2021 Proxy Statement Foot Locker, Inc.

During 2020, we met individually with shareholders representing approximately 20% of our total shares outstanding, as well as proxy advisory firms, and our engagement program addressed our Board of Directors (the “Board”) refreshment and composition, Board evaluation process, boardroom and company culture, executive compensation programs, and Corporate Social Responsibility (“CSR”) program. We have been responsive to shareholder feedback. In recent years, we have taken a number of actions to strengthen our governance and global CSR program and enhance the disclosure of our practices. We value an open dialogue with our shareholders, and we believe that regular communication is a critical part of our long-term success. We are proud of our long-standing and robust shareholder engagement program. We engage proactively with our shareholders, maintaining a two-way, yearround governance calendar as shown below: Summer Board reviews the voting results of the Company’s annual shareholders’ meeting. Board reviews governance trends and key topics from the proxy season and peer company practices. Fall We contact shareholders and proxy advisors to engage in conversations and listen to their concerns and other feedback on our governance and compensation practices. Our Lead Independent Director shares engagement feedback with the Board. Winter The Board uses the feedback from our engagement meetings in its review of governance and compensation practices for the coming year. We begin drafting the Proxy Statement and consider disclosure improvements based on engagement feedback. Spring We file our Proxy Statement and contact shareholders to answer any questions on the items being voted on at the annual meeting. We hold our annual meeting. Annual Meeting For additional information, see Shareholder Engagement on page 27

Table of Contents

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Notice of 2021 Annual Meeting of Shareholders

330 WEST 34TH STREET 

NEW YORK, NEW YORK 10001

 

	Date and Time May 19, 2021 at 9:00 a.m., Eastern Daylight Time (“EDT”)
	Virtual Meeting Site virtualshareholdermeeting.com/FL2021
	Record Date Shareholders of record as of March 22, 2021 can vote at the 2021 Annual Meeting

  

During this extraordinary time, we must all do our part to stop the spread of COVID-19. While we intended to hold our 2021 Annual Meeting in person, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials have issued in light of the COVID-19 pandemic. As a result, we are holding our 2021 Annual Meeting virtually, to the extent permitted by applicable law. Please retain the 16-digit control number included on your Notice of Internet Availability of Proxy Materials (“Notice”), proxy card, and voting instruction form that accompanied your proxy materials, as you will need this number to attend the virtual meeting if you wish to participate. All shareholders will be afforded the same rights they would have had at a physical meeting, and our current intention is to revert to a physical meeting in 2022.

In the event a virtual-only meeting is not permitted under New York law, we will notify shareholders in advance of the physical location of the meeting by issuing a press release, which will be available on our corporate website at footlocker.com/corp and proxyvote.com, and filing it as additional proxy material with the U.S. Securities and Exchange Commission (“SEC”).

 

 

All shares that have been properly voted and not revoked will be voted at the 2021 Annual Meeting. If you sign and return a proxy card but do not give voting instructions, the shares represented by that proxy card will be voted as recommended by the Board. Your vote is very important to us. Please exercise your right to vote.

Items of Business

 

Proposal		Board’s Voting Recommendation	Vote Required to Approve
Item 1	Elect ten members to the Board to serve for one-year terms	✓ FOR each nominee	Majority of Votes Cast by Shareholders
Item 2	Approve, on an advisory basis, our named executive officers’ (“NEOs”) compensation	✓ FOR	Majority of Votes Cast by Shareholders
Item 3	Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2021 fiscal year	✓ FOR	Majority of Votes Cast by Shareholders
Transact such other business as may properly come before the 2021 Annual Meeting and at any adjournment or postponement of the meeting

  

Proxy Voting

 

You may vote using any of the following methods:
Telephone	If you are located within the United States or Canada, you may vote your shares by calling 800-690-6903 and following the recorded instructions. Telephone voting is available 24 hours per day and will be accessible until 11:59 p.m. EDT on May 18, 2021. The telephone voting system has easy to follow instructions and allows you to confirm that the system has properly recorded your vote. If you vote by telephone, you do NOT need to return a proxy card or voting instruction form.
Scanning	You may scan the QR Code provided to you to vote your shares through the internet with your mobile device. Internet voting is available 24 hours per day and will be accessible until 11:59 p.m. EDT on May 18, 2021. You will be able to confirm that the system has properly recorded your vote. If you scan your QR code to vote, you do NOT need to return a proxy card or voting instruction form.
At the Meeting	You may vote at the 2021 Annual Meeting using the 16-digit control number included on your Notice, proxy card, and voting instruction form that accompanied your proxy materials.
Internet	You may vote your shares through the internet at proxyvote.com. Internet voting is available 24 hours per day and will be accessible until 11:59 p.m. EDT on May 18, 2021. You will be able to confirm that the system has properly recorded your vote. If you vote via the internet, you do NOT need to return a proxy card or voting instruction form.
Mail	If you received printed copies of the proxy materials by mail, you may vote by mail. Simply mark your proxy card or voting instruction form, date and sign it, and return it in the postage-paid envelope that we included with your materials.
App	You may vote your shares by using the ProxyVote app. Download the app from the App Store or Google Play, scan or enter your control number, and vote. App voting is available 24 hours per day and will be accessible until 11:59 p.m. EDT on May 18, 2021. You will be able to confirm that the system has properly recorded your vote. If you vote using the app, you do NOT need to return a proxy card or voting instruction form.

 

Important Notice Regarding the Availability of Proxy Materials for the 2021 Annual Meeting to be Held on May 19, 2021

 

The Company’s Proxy Statement and 2020 Annual Report on Form 10-K are available at materials.proxyvote.com/344849.

 

April 9, 2021

 

SHEILAGH M. CLARKE 

Senior Vice President, General Counsel and Secretary

2021 Proxy Statement

1

Message from Our Chairman and Chief Executive Officer

2

Foot Locker, Inc.

Message from Our Chairman and Chief Executive Officer

About Foot Locker, Inc. 

Foot Locker, Inc. (NYSE: FL) (“Foot Locker,” the “Company,” “we,” “our,” or “us”) leads the celebration of sneaker and youth culture around the globe through a portfolio of brands, including Foot Locker, Lady Foot Locker, Kids Foot Locker, Footaction, Champs Sports, Eastbay, and Sidestep, including approximately 3,000 retail stores across North America, Europe, the Middle East, Asia, Australia, and New Zealand, as well as websites and mobile apps.

Learn More About Our Company

You can learn more about the Company by visiting our corporate website at footlocker.com/corp. We also encourage you to read our Annual Report on Form 10-K for the fiscal year ended January 30, 2021, available on our corporate website at footlocker.com/corp.

Our Strategic Imperatives

We have established strategic imperatives for sustained performance centered around our customers:

ELEVATE THE CUSTOMER EXPERIENCE DRIVE PRODUCTI V ITY INVEST FOR LONG-TERM GROWTH LEVERAGE THE POWE R O F OUR PEOPLE 

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Foot Locker, Inc.

About Foot Locker, Inc.

Our Fiscal 2020 Performance Highlights

Despite the unprecedented business disruption caused by COVID-19, particularly given the store closures during the first quarter, we drove strong sales volume in 2020 once stores were reopened during the second quarter. Highlights include the following:

Sales of $7.5 billion $2.3 billion of liquidity (including $1.7 billion of cash and cash equivalents, the strongest financial position in our history) $3.08 per share earned net income ($2.81 per share on non-GAAP* basis) 63.5% growth in digital business to over $2 billion, representing 28% of sales Over $1 billion net cash provided by operating activities ($903 million free cash flow on non-GAAP* basis) $159 million invested in our business to drive future growth through our capital program $110 million returned to shareholders between share repurchase program and dividends 

Our Corporate Social Responsibility Program

We are fully committed to building on our progress and strengthening our vision for a more sustainable world. Our global CSR program is focused on the following four pillars:

1 Leveraging the Power of Our People and Communities 2Strengthening the Sustainability of Our Supply Chain 3 Managing and Reducing Our Environmental Impacts 4 Operating Ethically and Transparently. We are passionate about making progress in our programs and a sustainable impact on the world 

To learn more about our global CSR program, see Corporate Social Responsibility beginning on page 29 and our Impact Report on our corporate website at footlocker.com/corp.

2021 Proxy Statement

5

Voting Roadmap

Proposal		Board’s Voting Recommendation
	ELECT TEN MEMBERS TO THE BOARD TO SERVE FOR ONE-YEAR TERMS   The Board believes that the ten director nominees possess the necessary qualifications, experiences, and diversity to provide quality advice and counsel to the Company’s management and effectively oversee the business and the long-term interests of shareholders.	✓ FOR each nominee » Page 7
	APPROVE, ON AN ADVISORY BASIS, OUR NEOs’ COMPENSATION   The Company seeks a non-binding advisory vote to approve the compensation of its NEOs, as described in the Compensation Discussion and Analysis (“CD&A”) beginning on page 41 and the Summary Compensation Table and related tables beginning on page 62.	✓ FOR » Page 40
	RATIFY THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2021 FISCAL YEAR   The Board believes that the retention of KPMG LLP to serve as the Independent Auditors for the 2021 fiscal year is in the best interest of the Company and its shareholders. As a matter of good corporate governance, shareholders are being asked to ratify the Audit Committee’s selection of the Independent Auditors.	✓ FOR » Page 83

On or about April 9, 2021, we started mailing a Notice to our shareholders.

Proxies are being solicited by the Board to be voted at our 2021 Annual Meeting.

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Foot Locker, Inc.

Proposal 1: Election of Directors 

General

There are currently 11 directors on our Board. Maxine Clark will be retiring when her term expires at the conclusion of the 2021 Annual Meeting, and the Board has fixed the number of directors at 10 effective at such time. All current directors other than Ms. Clark are standing for election for a one-year term at this meeting.

We have refreshed our Board over the past five years, as four highly-qualified directors were added to the Board and, as of the 2021 Annual Meeting, four directors will have retired during that time period. We believe that the Board possesses the appropriate mix of diversity in terms of gender, age, ethnicity, skills, business and Board experience, and viewpoints.

