UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

 

Exchange Act of 1934 (Amendment No.__)

 

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NORDSTROM, INC.

 

 

 

(Name of Registrant as Specified In Its Charter)

 

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(GRPAHIC) 

   

 

 

(NORDSTROM LOGO)

1617 Sixth Avenue, Seattle, WA 98101

April 19, 2018

Dear Shareholder,

You are invited to join us online May 29, 2018, at 9:00 a.m. Pacific Daylight Time for the 2018 Annual Meeting of Shareholders via webcast. If you would like to attend in person, the meeting will take place in the John W. Nordstrom Room, on the 5th floor of Downtown Seattle Nordstrom, at 1617 Sixth Avenue.

For Nordstrom, 2017 was a year of significant progress. We continued to make investments in many areas including our people, our digital and physical capabilities, our product offerings and our services. Customers want more control over their shopping experience than ever before, and that’s driving changes across the entire industry. The definition of service continues to evolve, and we’re working to evolve with it. We remain steadfast in our focus on solving customer needs in new and more relevant ways.

As a company, we strive to be the number one retailer in every market we serve. We hope to achieve this by focusing on our three strategic pillars: providing a differentiated product offering, delivering exceptional services and experiences, and leveraging the strength of our brand. We remain committed to managing the business in the best interests of customers, employees and shareholders.

You have a right as a shareholder to vote. You can vote online, by telephone or by using a printed proxy card as outlined in this document. In addition to this Proxy Statement, we encourage you to view our online Letter to Shareholders at investor.nordstrom.com and read our 2017 Annual Report. There you will find a more complete picture of our performance and how we are working to increase shareholder value by improving the customer experience.

On behalf of all of us at Nordstrom, thank you for your continued support.

Sincerely,

   
-s- Philip G. Satre  -s- Blake W. Nordstrom 
Philip G. Satre Blake W. Nordstrom
Chairman of the Board Co-President
   
   
-s- Peter E. Nordstrom  -s- Erik B. Nordstrom 
Peter E. Nordstrom Erik B. Nordstrom
Co-President Co-President
   

 

 

Table of Contents

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS   7
     
     
PROXY SUMMARY   8
     
     
CORPORATE GOVERNANCE   11
     
Our Corporate Governance Framework   11
Board Responsibilities, Leadership Structure and Role in Risk Oversight   11
Director Independence   12
Chairman of the Board and Presiding Director   12
Director Elections   13
Management Succession Planning   13
Communications with Directors   13
Board Committees and Charters   14
Board Meetings and Attendance   16
Director Compensation   16
Compensation Committee Interlocks and Insider Participation   18
Codes of Business Conduct and Ethics and Other Policies   18
Corporate Social Responsibility   18
Website Access to Corporate Governance Documents   18
       
       
PROPOSAL 1 ELECTION OF DIRECTORS   19
       
       
AUDIT COMMITTEE REPORT   23
     
     
PROPOSAL 2 RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   24
     
     
EXECUTIVE OFFICERS   25
     
     
COMPENSATION OF EXECUTIVE OFFICERS   26
     
Compensation Discussion and Analysis   26
Compensation Committee Report   35
Summary Compensation Table   36
Grants of Plan-Based Awards in Fiscal Year 2017   39
Outstanding Equity Awards at Fiscal Year-End 2017   42
Option Exercises and Stock Vested in Fiscal Year 2017   45
Pension Benefits   46
Fiscal Year 2017 Pension Benefits Table   47
     

 

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Nonqualified Deferred Compensation   47
Fiscal Year 2017 Nonqualified Deferred Compensation Table   48
Potential Payments Upon Termination or Change in Control   48
Pay Ratio Disclosure   53
       
       
PROPOSAL 3 ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION: SAY ON PAY   54
     
     
EQUITY COMPENSATION PLANS   55
     
     
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT   56
     
Beneficial Ownership Table   56
Section 16(a) Beneficial Ownership Reporting Compliance   58
     
     
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS   59
     
Review and Approval Process   59
Related Party Transaction   59
     
     
OTHER MATTERS   59
     
     
2019 ANNUAL MEETING OF SHAREHOLDERS INFORMATION   60
     
Requirements and Deadlines for Submission of Proxy Proposals, Nomination of Directors and Other Business of Shareholders   60
     
     
FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING   61
       
       
APPENDIX A RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES   A-1
       

 

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(NORDSTRO LOGO) 

1617 Sixth Avenue, Seattle, Washington 98101-1707

 

Notice of Annual Meeting
of Shareholders

Tuesday, May 29, 2018 

9:00 a.m. Pacific Daylight Time

John W. Nordstrom Room, Downtown Seattle Nordstrom, 1617 Sixth Avenue, 5th Floor, Seattle, WA 98101

The 2018 Annual Meeting of Shareholders (the “Annual Meeting”) of Nordstrom, Inc. (the “Company”) will be held for the following purposes:

1.To elect 11 Directors to serve until the 2019 Annual Meeting of Shareholders;
2.To ratify the appointment of Deloitte & Touche LLP (“Deloitte”) as the Company’s Independent Registered Public Accounting Firm to serve for the 2018 fiscal year;
3.To conduct an advisory vote regarding the compensation of our Named Executive Officers: Say on Pay; and
4.To transact any other business that may properly come before the Annual Meeting and any adjournment or postponement thereof.

You are eligible to vote if you were a shareholder of record at the close of business on March 19, 2018 (the “Record Date”). There were 167,795,884 shares of the Company’s Common Stock issued and outstanding as of March 19, 2018.

Shareholders are invited to attend the Annual Meeting in person. Those who are hearing impaired or require other assistance should contact the Company at 206-303-3040 so that we may facilitate your participation at the Annual Meeting.

YOUR VOTE IS VERY IMPORTANT. Whether or not you intend to be present at the Annual Meeting, you are encouraged to vote.

Seattle, Washington
April 19, 2018

By order of the Board of Directors,

-s- Robert B. Sari

Robert B. Sari
Secretary

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
2018 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 29, 2018
 
The accompanying Proxy Statement and the 2017 Annual Report on Form 10-K are available at investor.nordstrom.com
 

NORDSTROM, INC. - 2018 Proxy Statement     7

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PROXY SUMMARY

This summary highlights information described in more detail elsewhere in this Proxy Statement. It does not contain all of the information you should consider, and you should read the entire Proxy Statement carefully before voting. Page references are provided to help you find further information.

2018 Annual Meeting of Shareholders

Date and Time:    


Place:
May 29, 2018
9:00 a.m. Pacific Daylight Time


John W. Nordstrom Room
Downtown Seattle Nordstrom
1617 Sixth Avenue, 5th Floor
Seattle, WA 98101-1707
Meeting Webcast:     investor.nordstrom.com, select Webcasts & Presentations and follow the instructions given. The webcast will be archived and available for one year following the Annual Meeting.

Eligibility to Vote

You are eligible to vote if you were a shareholder of record at the close of business on March 19, 2018.

How to Cast Your Vote (page 62)

You can vote by any of the following methods:

(IMAGE)  Internet (www.proxyvote.com), until 11:59 p.m. Eastern Daylight Time on May 28, 2018;   (IMAGE)  Mail, by completing, signing and returning your proxy or voting instruction card on or before May 25, 2018; or
(IMAGE)  Telephone, if you requested printed materials, by using the toll-free number listed on your proxy card until 11:59 p.m. Eastern Daylight Time on May 28, 2018;   (IMAGE)  In person, if you are a shareholder of record, by voting your shares at the Annual Meeting. If your shares are held in the name of a broker, nominee or other intermediary, you must obtain a proxy, executed in your favor, to bring to the meeting.

Voting Matters (page 61)

    Board Vote
Recommendation
  Page Reference
(for more detail)
1. Election of Directors FOR each Director Nominee   19
2. Ratification of the Appointment of Independent Registered Public Accounting Firm FOR   24
3. Advisory Vote Regarding Executive Compensation: Say On Pay FOR   54

Board of Directors Nominees (page 20)

Name Age Director
Since
Occupation Committee Memberships Other Public
Company Boards
Shellye L. Archambeau* 55 2015 Former Chief Executive Officer of MetricStream, Inc. Audit, Technology Verizon, Inc.
Stacy Brown-Philpot* 42 2017 Chief Executive Officer of TaskRabbit, Inc. Finance, Technology HP Inc.
Tanya L. Domier* 52 2015 Chief Executive Officer of Advantage Solutions Audit, Compensation (Chair) YUM! Brands, Inc.
Blake W. Nordstrom 57 2005 Co-President of Nordstrom, Inc. N/A  
Erik B. Nordstrom 54 2006 Co-President of Nordstrom, Inc. N/A  
Peter E. Nordstrom 56 2006 Co-President of Nordstrom, Inc. N/A  
Philip G. Satre* 68 2006 Private Investor, Retired Chairman and Chief Executive Officer of Harrah’s Entertainment, Inc. Compensation, Corporate
Governance and Nominating
International Game Technology, PLC
Brad D. Smith* 54 2013 Chairman and Chief Executive Officer of Intuit, Inc. Audit (Chair), Technology Intuit, Inc.
Gordon A. Smith* 59 2015 Co-President and Chief Operating Officer of JPMorgan Chase & Co. Compensation, Corporate Governance and Nominating  
Bradley D. Tilden* 57 2016 Chairman and Chief Executive Officer of Alaska Air Group, Inc. Audit, Finance (Chair) Alaska Air Group, Inc.
B. Kevin Turner* 53 2010 Vice Chairman of the parent company of Albertson’s Companies LLC Finance, Technology (Chair)  
*Independent Director
  

NORDSTROM, INC. - 2018 Proxy Statement     8

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Governance of the Company (page 11)

8 of 11 Director nominees are independent.
Independent Directors meet regularly in executive session.
The roles of Co-Presidents and Chairman of the Board are separate.
Only independent Directors are Committee members.
Director elections have a majority voting standard and all Directors are elected annually.
The Board has stock ownership guidelines for Directors and Executive Officers.
Board, Committee and Director performance evaluations are conducted annually.
The Board and its Committees are responsible for risk oversight.
Co-President and management succession planning is one of the Board’s highest priorities.

Business Highlights

Our 2017 earnings per diluted share was $2.59, which included impacts associated with corporate tax reform, consisting of a $0.25 per share reduction related to our income tax provision and a $0.06 per share decrease for a one-time investment in our employees. Net sales during fiscal year 2017 increased 4.4%, inclusive of approximately $220 million or 150 basis points from the 53rd week, and comparable sales increased 0.8%.

 

(BAR CHART) 

We reached record sales of $15 billion in 2017, achieving the following milestones in executing our growth plans:

We experienced continued positive customer trends, reflecting customer growth of 4% to 33 million customers. Additionally, 9 million customers shopped with us in multiple ways, a 6% increase over the prior year.
Investments in new market and digital capabilities, which include Nordstromrack.com/HauteLook, Canada and Trunk Club, contributed $1.5 billion in sales.
In the Nordstrom full-price business, strategic brands, including product with limited distribution and Nordstrom proprietary labels, continued to deliver outsized sales growth.
The Nordstrom Rack off-price business gained 6 million new customers with approximately one-third of off-price customers expected to cross-shop the full-price business over time.
Sales from Nordstrom Rewards customers represented 51% of sales, an increase from 44% in 2016.

Our strategic brand partnerships and combined digital and physical assets make us uniquely positioned in the marketplace. We believe our diversified and resilient business model will continue to serve us well while creating value for our shareholders, customers and employees.

NORDSTROM, INC. - 2018 Proxy Statement     9

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Executive Compensation Highlights - Paying For Performance

In accordance with our pay-for-performance philosophy, the compensation program for our Named Executive Officers is straightforward in design and includes four primary elements: base salary, performance-based bonus, long-term incentives (“LTI”) and benefits. Within these elements, we emphasize variable pay over fixed pay, with approximately 80% of our Named Executive Officers’ combined target compensation linked to our financial or market results. The program also balances the importance of these executives achieving both critical short-term objectives and strategic long-term priorities. The following graphics represent target compensation for the Co-Presidents and the other Named Executive Officers and exclude Geevy Thomas’s promotion award granted in February 2017 and Anne Bramman’s new hire award granted in August 2017. See page 32 for additional detail.

(BAR CHART) 

Our Variable Pay Reflects Company Performance

Our pay-for-performance design includes rigorous performance goals and high performance standards. Further, with a substantial portion of pay in the form of Nordstrom stock, pay outcomes align with our shareholders’ experience. This is evidenced by our Named Executive Officers’ recent incentive compensation payouts and grant realizable values as of our 2017 fiscal year end, as shown below.

INCENTIVE COMPENSATION PAYOUTS 2013 2014 2015 2016 2017
Incentive Earnings Before Interest and Income Tax Expense (“Incentive EBIT”) $ $  1,377M $  1,391M $  1,246M $  1,076M $   952M
Incentive Return on Invested Capital (“Incentive ROIC”) % 13.8% 13.6% 11.0% 12.4% 10.0%
Annual bonus (payout as % of Target*) 64% 83% 0% 80% 94%
3-year TSR percentile ranking within comparator group 50%ile 63%ile 53%ile 16%ile 10%ile
PSU vesting (payout as % of Target) 0% 75% 75% 0% 0%
*Bonus payout for fiscal year 2017 as a % of Target for Named Executive Officers other than the Co-Presidents was 96%.

Incentive EBIT and Incentive ROIC are not measures of financial performance under Generally Accepted Accounting Principles (“GAAP”) and should be considered in addition to, and not a substitute for, return on assets, net earnings, total assets and other financial measures prepared in accordance with GAAP. See Appendix A for a reconciliation of GAAP and non-GAAP financial measures. Note that Incentive EBIT for fiscal year 2016 included a $197 million Trunk Club impairment charge.

Performance share unit (“PSU”) vesting as shown in the table above corresponds to the performance periods ending in fiscal years 2013 through 2017. Three-year Total Shareholder Return (“TSR”) percentile ranking is based on our TSR performance over three-year rolling periods between fiscal years 2011 and 2017 versus the comparator group. Beginning with the 2014 – 2016 PSU award, we changed our comparator group from our retail peer group to the Standard and Poor’s 500. See pages 31 and 32 to learn more about long-term incentive pay.

GRANT REALIZABLE VALUES 2013 2014 2015 2016 2017
PSUs (realizable value as a % of grant value) 74% 0% 0% 0% 0%
RSUs (realizable value as a % of grant value) 0% 97% 67% 109% 111%
Stock options (realizable value as a % of grant value) 86% 38% 0% 7% 7%

Realizable values shown above are based on the actual value at time of vest, current unvested values using our 2017 fiscal year end stock price of $47.85 and current performance for outstanding PSUs (which are tracking at 0% payout), shown as a percent of grant value. PSUs, restricted stock units (“RSUs”) and stock options are shown in the column matching the year of grant. 2017 realizable value for RSUs excludes Anne Bramman’s new hire award with a grant value of $750,000 and Geevy Thomas’s promotion award with a grant value of $680,000.

