Form DEF 14A VALVOLINE INC For: Jan 25

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

VALVOLINE INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box)

100 Valvoline Way

Lexington, KY 40509

December 14, 2021

Dear Valvoline Inc. Shareholder:

On behalf of our Board of Directors and management, we cordially invite you to attend the 2022 Annual Meeting of Shareholders of Valvoline Inc. The meeting will be held on Tuesday, January 25, 2022, at 8:00 a.m. (ET), at Valvoline’s principal office, 100 Valvoline Way, Lexington, KY 40509.

We are pleased to provide access to our proxy materials via the Internet under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we are mailing to most of our shareholders a Notice of Internet Availability of Proxy Materials (“Notice”) instead of a paper copy of this Proxy Statement, a proxy card and our 2021 Annual Report. The Notice contains instructions on how to access those documents over the Internet, as well as instructions on how to request a paper copy of our proxy materials. All shareholders who do not receive a Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail. We believe that this approach provides a convenient way for you to access our proxy materials and vote your shares, while reducing the costs of printing and distributing our proxy materials and conserving natural resources.

The attached Notice of Annual Meeting and Proxy Statement describe the business to be conducted at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. We encourage you to promptly vote and submit your proxy by telephone or over the internet using the instructions on the Notice, or, if you received paper copies of the proxy materials, you may also vote by following the instructions on the proxy card and signing and returning it in the pre-addressed postage-paid envelope provided for your convenience. If you attend the Annual Meeting, you can vote in person even if you previously submitted your proxy.

In response to the ongoing COVID-19 pandemic, health and safety protocols will be followed at the Annual Meeting. All seating will be appropriately spaced to ensure proper social distancing and attendees will be required to wear a mask or other acceptable face covering during the meeting. In the event it is not possible to hold the Annual Meeting in person, we will publicly announce alternative arrangements for the Annual Meeting as soon as practicable, which may include holding a virtual-only meeting.

We appreciate your continued confidence in Valvoline and look forward to seeing you at the meeting.

Sincerely,

This summary highlights certain information about matters discussed in this Proxy Statement. This summary does not contain all information you should consider, and we encourage you to read this entire Proxy Statement carefully before voting.

2022 Annual Meeting of Shareholders

Date and Time: Tuesday, January 25, 2022 at 8:00 a.m. Eastern Time		Location: Headquarters of Valvoline Inc. 100 Valvoline Way Lexington, KY 40509		Record Date: November 29, 2021		Proxy Mail Date: On or about December 14, 2021

Voting Matters and Board Recommendations

Corporate Governance Highlights

Valvoline believes good governance is critical to achieving long-term shareholder value. We are committed to governance practices and policies that serve the best interests of the Company and our shareholders. The following table summarizes certain highlights of our corporate governance practices and policies:

 

				PROXY STATEMENT    i

Board Diversity

Our director nominees exhibit a mix of skills, experience and perspectives that will facilitate the strong oversight and strategic direction required to govern the Company’s business and strengthen and support senior management.

Board Expertise & Skills

Automotive Transportation

Finance

Franchise Operations

International

Digital and Marketing

M&A

Retail

Risk Management

Supply chain

Our Director Nominees to the Board

You are being asked to vote on the election of the nine directors listed below. Detailed information about each nominee’s background and experience can be found beginning on page 8.

Nominee Name Occupation						Director   Since				Other Public   Co. Boards		Committee Memberships
				Age				Independent				Audit		Comp		G&N
		Gerald W. Evans, Jr. Retired Chief Executive Officer of Hanesbrands Inc.		62		2019		✓		0
		Richard J. Freeland Retired President and Chief Operating Officer of Cummins Inc.		64		2016		✓		1
		Stephen F. Kirk Chairman of the Board; Retired Senior Vice President and Chief Operating Officer of The Lubrizol Corporation		72		2016		✓		0
		Carol H. Kruse Former Chief Marketing Officer of ESPN and Cambia Health Solutions		59		2018		✓		0
		Stephen E. Macadam Retired Chief Executive Officer and President of EnPro Industries, Inc.		61		2016		✓		2
		Vada O. Manager President and Chief Executive Officer of Manager Global Holdings LLC; Chief Strategist & Board Director of Think TRUE		60		2016		✓		0
		Samuel J. Mitchell, Jr. Chief Executive Officer and Director of Valvoline Inc.		60		2016				0
		Charles M. Sonsteby Former Vice Chairman of The Michaels Companies		68		2016		✓		1
		Mary J. Twinem Retired Executive Vice President and Chief Financial Officer of Buffalo Wild Wings, Inc.		61		2016		✓		1

  =  Chair                       =  Member

 

		ii				PROXY STATEMENT

Fiscal 2021 Financial and Operational Highlights

Fiscal 2021 was a remarkable year for growth and transformation at Valvoline, including record sales, net income and adjusted EBITDA, each reflecting exceptional year-over-year growth. Valvoline’s strategy to become a more service-driven business was strengthened as our Retail Services segment contributed 54% of our total segment adjusted EBITDA⁽¹⁾, driven by outstanding year-over-year same store sales growth and unit additions. We also saw strong sales and volume growth in our Global Products segment.

The success of both segments demonstrates the solid foundation that we have built across our businesses. In October 2021, the Company announced its plan to accelerate its continued transformation by pursuing a separation of its two reportable segments, Retail Services and Global Products.

Retail Services

Global Products

 

				PROXY STATEMENT    iii

Fiscal 2021 Compensation Highlights

Pay for Performance

Pay-for-performance Compensation Philosophy

To reinforce our pay for performance philosophy, the total compensation program for our Named Executive Officers is highly incentive-based and therefore fluctuates based on financial results and stock price performance. This approach motivates executives to consider the impact of their decisions on both the short-term and long-term performance of the Company and shareholder value creation, while taking appropriate types and amounts of risk.