Director Nominees

Alan D. Feldman, Richard A. Johnson, Guillermo G. Marmol, Matthew M. McKenna, Darlene Nicosia, Steven Oakland, Ulice Payne, Jr., Kimberly Underhill, Tristan Walker, and Dona D. Young will be considered for election as directors to serve for one-year terms expiring at the 2022 Annual Meeting. Each nominee has been nominated by the Board for election and has consented to serve. If, prior to the 2021 Annual Meeting, any nominee is unable to serve, then the persons designated as proxies for this meeting (Sheilagh M. Clarke and John A. Maurer) will have full discretion to vote for another person to serve as a director in place of that nominee, or the Board may reduce its size.

Director Qualifications

The Nominating and Corporate Governance Committee (the “Governance Committee”) reviewed the director skill-set matrix in light of the Company’s long-term strategic plan and evaluated the directors’ skills, experience, and qualifications under the updated matrix, which is shown on pages 16 through 17.

The Board, acting through the Governance Committee, considers its members, including those directors being nominated for reelection to the Board at the 2021 Annual Meeting, to be highly qualified for service on the Board due to a variety of factors reflected in each director’s education, areas of expertise, and experience serving on the boards of directors of other organizations during the past five years. Generally, the Board seeks individuals with broad-based experience and the background, judgment, independence, and integrity to represent the shareholders in overseeing the Company’s management in their operation of the business. Within this framework, specific items relevant to the Board’s determination for each director are listed in each director’s biographical information beginning on page 10. The ages shown are as of April 9, 2021. There are no family relationships among our directors or executive officers.

The Board recommends a vote FOR the election of each of the ten identified nominees to the Board. 

2021 Proxy Statement

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Proposal 1: Election of Directors

Richard A. Johnson
	Chairman and	Committee:
	Chief Executive Officer
	Age: 63
		Skills and Qualifications:
	Director since: 2014

Dona D. Young
	Lead Independent Director	Committees:
	Age: 67	A G E
	Director since: 2001
		Skills and Qualifications:

Chief Executive Broad-Based Business Digital and Channel Connectivity Public Service Information Security International Retail, Brand Marketing, and Social Media Strategic Investments Strategic Planning and Analysis Supply Chain Technology and Systems Youth Culture / Target Market Accounting or Financial Business Development / Mergers and Acquisitions Environmental, Social, and Governance Risk Management A Audit C Compensati on F Finance G Governance E Executive Committe e Chair

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Foot Locker, Inc.

Proposal 1: Election of Directors

Alan D. Feldman
	Independent Director	Committees:
	Age: 69	C F
	Director since: 2005
		Skills and Qualifications:

Guillermo G. Marmol
	Independent Director	Committees:
	Age: 68	C E
	Director since: 2011
		Skills and Qualifications:

Chief Executive Broad-Based Business Digital and Channel Connectivity Public Service Information Security International Retail, Brand Marketing, and Social Media Strategic Investments Strategic Planning and Analysis Supply Chain Technology and Systems Youth Culture / Target Market Accounting or Financial Business Development / Mergers and Acquisitions Environmental, Social, and Governance Risk Management A Audit C Compensati on F Finance G Governance E Executive Committe e Chair

2021 Proxy Statement

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Proposal 1: Election of Directors

Matthew M. McKenna 

	Independent Director	Committees:
	Age: 70	A E
	Director since: 2006
		Skills and Qualifications:
Professional Experience	Director Qualifications
Open Prairie Rural Opportunities Fund, L.P. (private equity fund)  ●      General Partner, since April 2018  Georgetown University’s McDonough School of Business  ●      Executive in Residence, since February 2017  U.S. Secretary of Agriculture  ●      Senior Advisor, July 2013 to January 2017  Fordham University School of Law  ●      Adjunct Professor	Mr. McKenna has extensive financial, tax, and legal expertise, having served as a partner at an international law firm in New York City, Senior Vice President of Finance of PepsiCo, Inc. from August 2001 to December 2007, and a general partner of a private equity fund, which is useful for his service as Finance Committee Chair and as a member of the Audit Committee. The Board has determined that Mr. McKenna qualifies as an “audit committee financial expert,” as defined by the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, Mr. McKenna has government experience, as he previously served as Senior Advisor to the U.S. Secretary of Agriculture. He also brings the perspective of the non-profit sector from his previous positions as President and Chief Executive Officer of Keep America Beautiful, Inc. from January 2008 to June 2013 and Chairman of Ignatian Volunteer Corps., as well as his current positions as Executive in Residence of Georgetown University and adjunct professor at Fordham University.   Other Directorships   Mr. McKenna serves as a director and member of the Audit Committee of Green Dot Bioplastics LLC (bioscience social enterprise and full-service bioplastics company), and a director of Anacostia Impact Fund.

Darlene Nicosia 

	Independent Director	Committees:
	Age: 53	A C
	Director since: 2020
		Skills and Qualifications:
Professional Experience	Director Qualifications
The Coca-Cola Company (non-alcoholic beverage company)  ●     President, Canada and Northeast U.S., North America Operating Unit, since January 2021  ●     President of the Canada Business Unit, January 2019 to January 2021  ●     Vice President, Commercial Product Supply, May 2016 to January 2019  ●     Vice President and Chief Procurement Officer, March 2015 to May 2016	Ms. Nicosia brings to our Board a broad-based global business background gained through her experience in the consumer products industry. Currently Ms. Nicosia serves as President, Canada and Northeast U.S., North America Operating Unit for The Coca-Cola Company, where she is responsible for building some of the world’s biggest brands in partnership with retailers and suppliers. Ms. Nicosia brings deep knowledge of global supply chain management, having served as Vice President, Global Product Supply, and Chief Procurement Officer at The Coca-Cola Company, and previous supply chain experience at both Kraft Heinz Company, and PepsiCo, Inc. Throughout her career, Ms. Nicosia has led sustainability initiatives, navigating complex regulatory environments and shifting consumer preferences. Her extensive understanding of general management, supply chain, marketing operations, customer and commercial, and business transformation is an asset to our Board.   Other Directorships   Ms. Nicosia is a member of the Advisory Board of the Georgia Institute of Technology, Scheller College of Business, a member of the Canadian Beverage Association, and a member of the Food, Health and Consumer Products of Canada Association.

Chief Executive Broad-Based Business Digital and Channel Connectivity Public Service Information Security International Retail, Brand Marketing, and Social Media Strategic Investments Strategic Planning and Analysis Supply Chain Technology and Systems Youth Culture / Target Market Accounting or Financial Business Development / Mergers and Acquisitions Environmental, Social, and Governance Risk Management A Audit C Compensati on F Finance G Governance E Executive Committe e Chair

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Foot Locker, Inc.

Proposal 1: Election of Directors

Steven Oakland 

	Independent Director	Committees:
	Age: 60	F E
	Director since: 2014
		Skills and Qualifications:
Professional Experience	Director Qualifications
TreeHouse Foods, Inc. (manufacturer of packaged foods and beverages)  ●     Chief Executive Officer and President, since March 2018  The J.M. Smucker Company (manufacturer of packaged foods and beverages)  ●     Vice Chair and President, U.S. Food and Beverage, May 2016 to March 2018  ●     President, Coffee and Foodservice, April 2015 to April 2016	Mr. Oakland brings to our Board a broad-based business background and extensive experience in domestic and international consumer products operations, with particular strength in customer engagement, marketing, brand-building, and strategic planning. Mr. Oakland is actively involved in management resources issues and governance matters as the chief executive officer of a public company, providing him with relevant expertise as a member of the Finance Committee and Governance Committee Chair. Mr. Oakland also has risk management, business development, and mergers and acquisitions experience.   Other Directorships   Mr. Oakland serves on the boards of TreeHouse Foods, Inc., MTD Products, Inc., and Foster Farms.

Ulice Payne, Jr.

	Independent Director	Committees:
	Age: 65	A G
	Director since: 2016
		Skills and Qualifications:
Professional Experience	Director Qualifications
Addison-Clifton, LLC (global trade compliance advisory services provider)  ●      President and Managing Member, since May 2004	Mr. Payne brings to our Board significant managerial, operational, financial, public service, and global experience as a result of the many senior positions he has held, including as President and Managing Member of Addison-Clifton, LLC since May 2004, President and Chief Executive Officer of the Milwaukee Brewers Baseball Club from September 2002 to December 2003, Managing Partner of Foley & Lardner, LLP from 2001 to 2002, Partner of Foley & Lardner, LLP from February 1998 to September 2002, and the Wisconsin Commissioner of Securities from February 1985 to December 1987. As Foot Locker is a global company, the Board also benefits from his broad experience in, and knowledge of, international business and global trade compliance. In addition, Mr. Payne’s past and present experience on the boards of several public corporations includes service as a member of either the Audit or Finance committee at each of these companies, which is beneficial to the Board.   Other Directorships   Mr. Payne serves as a director and member of the Audit Committee and Nominating and Governance Committee of ManpowerGroup, Inc., a director and member of the Finance Committee and Compensation Committee Chair of WEC Energy Group, Inc., and he also sits on the board of the Wisconsin Conservatory of Music. He previously served as a director of The Northwestern Mutual Life Insurance Company from January 2005 to May 2018.

Chief Executive Broad-Based Business Digital and Channel Connectivity Public Service Information Security International Retail, Brand Marketing, and Social Media Strategic Investments Strategic Planning and Analysis Supply Chain Technology and Systems Youth Culture / Target Market Accounting or Financial Business Development / Mergers and Acquisitions Environmental, Social, and Governance Risk Management A Audit C Compensati on F Finance G Governance E Executive Committe e Chair

2021 Proxy Statement

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Proposal 1: Election of Directors

Kimberly Underhill 

	Independent Director	Committees:
	Age: 56	G E
	Director since: 2016
		Skills and Qualifications:
Professional Experience	Director Qualifications
Kimberly-Clark Corporation (manufacturer of branded personal care, consumer tissue, and professional healthcare products)  ●     President, North America Consumer, since May 2018  ●     Global President of Kimberly-Clark Professional, April 2014 to May 2018	Ms. Underhill brings to our Board a broad-based business background and extensive experience in domestic and international consumer products operations, with particular strength in marketing, brand-building, strategic planning, and international business development. Additionally, Ms. Underhill is actively involved in management resources issues as a senior executive of a public company, which provides relevant expertise to both our Compensation Committee, of which she is Chair, and Governance Committee, of which she is a member. Through her senior executive position at Kimberly-Clark, Ms. Underhill also has significant international and business development experience.   Other Directorships   Ms. Underhill is a director of Kimberly-Clark de Mexico, S.A.B. de C.V., a director and Compensation Committee Chair of the Network of Executive Women (women’s leadership organization serving retail and consumer goods industries), a director and member of the Compensation Committee of ThedaCare Board of Trustees, and a director of the Food Marketing Institute.

