DEFA14A: ODP Corporation Seeks Shareholder Approval for Incentive Plan Amendment to Fuel B2B Transformation

ODP Corporation is asking shareholders to approve an amendment to its 2021 Long-Term Incentive Plan to sustain its performance-based equity program and support its B2B transformation.

Summary

• ODP Corporation is seeking shareholder approval for Proposal 5, an amendment to the company's 2021 Long-Term Incentive Plan.
• The amendment aims to provide additional shares under the plan to sustain the current performance-based equity program.
• The company believes this program rewards long-term value creation and is competitive with market programs.
• The additional shares will help maintain alignment between leadership/employee incentives and shareholder outcomes.
• It will also help attract and retain talent critical to the company's B2B transformation.
• The company does not intend to change its long-term incentive award mix if the proposal is approved.
• In 2025, the company refined its long-term incentive program design to strengthen the alignment of executive compensation with shareholder value by tethering 100% of PSUs to rTSR.
• Approval of Proposal 5 is critical to ensuring that the company can sustain its performance-based equity program through 2026 and beyond.
• The company remains focused on operational discipline, EBITDA growth, and long-term value creation.
• The company believes that maintaining a market-aligned equity program is critical to attracting and retaining the talent needed to execute its strategy and drive long-term growth.
• Without additional shares, the company would have to consider cash alternatives, which could introduce variable accounting treatment and weaken alignment of executive compensation with shareholder interests.
• 90% of the CEO's compensation is at risk, with 45% tied directly to PSU performance.
• Nearly 70% of compensation for other Named Executive Officers is at risk.

Sentiment

Score: 7

Explanation: The document presents a clear and positive case for the proposed amendment to the incentive plan, emphasizing alignment with shareholder value and long-term growth. The focus on performance-based metrics and accountability is viewed favorably.

Positives

• The proposed amendment will sustain a performance-based equity program, with 100% of PSUs now tied to relative Total Shareholder Return (rTSR).
• The amendment reinforces the company's strategy and execution to remain focused on operational discipline, EBITDA growth, and long-term value creation.
• It supports performance-based leadership to award market-competitive pay.
• It encourages accountability and performance results through at-risk compensation.
• The company's equity incentive compensation strategy is key in building a performance-driven team and maintaining alignment between awards and shareholder interests.
• The company's long-term incentive program is built on clear, measurable metrics that drive accountability and long-term performance.
• The company believes that maintaining a market-aligned equity program is critical to attracting and retaining the talent needed to execute its strategy and drive long-term growth.

Negatives

• Without additional shares, the company would have to consider cash alternatives, which could introduce variable accounting treatment and weaken alignment of executive compensation with shareholder interests.

Risks

• Failure to approve Proposal 5 could negatively impact the company's ability to attract and retain talent.
• The company may have to consider cash alternatives if the proposal is not approved, which could introduce variable accounting treatment and weaken alignment of executive compensation with shareholder interests.

Future Outlook

The company aims to sustain its performance-based equity program through 2026 and beyond, supporting its B2B transformation and long-term value creation.

Management Comments

• The company is committed to a pay-for-performance approach that aligns executive compensation with shareholder value.
• The company believes that shareholders should vote FOR Proposal 5, because the Plan with a refreshed share pool will sustain a performance-based equity program, reinforce strategy and execution, support performance-based leadership, and encourage accountability and performance results.

Industry Context

In the current market, companies are increasingly focused on aligning executive compensation with shareholder value and long-term performance. The ODP Corporation's move to tie 100% of PSUs to rTSR reflects this trend.

Comparison to Industry Standards

• Many companies in the technology and retail sectors use long-term incentive plans to align executive compensation with shareholder returns.
• Companies like Best Buy and Staples also utilize equity-based compensation to attract and retain talent.
• The specific mix of PSUs and other equity awards varies, but the focus on performance-based metrics is a common theme.

Stakeholder Impact

• Shareholders: Approval of the amendment is intended to align executive compensation with shareholder value and drive long-term growth.
• Employees: The amendment aims to attract and retain talent critical to the company's B2B transformation.
• Executives: The amendment will sustain a performance-based equity program that rewards long-term value creation.

Next Steps

• Shareholder vote on Proposal 5 to amend the 2021 Long-Term Incentive Plan.

Keywords

Long-Term Incentive Plan, Shareholder Value, Executive Compensation, Performance Stock Units, Relative Total Shareholder Return, B2B Transformation, Equity Program, ODP Corporation