The Compensation Committee reviews these results and other analyses to ensure the Named Executive Officers’ aggregate compensation aligns with shareholder interests. Based on these and other outcomes, the Compensation Committee believes that total direct compensation for our Named Executive Officers reflects our pay-for-performance objective and is well aligned with shareholder interests.

For more information on executive compensation, please see the Compensation Discussion and Analysis starting on page 26.

NORDSTROM, INC. - 2018 Proxy Statement     10

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CORPORATE GOVERNANCE

Our Corporate Governance Framework

Since its founding, our Company’s leaders and employees have always sought to maintain the highest ethical standards in every aspect of our business. Our corporate governance framework is designed to support this tradition of integrity, trust and unyielding commitment to do the right thing, which has served our customers and shareholders well over the years. Our corporate governance framework, more fully discussed on the following pages, includes the following highlights:

Board Responsibilities, Leadership Structure and Role in Risk Oversight

The Board of Directors (“Board”) oversees, counsels and directs management in promoting the long-term interests of the Company and our shareholders. The Board’s responsibilities include:

determining the appropriate structure for the senior leadership of the Company;
selecting and evaluating the performance of the Co-Presidents;
planning for succession with respect to the positions of the Co-Presidents and monitoring management’s succession planning for other senior executives;
reviewing and approving our major financial objectives, our strategic and operational plans and other significant actions;
monitoring the conduct of our business and the assessment of our business risks to promote the proper management of the business;
overseeing the management of cybersecurity, including oversight of appropriate risk mitigation strategies, systems, processes and controls; and
overseeing the processes for maintaining integrity with regard to our financial statements and other public disclosures, and compliance with laws and our Code of Business Conduct and Ethics.

At this time, the Board believes different people should hold the positions of Chairman of the Board and Co-Presidents, as this may strengthen corporate governance and aid in the Board’s oversight of management. Currently, Philip G. Satre serves as Chairman of the Board and Blake Nordstrom, Erik Nordstrom and Peter Nordstrom serve as Co-Presidents.

NORDSTROM, INC. - 2018 Proxy Statement     11

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The Co-Presidents are responsible for day-to-day leadership and performance of the Company, while the Chairman of the Board provides guidance to the Co-Presidents and presides over the full Board. The duties of our Chairman of the Board are more fully described in the Chairman of the Board and Presiding Director section below. The Board believes this leadership structure also aids in the Board’s oversight and management of risk.

The full Board has primary responsibility for oversight of risk management, and has assigned to the Board’s standing Committees the task of focusing on the specific risks inherent in their respective areas of oversight. The full Board:

considers and determines the Company’s risk appetite, which is the amount of risk the organization is willing to accept;
oversees management’s implementation of an appropriate system to manage risks (i.e., to identify, assess, mitigate, monitor and communicate these risks) and monitors the effectiveness of this process as the business environment changes;
provides risk oversight through the Board’s committee structure and processes; and
manages directly certain risks, in particular, the risks associated with the Company’s strategic direction, which are reviewed at an annual strategy planning meeting and periodically throughout the year.

The Company has a comprehensive, structured approach to managing risks, which are identified, assessed, prioritized and managed at all levels within the Company through an enterprise risk management process which is aligned with the Company’s strategy. Within this framework, management is responsible for assessing and managing the Company’s exposure to risks. Management regularly reports on risks to the relevant Committee or the Board. The Board and its Committees discuss the various risks confronting the Company throughout the year, particularly when reviewing operating and strategic plans and when considering specific actions for approval. The risks are classified into four major categories: Strategic, Compliance, Operational and Financial, and mapped for the appropriate management and Board (and Committee) oversight.

Through the risk oversight process, the Board: (i) obtains an understanding of the risks inherent in the Company’s strategy and management’s execution of the strategy within the agreed risk appetite; (ii) accesses useful information from internal and external sources about the critical assumptions underlying the strategy; (iii) is alert for possible dysfunctional behavior within the organization which might lead to excessive risk taking; (iv) provides input to executive management regarding critical risk issues on a timely basis; and (v) encourages open communication and appropriate escalation of reporting of risk throughout the enterprise, striving to ensure that risk management is part of the corporate culture. The Board’s leadership structure and the collective knowledge and experience of its members promotes a broad perspective, open dialogue and useful insights regarding risk, thereby increasing the effectiveness of the Board’s role in risk oversight.

Director Independence

A Director is considered independent when our Board affirmatively determines that he or she has no material relationship with the Company, other than as a Director. Our Board makes this determination in accordance with the standards set forth in our Corporate Governance Guidelines, which are consistent with the listing standards of the New York Stock Exchange (“NYSE”) and Securities and Exchange Commission (“SEC”) rules. In making this determination, the Board considers existing relationships between the Company and the Director, whether directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. The Board has affirmatively determined the following Director nominees are independent within the meaning of the listing standards of the NYSE, SEC rules and the Company’s Corporate Governance Guidelines, and none of these Director nominees have a material relationship with the Company other than as a Director:

     
Shellye L. Archambeau Philip G. Satre Bradley D. Tilden
Stacy Brown-Philpot Brad D. Smith B. Kevin Turner
Tanya L. Domier Gordon A. Smith  

Chairman of the Board and Presiding Director

The Company has a Chairman of the Board who is also an independent Director and who serves as the Presiding Director within the meaning of the listing standards of the NYSE. Currently, Philip G. Satre serves as the Company’s Chairman of the Board.

The Chairman of the Board is appointed annually by the Board. As described in the Company’s Bylaws, Corporate Governance Guidelines and Charter of the Corporate Governance and Nominating Committee, the Chairman of the Board:

presides at meetings of the Board;
assists in establishing the agenda for each Board and Board Committee meeting;
serves as the Presiding Director to lead regular executive sessions of the Board in which only independent Directors participate;
calls special meetings of the Board and/or the shareholders;
provides input and support to the Chair of the Corporate Governance and Nominating Committee on nominees to fill vacant Board seats and the selection of Committee Chairs and membership on Board Committees;
advises the Co-Presidents and other members of the Executive Team on such matters as strategic direction, corporate governance and overall risk assessment; and
performs such other duties as the Board may from time to time delegate to assist the Board in the fulfillment of its responsibilities.

NORDSTROM, INC. - 2018 Proxy Statement     12

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Director Elections

The Company’s Bylaws provide that, in an uncontested election, a Director nominee will be elected if the number of votes cast for the nominee’s election exceeds the number of votes cast against the nominee’s election. An incumbent Director nominee who fails to receive the requisite votes for election will continue to serve as a Director until the earlier of: (i) 90 days from the date on which the voting results of the election are determined; or (ii) the date on which an individual is selected by the Board to fill the position held by such Director. In any election which is a contested election (meaning that the number of director nominees exceeds the number of directors to be elected), the standard for election of directors is a plurality of the votes cast by holders of shares entitled to vote in the election at a meeting.

Management Succession Planning

The Board and management believe that one of their primary responsibilities is to ensure the Company has the appropriate leadership capability to effectively deliver upon its business commitments. The Company’s management is actively engaged and involved in leadership development, having regular discussions of the leadership capabilities of the organization and the attraction, development and retention of critical talent to promote future success. In addition to the Company’s regular review of leadership capabilities, the Board annually conducts a detailed review of the talent strategies for the entire organization and reviews succession plans for senior leadership positions, including those of the Co-Presidents. The Board reviews high-potential employees, evaluates plans to develop their management and leadership capabilities and sanctions the strategies used to deploy these individuals most effectively. In addition to the annual review, succession is regularly discussed in executive sessions of the Board and in Board Committee meetings, as applicable. Directors become familiar with potential successors for key leadership positions through various means, including the comprehensive annual talent and succession review, Board meeting presentations and less formal interactions throughout the course of the year.

Our entire Board, with the oversight of our Corporate Governance and Nominating Committee, is responsible for implementing succession procedures for the Co-Presidents. We believe the Board, led by our Chairman, should collaborate with the Co-Presidents on the critical aspects of the succession planning process, including establishing selection criteria, identifying and evaluating candidates and making management succession decisions. The Board has procedures in place to respond to an unexpected vacancy in one or more of the Co-Presidents’ positions, including a detailed review of the succession plan annually by the Corporate Governance and Nominating Committee. It is the Board’s practice to be prepared for a planned or unplanned change in leadership in order to ensure the stability of the Company.

Communications with Directors

Shareholders and other interested parties may communicate with Directors by contacting the Corporate Secretary’s Office at:

   
Telephone: 206-303-2541
   
Email: board@nordstrom.com
   
Mail: Nordstrom, Inc.
1700 Seventh Avenue, Suite 700
Seattle, Washington 98101-4407
Attn: Corporate Secretary

The Corporate Secretary will relay the question or message to the specific Director with whom the shareholder or interested party wishes to communicate.

If no specific Director is requested, the Corporate Secretary will relay the question or message to the Chairman of the Board. Certain items that are unrelated to the duties and responsibilities of the Board, such as business solicitations, advertisements, junk mail and other mass mailings will not be relayed to Directors.

The Audit Committee has established procedures to respond to possible concerns about ethics and accounting-related practices. To report your concerns, you may use the Company’s confidential Whistleblower Hotline at:

   
Telephone: 1-888-832-8358
   
Internet: ethicspoint.com

Your concerns will be investigated and communicated to the Audit Committee, as necessary.

NORDSTROM, INC. - 2018 Proxy Statement     13

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Board Committees and Charters 

The Board has a standing Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee, Finance Committee and Technology Committee. Each Committee has a Board-approved Charter which is reviewed annually by the respective Committee. Recommended changes, if any, are submitted to the Corporate Governance and Nominating Committee and the Board for approval. The Board makes Committee and Committee Chair assignments annually at its meeting immediately following the Annual Meeting, although further changes to Committee assignments may be made from time to time as deemed appropriate by the Board. The Board has determined the Chairs and all Committee members are independent under the applicable NYSE rules. Committee Charters and current Committee membership are posted on our website at investor.nordstrom.com and may be viewed by selecting Corporate Governance. The Chairs and members of the Committees as of the date of this Proxy Statement are identified in the following table.

 

Director Audit Committee Compensation Committee Corporate Governance and Nominating Committee Finance Committee Technology Committee
Shellye L. Archambeau    
Stacy Brown-Philpot      
Tanya L. Domier (GRAPHIC)    
Philip G. Satre  
Brad D. Smith (GRAPHIC)  
Gordon A. Smith  
Bradley D. Tilden     (GRAPHIC)
B. Kevin Turner       (GRAPHIC)
Robert D. Walter(a)   (GRAPHIC)  

 (GRAPHIC)Chair

(a)Mr. Walter is not seeking re-election and will be retiring from the Board at the end of his current term in May 2018.

Audit Committee

 

As more fully described in its Charter, the primary responsibility of the Audit Committee is to assist the Board in fulfilling its oversight responsibility by reviewing and discussing:

the integrity of the Company’s financial statements;
the accounting, auditing and financial reporting processes of the Company;
the management of business and financial risk and the internal controls environment;
the Company’s compliance with legal and regulatory requirements and ethics programs as established by management and the Board, in conjunction with any recommendations by the Corporate Governance and Nominating Committee with respect to corporate governance standards;
the reports resulting from the performance of audits by the independent auditor and the internal audit team;
the qualifications, independence and performance of the Company’s independent auditors; and
the performance of the Company’s internal audit team.

The Audit Committee meets regularly with the independent registered public accounting firm and management, including the Vice President, Internal Audit, to review accounting, auditing and financial reporting processes, enterprise risk management and compliance with laws and regulations. The Audit Committee also meets privately and separately with the independent registered public accounting firm, the Chief Financial Officer and the Vice President, Internal Audit.

In addition to meeting the independence requirement for audit committee members, each current member of the Audit Committee also meets the financial literacy and experience requirements contained in the corporate governance listing standards of the NYSE. The Board has determined that all Audit Committee members qualify as “audit committee financial experts” under the regulations of the SEC. Although all members of the Audit Committee meet the current regulatory requirements for accounting or related financial management expertise and the Board has determined that each of them qualifies as an “audit committee financial expert,” members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not technical experts in auditing or accounting.

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Compensation Committee

 

As more fully described in its Charter, the primary responsibilities of the Compensation Committee are to:

approve an overall compensation philosophy for the Company’s Executive Officers in light of the Company’s goals and objectives. The Executive Officers are referenced on page 25 and include the Named Executive Officers shown in the Compensation Discussion and Analysis on page 26 and other business unit presidents and Company executives over major organizational functions reporting to the Co-Presidents or other senior executives;
select performance measures aligned with the Company’s business strategy;
review and approve the Company’s cash and equity-based compensation plans for executives;
review and approve any benefit plans, retirement and deferred compensation or other perquisites offered to the Executive Officers and other eligible employees; and
review the Company’s compensation practices so that they do not encourage imprudent risk taking.

The Committee has the sole authority to retain such consultants and advisors as it may deem appropriate and to approve related fees and other retention terms. The Committee has retained Semler Brossy Consulting Group, LLC (“Semler Brossy”), an independent compensation consulting firm, to advise the Committee on executive compensation and benefit matters. Semler Brossy provides services only as directed by the Committee. During the fiscal year 2017, Semler Brossy’s services included review of pay programs, performance goal-setting, alignment of pay and performance and other pay-related matters specific to the Compensation Committee’s Charter. The Compensation Committee has assessed the independence of Semler Brossy pursuant to NYSE rules and determined that Semler Brossy is independent and its work for the Compensation Committee does not raise any conflict of interest.

A consultant from Semler Brossy attends Committee meetings in person or by phone and supports the Committee by providing independent expertise on market practices and trends in executive compensation within the general industry and the peer group defined for such purposes. Additionally, the consultant provides advice regarding the composition of the Company’s peer group and analysis of peer group practices for base salary, performance-based bonus, long-term incentives and other compensation elements, and advice on management’s proposed levels of executive compensation. Semler Brossy also advises the Committee on compensation program design including incentive structure, stock ownership guidelines, regulatory requirements related to executive compensation, plans submitted to shareholders for approval, governance responsibilities, and such other matters as assigned by the Committee from time to time as necessary to carry out its responsibilities under its Charter.

Corporate Governance and Nominating Committee

 

As more fully described in its Charter, the primary responsibilities of the Corporate Governance and Nominating Committee are to:

review and recommend individuals to the Board for nomination as members of the Board and its Committees;
review possible conflicts of interest of Board members and the Company’s Executive Officers;
develop and review the Company’s Corporate Governance Guidelines;
review and consider revisions to the corporate governance standards contained in the Company’s Codes of Business Conduct and Ethics;
review and recommend approval of the policies and practices of the Company in the area of corporate governance;
produce and provide to the Board an annual performance evaluation of the Board, the Directors and each Committee of the Board;
establish succession procedures in the case of an emergency or the retirement of one or more of the Co-Presidents;
recommend to the Board the form and amount of Director compensation; and
review the overall performance of the Co-Presidents on an annual basis.

