Constellation Brands, Inc., the global producer and marketer of beer, wine and spirits, always seems to have some interesting features in its definitive proxy statement. For example, as I’ve noted in the past, each year the company provides an extensive discussion in its Compensation Discussion and Analysis of the perquisites that it makes available to its named executive officers (see page 41).
This year, what caught my eye was the information that the company provided in its CD&A in response to the COVID-19 pandemic. As the company notes (on page 29):
Learning from our experiences and successes in Fiscal 2021, we continued to implement policies and practices related to our people and our business that allowed us to focus on our foremost priority through the pandemic, the health and safety of our employees, consumers, and the communities we serve. Constellation’s executive officers took decisive action to respond to the continued disruption caused by the pandemic.
The company then goes on to list 13 specific actions that it took in fiscal 2022 as it continued to deal with the effects of the pandemic.
For many companies, 2022 was the year when they began to return their executive compensation program to its pre-COVID design. That’s what Constellation Brands did, and it devoted space in its CD&A to describe how, as the pandemic started to abate, it was able to leverage its prior experience to shape its compensation program for fiscal 2022 (at page 29):
During Fiscal 2022, the Human Resources Committee . . . considered the impact of the COVID-19 pandemic on our executive compensation program by reference to the principles of the program, including pay for performance, alignment with stockholders’ interests, and motivation and retention of key talent. For Fiscal 2022, the Committee was able to draw on over a year of experience in navigating the COVID-19 pandemic. As such, the impact of the pandemic on our Fiscal 2022 executive compensation program was more muted as compared with the Committee’s actions taken with respect to the Fiscal 2021 program. For Fiscal 2022, the Committee took the following approach:
- Continued to review with heightened focus and increased frequency the Company’s planning and actions related to human capital, talent management, and succession planning.
- Given our experiences in Fiscal 2021 managing through the financial planning and goal setting processes during COVID-19 pandemic, we did not delay setting our Fiscal 2022 annual operating plan or the performance goals and targets under our short-term cash incentive program in a similar fashion as taken for Fiscal 2021. As such, the Fiscal 2022 performance goals and targets under our short-term cash incentive program were set in early April 2021, as had been our practice prior to the COVID-19 pandemic.
- Reverted to the pre-pandemic approach of using narrower performance ranges under our Fiscal 2022 short-term cash incentive program as compared to the wider performance ranges under the Fiscal 2021 short-term cash incentive program.
For Fiscal 2022, the Committee did not modify the performance goals that were previously established for any outstanding PSU awards, delay setting goals for the Fiscal 2022 PSU awards, or exercise discretion at fiscal year end when determining short-term cash incentive payments for Fiscal 2022.
I’ve seen several companies include similar disclosure in their Compensation Discussion and Analyses; primarily as a way of signaling to the major proxy advisory firms that they are returning to their prior approach in structuring their executive compensation program. While such disclosure isn’t required, it’s a pretty effective way of letting shareholders and their advisors know that most, if not all, of the dramatic measures taken during the height of the pandemic have been tempered and that the company is getting back to its pre-pandemic plan design and related policies.
— Mark Borges, CompensationStandards.com, June 3, 2022
