 2021 Plan and will not be added to the share pool. Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options granted under the 2021 Plan or a Prior Plan will not be added back to the share pool.

Incentive Stock Options

One of the requirements for the favorable tax treatment available to ISOs under the Internal Revenue Code is that the 2021 Plan must specify, and our shareholders must approve, the number of shares available for issuance pursuant to ISOs. As a result, in order to provide flexibility to the Compensation & Talent Committee, the 2021 Plan provides that all or any portion of the share pool may be issued pursuant to ISOs.

Current Stock Price

The closing price of our common stock on The Nasdaq Global Select Market on February 25, 2021 was $ 39.63 per share.

In evaluating this proposal, shareholders should specifically consider the information set forth under the following section entitled “Plan Summary”.

Plan Summary

The following summary of the material terms of the 2021 Plan is qualified in its entirety by reference to the full text of the 2021 Plan, which is attached as Annex 1 to this Proxy Statement. The 2021 Plan is not a qualified deferred compensation plan under Section 401(a) of the Internal Revenue Code and is not intended to be an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended.

Purpose of the 2021 Plan

The purpose of the 2021 Plan is to promote the long-term growth and profitability of The ODP Corporation and its subsidiaries by (i) providing certain employees, officers, non-employee directors, and consultants who perform services for The ODP Corporation and its subsidiaries with incentives to maximize shareholder value and otherwise contribute to the success of The ODP Corporation, and (ii) enabling The ODP Corporation to attract, motivate, retain and reward qualified employees, officers, non-employee directors and consultants.

Administration of the 2021 Plan

The 2021 Plan will be administered by the Compensation & Talent Committee or such other committee consisting of two or more independent members of the Board of Directors as may be appointed by the Board to administer the 2021 Plan (the “Committee”). If any member of the Committee does not qualify as a “non-employee director” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Board of Directors will appoint a subcommittee of the Committee, consisting of at least two members of the Board of Directors, to grant awards to officers

 

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44

and members of the Board of Directors who are subject to Section 16 of the Exchange Act, and each member of such subcommittee must satisfy the above requirements. References to the Committee in this summary include and, as appropriate, apply to any such subcommittee. To the extent permitted by law, the Committee may also delegate its authority to one or more persons who are not members of the Board of Directors, except that no such delegation will be permitted with respect to officers who are subject to Section 16 of the Exchange Act.

Certain Restrictions

 

•

No dividend equivalents will be granted with respect to any stock option or SAR. Additionally, no dividends or dividend equivalents will be paid currently with respect to any other award while the award is unvested. Instead, any dividends or dividend equivalents with respect to an unvested award will be accumulated or deemed reinvested until such time as the underlying award becomes vested (including, where applicable, the achievement of performance goals).

 

•

The minimum vesting period for each award granted under the 2021 Plan must be at least one year, except that this requirement does not apply to awards for up to 5% of the shares authorized for issuance under the 2021 Plan, assumed converted or substituted awards, and awards granted to Independent Directors that vest on the earlier of the one-year anniversary of the grant date and the next annual shareholders meeting that is at least 50 weeks after the immediately preceding year’s annual meeting. However, an award may provide for accelerated vesting for any reason, including but not limited to retirement, death, disability, or Change in Control.

Eligible Participants

Employees of the Company and its subsidiaries, non-employee members of the Board of Directors, and any other natural person who provides bona fide services to the Company or one of its subsidiaries not in connection with the offer or sale of securities in a capital raising transaction (subject to certain limitations) will be eligible for selection by the Committee for the grant of awards under the 2021 Plan. As of March 10, 2021, approximately 350 employees of the Company and its subsidiaries and 8 non-employee members of the Board of Directors were eligible for awards under the 2021 Plan. No other service providers are currently eligible to participate in the 2021 Plan.

Types of Awards

The 2021 Plan provides for the grant of performance shares, performance units, restricted stock, RSUs, NQSOs, ISOs, SARs and Other Awards. ISOs may be granted only to employees of The ODP Corporation or its subsidiaries.

The Committee will determine the individuals to whom awards will be granted, the number of shares subject to an award, and the other terms and conditions of an award. For any one independent director, the maximum aggregate amount of cash paid in any one fiscal year of The ODP Corporation to such independent director for service as a member of the Board of Directors during such fiscal year, including service performed in such fiscal year but for which payment is not made until the following fiscal year, and grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all equity awards granted in such fiscal year to such independent director shall not exceed six hundred fifty thousand dollars ($650,000). This limitation will not apply for a fiscal year to a director who serves as Chairman of the Board of Directors at any time during such fiscal year provided that the affected director does not participate in the decision to award compensation in excess of the limitation for such fiscal year.

Adjustments

The Committee shall make equitable adjustments in the number and class of securities available for issuance under the 2021 Plan (including under any awards then outstanding), and the terms of any outstanding award, as it determines are necessary and appropriate, to reflect any merger, reorganization, consolidation, recapitalization, reclassification, stock split, reverse stock split, spin-off combination, exchange of shares, distribution to shareholders (other than an ordinary cash dividend), or similar corporate transaction or event.