Finance Committee

 

As more fully described in its Charter, the primary responsibilities of the Finance Committee are to: 

assist the Board in fulfilling its oversight responsibilities with respect to the Company’s capital structure, financial policies, capital investments, business and financial planning and related matters;
review and discuss the Company’s tax strategies and the implications of actual or proposed tax law changes;
review and discuss the Company’s dividend payment and share repurchase strategies, banking relationships, borrowing facilities and cash management; and
monitor the rating assigned by rating agencies to the Company’s long-term debt.

Additionally, in conjunction with the Technology Committee, the Committee makes recommendations to the Board with respect to investments in technology. 

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Technology Committee

 

As more fully described in its Charter, the primary responsibilities of the Technology Committee are to:

assist the Board in its oversight with respect to the Company’s technology strategy;
review and discuss the Company’s technology acquisition and development process to assure ongoing business growth;
review and discuss the Company’s data management and automation processes, and measurement and tracking systems; and
review and discuss the Company’s policies and safeguards for information technology and data security.

Additionally, in conjunction with the Finance Committee, the Committee makes recommendations to the Board with respect to investments in technology.

Board Meetings and Attendance

The Board held 7 regular meetings during fiscal year 2017, one of which was devoted principally to Company strategy. During the past fiscal year, the Audit Committee held 13 meetings, the Compensation, Technology and Finance Committees each held 5 meetings, and the Corporate Governance and Nominating Committee held 4 meetings. Each Director attended at least 75% of the aggregate of all meetings of the Board and the Committees on which he or she served during the year and overall attendance at the meetings, on a combined basis, was 97%. Independent members of the Board met at each regular meeting of the Board in executive session without management present.

Director Compensation

The Company’s pay-for-performance philosophy for Director compensation reflects the Board’s belief that payment of a majority of the Director fees in the form of Common Stock aligns the interests of Directors with the interests of the Company’s shareholders and enhances Director compensation when the Company performs well. The Board believes that the Director fees paid by the Company should be competitive with other companies of similar characteristics.

Employee Directors of the Company are not paid any fees for serving as members of the Board. Nonemployee Director compensation consists of the following elements:

Annual Compensation Elements for 2017 Amount
($)(a)
Director Retainer 85,000
Audit Committee Chair Retainer 20,000
Compensation Committee Chair Retainer 20,000
Corporate Governance and Nominating Committee Chair Retainer 15,000
Finance Committee Chair Retainer 15,000
Technology Committee Chair Retainer 15,000
Audit Committee Liaison to Nordstrom fsb Board Retainer 20,000
Director Equity Grant of Common Stock having a grant date value of 140,000
Chairman of the Board Equity Grant of Common Stock having a grant date value of 200,000
(a)Directors may elect to take some or all of their cash retainer fees in Common Stock.

Under the Director Stock Ownership Guidelines, Directors are currently required to own Common Stock having a value of at least $425,000 by their fifth anniversary of joining the Board. As of March 19, 2018, each Director nominated for election at the Annual Meeting had either satisfied this obligation or had time remaining to do so.

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Director Summary Compensation Table

 

During the fiscal year ended February 3, 2018, nonemployee Directors of the Company received the following compensation for their services:

Name

Fees Earned

or Paid in Cash

($)(a)(b)

Stock

Awards

($)(b)(c)

All Other

Compensation

($)(d)

Total

($)

Shellye L. Archambeau 85,000 139,964 3,944 228,908
Stacy Brown-Philpot 85,000 139,964 2,599 227,563
Tanya L. Domier 105,000 139,964 16,404 261,368
Philip G. Satre 85,000 339,933 1,446 426,379
Brad D. Smith 125,000 139,964 2,649 267,613
Gordon A. Smith 85,000 139,964 11,946 236,910
Bradley A. Tilden 100,000 139,964 6,607 246,571
B. Kevin Turner 99,974 139,964 29,627 269,565
Robert D. Walter 100,000 139,964 11,560 251,524

(a) Fees Earned or Paid in Cash

The amounts reported reflect the cash fees paid to each nonemployee Director, whether or not such fees were deferred or taken as Common Stock. Ms. Domier received $20,000 for service as the Compensation Committee Chair, and Mr. Brad Smith received $20,000 for service as the Audit Committee Chair and $20,000 for service as Audit Committee Liaison. Mr. Gordon Smith elected to take his cash fees in Common Stock. Mr. Tilden received $15,000 for service as Finance Committee Chair, Mr. Turner received $15,000 for service as the Technology Committee Chair and elected to take his cash fees in Common Stock, and Mr. Walter received $15,000 for service as the Corporate Governance and Nominating Committee Chair.

(b) Deferred Compensation Program

Nonemployee Directors may elect to defer all or a part of their cash retainers and stock awards under the Nordstrom Directors Deferred Compensation Plan (“Directors Plan”). Directors are required to make advance elections to defer the receipt of fees or stock awards, and all deferral elections generally are irrevocable. Directors are also required to make advance elections about the form and timing of distribution of their deferred cash fees or stock awards.

In 2017, cash deferrals could be directed among 21 deemed investment alternatives and gains and losses for cash deferrals were posted to the Director’s account daily based on their investment elections. In addition, plan participants were offered a fixed rate option of 4.4% in 2017, which was not subsidized by the Company, but rather was a rate based on guaranteed contractual returns from a third-party insurance company provider. Deferred stock awards are credited to the Director’s account as units. Each unit in the Directors Plan is equal in value to the price of one share of Common Stock. Each deferred unit is credited with dividends, in the form of additional units, to the same extent as a share of Common Stock.

During the fiscal year which ended February 3, 2018, Ms. Archambeau and Mr. Walter deferred 100% of their stock award into the Directors Plan.

(c) Stock Award

The amounts reported reflect the grant date fair value associated with each Director’s stock awards. Fractional shares are not awarded or paid in cash. In recognition of the significant time and attention in performing the duties required of the position, our Chairman of the Board is annually awarded, on the date of the Company’s Annual Meeting, an additional stock award having a value of $200,000.

(d) All Other Compensation

All Directors, their spouses and eligible children may participate in the Company’s employee merchandise discount program. The program provides discounts ranging from 20% for eligible nonmanagement employees up to 33% for eligible management and high-performing nonmanagement employees and Directors. A 40% discount is available at certain times of the year on specified merchandise. These discounts vary somewhat by source and type of merchandise or service. During the fiscal year ended February 3, 2018, all Other Compensation consisted only of merchandise discounts for all Directors.

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Compensation Committee Interlocks and Insider Participation

During the fiscal year ended February 3, 2018, no member of the Compensation Committee was an employee, officer or former officer of the Company or any of its subsidiaries, and no Executive Officer of the Company served on the board of directors or compensation committee of any entity that has one or more directors, or compensation committee of any entity that has one or more Executive Officers, serving as a member of the Company’s Board or Compensation Committee.

Codes of Business Conduct and Ethics and Other Policies

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, including our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and persons performing similar functions. We have also adopted a Directors’ Code of Business Conduct and Ethics that applies to all of our Directors. A grant of a waiver from a provision of the codes requiring disclosure under applicable SEC rules, if any, will be disclosed on our website at investor.nordstrom.com under Corporate Governance.

We have a policy that prohibits Directors and Executive Officers (as well as other key insiders and their immediate family members) from engaging in hedging or short sale transactions with respect to the Company’s Common Stock. We also have a policy with respect to pledging of Common Stock, which subjects Directors and Executive Officers to a preclearance requirement and restrictions, including that pledged shares may not be counted toward the Company’s stock ownership guidelines. Our Executive Officers, in the aggregate, have less than 0.5% of the Company’s outstanding shares pledged to third parties and are in compliance with our policy.

Corporate Social Responsibility

Our goal is to operate our business with the utmost integrity and serve our customers, employees and shareholders in a way that is deserving of their support and trust. Social responsibility is one way we strive to follow through with this commitment. We actively pursue solutions to reduce our environmental impact, contribute to the communities we serve, and support the rights of workers who create our products. We believe that both transparency and collaboration are key to progress in all of these areas, and we disclose our efforts in an annual Corporate Social Responsibility Report. More information can be found at nordstrom.com under Nordstrom Cares. We also continue to work with and learn from interested parties. The Company does not use corporate funds to make contributions to support or oppose federal, state or local political parties, candidates, campaigns and/or ballot measures. Our statement on Political Activity may be accessed through our website at investor.nordstrom.com under Corporate Governance.

Website Access to Corporate Governance Documents

The Charters for each of the standing Committees of the Board, the Company’s Corporate Governance Guidelines, the Employee Code of Business Conduct and Ethics, and the Director Code of Business Conduct and Ethics, as well as all Company filings made with the SEC, may be accessed through our website at investor.nordstrom.com, under Corporate Governance and SEC Filings.

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PROPOSAL 1  ELECTION OF DIRECTORS

The Board recommends a vote FOR each nominee.

Eleven nominees, recommended by the Company’s Board, will be elected at the Annual Meeting, each to hold office until the 2019 Annual Meeting of Shareholders and until their successors have been duly elected and qualified. All of the nominees listed in this Proposal 1 are currently Directors of the Company.

Director Qualifications and Experience

 

The Board, acting through the Corporate Governance and Nominating Committee, seeks a Board that, as a whole, possesses the experience, skills, backgrounds and qualifications appropriate to function effectively in light of the Company’s current and evolving business circumstances. The Committee reviews the size of the Board, the tenure of our Directors and their skills, backgrounds and experiences in determining the slate of nominees and whether to seek one or more new candidates. The Committee seeks directors with established records of significant accomplishments in businesses and areas relevant to our strategies. With respect to the nomination of continuing Directors for re-election, the individual’s prior contributions to the Board are also considered.

All of our Directors bring to our Board a wealth of executive leadership experience derived from their service as senior executives of large corporations. As a group, they also bring extensive board experience. The process undertaken by the Committee in recommending qualified director candidates is described in the Director Nominating Process below.

Director Nominating Process

 

The Corporate Governance and Nominating Committee is responsible for identifying and recommending to the Board the nominees to stand for election as directors at each Annual Meeting of Shareholders or, if applicable, at a special meeting of shareholders.

In nominating director candidates, the Committee considers such factors as it deems appropriate, including whether there are any evolving needs of the Board with respect to a particular field, skill or experience. These factors may include judgment, skill, experience with businesses and other organizations, the candidate’s experience and skill set relative to those of other members of the Board and the extent to which the candidate would be a desirable addition to the Board and any Committees of the Board. In addition to these factors, the Committee may also consider a director candidate’s diversity of background during the evaluation and selection process of director candidates. In this context, diversity is broadly construed to mean varied skills, backgrounds and experiences, which include gender and ethnicity, as well as other differentiating characteristics, all in the context of the requirements and needs of the Board at that point in time. The Committee, however, does not have a formal policy regarding how diversity of background should be applied in identifying or evaluating director candidates, and, depending on the current needs of the Board, the Committee may weigh certain factors more or less heavily. The goal of the Committee is to assist the Board in attracting competent individuals with the requisite management, financial and other expertise who will act as directors in the best interests of the Company and its shareholders.

The Committee will consider the qualifications of director candidates recommended by shareholders, and evaluate each of them using the same criteria the Committee uses for incumbent candidates. Shareholders who wish to submit nominees for election as directors should follow the procedures described on page 60.

The following table summarizes key qualifications, skills or attributes most relevant to the decision to nominate an individual to serve on the Board. A mark indicates an area of focus or expertise on which the Board relies. The lack of a mark, however, does not mean the Director does not possess that qualification or skill.

                                     
Director                       
Shellye L. Archambeau  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)   
Stacy Brown-Philpot  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)   
Tanya L. Domier  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)   
Blake W. Nordstrom  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)      
Erik B. Nordstrom  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)         
Peter E. Nordstrom  (GRAPHIC)  (GRAPHIC)        (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)         
Philip G. Satre  (GRAPHIC)        (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)
Brad D. Smith  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)   
Gordon A. Smith  (GRAPHIC)  (GRAPHIC)        (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)
Bradley D. Tilden  (GRAPHIC)        (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)
B. Kevin Turner  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)  (GRAPHIC)     (GRAPHIC)  (GRAPHIC)  (GRAPHIC)        (GRAPHIC)

No director candidates were recommended by our shareholders for election at the Annual Meeting.

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Our Director Nominees

 

Information related to the Director nominees as of March 19, 2018 is set forth below, including age, and the particular experience, qualifications, attributes or skills that led the Board to conclude that the person should serve as a Director for the Company.

(GRAPHIC) 

Shellye L. Archambeau


Director since 2015
Age 55

Former Chief Executive Officer of MetricStream, Inc., a global provider of governance, risk, compliance and quality management solutions to corporations across diverse industries from 2002 to January 2018. Prior to joining MetricStream, Ms. Archambeau was Chief Marketing Officer and Executive Vice President of Sales for Loudcloud, Inc., a provider of Internet infrastructure services, from 2001 to 2002; Chief Marketing Officer of NorthPoint Communications from 2000 to 2001; and President of Blockbuster Inc.’s ecommerce division from 1999 to 2000. Before joining Blockbuster, Ms. Archambeau held domestic and international executive positions during a 15-year career at IBM. Ms. Archambeau has been a director of Verizon, Inc. since December 2013. She served as a director of Arbitron, Inc. from 2005 to 2013.

Ms. Archambeau brings to the Board, among other skills and qualifications, leadership experience in technology, ecommerce, digital media and communications. Her technology and international experience uniquely positions her to advise the Board and senior management on global operations and on technology innovations to elevate the customer experience.


(GRAPHIC) 

Stacy Brown-Philpot


Director since 2017
Age 42

Chief Executive Officer of TaskRabbit, Inc., a digital home services labor platform company, since April 2016. Previously, Ms. Brown-Philpot served as the company’s Chief Operating Officer from January 2013 to April 2016. From May 2012 to December 2012, Ms. Brown-Philpot was an Entrepreneur-in-Residence at Google Ventures, the venture capital investment arm of Alphabet, Inc. Prior to that, she spent nearly a decade, from 2003 to 2012, in various directorial positions at Google, including two years as the company’s senior director of global consumer operations. Ms. Brown-Philpot also has a background in finance where she served as a senior analyst at Goldman Sachs and senior associate at PricewaterhouseCoopers. She has been a director of HP Inc. since 2015.

Ms. Brown-Philpot brings to the Board innovation, operational and entrepreneurial experience, digital, branding and marketing expertise, as well as financial and accounting skills. She provides unique insights to elevate the consumer experience in a global digital economy. Her service on the board of HP Inc. provides her with experience in corporate governance matters and key skills in working with directors, understanding board processes and functions, assessing risk and overseeing management.


