CLX DEF 14A Report ended Nov. 20, 2019

Dear Shareholders:

I am pleased to invite you to attend our 2019 Annual Meeting of Shareholders.

As we enter the final year of our 2020 Strategy, we remain committed to Good Growth – our philosophy that profitable, sustainable and responsible growth is a requirement for success in today’s marketplace – while also looking beyond the horizon, as we roll out our new IGNITE Strategy . By imagining new ways of earning customer loyalty and infusing our brands with bold ideas, we aim to continue to deliver not only superior consumer value but also the required performance to earn our shareholders’ continued trust.

Environmental, social and governance matters, including inclusion and diversity, continue to be top priorities for us, guiding us in making decisions that effectively serve the needs of our diverse consumer base. We have also continued our strong commitment to reducing the environmental impact of our operations and improving the sustainability of our supply chain and products, while also making a positive difference in the global communities in which we operate.

Our Board continues to provide excellent guidance and leadership, setting the right tone for the organization. Whether through strategic oversight, risk management, or people management and culture, the Board is constantly thinking about how we can meet the needs of our consumers with strong investment in brands that offer superior value, innovation and technology transformation, in ways that are responsible, in order to continue to generate long-term financial returns for you, our shareholders.

We look forward to sharing our progress and results with you at our Annual Meeting. Thank you for your continued support and investment in Clorox.

Dear Shareholders:

As Lead Independent Director of Clorox, it is my honor to serve with our other independent directors as the independent voices representing you, our shareholders, to help ensure that the Company continues to be managed with integrity, strong corporate governance, and appropriate oversight of strategy, risks and corporate culture.

Over the past fiscal year, I have had the opportunity to deepen my role and involvement with the Company and also to meet and engage more directly with our shareholders, customers and employees. I strongly believe that our people are the primary ambassadors of our brands, and as a result, it is important for our people to feel proud of Clorox and what it stands for.

Inclusion and diversity remain key priorities for the Board. The diverse backgrounds, skills and experiences of the Board enable us to provide strong guidance to Clorox in these key areas, as well as in our oversight of strategy and risks. We believe that a diverse Board, management team and workforce that is reflective of our diverse consumer base position us to better understand consumers’ wants and needs – which we believe drives our ability to deliver superior consumer value and successfully innovate. Diverse perspectives in the boardroom also allow us to evaluate issues through different experiences and perspectives and help us to guide the Company in a thoughtful way.

Once again in fiscal year 2019, I participated in outreach meetings with our shareholders to better understand the issues that are most important to you. As a Board, we continue to regularly discuss and consider investor feedback on a wide variety of business and environmental, social and governance issues, as we continue to strive to be responsible stewards of the Company.

On behalf of the independent directors, thank you for your confidence and your support.

The Board, upon the recommendation of the Nominating, Governance and Corporate Responsibility Committee (NGCRC) , has nominated the eleven people listed below for election at the Annual Meeting to serve until the 2020 Annual Meeting of Shareholders, and until their respective successors are duly elected and qualified.

Carolyn Ticknor, who has served on the Board since 2005, is not being re-nominated for re-election in accordance with the Board’s retirement age policy and, therefore, will be retiring from the Board on the date of the Annual Meeting.

We invite you to read about our director nominees below. Our director nominees represent diverse perspectives and experiences and bring core strategic, operating, financial and governance skills as well as consumer product

expertise to our Board. Each of the director nominees has agreed to be named in this proxy statement and to serve as a director if elected, and is currently serving as a director of the Company.

To enhance and expand on the key skills and experiences relevant to the Company’s industry, our directors regularly participate in external continuing education programs and presentations developed internally and given by external expert speakers . New directors also participate in comprehensive orientation sessions that provide them with a robust overview of the Company’s business and strategies as well as a thorough understanding of their fiduciary duties, which allows new directors to begin making contributions to the Board at the start of their service.

Clorox is committed to inclusion and diversity throughout our organization from the boardroom to the factory floor. As highlighted in our Governance Guidelines, the Board values diversity and recognizes the importance of having unique and complementary backgrounds and perspectives in the boardroom. The Board believes that setting the tone at the top – that people of all backgrounds are welcome and empowered – helps the Company attract and retain the best talent and also helps lead to a better strategy that resonates with our customers and consumers. The Board endeavors to bring together diverse skills, professional

experience, perspectives, age, race, ethnicity, gender, sexual identity and orientation, and cultural backgrounds that reflect the Company’s diverse consumer and investor base, and to guide the Company in a way that reflects the best interests of all of our shareholders and considers the impact on other stakeholders. The NGCRC assesses the effectiveness of these efforts by examining the overall composition of the Board, assessing how individual director candidates, including incumbent directors, can contribute to the overall success of the Board, and reviewing individual, committee, and Board evaluation results.

Vote Required

The Company’s Bylaws require each director to be elected by a majority of the votes cast with respect to such director in uncontested elections—the number of shares voted FOR a director must exceed the number of shares voted AGAINST that director.

The people designated in the proxy and voting instruction card intend to vote your shares represented by proxy FOR the election of each of these nominees, unless you include instructions to the contrary. In the event any director nominee is unable to serve or for good cause will not serve, the persons named as proxies may vote for a substitute nominee recommended by the Board, or the Board may reduce the size of the Board or leave a vacancy.