 

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45

Performance Shares and Units

The Committee will specify the terms of a performance share or performance unit award in the award agreement. A performance share will have an initial value equal to the fair market value of a share on the date of grant. A performance unit will have an initial value that is established by the Committee at the time of grant. In addition to any non-performance terms applicable to the performance share or performance unit, the Committee will set one or more performance goals which, depending on the extent to which they are met, will determine the number or value of the performance share or unit that will be paid out to the participant. The Committee may provide for payment of earned performance shares/units in cash, shares of our common stock, other The ODP Corporation securities or any combination thereof. The Committee will also specify any restrictions applicable to the performance share or performance unit award such as continued service, the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or a change in control, shorten or terminate the restriction period.

Performance shares/units will not possess voting rights and will accrue dividend equivalents only to the extent provided in the award agreement evidencing the award; provided, however, that rights to dividend equivalents are permitted only to the extent they comply with, or are exempt from, Section 409A of the Internal Revenue Code (“Section 409A”). Any rights to dividends or dividend equivalents on performance shares/units or any other award subject to performance conditions will be subject to the same restrictions on vesting and payment as the underlying award.

Performance Measures

A performance objective may be described in terms of company-wide objectives or objectives that are related to a specific division, subsidiary, employer, department, region, or function in which the participant is employed or as some combination of these (as alternatives or otherwise). A performance objective may be measured on an absolute basis or relative to a pre-established target, results for a previous year, the performance of other corporations, or a stock market or other index. The Committee will specify the period over which the performance goals for a particular award will be measured and will determine whether the applicable performance goals have been met with respect to a particular award following the end of the applicable performance period.

In determining whether any performance goal has been satisfied, the Committee may include or exclude any or all items that are unusual or infrequent, including but not limited to (i) charges, costs, benefits, gains or income associated with reorganizations or restructurings of the Company and its subsidiaries, discontinued operations, goodwill, other intangible assets, long-lived assets (non-cash), real estate strategy (e.g., costs related to lease terminations or facility closure obligations), litigation or the resolution of litigation (e.g., attorneys’ fees, settlements or judgments), or currency or commodity fluctuations; and (ii) the effects of changes in applicable laws, regulations or accounting principles. In addition, the Committee may adjust any performance goal for a performance period as it deems equitable to recognize unusual or infrequent events affecting the Company and its subsidiaries, changes in laws or regulations or accounting principles, mergers, acquisitions and divestitures, or any other factors as the Committee may determine.

Restricted Stock and Restricted Stock Units

The Committee will specify the terms of a restricted stock or RSU award in the award agreement, including the number of shares of restricted stock or number of RSUs; the purchase price, if any, to be paid for such restricted stock or RSU (which may be equal to or less than the fair market value of a share and may be zero, subject to such minimum consideration as may be required by applicable law); any restrictions applicable to the restricted stock or RSUs such as continued service or achievement of performance goals; the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or a change in control, shorten or terminate the restriction period; the rights of the participant during the restriction period to vote and receive dividends in the case of restricted stock or to receive dividend equivalents in the case of RSUs that accrue dividend equivalents (subject to the limitations described below); and whether RSUs will be settled in cash, shares of our common stock, other The ODP Corporation securities or any combination thereof.

Generally, a participant who receives a restricted stock award will have (during and after the restriction period), all of the rights of a shareholder of the Company with respect to that award, including the right to vote the shares and the right to receive dividends and other distributions to the extent, if any, such shares possess such rights and are subject to the

 

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limitations described in this paragraph. However, any dividends and other distributions payable on shares of restricted stock during the restriction period shall be either automatically reinvested in additional shares of restricted stock or paid to the Company for the account of the participant, in either case subject to the same vesting restrictions as the underlying award. All terms and conditions for the payment of dividends and other distributions will be included in the award agreement and, to the extent required, comply with the requirements of Section 409A.

A participant receiving an RSU award will not possess voting rights and will accrue dividend equivalents on such units only to the extent provided in the award agreement evidencing the award; provided, however, that any dividend equivalents will be subject to the same vesting restrictions as the underlying award. All terms and conditions for payment of dividends equivalents will be included in the award agreement and, to the extent required, comply with the requirements of Section 409A.

Stock Options

An option provides the participant with the right to buy a specified number of shares at a specified price (the “exercise price”) after certain conditions have been met. The Committee may grant both NQSOs and ISOs under the 2021 Plan. The tax treatment of NQSOs is different from the tax treatment of ISOs as explained below. The Committee will determine and specify in the award agreement evidencing an option whether the option is an NQSO or ISO, the number of shares subject to the option, the exercise price of the option and the period of time during which the option may be exercised, any restrictions applicable to the option such as continued service, the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or a change in control, shorten or terminate the restriction period. Generally (except as otherwise described in the 2021 Plan), no option can be exercisable more than 10 years after the date of grant and the exercise price of a stock option must be at least equal to the fair market value of a share on the date of grant of the option. However, with respect to an ISO granted to a participant who is a shareholder holding more than 10% of The ODP Corporation’s total voting stock, the ISO cannot be exercisable more than five years after the date of grant and the exercise price must be at least equal to 110% of the fair market value of a share on the date of grant. ISOs cannot be granted under the 2021 Plan after March 10, 2031. Dividend equivalents will not be paid with respect to options. A participant may pay the exercise price under an option in cash; in a cash equivalent approved by the Committee; if approved by the Committee, by tendering previously acquired shares (or delivering a certification or attestation of ownership of such shares) having an aggregate fair market value at the time of exercise equal to the total option exercise price (provided that the tendered shares must have been held by the participant for any period required by the Committee); or by a combination of these payment methods. The Committee may also allow cashless exercises as permitted under the Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the 2021 Plan’s purpose and applicable law. No certificate representing a share (to the extent shares are so evidenced) will be delivered until the full option price has been paid.