(GRAPHIC) 

Tanya L. Domier


Director since 2015
Age 52

Chief Executive Officer of Advantage Solutions, a global business solutions services firm, since 2013 and has served on Advantage Solutions’ board of directors since 2008. Ms. Domier was President and Chief Operating Officer from 2010 to 2012 and President of Marketing Services Division and Integrated Marketing Services from 2000 to 2010. Before joining Advantage Solutions (formerly known as Advantage Sales & Marketing) in 1990, Ms. Domier held management positions with the J.M. Smucker Company. She has been a director of Yum! Brands, Inc. since January 2018.

Ms. Domier brings to the Board extensive experience in global sales and marketing focused on the customer, successful strategic planning expertise and senior leadership skills. Further, Ms. Domier possesses financial and accounting skills, and knowledge of and experience with executive compensation programs.


(GRAPHIC) 

Blake W. Nordstrom


Director since 2005(a)
Age 57

Co-President of Nordstrom, Inc., since May 2015. Mr. Nordstrom previously served as President, Nordstrom, Inc. from August 2000 to May 2015, Executive Vice President and President, Nordstrom Rack from February 2000 to August 2000, and as Co-President of the Company from 1995 to February 2000. Mr. Nordstrom has held various other management and sales positions of increasing responsibility since joining the Company in 1975. He served as a director of the Federal Reserve Bank of San Francisco, Seattle Branch, from 2004 to 2006 and as a director of the Federal Reserve Bank of San Francisco from 2007 to 2012. Mr. Nordstrom served as a director of Whole Foods, Inc. from 2011 to 2012.

Mr. Nordstrom’s positions of increasing responsibility with the Company over 40 years, including diverse executive and operational roles, give him a customer-centric perspective in retailing and supporting the business of the Company. 

(a)Blake Nordstrom, Erik Nordstrom and Peter Nordstrom are brothers, great grandsons of the Company’s founder and the second cousins of James F. Nordstrom, Jr., President, Stores for the Company.

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(GRAPHIC) 

Erik B. Nordstrom


Director since 2006(a)

Age 54

Co-President of Nordstrom, Inc. since May 2015. Mr. Nordstrom served as Executive Vice President and President, Nordstrom.com from May 2014 to May 2015. From February 2006 to May 2014, Mr. Nordstrom was Executive Vice President and President, Stores for the Company. From August 2000 to February 2006, he served as Executive Vice President, Full-Line Stores. Mr. Nordstrom previously served as Executive Vice President and Northwest General Manager from February 2000 to August 2000, and as Co- President of the Company from 1995 to February 2000. He has held various other management and sales positions of increasing responsibility since joining the Company in 1979.

Mr. Nordstrom’s positions of increasing responsibility with the Company over more than 35 years, including executive and operational roles, give him a customer-centric perspective in retailing and supporting the business of the Company.


(GRAPHIC) 

Peter E. Nordstrom


Director since 2006(a)

Age 56

Co-President of Nordstrom, Inc. since May 2015. Mr. Nordstrom served as Executive Vice President and President, Merchandising for the Company from February 2006 to May 2015. From September 2000 to February 2006, he served as Executive Vice President and President, Full-Line Stores. Mr. Nordstrom previously served as Executive Vice President and Director of Full-Line Store Merchandise Strategy from February 2000 to September 2000, and as Co-President of the Company from 1995 to February 2000. He has held various other management and sales positions of increasing responsibility since joining the Company in 1978.

Mr. Nordstrom’s positions of increasing responsibility with the Company over more than 35 years, including executive and operational roles, give him a customer-centric perspective in retailing and supporting the business of the Company.


(GRAPHIC) 

Philip G. Satre


Director since 2006

Age 68

Private Investor, Retired Chairman and Chief Executive Officer of Harrah’s Entertainment, Inc., a provider of branded casino entertainment, from 1994 to 2003 and a director of Harrah’s from 1988 to 2005, serving as Chairman of the Board from 1997 to 2005. Mr. Satre held various other positions of increasing responsibility with Harrah’s beginning in 1980, when he joined the company as Vice President, General Counsel and Secretary, until his retirement in 2005. Prior to joining Harrah’s, Mr. Satre practiced law in Reno, Nevada. He has been a director of International Game Technology, PLC since January 2009 and its Chairman since December 2009. Mr. Satre served as a director of NV Energy from 2005 through 2013, Rite Aid Corporation from 2005 to 2011 and Tabcorp Holdings, Ltd. (Australia) from 2000 to 2007.

Mr. Satre’s roles at Harrah’s Entertainment provide him legal experience, senior leadership skills as chief executive officer and experience overseeing customer loyalty and service programs. Further, Mr. Satre’s substantial board experience at International Game Technology, Rite Aid, NV Energy, Tabcorp and his role as Chairman of Harrah’s Entertainment, which under his leadership became one of the world’s largest casino gaming companies, provide him with extensive experience responding to complex financial, operational and strategic challenges, experience with corporate governance matters and key skills in working with directors, understanding board processes and functions, assessing risk and overseeing management.


(GRAPHIC) 

Brad D. Smith


Director since 2013

Age 54

Chairman and Chief Executive Officer of Intuit, Inc., a global provider of business and financial management solutions since 2016 and President and Chief Executive Officer since 2008. Mr. Smith has served on Intuit’s board of directors since 2008. Mr. Smith joined Intuit in 2003 and served as Senior Vice President and General Manager, Small Business division from 2006 to 2007, Senior Vice President and General Manager, QuickBooks from 2005 to 2006, Senior Vice President and General Manager, Consumer Tax Group from 2004 to 2005 and as Vice President and General Manager of Intuit’s Accountant Central and Developer Network from 2003 to 2004. Before joining Intuit, Mr. Smith was Senior Vice President of Marketing and Business Development of ADP, where he held several executive positions from 1996 to 2003. Mr. Smith served on the board of directors of Yahoo! Inc. from 2010 until 2013.

Mr. Smith brings to the Board digital expertise, brand marketing, innovation and entrepreneurial experience, as well as financial and accounting skills, from his position at Intuit. He provides unique insights related to technology innovation and marketing of products and services to broad audiences throughout the world. Mr. Smith’s service on the boards of Yahoo! and Intuit provide him with experience in corporate governance matters and key skills in working with directors, understanding board processes and functions, assessing risk and overseeing management.

(a)Blake Nordstrom, Erik Nordstrom and Peter Nordstrom are brothers, great grandsons of the Company’s founder and the second cousins of James F. Nordstrom, Jr., President, Stores for the Company.

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(GRAPHIC) 

Gordon A. Smith


Director since 2015

Age 59

Co-President and Chief Operating Officer of JP Morgan Chase & Co., a global financial services firm since January 2018. Mr. Smith was Chief Executive Officer, Consumer and Community Banking, JP Morgan Chase & Co. from 2007 to January 2018. He previously was President, Global Commercial Card Group for American Express Travel Related Services, Inc., from 2005 to 2007, President of Consumer Card Services Group for American Express Travel Related Services, Inc., from September 2001 to 2005 and Executive Vice President of U.S. Service Delivery from March 2000 to September 2001. Mr. Smith joined American Express in 1978 and held positions of increasing responsibility within the company. Mr. Smith served on the board of directors of Choice Hotels International from 2004 until 2017.

Mr. Smith brings to the Board his extensive experience in customer-focused businesses in a highly competitive industry. He provides unique insights with respect to customer rewards programs in the consumer services industry. Further, Mr. Smith’s service on a public company board provides him with experience with corporate governance matters and key skills in working with directors, understanding board processes and functions, assessing risk and overseeing management.


(GRAPHIC) 

Bradley D. Tilden


Director since 2016

Age 57

Chairman and Chief Executive Officer of Alaska Air Group, Inc., an airline holding company, since January 2014. In May 2012, Mr. Tilden was named President and Chief Executive Officer of Alaska Air Group. He served as Executive Vice President of Finance and Planning from 2002 to 2008 and as Chief Financial Officer from 2000 to 2008 for Alaska Air Group, and prior to 2000, was Vice President of Finance at Alaska Air Group. Before joining Alaska Airlines, Mr. Tilden worked for the accounting firm PricewaterhouseCoopers. He serves on the board of Alaska Air Group.

Mr. Tilden brings to the Board executive, operational, strategic planning and financial experience, as well as insights with respect to customer rewards programs in the consumer services industry. Mr. Tilden’s service on a public company board provides him with experience with corporate governance matters and key skills in working with directors, understanding board processes and functions, assessing risk and overseeing management.


(GRAPHIC) 

B. Kevin Turner


Director since 2010

Age 53

Vice Chairman of the Board of Managers of AB Acquisition, LLC, the parent company of Albertson’s Companies LLC, an American grocery company, since August 2017. Mr. Turner was Chief Executive Officer of Citadel Securities, a global market maker, and Vice Chairman of Citadel LLC, a global financial institution, from August 2016 to January 2017. He served as Chief Operating Officer of Microsoft Corporation from 2005 to 2016, and as Chief Executive Officer and President of Sam’s Club, a Wal-Mart subsidiary corporation from 2002 to 2005. Between 1985 and 2002, Mr. Turner held a number of positions of increasing responsibility with Wal-Mart Stores, Inc., including Executive Vice President and Global Chief Information Officer from 2001 to 2002.

Mr. Turner’s experience at Microsoft and Wal-Mart has provided him with strategic and operational leadership skills and expertise in online worldwide sales, global operations, supply chain, merchandising, branding, marketing, information technology and public relations.


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AUDIT COMMITTEE REPORT

The following Report of the Company’s Audit Committee of the Board (the “Audit Committee”) does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates this Report by reference.

The Audit Committee operates under a written Charter adopted by the Board. The Charter contains a detailed description of the scope of the Audit Committee’s responsibilities and how they will be carried out. The Audit Committee’s Charter is available on our website at investor.nordstrom.com, under Corporate Governance.

The Board determined that each member of the Audit Committee is independent from the Company as such term is defined in Sections 303.01(B)(2)(a) and (3) of the NYSE’s listing standards at all times during the fiscal year and that each member was an “audit committee financial expert” within the meaning of Item 407 of Regulation S-K under the Securities Exchange Act of 1934.

The Audit Committee serves in an oversight capacity and is not part of the Company’s managerial or operational decision-making process. As part of its responsibilities for oversight of the Company’s Enterprise Risk Management process, the Audit Committee reviews and discusses Company policies and processes with respect to risk assessment and risk management, including discussions of individual risk areas. Management is responsible for the Company’s internal controls and the financial reporting process. Deloitte, the Company’s independent registered public accounting firm, reports to the Company’s Audit Committee, and is responsible for performing an integrated audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with auditing standards generally accepted in the United States of America.

Deloitte and the Company’s internal auditors have full access to the Audit Committee. The auditors meet with the Audit Committee at each of the Audit Committee’s regularly scheduled meetings, with and without management being present, to discuss appropriate matters. The Audit Committee has the sole authority to engage, evaluate and terminate the Company’s independent auditors. The Audit Committee also pre-approves all auditing services, internal control-related services and permitted nonaudit services to be performed by the Company’s independent auditors, and periodically reviews whether to request proposals for the engagement of the independent audit firm.

The Audit Committee recommended to the Board that the audited consolidated financial statements for the fiscal year ended February 3, 2018 be included in the Company’s Annual Report on Form 10-K for such fiscal year, based on the following actions by the Committee:

review and discussion of the Company’s audited consolidated financial statements with management;
review of the unaudited interim financial statements and Forms 10-Q prepared each quarter by the Company;
review of the Company’s Disclosure Committee practices and the certifications prepared each quarter in accordance with Sections 302 and 906 of the Sarbanes-Oxley Act of 2002;
discussions with management regarding the critical accounting estimates on which the financial statements are based, as well as its evaluation of alternative accounting treatments;
receipt of management representations that the Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States of America;
discussions with management, the internal auditors and Deloitte regarding management’s assessment of the effectiveness of the Company’s internal control over financial reporting and Deloitte’s evaluation of the Company’s internal control over financial reporting;
discussions with legal counsel and management regarding contingent liabilities;
receipt of the written disclosures and letter from Deloitte required by the Public Company Accounting Oversight Board Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence; and
discussions with Deloitte regarding their independence, the audited consolidated financial statements, the matters required to be discussed by Auditing Standard No. 16 Communications with Audit Committees, as amended, and other matters, including Rule 2-07 of SEC Regulation S-X.

AUDIT COMMITTEE

Brad D. Smith, Chair
Shellye L. Archambeau
Tanya L. Domier
Bradley D. Tilden 

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PROPOSAL 2   RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board recommends a vote FOR this proposal.

The Audit Committee, consistent with NYSE and SEC rules, has appointed Deloitte to be the Company’s independent registered public accounting firm for the fiscal year ending February 2, 2019. Deloitte and its predecessors have served as the Company’s independent registered public accounting firm for over 45 years, including the fiscal year ended February 3, 2018.

As a matter of good corporate practice to provide shareholders an avenue to express their views on this matter, the Board has determined to seek shareholder ratification of Deloitte’s appointment at this time. If the shareholders do not ratify the appointment of Deloitte, the Board will reconsider the appointment. A representative of Deloitte will be present at the Annual Meeting to respond to questions and to make a statement if he or she so desires.

Audit Fees

The following table summarizes fees billed or expected to be billed to the Company by Deloitte in connection with services for the fiscal years ended February 3, 2018 and January 28, 2017:

             
    Fiscal Year Ended
February 3, 2018
  Fiscal Year Ended
January 28, 2017
Type of Fee   ($) (%)   ($) (%)
Audit Fees(a)   2,924,000 55   2,298,000 71
Audit-Related Fees(b)   683,000 13   921,000 29
Other Fees(c)   1,680,000 32  
TOTAL   5,287,000 100   3,219,000 100

(a) Audit Fees

Audit Fees primarily relate to fees for services for: (i) auditing the consolidated financial statements of the Company; (ii) reviewing the interim financial information of the Company included in its Form 10-Qs; and (iii) auditing the Company’s internal control over financial reporting. Substantially all of Deloitte’s work on these audits was performed by full-time, regular employees and partners of Deloitte and its affiliates.

(b) Audit-Related Fees

Audit-Related Fees are fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and internal control over financial reporting.

This amount does not reflect reimbursement of $254,000 for fiscal year ended February 3, 2018 and $306,000 for fiscal year ended January 28, 2017. This amount includes accounting research tool subscription fees of $6,000 for fiscal year ended February 3, 2018 and $2,077 for fiscal year ended January 28, 2017.

(c) Other Fees

Other Fees primarily relate to fees for advice and recommendations on supply chain strategy.