Under the Company’s Bylaws, any director who fails to be elected by a majority of the votes cast in an uncontested election must tender their resignation to the Board. The NGCRC would then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board would act on the NGCRC’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from

the date the election results are certified. A director who tenders their resignation would not participate in the Board’s decision.

Board’s Recommendation

The Board unanimously recommends a vote FOR each of the Board’s eleven nominees for director listed above. The Board believes that each nominee listed above is highly qualified and has the background, skills, experience, and attributes that qualify each nominee to serve as a director of the Company. See each nominee’s biographical information and the How We Identify, Evaluate and Nominate our Directors section above for more information. The Board’s recommendation is based on its carefully considered judgment that the background, skills, experience, and attributes of the nominees make them the best candidates to serve on the Board.

Shareholder Recommendations and Nominations of Director Candidates

The NGCRC considers recommendations from many sources, including shareholders, regarding possible candidates for director. Such recommendations, together with biographical and business experience information (similar to that required to be disclosed under the applicable Securities and Exchange Commission (SEC) rules and regulations) regarding the candidate, should be submitted to The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. The NGCRC evaluates all candidates for the Board in the same manner, including those suggested by shareholders.

In addition, our Bylaws permit a shareholder or group of up to 20 shareholders who have owned at least 3% of the outstanding shares of the Company’s common stock (Common Stock) for at least three years to submit director nominees (up to 20% of the Board) for inclusion in the Company’s proxy statement and form of proxy used in connection with the Annual Meeting (proxy materials) if the shareholder(s) provide(s) timely written notice of such

nomination(s) and the shareholder(s) and the nominee(s) satisfy the requirements specified in the Company’s Bylaws. Shareholders who wish to nominate directors for inclusion in the Company’s proxy materials or directly at an annual meeting of shareholders in accordance with the procedures in our Bylaws should follow the instructions under the Shareholder Proposals and Director Nominations for the 2020 Annual Meeting section of this proxy statement.

Director Communications

Shareholders and interested parties may direct communications to individual directors, including the lead independent director, to a Board committee, to the independent directors as a group, or to the Board as a whole, by addressing the communications to the appropriate party and sending them to The Clorox Company, c/o Corporate Secretary, 1221 Broadway, Oakland, CA 94612-1888. The Corporate Secretary will review all communications so addressed and will forward to the addressee(s) all communications determined to bear substantively on the business, management, or governance of the Company.

Corporate Governance Strengths

Our Commitment to Corporate Responsibility

In 2015, we became a signatory to the United Nations Global Compact, which is the world’s largest corporate responsibility initiative. As a signatory, we pledged to support and promote 10 principles in the areas of human rights, labor, the environment and anti-corruption. Our commitment to sustainability includes:

We believe our financial performance and commitment to corporate responsibility go hand in hand. Each year, we publish an integrated report that highlights the intersection of our business and corporate responsibility commitments by reporting our financial and ESG performance as described below .

Integrated Annual Reporting

The Clorox Company Governance Guidelines

The Board has adopted Governance Guidelines to reflect the Board’s view and the Company’s policy regarding significant corporate governance matters, which the Board believes are best practice. The Governance Guidelines present a framework for the governance of the Company by setting forth the Board’s and the Board committees’ responsibilities, qualifications, and operational matters and describing key matters, such as the evaluation of the CEO and ordinary-course and emergency succession planning. The NGCRC reviews the Governance Guidelines on, at least, an annual basis and recommends changes to the Board based on current corporate governance best practices.

While the Company’s management is responsible for the day-to-day risk management process, the Board has ultimate responsibility for the oversight of the Company’s risk management and setting the right tone for integrity, ethics and culture. The Company has instituted a robust, comprehensive enterprise risk management program, which involves Board oversight, and an Enterprise Risk Management Steering Committee (ERM Committee), which consists of a cross-functional team of senior leaders and key executives. The ERM Committee oversees the annual key risk identification process, whereby it identifies the top risks that the Company faces with respect to its business, operations, strategy, and other factors, as well as key mitigation strategies and risk owners. The Company’s management reports and discusses identified risks and risk mitigation and management efforts with the Board, at minimum, on an annual basis and typically in connection with the Board’s annual strategy meeting.

The Board also oversees risk management through its committees by allocating certain matters to the Board committees based on expertise, and these committees report on risk exposure during its regular reports to the full Board to facilitate proper risk oversight by the entire Board.

For example, the Audit Committee reviews compliance and risk management related to accounting and financial reporting matters and financial risk management and also receives quarterly cybersecurity updates, and the MDCC reviews the risks related to the executive compensation structure.

Based on its review and the analysis provided by its independent compensation consultant, FW Cook, the MDCC has determined that the risks arising from the Company’s compensation policies and practices for its employees, including executive officers, are not reasonably likely to have a material adverse effect on the Company.

In overseeing culture, the Board also receives information through a number of channels, including updates from the Chief People Officer, such as data and metrics from our annual employee engagement survey and also relating to inclusion and diversity, as well as updates from the General Counsel on any significant compliance, discrimination and harassment complaints.

Board Meeting Attendance

The Board held seven meetings during fiscal year 2019. All incumbent directors attended at least 75% of the meetings of the Board and committees of which they were members during fiscal year 2019 during the period in which they served on the Board. All members of the Board are expected to attend the Annual Meeting of Shareholders. Each of the twelve members of the Board at the time of the Company’s 2018 Annual Meeting of Shareholders attended that meeting.