Pay Mix of CEO and Other NEOs⁽¹⁾⁽²⁾

 

		iv				PROXY STATEMENT

Fiscal Year 2021 Annual and Long-Term Incentive Plan Payouts

Say on Pay   Shareholders continued to show strong support for our executive compensation programs, with 97% of the votes cast for the approval of the “say on pay” proposal at our 2021 Annual Meeting of Shareholders.

Environmental, Social and Governance (“ESG”) Oversight

Valvoline recognizes the importance of being a good corporate citizen and we strive to run our business in a responsible manner, reduce our environmental impact and create a diverse and vibrant workforce. We believe that ESG matters are intimately intertwined with our business and believe that a strategy that recognizes the importance of each ESG pillar is in the best interests of Valvoline and our stakeholders.

To provide for effective oversight of Valvoline’s strategy, initiatives and policies regarding ESG matters, our Board consolidated the review and oversight of ESG matters within the Governance & Nominating Committee in fiscal 2021. The ESG matters that the G&N Committee reviewed and discussed with members of the Valvoline Leadership Team (“VLT”) and our newly established ESG Steering Committee in fiscal 2021 included:

Valvoline established an ESG Steering Committee in fiscal 2021 to guide the VLT in enhancing and further developing Valvoline’s strategy related to ESG matters and to consider and recommend policies, practices and disclosures that conform to that strategy. The ESG Steering Committee meets at least four times per year and is composed of employees with the knowledge and expertise in relevant and varied disciplines.

 

				PROXY STATEMENT    v

Proposal and Required Vote

Our Board of Directors (the “Board”) currently consists of the following nine members: Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby and Mary J. Twinem. Each member of the Board was elected at the 2021 Annual Meeting of Shareholders and has been nominated for re-election at the 2022 Annual Meeting.

In nominating Mr. Kirk for re-election to the Board, the Governance & Nominating Committee of the Board (the “G&N Committee”) and the Board unanimously determined that, although Mr. Kirk currently exceeds the director retirement policy age of 72, it would be in the Company’s and its shareholders’ best interest to retain Mr. Kirk as a director until the earlier of (i) such time as the Company completes the separation of its Retail Services and Global Products businesses and (ii) the 2023 Annual Meeting. Under the Company’s director retirement policy set forth in our Corporate Governance Guidelines (published on our website at http://investors.valvoline.com/governance), a director is not required to retire at the annual meeting following his or her 72nd birthday if the G&N Committee, with the approval of a majority of the Company’s independent directors, makes an exception based upon a determination, after due consideration of the director’s extensive service, that it would be in the interest of the Company’s shareholders to retain that director. Mr. Kirk has served as Chairman of the Board since 2017 and his leadership has been instrumental in the Company’s strategic transformation to a more service-driven business model and guiding the Board’s decision to pursue a separation of the Retail Services and Global Products businesses as the next step in that transformation. In addition, Mr. Kirk served as a director of Ashland Global Holdings when it spun-off Valvoline. The G&N Committee and the Board determined that Mr. Kirk’s experience would be invaluable as the Company pursues a transaction it believes will maximize shareholder value and position each business for continued success.

The G&N Committee, with the assistance of a leading director search firm, is currently in the process of conducting a search for a new director that exhibits the personal and professional qualifications specified in the G&N Committee’s charter. Specifically, the G&N Committee’s director search has been focused on identifying a candidate with professional experience and expertise that will help guide the Company’s strategy to expand its capabilities to serve future transport vehicles by continuing to develop relationships with electric vehicle OEMs and leveraging innovation in the delivery of future services and products in direct and adjacent markets. Based on this need, the G&N Committee is looking for one or more candidates with significant experience in the areas of electric vehicles,

energy transition and/or autonomous transportation which is relevant to the Company’s strategy to transform with the evolving car parc. The G&N Committee also considers diversity of race, ethnicity, gender and age as an important factor in evaluating candidates for membership to the Board.

See the “Corporate Governance—Valvoline’s Board of Directors” section of this Proxy Statement for further information about the structure, operations and roles of our Board. The G&N Committee has confirmed that all nine nominees will be available to serve as directors upon election and recommends their election.

Directors are elected at each annual meeting of shareholders to hold office until the following annual meeting of shareholders and until their successors have been duly elected and qualified. Pursuant to our Articles, a director nominee in an uncontested election must receive the affirmative vote of a majority of votes cast with respect to that director nominee in order to be elected to our Board. Therefore, to be elected at the Annual Meeting, a director nominee must receive more votes cast “for” his or her election than votes cast “against” his or her election. Abstentions and broker non-votes will not be counted as votes cast. Nominees elected at the 2022 Annual Meeting will serve until our 2023 Annual Meeting of Shareholders and will hold office until their successors are duly elected and qualified.

If you (i) sign and return a proxy card without giving specific voting instructions or (ii) indicate when voting by telephone or over the Internet that you wish to vote as recommended by the Board, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy FOR each of the nine nominees named in this Proxy Statement. Should any of the nominees be unable or unwilling to stand for election at the time of the Annual Meeting, the proxies may vote for a replacement nominee recommended by the Board, or the Board may reduce the number of directors to be elected at the Annual Meeting.

 

		6				PROXY STATEMENT

Information Concerning Director Nominees

The nine individuals nominated for election as directors at the Annual Meeting are Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby and Mary J. Twinem. Each of these nominees is currently a member of our Board and has agreed to stand for election. Background information about each director nominee is set forth below, including information regarding the specific experiences, characteristics, attributes and skills considered in connection with the nomination of each director nominee, all of which the Board believes provide the Company with the perspective and judgment needed to guide, monitor and execute its strategies.