Pre-Approval Policy

Consistent with SEC policies regarding auditor independence, the services performed by Deloitte for the fiscal years ended February 3, 2018 and January 28, 2017 were pre-approved in accordance with the policies and procedures adopted by the Audit Committee. The pre-approval policy is periodically reviewed and updated. It describes the permitted audit, audit-related, tax and other services that Deloitte may perform. Normally, pre-approval is provided at regularly scheduled Audit Committee meetings. However, the authority to grant specific pre-approval between meetings, as necessary, has been assigned to the Chair of the Audit Committee. The Chair is responsible for updating the Audit Committee at the next regularly scheduled meeting of any services that were pre-approved between meetings.

The Audit Committee approves fees up to a specified amount associated with each proposed service. Providing for fees up to a specified amount for a service incorporates appropriate oversight and control of the Deloitte relationship, while permitting the Company to receive immediate assistance from Deloitte when time is of the essence.

The Committee also reviews on a regular basis:

a listing of approved services since its last review;
a report summarizing the year-to-date services provided by Deloitte, including fees paid for those services; and
a projection for the current fiscal year of estimated fees.

The policy prohibits the Company from engaging the independent registered public accountants for services billed on a contingent fee basis and from hiring current or former employees of the independent auditor who have not satisfied the statutory cooling-off period for certain positions.

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EXECUTIVE OFFICERS

The Executive Officers of the Company are appointed annually by the Board following each year’s annual meeting and serve at the discretion of the Board. In addition to Blake Nordstrom, Erik Nordstrom and Peter Nordstrom, whose biographical information is provided under Election of Directors on pages 20 and 21, the following are the other Executive Officers of the Company on the date of filing of this Proxy Statement.

 

Anne L. Bramman


Employee since 2017
Age 50

Chief Financial Officer since June 2017, when she joined the Company. From March 2015 to March 2017, Ms. Bramman served as Senior Vice President and Chief Financial Officer of Avery Dennison Corporation. She previously served as Chief Financial Officer of Carnival Cruise Line from December 2010 to March 2015. She was employed by L Brands in various finance leadership positions from July 2004 to December 2010, including Senior Vice President, Chief Financial Officer of Henri Bendel from 2008 to 2010.


 

Christine F. Deputy


Employee since 2015
Age 52

Chief Human Resources Officer since June 2015, when she joined the Company. Ms. Deputy previously served as Group Human Resources Director at Aviva plc from March 2013 to June 2015. From February 2012 to March 2013, she was Human Resources Director — Global Retail Banking for Barclays Bank. From July 2009 to February 2012, she was Chief Human Resource Officer at Dunkin’ Brands. She was employed at Starbucks, Inc. from March 1998 to June 2009, serving as Vice President, Human Resources Asia Pacific from November 2007 to June 2009, Vice President, Global Staffing from September 2005 to January 2008, as well as other executive positions from 1998 to 2005.


 

Kelley K. Hall


Employee since 2017
Age 45

Chief Accounting Officer and Treasurer since August 2017, when Ms. Hall joined the Company. From October 2008 to August 2017, she held various senior finance leadership positions at NIKE, Inc. most recently as Vice President and Chief Financial Officer for NIKE, Inc.’s Enterprise Operations. Prior to NIKE, she spent 14 years with Starbucks Corporation in a variety of finance leadership roles, including several roles as vice president supporting U.S. retail and corporate finance.


 

Scott A. Meden


Employee since 1985
Age 55

Chief Marketing Officer since August 2016. From February 2010 to August 2016, Mr. Meden served as Executive Vice President and General Merchandise Manager, Shoe Division. He previously served as Executive Vice President and President, Nordstrom Rack from February 2006 to February 2010, as Divisional Merchandise Manager from September 2002 to January 2006, as Director of Business Planning and Analysis from 2001 to September 2002, and as Financial Manager, Shoes from 1999 to 2001.

 

 

James F. Nordstrom, Jr.


Employee since 1986
Age 45

President, Stores since May 2014. From 2005 to 2014, Mr. Nordstrom served as Executive Vice President and President, Nordstrom Direct. He previously served as Corporate Merchandise Manager, Children’s Shoes, from May 2002 to February 2005, and as a project manager for the design and implementation of the Company’s inventory management system from 1999 to May 2002. Mr. Nordstrom is a great-grandson of the Company founder.


 

Robert B. Sari


Employee since 2009
Age 62

General Counsel and Corporate Secretary since April 2009, when he joined the Company. Mr. Sari previously served as Executive Vice President, General Counsel and Secretary of Rite Aid Corporation since October 2005. Mr. Sari also served as Rite Aid’s Senior Vice President, General Counsel and Secretary from 2002 to 2005 and as Senior Vice President, Deputy General Counsel and Secretary from 2000 to 2002. He served in other roles for Rite Aid beginning in 1997.


 

Geevy S.K. Thomas


Employee since 1983
Age 53

President, Nordstrom Rack since January 2018. Mr. Thomas previously served as Chief Innovation Officer since January 2017. From 2010 to 2017, he served as Executive Vice President and President, Nordstrom Rack. He previously served as Executive Vice President and South Regional Manager from November 2001 to February 2010, as Executive Vice President and General Merchandise Manager, Full-Line Stores from February 2001 to November 2001, and as Executive Vice President, Full-Line Stores and Director of Merchandising Strategy from February 2000 to February 2001. Prior to February 2000, he held various merchandise strategy, store and regional management positions with the Company.


 

Kenneth J. Worzel


Employee since 2010
Age 53

President, Nordstrom.com since September 2016. From 2010 to 2016, Mr. Worzel served as Executive Vice President, Strategy and Development. Prior to joining the Company, he was a partner with McKinsey & Company, a global management consulting firm, from 2009 to 2010. While at McKinsey, he provided the Company and other clients with management strategy and organizational services. Prior to joining McKinsey, he was a managing partner at Marakon Associates, an international strategy consulting firm, from 1992 to 2008. As a partner at Marakon Associates, he provided consulting services to the Company from 1997 to 2008.

 



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COMPENSATION OF EXECUTIVE OFFICERS

Compensation Discussion and Analysis

This section describes our executive compensation program and the compensation decisions made for our fiscal year 2017 Named Executive Officers:

Blake W. Nordstrom   Co-President
Peter E. Nordstrom   Co-President
Erik B. Nordstrom   Co-President
Anne L. Bramman   Chief Financial Officer
Geevy S.K. Thomas   President, Nordstrom Rack
Michael G. Koppel   Retired Chief Financial Officer

For purposes of our filings with the SEC, including this annual Proxy Statement, Blake Nordstrom is considered our Principal Executive Officer. Anne Bramman joined our Company on June 2, 2017 as our Chief Financial Officer and is considered our Principal Financial Officer for purposes of our filings with the SEC. Michael Koppel retired from that position on May 1, 2017.

2017 Snapshot

 

Achieved Record Sales of $15 Billion

Our 2017 earnings per diluted share was $2.59, which included impacts associated with corporate tax reform, consisting of a $0.25 per share reduction related to our income tax provision and a $0.06 per share decrease for a one-time investment in our employees. Net sales during fiscal year 2017 increased 4.4%, inclusive of approximately $220 million or 150 basis points from the 53rd week, and comparable sales increased 0.8%.

We reached record sales of $15 billion in 2017, achieving the following milestones in executing our growth plans:

We experienced continued positive customer trends, reflecting customer growth of 4% to 33 million customers. Additionally, 9 million customers shopped with us in multiple ways, a 6% increase over the prior year.

Investments in new market and digital capabilities, which include Nordstromrack.com/HauteLook, Canada and Trunk Club, contributed $1.5 billion in sales.

In the Nordstrom full-price business, strategic brands, including product with limited distribution and Nordstrom proprietary labels, continued to deliver outsized sales growth.

The Nordstrom Rack off-price business gained 6 million new customers with approximately one-third of off-price customers expected to cross-shop the full-price business over time.

Sales from Nordstrom Rewards customers represented 51% of sales, an increase from 44% in 2016.

Our strategic brand partnerships and combined digital and physical assets make us uniquely positioned in the marketplace. We believe our diversified and resilient business model will continue to serve us well while creating value for our shareholders, customers and employees.

Shareholders Support our Compensation Program

Our shareholders approved our Board’s recommendation to hold Say-on-Pay advisory votes on an annual basis so that they may frequently and openly express their views about the compensation of our Named Executive Officers. Each year since 2011, more than 90% of the votes cast have been supportive of our compensation programs. Based on the majority of shareholders voting in favor of our executive compensation program last year, we continued to implement similar compensation policies and programs in fiscal year 2017, and continued to apply the following guiding principles.

Our Guiding Principles:

Motivate and reward our people to achieve meaningful results that support our strategic goals and shareholder interests, while avoiding encouragement of excessive risk taking;

Attract and keep the best talent through programs that reflect our values and consider, but are not dictated by, market practice;

Ensure the cost of our programs best serve a balance of employee and shareholder business interests;

Keep things simple to promote understanding for our employees and transparency for our shareholders; and

Be attuned to trends and new ideas to support our programs and diverse workforce.

 

 

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2017 Highlights Reflect Dynamics of Our Business Model

(graphic) 
 
Achieved a new record of total net sales at $15.1B, driven by Nordstrom full-price growth of 2.0% and Nordstrom Rack off-price growth of 9.9%.   Grew comparable sales 0.8%, reflecting Nordstrom full-price increase of 0.1% and Nordstrom Rack off-price increase of 2.5%.   Generated earnings of $437M, reflecting continued top-line growth, inventory and expense discipline and investments in capabilities to support our growth plans. 2016 earnings included a $197M Trunk Club impairment charge.

We Emphasize Variable Pay and Balance Short- and Long-Term Incentives as Well as Incentive Values

In accordance with our pay-for-performance philosophy, the compensation program for our Named Executive Officers is straightforward in design and includes four primary elements: base salary, performance-based bonus, long-term incentives (“LTI”) and benefits. Within these elements, we emphasize variable pay over fixed pay, with approximately 80% of our Named Executive Officers’ combined target compensation linked to our financial or market results. The program also balances the importance of these executives achieving both critical short-term objectives and strategic long-term priorities. The following graphics represent target compensation for the Co-Presidents and the other Named Executive Officers and exclude Geevy Thomas’s promotion award granted in February 2017 and Anne Bramman’s new hire award granted in August 2017. See page 32 for additional detail.

 (graphic)
   

Our Variable Pay Reflects Company Performance

Our pay-for-performance design includes rigorous performance goals and high performance standards. Further, with a substantial portion of pay in the form of Nordstrom stock, pay outcomes align with our shareholders’ experience. This is evidenced by our Named Executive Officers’ recent incentive compensation payouts and grant realizable values as of our 2017 fiscal year end, as shown below and on the following page.

INCENTIVE COMPENSATION PAYOUTS 2013   2014   2015   2016   2017
Incentive Earnings Before Interest and Income Tax Expense (“Incentive EBIT”) $ $  1,377M   $  1,391M   $  1,246M   $  1,076M   $   952M
Incentive Return on Invested Capital (“Incentive ROIC”)% 13.8%   13.6%   11.0%   12.4%   10.0%
Annual bonus (payout as % of Target*) 64%   83%   0%   80%   94%
3-year TSR percentile ranking within comparator group 50%ile   63%ile   53%ile   16%ile   10%ile
PSU vesting (payout as % of Target) 0%   75%   75%   0%   0%
*Bonus payout for fiscal year 2017 as a % of Target for Named Executive Officers other than the Co-Presidents was 96%. See page 31 for more information.

 

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Incentive EBIT and Incentive ROIC are not measures of financial performance under Generally Accepted Accounting Principles (“GAAP”) and should be considered in addition to, and not a substitute for, return on assets, net earnings, total assets and other financial measures prepared in accordance with GAAP. See Appendix A for a reconciliation of GAAP and non-GAAP financial measures. Note that Incentive EBIT for fiscal year 2016 included a $197 million Trunk Club impairment charge. Performance share unit (“PSU”) vesting as shown in the table on the previous page corresponds to the performance periods ending in fiscal years 2013 through 2017. Three-year Total Shareholder Return (“TSR”) percentile ranking is based on our TSR performance over three-year rolling periods between fiscal years 2011 and 2017 versus the comparator group. Beginning with the 2014 – 2016 PSU award, we changed our comparator group from our retail peer group to the Standard and Poor’s 500. See pages 31 and 32 to learn more about long-term incentive pay.

GRANT REALIZABLE VALUES 2013   2014   2015   2016   2017
PSUs (realizable value as a% of grant value) 74%   0%   0%   0%   0%
RSUs (realizable value as a% of grant value) 0%   97%   67%   109%   111%
Stock options (realizable value as a% of grant value) 86%   38%   0%   7%   7%

Realizable values shown above are based on the actual value at time of vest, current unvested values using our 2017 fiscal year end stock price of $47.85 and current performance for outstanding PSUs (which are tracking at 0% payout), shown as a percent of grant value. PSUs, restricted stock units (“RSUs”) and stock options are shown in the column matching the year of grant. 2017 realizable value for RSUs excludes Anne Bramman’s new hire award with a grant value of $750,000 and Geevy Thomas’s promotion award with a grant value of $680,000.

The Compensation Committee reviews these results and other analyses to ensure the Named Executive Officers’ aggregate compensation aligns with shareholder interests. Based on these and other outcomes, the Compensation Committee believes that total direct compensation for our Named Executive Officers reflects our pay-for-performance objective and is well aligned with shareholder interests.

Effective Corporate Governance Reinforces Our Compensation Program

Our compensation philosophy for our executive team, including our Named Executive Officers, is reflected in governance practices that support the needs of our business, drive performance and align with our shareholders’ long-term interests. Below is a summary of what we do and don’t do in that regard.

WHAT WE DO   WHAT WE DON’T DO
(GRAPHIC) Pay for performance: Our compensation program for Named Executive Officers emphasizes variable pay over fixed pay, with approximately 80% of their collective target compensation linked to our financial or market results.   (GRAPHIC) Provide employment agreements.
(GRAPHIC) Retain meaningful stock ownership guidelines: Our expectations for ownership align executives’ interests with those of our shareholders, and all Named Executive Officers have exceeded their targets or have time to do so within the time period allowed.   (GRAPHIC) Offer separation benefits to Named Executive Officers who are Nordstrom family members.
(GRAPHIC) Mitigate undue risk: We have caps on potential bonus payments, a clawback policy on performance-based compensation, and active and engaged oversight and risk management systems, including those related to compensation-related risk.   (GRAPHIC) Offer special perquisites to our Named Executive Officers.
  (GRAPHIC) Maintain separate change in control agreements.
(GRAPHIC) Engage an independent compensation consulting firm: The Compensation Committee’s consultant does not provide any other services to the Company.   (GRAPHIC) Gross up taxes, except in the case of selected relocation expenses.
(GRAPHIC) Apply conservative post-employment and change in control provisions: Executive Officers are subject to provisions in the same manner as those for our broader employee population.   (GRAPHIC) Reprice underwater stock options.
(GRAPHIC) Limit accelerated vesting: Our equity plan provides for accelerated vesting of equity awards after a change in control only if an executive is involuntarily terminated by the Company or resigns for good reason, a provision referred to as a “double trigger.”   (GRAPHIC) Issue grants below 100% fair market value.
  (GRAPHIC) Pay dividends on any unearned or unvested equity awards.
(GRAPHIC) Restrict pledging activity: All Executive Officers are subject to pre-clearance requirements and restrictions.   (GRAPHIC) Permit hedging or short-sale transactions.
(GRAPHIC) Receive strong shareholder support: Each year since 2011, more than 90% of the votes cast on the matter have been in favor of our compensation programs.   (GRAPHIC) Count pledged shares towards stock ownership targets.