Director Independence

The Governance Guidelines provide that a substantial majority of the Board must consist of independent directors. The Board determines whether individual Board members are independent, as defined by the New York Stock Exchange (NYSE). The Board has adopted director independence standards, which are set forth in the Governance Guidelines, to assist it in assessing the independence of directors. The Board makes an affirmative determination regarding the independence of each director annually, based upon the recommendation of the NGCRC.

The Board has determined that each of our directors who served during the 2019 fiscal year (Messrs. Fleischer, Mackay, Matschullat, Shattock, Weiner, and Williams, Mmes. Banse, Lee, Thomas-Graham, and Ticknor, and Dr. Carmona) is independent under the NYSE listing standards and the independence standards set forth in the Governance Guidelines, except for Mr. Dorer as a result of his service as the Company’s CEO. The Board’s determination considered the impact of tenure on a director’s independence, particularly with respect to directors with 10 or more years of Board service, and the Board concluded that such longer-tenured directors, based on their communications and interactions with management, their decisions, and their adherence to their fiduciary duties to shareholders, have demonstrated their independence from management.

A “Related Person” is (i) any person who is or was (since the beginning of the Company’s last fiscal year, even if they do not presently serve in that role) an executive officer, director, or nominee for election as a director, (ii) a beneficial owner of more than 5% of the Company’s Common Stock, or (iii) an immediate family member of any of the foregoing. For purposes of this definition, “immediate

Under the Related Person Policy, if a new Interested Transaction is identified for approval, it is brought to the Audit Committee to determine if the proposed transaction is reasonable and fair to the Company. The Audit Committee will review the material facts of all Interested Transactions that require its approval and either approve or disapprove of the entry into the Interested Transaction.

The Related Person Policy also contains categories of preapproved transactions that the Board has identified as not having a significant potential for an actual or potential conflict of interest or improper benefit.

In determining whether to approve or ratify an Interested Transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the Related Person’s interest in the transaction.

The Code of Conduct applies to all of the Company’s employees, including executives, as well as directors. We require that all Board members and employees complete

We also have established a separate Business Partner Code of Conduct outlining our standards and expectations of our suppliers and other business partners, which can also be found at https://www.thecloroxcompany.com/who-we-are/corporate-governance/codes-of-conduct .

As part of our ongoing , proactive efforts to implement effective and progressive corporate governance practices, the NGCRC regularly reviews the leadership structure of the Board in addition to its annual review of the Company’s Governance Guidelines, taking into account the Company and its needs, market practices, investor feedback, and corporate governance studies and expert commentary, among other things. Since August 2016, the Board leadership structure has consisted of a combined Chair and CEO role held by Mr. Dorer, a strong lead independent director position held by Ms. Thomas-Graham, and strong independent committee chairs. The Board is committed to continuously evaluating this structure to ensure that it promotes effective governance.

Further, the Board believes that Ms. Thomas-Graham’s strong leadership and qualifications, including her prior experience as a CEO and her tenure on the Board, among other factors, contribute to her ability to fulfill the role of lead independent director effectively.

The Company’s Governance Guidelines require an independent director to serve as a lead director if the position of Chair is held by a management director. In order to ensure that the lead independent director has the skills and qualifications necessary to serve as a strong leader,

The lead independent director is elected annually by and from the independent directors. In order to qualify as lead independent director, a director must have served as a member of the Board for at least three years. The duties of the lead independent director include coordinating the activities of the independent directors and serving as a liaison between the Chair and the independent directors. In addition, the lead independent director:

Lastly, the Board is guided by strong, independent committee chairs, with Dr. Carmona leading the NGCRC, Mr. Fleischer leading the MDCC, and Ms. Ticknor serving as the Audit Committee chair for several years. Since Ms. Ticknor is not standing for re-election at this Annual Meeting, Mr. Williams has agreed to serve as the new Audit Committee chair, pending his re-election to the Board.

While our Board is diverse by many traditional metrics, our Board leadership positions also reflect this diversity, as Ms. Thomas-Graham, Dr. Carmona, and Mr. Williams are each ethnically diverse.

Other than Mr. Dorer, all of the Company’s directors are “independent” as defined by the NYSE rules. The Board believes that this structure promotes effective governance and that the leadership structure described above is in the best interests of the Company and its shareholders, in light of current circumstances.

Audit Committee . The Audit Committee is the principal link between the Board and the Company’s independent registered public accounting firm. The Audit Committee has the functions and duties set forth in its charter, including:

The Board has determined that, with respect to fiscal year 2019, directors Ms. Ticknor and Mr. Williams are audit committee financial experts, as defined by SEC rules, and each member of the Audit Committee is financially literate, as defined by NYSE rules.

Nominating, Governance and Corporate Responsibility Committee . The NGCRC has the functions and duties set forth in its charter, including:

Evaluations are conducted through individual director interviews as part of its evaluation process. Each director provides an individual assessment as well as any feedback they may have on other Board members’ performance on an annual basis. The individual assessments are conducted by the chair of the NGCRC, who summarizes and reports the results and any related recommendations to the NGCRC and the full Board.

Directors who serve as a Board member, lead independent director, or committee chair for less than the full fiscal year receive pro-rated retainer amounts based on the number of days they served in such position during the fiscal year. In addition to the retainer amounts, each non-employee director is entitled to receive a fee of $2,500 per day for any special assignment requested by the Board. No special assignment fees were paid in fiscal year 2019.