Stock Appreciation Rights

A SAR entitles the participant to receive cash, shares of The ODP Corporation’s common stock, other company securities or any combination thereof, as the Committee may determine, in an amount equal to the excess of the fair market value of a share on the exercise date over the exercise price for the SAR, after certain conditions have been met. The Committee will determine and specify in the SAR award agreement the number of shares subject to the SAR, the SAR price (which generally must be at least equal to the fair market value of a share on the date of grant of the SAR) and the period of time during which the SAR may be exercised, any restrictions applicable to the SAR such as continued service, the length of the restriction period (subject to the one-year minimum described above) and whether any circumstances, such as death, disability, or a change in control, shorten or terminate the restriction period. Generally, no SAR can be exercisable more than 10 years after the date of grant. SARs may be granted in tandem with a stock option or independently. If a SAR is granted in tandem with a stock option, the participant may exercise the stock option or the SAR, but not both. Dividend equivalents will not be paid with respect to SARs.

Other Awards

The Committee may grant other forms of equity-based or equity-related awards that the Committee determines to be consistent with the purpose of the 2021 Plan and the interests of The ODP Corporation. These Other Awards may provide for cash payments based in whole or in part on the value or future value of shares, for the issuance or future issuance of shares of The ODP Corporation common stock, or any combination thereof. Where the value of such an award is based on

 

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the difference in the value of a share at different points in time, the grant or exercise price must generally not be less than 100% of the fair market value of a share on the date of grant.

Termination of Employment

Subject to certain exceptions, generally, if a participant ceases to perform services for The ODP Corporation and its subsidiaries for any reason (i) all of the participant’s restricted stock, RSUs, performance shares, performance units and Other Awards that were not vested on the date of such cessation shall be forfeited immediately upon such cessation, (ii) all of the participant’s stock options and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of 90 days after the date of such cessation, but in no event after the expiration date of the stock options or SARs, and (iii) all of the participant’s stock options and SARs that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation. The Committee may provide that a participant shall be eligible for a full or prorated award upon a cessation of the participant’s service. For an award subject to one or more performance objectives, the Committee may provide for payment of any such full or prorated award prior to certification of such performance objectives or without regard to whether they are certified.

Change in Control

The Committee may, in its sole discretion, provide that any time-based vesting requirement applicable to an Award shall be deemed satisfied in full in the event that both a change in control and a cessation of the participant’s service relationship with The ODP Corporation and its subsidiaries occurs or if the surviving entity in such change in control does not assume or replace the award in the change in control. With respect to an Award that is subject to one or more performance objectives, the Committee may, in its sole discretion, provide that in the event of a change in control, achievement of such performance objective shall be determined as of the effective date of the Change in Control or such performance objective shall be deemed achieved at the target level of performance.

Transferability

No ISO may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than upon the participant’s death to a beneficiary or by will or the laws of descent and distribution. However, a participant who is an officer, including, but not limited to, a participant with the title: Vice President, Senior Vice President, Executive Vice President, President or Chief Executive Officer of The ODP Corporation (collectively referred to herein as “Officers”) or a non-employee director may transfer NQSOs to a Permitted Transferee (as defined in the 2021 Plan document) in accordance with procedures approved by the Committee. Except for a transfer of NQSOs by an Officer or non-employee director to a Permitted Transferee, unless the Committee determines otherwise consistent with securities and other applicable laws, rules and regulations, (i) no award shall be sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a participant other than upon the participant’s death, to a beneficiary or by will or the laws of descent and distribution, and (ii) each option and SAR outstanding to a participant may be exercised during the participant’s lifetime only by the participant or his or her guardian or legal representative (provided that an ISO may be exercised by such guardian or legal representative only if permitted by the Internal Revenue Code and any regulations promulgated thereunder). In the event of a transfer to a Permitted Transferee or a transfer otherwise permitted by the Committee, appropriate evidence of any transfer to the Permitted Transferee shall be delivered to The ODP Corporation at its principal executive office. If all or part of an Award is transferred to a Permitted Transferee, the Permitted Transferee’s rights thereunder shall be subject to the same restrictions and limitations with respect to the award as the participant. Any permitted transfer of an award will be without payment of consideration by the Permitted Transferee.

Amendment and Termination

The Board of Directors or the Committee may at any time terminate and from time to time amend the 2021 Plan in whole or in part, but no such action shall materially adversely affect any rights or obligations with respect to any awards previously granted under the 2021 Plan unless such action is required by applicable law or any listing standards applicable to our common stock or the affected participants consent in writing. To the extent required by Section 422 of the Internal Revenue Code, other applicable law, or any such listing standards that the shareholders are required to approve a specific type of amendment to the 2021 Plan, no such amendment shall be effective unless approved by the Company’s shareholders.