Tristan Walker 

	Independent Director	Committees:
	Age: 36	F G
	Director since: 2020
		Skills and Qualifications:
Professional Experience	Director Qualifications
Walker & Company Brands Inc. (manufacturer of health and beauty products for people of color), a subsidiary of the Procter & Gamble Company  ●      Founder and Chief Executive Officer, since April 2013	Mr. Walker is the Founder and Chief Executive Officer of Walker & Company Brands. Prior to his founding Walker & Company Brands, Mr. Walker was an Entrepreneur in Residence at Andreessen Horowitz (venture capital firm) from June 2012 to April 2013 and oversaw strategic partnerships and monetization as Director of Business Development at Foursquare from August 2009 to June 2012. Mr. Walker’s brand marketing and technology experience are deeply connected to the mission of designing solutions for consumers while bridging the gap between technology product innovation and youth culture. Mr. Walker understands how to utilize innovation and technology to drive change and deliver growth. His work at the intersection of technology and the consumer experience makes a great addition to our Board.   Other Directorships   Mr. Walker serves as a director of Shake Shack, Inc. and a trustee of Children’s Healthcare of Atlanta. He co-founded and served as Chairman of the Board of CODE2040 until January 2020, which matches high-performing Black and Latino software engineering students and graduates with technology firms and start-ups.

Chief Executive Broad-Based Business Digital and Channel Connectivity Public Service Information Security International Retail, Brand Marketing, and Social Media Strategic Investments Strategic Planning and Analysis Supply Chain Technology and Systems Youth Culture / Target Market Accounting or Financial Business Development / Mergers and Acquisitions Environmental, Social, and Governance Risk Management A Audit C Compensati on F Finance G Governance E Executive Committe e Chair

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Foot Locker, Inc.

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2021 Proxy Statement

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Corporate Governance

Our Board of Directors

Our By-Laws provide for a Board consisting of between 7 and 13 directors. The exact number of directors is determined from time to time by the entire Board. There are currently 11 directors on our Board. Maxine Clark will be retiring when her term expires at the conclusion of the 2021 Annual Meeting, and the Board has fixed the number of directors at 10 effective at such time.

Directors’ Independence

A director is not considered independent under New York Stock Exchange (“NYSE”) rules if they have a material relationship with the Company that would impair their independence. In addition to the independence criteria established by the NYSE, the Board has adopted categorical standards to assist it in making its independence determinations regarding individual directors. These categorical standards are contained in the Corporate Governance Guidelines, which are posted on our corporate website at footlocker.com/corp.

The Board has determined that the following categories of relationships are immaterial for purposes of determining whether a director is independent under the NYSE listing standards:

We individually inquire of each of our directors and executive officers about any transactions in which the Company and any of these related persons or their immediate family members are participants. We also make inquiries within the Company’s records for information on any of these kinds of transactions. Once we gather the information, we then review all relationships and transactions of which we are aware in which the Company and any of our directors, executive officers, their immediate family members or five-percent shareholders are participants to determine, based on the facts and circumstances, whether the related persons have a direct or indirect material interest. The General Counsel’s office coordinates the related person transaction review process. The Governance Committee reviews any reported transactions involving directors and their immediate family members in making its recommendation to the Board on the independence of the directors. In approving, ratifying, or rejecting a related person transaction, the Governance Committee considers such information as it deems important to determine whether the transaction is on reasonable and competitive terms and is fair to the Company. The Company’s written policies and procedures for related person transactions are included within both the Corporate Governance Guidelines and the Code of Business Conduct. There were no related person transactions in 2020.

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Foot Locker, Inc.

Corporate Governance

The Board, upon the recommendation of the Governance Committee, has determined that the following directors are independent under NYSE rules because they have no material relationship with the Company that would impair their independence:

Maxine Clark Age72 Director since 2013 Alan D. Feldman Age 69 Director since 2005 Guillermo G. Marmol Age68 Director since 2011 Matthew M. McKenna Age70 Director since 2006 Darlene Nicosia Age53 Director since 2020 Steven Oakland Age60 Director since 2014 Age 65 Director since 2016 Ulice Payne, Jr. Kimberly Underhill Age56 Director since 2016 Tristan Walker Age36 Director since 2020 Age67 Director since 2001 Dona D. Young

In making its independence determination, the Board reviewed recommendations of the Governance Committee and considered Mrs. Young and Mr. Payne’s relationships as directors of companies with which we do business. The Board has determined that these relationships meet the categorical standard for Relationships with Other Business Entities and are immaterial with respect to determining independence.

Board Independence 10 Directors All Directors are independent, except the CEO 

The Board has determined that all members of the Audit Committee, the Compensation Committee, the Finance Committee, and the Governance Committee are independent as defined under the NYSE listing standards and the director independence standards adopted by the Board.

Board Leadership Structure

Our Board evaluates, from time to time as appropriate, whether the same person should serve as Chairman and Chief Executive Officer, or whether the positions should be held by different persons, in light of all relevant facts and circumstances and what it considers to be in the best interests of the Company and our shareholders. Since May 2016, the positions of Chairman and Chief Executive Officer have been held by Mr. Johnson, with Mrs. Young serving as Lead Independent Director. The Board has utilized various leadership structures since 2010, as shown below:

January 2010 Positions combined, with a Lead Independent Director December 2014 Positions separated, with the former Chairman and Chief Executive Ocer serving as Executive Chairman, and a Lead Independent Director May 2015 Positions separated, with an independent director serving as Non-Executive Chairman May 2016 Positions combined, with a Lead Independent Director 

The Board believes that, based on the Company’s current facts and circumstances, its Board leadership structure is appropriate.

2021 Proxy Statement

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Corporate Governance

	Note from Our Lead Independent Director
	Foot Locker, Inc. is resilient. The Company’s success in addressing the extraordinary challenges during 2020—COVID-19 and social unrest—are testaments to this resiliency. Management and the Board were tested in multiple ways during 2020 and their discipline, breadth, diversity, and partnership proved to be important assets.
	On behalf of the Board, I am pleased to share with you some highlights of the governance work we have done to successfully navigate the challenges presented during 2020:
	•	Stewardship through Challenges. The Board believes deeply that it must be fit for its purpose and provide strategic value to the Company. This dynamic has been highlighted during the COVID-19 pandemic and the social unrest during 2020. The Board didn’t skip a beat as its focus quickly pivoted toward protecting the communities we serve, keeping our team members safe, and maintaining financial stability for our shareholders. We also onboarded two new directors during the pandemic, whose skills and experiences proved to be highly relevant and contributory during 2020. This underscores our long-term focus on continuous Board refreshment and ensuring the Board is fit for its purpose given our strategic direction. Also, because the positions of Chairman and Chief Executive Officer are combined, the role of the Lead Independent Director is critical. As Lead Independent Director, I meet regularly with the Chief Executive Officer and members of his leadership team, visit stores and facilities to the extent possible given health and safety protocols in light of COVID-19, and participate in selected Company events. The committee chairs also regularly engage with management regarding the work of their committees.
	•	Shareholder Engagement. As a Board, one of our priorities is listening to, and considering the views of, our shareholders. We accomplish this through a robust outreach and engagement program, which was particularly important during 2020. These meetings provide an important platform to receive feedback from investors. This engagement program promotes transparency between the Board and our shareholders and helps build informed and productive relationships. As Lead Independent Director, I participate in these meetings on behalf of the Board and share the feedback gained from these meetings with the full Board and the Governance Committee, as well as compensation-specific feedback with the Compensation Committee. As a result of the feedback, enhancements have been made to this Proxy Statement to further improve transparency. For additional information, see Shareholder Engagement on page 27.
	•	Corporate Social Responsibility. The Board is actively engaged in the oversight of the Company’s global CSR program and this message is a key topic during each shareholder engagement meeting. The Governance Committee oversees our global CSR program, and the Board receives updates from the Governance Committee Chair throughout the year. The Audit Committee and the Compensation Committee also consider the relevant oversight responsibilities of their respective committees in the context of the CSR program. Our commitment to CSR is fundamental to our business and corporate philosophy and serves as the foundation of our long-term success. The Board lives these values and leads by example. For example, in 2020, my fellow directors participated in fireside chats and other meetings with our team members to share their personal experiences and thoughts on leading with purpose during times of change. These important discussions have created opportunities to listen, learn, and address issues of equity, diversity and inclusion, and breaking down barriers within the workplace and the communities we serve, which were on display in 2020. For additional information regarding our global CSR program and Board oversight, see Corporate Social Responsibility beginning on page 29, and our Impact Report on our corporate website at footlocker.com/corp.
	The Board is impressed with how the Company navigated this extraordinary year to overcome the many obstacles 2020 threw its way. This success was because of the dedication and expertise of its people. I would, therefore, like to say a big “thank you” on behalf of the Board to the Company’s entire team across all functions, all banners and geographies. The Board looks forward to working with management in the year ahead as we continue to work through the disruption and implications presented by this global pandemic to help them meet their targets and achieve the Company’s purpose to inspire and empower youth culture.

	“Foot Locker, Inc.’s success in addressing the extraordinary challenges during 2020—COVID-19 and social unrest—are testaments to the Company’s resiliency.”   DONA D. YOUNG  Lead Independent Director

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Foot Locker, Inc.

Corporate Governance

Director On-Boarding

We have an on-boarding program for new directors that is intended to educate a new director on the Company and the Board’s practices. During the first year of a director’s service, the newly-elected director meets with the Company’s Chief Executive Officer, Chief Financial Officer, Chief Human Resources Officer, General Counsel, and other members of senior management, to review the Company’s business operations, financial matters, strategy, investor relations, risk management, corporate governance, composition of the Board and its committees, succession and development plans, and global CSR program. Additionally, they visit our stores near the Company’s New York headquarters, and elsewhere, with senior management for an introduction to store operations. During this first year, new directors periodically meet with the Lead Independent Director and with the committee chairs for an immersion into the work of the committees. As part of the on-boarding process, we assign a Board mentor to each new director in addition to the Lead Independent Director making herself available to new directors as part of the on-boarding process.