Payment Elections

Under the Company’s Independent Directors’ Deferred Compensation Plan, a director may annually elect to receive all or a portion of their cash compensation in the form of cash, Common Stock, deferred cash, or deferred stock units.

Elective Deferral Program: Deferred Cash. For directors who elect deferred cash, the amount deferred is credited to an unfunded cash account that is credited with interest at an annual interest rate equal to Wells Fargo Bank, N.A.’s prime lending rate in effect on January 1 of each year. Upon termination of service as a director, the amounts credited to the director’s deferred cash account are paid out in five annual cash installments or in one lump-sum cash payment, as elected by the director.

Elective Deferral Program: Deferred Stock Units. For directors who elect deferred stock units, the amount deferred is credited to an unfunded account in the form of units equivalent to the fair market value of the Common Stock on the last trading day of the quarter for which the fees were earned. When dividends are declared, additional deferred stock units are allocated to the director’s deferred stock unit account in amounts equivalent to the dollar amount of Common Stock dividends paid by the Company divided by the fair market value of the Common Stock on the date the dividends are paid. Upon termination of service as a director, the amounts credited to the deferred stock unit account, which include any elective deferrals and the annual deferred stock unit grants described above, are paid out in shares of Common Stock in five annual installments or in one lump sum, as elected by the director. Deferred stock units may only be settled in shares of Common Stock.

Equity Compensation

Each non-employee director receives a majority of their annual compensation in the form of deferred stock units. Deferred stock units are shares of the Company’s Common Stock that the director receives only upon terminating their service with the Company. Each non-employee director receives an annual grant of deferred stock units. The value of the deferred stock unit award amount earned by a non-employee director serving for the full fiscal year 2019 was $152,500. Awards are made as of the last business day in the calendar year and represent payment for services provided during such calendar year. The dollar value of an annual grant of deferred stock units was not increased for calendar year 2019.

Fiscal Year 2020 Compensation Changes

As discussed above, the MDCC reviews the form and amount of compensation of non-employee directors at least once a year to ensure that the Company’s non-employee directors are being compensated appropriately relative to peer companies. The MDCC again reviewed non-employee director compensation in September 2019. As part of its review, the MDCC considered the data provided by FW Cook as well as its guidance and recommendations regarding compensation levels relative to our compensation peer group as well as trends and recent developments in the area of non-employee director compensation. After taking all of this information into account, the MDCC has recommended, and the Board agreed, to increase the annual director cash retainer to $103,000 from $100,000 , the annual compensation in the form of deferred stock units to $157,000 from $152,500, and the annual Audit Committee chair retainer to $25,000 from $20,000, effective as of October 2019. No other changes were made to the Company’s director compensation program.

Stock Ownership Philosophy and Guidelines for Directors

Fiscal Year 2019 Performance Highlights

In fiscal year 2019, Clorox delivered mixed results with fiscal year net sales growth of 1% in a macroeconomic environment that included high levels of competition in select categories, increasingly competitive retail dynamics, significantly rising logistics and commodity costs and global inflationary pressures. The Company also grew diluted net earnings per share (EPS) from continuing operations by 1%. In addition, the Company maintained its focus on operational efficiencies including maintaining discipline on selling and administrative expenses, delivering cost savings, and continuing to make progress toward its product sustainability improvement and green-house gas emissions, water energy, and waste reduction goals.

The Company’s 2020 Strategy, which we introduced in 2013, aims to accelerate profitable growth by engaging employees as business owners, increasing brand investment behind superior products and technology that reach consumers in a dynamic marketplace, expanding its brands into new categories and channels, and driving out waste in its work, processes, and products. Successes for the Company in fiscal year 2019 included:

Our fiscal year 2019 results and compensation decisions continue to illustrate application of our pay-for-performance philosophy, with pay being driven by performance in the following ways:

Base Salary. The MDCC generally seeks to establish base salaries for our named executive officers within 15% of the median of the compensation peer group. The MDCC considered factors such as the executive’s specific role, level of experience, and sustained performance, as well as the compensation peer group data, in determining each named executive officer’s base salary for fiscal year 2019. Changes in base salary are approved by the MDCC in September and become effective in October of each year. All base salaries that went into effect in October 2018 for the named executive officers, who were executive officers at the time, were within this target pay range.

After conducting a review for Mr. Dorer and evaluating his performance and overall Company performance for fiscal year 2018 in light of his competitive pay positioning, the MDCC approved a base salary increase of 11.6% to $1,200,000 effective October 2018. The annual base salary increases for our named executive officers represented a combination of merit increases and market adjustments in light of competitive pay positioning, and other than for our CEO, ranged from 3.4% to 10% with an average increase of 5.8%. The actual base salaries earned by our named executive officers in fiscal year 2019 are listed in the Salary column of the Summary Compensation Table.

Annual Incentives. The Company provides annual incentive awards to our named executive officers under the Company’s Executive Incentive Compensation Plan (Annual Incentive Plan). Payouts under the Annual Incentive Plan are based on the level of achievement of

Annual Incentive Design. The amounts actually paid under the Annual Incentive Plan are based on the following factors:

Each of the elements of the annual incentive formula is further described below.

Base Salary . The named executive officer’s actual fiscal year 2019 base salary is the starting point for the annual incentive calculation.