 

				PROXY STATEMENT    7

The Audit Committee of our Board of Directors (the “Audit Committee”) reviews our accounting firm’s qualifications, performance and independence in accordance with regulatory requirements and guidelines to determine whether to reappoint such firm as our independent registered public accounting firm. Based on its review, the Audit Committee has recommended to the Board, and the Board has approved, the appointment of Ernst & Young LLP to audit Valvoline’s Consolidated Financial Statements and Internal Control Over Financial Reporting for fiscal 2022. See the “Corporate Governance—Valvoline’s Board of Directors—Committees” section of this Proxy Statement for further information about the role and responsibilities of our Audit Committee.

The following table presents the aggregate fees (including out-of-pocket costs) for professional services rendered by the member firms of Ernst & Young LLP and their respective affiliates (collectively, “EY”) for the fiscal years ended September 30, 2021 (“fiscal 2021”) and September 30, 2020 (“fiscal 2020”). The fees paid to EY shown in the table below were all pre-approved in accordance with Audit Committee procedures discussed in the “Audit Committee Matters” section of this Proxy Statement.

Our shareholders are being asked to ratify the appointment of EY as Valvoline’s independent registered public accounting firm for fiscal 2022. The appointment of EY will be deemed ratified if the number of votes cast “for” ratification exceed the number of votes cast “against” it. Abstentions and broker non-votes will not be counted as votes cast “for” or “against” ratification. If our shareholders fail to ratify the appointment of EY, the Audit Committee may, but is not required to, reconsider the selection of such firm. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.

The Company has been advised by EY that neither the firm, nor any covered person of the firm, has any financial interest, direct or indirect, in any capacity in Valvoline or its subsidiaries.

One or more representatives of EY will be present at the Annual Meeting to respond to questions from shareholders and will be given the opportunity to make a statement.

If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR the ratification of the appointment of EY as Valvoline’s independent registered public accounting firm for fiscal 2022.

 

				PROXY STATEMENT    13

Policy on Pre-Approval of Audit Firm Services

The Audit Committee of our Board (the “Audit Committee”) has responsibility for appointing, determining compensation of and overseeing the work of the independent registered public accounting firm that audits our financial statements.

The Audit Committee has adopted strict guidelines on the use of the independent registered public accounting firm to provide audit and non-audit services. The Audit Committee reviews and pre-approves all audit and non-audit services performed by the independent registered public accounting firm in the fiscal year. These services may include audit services, audit-related services, tax services and other permissible non-audit services. In circumstances where the engagement of the independent registered public accounting firm to perform work beyond the scope of and not contemplated in the original pre-approval occurs, specific pre-approval of the additional services and fees (not exceeding $500,000) is required by the Audit Committee Chair prior to the engagement of the independent registered public accounting firm for those services and must be presented to the Audit Committee at its next meeting. For each proposed service, the independent registered public accounting firm provides detailed supporting documentation at the time of approval to permit the Audit Committee to make a determination whether the provision of such service would impair the independence of the independent registered public accounting firm.

Professional services provided by EY as our independent registered accounting firm in fiscal 2021 were subject to pre-approval under the guidelines discussed above. Under these guidelines, prior to engagement, the Audit Committee pre-approved the audit and non-audit services to be rendered by EY in fiscal 2021, in each case, including all engagement fees and terms.

Audit Committee Report

The Audit Committee is currently composed of three independent directors and operates under a written charter adopted by the Board. A copy of the Audit Committee’s charter may be obtained from the Company’s Investor Relations website at http://investors.valvoline.com. The Board, after reviewing the qualifications of the Audit Committee members and any relationships that such members may have with the Company that might affect their independence, determined that all current Audit Committee members—Messrs. Manager and Sonsteby and Ms. Twinem—are “independent” as that term is defined by Rule 10A-3 of the Exchange Act, the listing standards of the NYSE, and Valvoline’s Director Independence Standards. The Board also determined that each member of the Audit Committee is an “audit committee financial expert” as defined by SEC rules. A description of each Audit Committee member’s financial experience is contained in their biographies under Proposal One—Election of Directors.

The Audit Committee assists in fulfilling the oversight responsibilities of the Board relating to: the integrity of the Company’s financial statements and financial reporting process; the integrity of the Company’s systems of internal accounting and financial control, including the Company’s systems to monitor and manage business risk; the performance of the Company’s internal audit function; the independent auditors’ qualifications, performance and independence; the independent auditors’ audit of the Company’s financial statements and effectiveness of internal control over financial reporting; the Company’s risk management policies and processes; the Company’s information and cyber security risks and programs to manage such risks; the Company’s financial affairs, including capital structure, securities offerings, major borrowings, credit facilities, and derivatives and swap policies; material legal and regulatory compliance requirements; the Company’s insurance program; and the Company’s process for handling complaints regarding accounting, internal control and auditing matters. The Audit Committee also oversees the Company’s enterprise risk management (“ERM”) program and has direct oversight over financial reporting and control and several other risks within the ERM framework. In fiscal 2021, the Audit Committee met 10 times, including videoconferences to review and discuss Valvoline’s quarterly and annual financial performance and associated earnings releases.

The Company’s management has primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. The independent auditors are responsible for expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting.

 

		14				PROXY STATEMENT

The Audit Committee is responsible for the appointment, retention, compensation and oversight of the Company’s independent registered public accounting firm, including the review of their qualifications, independence and performance, and approval of the audit fees. The Audit Committee appointed EY to audit Valvoline’s consolidated financial statements for fiscal 2021 and to issue an opinion on whether such statements present fairly, in all material respects, Valvoline’s consolidated financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. EY was also engaged to audit and to issue an opinion on the effectiveness of Valvoline’s internal control over financial reporting. EY has served as Valvoline’s independent registered public accounting firm since 2016. The Audit Committee considered several factors in selecting EY as Valvoline’s independent registered public accounting firm for fiscal 2021, including EY’s independence, EY’s system of quality control, EY’s professional qualifications including the qualifications of the lead audit partner and other key engagement members, the Audit Committee’s evaluation of EY’s performance on the fiscal 2020 audit, the extent and quality of EY’s communications with the Audit Committee, the appropriateness of EY’s fees, EY’s tenure as Valvoline’s independent registered public accounting firm and its familiarity with Valvoline’s business and internal control over financial reporting. Based on such factors, the Audit Committee determined that the appointment of EY as Valvoline’s independent registered public accounting firm for fiscal 2021 was in the best interests of Valvoline and its shareholders.

In accordance with SEC rules, lead audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to a company. For lead audit partners, the maximum number of consecutive years of service is five years. The Audit Committee periodically reviews and evaluates the performance of EY’s lead audit partner, oversees the required rotation of the lead audit partner, and reviews and considers the selection of the lead audit partner. EY’s current lead audit partner has served since 2017 and in accordance with the SEC’s rotation requirements, a new lead audit partner has been selected for the fiscal 2022 audit.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management and EY the audited financial statements, management’s assessment of the effectiveness of Valvoline’s internal control over financial reporting and EY’s evaluation of Valvoline’s internal control over financial reporting. The Audit Committee further reviewed EY’s judgment as to the quality and acceptability of Valvoline’s accounting principles, financial reporting process and controls and such other matters as are required to be discussed with the Audit Committee under applicable requirements of the Public Company Accounting Oversight Board (United States) (the “PCAOB”). In addition, the Audit Committee reviewed EY’s independence from management and Valvoline, including the matters in the written disclosures regarding EY’s independence required by the PCAOB, and has discussed such matters with EY. The Audit Committee considered with EY whether the provision of non-audit services provided by them to the Company during fiscal 2021 was compatible with their independence.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that Valvoline’s consolidated financial statements be included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2021, for filing with the SEC.

AUDIT COMMITTEE

Charles M. Sonsteby, Chair

Vada O. Manager

Mary J. Twinem

The Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent that Valvoline specifically incorporates the Audit Committee Report by reference therein.

 

				PROXY STATEMENT    15

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are seeking your vote, on a non-binding advisory basis, on the compensation of our named executive officers as described in the Compensation Discussion and Analysis, compensation tables and narrative disclosure, as provided in this Proxy Statement. Specifically, shareholders are being asked to vote upon, and the Board has approved and unanimously recommends, the following non-binding advisory resolution:

RESOLVED, that the compensation paid to Valvoline’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.

The Board believes that our executive compensation program is well-designed, appropriately aligns executive pay with Company performance and incentivizes desirable executive performance. This proposal gives you an opportunity to express your own view of our fiscal 2021 executive compensation practices. While the vote does not address any specific item of compensation and is not binding on the Board, the Board and its Compensation Committee (the “Compensation Committee”) value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions.

The advisory resolution approving our executive compensation shall be deemed approved if the number of votes cast “for” the resolution exceed the number of votes cast “against” the resolution. Abstentions and broker non-votes will not be counted as votes cast “for” or “against” the resolution.

If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR the approval of the resolution.

 

		16				PROXY STATEMENT

Valvoline’s Board of Directors

Composition

Our business and affairs are managed under the direction of our Board. Our Corporate Governance Guidelines require that two-thirds of our directors be independent, as defined in our Director Independence Standards (published on our investor relations website at http://investors.valvoline.com/governance) (“Independence Standards”), which incorporate the requirements of SEC rules and NYSE listing standards. Within this framework, the Governance & Nominating Committee (the “G&N Committee”) is charged with determining and refreshing, as appropriate, the composition of our Board. The G&N Committee seeks to fill our Board with exceptionally talented and diverse directors, with expertise and leadership experience in the markets in which we operate.

Our Board currently consists of the following nine members: Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby, and Mary J. Twinem. All of the directors were elected at the 2021 Annual Meeting of Shareholders. Each of the current directors has been nominated for re-election at the 2022 Annual Meeting.

In nominating Mr. Kirk for re-election to the Board, the Governance & Nominating Committee of the Board (the “G&N Committee”) and the Board unanimously determined that, although Mr. Kirk currently exceeds the director retirement policy age of 72, it would be in the Company’s and its shareholders’ best interest to retain Mr. Kirk as a director until the earlier of (i) such time as the Company completes the separation of its Retail Services and Global Products businesses and (ii) the 2023 Annual Meeting. Under the Company’s director retirement policy set forth in our Corporate Governance Guidelines (published on our website at http://investors.valvoline.com/governance), a director is not required to retire at the annual meeting following his or her 72nd birthday if the G&N Committee, with the approval of a majority of the Company’s independent directors, makes an exception based upon a determination, after due consideration of the director’s extensive service, that it would be in the interest of the Company’s shareholders to retain that director. Mr. Kirk has served as Chairman of the Board since 2017 and his leadership has been instrumental in the Company’s strategic transformation to a more service-driven business model and guiding the Board’s decision to pursue a separation of the Retail Services and Global Products businesses as the next step in that transformation. In addition, Mr. Kirk served as a director of Ashland Global Holdings when it spun-off Valvoline. The G&N Committee and the Board determined that Mr. Kirk’s experience would be invaluable as the Company pursues a transaction it believes will maximize shareholder value and position each business for continued success.

The G&N Committee, with the assistance of a leading director search firm, is currently in the process of conducting a search for a new director that exhibits the personal and professional qualifications specified in the G&N Committee’s charter. Specifically, the G&N Committee’s director search has been focused on identifying a candidate with professional experience and expertise that will help guide the Company’s strategy to expand its capabilities to serve future transport vehicles by continuing to develop relationships with electric vehicle OEMs and leveraging innovation in the delivery of future services and products in direct and adjacent markets. Based on this need, the G&N Committee is looking for one or more candidates with significant experience in the areas of electric vehicles, energy transition and/or autonomous transportation, which is relevant to the Company’s strategy to transform with the evolving car parc. The G&N Committee also considers diversity of race, ethnicity, gender and age as an important factor in evaluating candidates for membership to the Board.

See the “Proposal One—Election of Directors” section of this Proxy Statement.

During fiscal 2021, 12 meetings of the Board were held. On average, our directors attended 98% of the total meetings of the Board and the Committees on which they serve. No director attended less than 75% of such meetings.

Leadership Structure

Our Amended and Restated By-Laws (“By-Laws”) provide the Board flexibility in determining the appropriate leadership structure for the Company. Currently, Mr. Mitchell serves as our Chief Executive Officer and Mr. Kirk serves as Chairman of the Board. At its November 2021 meeting, the Board, upon the recommendation of the G&N

 

				PROXY STATEMENT    17

Committee, elected Mr. Freeland to succeed Mr. Kirk as Chairman of the Board, effective on the day immediately prior to the 2022 Annual Meeting. The Board currently believes that separating the roles of Chairman and Chief Executive Officer is in the best interest of the Company because it allows our Chief Executive Officer to focus on operating and managing the day-to-day activities of our business, while the Chairman can focus on Board leadership independent of management.

The Board will periodically review and reassess our Board leadership structure and determine whether it is in the Company’s and our shareholders’ best interest to continue the separate roles of Chairman and Chief Executive Officer. In the event that the Board combines the role of Chairman and Chief Executive Officer, our Corporate Governance Guidelines require the Board to appoint a lead independent director.

Independence

Our Corporate Governance Guidelines require that two-thirds of our directors be independent, as defined in the Independence Standards. The Independence Standards incorporate the requirements of SEC rules and NYSE listing standards and were adopted by our Board to assist in its determination of director independence. Pursuant to these rules, our Board must make an affirmative determination that those members of the Board who serve as independent directors have no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). Members of the Audit and Compensation Committees are also subject to heightened standards for independence under SEC rules and NYSE listing standards.

Our Board annually reviews director independence in accordance with these requirements. In making its independence determinations, the Board considered relationships and transactions between each director, on the one hand, and Valvoline, its subsidiaries and its affiliates, on the other hand, including the director’s commercial, economic, charitable and familial relationships. As a result of this review, the Board affirmatively determined that Ms. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby are each independent of Valvoline and its affiliates. Mr. Mitchell was determined not to be independent because he currently serves as Chief Executive Officer of the Company.

In addition, the Board determined that Ms. Twinem and Messrs. Manager and Sonsteby each satisfy the heightened independence standards applicable to audit committee members, including those under Exchange Act Rule 10A-3. Similarly, the Board determined that Ms. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby each satisfy the heightened independence standards applicable to compensation committee members as set forth in NYSE listing standards.

Committees

Our Board has established three standing committees: an Audit Committee, a Compensation Committee and a Governance & Nominating Committee (each a “Committee” and, collectively, the “Committees”) to assist in the performance of the Board’s various functions. All Committee members are appointed by our Board upon recommendation of the G&N Committee.

 

		18				PROXY STATEMENT

Listed below are the members of each of the three Committees. As discussed above in “—Independence,” our Board has determined that all of the members of these Committees are independent as defined by our Independence Standards, including, in the case of Audit and Compensation Committee members, the heightened standards for independence under SEC rules and NYSE listing standards.

The responsibilities of each of our Committees are described below. Each of the Committees operates under a written charter; must meet at least four times a year, plus additional meetings as circumstances require; has authority to retain independent legal, accounting or other advisors; makes regular reports to the Board; and reviews its own performance annually. Each Committee’s charter is available on our investor relations website at http://investors.valvoline.com/governance.

The Board has established the Audit Committee in accordance with Section 3(a)(58) of the Exchange Act. The Audit Committee is currently composed of three members and the Board has determined that each member of the Audit Committee is “independent” and “financially literate,” as such terms are defined by NYSE listing standards. In addition, the Board has determined that each member of the Audit Committee is an “audit committee financial expert” as that term is defined by SEC rules. A director may not serve on the Audit Committee if he or she serves on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service and time commitment would not impair the director’s ability to effectively serve on the Audit Committee.

The Audit Committee is responsible for, among other things, assisting the Board in fulfilling its oversight responsibilities with respect to:

 

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The Compensation Committee is currently composed of eight members and the Board has determined that each member of the Compensation Committee is “independent” as such term is defined by NYSE listing standards and SEC rules and qualifies as a “non-employee director” pursuant to Rule 16b-3 under the Exchange Act.

The Compensation Committee is responsible for, among other things:

 

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The G&N Committee is currently composed of eight members and the Board has determined that each member is “independent” as such term is defined by NYSE listing standards. The G&N Committee is responsible for, among other things:

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee (Ms. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby) (i) was an officer or employee of Valvoline at any time during or prior to fiscal 2021 or (ii) is or was a participant in a “related person” transaction with Valvoline since the beginning of fiscal 2021. No executive officer of the Company served on the compensation committee or board of any company that employed any member of Valvoline’s Compensation Committee or the Board.

The Board’s Operations

Chairman of the Board.     Mr. Kirk has served as our Non-Executive Chairman, since October 1, 2017. At its November 2021 meeting, upon the recommendation of the G&N Committee, Mr. Freeland was unanimously appointed by the Board, to succeed Mr. Kirk as our Non-Executive Chairman, effective the day immediately prior to the 2022 Annual Meeting. The Chairman of the Board organizes Board activities to effectively provide guidance to, and oversight and accountability of, management. To fulfill that role, the Chairman of the Board, among other things, creates and maintains an effective working relationship with the Chief Executive Officer and the other

 

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members of senior management and the Board, assures that the Board agenda is appropriately directed to the matters of greatest importance to the Company and provides senior management with the Board’s advice, direction and opinions. The Non-Executive Chairman preserves the distinction between management and oversight, maintaining the responsibility of management to develop corporate strategy and the responsibility of the Board to review and express its views on corporate strategy.

Board and Committee Meetings.    The Board and Committees must hold regularly scheduled meetings. Directors are expected to attend all meetings of the Board and of the Committees on which they serve. Non-management directors meet in executive session at each regularly scheduled meeting of the Board, and at other times as they may determine appropriate.

Evaluation of Board Effectiveness.    The Board must conduct annual self-evaluations to determine whether it and its Committees are functioning effectively. The G&N Committee receives comments from all directors and reports to the Board with an annual assessment of the Board’s performance, with a focus on the Board’s contribution to the Company and areas in which the Board or its Committees can improve. We may also engage independent, third-party governance experts from time to time to conduct interviews and/or assessments regarding the structure and effectiveness of our Board and its Committees. The Committees of our Board of Directors have all adopted charters defining their respective purposes and responsibilities. Pursuant to these charters, the Committees must review their respective performances at least annually and each of the Committees has authority to engage independent legal, accounting or other advisors.

The Board’s Role in Risk Oversight

The Board has an active role, as a whole, and also at the committee level, in overseeing management of the Company’s risk. The Board approves and monitors the fundamental financial and business strategies of the Company and maintains policies and procedures designed to ensure that the assets of the Company are properly safeguarded and enterprise risks are properly managed, that appropriate financial and other controls are maintained, that processes are in place for maintaining the integrity of the Company and that the Company’s business is conducted in compliance with applicable laws and regulations. Management is responsible for the day-to-day management of risk, and members of our senior management regularly report to the Board and its Committees on current and emerging risks and the Company’s approach to avoiding and mitigating risk exposure. The Board reviews in detail the Company’s most significant risks and whether management is responding consistently within the Company’s overall risk management and mitigation strategy. While the Board is ultimately responsible for overall risk oversight at our Company, the Committees assist the Board in fulfilling its oversight responsibilities in certain areas. In particular, the Audit Committee has primary responsibility for monitoring the Company’s major financial risk exposures and the steps the Company has taken to control such exposures, including the Company’s risk management policies and processes. The Compensation Committee monitors the risks associated with our compensation policies and procedures. To provide for effective oversight of the Company’s strategy, initiatives and policies regarding environmental, social and governance (“ESG”) matters, the Board consolidated the review and oversight of ESG matters within the G&N Committee in January 2021. As part of this transition, the G&N Committee now assists the Board in fulfilling its oversight responsibility with respect to environmental, health and safety (“EH&S”) risks and programs and diversity, equity and inclusion efforts. EH&S risks and programs are now reviewed by the G&N Committee at least twice per year. The G&N Committee is also charged with reviewing and recommending governance policies and procedures, including Board and Committee structure, leadership and membership, that ensure independence of the Board as it exercises its corporate governance and risk oversight roles. In addition, the G&N Committee reviews transactions pursuant to our Related Person Transaction Policy (which is further described in “—Other Governance Policies and Practices—Related Person Transaction Policy”).

ESG Oversight

Valvoline recognizes the importance of being a good corporate citizen and we strive to run our business in a responsible manner, reduce our environmental impact and create a diverse and vibrant workforce. We believe that ESG matters are intimately intertwined with our business and believe that a strategy that recognizes the importance of each ESG pillar is in the best interests of Valvoline and our stakeholders.

 

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As part of the G&N Committee’s oversight responsibilities related to ESG matters, the G&N Committee reviewed and discussed a number of ESG matters with members of the Valvoline Leadership Team (“VLT”) and our newly established ESG Steering Committee in fiscal 2021. These topics included EH&S matters, including Valvoline’s sustainability initiatives and carbon reduction strategy; ethics and compliance, including Valvoline’s focus on anti-bribery/corruption, data privacy compliance, and key legal compliance risks and initiatives to mitigate such risks; diversity, equity and inclusion, including Valvoline’s initiatives to recruit, hire, train, promote and retain diverse talent, diversity spending with suppliers and charitable giving to diverse organizations, reviewing the activities of Valvoline’s Diversity, Equity and Inclusion Council (“Diversity Council”), and reviewing employee engagement surveys; and governance matters, including corporate governance responsibilities of the Board, overseeing the CEO and senior management succession planning process, and reviewing trends in corporate governance.

Valvoline also established an ESG Steering Committee in fiscal 2021 to guide the VLT in enhancing and further developing Valvoline’s strategy related to ESG matters and to consider and recommend policies, practices and disclosures that conform to that strategy. Pursuant to the ESG Steering Committee Charter, Valvoline’s Chief Legal Officer serves as Chair and the Chief People Officer serves as Vice Chair of the ESG Steering Committee. The ESG Steering Committee meets at least four times per year and is composed of employees with the knowledge and expertise in relevant and varied disciplines, including EH&S; legal and compliance; corporate governance; human capital management, including diversity, equity and inclusion; communications; community relations; investor relations; external reporting; information security; operations; supply chain and procurement; and research and development. In addition to guiding Valvoline’s ESG strategy, the ESG Steering Committee is responsible for reviewing and assessing goals for ESG matters and recommending proposed changes to the VLT, overseeing the Company’s reporting and disclosure related to ESG matters, considering current and emerging trends and advising the VLT on how those trends may impact Valvoline’s business, operations, performance or public image, advising the VLT on any shareholder proposals or stakeholder concerns related to ESG matters, overseeing the activities of the Diversity Council, and assisting the VLT with reporting ESG matters to the G&N Committee.

Other Governance Policies and Practices

Overview of Governance Principles

We are committed to adhering to sound corporate governance practices. We have adopted Corporate Governance Guidelines, which include our Related Person Transaction Policy. These Guidelines provide the framework for our Board’s governance of the Company and include a general description of our Board’s purpose, responsibilities and member qualification standards. As further discussed in “—Valvoline’s Board of Directors—Independence,” our Corporate Governance Guidelines require that at least two-thirds of our directors be independent. Our Related Person Transaction Policy requires our directors and executive officers to identify annually and on an as needed basis potential transactions with related persons or their firms that meet certain criteria set forth in our Related Person Transaction Policy.

We also require compliance with our code of business conduct, entitled “Global Standards of Business Conduct,” which applies to all of our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. Our Global Standards of Business Conduct promote honest and ethical conduct, compliance with applicable laws, rules and regulations, prompt reporting of violations of the standards set forth therein and full, fair, accurate, timely and understandable disclosure in reports filed with the SEC.

Our Corporate Governance Guidelines (including our Related Person Transaction Policy), Global Standards of Business Conduct and Committee charters are published on our investor relations website at http://investors.valvoline.com/governance. These documents are also available in print at no cost to any shareholder who requests them. We intend to post any amendments or waivers to our Global Standards of Business Conduct (to the extent applicable to our directors and executive officers) on our investor relations website or in a Current Report on Form 8-K.

 

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Related Person Transaction Policy

Federal securities laws require us to describe any transaction since the beginning of the last fiscal year, or any currently proposed transaction, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. Related persons are directors and executive officers, nominees for director and any immediate family members of directors, executive officers or nominees for director. We are also required to describe our policies and procedures for the review, approval or ratification of any Related Person Transaction.

Pursuant to our written Related Person Transaction Policy (the “Policy”), the G&N Committee is responsible for reviewing the material facts of all transactions that could potentially be “transactions with related persons.” The Policy covers any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year, (2) the Company is a participant, and (3) any related person has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). Transactions between the Company and any firm, corporation or entity in which a related person is an executive officer or general partner, or in which any related persons collectively hold more than 10% of the ownership interests, are also subject to review under the Policy.

Under the Policy, our directors and executive officers are required to identify annually potential transactions with related persons or their firms that meet the criteria set forth in the Policy, and management is required to forward all such disclosures to the G&N Committee. The G&N Committee reviews each disclosed transaction. The G&N Committee has discretion to approve, disapprove or otherwise act if a transaction is deemed to be a Related Person Transaction subject to the Policy. Only disinterested members of the G&N Committee may participate in the determinations made with regard to a particular transaction. If it is impractical to convene a meeting of the G&N Committee, the Chair of the G&N Committee is authorized to make a determination and promptly report such determination in writing to the other G&N Committee members. All determinations made under the Policy are required to be reported to the full Board.

Under the Policy and consistent with SEC regulations, certain transactions are not Related Person Transactions, even if such transactions exceed $120,000 in a fiscal year. Those exceptions are:

The G&N Committee determined that there were no Related Person Transactions that were required to be reported under Item 404(a) of Regulation S-K since the beginning of fiscal 2021, nor are there any currently proposed.

Communication with Directors

As set forth in our Corporate Governance Guidelines, the Board believes that management is responsible for communicating on behalf of the Company. However, at the request of management, individual Board members may meet or otherwise communicate with shareholders and other interested parties. Persons interested in communicating with the Board, or with a specific member or Committee of the Board, may do so by writing to Valvoline’s Corporate Secretary at 100 Valvoline Way, Lexington, KY 40509. Communications directed to our Corporate Secretary will be reviewed and distributed to individual directors, as appropriate, depending on the

 

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subject matter and facts and circumstances outlined in the correspondence. Communications that are not related to the duties and responsibilities of the Board, or are otherwise inappropriate, will not be forwarded to the directors, although all communications directed to the Board will be available to any director upon request.

Attendance at Annual Meeting

Although Valvoline does not have a formal policy regarding attendance by directors at Valvoline’s annual meetings of shareholders, Valvoline strongly encourages all directors to attend. All of Valvoline’s then current directors were present at the prior year’s annual meeting of shareholders.

Nomination of Directors

G&N Committee Recommendations for and Nominations of Directors.    Pursuant to our Corporate Governance Guidelines and the G&N Committee’s charter, the G&N Committee is responsible for leading the search for and recommending qualified director nominees for shareholder election to the Board for the next annual meeting of shareholders and for proposing director nominees for election by the Board to fill vacancies which occur between annual meetings of shareholders. The G&N Committee does not set specific, minimum qualifications that director nominees must meet to be nominated for election to the Board, but rather believes that each nominee should be evaluated on his or her individual merits, taking into account the needs and composition of the Board at the time. The G&N Committee considers candidates who bring a wide range of attributes to the Board. The general criteria the G&N Committee looks for in selecting an individual as a director nominee is someone who exhibits the highest personal and professional integrity, who has demonstrated exceptional ability and judgment and who shall be effective in serving the interests of the Company’s shareholders. Pursuant to the G&N Committee Charter, the G&N Committee shall seek director candidates who exhibit the following personal and professional qualifications: (1) significant experience in the lubricants, automobile or consumer marketing industries; (2) product or process innovation experience; (3) international business expertise; (4) diverse experience in policy-making in business, government, education and/or technology, or in areas that are relevant to the Company’s global business and strategy; (5) possess an inquisitive and objective nature, practical wisdom and mature judgment; and (6) the ability to work with the Company’s existing directors and management. The G&N Committee also believes that diversity of race, ethnicity, gender and age are important factors in evaluating candidates for Board membership. The G&N Committee has from time to time retained the services of third-party search firms to assist the G&N Committee in identifying and evaluating candidates for Board membership who best match the personal and professional criteria described above. The G&N Committee, with the assistance of a leading director search firm, is currently in the process of conducting a search for one or more new directors with significant experience in the areas of electric vehicles, energy transition and/or autonomous transportation, which is relevant to the Company’s strategy to transform with the evolving car parc as discussed in “—Valvoline’s Board of Directors—Composition,” above.

Shareholder Recommendations for Directors.    Shareholders wishing to recommend candidates for consideration by the G&N Committee should send their recommendation via registered, certified or express mail to the Corporate Secretary of Valvoline at 100 Valvoline Way, Lexington, KY 40509. Recommendations should be received no later than September 1, 2022, to be considered by the G&N Committee in connection with its review of candidates for election at our 2023 Annual Meeting of Shareholders. Suggestions for director candidates should include the information described in Section 3.03 of our By-laws, and any other relevant information, as to the proposed candidate. The G&N Committee will review all director candidates in accordance with its charter and Valvoline’s Corporate Governance Guidelines, and it will identify qualified individuals consistent with the personal and professional criteria described above. Individuals recommended by shareholders in accordance with these procedures will be evaluated by the G&N Committee in the same manner as individuals who are recommended through other means.

Shareholder Nominations of Directors.    Our By-laws permit eligible shareholders to directly nominate candidates for election at annual meetings of shareholders. Our By-laws require that the Company be given advance written notice of shareholder nominations for election to the Board of Directors. Such notice must contain the information required by our By-laws with respect to the nominee and the shareholder and must be timely. To be timely for purposes of an annual meeting, such notice must be received at least 90 but not more than 120 days before the first anniversary of the prior year’s annual meeting; provided, however, if the annual meeting is to be held more than 30 days earlier or

 

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more than 60 days later than such anniversary date, notice must be received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting and (ii) the 10th day following the day on which public announcement of such meeting is first made. Based on the January 25, 2022, date for our upcoming Annual Meeting, shareholder nominations must be received no earlier than September 27, 2022, and no later than October 27, 2022, to be considered timely for our 2023 Annual Meeting of Shareholders, assuming such meeting will be held no more than 30 days before and no more than 60 days after January 25, 2023. The chairman of an annual meeting of shareholders may refuse to acknowledge the nomination of any person not made in compliance with our By-laws. Shareholders should send all director nominations for the 2023 Annual Meeting of Shareholders via registered, certified or express mail to the Corporate Secretary of Valvoline at 100 Valvoline Way, Lexington, KY 40509.

A copy of our By-laws has been filed with the SEC and is available on the SEC’s website, http://www.sec.gov, and the Company’s website, http://investors.valvoline.com/governance, or may be obtained by written request to: Valvoline’s Corporate Secretary, 100 Valvoline Way, Lexington, KY 40509.

 

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Executive Summary

Fiscal 2021 Highlights

Fiscal 2021 was a remarkable year for growth and transformation at Valvoline, yielding record results, including sales of $3 billion, net income of $420 million and adjusted EBITDA of $634 million, each reflecting exceptional year-over-year growth. The Company reported earnings per diluted share (“EPS”) of $2.29, up 36%, and adjusted EPS of $1.95, an increase of 37%, versus the prior year. The Company further advanced its strategy to become a more service-driven business with Retail Services segment contributing 54% of our total segment adjusted EBITDA in fiscal 2021, driven by outstanding year-over-year same store sales growth and unit additions. We also saw strong sales and volume growth in our Global Products segment. The success of both segments demonstrates the solid foundation that we have built across our businesses. In October 2021, the Company announced its plan to accelerate its continued transformation by pursuing a separation of its two reportable segments, Retail Services and Global Products. Refer to Appendix A for a reconciliation of non-GAAP measures.

Changes to the Fiscal 2021 Compensation Program

The Compensation Committee annually reviews the components of the Company’s executive compensation program to ensure that it aligns with the compensation philosophy and shareholder interests. In fiscal 2021, the Compensation Committee modified the Company’s annual and long-term incentive plans, as described below:

 

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Compensation Philosophy

The Compensation Committee has adopted a Compensation Philosophy, which it reviews annually, that is intended to align our compensation program with the interests of our shareholders. This philosophy supports our business strategy and financial and talent management objectives to deliver long-term profitable growth.

 

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Pay for Performance

This section describes how Valvoline’s short-term and long-term performance is linked to the NEOs’ fiscal 2021 compensation.

To reinforce our pay-for-performance philosophy, the total compensation program for the NEOs is highly incentive-based and therefore fluctuates based on financial results and stock price performance. This approach motivates executives to consider the impact of their decisions on both the short-term and long-term performance of the Company and shareholder value creation, while taking appropriate types and amounts of risk.

 

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For fiscal 2021, approximately seventy-nine percent (79%) of the CEO’s target compensation and approximately sixty-one percent (61%) of the other NEOs’ target compensation, on average, was at-risk.

Pay Mix of CEO and Other NEOs⁽¹⁾⁽²⁾

What We Do vs. What We Don’t Do