The second phase of the on-boarding program commences approximately 18 months after a director joins the Board and is specifically tailored to the individual director, taking into consideration their experience as a director of other public companies, the committees of our Board on which they serve, and areas of our business and strategy that the director would like to explore more thoroughly with management. For example, during this second phase of the program, directors participate in enhanced discussions in the areas of customer data, retail accounting and operations, and risk management, and meet with key talent. Regular check-ins with the Lead Independent Director continue throughout the on-boarding program.

Director Continuing Education

Director education is an ongoing process, which begins when a director joins our Board. We host quarterly Board and Committee presentations and education sessions to inform and keep directors appropriately apprised of key developments concerning the following topics so that they can effectively carry out their oversight responsibilities:

Retail Board Audit Compensation Finance Governance 

We also encourage all directors to attend other continuing education programs to maintain their expertise and provide feedback to the other directors on these programs. We reimburse directors for reasonable expenses incurred in attending continuing education programs. In 2020, our directors attended a variety of virtual continuing education programs, conferences, and events hosted by universities, trade groups, law firms, accounting firms, and other advisory service firms on a variety of topics, including the following:

Accounting and Finance Audit Brand Marketing Compensation COVID-19 Response and the Future of Work Cybersecurity and Data Digital ESG Governance International Labor and Employment Lead Director Role Mergers and Acquisitions Public Company Reporting Retail Disruption Risk Management Social Media Strategy Supply Chain Technology and Systems 

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Corporate Governance

Mandatory Resignation or Retirement

The Board has established a policy whereby a non-employee director is required to advise the Governance Committee Chair of any change to their principal employment. If requested by the Chair, after consultation with the members of the Committee, the director will submit a letter of resignation to the Committee Chair, and the Committee would then meet to consider whether to accept or reject the resignation.

The Corporate Governance Guidelines also require that directors retire from the Board at the annual meeting of shareholders following the director’s 72nd birthday.

Corporate Governance Guidelines

The Board has responsibility for establishing broad corporate policies, reviewing significant developments affecting the Company, overseeing the business strategy, and monitoring the general performance of the Company.

The Board has adopted Corporate Governance Guidelines. The Board periodically reviews the guidelines and revises them, as appropriate. The Corporate Governance Guidelines are available on the corporate governance section of our corporate website at footlocker.com/corp. You may also obtain a printed copy of the guidelines by writing to the Secretary at the Company’s headquarters.

Board Attendance

The Board held 14 meetings during 2020. All of our directors attended at least 96% of the aggregate of all Board and committee meetings for the committees on which they served in 2020.

The Board holds regularly scheduled executive sessions of independent directors in conjunction with each Board meeting. Mrs. Young, as Lead Independent Director, presides at these executive sessions.

Directors are expected to attend annual meetings of shareholders. The annual meeting is normally scheduled on the same day as a quarterly Board meeting. In 2020, all of the directors attended the annual meeting, which was held virtually given the health and safety concerns surrounding the COVID-19 pandemic.

Retention of Outside Advisors

The Board and all of its committees have authority to retain outside advisors and consultants that they consider necessary or appropriate in carrying out their respective responsibilities. The independent accountants are retained by, and report directly to, the Audit Committee. In addition, the Audit Committee is responsible for overseeing the qualifications, performance, and compensation of the internal auditors, which the Company has partially outsourced. Similarly, the consultant retained by the Compensation Committee to assist in evaluating senior executive compensation reports directly to that committee.

Board Evaluations

Each year, the Board and its committees engage in a robust evaluation process consistent with the Board’s goal of continuous improvement. The Governance Committee oversees the evaluation process and reviews the procedures, which may vary from year to year, in advance of each year’s evaluation. The process is designed to elicit candid feedback regarding the areas in which the Board and its committees could improve their effectiveness and utilizes surveys, individual interviews, and action planning.

In addition, the Board conducts a 360-degree peer evaluation approximately every three years, with the next process launching in 2021. This process is facilitated by an independent third party. Each director completes an evaluation and individual interview with the third party. The Lead Independent Director receives a summary of each director’s evaluation and meets separately with each director to discuss the results of the individual evaluations, and the Governance Committee Chair receives a summary of the Lead Independent Director’s evaluation and meets with the Lead Independent Director to discuss the results of her evaluation.

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Corporate Governance

Stock Ownership Guidelines

The Board has adopted Stock Ownership Guidelines applicable to the Board, the Chief Executive Officer, and other covered executives. The Guidelines are as follows: 

Covered Position		Stock Ownership Guidelines
Non-employee Director		4x	Annual Retainer Fee (both Cash and Equity)
Chief Executive Officer		6x	Annual Base Salary Rate
Executive Vice President		3x	Annual Base Salary Rate
Senior Vice President; Senior Vice President and General Manager		2x	Annual Base Salary Rate
Corporate Vice President; Vice President and General Manager		0.5x	Annual Base Salary Rate

Shares of unvested restricted stock units (“RSUs”), and deferred stock units (“DSUs”) are counted towards ownership for purposes of the Stock Ownership Guidelines. Performance RSUs (“PSUs”) are counted once earned. Stock options and shares held through the Foot Locker 401(k) Plan are disregarded in calculating ownership.

Directors, the Chief Executive Officer, and other covered executives are required to be in compliance within five years of becoming subject to these guidelines. In the event of any increase in the required ownership level, whether as a result of an increase in the annual retainer fee or base salary or an increase in the required ownership multiple, the target date for compliance with the increased ownership guideline is five years after the effective date of such increase.

All directors, the Chief Executive Officer, and other covered executives who were required to be in compliance with the guidelines as of the end of the 2020 fiscal year are in compliance. The Company measures compliance with the guidelines at the end of the prior fiscal year based on the market value of the Company’s stock at that time.

If a director, the Chief Executive Officer, or other covered executive fails to be in compliance with the guidelines as of the end of the prior fiscal year, they must hold the net shares obtained through future stock option exercises and RSU vestings, after payment of applicable taxes, until again regaining compliance with the guidelines. In order to take into consideration fluctuations in the Company’s stock price, any person who has been in compliance with the guidelines as of the end of at least one of the two preceding fiscal years and who has not subsequently sold shares will not be subject to this holding requirement. For non-employee directors, the Governance Committee will consider a director’s failure to comply with the Stock Ownership Guidelines when considering that director for reelection.

	POLITICAL CONTRIBUTIONS
Our Code of Business Conduct prohibits making contributions on behalf of the Company to political parties, political action committees, political candidates, or holders of public office. The Company is a member of several trade associations which, as part of their overall activities, may engage in advocacy activities with regard to issues important to the retail industry or the business community generally.

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Corporate Governance

Our Board’s Oversight of Our Business

Oversight of the Company’s business strategy and strategic planning is a key responsibility of the Board, including work embedded in the Board committees. The Board believes that overseeing and monitoring strategy is a continuous process and takes a multilayered approach in exercising its duties. The Board’s oversight and management’s execution of business strategy are viewed with a long-term mindset and a focus on assessing both opportunities for, and potential risks to, the Company. In addition to financial and operational performance, non-financial measures, including sustainability goals, are discussed regularly by the Board and Board committees.

The Board believes deeply that it must be fit for its purpose and provide strategic value to the Company. This dynamic has been highlighted during the COVID-19 pandemic, and the social unrest during 2020, as the Board’s focus quickly pivoted toward protecting the communities we serve, keeping our team members safe, and maintaining financial stability for our shareholders. See 2020 Year in Focus beginning on page 42 for a discussion of the Board’s efforts during the ongoing COVID-19 pandemic, as well as the social unrest during 2020.

While the Board and its committees oversee strategic planning, management is charged with developing and executing the business strategy. To monitor performance against the Company’s strategic goals, the Board receives regular updates and actively engages in dialogue with management. These boardroom discussions are enhanced with “hands-on” experiences, such as store and facility visits, which provide directors an opportunity to see strategy execution first hand.

Human Capital Management Oversight

The Board believes that the strength of the Company’s workforce is one of the significant contributors to our success as a global brand that leads with purpose. The Board made human capital management a priority though its Compensation Committee, which oversees the Company’s strategies and initiatives on diversity and inclusion, employee well-being, compensation and benefits program, and engagement. For additional information on the Company’s human capital management strategies and initiatives, see our 2020 Annual Report on Form 10-K.

Corporate Social Responsibility Oversight

The Board is actively engaged in the oversight of the Company’s global CSR program. In exercising its authority, the Board recognizes that the long-term interests of our shareholders are best advanced when considering other stakeholders and interested parties, including customers, team members, business partners, and the communities in which we operate. The Governance Committee oversees our global CSR program, and the Board receives updates from the Governance Committee Chair throughout the year. The Audit Committee and the Compensation Committee also consider the relevant oversight responsibilities of their respective committees in the context of the CSR program. 

	Inspired by engagement with shareholders, the Company published its inaugural Impact Report covering two fiscal years (2019-20). The Impact Report provides details on our global CSR program, consistent with SASB and TCFD reporting standards. Our global CSR program is focused on:
1 Leveraging the Power of Our People and Communities 2Strengthening the Sustainability of Our Supply Chain 3 Managing and Reducing Our Environmental Impacts 4 Operating Ethically and Transparently
	For additional information regarding our global CSR program and Board oversight, see Corporate Social Responsibility beginning on page 29, and our Impact Report on our corporate website at footlocker.com/corp.

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Corporate Governance

Global Environmental and Climate Change Statement

The Company has adopted a Global Environmental and Climate Change Statement that sets out certain sustainability and environmental commitments and priorities, including reducing greenhouse gases that may have an adverse effect on Climate Change. The Statement also sets forth certain responsibilities of its suppliers. The Statement is available on the corporate governance section of our corporate website at footlocker.com/corp. You may also obtain a printed copy of the guidelines by writing to the Secretary at the Company’s headquarters.

Global Human Rights Statement

The Company has adopted a Global Human Rights Statement that sets out certain commitments, including maintaining a work environment that respects and supports the provision of basic human rights to all of its team members around the world, regardless of the country in which they work, to the full extent permitted by law. The Statement also sets forth certain responsibilities of its suppliers. The Statement is available on the corporate governance section of our corporate website at footlocker.com/corp. You may also obtain a printed copy of the guidelines by writing to the Secretary at the Company’s headquarters.