For fiscal year 2019, the MDCC established financial goals with a focus on increasing net sales, net earnings from continuing operations, and gross margin, as described in greater detail below, in order to drive sustainable, profitable growth and short- and long-term total stockholder returns. The Financial Performance Multiplier is based on the following metrics.

Long-Term Incentives. Each year, we provide long-term incentive compensation to our named executive officers. These awards have been made in the form of performance shares and stock options, which we believe align Company performance and executive officer compensation with the interests of our stockholders. These incentive awards also support the achievement of our long-term corporate financial goals.

We use time-based restricted stock for non-executive officer employees and occasionally for special purposes for executive officers, such as in connection with a promotion or as a replacement for compensation forfeited by an externally recruited executive at a prior employer.

The MDCC annually reviews the costs of, and potential stockholder dilution attributable to, our long-term incentive program to ensure that the overall program is financially efficient and in line with that of our compensation peer group. The MDCC also seeks to calibrate the long-term incentive program design to drive performance and deliver appropriate rewards relative to the compensation peer group. In determining the total value of the long-term incentive opportunity for each named executive officer, the MDCC reviews the compensation peer group data presented by both management and the independent compensation consultant on a role-by-role basis and considers recommendations by our CEO for the other named executive officers.

The MDCC’s goal is to target long-term incentive awards in amounts that are generally competitive with the median of the compensation peer group. Actual long-term incentive award target levels for individual named executive officers may vary from the median based on a variety of factors, such as the named executive officer’s sustained performance, individual experience, critical nature of their role, and expected future contributions. Like the annual incentive awards, actual payouts under the long-term

incentive awards will vary from the target based on how the Company performs against pre-established targets. The value of payouts will also vary based on changes in the market price of our Common Stock.

The MDCC determined that our named executive officers would receive 50% of the value of their total annual long-term incentive award granted in fiscal year 2019 in performance shares and 50% in stock options. The MDCC believes this mix of equity awards supports several important objectives, including compensating named executive officers for achievement of long-term goals tied to our business strategy, rewarding named executive officers for sustained increases in the price of our Common Stock, enhancing retention by mitigating the impact of price fluctuations of our Common Stock in the overall long-term incentive value, and ensuring that the overall cost of the program is aligned with the compensation realized by the named executive officers and the performance delivered to stockholders. The MDCC does not consider the amount of outstanding performance shares, stock options, and restricted stock currently held by a named executive officer when making annual awards of performance shares and stock options because such amounts represent compensation attributable to prior years.

Long-Term Incentive Award. The long-term incentive awards granted to our named executive officers for fiscal year 2019 were made in September 2018. The MDCC considered factors such as the executive’s role, level of experience, and sustained performance, as well as the compensation peer group market data, in determining each named executive officer’s long-term incentive award. For fiscal year 2019, the long-term incentives for our named executive officers (including the off-cycle awards discussed below), excluding our CEO, ranged in value from $900,000 to $1,300,000. Mr. Dorer received a long-term incentive award valued at $5,750,000. Our

Performance Shares . Performance shares are grants of restricted stock units that pay out after a three-year performance period only if the Company meets pre-established financial performance goals, which are described below. Economic profit (EP) performance is measured to a three-year annual growth rate that is established at the beginning of the cycle and held constant. For purposes of the performance shares, EP is defined as earnings before interest and taxes, adjusted for non-cash restructuring charges, times one minus the tax rate, less capital charge. The potential payout can range from 0% to 200% of target.

We believe that performance shares align the interests of our named executive officers with the interests of our stockholders because the number of shares earned and the shares’ potential value are tied to the achievement of performance targets. As discussed above, the performance target for the awards granted in September 2018 is a three-year annual EP growth rate target informed by our three-year financial long-range plan and the budget developed by management, which is reviewed and approved by the Board. In setting the performance targets for the performance shares, the MDCC reviews the budget and long-range plan and seeks to appropriately align the performance goals with the objectives of the Annual Incentive Plan, so that the overall compensation design does not encourage participants to take unnecessary or excessive risk or actions that are inconsistent with the Company’s short- and long-term strategic and financial objectives. The MDCC believes its use of growth in EP as a metric provides rigor and an ability to align performance with pay over the three-year performance period.

The payout of the performance share awards granted in September 2018 is subject solely to the Company’s achievement of a three-year EP annual growth rate target during the performance period of July 2018 through June 2021. The percentage range for payouts is from 0%, if the minimum EP target is not met, to a maximum of 200% of the target number of shares.

In August 2019, the MDCC certified the results of the September 2016 grant for the July 2016 to June 2019 performance period. The adjusted financial target for the grant was a cumulative EP of $1.750 billion over the three-year performance period for a 100% payout. The cumulative EP target was adjusted in accordance with predetermined criteria established by the MDCC at the time initial grants were approved as set forth in the grant agreements for the impact of the adoption of a change to the accounting standards for share-based payments under ASU 2016-09, as well as for the acquisition of Nutranext in April 2018, fiscal year 2018 net impact of hurricanes, Argentina tax reform and the Tax Cuts and Jobs Act that went into effect January 1, 2018. The cumulative EP target also reflects the inclusion of certain net adjustments related to certain trade expenses. The Company’s actual cumulative EP , inclusive of the predetermined adjustments, of $1.754 billion was above the target amount of $1.750 billion, resulting in the MDCC certifying a payout of 104% for the 2016 grants.