 

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The Committee may amend an outstanding award agreement in a manner not inconsistent with the terms of the 2021 Plan, but the amendment will not be effective without the participant’s written consent if the amendment is materially adverse to the participant. However, the Committee cannot reprice a stock option or SAR except in accordance with the adjustment provisions of the 2021 Plan (as described above) or in connection with a change in control. For this purpose, a repricing generally is an amendment to the terms of an outstanding stock option or SAR that would reduce the exercise price of that stock option or SAR or a cancellation of an outstanding stock option or SAR with a per share exercise price that is more than fair market value at the time of such cancellation in exchange for cash, another award or a stock option or SAR with an exercise price or SAR price that is less than the option exercise price or SAR price of the original stock option or SAR.

The Committee may provide in award agreements or in a separate policy that if a participant engages in detrimental activity, as defined in such award agreement or separate policy, the Committee may cancel, rescind, suspend, withhold or otherwise restrict or limit any unexpired, unexercised, unpaid or deferred award as of the first date the participant engages in the detrimental activity. The award agreement or separate policy may also provide that if the participant exercises an option or SAR, receives an RSU, performance share, performance unit, Other Award payout, or receives or vests in shares of our common stock under an award at any time during a time specified in such award agreement or separate policy, the participant shall be required to pay to The ODP Corporation the excess of the then fair market value of the shares that were received with respect to the award (or if the participant previously disposed of such shares, the fair market value of such shares at the time of the disposition) over the total price paid by the participant for such shares.

Certain Federal Income Tax Consequences

The following is intended only as a brief summary of the federal income tax rules relevant to the primary types of awards available for issuance under the 2021 Plan and is based on the terms of the Internal Revenue Code as currently in effect. The applicable statutory provisions are subject to change in the future (possibly with retroactive effect), as are their interpretations and applications. Because federal income tax consequences may vary as a result of individual circumstances, participants are encouraged to consult their personal tax advisors with respect to their tax consequences. The following summary is limited only to United States federal income tax treatment. It does not address state, local, gift, estate, social security or foreign tax consequences, which may be substantially different. Certain intended 2021 Plan participants are residents of foreign countries.

Performance Share/Unit Awards

A participant generally is not taxed upon the grant of a performance share/unit. The participant will recognize taxable income at the time of settlement of the performance share/unit in an amount equal to the amount of cash and the fair market value of the shares received upon settlement (subject to the short swing profits rule). The income recognized will be taxable at ordinary income tax rates. The ODP Corporation generally will be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant, subject to the requirements of Section 162(m), as applicable. Any gain or loss recognized upon the disposition of the shares acquired pursuant to settlement of a performance share/unit will qualify as long-term capital gain or loss if the shares have been held for more than one year after settlement.

Awards of Shares; Restricted Stock Awards

A participant generally will recognize taxable ordinary income upon the receipt of shares as a stock award or restricted stock award if the shares are not subject to a substantial risk of forfeiture. The income recognized will be equal to the fair market value of the shares at the time of receipt less any purchase price paid for the shares. If the shares are subject to a substantial risk of forfeiture, the participant generally will recognize taxable ordinary income when the substantial risk of forfeiture lapses. If the substantial risk of forfeiture lapses in increments over several years, the participant will recognize income in each year in which the substantial risk of forfeiture lapses as to an increment. If the participant cannot sell the shares without being subject to suit under Section 16(b) of the Exchange Act (the short swing profits rule), the shares will be treated as subject to a substantial risk of forfeiture. The income recognized upon lapse of a substantial risk of forfeiture will be equal to the fair market value of the shares determined as of the time that the substantial risk of forfeiture lapses less any purchase price paid for the shares. The ODP Corporation generally will be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant, subject to the requirements of Section 162(m), as applicable.

 

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Alternatively, if the shares are subject to a substantial risk of forfeiture, the participant may make a timely election under Section 83(b) of the Internal Revenue Code (“Section 83(b)”) to recognize ordinary income for the taxable year in which the participant received the shares in an amount equal to the fair market value of the shares at that time. That income will be taxable at ordinary income tax rates. If a participant makes a timely Section 83(b) election, the participant will not recognize income at the time the substantial risk of forfeiture lapses with respect to the shares. At the time of disposition of the shares, a participant who has made a timely Section 83(b) election will recognize capital gain or loss in an amount equal to the difference between the amount realized upon sale and the ordinary income recognized upon receipt of the share (increased by the amount paid for the shares, if any). If the participant forfeits the shares after making a Section 83(b) election, the participant is not entitled to a deduction with respect to the income recognized as a result of the election but will be entitled to a capital loss equal to the excess (if any) of the amount paid for the shares (if any) over the amount realized upon forfeiture (if any). To be timely, the Section 83(b) election must be made within thirty (30) days after the participant receives the shares. The ODP Corporation will generally be entitled to a deduction in an amount equal to the amount of ordinary income recognized by the participant at the time of the election, subject to the requirements of Section 162(m), as applicable.

Restricted Stock Units

A participant generally is not taxed upon the grant of an RSU. Generally, if an RSU is designed to be paid on or shortly after the RSU is no longer subject to a substantial risk of forfeiture, then at the time of payment the participant will recognize ordinary income equal to the amount of cash and the fair market value of the shares received by the participant (subject to the short swing profits rule) and The ODP Corporation will be entitled to an income tax deduction for the same amount, subject to the requirements of Section 162(m), as applicable. However, if an RSU is not designed to be paid on or shortly after the RSU is no longer subject to a substantial risk of forfeiture, the RSU may be deemed a nonqualified deferred compensation plan under Section 409A. In that case, if the RSU is designed to meet the requirements of Section 409A, then at the time of payment the participant will recognize ordinary income equal to the amount of cash and the fair market value of the shares received by the participant, and The ODP Corporation will be entitled to an income tax deduction for the same amount. However, if the RSU is not designed to meet the requirements of Section 409A, the participant will be subject to ordinary income when the substantial risk of forfeiture lapses as well as an additional twenty percent (20%) excise tax, and additional tax could be imposed each following year.

Nonqualified Stock Options; Stock Appreciation Rights

A participant generally is not taxed upon the grant of an NQSO or SAR, unless the NQSO or SAR has a readily ascertainable fair market value. However, the participant must recognize ordinary income upon exercise of the NQSO or SAR in an amount equal to the difference between the NQSO or SAR exercise price and the fair market value of the shares acquired on the date of exercise (subject to the short swing profits rule). The ODP Corporation generally will have a deduction in an amount equal to the amount of ordinary income recognized by the participant in The ODP Corporation’s tax year during which the participant recognizes ordinary income, subject to the requirements of Section 162(m), as applicable.

Upon the sale of shares acquired pursuant to the exercise of an NQSO or SAR, the participant will recognize capital gain or loss to the extent that the amount realized from the sale is different than the fair market value of the shares on the date of exercise (or, if the participant was subject to Section 16(b) of the Exchange Act and did not make a timely election under Section 83(b), the fair market value on the delayed determination date, if applicable). This gain or loss will be long-term capital gain or loss if the shares have been held for more than one year after exercise.

Incentive Stock Options

A participant is not taxed on the grant or exercise of an ISO. The difference between the exercise price and the fair market value of the shares covered by the ISO on the exercise date will, however, be a preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO for at least two years following the ISO grant date and at least one year following exercise, the participant’s gain or loss, if any, upon a subsequent disposition of the shares is long-term capital gain or loss. The amount of the gain or loss is the difference between the proceeds received on disposition and the participant’s basis in the shares (which generally equals the ISO exercise price). If a participant disposes of shares acquired pursuant to exercise of an ISO before satisfying these holding periods and realizes an amount in excess of the exercise price, the amount realized will be taxed to the participant as ordinary income up to the fair market value of the shares on the exercise date and any additional amount realized will be taxable to the

 

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participant as capital gain in the year of disposition; however, if the exercise price exceeds the amount realized on sale, the difference will be taxed to the participant as a capital loss. The ODP Corporation is not entitled to a federal income tax deduction on the grant or exercise of an ISO or on the participant’s disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, The ODP Corporation will be entitled to a deduction in the year the participant disposes of the shares in an amount equal to any ordinary income recognized by the participant, subject to the requirements of Section 162(m), as applicable.

In order for an option to qualify as an ISO for federal income tax purposes, the grant of the option must satisfy various other conditions specified in the Internal Revenue Code. In the event an option intended to be an ISO fails to qualify as an ISO, it will be taxed as an NQSO as described above.

Golden Parachute Payments

The terms of the award agreement evidencing an award under the 2021 Plan may provide for accelerated vesting or accelerated payout of the award in connection with a change in ownership or control of The ODP Corporation. In such event, certain amounts with respect to the award may be characterized as “parachute payments” under the golden parachute provisions of the Internal Revenue Code. Under Section 280G of the Internal Revenue Code, no federal income tax deduction is allowed to The ODP Corporation for “excess parachute payments” made to “disqualified individuals,” and receipt of such payments subjects the recipient to a 20% excise tax under Section 4999 of the Internal Revenue Code. For this purpose, “disqualified individuals” are generally officers, shareholders or highly compensated individuals performing services for The ODP Corporation, and the term “excess parachute payments” includes payments in the nature of compensation which are contingent on a change in ownership or effective control of The ODP Corporation, to the extent that such payments (in present value) equal or exceed three times the recipient’s average annual taxable compensation from The ODP Corporation for the previous five years. Certain payments for reasonable compensation for services rendered after a change of control and payments from tax-qualified plans are generally not included in determining “excess parachute payments.” If payments or accelerations may occur with respect to awards granted under the 2021 Plan, certain amounts in connection with such awards may possibly constitute “parachute payments” and be subject to these “golden parachute” tax provisions.

Section 162(m)

Section 162(m) of the Internal Revenue Code (“Section 162(m)”) as in effect prior to the enactment of the Tax Cuts and Jobs Act of 2017 enacted on December 22, 2017 (the “Act”), limited to $1 million the deduction that the Company was permitted to take for annual compensation paid to each “covered employee” (at that time defined as the CEO and the three other highest paid executive officers employed at the end of the year other than the Chief Financial Officer (“CFO”)), except to the extent the compensation qualified as “performance-based” for purposes of Section 162(m). The Act retained the $1 million deduction limit, but it repealed the performance-based compensation exemption and expanded the definition of “covered employees” effective for taxable years beginning after December 31, 2017. “Covered employees” for a fiscal year now include any person who served as CEO or CFO of the Company at any time during that fiscal year, the three other most highly compensated executive officers for that fiscal year (whether or not employed on the last day of that fiscal year) and any other person who was a covered employee in a previous taxable year (but not earlier than 2017) as determined pursuant to the pre-Act version of Section 162(m). Any awards that the Company grants pursuant to the 2021 Plan to covered employees, whether performance-based or otherwise, will be subject to the $1 million annual deduction limitation. While the Compensation & Talent Committee considers the deductibility of compensation when making equity awards, it is only one factor it considers. Because of the elimination of the performance-based compensation exemption, the Compensation & Talent Committee expects that all or a portion of the compensation paid to covered employees in the form of equity grants under the 2021 Plan may not be deductible by the Company.

New 2021 Plan Benefits

Any future awards to executive officers, non-employee directors, employees and consultants of The ODP Corporation under the 2021 Plan are discretionary and cannot be determined at this time because the amount and form of grants to be made to any eligible participant in any year is determined at the discretion of the Committee. As a result, the benefits and amounts that will be received or allocated under the 2021 Plan are not determinable at this time, and The ODP Corporation has not included a table that reflects such future awards.

 

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The affirmative vote of holders of a majority of the shares of our common stock present in person or represented by proxy (as counted for purposes of determining the existence of a quorum) and entitled to vote at the Annual Meeting is required to approve the 2021 Plan.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF THE ODP CORPORATION 2021 LONG-TERM INCENTIVE PLAN.

EQUITY COMPENSATION PLAN INFORMATION

 

Equity Compensation Plan Information
The table below summarizes the status of our equity compensation plans at December 26, 2020
		(1) Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)				(2) Weighted- average exercise price of outstanding options, warrants and rights (b)				Number of securities remaining available for future issuance under equity compensation plans (excluding Securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		4,123,393				$1.48				2,669,187
Equity compensation plans not approved by security holders		-				-				-
(1)   The number of shares reported includes 2,458,978 performance stock units (“PSUs”) reserved at target where performance attainment has yet to be determined. Shares reserved for issuance under the Company’s equity compensation plan will be adjusted accordingly for a payout other than target.
(2)   The outstanding awards include RSUs, which have no exercise price. Excluding the impact of RSUs, the outstanding options had a weighted average exercise price of $44.18 per share.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This compensation discussion and analysis (the “CD&A”) describes our executive compensation programs and explains how the Compensation & Talent Committee (the “C&T Committee”) made its compensation decisions for our named executive officers (also referred to in this CD&A as “NEOs”) for fiscal year 2020. The NEOs for fiscal year 2020 are:

 

Name		Position
Gerry P. Smith		Chief Executive Officer
D. Anthony Scaglione		Executive Vice President and Chief Financial Officer
N. David Bleisch		Executive Vice President, Chief Legal & Administrative Officer
Terry Leeper		Executive Vice President and Chief Technology Officer
John W. Gannfors		Executive Vice President, Chief Merchandising and Supply Chain Officer

As required by the SEC rules, our NEOs for fiscal year 2020 also include our former Executive Vice President and Chief Financial Officer, Mr. Joseph T. Lower, who left the Company on January 10, 2020. Mr. Smith served as our Principal Financial Officer from January 10, 2020 until Mr. Scaglione commenced employment on July 20, 2020.

While the discussion in the CD&A is focused on our NEOs, many of our executive compensation programs apply broadly across our management ranks, including our cash Annual Bonus Plan that covers approximately 2,200 employees.

EXECUTIVE SUMMARY

Impact of COVID-19 on our Business

The ODP Corporation is a leading provider of business services and supplies, products and digital workplace technology solutions to small, medium and enterprise businesses, through an integrated business-to-business (B2B) distribution platform, which includes world-class supply chain and distribution operations, dedicated sales professionals and technicians, online presence, and approximately 1,100 stores. Through its banner brands Office Depot^®, OfficeMax^®, CompuCom^® and Grand&Toy^®, as well as others, we offer our customers the tools and resources they need to focus on their passion of starting, growing and running their business.

On March 11, 2020, the World Health Organization declared the novel coronavirus disease (“COVID-19”) a global pandemic. In response to the rapid spread of COVID-19 globally and throughout the United States, federal, state and local authorities declared states of emergency and imposed varying degrees of restrictions on social and commercial activities, including travel restrictions and curfews, in order to prevent and slow the spread of the disease. These restrictive measures had significant adverse impacts on our business in 2020.

Overall demand for our products and services declined significantly as a result of the disruptions experienced by our business customers from restrictions on commercial activities and social distancing measures. The delayed start of the school year and the cancellation or delayed start of in-person school instruction across the U.S. (K-12 and higher education) resulted in lower sales in both retail (back-to-school supplies) and B2B sales. We experienced higher than forecasted demand, however, in our e-Commerce platform, as well as in our retail locations associated with certain product categories, such as furniture, technology products, cleaning and breakroom supplies and personal protective equipment that meet our customers’ needs arising from the risks related to potential exposure to COVID-19.

Highlights of Our COVID-19 Response

From the beginning of the COVID-19 pandemic, we made supporting the health and wellness of our employees and customers a priority. Due to the nature of products sold in our retail locations and integrated business-to-business distribution platform, our business was considered to be essential retail commerce by most local jurisdictions and remained open and operational. Based upon the guidance of the U.S. Centers for Disease Control (“CDC”) and local health authorities, we quickly implemented appropriate measures to help reduce the spread of infection to our employees and customers, including the institution of social distancing protocols and increased frequency of cleaning and sanitizing in

 

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those facilities. We enabled employees to work from home where possible and limited employee travel to only essential business needs.

We successfully leveraged our balanced ecosystem and integrated B2B distribution platform, including our supply chain, to address evolving customer needs as the pandemic shifted product demand. We quickly implemented creative and resilient approaches to meeting customer needs through a combination of buy online-pick up in-store, curbside pickup, and several home or office delivery options. We launched a new Personal Protective Equipment business with gross revenues of approximately $200 million in the first nine months of fiscal year 2020, illustrating the agility of our underlying sourcing and supply chain capabilities and our ability to create new business adjacencies. Additionally, in response to the volatility resulting from the pandemic, we took critical measures to protect our financial position during this challenging time period. These measures included creating contingency plans for merchandise in potential high demand categories, adjusting our inventory levels, reducing certain occupancy costs, reducing nonessential expenses, and reducing our capital spend, among others.

We are proud of our response to the unprecedented challenges of fiscal year 2020, but we are even prouder that we lived up to our 5C (Customer, Commitment, Change, Caring and Creativity) culture.

2020 Business Highlights

Despite the pandemic-driven headwinds during the 2020 fiscal year, we continued to move forward with our plans to transform the Company and position it as a leading B2B provider of business products and services. For the year, we streamlined our operations and built a more efficient business model, improved our B2B platform for future profitable growth, generated strong cash flow results, maintained a strong balance sheet and returned capital to shareholders. Some of the specific highlights from fiscal year 2020 are as follows:

 

•

Continued to see benefits related to our Business Acceleration Program, driving sustainable improvements in our business model and contributing to a decrease in our selling, general and administrative expenses by $274 million or 13% in 2020 compared to 2019;

 

•

Generated operating cash flow from continuing operations of $485 million; maintained a strong balance sheet, ending the year with approximately $1.7 billion in total liquidity;

 

•

Returned $43 million through stock repurchases and dividends; and streamlined our capital structure by refinancing credit facility and repaying term loan; and

 

•

Invested in our future, including expanding our distribution network capabilities, enhancing our eCommerce platform, and embracing new technology to increase automation in our operations.

The fiscal year 2020 results reflect the focus, contribution and dedication of our leadership team and our employees, in successfully navigating a challenging year and progressing our transformation to becoming a leading integrated B2B distribution platform.

 

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Key 2020 Compensation Actions

The primary elements of our total direct compensation program for the NEOs and a summary of the actions taken by the C&T Committee during fiscal year 2020 are set forth below.

 

Compensation  Component		Link to Business and Talent Objectives		2020 Compensation Actions
Base Salary  (Page 58)		•  Competitive base salaries help attract and retain executive talent •  Reflects the level and scope of responsibility within the company		•  Increased base salary for Messrs. Bleisch and Gannfors, to recognize increased responsibilities and to remain market competitive •  No changes were made in the base salary of the other NEOs
Annual Cash Bonus  (Page 58)		•  We operate a single annual bonus plan for our executives and approximately 2,200 employees •  Focus executives and employees on achieving annual financial results that are key indicators of annual financial and operational performance •  Goals were based on Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (50%) and Net Sales (50%) •  These metrics are critical for continued stability, with an emphasis on growing top line sales		•  Retained the same metrics as in 2019 •  Increased target bonus for Messrs. Bleisch and Gannfors by 15% to 90% of base salary to recognize increased responsibilities •  The 2020 Annual Bonus Plan goals were established in February 2020, before the onset of COVID-19 and the impact of the pandemic would have resulted in funding of the Annual Bonus Plan at significantly below the target payout level •  As more fully discussed under “2020 Annual Bonus Plan,” after considering the impact of the pandemic on the pre-established goals, the achievements of the Company during the pandemic and the contribution of the executives and employees, the C&T Committee determined to pay bonuses at 74.4% of target for all participants
Long-Term  Incentive (LTI)  Compensation  (Page 60)		•  2020 long-term awards consist of performance shares and restricted stock units (RSUs) •  Performance shares are based on 3-year relative Total Shareholder Return (TSR) performance and achievement of pre-established 3-year cumulative free cash flow (FCF) levels •  FCF is integral to the investment in the ongoing transformation of the business and will also provide financial flexibility for future debt repayments and capital return •  Relative TSR measures the creation of value for our shareholders relative to peers during the performance period •  RSUs provide focus on stock price growth and serve our talent retention objectives		•  Retained the same weighting as in 2019, with performance shares representing 60% of the LTI opportunity and RSUs representing 40% of the LTI opportunity •  Of the performance shares, 50% will be earned based on relative TSR and 50% will be earned based on achievement of FCF goals •  The C&T Committee did not make any discretionary adjustments to outstanding equity awards to address the impact of the pandemic •  Our 2018 performance share awards were earned at 181.25% of target

 

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Shareholder Feedback on Executive Compensation Programs

In fiscal year 2020, we received 76.9% shareholder support on our Say-on-Pay advisory vote. This outcome was disappointing to us and represented a decline versus results from prior years, which averaged 84.9% over the period 2017 to 2019. In response to this, we increased our efforts in fiscal year 2020, indirectly engaging with shareholders to discuss governance items, including executive compensation. Our program includes outreach to the investment community, particularly our top 20 investors who collectively represent approximately 70% of our outstanding common stock, to obtain feedback on our progress and strategy as well as executive compensation design, board composition, risk management and other ESG issues. Management also holds conference calls and participates in in-person meetings with investors following our quarterly earnings release as another way to seek feedback and respond to questions about specific matters of importance such as executive compensation design. Regarding executive compensation, in general, shareholders provided positive feedback about our overall program. The following table explains what we heard and how we responded:

 

WHAT WE HEARD		HOW WE RESPONDED
•  More transparency on Diversity & Inclusion		•  Added Workforce Diversity & Inclusion statistics for Management/ All Other Employees based on gender and ethnic/ racial status
•  Increased focus of the Board of Directors on ESG concerns		•  Board of Director oversight for all ESG matters; governance framework to provide direction on Sustainability matters
•  ESG considerations tied to Compensation		•  Added ESG as a 4th principle to our Compensation Philosophy
•  Better engagement by the Board of Directors on matters of Human Capital		•  Broadened the scope of Compensation & Talent Committee to include Human Capital/Talent Management oversight, renamed Compensation & Talent Committee
•  Commitment to fight climate change		•  Added transparency for operational improvements including energy consumption, waste diverted from landfills and Greenhouse Gas emission reductions

We believe our executive compensation program is tailored to our business strategies, aligned with our pay-for-performance philosophy and market views on best practices, and designed to create long-term value for our stakeholders and shareholders.

Compensation Philosophy

 

OBJECTIVE				COMPENSATION DESIGN CRITERIA
Accountability for Business Performance				•   Tie compensation in large part to our financial and operating performance, so that executives are held accountable for the performance of the business for which they are responsible and for achieving the Company’s Annual Operating Plan.
Accountability for Long-Term Performance				•   Include meaningful incentives to create long-term shareholder value while not promoting excessive risk taking.
Competition				•   Reflect the competitive marketplace so we can attract, retain, and motivate talented executives throughout the volatility of business cycles.
Environmental, Social and Governance (ESG)				•   Include incentives tied to specified ESG initiatives to help ensure executives are focused on corporate social responsibility matters that are of substantial importance to the Company, our shareholders, and other stakeholders.

 

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Key Compensation Elements

The various elements of compensation we pay to our NEOs is intended to reflect our compensation philosophy and: (i) provide an appropriate level of financial certainty through fixed compensation, (ii) ensure that at least 60% of equity compensation is performance-based, and (iii) create a balance of short-term and long-term incentives. The key elements of the Company’s fiscal year 2020 executive compensation program can be summarized as follows:

 

		2020 Total Direct Compensation Element
		Base Salary		Annual Cash Bonus		Performance Shares		Restricted Stock Units
Who Receives		All Named Executive Officers
When Granted		Annually
Form of Delivery		Cash				Equity
Type of Performance		Short-term emphasis (fixed)		Short-term emphasis (variable)		Long-term emphasis (variable)
Performance Period		1 year		1 year		3 years		3 years
How Payout Determined		Compensation & Talent Committee determination		Pre-established formula		Pre-established formula		Stock price at each vesting date
Performance Measures		Individual		Adjusted EBITDA; Net Sales		Free Cash Flow; Relative TSR		Stock price

Compensation Best Practices

The C&T Committee is guided by the following best practices in determining the compensation structure for our executives:

 

WHAT WE DO				WHAT WE DON’T DO
✓     Pay for performance by structuring a significant percentage of   target annual compensation in the form of variable, at-risk   compensation   ✓     Use of pre-established performance goals that are aligned   with creation of long-term shareholder value   ✓     Market comparison of executive compensation against a   relevant peer group   ✓     Use of long-standing and robust clawback policy   ✓     Use of rigorous stock ownership guidelines   ✓     Use of an independent compensation consultant   ✓     Annual say-on-pay vote				X     No excise tax gross-ups   X     No dividends or dividend equivalents on unearned equity awards   X     No repricing of underwater stock options without shareholder approval   X     No hedging of our stock by our directors, executive officers and all other employees   X     No pledging of our stock by our directors or executive officers   X     No unapproved trading plans   X     We do not maintain compensation programs that we believe create risks reasonably likely to have a material adverse effect on the Company

 

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