Global Occupational Health and Safety Statement

The Company has adopted a Global Occupational Health and Safety Statement that sets out certain commitments, including operating in a safe and responsible manner to protect the health and safety of its team members, partners, and customers. The Statement also sets forth certain responsibilities of its suppliers. The Statement is available on the corporate governance section of our corporate website at footlocker.com/corp. You may also obtain a printed copy of the guidelines by writing to the Secretary at the Company’s headquarters.

Risk Oversight

The Board has oversight responsibilities regarding risks that could affect the Company. Oversight for some of these risks is assigned to the committees—largely the Audit Committee—based on the individual risk.

The Audit Committee has established procedures for reviewing the Company’s risks. These procedures include regular risk monitoring by management to update current risks and identify potential new and emerging risks, quarterly risk reviews by management with the Audit Committee, and an annual risk report to the full Board. In addition, the Audit Committee receives regular briefings from our Chief Information Security Officer, Chief Financial Officer, Chief Accounting Officer, General Counsel, Vice President of Internal Audit, and outside experts on cybersecurity risks and cyber risk oversight. During these meetings, the Audit Committee and management discuss these risks, risk management activities and efforts, best practices, lessons learned from incidents at other companies, the effectiveness of our security measures, and other related matters. The Audit Committee Chair reports on the committee’s meetings, considerations, and actions to the full Board at the next Board meeting following each committee meeting.

The Compensation Committee considers risk in relation to the Company’s compensation policies and practices. The Compensation Committee’s independent compensation consultant provides an annual report to the committee on risk relative to the Company’s compensation programs.

The Company believes that this process for risk oversight is appropriate in light of the Company’s business, size, and active senior management participation, including by the Chief Executive Officer, in managing risk and holding regular discussions on risk with the Audit Committee, the Compensation Committee, and the Board. 

		CYBERSECURITY
We are subject to technology risks including failures, security breaches, and cybersecurity risks that could harm our business, damage our reputation, and increase our costs in an effort to protect against such risks. Our cybersecurity program includes the following elements:
•	Technology: We employ a layered “defense, detect, and respond” strategy.
•	Benchmarking and external engagement: We benchmark our security practices against other organizations and are active in the information security community.
•	Third-party assessments: We engage a range of outside experts to regularly assess our organizational security programs, processes, and capabilities.
•	Internal assessments: We regularly test and improve our information systems through security risk and compliance review, user access campaigns, and other strategies.

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Corporate Governance

	PRIVACY
Our Privacy Policy and Privacy Statement govern our treatment of customer data. Our policies provide explanations of the types of customer personal information we collect, how we use and share that information and the measures we take to protect the security of that information. Our policies provide multiple points of contact through which our customers may initiate inquiries and raise concerns to us regarding our collection, sharing, and use of their personal data. Our privacy policies and practices in the European Union were updated in 2018 in response to the EU Global Data Protection Regulation (GDPR) requirements. Similarly, our privacy statements and practices in the United States were updated in response to the California Consumer Privacy Act (CCPA), which came into force in January 2020.

Code of Business Conduct

The Company has adopted a Code of Business Conduct for directors, officers, and other team members. The Company periodically reviews the Code of Business Conduct and revises it, as appropriate. A copy of the Code of Business Conduct is available on the corporate governance section of our corporate website at footlocker.com/corp. You may obtain a printed copy of the Code of Business Conduct by writing to the Secretary at the Company’s headquarters.

Any waivers of the Code of Business Conduct for directors and executive officers must be approved by the Audit Committee. The Company promptly discloses amendments to the Code of Business Conduct and any waivers of the Code of Business Conduct for directors and executive officers on the corporate governance section of our corporate website at footlocker.com/corp.

Global Sourcing Guidelines

The Company has adopted Global Sourcing Guidelines that set out standards applicable to the production of all products sold in our stores. The Company periodically reviews the guidelines and revises them, as appropriate. The Global Sourcing Guidelines are available on the corporate governance section of our corporate website at footlocker.com/corp. You may also obtain a printed copy of the guidelines by writing to the Secretary at the Company’s headquarters.

Succession Planning

The Board engages in an effective planning process to identify, evaluate, and select potential successors to the Chief Executive Officer and other members of senior management. The Chief Executive Officer reviews senior management succession planning with the Board. Each director has complete and open access to any member of management. Members of management, including those several levels below senior management, are invited regularly to make presentations at Board and committee meetings and meet with directors in informal settings to allow the directors to form a more complete understanding of the executives’ skills and character.

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Corporate Governance

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Corporate Governance

Communications with the Board

Shareholders and other interested parties who wish to communicate directly with the independent directors of the Board should send a letter to the Board, c/o Secretary, Foot Locker, Inc., 330 West 34th Street, New York, New York 10001.

The Secretary will promptly send a copy of the communication to the Lead Independent Director, who may direct the Secretary to send a copy of the communication to the other independent directors and may determine whether a meeting of the independent directors should be called to review the communication.

A copy of the Procedures for Communications with the Board is available on the corporate governance section of our corporate website at footlocker.com/corp. You may obtain a printed copy of the procedures by writing to the Secretary at the Company’s headquarters.

Majority Voting in the Election of Directors

Directors must be elected by a majority of the votes cast in elections for which the number of nominees for election does not exceed the number of directors to be elected. A plurality vote standard applies to contested elections where the number of nominees exceeds the number of directors to be elected. Our Corporate Governance Guidelines provide that any incumbent director who does not receive a majority of the votes cast in an uncontested election is required to tender their resignation for consideration by the Governance Committee. The Governance Committee will make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The director who tenders his or her resignation will not participate in the Committee’s or the Board’s decision. In determining its recommendation to the Board, the Governance Committee will consider all factors that it deems relevant. Following such determination, the Company will promptly publicly disclose the Board’s decision, including, if applicable, the reasons for rejecting the tendered resignation.

Proxy Access

Under our proxy access by-law, a shareholder, or a group of up to 20 shareholders, owning at least 3% of the Company’s outstanding common stock, par value $0.01 per share (“Common Stock”) continuously for at least three years as of the date of the notice of nomination, may nominate and include in the Company’s proxy materials director nominees constituting up to two individuals or 20% of the Board, whichever is greater (subject to certain limitations set forth in the By-Laws), provided that the shareholder(s) and nominee(s) satisfy the requirements specified in the By-Laws.

Rights Plan

In December 2020, the Board adopted a short-term shareholder rights plan intended to protect the interests of all of the Company’s shareholders by reducing the likelihood that any person would gain control of the Company through open market accumulation or other tactics without appropriately compensating the Company’s shareholders for such control. The rights plan provides that the rights will only become exercisable if a person acquires beneficial ownership of 20% or more of the Common Stock. Under the terms of the rights agreement, the rights expire on December 7, 2021.

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Foot Locker, Inc.

Corporate Social Responsibility 

Our commitment to Corporate Social Responsibility—built on a strong foundation of transparency, governance, and ethics—creates value for Foot Locker, Inc. and our stakeholders. Our stakeholders increasingly want to know that the company they are buying from, investing in, working for, or doing business with, is not only delivering strong financial returns, but also acting responsibly. They look to companies like ours to be good corporate citizens that value their team members, give back to the communities they serve in meaningful ways, and actively address the environmental impact of their operations.

The way in which we achieve our purpose is just as important as the outcome itself–which is why, over the past three years, we have been on a purposeful journey to improve the environmental and social impacts of our business, measure the impact we are making, and communicate with our stakeholders.

Our global CSR program is focused on the following four pillars:

1 Leveraging the Power of Our People and Communities 2Strengthening the Sustainability of Our Supply Chain 3 Managing and Reducing Our Environmental Impacts 4 Operating Ethically and Transparently

CSR is not a separate mandate for Foot Locker, Inc.; it is embedded in our ability to achieve our strategic imperatives.

Our global CSR program is part of the fabric of who we are and reflects our core values.

Working collaboratively with our vendor partners, we look to integrate sustainability into our everyday actions.

Helping to fight climate change and reduce our carbon footprint

The Governance Committee oversees our global CSR program and the Board receives updates from the Governance Committee Chair throughout the year.

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Corporate Social Responsibility

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Foot Locker, Inc.

Our Purpose To inspire and empower YOUTH CULTURE Our Mission To fuel a shared passion for self-expression Our Vision To create unrivaled experiences for our consumers Our Position To be at the heart of the sport and sneaker communities 2021 Proxy Statement 31 

Board of Directors 

The Board has delegated certain duties to committees, which assist the Board in carrying out its responsibilities. There are five standing committees of the Board. Each independent director serves on at least two committees.

The Board has adopted charters for each of the Audit Committee, the Compensation Committee, the Finance Committee, and the Governance Committee. Copies of the charters for these committees are available on the corporate governance section of our corporate website at footlocker.com/corp. You may also obtain printed copies of these charters by writing to the Secretary at the Company’s headquarters.

As a general principle, the Board believes that the periodic rotation of committee assignments on a staggered basis is desirable and provides an opportunity to foster diverse perspective and develop breadth of knowledge within the Board. In May 2020, Mr. Oakland rotated off the Compensation Committee to the Finance Committee, Mr. Marmol rotated off the Finance Committee to the Compensation Committee, and Ms. Underhill rotated off the Finance Committee to the Governance Committee.

The key oversight responsibilities of the committees, the current committee memberships, and the number of meetings held during 2020 are as follows:

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Board of Directors

Director Compensation

This discussion relates to the compensation we pay to non-employee directors. We do not pay additional compensation for service on the Board or any committee to any director who is also a Company employee.

Key Principles of Director Compensation Program

The Company compensates its non-employee directors for their service according to the following principles:

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Board of Directors

Components of Director Compensation Program

Our non-employee directors are paid an annual retainer fee and meeting fees for attendance at each Board and committee meeting. The Lead Independent Director and the committee chairs are each paid additional retainer fees for service in these capacities. We do not pay additional compensation to any director who is also a Company team member for service on the Board or any committee.

Below is a summary of the fees paid to the non-employee directors in 2020:

Non-employee directors’ compensation, inclusive of cash and equity, is capped at $600,000 per fiscal year for each non-employee director. We reimburse non-employee directors for reasonable expenses incurred in attending Board and committee meetings, other meetings with management, and continuing education programs, including their transportation, hotel accommodations, and meals. Directors are eligible to receive the same discount on purchases of merchandise from our stores, catalogs, and websites that is available to team members.