Stock Options . Stock options align the interests of our named executive officers with those of our stockholders because the options only have value if the price of the Company’s stock increases after the stock options are granted. Stock options vest in 25% increments over a four-year period (beginning one year from the date of grant) and expire 10 years from the date of grant. In fiscal year 2019, the MDCC awarded stock options to our named executive officers as part of our annual long-term incentive plan. Information on all stock option grants is shown in the Grants of Plan-Based Awards table.

Retirement Plans

Our named executive officers participate in the same tax-qualified retirement benefit programs available to all other United States-based salaried and non-collectively bargained hourly employees. The Company’s retirement plans are designed to provide replacement income upon retirement and to be competitive with programs offered by our peers.

In addition, because the IRC limits the amount of benefits that can be contributed to and paid from a tax-qualified retirement plan, the Company also provides our executive officers,

A brief description of each of our retirement programs is set forth below. Each of our named executive officers participates in these retirement programs with the exception of the Supplemental Executive Retirement Plan.

The Clorox Company Pension Plan. The Clorox Company Pension Plan (the Pension Plan) is a cash balance pension plan that was frozen effective June 30, 2011. This freeze did not affect the benefits previously accrued under the Pension Plan, which remain fully funded.

The Clorox Company 401(k) Plan. After the Pension Plan was frozen in June 2011, the Clorox Company 401(k) Plan (the 401(k) Plan) became the primary retirement plan for the Company. The Company makes an annual fixed contribution of 6% of eligible pay and a matching contribution of up to 4% of eligible pay to eligible employees.

Nonqualified Deferred Compensation Plan. Under the Nonqualified Deferred Compensation Plan (the NQDC), eligible employees may voluntarily defer receipt of up to 50% of base salary and up to 100% of their annual incentive awards. In fiscal year 2019, deferred amounts could be invested in a manner that generally mirrored the funds available in the 401(k) Plan. The NQDC permits the Company to contribute amounts that exceed the IRC compensation limits in the tax-qualified plans through a 401(k) restoration provision for those employees deferring at required levels in the plan.

Supplemental Executive Retirement Plan. The Supplemental Executive Retirement Plan (the SERP), a defined benefit plan, was closed to new participants effective April 2007 and, effective June 30, 2011, was frozen with regard to pay and offsets, while still accruing age and service credits. Benefits under the SERP have historically been calculated as an annuity based on a percentage of average compensation adjusted by age and years of service and offset by the annuity value of Company contributions to the tax-qualified retirement plans and by Social Security. Effective July 1, 2011, the SERP was replaced by the Executive Retirement Plan (the ERP) (described below). Moving from the SERP to the ERP created a defined contribution structure that is more closely aligned

Executive Retirement Plan. Our executive officers (including named executive officers) participate in the ERP. Under the ERP, the Company makes an annual contribution of 5% of an eligible participant’s base salary and annual incentive award into the plan.

Further details about the provisions of the Pension Plan, NQDC, SERP, and ERP are provided in the Overview of Pension Benefits and the Overview of the Nonqualified Deferred Compensation Plans sections below.

Post-Termination Compensation

The Company has a severance plan (the Severance Plan) that provides our named executive officers with post-termination payments if the named executive officers’ employment is terminated by the Company other than for cause. These payments are intended to provide a measure of financial security following the loss of employment, which we believe is important to attract and retain executives. The severance benefits are designed to be competitive with the compensation peer group and external market practices.

The Company also has an Executive Change in Control Severance Plan (the CIC Plan), which provides severance benefits to certain eligible executives of the Company, including all of the Company’s named executive officers, if their employment with the Company is involuntarily terminated in connection with a change in control of the Company. In addition to helping mitigate the financial impact associated with termination after a change in control, these benefits further align the interests of our executive officers with the interests of our stockholders by providing incentives for retention, for business continuity purposes. Under the CIC Plan, a named executive officer is eligible for change in control severance benefits if their employment is terminated in connection with a change in control, either by the Company without cause or by the named executive officer for good reason. See the Potential Payments Upon Termination or Change in Control section of the CD&A for additional information.

We provide our named executive officers with other limited benefits we believe are competitive with the compensation peer group and consistent with the Company’s overall executive compensation program. These benefits allow our named executive officers to proactively manage their health, work more efficiently, and, in the case of the financial planning program, help them optimize the value received from our compensation and benefits programs. These perquisites are a Company car or car allowance, paid parking at the Company’s headquarters, an annual executive physical exam, reimbursement for health club membership, and financial planning services.

A core principle of our compensation philosophy is to align pay with performance. We do so by delivering the majority of executive pay through “at-risk” variable incentive awards that help ensure realized pay is tied to attainment of critical operational goals and sustainable appreciation in stockholder value. In fiscal year 2019, approximately 86% of the targeted compensation for our CEO and approximately 72% of the targeted compensation for our other named executive officers was directly tied to the achievement of short- and long-term operating goals and total stockholder return. This approach is designed to accomplish the following:

The following elements of our executive compensation program reflect our continued commitment to our compensation philosophy:

What We Have

What We Don’t Have

Management Development and Compensation Committee. The MDCC is made up entirely of independent directors as defined by our Governance Guidelines and NYSE listing standards. The MDCC regularly reviews the design and implementation of our executive compensation program and reports on its discussions and actions to the Board. In particular, the MDCC (i) oversees our executive compensation program, (ii) approves the performance goals and strategic objectives for our named executive officers, evaluates results against those targets each year, and determines and approves the compensation of our CEO (after consulting with the other independent members of the Board) and our other named executive officers, as well as officers at or above the level of senior vice president and any other officers covered by Section 16 of the Exchange Act, and (iii) makes recommendations to the Board with respect to the structure of overall incentive and equity-based plans.

The MDCC makes its determinations regarding executive compensation after consulting with management and the MDCC’s independent compensation consultant (as further described below), and its decisions are based on a variety of factors, including the Company’s performance, individual executives’ performance, peer group data, and input and recommendations from the independent compensation consultant.

The MDCC evaluates individual performance based on the performance of the business or operations for which the executive is responsible, the individual’s skill set relative to industry peers, overall experience and time in the position, the critical nature of the individual’s role, difficulty of replacement, expected future contributions, readiness for promotion to a higher level, and role relative to that of other executive officers.

In determining the compensation package for each of our named executive officers other than our CEO, the MDCC receives input and recommendations from our CEO and our Executive Vice President – Chief People Officer. Named executive officers do not have a role in the determination of their own compensation, but named executive officers other than our CEO do discuss their individual performance objectives and results with our CEO.

Board of Directors. The independent members of the Board undertake a thorough process during which they review our CEO’s annual performance, and each independent director provides candid feedback and

Independent Compensation Consultant. The MDCC retains the services of an independent compensation consulting firm to assist it in the performance of its duties. During fiscal year 2019, the MDCC used the services of Frederic W. Cook & Co., Inc. (FW Cook). FW Cook’s work with the MDCC included data analysis and guidance and recommendations on the following topics: compensation levels relative to our peers, market trends in incentive plan design, risk and reward structure of executive compensation plans, and other policies and practices, including the policies and views of third-party proxy advisory firms. FW Cook also assisted in the evaluation and implementation of changes to the Company’s incentive plans, which were effective with fiscal year 2019 and are described under the What We Pay: Components of Our Compensation Program section of this CD&A . See the Independence of the Compensation Consultant section below for a discussion of FW Cook’s independence from management.

Chief Executive Officer. Our CEO makes compensation recommendations to the MDCC for all executive officers other than himself. In making these recommendations, our CEO evaluates the performance of each executive officer and considers their responsibilities as well as the compensation analysis provided by the independent compensation consultant.

Other Members of Management. Senior human resources management provides analyses regarding competitive practices and pay ranges, compensation and benefit plans, policies and procedures for equity awards, perquisites, general compensation, and benefits philosophy. Senior human resources, legal, and, from time to time, finance executives attend non-executive sessions of the MDCC meetings to provide additional perspective and expertise.

Pursuant to its charter, the MDCC is authorized to retain, oversee, and terminate any consultants as it deems necessary, as well as to approve the fees and other retention terms of any such consultants. Prior to retaining a compensation consultant or any other external advisor, from time to time as the MDCC deems appropriate but at least annually, the MDCC assesses the independence of the advisor from management. In evaluating FW Cook, the MDCC’s compensation consultant, the MDCC took into consideration all factors relevant to FW Cook’s independence, including the following factors specified in the NYSE listing standards:

FW Cook has provided the MDCC with appropriate assurances and confirmation of its independent status in accordance with the MDCC’s charter and other considerations. The MDCC believes that FW Cook has been independent throughout its service to the MDCC and that there is no conflict of interest between FW Cook or individuals at FW Cook and the MDCC, the Company’s executive officers, or the Company.

Our Peer Group

To determine the compensation peer group for each year, the MDCC considers companies that:

The MDCC annually reviews and makes adjustments to the compensation peer group as appropriate to ensure that the peer group companies continue to meet the relevant criteria. As of July 31, 2019, the Company was at the 33rd percentile for revenue, 55th percentile for net income, and 61st percentile for market capitalization compared with the compensation peer group.

For fiscal year 2019, management engaged Aon Hewitt to obtain and aggregate compensation data for the compensation peer group. This data was used to advise the MDCC on setting target compensation for our named executive officers. FW Cook reviewed this information

and performed an independent compensation analysis of the compensation peer group data to advise the MDCC. Although each individual component of executive compensation is reviewed, particular emphasis is placed on targeting total compensation within 15% of the median

Other Executive Compensation Policies and Practices

Tally Sheets. To help ensure that our executive compensation design is aligned with our overall compensation philosophy of pay for performance and that total compensation levels are appropriate, the MDCC annually reviews compensation tally sheets for each of our named executive officers. These tally sheets outline current target total compensation (including the compensation elements described above), the potential wealth creation of long-term incentive awards granted to our officers under various potential stock prices, and the potential value of payouts under various termination scenarios. As such, these tally sheets help provide the MDCC with a comprehensive understanding of all elements of the Company’s compensation program and enable the MDCC to consider changes to the Company’s compensation program, arrangements, and plans in light of best practices and emerging trends. The MDCC may consider the information presented in the tally sheets in determining future compensation.

Results of 2018 Advisory Vote on Executive Compensation. At our 2018 Annual Meeting of Stockholders held on November 14, 2018, we asked our stockholders to approve, on an advisory basis, our fiscal year 2018 compensation awarded to our named executive officers, commonly referred to as a “say-on-pay” vote. Our stockholders overwhelmingly approved the compensation to our named executive officers, with approximately 93% of votes cast in favor of our proposal. We value this positive endorsement by our stockholders of our 2018 executive compensation policies and believe that the outcome signals our stockholders’ support of our compensation program. We continued our general approach to compensation for fiscal year 2018, specifically our pay-for-performance philosophy and our efforts to attract, retain, and motivate our named executive officers, taking into account the say-on-pay results as well as specific feedback from our stockholders. We value the opinions of our stockholders and will continue to consider the results from this year’s and future advisory votes on executive compensation, as well as feedback received throughout the year, when making compensation decisions for our named executive officers.

The MDCC may also make occasional grants of stock options and other equity-based awards at other times to recognize, retain, or recruit executive officers.

Executive Stock Ownership Guidelines. To maintain alignment of the interests of the Company’s executive officers and our stockholders, all executive officers, including the named executive officers, are expected to build and maintain a significant level of direct stock ownership. Ownership levels can be achieved over time in a variety of ways, such as by retaining stock received upon the exercise of stock options or the vesting of stock awards or by purchasing stock in the open market. At a minimum, executive officers are expected to establish and maintain direct ownership of Common Stock having a value, based on the closing market price of the stock on the first business day of fiscal year 2019, equal to a multiple of each executive officer’s annual base salary. The current minimum ownership guidelines are as follows:

Ownership levels are based on shares of Common Stock owned by the named executive officer or held pursuant to Company plans, including performance shares that have vested and been deferred for settlement. Unexercised stock options and shares that have not vested due to time or performance restrictions are excluded from the ownership calculations.

As of the date of this proxy statement, Messer. Dorer and Reynolds and Ms. Stein have met the required ownership levels. Ms. Rendle and Mr. Jacobsen became subject to a higher threshold with their promotions to the Executive Committee in fiscal years 2017 and 2018, respectively, and their ownership threshold increased from 2 times annual base salary to 3 times annual base salary required for executive officers other than the CEO.

Securities Trading Policy; Prohibition on Hedging and Pledging. To ensure alignment of the interests of our stockholders with all of our directors, officers, employees and consultants, including our named executive officers, the Company’s Insider Trading Policy does not permit any director, officer, employee or consultant of the Company, including any of the Company’s executive officers, either (1) to trade in the stock or other securities of any company when aware of material nonpublic information about that company, including the Company as well as any customers or suppliers of the Company or firms with which the Company may be negotiating a major transaction or (2) to engage in short-term or speculative transactions or derivative transactions involving the Company’s stock and includes prohibitions on options trading and hedging. Restrictions and cautions have also been set forth in this Policy on pledging the Company’s stock as collateral.

The Policy’s prohibition on engaging in hedging transactions in Company securities covers the purchase of a financial transaction instrument, or otherwise engaging in a transaction that hedges or offsets, or is designed to hedge or offset, any decrease in the market value of the Company’s equity securities that were granted as part of the individual’s compensation or that the individual holds directly or indirectly. The following transactions are expressly prohibited by the Policy: (1) short sales (selling Company securities you do not own), (2) transactions involving publicly traded options or other derivatives whose value is tied to the Company’s securities, including trading in or writing puts or calls on the Company’s securities, (3) pre-paid forward contracts and (4) collars. Directors, executive officers, the principal accounting officer and 10% beneficial owners of the Company’s common stock are also prohibited from borrowing against the value of any Company stock that they own through the use of a margin account or other pledge of Company stock as collateral.

Trading of the Company’s securities by directors, executive officers and certain other employees who are so designated from time to time and are informed of their status by the office of the Company’s General Counsel is permitted only during announced trading periods or in accordance with a previously established trading plan that meets SEC

Clawback Provisions. Under our Annual Incentive Plan and long-term incentive plan, in the event of a restatement of financial results to correct a material error or other factors as described in the long-term incentive plan, the MDCC is authorized to reduce or recoup an executive officer’s award, as applicable, to the extent that the MDCC determines such executive officer’s fraud or intentional misconduct was a significant contributing factor to the need for a restatement.

Tax Deductibility Limits on Executive Compensation. Section 162(m) limits the federal income tax deductibility of compensation paid to our CEO and the three other most highly compensated named executive officers employed at the end of the year (other than the CFO) to $1 million per year, unless such amounts are determined to be performance-based compensation awarded on or before November 2, 2017. Our policy with respect to Section 162(m) seeks to balance the interests of the Company in maintaining flexible incentive plans against the possible loss of a tax deduction when taxable compensation for any of the executive officers subject to Section 162(m) exceeds $1 million per year. The rules and regulations promulgated under Section 162(m) are complex and subject to change from time to time, sometimes with retroactive effect. There can be no guarantee, therefore, that amounts potentially subject to the Section 162(m) limitations and awarded on or before November 2, 2017 will be treated by the Internal Revenue Service as “qualified performance-based compensation” under Section 162(m) and/or deductible by the Company.

With the enactment of the Tax Cuts and Jobs Act in December 2017, for taxable years beginning after December 31, 2017, which includes our 2019 fiscal year, the deductibility exemption for performance-based compensation under Section 162(m) has been eliminated. As a result, compensation in excess of $1 million paid to covered executive officers generally is not deductible unless the compensation qualifies for certain transition relief under the Tax Cuts and Jobs Act. As a result, the Company has assessed, and continues to assess how the amendments to Section 162(m) affect its annual and long-term incentive compensation. Given the commitment of the Company and the MDCC to tying the compensation of its executives to the performance of the Company, to date there have not been, and we do not expect there to be in the future material changes made to the manner in which the Company awards its incentive compensation.