 

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Context for Understanding Our Compensation Program and Decisions

This section provides background on the roles involved in determining compensation for our Named Executive Officers, our use of market data and the companies selected for our peer group.

Our Roles in Determining Compensation are Well Defined

Compensation Committee

Our Compensation Committee (“Committee”) oversees the development and delivery of our guiding principles and compensation plans for the Named Executive Officers and other executives as described in the Committee Charter on our website at investor.nordstrom.com.

As part of that oversight, the Committee ensures the Named Executive Officers’ aggregate compensation aligns with shareholder interests by reviewing analyses that include:

Cash alignment to evaluate the short-term incentive payouts relative to our Earnings Before Interest and Income Tax Expense (“EBIT”) performance results.

Relative pay and performance to compare the percentile rankings of our total direct compensation (base salary + performance-based bonus + long-term incentives) with financial performance metrics of our peer group.

Compensation Committee Consultant

The Committee’s independent executive compensation consulting firm, Semler Brossy Consulting Group, LLC (“Semler Brossy”), is retained by, and reports directly to, the Committee. A consultant from that firm attends the Committee meetings and supports the Committee’s role by providing independent expertise on market practices, compensation program design and related subjects as described on page 15. Semler Brossy provides services only as directed by the Committee. During fiscal year 2017, Semler Brossy’s services included review of pay programs, performance goal-setting, alignment of pay and performance and other pay-related matters specific to the Committee’s Charter.

Management

Our Co-Presidents provide input to the Committee on the level and design of compensation elements for the Named Executive Officers and other Executive Officers, excluding themselves. Our Chief Human Resources Officer joins the Co-President(s) in Committee meetings to provide perspective and expertise relevant to the agenda. Management supports the Committee’s activity by providing analyses and recommendations developed internally or occasionally with the assistance of external consulting firms other than the Committee’s consulting firm. During fiscal year 2017, technical guidance to management on executive compensation matters came primarily from the professional services provider Korn Ferry Hay Group.

Market Data Provides a Reference Point for Compensation

The Committee believes that knowledge of market practices, particularly those of our peers listed on the following page, is helpful in assessing the design and targeted level of our executive compensation package. In reviewing peer group information, the Committee uses survey data provided by external consultants, monitors general market movement for executive pay and references proxy statements for specific roles.

When the Committee reviews market data, they consider the 50th percentile (median) of our peer group as a reference point, rather than a policy, for positioning target total direct compensation. Target opportunities for individual pay elements vary by executive role based on scope of responsibilities and expected contributions.

Blake Nordstrom, Peter Nordstrom and Erik Nordstrom’s target total direct compensation for 2017 was below our peer group median, as it has been in previous years. Based on the Committee’s review of relevant market data and internal pay equity, the Committee believes the target total direct compensation for Anne Bramman and Geevy Thomas was within a competitive range. Actual pay for the Named Executive Officers can exceed our established targets or peer group actual pay through the variable compensation elements when pre-determined performance milestones are achieved.

Peer Group Companies Represent Our Business

Each year, the Committee reviews the appropriateness of our peer group for comparison on pay and related practices. While the companies represent prominent brands and specialty retailers that are relevant to Nordstrom, they may not always have a direct match to our product offerings or annual revenue. However, the peer group companies meet the following selection criteria:

collective representation of our primary business areas including our full-price, off-price, in store, and online business and private label products;

some overlap with our industry group as defined by institutional shareholders and shareholder service organizations;

general compatibility with our compensation strategy through a competitive offering of the primary pay elements of base salary, performance-based bonus and long-term incentives; and

public company subject to similar market pressures with a track record of sustainability.

 

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Our peer group used for evaluating compensation for fiscal year 2017 was comprised of the following retail companies:

Bed Bath & Beyond, Inc. Kohl’s Corporation Ross Stores, Inc.
Coach, Inc. L. Brands, Inc. Starbucks Corporation
Dillard’s, Inc. Macy’s, Inc. Tiffany & Co.
Estée Lauder Companies, Inc. Michael Kors Holding Limited The TJX Companies, Inc.
Foot Locker, Inc. Neiman Marcus, Inc. Urban Outfitters, Inc.
Gap, Inc. Nike, Inc. VF Corporation
J. C. Penney Company, Inc. Ralph Lauren Corporation Williams-Sonoma, Inc.

During 2017, as part of its annual review of peer companies to be used for compensation comparison purposes, the Committee updated the peer group for 2018 by (1) removing Nike, Inc. and Starbucks Corporation due to significantly higher market values, and (2) adding Hudson’s Bay Company due to its size, business similarities and fit with our selection criteria.

Each Element of Compensation Has its Own Purpose

Our compensation program for Named Executive Officers is made up of four primary elements outlined below. Each element has its own purpose based on our fundamental premise of pay for performance and our guiding principles, described on page 26. Additional information is provided below in the “About Our Compensation Elements, What We Paid in 2017 and Why” section.

Compensation Element   Purpose

Base Salary

(See below)

  Reflect scope of the role and individual performance through base-line cash compensation.

Performance-Based Annual

Cash Bonus

(Page 31)

  Motivate and reward contributions to annual operating performance and long-term business strategy with cash that varies based on results.

Long-Term Incentives

(Pages 31 and 32)

  Promote alignment of executive decisions with Company goals and shareholder interests through stock options, performance share units and restricted stock units where value varies with Company stock performance.

Benefits

(Page 33)

  Provide meaningful and competitive broad-based, leadership and retirement benefits that support healthy lifestyles and contribute to financial security.

Pay Changes for 2017

On an annual basis, the Committee reviews base salary, performance-based bonus target opportunity and long-term incentive target grant value for each of the Named Executive Officers in consideration of the upcoming fiscal year. Committee decisions for fiscal year 2017 are summarized below and shown as a comparison of 2016 and 2017 fiscal year end (“FYE”) amounts. The Committee believes these elements and the overall compensation program are meeting the expectations for our pay-for-performance philosophy and guiding principles.

 

Base Salary

($)

 

Performance-Based

Annual Cash Bonus

(Target Opportunity as % of

Base Salary)

 

Long-Term Incentives

Annual Grant Target

(Grant Value as % of

Base Salary)

Name FYE 2016   FYE 2017   FYE 2016   FYE 2017   FYE 2016*   FYE 2017*
Blake W. Nordstrom 758,500   same   200   same   350   same
Peter E. Nordstrom 758,500   same   200   same   350   same
Erik B. Nordstrom 758,500   same   200   same   350   same
Anne L. Bramman   750,000     90     175
Geevy S.K. Thomas 680,000   same   80   same   150   same
Michael G. Koppel 790,000     90     175  

 *In 2016 and 2017, actual annual long-term incentive grant values varied from target grant values for certain Named Executive Officers. See pages 31 and 32 to learn more about the long-term incentive pay elements for 2017.
About Our Compensation Elements, What We Paid in 2017 and Why

Base Salary

The Committee begins its annual review of base salary for the Named Executive Officers through discussion with the Co-Presidents on the expectations and achievements of each executive during the previous year, as well as their pay history and pay equity with other internal roles. The Committee then references our pay levels to similar roles in peer companies to ensure they are within a competitive range of the peer group median. Named Executive Officers do not necessarily receive increases in base salary every year. When they do, the changes are effective April 1st following their annual performance review, which includes a discussion about individual results against defined expectations.

For 2017, the Named Executive Officers did not receive increases in base salary.

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Performance-Based Annual Cash Bonus

The opportunity for annual performance-based cash awards under our shareholder-approved Nordstrom, Inc. Executive Management Bonus Plan (“Executive Management Bonus Plan”) is designed to focus the Named Executive Officers on the alignment between annual operating performance and long-term business strategy. In support of our guiding principles, the performance-based bonus awards pay out only when pre-determined performance milestones are achieved. The Committee establishes the following criteria in developing the annual bonus arrangements:

Target bonus opportunity: In determining the target percentage of base salary shown on page 30, the Committee takes into account the mix of pay elements, market pay information for similar roles within our peer group and the internal relationship between roles within the Company.

In support of our pay-for-performance philosophy, the maximum bonus payout, which is associated with superior performance, is 2.5 times an executive’s target bonus opportunity. This maximum is higher than is common among our retail peers because we believe it is important to continue encouraging and paying rewards when we achieve truly superior results.

Performance measures: The Committee establishes the performance measures to focus executives on the most important annual and long-term strategic goals. For fiscal year 2017, the Named Executive Officers all had the following measures:
ROIC to ensure our overall performance aligns directly with shareholder returns over the long term. The measure is expressed as a threshold that must be met before any payout can be made on EBIT results to ensure our executives are rewarded only after earnings generate a meaningful return for our shareholders.
EBIT to emphasize the importance of earnings and its role in driving shareholder value. Each executive’s performance-based bonus was weighted 100% on this measure, subject to the ROIC threshold.
Strategic Bonus Measure to use as a bonus payout modifier (up or down) by up to 25%, not to exceed the maximum payout under the Executive Management Bonus Plan, which is 2.5 times an executive’s target bonus opportunity. The Strategic Bonus Measure for fiscal year 2017 considered objective progress in expanding: 1) market share, 2) customer count, and 3) customer engagement, each of which are key indicators of our success in our strategy of serving customers across the breadth of our physical and digital platforms.
Performance measure milestones: The Committee defines financial milestones for ROIC (as a threshold) and EBIT (as a range) that relate to varying percentages of bonus payout. The difficulty level in achieving the milestones reflects the Committee’s belief that there should be a balance between executive pay opportunity, reinvestment in the Company and return to shareholders.

In accordance with our bonus plan, ROIC and EBIT achievement used to determine bonus payout may differ from ROIC and EBIT, as reported in our Form 10-K filed with the SEC, due to the exclusion of certain one-time gains or losses. In this situation, we refer to the measure achievements as Incentive ROIC and Incentive EBIT. This is the case for 2017 where achievements reflect non-operating related adjustments not included in the financial plan. Incentive ROIC and Incentive EBIT are not measures of financial performance under GAAP and should be considered in addition to, and not a substitute for, return on assets, net earnings, total assets and other financial measures prepared in accordance with GAAP. See Appendix A for a reconciliation of GAAP and non-GAAP financial measures.

Our Incentive ROIC for fiscal 2017 was 10.0%, exceeding our threshold goal of 8.5%.
Our Incentive EBIT achievement fell slightly below our target goal of $964 million, warranting a payout level of less than 100%. As shown in the table below, the Incentive EBIT achievement for Blake Nordstrom, Peter Nordstrom and Erik Nordstrom was less than that for the other Named Executive Officers as the Committee determined that one of the three non-operating related adjustments approved for fiscal year 2017 would not apply for them.
We continued to make progress on our Strategic Bonus Measure even in a difficult environment and saw growth in all three of our strategic measures: 1) market share, 2) customer count, and 3) customer engagement, which we track in terms of customers who buy from us across more than one channel. The Committee determined to make no upward or downward adjustment to 2017 bonus payouts based on these results.

The fiscal year 2017, Incentive EBIT performance milestones and actual achievement are shown below.

2017 Incentive EBIT Milestones and Bonus Payout

            Actual Achievement*
  Minimum Threshold Target

Superior /

Maximum

 

Blake Nordstrom,

Peter Nordstrom

and Erik Nordstrom

Other Named

Executive

Officers

Incentive EBIT Performance Less than $747M $747M $964M $1,182M or Greater   $948M $952M
Bonus Payout Level              
% of Executive’s Target              
Bonus Opportunity 0% 25% 100% 250%   94% 96%

*The Incentive EBIT achievement for Blake Nordstrom, Peter Nordstrom and Erik Nordstrom was less than that for the other Named Executive Officers as the Committee determined that one of the three non-operating related adjustments approved for fiscal year 2017 would not apply for them.

Long-Term Incentives

Annual grants of equity under the shareholder-approved 2010 Equity Incentive Plan provide the Named Executive Officers with additional incentive to create shareholder value and receive financial rewards. The long-term incentive value that determines the size of the annual grant to Named Executive Officers is expressed as a percentage of base salary as shown on page 30.

 

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In establishing the long-term incentive value at grant for each Named Executive Officer, the Committee considers the mix of pay elements, market pay information for similar roles within our peer group, our annual share usage and dilution, performance and internal equity of grant size by role. The Committee typically approves annual grants of equity awards during the February Committee meeting, which is scheduled at least a year in advance. The February meeting occurs after performance results for the prior year are known, which allows the Committee to align compensation elements with our performance and business goals.

For fiscal year 2017, we used a combination of vehicles that our Committee believed created the right balance of absolute and relative performance.

Restricted stock units granted as part of the annual grant vest in four equal annual installments and complement our objectives for balancing award value through both absolute and relative stock performance.
Performance share units reward the executive team for our relative TSR performance compared to companies in the Standard & Poor’s 500. The units are earned after a 3-year performance cycle only when the Company’s TSR outperforms more than 40% of the companies identified for that grant.
Stock options granted as part of the annual grant vest and become exercisable in four equal annual installments and have a 10-year term. Our equity incentive plan does not permit repricing, grant prices below 100% of the fair market value of Common Stock on the date of grant or cash dividend payments on options.

The grant value of the equity awarded to the Named Executive Officers in the fiscal year 2017 annual grant consisted of 50% restricted stock units, 25% performance share units and 25% stock options. This was a change from past years’ mix of 50% stock options, 25% performance share units and 25% restricted stock units to better align with peer group norms and enhance executive retention.

In February 2017, after consideration of fiscal year 2016 performance results, including the impairment charge related to an acquisition, the Committee used its discretion to decrease the long-term incentive annual grant value (as % of base salary) for certain Named Executive Officers for fiscal year 2017.

Blake Nordstrom, Peter Nordstrom and Erik Nordstrom received a decrease in their long-term incentive annual grant value as a percentage of base salary from 350% to 325%.
Geevy Thomas and Michael Koppel received target long-term incentive annual grant values as a percent of base salary of 150% and 175%, respectively.

One-Time Equity Awards

Late in fiscal year 2016, Geevy Thomas became the Chief Innovation Officer and received an additional grant of restricted stock units, valued at $680,000 at the time of grant, which vest in three equal annual installments. His grant was made on February 28, 2017, the first day of the open trading window following Committee approval of the grant.