Deferral Opportunities

Non-employee directors may elect to receive all or a portion of the cash component of their annual retainer fee, including committee chair retainers, in the form of DSUs or to have these amounts placed in an interest account. Directors may also elect to receive all or part of the stock component of their annual retainer fee in the form of DSUs. A DSU is an accounting equivalent of one share of Common Stock. The interest account is a hypothetical investment account bearing interest at the rate of 120% of the applicable federal long-term rate, compounded annually, and set as of the first day of each plan year. For all compensation periods through and including 2020, three of our current directors, and Ms. Turpin, who retired in May 2020, have previously elected to defer all or a portion of one or more of their annual retainers into DSUs, and none of the current directors have elected to place any amount of their annual retainer fees into an interest account.

Governance

The Governance Committee and Compensation Committee jointly oversee our non-employee director compensation program, and conduct annual reviews and make recommendations for adjustments, as appropriate, to the Board. The Governance Committee reviews trends and governance with regard to non-employee directors’ compensation. Following consultation with the Governance Committee, the Compensation Committee reviews non-employee directors’ compensation and makes recommendations to the Board concerning the form and amount of non-employee directors’ compensation.

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Board of Directors

In connection with the review conducted in fiscal year 2020, the outside consultant on director compensation retained by the Compensation Committee assessed the compensation paid to our non-employee directors against non-employee director compensation trends and data from our company peer group, including overall trends and governance principles, market competitiveness of our program, and the mix of cash and equity provided under our program. No changes were made to the non-employee director compensation program as a result of the review conducted in 2020 because the program was competitive with the Company’s peer group median and non-employee director compensation was not expected to increase in the near term given the impact of the COVID-19 pandemic on business results. Other aspects of the program, including the mix of cash and equity, were found to be aligned with industry norms and best practices.

Fiscal 2020 Director Compensation

The amounts paid to each non-employee director for fiscal 2020, including amounts deferred under the Stock Incentive Plan, and the RSUs granted to each director are reported in the tables below:

Notes to Director Compensation Table

The following table sets forth the grant date fair value of the above stock awards granted to our directors in fiscal year 2020:

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Board of Directors

For additional information on the valuation assumptions, refer to Note 20 to the Company’s financial statements in our 2020 Annual Report on Form 10-K.

As of the end of fiscal year 2020, the number of RSUs and DSUs held by our directors was as follows:

Directors and Officers Indemnification and Insurance

The Company has entered into indemnification agreements with its directors and officers, as approved by shareholders at the 1987 Annual Meeting.

We have purchased directors and officers liability and corporation reimbursement insurance from a group of insurers comprising ACE American Insurance Co. (Chubb), Zurich American Insurance Co., North American Specialty Insurance Co. (SwissRe), Continental Casualty Company (CNA), Freedom Specialty Insurance Co. (Nationwide), Arch Insurance Co., Argonaut Insurance Co. (ARGO RE), Beazley Insurance Company, Inc., QBE Insurance Corporation, Berkley Insurance Co., Chubb Bermuda Ins Ltd. (Chubb), Markel American Insurance Company, National Union (AIG) and Endurance American Insurance Co. (Sampo International). These policies insure the Company and all of its wholly-owned subsidiaries. They also insure all of the directors and officers of the Company and its covered subsidiaries. The policies were written for a term of 12 months, from October 12, 2020 until October 12, 2021. The total annual premium for these policies, including fees and taxes, is $1,496,256. Directors and officers of the Company, as well as all other team members with fiduciary responsibilities under the Employee Retirement Income Security Act of 1974, as amended, are insured under policies issued by a group of insurers comprising Zurich American Insurance Co., Continental Casualty Company (CNA), Beazley Insurance Company, Inc., ACE American Insurance Co. (Chubb), and Endurance American Insurance Co. (Sampo International) which have a total premium, including fees and taxes, of $406,000 for the 12-month period ending October 12, 2021.

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Proposal 2: Advisory Approval of Executive Compensation

The Board is asking our shareholders to approve, on a non-binding, advisory basis, the compensation of our NEOs, as described beginning on page 41. We currently hold our “Say-on-Pay” vote every year. Shareholders have an opportunity to cast an advisory vote on the frequency of Say-on-Pay votes at least every six years. The next advisory vote on the frequency of the Say-on-Pay vote is expected to occur at the 2022 Annual Meeting.

As described in detail under the CD&A beginning on page 41, our compensation program is designed to attract, motivate and retain talented executives responsible for leading our strategic priorities and, in turn, deliver value to our shareholders. Our executive compensation program ties pay closely to performance. A significant portion of the compensation provided to the NEOs is based upon the Company’s performance or the performance of our share price, and we believe this compensation structure closely aligns the interests of our NEOs with the interests of our shareholders. The more senior an executive’s position, the greater portion of their compensation is tied to performance.

At the 2020 Annual Meeting, nearly 95% of the votes cast on the advisory vote to approve the compensation of our NEOs were voted in favor of the proposal. The Compensation Committee believes this affirms our shareholders’ support for the Company’s approach to executive compensation. We believe you should read the CD&A and the compensation tables beginning on page 41 in determining whether to approve this proposal.

The Board recommends approval of the following resolution:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of our NEOs, as disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting pursuant to the SEC’s compensation disclosure rules, including the CD&A, the 2020 Summary Compensation Table, and the other related tables and disclosures.”

The Board recommends a vote FOR Proposal 2.

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Executive Compensation

Compensation Discussion and Analysis

This CD&A describes our compensation philosophy and objectives, provides context for compensation decisions for our NEOs, and describes how our 2020 compensation is linked to performance against the goals that were established for the annual and long-term incentive compensation programs. For 2020, our NEOs were as follows:

Johnson Chairman, President and Chief Executive Officer Lauren B. Peters* Executive Vice President and Chief Financial Officer Executive Vice President and CEO—EMEA Vijay Talwar W. Scott Martin Executive Vice President and CEO—Asia Pacific and Chief Strategy and Development Officer Executive Vice President and

We made several strategic organizational changes in 2020 designed to foster greater agility and speed-to-act as the Company continues to advance its key strategic imperatives. Mr. Gray assumed the new role of Executive Vice President and Chief Commercial Officer, effective July 22, 2020, to lead the Company’s efforts to elevate the customer experience across the globe, including product, brand, digital, customer connectivity, global market planning, and store development (he previously served as Vice President and Chief Merchandising Officer). Mr. Martin assumed the role of Executive Vice President and Chief Executive Officer—Asia Pacific, effective July 22, 2020, in addition to his responsibilities as Chief Strategy and Development Officer, in light of Lewis Kimble’s retirement. Stephen D. Jacobs, also an NEO, served as Executive Vice President and Chief Executive Officer—North America until July 22, 2020, and departed from the Company on August 31, 2020. Franklin R. Bracken assumed the role of Executive Vice President and Chief Executive Officer—North America in light of Mr. Jacobs’s departure.

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Executive Compensation

2020 Year in Focus

2020 started with great promise—a strong global economic outlook and the expectation of delivering continued progress against our strategic imperatives. Then COVID-19 emerged. Within weeks of the new fiscal year, the global pandemic began to impact our business, first in Asia Pacific and with our supply chain and then, by late February, in EMEA. In mid-March, we began temporarily closing all of our brick-and-mortar stores across all of our brands around the globe in response to government restrictions and the concern for the health and safety of our team members and customers. At that time, it was uncertain how long our stores would remain closed and, virtually overnight, we transitioned from a predominantly brick-and-mortar to a completely digital business. Management also had a new challenge in managing a completely remote workforce with many unknowns ahead.

After an extended period of store closures with a phased reopening beginning in late April, as the economies around the globe began a slow reopening process, a social justice challenge arose at the end of May. Some of the social unrest that ensued led to the damage of some of our stores. The social unrest struck at the hearts and souls of our customers and our team members. This movement became a rallying cry for the Company and, in June, we announced our LEED initiative, the Company’s commitment to invest $200 million over five years towards enhancing the lives of our team members and our customers in the Black community through economic development and education.

Leading Through Challenges

Recognizing the unprecedented business disruption caused by COVID-19 and social unrest during 2020, management and the Compensation Committee remained focused on our three primary stakeholder groups:

Shareholders Community Team Members

Early on, the Compensation Committee recognized that the events unfolding during 2020 were unpredictable and reacted quickly based on the information it had available at the time. Beginning with the Committee’s meeting in March, it decided that, due to the uncertainty ahead, it was prudent to postpone setting targets for the Annual Incentive Plan and the Long-Term Incentive Plan (“LTIP”) rather than resetting targets in flight. The Committee, recognizing that circumstances were fluid, held an increased number of meetings during 2020, allowing it to react thoughtfully and appropriately to events as they were transpiring in the business. In mid-April, at one of two special Committee meetings, management recommended, and the Committee approved, a variety of actions to address the sudden reduction in sales, resulting in large part from the ongoing government restrictions leading to store closures, including reducing executive salaries beginning in May as follows:

Additionally, except for promotions, no one in senior management received a merit or cost of living increase for 2020. Other team members did receive merit increases, albeit effective in August instead of the typical May annual cadence. The Board also suspended the cash elements of non-employee director compensation beginning in May. These reduced salaries and director compensation were not made up when prior compensation levels were later reinstated in September.

The Company also deferred 2019 bonus payments indefinitely. 2019 bonuses were paid later in July for all Corporate Vice Presidents and General Manager-level roles, and in August for the Chief Executive Officer and all Executive Vice Presidents and Senior Vice Presidents.

By May, certain parts of the world began to slowly reopen their economies. At the Compensation Committee meeting in May, management began the discussion about setting an Annual Incentive Plan for 2020, with the goals of stabilizing the business and positioning it to emerge in a position of strength in 2021. With these goals in mind, management recommended using sales as a financial metric in 2020, instead of profit. The Compensation Committee met with Management, the Company’s compensation consultant, and the Compensation Committee’s independent compensation consultant to review the executive compensation environment, including recent developments and trends in executive compensation relative to the Company’s executive

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compensation program, and the pay-for-performance correlation in the program and the changes to the program recommended by the management and the consultants. Sales were viewed as the best financial metric to ensure we ended 2020 with a fresh inventory position. This cadence aligned with revenue increases tied to the reopening of our stores and the acceleration of digital sales. We believe this decision benefited our team members, the communities we serve, and our shareholders because it focused the Company on reopening stores, putting our team members back to work, and driving sales.

