UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

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Dear Fellow WestRock Company Stockholders:

We invite you to join us on February 1, 2019 in Atlanta, Georgia for WestRock’s annual meeting of stockholders. Please review the enclosed notice of annual meeting and proxy statement carefully as you vote your shares for this year’s meeting.

2018 was a record setting year for WestRock. Through a combination of acquisitions and organic growth, we increased our sales by 10% to $16.3 billion – the highest sales level in our history. Through improved operating performance, we increased our net cash provided by operating activities by 27% and our segment EBITDA by 28%. Our strategy leverages the broadest portfolio of differentiated paper and packaging solutions in the industry to optimize our business across our system and to grow our sales with customers that value our unique solutions. Our 2018 financial performance suggests that we are successfully executing this strategy. I am very proud of our team members for delivering these impressive results.

When we completed the merger of RockTenn and MeadWestvaco in 2015, we set an ambitious goal to realize $1 billion in synergy and performance improvements by the end of fiscal 2018. We achieved this goal one quarter earlier than initially expected. This accomplishment demonstrates that our culture of continuous improvement, innovation and execution is driving improved financial results and delivering long-term value for our stockholders.

In 2018, we used our financial strength to invest in our business to promote long-term value creation for our stockholders.

 

•

We deployed $348 million to strategic acquisitions and investments, primarily including the acquisitions of Plymouth Packaging and its “box on demand” system, which has helped us to better serve the growing e-commerce market, and Schlüter Print Pharma Packaging, which has increased our exposure to the pharmaceutical market and expanded the geographic scope of our Consumer Packaging segment in Europe.

 

•

We invested $1 billion in capital expenditures, including $179 million towards strategic capital projects, including projects to install a new paper machine at our mill in Florence, South Carolina, to install a new curtain coater at our mill in Cottonton, Alabama and to build a new box plant in Brazil. These multi-year investments will enable us to more efficiently operate our business and better serve our customers.

In addition, after investing in our business, we returned $636 million to our stockholders, including $441 million in dividends and $195 million in share repurchases. We recently increased our annualized dividend for the third successive year since forming WestRock. The increase to $1.82 per share represented a 5.8% increase over our prior dividend.

In November, we completed the approximately $4.8 billion acquisition of KapStone Paper and Packaging Corporation. KapStone is a great fit with WestRock. Its complementary corrugated packaging and distribution operations enhance our ability to serve customers across our system, particularly in the western United States, and the addition of KapStone’s specialty kraft paper products enhances our differentiated portfolio of paper and packaging solutions. I am thrilled about the addition of KapStone and confident that the acquisition will make WestRock an even better company.

The strength and continuity of our Board has been instrumental in the development of our business strategy, repositioning our business portfolio and realizing significant synergies and business improvements from the merger of RockTenn and MeadWestvaco. I thank our directors for their guidance and contributions. We welcomed a new director to the Board in 2018. Colleen Arnold was appointed to the Board in July. Her appointment demonstrates the Board’s commitment to refreshment with independent nominees who possess the perspective and experience to promote our long-term business strategy.

On behalf of our Board of Directors and our 50,000 team members around the world, thank you for your investment in WestRock.

Very truly yours,

 

 

    

Steven C. Voorhees, Chief Executive Officer and President

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

TIME AND DATE:		9:00 a.m., local time, on Friday, February 1, 2019
PLACE:		The Westin Atlanta Perimeter North, 7 Concourse Parkway, Atlanta, Georgia 30328
ITEMS OF BUSINESS:		(1)		To elect 13 directors
		(2)		To approve an amendment to the Amended and Restated Certificate of Incorporation of WRKCo Inc., a wholly owned subsidiary of WestRock Company
		(3)		To hold an advisory vote to approve executive compensation
		(4)		To ratify the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm
		(5)		To transact any other business that properly comes before the meeting or any adjournment of the meeting
WHO MAY VOTE:		You may vote if you were a holder of our common stock of record on December 7, 2018
DATE THESE PROXY MATERIALS WERE FIRST MADE AVAILABLE ON THE INTERNET:		December 18, 2018

TABLE OF CONTENTS

 

EXPLANATORY NOTE
PROXY STATEMENT SUMMARY
Meeting Information		2
Meeting Agenda		2
Director Nominees		2
Historical Perspective		3
Performance Highlights		4
Governance Highlights		5
Compensation Program Highlights		6
BOARD AND GOVERNANCE MATTERS
Item 1. Election of Directors		7
Governance Framework		7
Board Composition		7
Board Operations		15
Director Compensation		19
Certain Relationships and Related Transactions		20
Communicating with the Board		20
Item  2. Approval of an Amendment to the Amended and Restated Certificate of Incorporation of WRKCo Inc.		21
COMPENSATION MATTERS
Item  3. Advisory Vote to Approve Executive Compensation		23
Compensation Discussion and Analysis		25
Executive Compensation Tables		39
CEO Pay Ratio		49
AUDIT MATTERS
Item 4. Ratification of Appointment of Ernst  & Young, LLP		50
Report of the Audit Committee		50
Fees of the Independent Registered Public Accounting Firm		51
Pre-Approval Policies and Procedures		51
OTHER IMPORTANT INFORMATION
Beneficial Ownership of Common Stock		52
Section  16(a) Beneficial Ownership Reporting Compliance		54
Annual Report on Form 10-K		54
Stockholder Proposals or Director Nominations for the 2020 Annual Meeting		54
Frequently Asked Questions Regarding the Annual Meeting and Voting		54
Appendix A – Proposed Amendment to the Amended and Restated Certificate of Incorporation of WRKCo Inc.		A-1

EXPLANATORY NOTE

On November 2, 2018, pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 28, 2018, among WRKCo Inc. (formerly known as WestRock Company) (“WRKCo”), KapStone, WestRock Company (formerly known as Whiskey Holdco, Inc.) (“we”, “us”, the “Company” or “WestRock”), Whiskey Merger Sub, Inc. and Kola Merger Sub, Inc., the Company acquired all of the outstanding shares of KapStone through a transaction in which: (i) Whiskey Merger Sub, Inc. merged with and into WRKCo, with WRKCo surviving as a wholly owned subsidiary of the Company (the “WestRock Merger”) and (ii) Kola Merger Sub, Inc. merged with and into KapStone, with KapStone surviving as a wholly owned subsidiary of the Company (the “KapStone Merger” and, together with the WestRock Merger, the “Mergers”). As a result of the Mergers, among other things, (1) the Company became the ultimate parent of WRKCo, KapStone and their respective subsidiaries, (2) each share of WRKCo common stock, par value $0.01 per share, was converted into a share of WestRock common stock, par value $0.01 per share (WRKCo common stock and WestRock common stock are each referred to herein as “Common Stock”) and (3) equity awards of WRKCo were converted into equivalent equity awards of WestRock. Effective as of the effective time of the Mergers, the Company changed its name to “WestRock Company” and WRKCo changed its name to “WRKCo Inc.”

The shares of both WRKCo common stock and KapStone common stock were suspended from trading on the New York Stock Exchange (the “NYSE”) prior to the open of trading on November 5, 2018. Shares of Company common stock continued regular-way trading on the NYSE using WRKCo’s trading history under the ticker symbol “WRK” immediately following the suspension of trading of WRKCo common stock. Since the Mergers closed after the September 30, 2018 fiscal year end, the historical financial results referred to in this Proxy Statement reflect the results of WRKCo for periods prior to the Mergers and do not reflect the Mergers or include any results of KapStone.

The Company is the successor issuer to both WRKCo and KapStone pursuant to Rule 12g-3(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result of the Mergers and subsequent Form 15 filings, WRKCo and KapStone are no longer subject to the reporting requirements of the Exchange Act. As disclosed in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2018 (the “Form 10-K), in order to provide continuity of information to investors and to meet the Company’s obligations pursuant to Rule 12b-3(g) under the Exchange Act, the Form 10-K filed by the Company under the Company’s new CIK code was also a complete annual report on Form 10-K of the Company’s predecessor registrant WRKCo with respect to WRKCo’s last full fiscal year (the fiscal year ended September 30, 2018) prior to the Mergers and contained all of the information that would have been required had WRKCO itself filed an annual report on Form 10-K for the year ended September 30, 2018 prior to filing the Form 15 suspending its reporting obligations. As specified in the Form 10-K, this Proxy Statement contains the information required by Part III of Form 10-K that the Form 10-K incorporated by reference to this Proxy Statement in accordance with Instruction G(3) to Form 10-K.

 

1

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider. You should read this entire Proxy Statement carefully before voting.

MEETING INFORMATION

 

Time and Date		9:00 a.m., local time, on Friday, February 1, 2019
Location		The Westin Atlanta Perimeter North, 7 Concourse Parkway, Atlanta, Georgia 30328
Record Date		December 7, 2018

MEETING AGENDA

 

Proposals		Board Recommendation		Page
Election of 13 Directors		FOR each nominee		7
Approval of an Amendment to the Amended and Restated Certificate of Incorporation of WRKCO Inc.		FOR		21
Advisory Vote to Approve Executive Compensation		FOR		23
Ratification of Appointment of Ernst & Young, LLP		FOR		50

DIRECTOR NOMINEES

 

Name		Age		Director Since		Experience		Committee Memberships		Other Public   Company   Boards
Colleen F. Arnold *		61		2018		Former Senior Vice President, Sales and Distribution, International Business Machines Corporation		AC, FC		1
Timothy J. Bernlohr *		59		2015		Managing Member, TJB Management Consulting, LLC		EC, CC **, NCG		3
J. Powell Brown *		51		2015		President and CEO, Brown & Brown, Inc.		AC, FC		1
Michael E. Campbell *		71		2015		Former Chairman, President and CEO, Arch Chemicals, Inc.		CC, NCG		0
Terrell K. Crews *		63		2015		Former Executive Vice President, CFO, Monsanto Corporation		AC, FC		2
Russell M. Currey *		57		2015		President, Boxwood Capital, LLC		AC, FC		0
John A. Luke		70		2015		Non-Executive Chairman, WestRock Company; Former Chairman and CEO, MeadWestvaco Corporation		EC **		2
Gracia C. Martore *		67		2015		Former President and CEO, TEGNA, Inc.		EC, AC **, CC		2
James E. Nevels *§		66		2015		Chairman, The Swarthmore Group		NCG, FC		2
Timothy H. Powers *		70		2015		Former Chairman, President and CEO, Hubbell, Inc.		AC, CC		1
Steven C. Voorhees		64		2015		President and CEO, WestRock Company		EC		1
Bettina M. Whyte *		69		2015		President/Owner, Bettina Whyte Consultants, LLC		EC, CC, NCG **		0
Alan D. Wilson *		61		2015		Former Chairman and CEO, McCormick & Company, Inc.		NCG, FC **		1

*	Denotes Independent Director; ** Denotes Committee Chair; § Denotes Lead Independent Director

AC = Audit Committee; CC = Compensation Committee; EC = Executive Committee; FC = Finance Committee; NCG = Governance Committee

 

 

2

HISTORICAL PERSPECTIVE

We completed the combination of the Rock-Tenn Company and MeadWestvaco Corporation businesses (the “Combination”) in 2015. The Combination created a company with leadership positions in the global consumer and corrugated packaging markets.

Since completing the Combination, we have executed a number of transactions to focus our asset portfolio on paper-based packaging solutions. These transactions have allowed us to:

 

g

Better focus on our core businesses and end markets

 

g

Enhance our integration levels

 

g

Expand our end markets, product offerings and geographic reach

The following timeline summarizes certain of the key acquisitions, divestitures and investments that we have made since the Combination.

 

2016

•  Spun-off our specialty chemicals business (Ingevity) to better focus on our core businesses and markets. The separation was well received by our stockholders and the trading price of Ingevity common stock has increased from $23.50 on May 2, 2016 to $101.88 on September 28, 2018, the last trading date of our 2018 fiscal year.   •  Entered into a joint venture with Grupo Gondi to grow and expand our presence in Mexico.

 

2017

•  Divested our dispensing business for approximately $1.0 billion net of tax, allowing us to better focus on our core businesses and markets.   •  Acquired Multi Packaging Solutions International Limited for approximately $2.3 billion, strengthening our differentiated portfolio of paper and packaging solutions.

 

2018

•  Acquired KapStone Paper and Packaging Corporation (“KapStone”) for approximately $4.8 billion to enhance our ability to serve customers across our system, particularly in the western United States, and broaden our differentiated paper and packaging solutions portfolio.

 

3

PERFORMANCE HIGHLIGHTS

 

10% Net Sales Growth   2017: $14.9 billion 2018: $16.3 billion				27% Net Cash Provided by Operating Activities Growth   2017: $1.9 billion 2018: $2.4 billion				28% Segment EBITDA Growth   2017: $2.3 billion 2018: $2.9 billion

 

Achieved $1 Billion Synergy and Performance Improvement Goal   •  Set ambitious goal in connection with the Combination to realize $1 billion in synergy and performance improvements by end of fiscal 2018   •  Achieved goal through relentless focus and execution

 

Executed Disciplined Capital Allocation Strategy; Deployed $2 Billion of Capital   •  Returned $636 million to stockholders through dividends ($441 million) and share repurchases ($195 million)   •  Recently announced 5.8% increase in annualized dividend; dividend has increased 21% since the Combination   •  Invested $1 billion in capital expenditures   •  Deployed $348 million to strategic acquisitions and investments

 

Completed the Acquisition of KapStone and Invested in Other Acquisitions   •  Signed agreement to acquire KapStone in January 2018 and closed transaction in November for approximately $4.8 billion g  Expected to enhance our scale, expand our product offerings and strengthen our Corrugated Packaging operations on the West Coast of the United States   •  Allocated a portion of our substantial cash flow to other strategic acquisitions, including: g  Plymouth Packaging, whose “box on demand” systems have further enhanced our product platform and driven differentiation and innovation g  Schlüter Pharma, which has increased our exposure to the pharmaceutical market and expanded the geographic scope of our Consumer Packaging segment in Europe

 

4

GOVERNANCE HIGHLIGHTS

We believe good corporate governance promotes long-term value for our stockholders. The “Board and Governance Matters” section beginning on page 7 describes our corporate governance framework, which supports independent oversight and accountability.

 

Independent Oversight				Accountability
• 11 of 13 director nominees are independent				• Annual election of all directors
• Lead Independent Director				• Majority voting in uncontested elections
• All independent key committees				• Annual Board and committee evaluations
• Regular executive sessions of independent directors				• Annual advisory vote on executive compensation
• Mandatory retirement age				• Stock ownership guidelines and stock retention policy
				• Over-boarding policy

Board Refreshment

We recognize the importance of board refreshment. The Nominating and Corporate Governance Committee (the “Governance Committee”) engaged a consultant in 2017 to support its board refreshment processes and, in July 2018, Colleen Arnold was appointed to the Board. The appointment of Ms. Arnold demonstrates the Board’s commitment to refreshment with independent nominees possessing the right perspectives and experience to promote our near- and long-term business strategy. Ms. Arnold brings a wealth of valuable and relevant experience to WestRock, including:

 

g

International experience

 

g

Experience leading an organization with significant scale

 

g

Strong sales and technology experience.

We recently amended our Corporate Governance Guidelines (the “Guidelines”) to further institutionalize board refreshment within our corporate governance framework. To ensure that the Board continues to evolve in a manner that serves our changing business and strategic needs, going forward the Governance Committee will evaluate whether incumbent directors collectively possess the requisite skills and perspective before recommending a slate of incumbent directors for re-nomination. These evaluations are conducted annually, with discussions about Board refreshment held on an ongoing basis.

Stockholder Engagement

Stockholder engagement remains a key pillar of our corporate governance framework. We conduct stockholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our stockholders. We provide regular updates regarding our performance and strategic actions to the investor community, and we participate in numerous investor conferences, one-on-one meetings, earnings calls and educational investor and analyst conversations. We also communicate with stockholders and other stakeholders through various media, including our annual report and filings with the Securities and Exchange Commission (“SEC”), proxy statements, news releases and our website. We believe ongoing stockholder engagement allows us to respond effectively to stockholder concerns.

We hosted an “Investor Day” in December 2017. Approximately 100 analysts and investors attended in person. We took the opportunity to, among other things:

 

g

Focus on our differentiated business strategy

 

g

Showcase the depth and talent of our management team

 

g

Identify long-term financial performance targets.

 

5

COMPENSATION PROGRAM HIGHLIGHTS

Pay for Performance

Our executive compensation program is based on a pay-for-performance model. For fiscal 2018:

 

g

100% of our named executive officers’ (“NEOs”) short-term incentive goals were tied to Company, segment or unit performance

 

g

80% of our NEOs’ long-term incentive award value was tied to Company performance

 

g

Achieved 102% of the consolidated EBITDA component of our short-term incentive program because actual results exceeded target performance levels, resulting in a payout of 114%

 

g

Achieved 89% of the productivity component of our short-term incentive program because actual results fell short of target performance levels, resulting in a payout of 64%

Pay at Risk

A significant portion of our NEOs’ compensation is tied to performance. This allocation of variable target direct compensation aligns with our compensation philosophy of motivating our executive officers to achieve our business objectives in the short term and to grow our business to create long-term value for our stockholders.

 

CEO Pay Mix (1)				Other NEO Pay Mix
89% of Pay at Risk				76% of Pay at Risk

 

(1)

Excludes a restoration award to Mr. Voorhees. See “Compensation Matters – Compensation Discussion and Analysis – Compensation Elements – Long-Term Incentives (LTI) – Restoration Award to Mr. Voorhees” for additional information.

Enhancements

We made several enhancements to the annual performance bonus component of our 2018 executive compensation program to further align the program with our business strategies and the long-term interests of our stockholders.

 

What We Did				Why We Did It
•  Increased the weighting of the consolidated EBITDA, segment and unit-level EBITDA goals (1)				•  To maximize EBITDA over the long-term in order to drive stockholder value
•  Eliminated use of the annual customer engagement survey				•  To allow us to increase the weighting of the consolidated EBITDA, segment and unit-level EBITDA goals (1)
•  Improved the application of the safety modifier determination process				•  To allow the Compensation Committee to assess our safety performance holistically and apply negative discretion as appropriate to ensure that our commitment to safety is reflected in our annual performance bonuses

 

(1)

Except for Mr. Shore, whose unit-level EBITDA goal decreased in order to accommodate the addition of a productivity goal.

 

6

BOARD AND GOVERNANCE MATTERS

 

GOVERNANCE FRAMEWORK

All of our corporate powers are exercised by or under the authority of our board of directors (the “Board”), and our business and affairs are managed under the direction of the Board, subject to limitations and other requirements in our charter documents or in applicable statutes, rules and regulations, including those of the SEC and the NYSE.

Our governance framework supports independent oversight and accountability.

 

Independent Oversight				Accountability
•  11 of 13 director nominees are independent				•  Annual election of all directors
•  Lead Independent Director				•  Majority voting in uncontested elections
•  All independent key committees				•  Annual Board and committee evaluations
•  Regular executive sessions of independent directors				•  Annual advisory vote on executive compensation
•  Mandatory retirement age				•  Stock ownership guidelines and stock retention policy
				•  Over-boarding policy

Our governance framework is based on the key governance documents listed below, each of which is reviewed by the Board at least annually, except for the Bylaws (as defined below) and certificate of incorporation, which are reviewed periodically:

 

•

Amended and Restated Bylaws (the “Bylaws”)

 

•

Amended and Restated Certificate of Incorporation

 

•

The Guidelines

 

•

Charters of the Audit Committee, Compensation Committee, Finance Committee and Governance Committee

 

•

Code of Conduct

 

•

Code of Business Conduct and Ethics for Directors

 

•

Code of Ethical Conduct for CEO and Senior Financial Officers.

Copies of these documents are available on our website, www.westrock.com, or upon written request sent to our Corporate Secretary. The information on our website is not part of this Proxy Statement.

BOARD COMPOSITION

The Board consists of 13 directors, six of whom previously served on the RockTenn board of directors prior to the Combination, six of whom previously served on the MeadWestvaco board of directors prior to the Combination and one director (Ms. Arnold) nominated for election to the Board who has not previously stood for election to the Board by our stockholders.

We believe that the strength and continuity of the Board has been instrumental in the development of our business strategy, repositioning our business portfolio and realizing significant synergies and business improvements from the Combination.

 

7

Director Independence

Under the Guidelines and the corporate governance listing standards of the NYSE (the “NYSE Standards”), the Board must consist of a majority of independent directors. The Board annually reviews director independence under standards set forth in the Guidelines. The Board has affirmatively determined that all director nominees, other than Messrs. Luke and Voorhees, are independent. Mr. Luke is not independent because he was an employee of MeadWestvaco immediately prior to the effective date of the Combination. Mr. Voorhees is not independent because he is an employee of WestRock.

In the normal course of business, we purchase products and services from many suppliers and we sell products and services to many customers. In some cases, these transactions occur with companies with which Board members have relationships as directors or executive officers. Board members also have relationships as directors or executive officers with companies that hold or held our securities. For example, the Board considered the amount of payments received by us from McCormick & Company in the last three years (Mr. Wilson served as an executive officer of McCormick in the last three years) and a lease of office space for Bradley Currey, the retired chairman and CEO of RockTenn and the father of Board member Russell Currey. The Board determined these relationships were not material (individually or collectively) for purposes of its affirmative determinations of director independence.

Director Nomination Process

The Governance Committee is responsible for evaluating and recommending candidates for the Board. After completing its evaluation of candidates, the Governance Committee presents its recommendations to the Board for consideration and approval.

 

Candidates   recommended to   Governance Committee

®

Governance Committee   considers candidates’   qualifications

®

Governance Committee   recommends candidates   to Board

®

Board determines   nominees for election

 

The Governance Committee periodically assesses the Board to ensure that it has the right mix of experience, qualifications and skills. To facilitate these assessments, the Governance Committee has developed a matrix to assess each director’s level of experience in certain areas that we consider important in light of our current business strategy and structure. A list of the skills and experiences appearing in the matrix most recently used by the Governance Committee, along with an indication of how many of the director nominees possess each particular skill or experience, appears on page 9. The directors’ biographies (beginning on page 10) note each director’s relevant experience, qualifications and skills.   The Governance Committee also periodically assesses the appropriate size of the Board and any vacancies on the Board that are expected due to retirement or otherwise. If no vacancies are anticipated, the Governance Committee considers the qualifications of incumbent directors. If vacancies arise or are anticipated, it considers various potential director candidates. Candidates may come to the attention of the Governance Committee through current directors, professional search firms and advisors or other persons, including our stockholders. While nominations for director candidates are closed for the Annual Meeting, to nominate a candidate for next year’s annual meeting of stockholders, a stockholder must deliver or mail its nomination submission to WestRock Company, 1000 Abernathy Road NE, Atlanta, Georgia 30328, Attention: Corporate Secretary in accordance with the timing requirements set forth under the Bylaws as specified in “Other Important Information — Stockholder Proposals or Director Nominations for 2020 Annual Meeting”.				Governance Highlight   Colleen Arnold was appointed to the Board in July 2018. Her appointment demonstrates the Board’s commitment to refreshment with independent nominees possessing the right perspectives and experience to promote our near- and long-term strategy.

This year, one director (Ms. Arnold) is nominated for election to the Board who has not previously stood for election to the Board by our stockholders. Ms. Arnold was identified by a consultant that was assisting the Board with Board refreshment and was appointed to the Board on July 26, 2018. The Governance Committee evaluates potential candidates against the standards and qualifications set forth in the Guidelines, as well as other relevant factors it deems appropriate. In addition, each candidate must:

 

•

Be free of conflicts of interest and other legal and ethical issues that would interfere with the proper performance of the responsibilities of a director (recognizing that some directors may also be executive officers of the Company).

 

•

Be committed to discharging directors’ duties in accordance with the Guidelines and applicable law.

 

•

Be willing and able to devote sufficient time and energy to carrying out the director’s duties effectively and be committed to serving on the Board for an extended period of time.

 

•

Have sufficient experience to enable the director to meaningfully participate in deliberations of the Board and one or more of its committees, and to otherwise fulfill the director’s duties.

 

8

 

9

Succession Planning

The Board is responsible for overseeing and annually reviewing leadership development and assessment initiatives, as well as short- and long-term succession plans for our CEO and senior management. As part of an ongoing leadership succession planning process and working closely with our CEO and Chief Human Resources Officer, the Board regularly reviews our talent strategy to ensure that it supports our business strategy. Succession plans for executive officers are reviewed by the Board at least annually, and successor candidates are identified with input from the CEO.

In fiscal 2018, the Board used the annual talent evaluation process established by the Governance Committee to oversee CEO succession planning. This process includes reviewing our internal talent pipeline and external benchmarking. As part of this process, the CEO meets annually in executive session with the full Board to review our internal talent pipeline.

Majority Voting Standard in Uncontested Elections

Our directors are elected by a majority of the votes cast for them in uncontested elections. If a director does not receive a greater number of “for” votes than “against” votes, then the director must tender his or her resignation to the Board. The Board then determines whether to accept the resignation. Our directors are elected by a plurality vote standard in contested elections.

Over-Boarding Policy

Our directors may not serve on more than four other public company boards, and a director who serves as a CEO must limit his or her other public company directorships to two. None of our director nominees serves on more than three other public company boards.

Director Nominees

After evaluating each director and the composition of the Board, the Governance Committee recommended all of the current directors for election. If elected, each of the 13 nominees will hold office until the next annual meeting of stockholders and until his or her successor is elected and qualified. Each nominee has agreed to serve as a director if elected. If for some unforeseen reason a nominee becomes unwilling or unable to serve, proxies will be voted as recommended by the Board to elect substitute nominees recommended by the Board or the Board may allow the vacancy created to remain open until such time as it is filled by the Board, or the Board may determine not to elect substitute nominees and may instead determine to reduce the size of the Board.

Information about the nominees, including information concerning their qualifications for office, is set forth below.

 

COLLEEN F. ARNOLD
Age: 61   Director Since: 2018   Independent   Board Committees:   •   Audit •   Finance   Other public company boards:   •   Cardinal Health, Inc.   Other public company boards within 5 years:   •   None		Background: Ms. Arnold has served as a director of the Company since July 2018. She served as senior vice president, sales and distribution for International Business Machines Corporation (“IBM”) from 2014 to 2016. Prior to that, Ms. Arnold held a number of senior positions with IBM from 1998 to 2014, including senior vice president, application management services, IBM Global Business Services; general manager of GBS Strategy, Global Consulting Services, Global Industries and Global Application Services; general manager, Europe; general manager, Australia and New Zealand Global Services; and chief executive officer of Global Services Australia.
		Key Qualifications and Skills: Ms. Arnold’s experience serving in a number of senior roles with a large, global technology company provides her with global business experience, senior executive experience, consumer markets experience and technology experience.

 

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TIMOTHY J. BERNLOHR
Age: 59   Director Since: 2015   Independent   Board Committees: •   Compensation (Chair) •   Executive •   Governance   Other public company boards: •   Atlas Air Worldwide Holdings, Inc. •   International Seaways •   Skyline  Champion Corp.   Other public company boards within 5 years: •   Cash Store Financial Services Inc. •   RockTenn •   Chemtura Corp. •   Overseas Shipholding Group, Inc.		Background: Mr. Bernlohr served as a director of Smurfit-Stone Container Corporation (“Smurfit-Stone”) from 2010 until it was acquired by RockTenn in 2011, and he served as a director of RockTenn from 2011 until the effective date of the Combination when he became a director of the Company. Mr. Bernlohr is the managing member of TJB Management Consulting, LLC, a consultant to businesses in transformation and a provider of interim executive management and strategic planning services. From 1997 to 2005, he served in various executive capacities, including as president and CEO, at RBX Industries, Inc. Prior to joining RBX Industries, Mr. Bernlohr spent 16 years in various management positions with Armstrong World Industries, Inc.
		Key Qualifications and Skills: Mr. Bernlohr’s experience as a strategic consultant, a director of various publicly traded companies and as the CEO of an international manufacturing company provides him with broad corporate strategy and general business knowledge.

 

J. POWELL BROWN
Age: 51   Director Since: 2015   Independent   Board Committees:   •   Audit •   Finance   Other public company boards:   •   Brown & Brown, Inc.   Other public company boards within 5 years:   •   RockTenn		Background: Mr. Brown served as a director of RockTenn from 2010 until the effective date of the Combination when he became a director of the Company. He has served as president of Brown & Brown, Inc. since 2007 and as CEO since 2009. Mr. Brown previously served as a regional executive vice president of the company. From 2006 to 2009, he served on the board of directors of SunTrust Bank/ Central Florida, a commercial bank and subsidiary of SunTrust Banks, Inc.
		Key Qualifications and Skills: Mr. Brown’s experience as a CEO of a publicly traded insurance services company provides him with broad experience and knowledge of risk management and loss minimization and mitigation, as well as perspective on leadership of publicly traded companies.

 

MICHAEL E. CAMPBELL
Age: 71   Director Since: 2015   Independent   Board Committees:   •   Compensation •   Governance   Other public company boards:   •   None   Other public company boards within 5 years:   •   MeadWestvaco		Background: Mr. Campbell served as a director of MeadWestvaco from 2001 and its lead independent director from 2007, in each case, until the effective date of the Combination when he became a director of the Company. He served as chairman, president and CEO of Arch Chemicals, Inc. from 1999 to 2011. Mr. Campbell previously served as an executive vice president of Olin Corporation. He was elected chair of the Board of the American Chemistry Council and, subsequently, chair of the Board of the National Association of Manufacturing. President George W. Bush appointed Mr. Campbell to the Advisory Council for Trade Policy and Negotiations, and he was reappointed to the Council by President Barack Obama.
		Key Qualifications and Skills: Mr. Campbell’s background, experience and judgment as a CEO of a publicly traded manufacturing company provide him with leadership, business and governance skills, and experience with mergers and acquisitions, as well as public policy issues.

 

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TERRELL K. CREWS
Age: 63   Director Since: 2015   Independent   Board Committees:   •   Audit •   Finance   Other public company boards:   •   Hormel Foods Corporation •   Archer Daniels Midland Company   Other public company boards within 5 years:   •   RockTenn		Background: Mr. Crews served as a director of Smurfit-Stone from 2010 until it was acquired by RockTenn in 2011, and he served as a director of RockTenn from 2011 until the effective date of the Combination when he became a director of the Company. Mr. Crews served as executive vice president and CFO of Monsanto Company from 2000 to 2009, and as the CEO of Monsanto’s vegetable business from 2008 to 2009.
		Key Qualifications and Skills: Mr. Crews’ experience as a CFO and executive of a publicly traded company and as a director of other public companies provides him with broad business knowledge and in-depth experience in complex financial matters.

 

RUSSELL M. CURREY
Age: 57   Director Since: 2015   Independent   Board Committees: •   Audit •   Finance   Other public company boards: •   None   Other public company boards within 5 years: •   RockTenn		Background: Mr. Currey served as a director of RockTenn from 2003 until the effective date of the Combination when he became a director of the Company. He has served as the president of Boxwood Capital, LLC, a private investment company, since 2013. Mr. Currey worked for RockTenn from 1983 to 2008, and served as executive vice president and general manager of its corrugated packaging division from 2003 to 2008.
		Key Qualifications and Skills: Mr. Currey’s experience with RockTenn in a number of leadership roles over a period of 32 years provides him with substantial knowledge of our industry, business and customers.

 

JOHN A. LUKE
Age: 70   Director Since: 2015   Non-Executive Chairman   Board Committees   •   Executive   Other public company boards:   •   Timken Company •   Dominion Energy Midstream Partners, L.P.   Other public company boards within 5 years:   •   MeadWestvaco •   The Bank of New York Mellon Corporation		Background: Mr. Luke served as chairman and CEO of MeadWestvaco from 2002 until the effective date of the Combination when he became a director and the Non-Executive Chairman. He spent 36 years with MeadWestvaco and its predecessor company, Westvaco Corporation, serving in a variety of positions. From 1996 to 2002, Mr. Luke served as chairman, president and CEO of Westvaco. He has served as a director of FM Global, a mutual insurance company, since 1999.
		Key Qualifications and Skills: Mr. Luke’s background, experience and judgment, and his unique knowledge and understanding of MeadWestvaco’s operations, provide him with valuable leadership, business and governance skills.

 

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GRACIA C. MARTORE
Age: 67   Director Since: 2015   Independent   Board Committees:   •   Audit (Chair) •   Compensation •   Executive   Other public company boards:   •   United Rentals Inc. •   Omnicom Group Inc.   Other public company boards within 5 years:   •   MeadWestvaco •   TEGNA Inc.		Background: Ms. Martore served as a director of MeadWestvaco from 2012 until the effective date of the Combination when she became a director of the Company. She served as the president and CEO and as a director of TEGNA Inc. (formerly Gannett Co., Inc.) from 2011 to 2017, and she served as president and COO of Gannett from 2010 to 2011. Ms. Martore also served as Gannett’s executive vice president and CFO from 2006 to 2010, its senior vice president and CFO from 2003 to 2006 and in various other executive capacities beginning in 1985. She has served as a director of FM Global since 2005, as a director of The Associated Press since 2013 and as a Trustee of Wellesley College since 2016.
		Key Qualifications and Skills: Ms. Martore’s background, experience and judgment as CEO and CFO of a publicly traded company provide her with leadership, business, financial and governance skills.

 

JAMES E. NEVELS
Age: 66   Director Since: 2015   Lead Independent Director   Board Committees:   •   Finance •   Governance   Other public company boards:   •   First Data Corp. •   Alcoa Corp.   Other public company boards within 5 years:   •   MeadWestvaco •   The Hershey Company •   XL Group Ltd.		Background: Mr. Nevels served as a director of MeadWestvaco from 2014 until the effective date of the Combination when he became a director of the Company. He has served as chairman of The Swarthmore Group, an investment advisory firm, since 1991. Mr. Nevels served as a director of The Hershey Trust Company from 2007 to 2016 and as the lead independent director of The Hershey Company from 2015 to 2017, and he served as chairman of the company from 2009 to 2015. Mr. Nevels also served as a director of the Federal Reserve Bank of Philadelphia from 2010 to 2015 (and as its chairman from 2014 to 2015) and of MMG Insurance Company, a provider of insurance services.
		Key Qualifications and Skills: Mr. Nevels’ background and experience as an investment advisor and board member, chairman and lead independent director of public companies provide him with financial expertise and broad knowledge and perspective on the governance and leadership of publicly traded companies.

 

TIMOTHY H. POWERS
Age: 70   Director Since: 2015   Independent   Board Committees:   •   Audit •   Compensation   Other public company boards:   •   ITT Corp.   Other public company boards within 5 years:   •   Hubbell, Inc. •   MeadWestvaco		Background: Mr. Powers served as a director of MeadWestvaco from 2006 until the effective date of the Combination when he became a director of the Company. He served as chairman of Hubbell Inc. from 2012 to 2014, as executive chairman, president and CEO from 2004 to 2012, as president and CEO from 2001 to 2004 and as senior vice president and CFO from 1998 to 2001. Mr. Powers is a former director of the National Electrical Manufacturers Association.
		Key Qualifications and Skills: Mr. Powers’ background, experience and judgment as a CEO and CFO of a publicly traded manufacturing company provide him with financial expertise and broad leadership, management and governance skills.

 

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STEVEN C. VOORHEES
Age: 64   Director Since: 2015   President and CEO   Board Committees:   •   Executive   Other public company boards:   •   SunTrust Banks, Inc.   Other public company boards within 5 years:   •   RockTenn		Background: Mr. Voorhees served as a director of RockTenn from 2013 until the effective date of the Combination when he became a director of the Company. He served as RockTenn’s CEO from 2013 until the effective date of the Combination when he became our president and CEO. Mr. Voorhees served as RockTenn’s executive vice president and CFO from 2000 to 2013, chief administrative officer from 2008 to 2013 and president and COO in 2013.
		Key Qualifications and Skills: Mr. Voorhees’ experience with RockTenn and his service as our president and CEO provide him with extensive knowledge of our business, strategy and capabilities. The Board also believes Mr. Voorhees’ presence on the Board helps provide a unified focus for management to execute our strategy and business plans.

 

BETTINA M. WHYTE
Age: 69   Director Since: 2015   Independent   Board Committees:   •   Compensation •   Executive •   Governance (Chair)   Other public company boards:   •   None   Other public company boards within 5 years:   •   Annies, Inc. •   RockTenn •   AGL Resources Inc.		Background: Ms. Whyte served as a director of RockTenn from 2007 until the effective date of the Combination when she became a director of the Company. She has been the president and owner of Bettina Whyte Consultants, LLC since 2015. Ms. Whyte served as a managing director and senior advisor at Alvarez and Marsal Holdings, LLC, a world-wide business consulting firm, from 2011 to 2015. She has served as an interim CEO and crisis manager of numerous billion dollar corporations and has been instrumental in the debt restructuring of Puerto Rico. Ms. Whyte has served as a director of Amerisure Insurance since 2002, and she serves as a trustee of the National Museum of Wildlife Art of the United States.
		Key Qualifications and Skills: Ms. Whyte’s roles in the financial and operational restructuring of complex international and domestic businesses, her service as an executive of numerous troubled multinational public and private companies and her past service as a director of other public companies provide her with broad experience with financial and operational issues, as well as with governance issues.

 

ALAN D. WILSON
Age: 61   Director Since: 2015   Independent   Board Committees:   •   Finance (Chair) •   Governance   Other public company boards:   •   T. Rowe Price Group Inc.   Other public company boards within 5 years:   •   MeadWestvaco •   McCormick & Company, Inc.		Background: Mr. Wilson served as a director of MeadWestvaco from 2011 until the effective date of the Combination when he became a director of the Company. He served as chairman of the board of McCormick & Company, Inc. from 2009 to 2017 and he served as its CEO from 2008 to 2016. Mr. Wilson joined McCormick in 1993 and served in a variety of other positions, including as president from 2007 to 2015, president of North American Consumer Products from 2005 to 2006, president of the U.S. Consumer Foods Group from 2003 to 2005 and vice president - sales and marketing for the U.S. Consumer Foods Group from 2001 to 2003.
		Key Qualifications and Skills: Mr. Wilson’s background, experience and judgment as CEO of a publicly traded multinational consumer food company provides him with leadership, market expertise, and business and governance skills.

 

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BOARD OPERATIONS

Board Leadership Structure

The Bylaws separate the roles of CEO and Non-Executive Chairman. Mr. Voorhees serves as our president and CEO. In this role, he has general supervision of our business and affairs, and he is recognized as our leader by business partners, employees, stockholders and other parties. Mr. Luke serves as our Non-Executive Chairman. In this role, he provides oversight, direction and leadership to the Board, and facilitates communication among directors and the regular flow of information between management and directors. In addition, the Non-Executive Chairman:

 

•

Serves as the Chair of the Executive Committee

 

•

Presides during Board and stockholder meetings

 

•

Provides input to the Compensation Committee and Governance Committee, as appropriate, with respect to the CEO performance evaluation process, the annual Board performance self-evaluation process and Board succession planning.

Mr. Nevels serves as our Lead Independent Director. The Lead Independent Director is selected from among the directors and serves a one-year term, and no director may serve more than two consecutive terms, unless the Board determines otherwise. The Lead Independent Director:

 

•

Presides during all meetings of the Board at which the Non-Executive Chairman is not present, including executive sessions of the independent directors

 

•

May call meetings of the independent directors

 

•

Serves as a liaison between the Non-Executive Chairman and the independent directors

 

•

If requested by a major stockholder, ensures he or she is available for consultation and direct communication.

The Board believes this leadership structure is the most effective for us at this time because it allows our CEO to focus on running our business and combines a strong Non-Executive Chairman and Lead Independent Director to pursue sound governance practices that benefit the long-term interests of our stockholders.

Stockholder Engagement

Stockholder engagement remains a key pillar of our corporate governance framework. We conduct stockholder outreach throughout the year to ensure management and the Board understand and consider the issues that matter most to our stockholders. We provide regular updates regarding our performance and strategic actions to the investor community, and we participate in numerous investor conferences, one-on-one meetings, earnings calls and educational investor and analyst conversations. We also communicate with stockholders and other stakeholders through various media, including our annual report and SEC filings, proxy statements, news releases and our website. We believe ongoing engagement with our stockholders allows us to respond effectively to stockholder concerns.   In fiscal 2018, we engaged a third party to conduct interviews of several large stockholders in order to better understand the perceptions of WestRock among the investor community and we are using the insights derived from these interviews to tailor our outreach efforts.				Governance Highlight   We hosted an “Investor Day” in December 2017. Approximately 100 analysts and investors attended in person. We took the opportunity to, among other things, focus on our differentiated business strategy, showcase the depth and talent of our management team and identify long-term financial performance targets.

Board Committees

The Board assigns responsibilities and delegates authority to its committees, and the committees regularly report on their activities and actions to the Board. The Board has determined that all of the members of each committee (other than the Executive Committee) are “independent” within the meaning of the NYSE Standards and the Guidelines and meet any applicable additional committee-specific independence requirements. The purpose and principle responsibilities of each committee are summarized below and set forth in more detail in each committee’s (other than the Executive Committee) written charter, which can be found on our website.

 

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		AUDIT COMMITTEE   Members: Gracia C. Martore (Chair) Colleen F. Arnold J. Powell Brown Terrell K. Crews Russell M. Currey Timothy H. Powers   Meetings in Fiscal 2018: 7   Attendance Rate: 100%   * All members meet the independence requirements of Rule 10A-3 of the Exchange Act, the NYSE and the Guidelines and are “financially literate” within the meaning of the NYSE Standards. Each of Ms. Martore and Messrs. Crews and Powers is an “audit committee financial expert” within the meaning of SEC regulations.				Purpose: •   Assists the Board in fulfilling its responsibilities with respect to oversight of:   -  the integrity of our financial statements   -  our system of internal control over financial reporting   -  the performance of our internal audit function   -  our system of compliance with legal and regulatory requirements.   •   Oversees the independence, qualifications and performance of our independent auditor.   Principal Responsibilities: •   Directly appoints, compensates, retains and oversees the work of our independent auditor.   •   Discusses with management policies with respect to risk assessment and risk management.
		COMPENSATION COMMITTEE   Members: Timothy J. Bernlohr (Chair) Michael E. Campbell Gracia C. Martore Timothy H. Powers Bettina M. Whyte   Meetings in Fiscal 2018: 5   Attendance Rate: 96%   * All members meet the independence requirements of the NYSE, the outside director requirements of the Internal Revenue Code of 1986, as amended (the “Tax Code”) and the Guidelines, and qualify as a “non-employee director” for purposes of Rule 16b-3(b)(3)(i) of the Exchange Act.				Purpose: •   Assists the Board in fulfilling its responsibilities with respect to compensation of our executives and non-employee directors and oversight of matters relating to our equity compensation and employee benefits plans.   Principal Responsibilities: •   Sets the overall compensation strategy and compensation policies for our executives and non-employee directors.   •   Approves corporate goals/objectives relating to CEO compensation, evaluates our CEO’s performance and determines/approves our CEO’s compensation level.   •   Makes recommendations for compensating our non-employee directors.   •   Reviews our incentive compensation arrangements to confirm that incentive pay does not encourage inappropriate risk taking.   •   Directly appoints, terminates, compensates and oversees the work of its advisors.
		EXECUTIVE COMMITTEE   Members: John A. Luke (Chair) Timothy J. Bernlohr Gracia C. Martore Steven C. Voorhees Bettina M. Whyte   Meetings in Fiscal 2018: 0				Principal Responsibilities: Exercises the authority of the Board in managing our business and affairs; however, it does not have the power to (i) approve, adopt or recommend to our stockholders any action or matter (other than the election or removal of directors) that Delaware law requires to be approved by stockholders or (ii) adopt, amend or repeal the Bylaws.

 

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		FINANCE COMMITTEE   Members: Alan D. Wilson (Chair) Colleen F. Arnold J. Powell Brown Terrell K. Crews Russell M. Currey James E. Nevels   Meetings in Fiscal 2018: 5   Attendance Rate: 96%				Purpose   •   Assists the Board in fulfilling its responsibilities with respect to overseeing our financial management and resources.   Principal Responsibilities: •   Reviews and recommends capital budgets to the Board for approval.   •   Reviews management’s assessment of our capital structure, including dividend policies and stock repurchase programs, debt capacity and liquidity.   •   Reviews financing and liquidity initiatives proposed by management.
		GOVERNANCE COMMITTEE   Members: Bettina M. Whyte (Chair) Timothy J. Bernlohr Michael E. Campbell James E. Nevels Alan D. Wilson   Meetings in Fiscal 2018: 5   Attendance Rate: 88%   * All members meet the independence requirements of the NYSE and the Guidelines.				Purpose   •   Assists the Board in fulfilling its responsibilities with respect to:   -  identifying and recommending qualified candidates for the Board and its committees   -  overseeing the evaluation of the effectiveness of the Board and its committees   -  reviewing matters on corporate governance, including trends and current practices   -  developing and recommending the Guidelines and other governance policies and procedures.   -  CEO succession   -  Board refreshment   Principal Responsibilities: •   Evaluates and recommends Board candidates.   •   Evaluates and recommends changes to the size, composition and structure of the Board and its committees.   •   Oversees annual self-evaluation process.

Meeting Attendance

In fiscal 2018, the Board held ten meetings and committees of the Board held a total of 22 meetings. Overall attendance at these meetings was approximately 95%, and each director attended 75% or more of the aggregate of all meetings of the Board and the committees on which he or she served during fiscal 2018. All of our current directors attended the annual meeting of stockholders held on February 2, 2018.

Meetings of Non-Management Directors and Independent Directors

Our non-management directors meet separately from the other directors in regularly scheduled executive sessions in connection with each Board meeting. These meetings are conducted without the presence of management directors or executive officers, unless the non-management directors request the attendance of one or more members of management. At least once a year, and at such other times as may be scheduled by the Non-Executive Chairman or the Lead Independent Director, the independent directors meet separately from the other directors in executive session.

Evaluations

The Board and each standing committee conducts an annual self-evaluation. The Governance Committee oversees the process and implementation of these self-evaluations. The Governance Committee assesses the process of conducting self-evaluations annually and has used a variety of methods, including written questionnaires, interviews and group discussions. In fiscal 2018:

 

•

Our Non-Executive Chairman and the Chair of the Governance Committee conducted one-on-one interviews with each individual director to assess the performance of the Board committees and individual directors

 

•

The Board discussed its culture and dynamics, including the quality of Board discussion and effectiveness of Board meetings

 

•

The consultant engaged by the Governance Committee to provide advisory services related to board refreshment conducted interviews with each director (other than Ms. Arnold) related to, among other topics, Board effectiveness.

 

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Director Orientation and Continuing Education

New directors participate in an orientation program and receive materials and briefings to acquaint the director with our business, strategies and policies. Following her appointment to the Board in July 2018, Ms. Arnold met with certain of our senior executives to learn more about our business. She also received copies of our governance and strategy-related documents.

Continuing education is provided for all directors through board materials and presentations (including by outside speakers), discussions with management, visits to our facilities and other sources. In fiscal 2018:

 

•

The Board visited manufacturing locations in New Jersey in connection with meetings held near those locations

 

•

The Board arranged for an outside speaker to deliver a presentation on cybersecurity at one of the Board’s regularly scheduled meetings. The presentation covered a range of cybersecurity-related topics, including the cybersecurity landscape and cybersecurity risks related to manufacturing companies.

From time to time, certain of our directors may attend programs focused on topics that are relevant to their duties as a director. We reimburse directors for the cost of one third-party continuing education program every other year; however, our directors may be reimbursed for the costs of additional programs with the approval of the Chair of the Governance Committee.

Risk Oversight

The Board provides oversight of our risk management processes. The Board executes its risk oversight function both as a whole and through delegation to its key committees, each of which meets regularly and reports back to the Board. Each key committee’s risk oversight responsibilities are summarized below.   While the Board and its committees oversee risk management, management is charged with managing enterprise risks. The Board recognizes that it is neither possible nor desirable to eliminate all risk. Rather, the Board views appropriate risk taking as essential to our long-term success and seeks to understand and oversee critical business risks in the context of our business strategy, the magnitude of the particular risks and the proper allocation of our risk management and mitigation resources.   We have a robust internal control environment that facilitates the identification and management of risks and regular communications with the Board. Our internal audit department conducts a companywide risk assessment that includes interviews and surveys to identify and assess the highest impact risks. The Board and its committees receive regular reports from members of senior management on areas of material risk to us, including operational, financial, strategic, competitive, reputational, legal and regulatory risks, and how those risks are managed. Our general counsel informs each committee and the Board of relevant legal and compliance issues, and each committee has access to outside counsel when it deems it advisable. Each committee also has the authority to engage independent counsel at our expense as it deems necessary to carry out its duties and responsibilities.				Governance Highlight   An outside advisor delivered a presentation to the Board that covered a range of cybersecurity-related topics, including cybersecurity risks related to manufacturing companies.   Given the potential risks associated with cybersecurity, the Audit Committee received updates from our chief information officer on this topic at each regularly scheduled meeting during fiscal 2018.

 

		AUDIT COMMITTEE •  Oversees risk management related to   -   financial statements   -   financial reporting and disclosure processes   -   financial and other internal controls   -   accounting   -   legal/compliance matters   -   information technology   -   cybersecurity.   •  Oversees the internal audit function.   •  Meets separately on a regular basis with representatives of our independent auditing firm and the head of our internal audit department.				COMPENSATION COMMITTEE •  Oversees risk management related to our compensation philosophy and programs.   •  Reviews our incentive compensation arrangements to confirm incentive pay does not encourage inappropriate risk taking.   FINANCE COMMITTEE •  Oversees risk management related to our annual capital budget plans and our capital structure.   •  Reviews financing and liquidity initiatives.   GOVERNANCE COMMITTEE •  Oversees risk management related to governance policies and procedures, and board organization and membership.

 

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DIRECTOR COMPENSATION

The Compensation Committee is responsible for setting the overall compensation strategy and policies for our non-employee directors and for recommending to the Board the compensation of non-employee directors. Directors who also serve as employees do not receive payment for service as directors.

In making decisions concerning compensation for non-employee directors, the Compensation Committee considers the director compensation practices of peer companies and whether the recommendations align with the interests of our stockholders. We seek to align total non-employee director compensation with the approximate median of peer group total director compensation.

In fiscal 2018, the compensation consultant to the Compensation Committee analyzed the competitive position of our director compensation program against the peer group used for executive compensation purposes and examined how each element of our director compensation program compared to those for members of the peer group. The compensation consultant’s assessment focused on, among other areas, board size and composition, and frequency of meetings; board and committee compensation practices and levels; and total compensation for similarly situated non-employee directors. In addition, the assessment considered certain principles and leading practices identified by the National Association of Corporate Directors. Based on this assessment and in order to more closely align our pay levels to the peer group median, the Compensation Committee recommended to the Board a $5,000 increase in the annual equity award component of director compensation, as well as a $1,500 increase in the retainer paid to the Chair of the Compensation Committee and a $2,500 increase in the retainer paid to the Chair of each of the Governance Committee and Finance Committee. The Board considered and then approved these recommendations.

Compensation for non-employee directors in fiscal 2018 was comprised of the following components:

 

Component		Compensation ($)
Annual cash retainer		115,000
Annual stock award		135,000
Annual Non-Executive Chairman fee		40,000
Annual Lead Independent Director fee		20,000
Annual Committee Chair fees
Audit Committee		20,000
Compensation Committee		20,000
Finance Committee; Governance Committee		17,500

Director Compensation for 2018

 

Name		Fees Earned or Paid in Cash ($)		Stock Awards ($)		All Other Compensation ($)		Total ($)
Colleen F. Arnold (1)		28,750		67,499		0		96,249
Timothy J. Bernlohr		135,000		135,018		0		270,018
J. Powell Brown		115,000		135,018		0		250,018
Michael E. Campbell		115,000		135,018		0		250,018
Terrell K. Crews		115,000		135,018		0		250,018
Russell M. Currey		115,000		135,018		0		250,018
John A. Luke, Jr.		155,000		135,018		0		290,018
Gracia C. Martore		135,000		135,018		0		270,018
James E. Nevels		135,000		135,018		0		270,018
Timothy H. Powers		115,000		135,018		0		250,018
Bettina M. Whyte		132,500		135,018		0		267,518
Alan D. Wilson		132,500		135,018		0		267,518

(1) Ms. Arnold joined the Board in July 2018 and her fiscal 2018 compensation was therefore appropriately prorated.

 

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The amounts reported in the Fees Earned or Paid in Cash column reflect the cash fees earned by each non-employee director in fiscal 2018, whether or not such fees were deferred. These fees were paid in connection with the annual cash retainer, the annual Non-Executive Chairman’s fee, the annual Lead Independent Director’s fee and each Committee Chair annual fee. Ms. Arnold joined the Board in July 2018 and, in fiscal 2018, received one-quarter of the annual cash retainer.

The amounts reported in the Stock Awards column reflect the grant date fair value associated with stock awards made in fiscal 2018, calculated in accordance with the provisions of ASC 718. Our non-employee directors (other than Ms. Arnold) received their annual stock award on February 2, 2018. Each non-employee director received 2,008 restricted shares of Common Stock or restricted stock units (for directors who elected to defer their equity awards pursuant to the WestRock Company 2016 Deferred Compensation Plan for Non-Employee Directors (the “Deferred Compensation Plan”)). See “— Deferred Compensation.” The number of shares and units associated with this award was determined by dividing the value of the annual stock award by the closing price of Common Stock as reported on the NYSE on the grant date. Upon Ms. Arnold’s appointment to the Board on July 26, 2018, she received a stock award of 1,197 restricted shares of Common Stock approximately equal to one-half of the value of the annual stock award received by other non-employee directors on February 2, 2018. Both the stock award received by Ms. Arnold and the annual stock award received by the other non-employee directors vests on the first anniversary of the grant date.

Deferred Compensation

Non-employee directors may elect annually to defer all of their cash compensation and/or equity award pursuant to the terms of the Deferred Compensation Plan. At the director’s option, we credit his or her (i) cash deferred account with the cash compensation he or she elected to defer and (ii) stock unit account for each restricted share of Common Stock that he or she elected to defer. The rights of the director in the balance credited to his or her deferred cash account are vested at all times, whereas rights in the balance of the stock unit account vest in accordance with the vesting schedule for the related restricted Common Stock grants. During fiscal 2018, Messrs. Campbell, Powers and Wilson and Ms. Martore deferred both their cash compensation and equity award, and Ms. Whyte deferred only her equity award.

Director Stock Ownership and Retention Requirements

Each non-employee director is required to own at least the greater of (i) 5,000 shares of Common Stock or (ii) a number of shares of Common Stock having a value of not less than five times the annual cash retainer. In determining compliance with these guidelines, stock ownership includes vested and unvested restricted stock awards and restricted stock units. Directors have five years from the date of their initial election to achieve the targeted level of ownership.

All non-employee directors have either achieved the targeted level of ownership or joined the Board within the last five years.

Our non-employee directors are required to retain 50% of the restricted stock, net of any shares used to satisfy any related tax liability upon vesting, awarded to the individual for a period of two years following the vesting of the restricted stock, or until the individual no longer serves as a director. The retention period does not apply to any shares to the extent the recipient continues to own an amount of Common Stock at least equal to the number of shares required under the preceding sentence, plus a number of shares required to be held under our stock ownership guidelines.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We require that each executive officer, director and director nominee complete an annual questionnaire and report all transactions since the beginning of the last fiscal year that exceed $120,000 in which we were a participant and in which those persons (or their associates or immediate family members) had or will have a direct or indirect material interest. Management reviews responses to the questionnaires and, if any such transactions are disclosed, the Governance Committee then makes recommendations to the Board with respect to the appropriateness of such transactions. We do not have a formal written policy for approval or ratification of these transactions. Information included in directors’ responses to the questionnaires is reviewed annually by the Board for the purpose of assessing independence under the Guidelines, applicable rules and regulations of the SEC and the NYSE Standards, and we review all responses to ensure that any such transactions adhere to the standards set forth above as well as our various codes of conduct. There has not been a transaction during fiscal 2018, and there are no currently proposed transactions, in which we were or are to be a participant, the amount involved exceeds $120,000 and an executive officer, director, director nominee, a beneficial owner of five percent or more of our Common Stock (or any immediate family members of such persons) had or will have a direct or indirect material interest.

COMMUNICATING WITH THE BOARD

Stockholders and other interested parties may communicate with directors (i) by mail at WestRock Company, 1000 Abernathy Road NE, Atlanta, Georgia 30328 or (ii) by facsimile at (770) 263-4402. Communications intended specifically for our non-executive chairman and other non-management directors should be marked “Attention: Independent Director Communications,” while all other director communications should be marked “Attention: Director Communications.” Communications regarding accounting, internal accounting controls or auditing matters may be reported to the Audit Committee using the above address and marking the communication “Attention: Audit Committee Communications.” Comments may also be delivered by using our website contact form.

 

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		ITEM 2. APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF WRKCO INC., A WHOLLY OWNED SUBSIDIARY OF WESTROCK COMPANY
		What am I voting on? The Board is asking our stockholders to approve an amendment to the Amended and Restated Certificate of Incorporation of WRKCo, a wholly owned subsidiary of the Company, to remove a provision that requires the approval of the stockholders of the Company, in addition to the approval of the Company (as sole stockholder of WRKCo), in order for WRKCo Inc. to take certain actions.
		Voting Recommendation: FOR the approval of the amendment to the Amended and Restated Certificate of Incorporation of WRKCo Inc. to remove the Pass Through Provision (as defined below)
		Vote Required: An affirmative vote requires the majority of shares entitled to vote

On November 2, 2018, the Company completed its acquisition of Kapstone. As part of this transaction, pursuant to Section 251(g) of the General Corporation Law of the State of Delaware (the “DGCL”), WRKCo (formerly known as WestRock Company) merged with and into a wholly owned subsidiary of Whiskey Holdco, Inc. (now the Company) with WRKCo surviving as a wholly owned subsidiary of the Company.

As was required by Section 251(g) of the DGCL, the current Amended and Restated Certificate of Incorporation of WRKCo (the “WRKCo Charter”) contains provisions identical to the Company’s Amended and Restated Certificate of Incorporation with the exceptions of the corporate name and that the WRKCo Charter provides that any act or transaction by or involving WRKCo, other than the election or removal of directors, that requires the approval of WRKCo’s stockholders (i.e. the Company) will also require the approval of the Company’s stockholders by the same vote as is required by the DGCL and the WRKCo Charter (the “Pass-Through Provision”). Absent a provision like the Pass-Through Provision, there is no general requirement under Delaware law that stockholders of a parent entity approve acts or transactions by or involving the parent entity’s wholly owned subsidiaries.

The Pass-Through Provision permits stockholders of the Company, a public holding company, to have direct voting rights as to certain matters affecting the Company’s subsidiary, WRKCo, that would otherwise only require the approval of the Company, as WRKCo’s sole stockholder. This is highly unusual for a public holding company and restricts the Company’s flexibility to manage efficiently and effectively its organization under the existing holding company. For example, the Pass-Through Provision would require WRKCo to obtain approval from the Company’s stockholders (in addition to obtaining the approval of its sole stockholder, the Company) prior to making amendments to the WRKCo Charter and certain provisions of the Third Amended and Restated Bylaws of WRKCo. The Pass-Through Provision would also require the Company to seek approval from both the Company and the Company’s stockholders prior to taking certain intercompany actions, such as a merger of WRKCo with another wholly owned subsidiary of WRKCo. Furthermore, under the DGCL and pursuant to the Pass-Through Provision in WRKCo’s Charter, certain corporate acts, such as a conversion from a corporation into a limited liability company (which can facilitate intercompany transactions), would require the unanimous approval of all of the Company’s stockholders, in addition to the approval of the Company as the sole stockholder of WRKCo. Obtaining unanimous consent from all of a public corporation’s stockholders would be both impractical and unrealistic. Moreover, even for matters not requiring a unanimous vote, scheduling such a vote, whether at a regular annual stockholders meeting or at a special meeting, would delay the completion of the desirable actions and add to their cost. In order to avoid such delay and cost, and to provide maximum flexibility and efficiency under the existing holding company structure, the Company proposes to eliminate the Pass-Through Provision from the WRKCo Charter.

Following the removal of the Pass-Through Provision from the WRKCo Charter, stockholders of the Company will continue to have the voting rights provided to stockholders of a corporation by applicable law. Removing the Pass-Through Provision from the WRKCo Charter would have no effect on the right of stockholders of the Company to vote on matters relating to the Company, such as a merger or consolidation of the Company, a sale of all or substantially all of the Company’s assets, amendments to the Company’s certificate of incorporation, or any other acts or transactions requiring the approval of the Company’s stockholders under applicable law.

The Pass-Through Provision that would be eliminated from the WRKCo Charter by the proposed amendment reads as follows:

Article X

Notwithstanding anything to the contrary in this Certificate of Incorporation, any act or transaction by or involving the Corporation, other than the election or removal of directors, that requires for its adoption under the DGCL or the organizational documents of the Corporation the approval of the stockholders of the Corporation shall, pursuant to subsection 7(i)(A) of Section 251(g) of the DGCL, require, in addition, the approval of the stockholders of WestRock Company (or any successor by merger), by the same vote as is required by the DGCL and/or by the organizational documents of the Corporation.

 

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The Board believes that the removal of the Pass-Through Provision will provide the Company with the flexibility to manage its organization under the holding company structure more efficiently and effectively. The Board therefore seeks approval from the Company’s stockholders to amend the WRKCo Charter in order to remove the Pass-Through Provision.

A complete copy of the proposed amendment is attached to this Proxy Statement as Appendix A.

 

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COMPENSATION MATTERS

 

		ITEM 3. ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
		What am I voting on? The Board is asking our stockholders to approve, on an advisory basis, the compensation of the named executive officers as disclosed in this Proxy Statement
		Voting Recommendation: FOR the proposal
		Vote Required: An affirmative vote requires the majority of those shares present in person or represented by proxy and entitled to vote

In accordance with SEC rules, our stockholders are being asked to approve, on an advisory basis, the compensation of our NEOs as disclosed in this Proxy Statement. Last year, more than 98% of the votes cast were in favor of approving the compensation of our NEOs.

Pay-For-Performance

In many ways, fiscal 2018 was a record setting year for WestRock. For example,

 

•

We increased our sales by 10% to $16.3 billion – the highest sales level in our history

 

•

We increased our net cash provided by operating activities by 27%

 

•

We increased our segment EBITDA by 28%.

At the same time, the trading price of our Common Stock fell from $56.73 at the end of fiscal 2017 to $53.44 at the end of fiscal 2018. We believe that the trading price of our Common Stock has been adversely affected by concerns about announcements by certain of our competitors of planned capacity increases in the North American containerboard market. Notwithstanding these impacts, our aggregate total stockholder returns for the past ten, five and three years were 258%, 33% and 26%, respectively.

We maintain a long-term focus when developing our compensation policies and procedures. As described in detail in the Compensation Discussion and Analysis section beginning on page 25, we believe our compensation policies and procedures are competitive, focused on pay-for-performance principles and strongly aligned with the long-term interests of our stockholders. Our executive compensation philosophy is based on the belief that the compensation of our employees, including our NEOs, should be set at levels that allow us to attract and retain employees who are committed to achieving high performance and who demonstrate the ability to do so. Our objectives include creating a clear path between realized compensation and the successful execution of our business strategy and enhancing each individual executive’s performance. We seek to provide an executive compensation package that is driven by our overall financial performance, increased stockholder value, the success of areas of our business directly impacted by the executive’s performance and the performance of the individual executive. We view our compensation program as a strategic tool that supports the successful execution of our business strategy.

Our executive compensation program for fiscal 2018 reflects our commitment to pay-for-performance.

 

•

Short-Term Incentives

 

g

100% of our NEOs’ goals were tied to Company, segment or unit performance

 

g

Achieved 102% of the consolidated EBITDA component because actual results exceeded target performance levels, resulting in a payout of 114% of target

 

g

Achieved 89% of the productivity component because actual results fell short of target performance levels, resulting in a payout of 64% of target

 

g

Achieved 108% of the Integrated NA Corrugated EBITDA component, resulting in a payout of 152% of target and reflecting the superior results delivered by this business

 

g

Achieved 94% of the Integrated Consumer EBITDA component, resulting in a payout of 80% of target because actual results fell short of target performance levels

 

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•

Long-Term Incentives

 

g

80% of our NEOs’ award value is tied to Company performance, including a performance measure based on the achievement of cash flow (as defined below) per share and another based on relative total shareholder return compared to companies included in the S&P 500 Materials Index

 

g

While each measure’s performance will be assessed during the three-year period ending on December 31, 2020, if the measurement period had run from January 1, 2018 and ended on September 30, 2018 the component based on cash flow per share would have paid out at 85% of target and the component based on relative total shareholder return would have paid out at 0%.

Restoration Award to Mr. Voorhees

As disclosed in our 2017 proxy statement and our Form 8-K filed with the SEC on September 28, 2017, and as discussed in greater detail on page 36 under the heading “Restoration Award to Mr. Voorhees”, in February 2018, the Compensation Committee approved an award to Mr. Voorhees in order to restore the value to him of returned shares, forfeited shares and cash that he received in respect of fiscal 2014 and 2015 in excess of applicable stock plan limits. Although SEC rules require us to report the value of this award in the summary compensation table of this proxy statement, the award was granted only to ensure Mr. Voorhees received the full amount of the compensation he was granted for his services in fiscal 2014 and 2015. We have therefore included an additional column in our summary compensation table showing Mr. Voorhees’ total 2018 compensation, excluding the value of the restoration award, to show the compensation that was actually granted to Mr. Voorhees for his services in fiscal 2018.

Resolution

We believe that our executive compensation program has been instrumental in helping us to achieve our strong historical financial performance, and that the emphasis of the program on pay-for-performance has benefited the Company and our stockholders. The advisory vote on this resolution is not intended to address any specific element of compensation; rather, it relates to the overall compensation of our NEOs, as well as the compensation philosophy, policies and practices described in this Proxy Statement. Our stockholders have the opportunity to vote for or against, or to abstain from voting on, the following resolution:

RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of our named executive officers determined by the compensation committee, as described in the Compensation Discussion and Analysis section and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.

Because the required vote is advisory, it will not be binding on the Board. The Compensation Committee will, however, take into account the outcome of the vote when considering future executive compensation decisions.

 

24

COMPENSATION DISCUSSION AND ANALYSIS

 

This section explains our compensation philosophy, summarizes our executive compensation programs and discusses compensation decisions for our NEOs.   EXECUTIVE SUMMARY   We view our executive compensation program as a strategic tool that supports the successful execution of our business strategy.   The Compensation Committee has primary oversight over the design and execution of our executive compensation program. Our executive compensation program is based on a pay-for-performance model – it uses short-term incentives (“STI”) and long-term incentives (“LTI”) to drive performance and align the interests of our executives with those of our stockholders.   Our executive compensation program for fiscal 2018 reflects our commitment to pay-for-performance. For example, in connection with STI we achieved:				NEOs   Steven C. Voorhees   President and CEO   Ward H. Dickson   Executive Vice President and CFO   James B. Porter III   President, Business Development and Latin America   Robert A. Feeser   President, Consumer Packaging   Jeffrey W. Chalovich   President, Corrugated Packaging   Marc P. Shore   President, Multi Packaging Solutions (“MPS”)
•		102% of the consolidated EBITDA component because actual results exceeded target performance levels, resulting in a payout of 114% of target
•		89% of the productivity component because actual results fell short of of target performance levels, resulting in a payout of 64% of target
•		108% of the Integrated NA Corrugated EBITDA component, resulting in a payout of 152% of target and reflecting the superior results delivered by this business
•		Achieved 94% of the Integrated Consumer EBITDA component, resulting in a payout of 80% of target.
We continue to allocate a significant portion of our NEOs’ target total compensation to at-risk pay, which aligns with our compensation philosophy of motivating executive officers to achieve overall performance objectives in the short-term and grow our business to create long-term value for our stockholders.

COMPENSATION GOVERNANCE AND PRACTICES

 

Pay-for-Performance   •   100% of STI goals tied to Company/segment/unit performance; 80% of LTI award value tied to Company performance   •   89% of CEO’s total 2018 target compensation was at risk; an average of 76% for other NEOs   •   No repricing of stock options

Risk Mitigation   •   Annual review of compensation plans, policies and practices includes risk assessment   •   Anti-hedging/pledging policy   •   Clawback provisions   •   Stock ownership guidelines and stock retention policy

Program Features   •   Independent oversight   •   Competitive benchmarking   •   Limited perquisites   •   No dividend or dividend equivalents paid on unearned equity awards

SAY ON PAY RESULTS

 

Prior Year Say on Pay Support 98%		At last year’s annual meeting of stockholders, more than 98% of the votes cast were in favor of the advisory vote to approve executive compensation. The Compensation Committee took these results into account by continuing to emphasize our pay-for-performance philosophy and utilizing challenging performance measures that provide incentives to deliver value to our stockholders.

 

25

COMPENSATION HIGHLIGHTS

We made several enhancements to the annual performance bonus component of our 2018 executive compensation program to further align the program with our business strategies and the long-term interests of our stockholders.

 

What We Did				Why We Did It
•   Increased the weighting of the consolidated EBITDA and segment and unit-level EBITDA goals (1)   •   Eliminated use of the annual customer engagement survey   •   Improved the application of the safety modifier determination process				•   To maximize the focus on EBITDA over the long-term in order to drive stockholder value   •   To allow us to increase the weighting of the consolidated EBITDA, segment and unit-level EBITDA goals (1)   •   To allow the Compensation Committee to assess our safety performance holistically and apply negative discretion as appropriate to ensure that our commitment to safety is reflected in our annual performance bonuses

 

(1)

Except for Mr. Shore, whose unit-level EBITDA goal decreased in order to accommodate the addition of a productivity goal.

We view our executive compensation program as a strategic tool that supports the successful execution of our business strategy. For fiscal 2018, our business strategy continued to focus on generating EBITDA and free cash flow, and realizing synergy and productivity improvements. Our STI program placed substantial weight on achieving consolidated EBITDA, segment EBITDA, unit EBITDA and productivity goals – for example, 100% of the goals for our CEO and CFO were based on the achievement of consolidated EBITDA and productivity goals. Similarly, our LTI program placed substantial weight on generating cash flow – 50% of LTI award value was based on a cash flow per share measure. See “– Compensation Elements – Annual Performance Bonus (STI) – Performance Goals” and “– Compensation Elements – Long-Term Incentives (LTI) – Performance-Based Restricted Stock” for more information.

For fiscal 2018, the target levels for the consolidated EBITDA and synergies and performance improvements components of our STI program were $2,895 million and $268 million, respectively. In fiscal 2018, we generated consolidated EBITDA of $2,956 million and realized $239 million of year-over-year productivity improvements. We achieved 102% of target for the awards tied to consolidated EBITDA because our actual results exceeded target performance levels, and we achieved 89% of target for the awards tied to productivity because our actual results fell short of target performance levels. For the awards tied to Integrated NA Corrugated EBITDA, we achieved 108% of target, reflecting the superior results delivered by this business in 2018. For the awards tied to Integrated Consumer EBITDA, we achieved 94% of target.

EXECUTIVE COMPENSATION PROGRAM OVERVIEW

Philosophy and Objectives

Our executive compensation philosophy is based on the belief that the compensation of our employees, including our NEOs, should be set at levels that allow us to attract and retain employees who are committed to achieving high performance and who demonstrate the ability to do so. We seek to provide an executive compensation package that is driven by our overall financial performance, increased stockholder value, the success of areas of our business directly impacted by the executive’s performance and the executive’s leadership. Core principles of our executive compensation program include:

 

•

Overall compensation must be competitive relative to other comparable organizations in order to attract and retain superior executives.

 

•

A substantial portion of target total direct compensation should be linked to variable, at-risk pay.

 

•

LTI should be used in addition to STI to encourage a focus on long-term strategy and execution.

 

•

Compensation should reflect an employee’s level of responsibility and contribution, and the greater the responsibility, the greater the share of an employee’s compensation that should be at-risk with respect to performance.

 

•

Equity compensation should be used in addition to cash compensation to align our executives’ and stockholders’ interests.

 

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Pay-for-Performance

Our executive compensation program is based on a pay-for-performance model. In fiscal 2018, 100% of our NEOs’ STI goals and 80% of our NEOs’ LTI award value were tied to Company, segment or unit performance.

The Compensation Committee structures our NEOs’ compensation such that a significant portion is at risk. This allocation of variable target direct compensation aligns with our compensation philosophy of motivating our executive officers to achieve our business objectives in the short term and to grow our business to create long-term value for our stockholders. In fiscal 2018, approximately 89% of targeted total direct compensation for our CEO was at risk, and only 11% of his compensation was fixed, ensuring a strong link between his targeted total direct compensation and our financial and operating results. An average of approximately 76% of targeted total direct compensation for the other NEOs was at risk in fiscal 2018.

 

CEO Pay Mix (1)				Other NEO Pay Mix
89% Pay at Risk				76% Pay at Risk

 

(1)

Excludes a restoration award to Mr. Voorhees. See “– Compensation Elements – Long-Term Incentives (LTI) – Restoration Award to Mr. Voorhees” for additional information.

Effectiveness

Our aggregate total stockholder returns for the past ten, five and three years were 258%, 33% and 26%, respectively. We believe our executive compensation program has been instrumental in helping us to achieve the strong historical financial performance that has driven these returns.

TOTAL STOCKHOLDER RETURN*

 

*Cumulative stock price appreciation, plus dividends, with dividends reinvested; adjusted to reflect the separation of our specialty chemicals business (Ingevity) in 2016 and a stock split in 2014. Does not reflect the value associated with the increase in the trading price of Ingevity common stock, which closed at $23.50 on May 2, 2016 and $101.88 on September 28, 2018, the last trading date of our 2018 fiscal year.

 

27

ADMINISTRATION

 

Benchmarking   The Compensation Committee reviews competitive market data from a combination of a specific peer group of companies within the paper and packaging industry, as well as other industries, and various published survey data for similarly sized companies or business units in the “non-durable goods manufacturing” sector. In some cases, these surveys include “all manufacturing” or “general industry” data, when non-durable goods manufacturing categories are not available.   For fiscal 2018, the Compensation Committee selected a peer group based on the recommendation of its compensation consultant, which considered factors such as size as measured by revenue, nature of business, talent market, organizational complexity and location. Compared to the fiscal 2017 peer group, the fiscal 2018 peer group included PPG Industries Inc., Avery Dennison Corp. and LyondellBasell Industries NV – which were added to expand the peer group sample size and bring its median revenue into better alignment with our revenue – and excluded Sealed Air Corporation and Alcoa, Inc. – which were removed due to a lack of alignment from a revenue perspective and a lack of fit following a spin-off transaction completed by Alcoa, respectively.   The Compensation Committee uses the competitive market data regarding base salary, STI and LTI to evaluate overall compensation levels in light of practices at companies that we compete with for talent, and seeks to ensure that compensation levels do not deviate significantly from the market median, but does not target a specific level of compensation.   The following summarizes the Compensation Committee’s approach to the various components of executive compensation for our NEOs relative to the competitive market data for executive talent discussed above:		Fiscal 2018 Peer Group   3M Company   Avery Dennison Corp.   Ball Corporation   Crown Holdings, Inc.   The Goodyear Tire & Rubber Company   International Paper Company   Kimberly-Clark Corporation   LyondellBasell Industries NV   Nucor Corporation   Owens-Illinois Inc.   Packaging Corporation of America   PPG Industries Inc.   United States Steel Corporation   Weyerhaeuser Company

 

•

Base salary — Salaries are determined based on the executive’s responsibilities, performance, experience and the Compensation Committee’s judgment regarding competitive requirements and internal equity. Salaries are individually determined and range broadly among our senior executives.

 

•

STI — STI opportunities are determined based on the executive’s individual responsibilities and experience, and are individually set for each executive after reviewing market data. Bonus opportunities range broadly among our executives.

While the Compensation Committee reviews competitive market data regarding the various components of compensation for each NEO and certain other executives, the primary data point used to assess executive compensation is target total direct compensation. Target total direct compensation is comprised of target total cash compensation (base salary and target STI opportunity), plus target LTI award value. The Compensation Committee has a bias to deliver more performance-based pay, particularly LTI, to deliver competitive pay.

Role of the Compensation Consultant

The Compensation Committee has sole discretion to retain and obtain the advice of a compensation consultant, and is directly responsible for the appointment, termination, compensation and oversight of the work of the compensation consultant. The Compensation Committee retains a compensation consultant to provide objective analysis, advice and information (including competitive market data and compensation recommendations) to the Compensation Committee. The compensation consultant reports to the Chair of the Compensation Committee and has direct access to other Compensation Committee members. The compensation consultant attends all significant meetings of the Compensation Committee and meets with the Compensation Committee in person in executive sessions without management present.

For fiscal 2018, the Compensation Committee retained Korn Ferry Hay Group (“Korn Ferry”) to serve as its compensation consultant through August 2018, at which time the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”). The Committee engaged Meridian after completing a request for proposal involving multiple firms. In connection with engaging both Korn Ferry and Meridian, the Compensation Committee requested and received letters from each firm addressing its independence in light of the standards embodied in SEC rules and NYSE listing standards. The Compensation Committee took into account these considerations, along with other factors relevant to the firms’ independence from management, and concluded that each firm was independent and the engagement of each firm would not raise any conflict of interest.

 

28

Role of Management

The Compensation Committee considers input from our CEO in making determinations regarding our overall executive compensation program and the individual compensation of our senior executives, other than our CEO. As part of the annual planning process, our CEO develops targets for our annual bonus program and presents them to the Compensation Committee for consideration. Based on performance appraisals and information regarding competitive market practices provided by the independent compensation consultant, our CEO recommends base salary adjustments, STI opportunities and LTI levels for our senior executives, other than our CEO. In addition, each year, our CEO presents to the Compensation Committee and the directors his evaluation of each senior executive’s contributions and performance over the past year, strengths and development needs and actions. He also reviews succession plans for each senior executive.

Setting Compensation Levels

After taking into account advice and recommendations from our CEO and the independent compensation consultant, the Compensation Committee determines what changes, if any, should be made to the executive compensation program and sets the level of compensation for each senior executive with respect to each element of the compensation program. In setting these levels, the Compensation Committee reviews a detailed analysis of each senior executive’s annual total direct compensation and the value of benefits under our retirement plans, including with respect to competitive market data, and reviews compensation tally sheets for our most senior executives that set forth each element of the executives’ compensation and benefits.

COMPENSATION ELEMENTS

We provide a combination of pay elements and benefits to accomplish our executive compensation objectives. STI focus on the performance goals we believe drive stockholder value and for which our executives are responsible. LTI are equity based and include a combination of performance-based restricted stock and time-based restricted stock. We believe LTI are critical in aligning our executives’ and stockholders’ interests, and creating an effective retention measure. Together, we believe that these incentives focus our executives on making decisions that will benefit our stockholders and the price of our Common Stock over the long term.

Our executive compensation program generally includes the following primary components: base salary, STI, LTI and retirement benefits.

 

		Factors		Base Salary		Annual Performance Bonus (STI)		Performance-Based Restricted Stock (LTI)		Time-Based Restricted  Stock (LTI)
		Form of Compensation		Cash				Equity
				Fixed		Performance-Based		Performance-Based		Time-Based
		Performance Timing		Short-Term Emphasis				Long-Term Emphasis
		Measurement Period		Annual and Ongoing		1 year		Vests at end of 3-year period		Vests at end of 3-year period
		Key Performance Metrics Applicable		—		EBITDA and Productivity		Cash Flow Per Share; Relative Total Shareholder Return; Stock Price		Stock Price
		Determination of Performance- Based Payouts		—		Formulaic with Negative Discretion (Safety)		Formulaic with Negative Discretion		—

 

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Base Salary

Base salary is designed to provide competitive levels of compensation to executives based on their responsibilities, performance and experience. No specific formula is applied to determine the weight of each of these factors. We pay base salaries because they provide a basic level of compensation and are necessary to recruit and retain executives. At lower executive levels, base salaries represent a larger portion of total compensation in accordance with our pay philosophy. At more senior executive levels, a greater portion of overall compensation is progressively replaced with variable compensation opportunities. The Compensation Committee has historically followed a policy of primarily using performance bonus awards, rather than base salary increases, to reward outstanding performance. Base salary levels are also important because we generally tie the amount of STI and LTI opportunities and a substantial portion of our retirement benefits to a percentage of each executive’s base salary.

Annual Performance Bonus (STI)

Our annual executive bonus program is designed to motivate senior executives and reward the achievement of specific performance goals that support our business strategy. Annual bonus goals are established for each of the executives who participates in the program, including each NEO. Consistent with our philosophy of paying for performance, our NEOs’ performance-based compensation rises and falls with our overall achievement of the performance goals. The size of the target annual executive bonus program opportunities is designed to provide competitive levels of compensation to executives based upon their experience, duties and scope of responsibilities. Target awards are based on a percentage of the executive’s base salary.

The amount actually paid to an executive under the annual executive bonus program is a function of the following variables:

 

•

The executive’s target bonus opportunity

 

•

The goals established by the Compensation Committee for the executive

 

•

For each goal, the attainment of minimum achievement levels (threshold), capped by maximum achievement levels, and the Compensation Committee’s determination of the extent to which the executive’s goals were met.

Awards earned under the annual executive bonus program are contingent upon continued employment through the end of the fiscal year (which is our performance period) and are subject to the discretion of the Compensation Committee (based on safety performance) to reduce the payout.

 

30

Performance Goals

For fiscal 2018, the primary performance goals for each of our NEOs were EBITDA results and productivity results.

 

EBITDA Results The Compensation Committee again assigned the greatest weighting to the consolidated EBITDA goal and, for fiscal 2018, increased the weighting of this goal for all NEOs because it believes maximizing consolidated EBITDA will drive stockholder value over the long term.   For STI purposes in calculating our consolidated EBITDA performance and the EBITDA performance of our Brazil business, our Integrated Consumer segment, our Integrated NA Corrugated Packaging business and MPS, EBITDA is generally calculated as operating income adjusted to exclude the impact of depreciation and amortization; costs of discontinued operations or closed plants; certain severance costs; last in, first out inventory valuation expense; acquisition inventory step-up; expenses from certain litigation; extraordinary items; asset impairment charges; pension expense resulting from proactive management of our pension liability; expenses or income from conforming accounting policies or income statement impact from M&A; new accounting; pronouncements, cumulative effect of accounting changes and prior period accounting errors.   To reflect our acquisition of Plymouth Packaging in January 2018, we adjusted certain STI target goals upwards, so that executives would not be unfairly advantaged by the acquisition – e.g., Consolidated EBITDA increased from $2,884,800,000 to $2,895,400,000 and target Integrated NA Corrugated EBITDA increased from $1,645,900,000 to $1,656,500,000.
EBITDA Measure		Target (in 000s of $)		Actual (in 000s of $)
Consolidated		2,895,400		2,955,800
Brazil (1)		363,700		424,000
Integrated Consumer		1,075,300		1,009,200
Integrated NA Corrugated		1,656,500		1,784,700
Multi Packaging Solutions		293,300		259,100

 

(1)

Performance benchmark is presented in local currency (Brazilian Real).

 

Productivity Results For fiscal 2018, the Compensation Committee maintained the weighting of the productivity goal for all NEOs because it believes realizing productivity improvements will help us achieve our synergy and performance improvement goals. We believe that our executive compensation program’s focus on productivity since the Combination has played a positive role in achieving our $1 billion synergy and performance improvement goal.   For STI purposes, the productivity goals are measured based on realized improvements. For fiscal 2018, the target opportunity for year-over-year productivity improvements was $268 million and we realized $239 million of improvements, resulting in awards that were lower than the target opportunity for this component of our NEOs’ bonuses.

 

Safety Modifier We place a high value and emphasis on safety. For fiscal 2018, management evaluated safety results based on the following factors: OSHA recordable incident rate; lost work days; life changing events; year-over-year improvements; and proactive safety activities. If safety results failed to meet certain predetermined performance objectives (e.g., a 5% improvement in the OSHA recordable incident rate and the lost work days measure), then the Compensation Committee had discretion to reduce STI payouts by up to 10%.   We made solid improvements in our safety performance in the majority of our businesses in fiscal 2018; however, the safety performance of certain businesses worsened and, as a result, the Compensation Committee reduced STI payouts at the Company level by 1%. Each of our NEOs was impacted by this reduction.

The fiscal 2018 bonus goals for Messrs. Voorhees and Dickson were based exclusively on consolidated Company measures because their positions had a substantial impact on the achievement of those measures. The fiscal 2018 bonus goals for Messrs. Porter, Feeser, Chalovich and Shore were based on a combination of consolidated Company measures (i.e. EBITDA and productivity) and measures focused on the results of the businesses they oversaw (Brazil EBITDA for Mr. Porter, Integrated Consumer Packaging Segment EBITDA for Mr. Feeser, Integrated North American Corrugated Packaging EBITDA for Mr. Chalovich and MPS EBITDA for Mr. Shore). Each NEO’s target bonus amount was set at a percentage of his base salary, with payouts of 50% and 200% of that amount for threshold and maximum performance, respectively. Performance below threshold for a particular measure would result in no payout for that measure.

 

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For fiscal 2018, Mr. Voorhees was eligible to earn a maximum cash bonus of 300% of his fiscal year base salary to the extent we achieved our safety goals and each of the following goals at or in excess of the maximum performance benchmarks.

 

						Performance Benchmarks (in 000s of $ for EBITDA/Productivity)
Goal		Weight (%)				Threshold				Target				Maximum
EBITDA – Consolidated Company			75				2,461,100				2,895,400				3,329,700
Productivity (Realized) – Consolidated Company			25				227,800				268,000				339,600

For fiscal 2018, Mr. Dickson was eligible to earn a maximum cash bonus of 200% of his fiscal year base salary to the extent we achieved our safety goals and each of the following goals at or in excess of the maximum performance benchmarks.

 

						Performance Benchmarks (in 000s of $ for EBITDA/Productivity)
Goal		Weight (%)				Threshold				Target				Maximum
EBITDA – Consolidated Company			75				2,461,100				2,895,400				3,329,700
Productivity (Realized) – Consolidated Company			25				227,800				268,000				339,600

For fiscal 2018, Mr. Porter was eligible to earn a maximum cash bonus of 200% of his fiscal year base salary to the extent we achieved our safety goals and each of the following goals at or in excess of the maximum performance benchmarks.

 

						Performance Benchmarks (in 000s of $ for EBITDA/Productivity)
Goal		Weight (%)				Threshold				Target				Maximum
EBITDA – Consolidated Company			50				2,461,100				2,895,400				3,329,700
EBITDA – Brazil (1)			25				309,200				363,700				418,300
Productivity (Realized) – Consolidated Company			25				227,800				268,000				339,600

(1) Performance benchmarks are presented in local currency (Brazilian Real).

For fiscal 2018, Mr. Feeser was eligible to earn a maximum cash bonus of 200% of his fiscal year base salary to the extent we achieved our safety goals and each of the following goals at or in excess of the maximum performance benchmarks.

 

						Performance Benchmarks (in 000s of $ for EBITDA/Productivity)
Goal		Weight (%)				Threshold				Target				Maximum
EBITDA – Consolidated Company			40				2,461,100				2,895,400				3,329,700
EBITDA – Integrated Consumer Segment			35				914,000				1,075,300				1,236,600
Productivity (Realized) – Consolidated Company			25				227,800				268,000				339,600

 

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