Because Anne Bramman was hired mid-year, she did not receive the 2017 annual grant. Upon her hire, she received a new-hire grant, valued at $750,000 at the time of grant, consisting of 100% restricted stock units which vest in three equal annual installments. Her grant was made on August 21, 2017, the first day of the open trading window following her start date, which was the later of the Committee approval date or her start date.

2015 Performance Share Units Did Not Pay Out

Performance share units for the 2015-2017 fiscal year performance cycle were granted based on the following vesting schedule. At the end of the performance cycle, our TSR did not meet the minimum threshold of greater than the 50th percentile of the Standard & Poor’s 500, which is required for payout. As a result, none of these performance share units vested.

     
Required Percentile
Rank for Vesting
    % of Granted Performance Share Units
Paid Out at Vesting
 
>90th     175  
>80th     150  
>75th     125  
>65th     100  
>50th     75  
50th     0  

2016 and 2017 Performance Share Units are Still in Process

The 3-year performance cycle for the 2016 performance share units runs January 31, 2016 through February 2, 2019. The vesting schedule for the 2016 performance share unit grant is the same as the 2015 grant shown above. The 3-year performance cycle for the 2017 performance share units runs January 29, 2017 through February 1, 2020. After consideration of peer group market practices as shared by the Committee’s compensation consultant, the Committee decided to change the vesting schedule for the 2017 performance share unit grant, as shown below. Above median performance remains required for a payout at target. The peer group for each of these grants consists of companies in the Standard & Poor’s 500 as of the first day of the applicable performance cycle.

     
Required Percentile
Rank for Vesting
    % of Granted Performance Share Units
Paid Out at Vesting
 
>85th     175  
>75th     150  
>65th     125  
>55th     100  
>40th     50  
≤40th     0  

Stock Ownership Guidelines Align Executives and Shareholders

Ownership of Common Stock by our Named Executive Officers and other executive officers is encouraged by management and the Board. As a result, stock ownership guidelines were formally established in 2004. Ownership shares are made up of all forms of Common Stock, as well as vested performance share units that are deferred and unvested restricted stock units. Ownership shares do not include unvested or vested stock options, unvested performance share units or pledged shares.

The Named Executive Officers and other Executive Officers have an annual share target defined as base salary on each April 1st multiplied by their ownership multiple of base salary divided by a 52-week average closing stock price. The ownership multiples of base salary depend on the executive’s role in the Company and are as shown in the following table for the Named Executive Officers. The Committee has assigned these particular multiples to match or exceed market practice, and to represent a significant portion of the overall compensation package to reinforce the alignment of management’s decision making with shareholder interests. Executives new to the Company have five years to achieve their ownership target.

     
Position     Multiple of Base Salary Used to
Establish Ownership Target
Co-President     10x
Chief Financial Officer     4x
President, Nordstrom Rack     3x

Under our guidelines, Named Executive Officers and other Executive Officers are required to conduct any open market transactions in Common Stock only in accordance with an SEC Rule 10b5-1 trading plan. These plans predetermine the timing, number of shares and price at which an Executive

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Officer may buy or sell Company shares. The Executive Officers must also achieve and retain a minimum holding of 100% of their ownership targets before they may sell Company shares in the market.

The Committee regularly reviews stock ownership status for the Named Executive Officers. All of the Named Executive Officers have exceeded their ownership targets or are on track to do so within the allowed time period.

Benefits

The Company offers the Named Executive Officers a comprehensive program of broad-based, leadership and retirement benefits. Their purpose varies by benefit, but in general enhances total compensation with meaningful and competitive offerings that support healthy lifestyles and contribute to financial security. These benefits are regularly reviewed for consistency with our guiding principles, organizational culture and market practices. Additional information on 2017 benefits is provided as noted below.

    Benefit   Where to Learn More
Broad-Based ●   Company contribution to medical, dental and vision coverage; short- and long-term disability; life insurance; adoption assistance; and employee referral assistance. Employee access to accident insurance; health savings account and flexible spending accounts. Employee Stock Purchase Plan. Merchandise discount. Paid time off. ●   For merchandise discount, see All Other Compensation in Fiscal Year 2017, footnote (c) on page 38.
Leadership

Salary continuance; long-term disability coverage; life insurance

 

For long-term disability and life insurance, see All Other Compensation in Fiscal Year 2017, footnote (a) on page 37.

  Executive Deferred Compensation Plan See Nonqualified Deferred Compensation beginning on page 47.
  Leadership Separation Plan See Potential Payments Upon Termination or Change in Control at Fiscal Year-End 2017, footnote (f) beginning on page 52.
Retirement

 

 

401(k) match and discretionary profit-based match

 

Retiree health care (closed to new entrants in 2013)

 

Supplemental Executive Retirement Plan (closed to new entrants in 2012)

 

 

See All Other Compensation in Fiscal Year 2017, footnote(d) on page 38.

See Potential Payments Upon Termination or Change in Control at Fiscal Year-End 2017, footnote (e) on page 52.

See Pension Benefits beginning on page 46.

Changes for 2018

Each year, the Committee reviews the design of our total compensation elements and makes changes as needed to improve alignment with our guiding principles. In consideration of recommendations made by the Committee’s compensation consultant, the following changes were made for fiscal year 2018:

Base Salary

Anne Bramman and Geevy Thomas received increases of approximately 3% in base salary, effective April 1, 2018, to maintain their relative market competitiveness.
Blake Nordstrom, Peter Nordstrom and Erik Nordstrom’s base salaries remained unchanged.

Performance-Based Annual Cash Bonus

In addition to the Company EBIT measure, individual performance measures were added for Anne Bramman and Geevy Thomas to enable differentiation in bonus payout opportunity based on their individual contributions and execution against their goals. The individual performance measure comprises 33% of their fiscal year 2018 bonus opportunity and Company EBIT comprises 67%.
Blake Nordstrom, Peter Nordstrom and Erik Nordstrom’s 2018 bonus opportunity remains based 100% on Company EBIT due to their Co-President roles and responsibility for total Company performance.

Long-Term Incentives

The 2018 annual equity grant mix for Executive Officers, including the Named Executive Officers, was changed to 100% restricted stock units, consistent with the grant mix for all other eligible employees. This change resulted, in part, from the Committee’s deliberations following the announcement by the Nordstrom family group that it was exploring a potential going private transaction and the Committee’s determination to make awards which would remain relevant to executives and have some retention effect in the event that such a transaction were to occur. This grant mix is intended to be a one-time response to a special circumstance and may not be indicative of the Company’s pay strategy going forward.
In March 2018, the Committee determined to award Anne Bramman a restricted stock unit grant, equal to 300% of base salary, for retention and to recognize her critical role in supporting the Company.

Additional Cash Bonus

In March 2018, the Committee determined to award Anne Bramman a one-time cash payment in the amount of $150,000 in recognition of her service to the Company since assuming the role of Chief Financial Officer.

Additional Information

 

Compensation Risk Assessment Supports Integrity of the Pay Program

The Committee oversees an extensive review of the Company’s pay-for-performance philosophy, the composition and balance of elements in the compensation package and the alignment of plans with shareholder interests to ensure these practices do not pose a material adverse risk to the organization.

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The review is conducted every other year as underlying programs and practices are generally consistent over time. The last review, for fiscal year 2016, concluded with the following perspectives:

The goals of the Company’s compensation programs are to attract and retain the best talent and to motivate and reward our people in ways that are aligned with the long-term interests of our shareholders. This has been a long-standing objective of our pay-for-performance philosophy. We believe that the strong alignment of our employee compensation plans with performance has served our stakeholders, and in particular, our shareholders, well. The strength of this alignment is regularly reviewed and monitored by the Committee.
As a fashion specialty retailer, the Company’s compensation-related risks are generally more straightforward than some other business sectors. We have systems in place to identify, monitor and control risks, making it difficult for a single individual or a group of individuals to expose the Company to material compensation risk.
Our compensation program rewards both short- and long-term performance. Company results are team-oriented rather than individually focused and tied to measurable factors that are both transparent to shareholders and drivers of their shareholder return.
The compensation program balances the importance of achieving critical short-term objectives with a focus on realizing strategic long-term priorities. Strong stock ownership guidelines are in place for Company leaders, and mechanisms, such as an executive clawback policy, exist to address inappropriate rewards.
The Committee is actively engaged in establishing compensation plans, monitoring these plans during the year and using discretion in making rewards, as necessary.
The Company has active and engaged oversight systems in place. The Audit Committee and the full Board closely monitor and certify the performance that drives employee rewards through detailed and transparent financial reporting, which is in place to provide strong, timely insight into the performance of the Company.

Based on this review, the Committee believes that the Company’s compensation plans do not encourage risk taking that is reasonably likely to have a material adverse effect on the Company.

Executive Compensation Clawback Policy Applies to Performance-Based Pay

In February 2008, the Board adopted a formal executive compensation clawback policy that applies to any performance-based bonus, equity, equity equivalent or other incentive compensation awarded to an Executive Officer, beginning in that fiscal year. Under that policy, in the event of a material restatement of the Company’s financial results, the Board will review the circumstances that caused the restatement and consider accountability to determine whether an Executive Officer was negligent or engaged in misconduct. If so, and the amount or vesting of an award would have been less had the financial statements been correct, the Board will seek to recover compensation from the Executive Officer as it deems appropriate. This policy is in addition to any requirements which might be imposed pursuant to applicable law.

Termination and Change in Control Provisions are Committee-Directed

Under our Leadership Separation Plan, eligible Company leaders, including certain Named Executive Officers, are entitled to receive severance benefits upon involuntary termination of employment by the Company, due to job elimination, to assist in the transition from active employment. Blake Nordstrom, Peter Nordstrom and Erik Nordstrom are not eligible for separation benefits under the Plan. Separation benefits are described in the Potential Payments Upon Termination or Change in Control section beginning on page 48.

As described in the same section, the Named Executive Officers are generally not entitled to any payment or accelerated benefit in connection with a change in control of the Company. However, the Named Executive Officers are entitled to accelerated vesting of equity if they experience a qualifying termination (termination by the Company without cause or termination by the executive for good reason) within 12 months following a change in control, unless the Committee acts to prevent such acceleration.

Tax and Accounting Considerations Underlie the Compensation Elements

The Committee recognizes the tax and regulatory factors that can influence the structure of executive compensation programs, including:

Section 162(m) of the Internal Revenue Code (“IRC”), which generally disallows a tax deduction to public companies for annual compensation over $1 million paid to their Named Executive Officers. Prior to the enactment of corporate tax reform (the “Tax Act”), the IRC generally excluded from the calculation of the $1 million limit compensation that was based on the attainment of pre-established, objective performance goals established under a shareholder-approved plan. The exclusion for performance-based compensation was repealed by the Tax Act, effective for taxable years beginning after December 31, 2017, such that compensation paid to our Named Executive Officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The Tax Act also expanded the category of covered officers for purposes of the limitations of Section 162(m).

The Committee has historically considered, among other things, the impact of the exclusion for performance-based compensation when developing and implementing our executive compensation programs. Annual awards under our short- and long-term incentive plans were generally designed in a manner intended to meet the requirements under the exclusion. Under the Tax Act, we believe it is unlikely such awards will qualify as performance-based compensation under Section 162(m). We are evaluating what changes we may want to make to our executive compensation programs in order to address the changes in tax treatment.

While the Committee has historically sought to preserve tax deductibility in developing and implementing our compensation program, the Committee also believes it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying Company goals. Therefore, amounts paid under any of our executive compensation programs may be subject to the Section 162(m) limitation on deductibility.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 718, Stock Compensation (“ASC 718”), where stock options, performance share units and restricted stock units are accounted for based on their grant date fair value (see the notes to the financial statements contained within the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018, filed with the SEC). The Committee regularly considers the accounting implications of our equity-based awards.
Section 409A of the IRC, the limitations of which primarily relate to the deferral and payment of benefits under the Executive Deferred Compensation Plan and Supplemental Executive Retirement Plan. The Committee continues to consider the impact of Section 409A and in general, the evolving tax and regulatory landscape in which its compensation decisions are made.

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Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. The Committee believes the Compensation Discussion and Analysis represents the intent and actions of the Committee with regard to executive compensation and has recommended to the Board that it be included in this Proxy Statement for filing with the SEC.

COMPENSATION COMMITTEE

Tanya L. Domier, Chair

Philip G. Satre

Gordon A. Smith

Robert D. Walter

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Summary Compensation Table

The following table summarizes the total compensation paid or accrued by the Company for services provided by the Named Executive Officers for fiscal years ended February 3, 2018, January 28, 2017 and January 30, 2016.

Name and Principal Position  Fiscal Year  Salary
($)(a)
  Bonus
($)(b)
  Stock
Awards
($)(c)
 

Option

Awards
($)(d)

  Non-Equity Incentive Plan Compensation ($)(e)  Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)(f)
  All Other Compensation ($)(g)  Total
($)
Blake W. Nordstrom   2017   771,142      1,760,169   616,272   1,431,290   998,647   57,181   5,634,701
Co-President   2016   751,152      1,630,746   1,437,210   1,213,601   748,859   49,711   5,831,279
    2015   735,445      906,175   906,232         61,858   2,609,710
Anne L. Bramman   2017   504,173      749,965      430,384      316,516   2,001,038
Chief Financial Officer     —                        
      —                        
Peter E. Nordstrom   2017   771,142      1,760,169   616,272   1,431,290   1,030,787   40,774   5,650,434
Co-President   2016   751,152      1,630,746   1,437,210   1,213,601   758,249   47,811   5,838,769
    2015   735,445      906,175   906,232         42,203   2,590,055
Erik B. Nordstrom   2017   771,142      1,760,169   616,272   1,431,290   988,659   50,395   5,617,927
Co-President   2016   751,152      1,630,746   1,437,210   1,213,601   721,831   46,222   5,800,762
    2015   735,445      906,175   906,232         55,224   2,603,076
Geevy S.K. Thomas   2017   691,988      1,408,316   254,988   520,989   2,394,161   45,128   5,315,570
President Nordstrom Rack     —                        
      —                        
Michael G. Koppel   2017   207,128      987,158   345,612   170,690   749,709   461,079   2,921,376
Retired Chief Financial Officer   2016   782,223      835,218   898,239   568,800   647,994   25,598   3,758,072
    2015   764,328      655,120   655,199         23,659   2,098,306

(a) Salary

The amounts shown represent base salary earned during the fiscal year. The numbers shown for all fiscal years vary somewhat from annual base salaries due to the fact that our fiscal year ends on the Saturday nearest to January 31st and salary increases are effective April 1st of each year. Also, as a result of our 4-5-4 retail reporting calendar, fiscal year 2017 included an extra week (the “53rd week”). The 2017 base salaries for the Named Executive Officers were $758,500 each for Blake Nordstrom, Peter Nordstrom and Erik Nordstrom, $750,000 for Anne Bramman, $680,000 for Geevy Thomas and $790,000 for Michael Koppel. The amount shown for Anne Bramman reflects a partial year of base salary as she joined the Company in June 2017. The amount shown for Michael Koppel also reflects a partial year of base salary as he retired from the Company in May 2017. Neither Anne Bramman nor Geevy Thomas were Named Executive Officers prior to fiscal year 2017.