Customer focus also remained a key component of the Annual Incentive Plan with Net Promoter Score (“NPS”) confirmed as the metric to evaluate the customer experience. This benefitted the communities we serve because NPS allowed us to keep our finger on the pulse of our customers and to focus on the overall customer experience. After carefully reviewing these changes, in June, the Committee approved the 2020 Annual Incentive Plan with sales and NPS goals. We believe the 2020 Annual Incentive Plan reinforced our focus on sales and the customer experience, which was appropriate for this unprecedented year.

In November, following management’s strategic review sessions and preparation of preliminary financial plans, the Committee approved the 2020-21 LTIP performance targets based on Net Income and Return on Invested Capital (“ROIC”), which reflect the same metrics historically used in the LTIP.

2020 Performance Highlights

Management proactively addressed the many challenges of 2020 with resolve and agility, while learning how to thrive in the new environment. Management put the safety of our customers and team members first by following guidelines from local, state, and federal governments and agencies, ensuring the safety of our customers and team members around the globe.

Despite the unprecedented business disruption caused by COVID-19, particularly given the store closures during the first quarter, we drove strong sales volume in 2020 once stores were reopened during the second quarter. Highlights include the following:

Sales of $7.5 billion $2.3 billion of liquidity (including $1.7 billion of cash and cash equivalents, the strongest financial position in our history) $3.08 per share earned net income ($2.81 per share on non-GAAP* basis) 63.5% growth in digital business to over $2 billion, representing 28% of sales Over $1 billion net cash provided by operating activities ($903 million free cash flow on non-GAAP* basis) $159 million invested in our business to drive future growth through our capital program $110 million returned to shareholders between share repurchase program and dividends

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In addition, below are some highlights of the actions we took in 2020 to serve our three primary stakeholder groups.

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Our performance in 2020 aligned with our targeted focus on key stakeholder groups and the Company’s longer term business strategy, resulting in strong sales volume in 2020 particularly given the business disruption caused by COVID-19. Our 2020 compensation program, as outlined in detail in the following pages, tied to these key objectives demonstrating our strong connection between pay and performance.

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Say-on-Pay Shareholder Vote

Compensation Program Design and Structure

Components of Executive Compensation Program

One goal of the Compensation Committee is to align the compensation program with our business strategy and our shareholders’ interests. In order to achieve these objectives, our executive compensation program includes a mix of annual and long-term compensation, as well as a mix of cash and equity compensation. The centerpiece of our program is our pay-for-performance philosophy that aligns pay outcomes to the achievement of our annual operating plan and long-term strategy, and thus creation of shareholder value. This is especially true at senior levels of the Company where most of the compensation of our NEOs is tied to Company operating performance, as well as the performance of our stock. As shown in the charts below, for 2020, 88% of the CEO’s target compensation mix, and 70%, on average, of the other NEOs’ target compensation mix, was provided in the form of performance-based compensation.

CEO’s 2020 TARGET COMPENSATION MIX Long-Term Incentive Performance-Based Compensation Salary Annual Incentive 12% 24% 64% 88% AVERAGE OF OTHER NEO’s 2020 TARGET COMPENSATION MIX Long-Term Incentive Performance-Based Compensation Salary Annual Incentive 30% 22% 70% 48%

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The key components of our executive compensation program are described in the following chart:

Compensation Component Description and Purpose ANNUAL Base Salary Supports the objective of attracting and retaining talented executives with annual fixed compensation. Provides executives with market-competitive fixed compensation appropriate to their position, experience, and responsibilities. Performance-Based Compensation Annual Incentive Plan Links annual cash compensation to attainment of short-term performance goals based on sales and NPS. LONG-TERM Long-Term Incentive Program: Comprised of the performance-based LTIP, stock options, time-based RSUs, and the one-time Accelerate Future Growth (“AFG”) award. These long-term incentives and awards, which are linked to multi-year performance goals and the Company’s stock price, provide an incentive to work towards achievement of long-term strategic objectives. Long-term incentives support executive retention. LTIP Links compensation to attainment of long-term performance goals and service requirement, supporting executive retention. Earned awards are payable in equity based on two-year performance goals for net income (70%) and ROIC (30%), with an additional one-year vesting period for earned awards. Stock Options Provides the opportunity to purchase stock at the exercise price over a ten-year period from the grant date, subject to applicable vesting and exercisability conditions. Links realized compensation over long-term appreciation in stock price and represent value to executives only if the stock price increases. RSUs Aligns time-based RSUs with executives’ and shareholders’ interests with value that fluctuates based on stock price performance. RSUs support executive retention. AFG Award Incentivizes accelerated growth over a three-year period (2018-20) with this one-time AFG award made in 2018 to build on our strength and grow our business in a disruptive retail environment. This award is 100% performance based for the CEO and 75% performance based for the other NEOs. OTHER Retirement Benefits Provides pension and retirement savings benefits, which align with the objective of attracting and retaining talented executives. Perquisites Offers reasonable perquisites similar to our peer companies, which also aid in attracting and retaining talented executives.

Base Salary

Due to the business impact of COVID-19, the Company implemented a variety of actions to address the sudden reduction in sales, including reducing executive salaries from May 3, 2020 through August 31, 2020 as follows:

These reduced salaries were not made up when they were reinstated in September 2020. As part of its annual review of compensation, the Compensation Committee did not approve any merit or cost of living base salary increases for the NEOs in 2020, reflecting the Committee’s desire to promote accountability given the business impact of the widespread COVID-19 pandemic. However, the Committee approved an increase in Messrs. Martin and Gray’s annual base salaries, effective July 22, 2020, in connection with their promotions.

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Annual Incentive Plan

Consistent with our pay-for-performance culture, the Compensation Committee established rigorous sales and NPS targets for 2020 to further incentivize the execution of our customer experience initiatives. The targets the Compensation Committee established were based on the Company achieving sales of $6,523 million (which accounts for 80% of the payout) and NPS (which accounts for 20% of the payout). We drove strong sales in 2020, particularly given the business disruption caused by COVID-19. As a result, Mr. Johnson and Ms. Peters earned annual incentive payouts of 167.3% of their respective target awards for 2020.

Weighting Performance Metric Threshold Target Maximum Payout as a Percentage of Target (%) 80% Financial Performance (in millions) Sales $5,870 $6,523 $7,175 $7,769 200 20% Net Promoter Score Store Post-Purchase, Digital Post.Purchase, and Post-Fulfillment Promoters 70-80% 90-100% Detractors Passives -100-60% 36.7% 36.7 Total Annual Incentive Payout 167.3

The Compensation Committee established sales as one of the performance targets in connection with the Annual Incentive Plan in 2020. In 2020, we temporarily closed all of our brick-and-mortar stores across all of our brands around the globe in response to government restrictions and the concern for the health and safety of our team members and customers. Also, during the year, we temporarily closed certain stores related to social unrest. The Annual Incentive Plan sales metric is calculated on an internal basis of reporting and, therefore, does not include adjustments necessary for presentation in accordance with GAAP, including determining sales using actual foreign exchange rates and revenue associated with shipping and handling activities ($82 million). Annual Incentive Plan sales also provide for the adjustment of sales from stores closed in connection with the COVID-19 pandemic and the social unrest ($303 million) from such performance target to annualize sales based on sales for the time such stores were open because the Compensation Committee considers this to be unusual and non-recurring.

Financial Performance

SALES

The Compensation Committee did not establish Annual Incentive Plan targets until June. Once the targets were established, no changes were made to the in-flight performance cycle. In June, the Compensation Committee established the 2020 sales target of $6,523 million based upon the business plan and budget reviewed each year by our Finance Committee and approved by the Board. This occurred after the Company experienced the confluence of a 43% decline in sales during the first quarter of 2020 due to widespread store closings, the ramp up of our digital capabilities, and the impact of social unrest, and also began to understand the expected recovery. Our strong Annual Incentive Plan sales in 2020 ($7,769 million) allowed us to refresh our inventory and return to profitability in the third quarter of 2020 and position us for strong results in 2021.

As a division executive, Mr. Talwar’s annual incentive award was based on Company sales (weighted 20%), division sales (weighted 60%), and division NPS (weighted 20%). Mr. Talwar earned an annual incentive payout of 160.0% of his target award.

During 2020, Mr. Gray served as Vice President and Chief Merchandising Officer until July 22, 2020, and then as Executive Vice President and Chief Commercial Officer, so his annual incentive award was prorated between corporate and division results and individual performance. Mr. Gray earned an annual incentive payout of 175.4% of his target award.

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During 2020, Mr. Martin served as Senior Vice President and Chief Strategy and Development Officer until July 22, 2020, and then as Executive Vice President and Chief Executive Officer—Asia Pacific and Chief Strategy and Development Officer, so his annual incentive award was prorated between corporate and division performance. Mr. Martin earned an annual incentive payout of 138.0% of his target award.

Mr. Jacobs’s employment with the Company terminated prior to the end of 2020; he was, therefore, ineligible to receive an annual incentive payout.

In 2020, the North America, EMEA, and Asia Pacific divisions comprised the store and direct-to-customer operations of the following banners, respectively:

For competitive reasons, we do not disclose the sales targets for the North America, EMEA, or Asia Pacific divisions, as we do not publicly disclose results of these divisions on a separate basis, and we consider it competitively harmful to make that information public. Our objective is to set challenging performance goals for our executives throughout the Company. We believe that achieving these challenging performance goals for these divisions is demanding.

NPS

The Compensation Committee established NPS targets for the NEOs. NPS is a metric used to measure customer experience and predict future business growth. NPS is calculated using the answers to questions posed to customers scored on a 0-10 scale. Respondents are grouped as follows:

Subtracting the percentage of Detractors from the percentage of Promoters yields the NPS, which can range from a low of -100% (if every customer is a Detractor) to a high of 100% (if every customer is a Promoter). The Compensation Committee established three touchpoints for measuring NPS by each geographic region, each of which is assessed as a stand-alone performance to allow for balanced focus on each area of opportunity to improve an “omni-” customer experience​: Store Post-Purchase, Digital Post-Purchase, and Post-Fulfillment. The survey responses are aggregated by region (North America, EMEA, and Asia Pacific) and are scored individually by touchpoint. Each customer touchpoint has its own threshold, target, and maximum, but they ultimately roll up into one payout percentage. The evaluation of full-year NPS utilizes the Company’s global performance management rating scale, in which performance can range from 25% to 200% based on the relative achievement of the metrics. Due to the business impact of COVID-19, largely driven by carrier delays and significantly increased volumes at our Customer Care Centers, NPS results were negatively impacted. As described above, payout percentages associated with ratings for the metrics were averaged and resulted in an overall corporate payout percentage of 36.7%.