None of the Named Executive Officers elected to defer any of their base salary earned into the Executive Deferred Compensation Plan in fiscal year 2017.

Each of the Named Executive Officers contributed a portion of their base salary earned during fiscal year 2017 to the 401(k) Plan.

(b) Bonus

No amounts are reported because the Company did not pay discretionary or guaranteed bonuses to the Named Executive Officers during any of the reported fiscal years. As described on page 31, bonuses are performance-based, and for that reason, are required to be disclosed in column (e), “Non-Equity Incentive Plan Compensation.”

(c) Stock Awards

The amounts reported reflect the grant date fair value of performance share units and restricted stock units granted during the fiscal year under the 2010 Equity Incentive Plan. The amounts reported are not the value actually received.

The value the Named Executive Officers will ultimately receive from their performance share units will depend on whether the performance requirements are met and the market price of Common Stock at the end of the performance cycle. The amounts reported were calculated in accordance with FASB Accounting Standards Codification 718, Stock Compensation (“ASC 718”) and reflect the probable outcome with respect to satisfaction of performance conditions at the date of grant. The payout could be as low as zero depending on performance over the relevant period, and the value of any payout will depend on stock price at the time of payout. The maximum payout, or “potential value,” of performance share units awarded in 2017, assuming the grant date stock price, would be $1,078,418 each for Blake Nordstrom, Peter Nordstrom and Erik Nordstrom, $446,245 for Geevy Thomas and $604,819 for Michael Koppel. See column (c) of the Grants of Plan-Based Awards in Fiscal Year 2017 table on pages 39 and 40 for the number of performance share units granted in fiscal year 2017.

The value the Named Executive Officers may receive from their restricted stock units will depend on whether the time-based vesting requirement is met and the market price of Common Stock on the vesting date. The amounts reported were calculated in accordance with ASC 718. See column (d) of the Grants of Plan-Based Awards in Fiscal Year 2017 table on pages 39 and 40 for the number of restricted stock units granted in fiscal year 2017.

Stock awards granted to Michael Koppel during the fiscal year were forfeited upon his retirement in May 2017.

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(d) Option Awards

The amounts reported reflect the grant date fair value of stock options granted during the fiscal year under the 2010 Equity Incentive Plan. This is not the value received. The Named Executive Officers will only realize value from stock options if the market price of Common Stock is higher than the exercise price of the options at the time of exercise. The amounts reported were calculated in accordance with ASC 718. See column (e) of the Grants of Plan-Based Awards in Fiscal Year 2017 table on pages 39 and 40 for the number of stock options granted in fiscal year 2017.

Stock options granted to Michael Koppel during the fiscal year were forfeited upon his retirement in May 2017.

Assumptions used in the calculation of these amounts for fiscal years 2017, 2016 and 2015 are included in the notes to the financial statements contained within the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018, filed with the SEC.

(e) Non-Equity Incentive Plan Compensation

The amounts reported reflect the annual performance-based cash awards under the Executive Management Bonus Plan, as described on page 31. The amounts of the cash awards for fiscal year 2017, approved by the Compensation Committee on March 3, 2018, were paid in March 2018. None of the Named Executive Officers elected to defer their cash award for fiscal year 2017 into the Executive Deferred Compensation Plan.

(f) Change in Pension Value and Nonqualified Deferred Compensation Earnings

The amounts reported are the changes in actuarial present value from fiscal year-end 2016 to fiscal year-end 2017, as adjusted for payments made during the year, if any, for each of the eligible Named Executive Officer’s benefit under the Supplemental Executive Retirement Plan (“SERP”). The present value of the benefit is affected by current earnings, credited years of service, Company contributions and investment earnings under the 401(k) Plan (as applicable), the executive’s age and time until normal retirement eligibility, the age of the executive’s spouse or life partner as the potential beneficiary and economic assumptions (discount rate and mortality table used to determine the present value of the benefit). Because these factors vary by individual, the present value of the benefit increased more for some of the Named Executive Officers than for others. See the Pension Benefits section beginning on page 46 for more information about the SERP.

The amounts were calculated using the same discount rate and mortality table assumptions as those used in the Company’s financial statements to calculate the Company’s obligations under the SERP. Assumptions used in the calculation of these amounts are included in the notes to the financial statements contained within the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018, filed with the SEC.

Geevy Thomas and Michael Koppel had account balances in the Company’s nonqualified deferred compensation plan in fiscal year 2017, as shown on page 48. They did not receive above-market-rate or preferential earnings on their deferred compensation, so no amounts for these types of earnings are included in the table.

(g) All Other Compensation

Each component of all other compensation paid to the Named Executive Officers is shown in the table below.

All Other Compensation in Fiscal Year 2017

The following table shows each component of “All Other Compensation” for fiscal year 2017, reported in column (g) of the Summary Compensation Table on page 36, calculated at the aggregate incremental cost to the Company.

   Leadership
Benefit
  Broad-Based Benefit  Broad-Based Retirement Benefit  Other   
Name  Premium
on
Insurance
($)(a)
  SERP
($)(b)
  Merchandise
Discount
($)(c)
  401(k) Plan
Company
Match
($)(d)
  Personal Use
of Company
Aircraft
($)(e)
  Expenses in
Connection
with
Relocation
($)(f)
  Tax Reim-
bursement in
Connection
with Relocation
($)(g)
  Total
($)
Blake W. Nordstrom   742      37,539   18,900            57,181
Anne L. Bramman   430      23,519         277,264   15,303   316,516
Peter E. Nordstrom   742      9,529   18,900   11,603         40,774
Erik B. Nordstrom   742      30,753   18,900            50,395
Geevy S.K. Thomas   696      25,532   18,900            45,128
Michael G. Koppel   190   453,094   7,795               461,079

(a) Premium on Insurance

The Company provides life insurance to the Named Executive Officers in an amount equal to approximately 1.25 times their base salary and additional long-term disability insurance. The amounts reported are the annual Company-paid premiums.

(b) SERP

The Company has a SERP, in which all of the Named Executive Officers, except Anne Bramman, participate. As described in the Pension Benefits section beginning on page 46, the SERP provides an annual benefit, paid upon retirement. The amount shown for Michael Koppel is the total of the SERP benefit payments he received during fiscal year 2017 following his retirement. As required by IRS Code Section 409A, receipt of these payments was subject to a six-month delay.

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(c) Merchandise Discount

The Company provides a merchandise discount for its employees. The Named Executive Officers were provided a discount of 33% for purchases at Nordstrom full-line stores and Nordstrom.com and 20% for purchases at Nordstrom Rack stores, Nordstromrack.com/HauteLook and our restaurants. A 40% discount is available at certain times of the year on specific merchandise. The merchandise discount provided to the Named Executive Officers is the same as for all other eligible management and high-performing non-management employees of the Company. The amounts reported are the total discount the Named Executive Officers received on their Nordstrom purchases during the fiscal year. The Company provides the same merchandise discount program for its Board of Directors, as described on page 17.

(d) 401(k) Plan Company Match

The Company offers a matching contribution on employee 401(k) contributions under the 401(k) Plan to all eligible employees, including the Named Executive Officers. The Named Executive Officers may defer up to 16% of their eligible pay (i.e., base salary, performance-based bonus and other taxable wages) into the Plan, subject to IRC limits.

Although the matching contribution is discretionary and subject to change, the Company currently matches employee contributions for the Plan year, dollar for dollar, up to 4% of eligible pay. The 2017 calendar year compensation limit for eligible pay was $270,000, as set by the IRS. The maximum Company matching contribution for the eligible Named Executive Officers was $10,800 (4% x $270,000) for 2017.

The Company also offers a discretionary match up to an additional 2% of eligible pay, based on Company performance. Based on the Company’s performance in 2017, the Company’s Board approved this discretionary match. Also, this year the Board approved an additional match up to 1% of eligible pay, due to anticipated tax savings from the Tax Act. The Company discretionary match for the eligible Named Executive Officers was $8,100 (3% x $270,000) for 2017. The total Company contribution each of the eligible Named Executive Officers received for 2017 was $18,900, as reported on page 37.

Contributions under the Plan may be directed to any of 12 custom target retirement date funds or to any of 9 individual investment alternatives, including Common Stock. The Plan also offers a self-directed brokerage option.

(e) Personal Use of Company Aircraft

The Company owns two aircraft which it uses for business purposes. On rare occasions, a Named Executive Officer’s guest accompanies the executive on a business trip on the Company’s aircraft as an additional passenger. Only the direct variable costs (i.e., costs the Company incurs solely as a result of the passenger being on the aircraft) are included in determining the aggregate incremental cost to the Company. When travel does not meet the IRS standard for business travel, the cost of the travel is imputed as income to the executive, which is the Company’s practice to fully disclose. The Company does not reimburse the Named Executive Officers for taxes incurred as a result of the imputed income.

In fiscal year 2017, Peter Nordstrom was accompanied by a family member on one business trip. The costs reported are the total direct variable costs associated with the family member’s travel which include the tax deduction the Company was not able to take as a result of the nondeductible portion of the aircraft operating costs.

(f) Expenses in Connection with Relocation

The Company provides relocation assistance to eligible employees who have changed their place of residence to accept a position with Nordstrom. The type and amount of assistance varies by leadership level. Anne Bramman received the standard relocation benefits under our guidelines for an executive at her level when she relocated to the Company’s headquarters in Seattle. The amount reported is the cost incurred by the Company and includes home finding, travel expenses, transportation of household goods, new home closing costs and expenses related to the sale of the old home.

(g) Tax Reimbursement in Connection with Relocation

The Company provides reimbursement of all taxes incurred on taxable moving expenses to employees who have changed their place of residence to accept a position with Nordstrom. The amount reported is the tax reimbursement received by Anne Bramman in fiscal year 2017.

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Grants of Plan-Based Awards in Fiscal Year 2017

The following table discloses the potential range of payouts for:

non-equity incentive plan awards granted in fiscal year 2017. These awards are performance-based cash bonuses granted under the Executive Management Bonus Plan, as described on page 31; and
equity incentive plan awards granted in fiscal year 2017. These awards are performance share units granted under the 2010 Equity Incentive Plan, as described on page 32.

The table also discloses:

the grant date fair value of performance share units granted under the 2010 Equity Incentive Plan in fiscal year 2017;
the number, price and grant date fair value of stock options granted under the 2010 Equity Incentive Plan in fiscal year 2017, as described on page 32; and
the number and grant date fair value of restricted stock units granted under the 2010 Equity Incentive Plan in fiscal year 2017, as described on page 32.
         Estimated Future Payouts  Estimated Future Payouts Under  All Other  All Other     Grant
         Under Non-Equity Incentive  Equity Incentive  Stock  Option     Date Fair
         Plan Awards  Plan Awards  Awards:  Awards:  Exercise  Value of
         (b)  (c)  Number  Number of  or Base  Stock
                           of Shares  Securities  Price of  and
   Grant                       of Stock  Underlying  Option  Option
Name  Date  Approval  Threshold  Target  Maximum  Threshold  Target  Maximum  or Units  Options  Awards  Awards
and Award  (a)  Date  ($)  ($)  ($)  (#)  (#)  (#)  (#)(d)  (#)(e)  ($/Sh)(f)  ($)(g)
Blake W. Nordstrom                                              
Executive                                              
Management                                              
Bonus         379,250   1,517,001   3,792,502                            
Performance                                              
Share Unit                                              
Award  2/28/2017  2/16/2017               6,603   13,207   23,112               527,620
Stock Option                                              
Award  2/28/2017  2/16/2017                               38,653   46.66   616,272
Restricted                                              
Stock Unit                                              
Award  2/28/2017  2/16/2017                           28,704           1,232,549
Anne L.                                              
Bramman                                              
Executive                                              
Management                                              
Bonus         112,348   449,394   1,123,484                            
Restricted                                              
Stock Unit                                              
Award  8/21/2017  5/01/2017                           18,350           749,965
Peter E.                                              
Nordstrom                                              
Executive                                              
Management                                              
Bonus         379,250   1,517,001   3,792,502                            
Performance                                              
Share Unit                                              
Award  2/28/2017  2/16/2017               6,603   13,207   23,112               527,620
Stock Option                                              
Award  2/28/2017  2/16/2017                               38,653   46.66   616,272
Restricted                                              
Stock Unit                                              
Award  2/28/2017  2/16/2017                           28,704           1,232,549

 

NORDSTROM, INC. - 2018 Proxy Statement     39

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         Estimated Future Payouts  Estimated Future Payouts Under  All Other  All Other     Grant
         Under Non-Equity Incentive  Equity Incentive  Stock  Option     Date Fair
         Plan Awards  Plan Awards  Awards:  Awards:  Exercise  Value of
         (b)  (c)  Number  Number of  or Base  Stock
                           of Shares  Securities  Price of  and
                           of Stock  Underlying  Option  Option
Name  Grant  Approval  Threshold  Target  Maximum  Threshold  Target  Maximum  or Units  Options  Awards  Awards
and Award  Date (a)  Date  ($)  ($)  ($)  (#)  (#)  (#)  (#)(d)  (#)(e)  ($/Sh)(f)  ($)(g)
Erik B.                                              
Nordstrom                                              
Executive                                              
Management                                              
Bonus         379,250   1,517,001   3,792,502                            
Performance                                              
Share Unit                                              
Award  2/28/2017  2/16/2017               6,603   13,207   23,112               527,620
Stock Option                                              
Award  2/28/2017  2/16/2017                               38,653   46.66   616,272
Restricted                                              
Stock Unit                                              
Award  2/28/2017  2/16/2017                           28,704           1,232,549
Geevy S.K.                                              
Thomas                                              
Executive                                              
Management                                              
Bonus         136,000   544,000   1,360,000                            
Performance                                              
Share Unit                                              
Award  2/28/2017  2/16/2017               2,732   5,465   9,563               218,327
Stock Option                                              
Award  2/28/2017  2/16/2017                               15,993   46.66   254,988
Restricted                                              
Stock Unit                                              
Award  2/28/2017  2/16/2017                           11,877           509,998
Restricted                                              
Stock Unit                                              
Award  2/28/2017  2/16/2017                           15,564           679,991
Michael G.                                              
Koppel                                              
Executive                                              
Management                                              
Bonus         44,557   178,229   445,573                            
Performance                                              
Share Unit                                              
Award  2/28/2017  2/16/2017