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Additional Information

The annual incentive plan for the NEOs makes incentive payments based upon the Company or relevant division’s results, without individual performance adjustments. However, executives who receive a “not meeting performance” rating in their annual performance review are ineligible to receive an annual incentive payment. All annual incentive targets and calculations are based on the results of continuing operations through the end of the 2020 fiscal year.

The payment of performance-based annual cash bonuses is calculated as a percentage of the base salary rate of the executive during the year. The maximum payout under this plan is 200% of target, with a maximum payout in any year for any participant capped at $6 million.

Bonus payouts are calculated on the basis of straight-line interpolation between the threshold (90%), target (100%), and maximum (110%) points. If the Company does not achieve threshold performance, then no annual bonus is earned or paid.

All participants, including the NEOs, are required to be employed on the payment date to receive payment.

Prior to the Compensation Committee determining whether bonus targets have been achieved, the Company’s independent registered public accounting firm, at the request, and for the restricted use, of the Compensation Committee, reviews the bonus calculations to ensure that the payout is calculated in accordance with the plan.

Annual Incentive payments are formula-driven based upon Company performance, and our 2020 program for the NEOs does not provide for discretionary adjustments based upon individual performance. The Compensation Committee did not exercise discretion in the amounts payable to the NEOs or any other executive officers under this incentive program.

LTI Program

Consistent with our pay-for-performance culture, the Compensation Committee established rigorous Adjusted Net Income and ROIC targets at the beginning of 2019 for the 2019-20 performance period and set a “performance floor” for each performance measure. The targets the Compensation Committee established were based on the Company achieving two-year average annual net income of $580 million (which accounts for 70% of the payout) and ROIC of 13.3% (which accounts for 30% of the payout). The Company achieved two-year average annual net income of $413 million and ROIC of 10.7% for this performance period. As a result, no payout was earned for this performance period and the awards were forfeited in 2020 without payment.

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LTIP

The LTIP is designed to reward executives for achieving multi-year performance targets. The LTIP is formula-driven, with targets established by the Compensation Committee based upon financial targets included in the business plan reviewed each year by our Finance Committee and approved by the Board. The LTIP pays out based upon the Company’s results, without individual performance adjustments. Key design features of the LTIP are:

The target LTIP awards for the 2020-21 performance period for the NEOs are listed in the following table:

LTIP (2019-20)

The targets, along with the adjusted actual performance for the period, and the calculation of ROIC are shown in the table below:

Weighting Performance Metric Threshold Target Maximum Payout as a Percentage of Target (%) 70% Average Annual Adjusted Net Income (in millions) $493 $580 $696 $413 0 30% Two-Year Average ROIC 11.7% 13.3% 15.4% 10.7% 0 Total LTIP Payout 0

The Compensation Committee establishes certain performance targets in connection with the Company’s long-term incentive program. The long-term incentive program provides for the exclusion of certain items from such performance targets that the Compensation Committee considers to be unusual or non-recurring. These items, if they occur, are excluded when calculating the long-term incentive program results, however such unusual or non-recurring items may not be material for purposes of the non-GAAP measures presented in the 2020 Annual Report on Form 10-K. In addition, certain items may not be adjusted for purposes of the long-term incentive program, as they do not exceed a pre-established adjustment threshold, although they are adjusted for financial reporting purposes in the 2020 Annual Report on Form 10-K consistent with past practices.

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Average Annual Adjusted Net Income Calculation for LTIP. Please note the following reconciliation:

ROIC Calculation for LTIP. Return on Invested Capital, or ROIC, is a non-GAAP financial measure. Please note the following reconciliation:

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Prior to the Compensation Committee determining whether bonus targets have been achieved, the Company’s independent registered public accounting firm, at the request, and for the restricted use, of the Compensation Committee, reviews the bonus calculations to ensure that the payout is calculated in accordance with the plan.

LTIP payments are formula-driven based upon Company performance, and our 2020 program for the NEOs does not provide for discretionary adjustments based upon individual performance. The Compensation Committee did not exercise discretion in the amounts payable to the NEOs or any other executive officers under this incentive program.

LTIP (2020-21)

In 2020, the Compensation Committee established LTIP performance targets for the 2020-21 performance period, which are also based on two-year average annual Adjusted Net Income (70%) and ROIC (30%). For competitive reasons, since this performance period is still ongoing, we have not disclosed the targets established for the period. The Compensation Committee will determine whether payouts have been earned following the end of the Company’s 2021 fiscal year, and we will provide specific information on the targets and results after the completion of the performance period. If awards are earned for the current 2020-21 performance period, payment will be made to participating executives in 2023, following the completion of a one-year vesting period.

Stock Options and RSUs

The Compensation Committee granted time-based equity awards to the NEOs in 2020, splitting the total value of the award between stock options and time-based RSUs in order to enhance the retentive value of the LTI awards. In deciding to grant these awards and determining the value of the awards, the Compensation Committee considered each executive’s performance, position, and career potential and the competitive market for equivalent talent. See the Grants of Plan-Based Awards Table beginning on page 66 for additional information on awards granted in 2020.

The values shown in the Grants of Plan-Based Awards Table for the stock option grants in 2020 are based on a Black-Scholes value of $5.03 per share on the grant date. The amounts shown in the table do not necessarily reflect the actual value that may be realized by the NEOs. The option exercise price is equal to the closing price of the Common Stock on the grant date. Stock options normally vest at the rate of one-third of the total grant per year over the first three years of the ten-year option term, subject to continuous service through each vesting date and accelerated vesting in certain limited circumstances. Time-based RSUs cliff vest generally after a period of three years. The Compensation Committee does not normally consider an executive’s gains from prior stock awards in granting new awards. The Compensation Committee determines the number of options granted based on a fixed value, using the Black-Scholes value on the grant date.

AFG

In 2018, the Compensation Committee, after considering the significant disruption occurring in the retail industry and the strategic work that would be necessary by the executives to accelerate the Company’s long-term growth, made one-time additional long-term incentive awards, or AFG awards, to the NEOs and other senior executives. The AFG is designed to reward executives for achieving multi-year performance targets.

The AFG is formula-driven, with targets established by the Compensation Committee based upon financial targets included in the 2018-19 financial plan and the forecast reviewed by our Finance Committee and approved by the Board. The percentage of achievement of the performance goals at the end of the performance period was applied to the target number of PSUs granted to the executive to determine the actual number of PSUs that were earned. The AFG is based upon the Company’s results, without individual performance adjustments. Key design features of the AFG are:

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The target AFG awards and actual payouts for the NEOs are listed in the following table:

Consistent with our pay-for-performance culture, the Compensation Committee established rigorous Total Revenue Growth, Digital Revenue Growth, and EBIT Margin targets at the beginning of 2018 for the 2018-20 performance period and set a “performance floor” for each performance measure. The targets the Compensation Committee established were based on the Company achieving three-year Total Revenue Growth of $766 million, or 10% (which accounts for ⅓ of the payout), Digital Revenue Growth of $212 million, or 20% (which accounts for ⅓ of the payout), and average EBIT Margin of 9.5% (which accounts for ⅓ of the payout). For the performance period, the Company experienced total revenue decline of $108 million, digital revenue growth of $1,035 million, and average EBIT margin of 7.8%, which resulted in earned AFG payouts of 66.7% of their respective target awards. For Mr. Johnson, 100% of the AFG award is PSUs; for the other NEOs, 75% of the AFG award is PSUs and 25% is time-based RSUs, and the PSUs were settled in 2021. The percentage of achievement of the performance goals at the end of the performance period was applied to the target number of PSUs granted to the executive to determine the actual number of PSUs earned. The targets, along with the adjusted actual performance for the period, are shown in the table below:

Weighting Performance Metric Threshold Target Maximum Payout as a Percentage of Target (%) 1 — 3 Total Revenue Growth (in millions) $479 6.25% $766 10% $1,149 15% -$108 -1.4% 0 1 — 3 Digital Revenue Growth (in millions) $132 12.5% $212 20% $318 30% $1,035 97.6% 200 1 — 3 EBIT Margin (in millions) 9.2% 9.5% 9.7% 7.8% 0 Total AFG Payout 66.7

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Retirement Plan and Excess Cash Balance Plan

The NEOs participate in the Retirement Plan and the Excess Cash Balance Plan. These plans, as well as the method of calculating benefits payable under these plans, are described beginning on page 75.

401(k) Plan and Excess Savings Plan

The NEOs participate in the 401(k) Plan and the Excess Savings Plan. These plans, as well as the method of calculating contributions under these plans, are described on page 77.

Supplemental Executive Retirement Plan

The Company maintains a Supplemental Executive Retirement Plan (“SERP”) for certain senior officers of the Company and other key employees, including the NEOs who met the eligibility requirements prior to the plan being frozen for new participants (including rehires) after December 31, 2018. See page 76 for additional information regarding the SERP.

International Assignment Compensation

We provide team members on long-term international assignments with additional benefits and allowances that are designed to minimize any financial detriment or gain to the team member from an international assignment. None of the NEOs, other than Messrs. Talwar and Gray, received any compensation under the International Assignment Policy (“IAP”) during 2020.

Perquisites

We provide the NEOs with certain perquisites, which the Compensation Committee believes to be reasonable and consistent with its overall objective of attracting and retaining talented executives. The Company provides the NEOs with an automobile reimbursement, medical expense reimbursement, supplemental long-term disability insurance, and financial planning. In addition, the Company reimburses Mr. Johnson for reasonable expenses of using car service for transportation in the New York metropolitan area. We also provide for continuation of medical and dental insurance benefits following retirement to participants who vested in the SERP prior to the start of the 2014 fiscal year when the benefit became closed to new participants. We do not provide a gross-up to executives for the income tax liability they incur due to their receipt of these perquisites.

Employment Agreements

As more fully described on pages 64 through 65, we have employment agreements with each of our NEOs, except Mr. Gray. Other than the agreement with Mr. Johnson as CEO, the agreements are substantially in the same form.

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Procedures for Determining Compensation

Setting Compensation, Establishing Goals, and Evaluating Performance

As reflected in the following timeline, the Compensation Committee oversees a rigorous and comprehensive compensation approval, goal setting, and performance review process: