UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PROXY STATEMENT PURSUANT TO
SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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☐ Preliminary Proxy Statement
☐ Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material under §240.14a-12
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NOTICE OF 2023 ANNUAL MEETING OF SHAREHOLDERS
RH, 15 Koch Road, Corte Madera, CA 94925
Important Notice Regarding the Availability of Proxy Materials for the Annual Shareholder Meeting to be Held on June 29, 2023 (the “Annual Meeting”): The Company’s 2023 Notice and Proxy Statement, its fiscal 2022 Annual Report on Form 10-K and its proxy card are available for review online at www.proxyvote.com
We are holding the Annual Meeting for the following purposes, which are more fully described in the proxy statement:
|1.||To elect the three nominees named in the proxy statement to our Board of Directors;|
|2.||To vote, on an advisory basis, on our named executive officer compensation;|
|3.||To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending February 3, 2024;|
|4.||To vote on a shareholder proposal for RH to report on matters related to the procurement of down feathers from its suppliers, if properly presented at the meeting; and|
|5.||To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.|
Only shareholders of record as of the close of business on May 23, 2023 are entitled to notice and to vote at the Annual Meeting or any postponement or adjournment thereof. A list of shareholders entitled to vote will be available for inspection at our offices for ten days prior to the Annual Meeting. If you would like to view this shareholder list, please contact the Corporate Secretary at (415) 945-4998.
We intend to hold our Annual Meeting in person. However, in the event we determine it is not possible or advisable to hold our Annual Meeting in person due to health or other considerations related to COVID-19 or other reasons, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. If we take this step, we will announce the decision to do so via a press release and details about how to participate will be posted on our website and filed with the U.S. Securities and Exchange Commission as additional proxy materials. Please monitor our website at ir.rh.com for updated information.
As always, we encourage you to vote your shares prior to the Annual Meeting. Each share of stock that you own represents one vote, and your vote as a shareholder of RH is very important. For questions regarding your stock ownership, you may contact the Corporate Secretary at (415) 945-4998 or, if you are a registered holder, our transfer agent, Computershare Investor Services, by email through their website at www.computershare.com/contactus or by phone at (800) 962-4284 (within the U.S. and Canada) or (781) 575-3120 (outside the U.S. and Canada).
The Board of Directors has approved the proposals described in the accompanying proxy statement and recommends that you vote “FOR” the election of all nominees for director (Proposal 1), “FOR” the non-binding advisory vote to approve the compensation of our named executive officers (Proposal 2), “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP (Proposal 3), and “AGAINST” the shareholder proposal described in the accompanying proxy statement (Proposal 4).
By order of the Board of Directors,
Chairman & Chief Executive Officer
Your Vote Is Important. Instructions for submitting your proxy are provided in the proxy statement and your proxy card. It is important that your shares be represented and voted at the Annual Meeting. Please submit your proxy through the Internet, by telephone, or by completing the enclosed proxy card and returning it in the enclosed envelope. You may revoke your proxy at any time prior to its exercise at the Annual Meeting.
2023 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT SUMMARY
INFORMATION ABOUT SOLICITATION AND VOTING
The accompanying proxy is solicited on behalf of the Board of Directors of RH (the “Company”) for use at the Company’s 2023 Annual Meeting of Shareholders (the “Annual Meeting”) to be held at the Company’s headquarters located at 15 Koch Road, Corte Madera, CA 94925 on June 29, 2023, at 10:30 a.m. (Pacific Time), and any adjournment or postponement thereof.
On or about May 24, 2023, we will mail to our shareholders this proxy statement, including our proxy card, and our fiscal 2022 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 29, 2023 (the “2022 Annual Report”) This proxy statement and our proxy card are first being made available online on or about May 24, 2023.
ABOUT THE ANNUAL MEETING
What is the purpose of the Annual Meeting?
At our Annual Meeting, shareholders will vote upon the four proposals described in this proxy statement.
What proposals are scheduled to be voted on at the Annual Meeting?
Shareholders will be asked to vote on the following four proposals:
|1.||The election to our Board of Directors of the three nominees named in this proxy statement;|
|2.||The approval, on a non-binding advisory basis, of our named executive officer compensation;|
|3.||The ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm for the fiscal year ending February 3, 2024 (“fiscal 2023”); and|
|4.||The shareholder proposal for RH to report on matters related to the procurement of down feathers from its suppliers (the “shareholder proposal”).|
What is the recommendation of the Board of Directors on each of the proposals scheduled to be voted on at the Annual Meeting?
The Board of Directors recommends that you vote:
FOR each of the nominees to the Board of Directors (Proposal 1);
FOR the approval, on a non-binding advisory basis, of our named executive officer compensation (Proposal 2);
FOR the ratification of the appointment of PwC as our independent registered public accounting firm for fiscal 2023 (Proposal 3); and
AGAINST the shareholder proposal (Proposal 4).
Could other matters be decided at the Annual Meeting?
Our bylaws require that we receive advance notice of any proposal to be brought before the Annual Meeting by shareholders of the Company. As of the date of this proxy statement, there are no other matters that the Board of Directors intends to present for action at the Annual Meeting other than those referred to in this proxy statement.
People for the Ethical Treatment of Animals (“PETA”) has notified us of its intent to present an item of business at the Annual Meeting in the form of a proposal to shareholders requesting RH to commission a report on matters related to the procurement of down feathers in our supply chain. If this proposal is properly presented at the Annual Meeting, the persons named as proxy holders in the accompanying form of proxy have informed us that they intend to exercise their discretionary authority to vote against it.
If any other matter were to come before the Annual Meeting, the proxy holders appointed by our Board of Directors will have the discretion to vote on those matters for you.
Who can vote at the Annual Meeting?
Shareholders as of the record date for the Annual Meeting, the close of business on May 23, 2023 (the “Record Date”), are entitled to vote at the Annual Meeting. At the close of business on the Record Date, there were 22,052,211 shares of the Company’s common stock outstanding and entitled to vote. Under Delaware law, any shares of Common Stock that are repurchased by RH between the record date of the 2023 Annual Meeting and the Annual Meeting date (which we refer to collectively as “Repurchased Shares”) would not be considered outstanding for purposes of voting at the 2023 Annual Meeting. Holders of any such Repurchased Shares will, however, already have received proxy cards soliciting their votes on the proposals to be presented at the 2023 Annual Meeting and may return completed proxy cards, even though those Repurchased Shares are no longer considered outstanding for voting purposes. In general, it will not be practicable for the Company to trace the voting instructions that apply to specific Repurchased Shares. Accordingly, in order to take the most appropriate approach to determining the voting outcome for each of the proposals before the Annual Meeting, the Company intends to instruct the inspector of elections for the 2023 Annual Meeting to assume that any such Repurchased Shares had voted “FOR” each of the directors listed in Proposal 1 and “FOR” each of Proposals 2, 3 and 4, and to reduce the total amount of “FOR” votes cast by an amount equal to the number of Repurchased Shares, and thereby to strike out such FOR votes with respect to any Repurchased Shares when determining if such proposals had received a majority of the votes cast.
Shareholder of Record: Shares Registered in Your Name
If, as of the close of business on the Record Date, your shares were registered directly in your name with our transfer agent, Computershare Investor Services, then you are considered the shareholder of record with respect to those shares.
As a shareholder of record, you may vote at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting in person, we urge you to vote over the Internet or by telephone, or by filling out and returning the proxy card.
Beneficial Owner: Shares Registered in the Name of a Broker or Nominee
If, as of the close of business on the Record Date, your shares were held in an account with a brokerage firm, bank or other nominee, then you are the beneficial owner of the shares held in street name. As a beneficial owner, you have the right to direct your nominee on how to vote the shares held in your account, and your nominee has enclosed or provided voting instructions for you to use in directing it on how to vote your shares. However, the organization that holds your shares is considered the shareholder of record for purposes of voting at the Annual Meeting. Because you are not the shareholder of record, you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from the organization that holds your shares giving you the right to vote the shares at the Annual Meeting.
How do I vote?
If you are a shareholder of record, you may:
VOTE IN PERSON—we will provide a ballot to shareholders who attend the Annual Meeting and wish to vote in person;
VOTE BY MAIL—simply complete, sign and date the enclosed proxy card, then follow the instructions on the card; or
VOTE VIA THE INTERNET or VIA TELEPHONE—follow the instructions on the proxy card and have the proxy card available when you access the Internet website or place your telephone call.
Votes submitted via the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on June 28, 2023. Submitting your proxy, whether via the Internet, by telephone or by mail, will not affect your right to vote at the Annual Meeting should you decide to attend the meeting.
If you are not a shareholder of record, please refer to the voting instructions provided by your nominee to direct it how to vote your shares.
Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure that your vote is counted. You may still attend the Annual Meeting if you have already voted by proxy.
What if I return my proxy card directly to the Company, but do not provide voting instructions?
If a signed proxy card is returned to us without any indication of how your shares should be voted on a particular proposal at the meeting, your shares will be voted in accordance with the recommendations of our Board of Directors stated above. For example, if you return a signed proxy card with no indication of your vote on any of the proposals, your votes will be cast “FOR” the election of the three director nominees named in this proxy statement, “FOR” the approval, on a non-binding advisory basis, of the compensation of our named executive officers, “FOR” the ratification of the appointment of PwC as our independent registered public accounting firm for fiscal 2023, and “AGAINST” the shareholder proposal.
If you hold your shares in street name and do not vote, and your broker does not have discretionary power to vote your shares, your shares may constitute “broker non-votes” (as described below) and may not be counted in determining the number of shares necessary for approval of a proposal. However, shares that constitute broker non-votes will be counted for the purpose of establishing a quorum for the Annual Meeting. Voting results will be tabulated and certified by the inspector of elections appointed for the Annual Meeting.
What is the quorum requirement for the Annual Meeting?
A majority of our outstanding shares as of the Record Date must be present at the Annual Meeting in order to hold the meeting and conduct business. This presence is called a quorum. Your shares are counted as present at the meeting if you are present and vote in person at the meeting or if you have properly submitted a proxy. Additionally, abstentions, broker non-votes and “WITHHOLD” votes, as described below, will also be counted towards the quorum requirement. If there is no quorum, the chair of the Annual Meeting may adjourn the meeting until a later date.
How are abstentions, broker non-votes and “WITHHOLD” votes treated?
Abstentions (i.e., shares present at the meeting and voted “abstain”) are counted for purposes of determining whether a quorum is present. In determining whether a proposal received the requisite number of affirmative votes, abstentions are not considered votes cast and will have no effect on the proposal. As a result, abstentions will have no impact on the non-binding advisory vote on our named executive officer compensation (Proposal 2), the ratification of appointment of our independent registered public accounting firm (Proposal 3), or the shareholder proposal (Proposal 4).
Broker non-votes are counted for purposes of determining whether a quorum is present. In determining whether a proposal received the requisite number of affirmative votes, broker non-votes are not considered votes cast and will have no effect on the proposal. Broker non-votes occur when shares held by a broker for a beneficial owner are not voted because (i) the broker did not receive voting instructions from the beneficial owner, and (ii) the broker lacked discretionary authority to vote the shares. Brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf with respect to “non-routine” proposals but may vote their clients’ shares on “routine” proposals. As a result, broker non-votes will have no impact on “non-routine” proposals, including the approval of the election of directors (Proposal 1), the non-binding advisory vote on our named executive officer compensation (Proposal 2), the ratification of appointment of our independent registered public accounting firm (Proposal 3), or the shareholder proposal (Proposal 4).
Note that if you are a beneficial holder and do not provide specific voting instructions to your broker, the broker that holds your shares will not be authorized to vote on “non-routine” items, including the election of directors (Proposal 1), the approval, on a non-binding advisory basis, of our named executive officer compensation (Proposal 2), or the shareholder proposal (Proposal 4). Ratification of the appointment of our independent registered public accounting firm for fiscal 2023 (Proposal 3) is considered to be a “routine” matter and, accordingly, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal 3, brokers will be permitted to exercise their discretionary authority to vote for the ratification of the appointment of the independent registered public accounting firm. Accordingly, we encourage you to provide voting instructions to your broker, whether or not you plan to attend the Annual Meeting.
“WITHHOLD” votes will also be counted towards the quorum requirement and will have no effect on the outcome of the election of directors (Proposal 1) because the election of directors is based on the votes actually cast.
6 | 2023 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
What is the vote required for each proposal?
The votes required to approve each proposal are as follows:
Proposal 1. Shareholders’ choices for Proposal 1 (Election of Directors) are limited to “FOR” and “WITHHOLD.” A plurality of the votes cast, whether in person or by proxy, is required to elect each of the three nominees for director described under Proposal 1. Under plurality voting, the three nominees receiving the largest number of votes cast (votes “FOR”) will be elected. You may vote for all the director nominees, withhold authority to vote your shares for all the director nominees or withhold authority to vote your shares with respect to any one or more of the director nominees. Withholding authority to vote your shares with respect to one or more director nominees will have no effect on the election of those nominees. Because the election of directors under Proposal 1 is considered to be a non-routine matter under the rules of the New York Stock Exchange (“NYSE”), if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal 1, brokers will not be permitted to exercise their voting authority and uninstructed shares may constitute broker non-votes. “WITHHOLD” votes and broker non-votes will have no effect on the outcome of Proposal 1 because the election of directors is based on the votes actually cast.
Proposal 2. Proposal 2 is a non-binding advisory vote. Therefore, our Board of Directors will consider our named executive officer compensation described under Proposal 2 (Advisory Vote to Approve Executive Compensation) to be approved if the proposal receives the affirmative vote of a majority of votes cast, whether in person or by proxy. Because the advisory vote under Proposal 2 is considered to be a non-routine matter under the rules of the NYSE, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal 2, brokers will not be permitted to exercise their voting authority and uninstructed shares may constitute broker non-votes. Abstentions and broker non-votes will have no effect on the outcome of Proposal 2 because the advisory vote is based on the votes actually cast.
Proposal 3. The affirmative vote of a majority of votes cast, whether in person or by proxy, is required to ratify the appointment of the independent registered public accounting firm for fiscal 2023 described under Proposal 3 (Ratification of Appointment of Registered Independent Public Accounting Firm). Proposal 3 is considered to be a “routine” matter under the rules of the NYSE and, accordingly, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal 3, brokers will be permitted to exercise their discretionary authority to vote for the ratification of the appointment of the independent registered public accounting firm. Abstentions and broker non-votes will have no effect on the outcome of Proposal 3 because the ratification of the appointment of the independent registered public accounting firm is based on the votes actually cast.
Proposal 4. The affirmative vote of a majority of votes cast, whether in person or by proxy, is required to ratify the shareholder proposal. Because the vote under Proposal 4 is considered to be a non-routine matter under the rules of the NYSE, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal 4, brokers will not be permitted to exercise their voting authority and uninstructed shares may constitute broker non-votes. Abstentions and broker non-votes will have no effect on the outcome of Proposal 4 because the vote is based on the votes actually cast.
How can I get electronic access to the proxy materials?
The Company’s proxy materials are available at ir.rh.com. This website address is included for reference only. The information contained on the Company’s website is not incorporated by reference into this proxy statement.
ANNUAL MEETING OF SHAREHOLDERS
2023 PROXY STATEMENT | 7
Who is paying for this proxy solicitation?
The Company is paying the costs of the solicitation of proxies. Proxies may be solicited on behalf of the Company by our directors, officers, associates (we refer to our employees as “associates”) or agents in person or by telephone, facsimile or other electronic means. We will also reimburse brokerage firms and other custodians, nominees and fiduciaries, upon request, for their reasonable expenses incurred in sending proxies and proxy materials to beneficial owners of our common stock. We have retained the services of Alliance Advisors LLC (“Alliance”) to assist in the solicitation of proxies for a fee of approximately $26,000 plus reasonable out-of-pocket expenses. We may engage Alliance for additional solicitation work and incur fees greater than $26,000 depending on a variety of factors, including preliminary voting results and recommendations from Institutional Shareholder Services. As part of its engagement agreement, the Company has also agreed to certain indemnification provisions with Alliance.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.
How can I change my vote after submitting my proxy?
A shareholder who has given a proxy may revoke it at any time before it is exercised at the meeting by:
Delivering to the Corporate Secretary of the Company (by any means, including facsimile) a written notice stating that the proxy is revoked;
Signing and delivering a proxy bearing a later date;
Voting again over the Internet or by telephone; or
Attending and voting at the Annual Meeting (although attendance at the meeting will not, by itself, revoke a proxy).
Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to revoke a proxy, you must contact that firm to revoke any prior voting instructions.
Where can I find the voting results?
The final voting results will be tallied by the inspector of elections and filed with the SEC in a Current Report on Form 8-K within four business days of the Annual Meeting.
8 | 2023 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
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ANNUAL MEETING OF SHAREHOLDERS
2023 PROXY STATEMENT | 9
SECURITY OWNERSHIP OF TOP
SHAREHOLDERS & LEADERSHIP
The following table sets forth information as of the close of business on May 23, 2023, regarding the beneficial ownership of our common stock by: each person or group who is known by us to beneficially own more than 5% of our outstanding shares of our common stock; each of our named executive officers; each of our current directors; and all of our current executive officers and directors as a group.
Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. Percentage of beneficial ownership is based on 22,052,211 shares of common stock outstanding as of May 23, 2023. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each shareholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the shareholder. Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o RH, 15 Koch Road, Corte Madera, CA 94925.
Represents beneficial ownership of less than 1% of our outstanding common stock.
|(1)||Under the rules of the SEC, our named executive officers include our principal executive officer, principal financial officer and the next three most highly compensated executive officers.|
|(2)||Includes 1,700,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of May 23, 2023. As of May 23, 2023, 583,334 of these options are subject to selling restrictions.|
|(3)||Based on the Form 13F-HR filed by FMR LLC with the SEC on May 11, 2023, in which it reported having shared voting power over 1,863,534 shares of common stock.|
|(4)||Based on the Form 13F-HR filed by Lone Pine Capital LLC with the SEC on May 15, 2023.|
|(5)||Based on the Form 13F-HR filed by Vanguard Group Inc. with the SEC on May 15, 2023, in which it reported having shared voting power over 7,375 shares of common stock.|
|(6)||Based on the Form 13F-HR filed by BlackRock Inc. with the SEC on May 12, 2023, in which it reported that it has the sole voting power over 1,567,670 shares of common stock.|
|(7)||Includes 511 restricted stock awards that vest on June 30, 2023.|
|(8)||Includes 23,643 shares of common stock held by the Chaya-Smith Revocable Trust and 321,500 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of May 23, 2023.|
|(9)||Includes 37,905 shares of common stock held by various family trusts established by Mr. Demilio, 38,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of May 23, 2023 and 511 restricted stock awards that vest on June 30, 2023.|
|(10)||Includes 21,535 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of May 23, 2023.|
|(11)||Includes 1,400 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of May 23, 2023.|
|(12)||Includes 94,149 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of May 23, 2023.|
|(13)||Includes 6,953 shares of common stock held by the Rowghani Keshavarz Living Trust and 511 restricted stock awards that vest on June 30, 2023.|
|(14)||Includes 2,176,584 shares of common stock our executive officers and directors have a right to acquire upon the exercise of options that are exercisable within 60 days of May 23, 2023 and 3,577 restricted stock awards that vest on June 30, 2023.|
INTENTIONALLY LEFT BLANK
SECURITY OWNERSHIP OF TOP SHAREHOLDERS & LEADERSHIP
2023 PROXY STATEMENT | 13
Chairman and Chief
Director since 2013
Class III Director:
Continuing in office until
Gary Friedman has served as our Chairman and Chief Executive Officer of the Company, and Founder of the RH brand as we know it today, since January 2014. Previously, Mr. Friedman served as our Co-Chief Executive Officer and Director from July 2013 to January 2014, and as Chairman and Co-Chief Executive Officer from May 2010 to October 2012. From October 2012 to July 2013, Mr. Friedman served as Chairman Emeritus, Creator and Curator on an advisory basis, and as Chief Executive Officer and a member of our Board of Directors from March 2001 to October 2012, during which time he served as our Chairman from March 2005 to June 2008. Mr. Friedman joined RH from Williams-Sonoma, Inc. where he spent 14 years serving as President and Chief Operating Officer from May 2000 to March 2001, as Chief Merchandising Officer of Williams-Sonoma, Inc. and President of Retail from 1995 to 2000, and as Executive Vice President of Williams-Sonoma, Inc. and President of the Williams-Sonoma and Pottery Barn brands from 1993 to 2000, during which time Mr. Friedman was responsible for transforming Pottery Barn from a $50 million dollar table top and accessories business into a billion dollar plus home furnishings lifestyle brand. Mr. Friedman also developed and rolled out the revolutionary Williams-Sonoma Grande Cuisine stores, growing the brand from less than $100 million to almost $1 billion. Lastly, while at Williams-Sonoma Mr. Friedman spent several years conceptualizing and developing the West Elm brand, which launched shortly after he left the company. Mr. Friedman joined Williams-Sonoma in 1988 as Senior Vice President of Stores and Operations. Mr. Friedman began his retail career in 1977 as a stock-boy at the Gap store in Santa Rosa, California. He spent eleven years with Gap, and held the positions of Store Manager, District Manager and Regional Manager overseeing 63 stores in Southern California.
Mr. Friedman was selected to our Board of Directors because of his leadership in re-conceptualizing and developing the RH brand and business into the leading luxury home brand in the North American market, his deep and unmatched expertise in developing and rapidly growing many of the leading consumer brands in the home furnishings space, and his extensive knowledge of building and leading complex multi-branded and multi-channel organizations.
Director since 2009
Class I Director:
Continuing in office until the 2025 annual meeting
Mark Demilio has served as a member of our Board of Directors since September 2009 and currently serves as the board’s Lead Independent Director. Mr. Demilio currently serves as a member of the Board of Directors and Chairman of the audit committee of SCP Health, a privately-held provider of emergency medicine and hospitalist services through physician staffing and management since September 2015. Since January 2021, Mr. Demilio has been serving as a consultant to Spinnaker Medical, a privately held special purpose acquisition company. Mr. Demilio served as a member of the Board of Directors of Cosi, Inc., a national restaurant chain, from April 2004 to May 2017, served on its audit committee, its compensation committee and its nominating and corporate governance committee, and served for a time as Chairman of the Board of Directors of Cosi and as the interim Chief Executive Officer of Cosi. From June 2018 through December 2020, Mr. Demilio was a member of the Board of Directors and Chairman of the audit committee of Nurse Assist, a medical device manufacturer and distributer. From February 2014 through March 2016, Mr. Demilio served as a member of the Board of Directors and Chairman of the audit committee of The Paslin Company, a private company that designs, assembles and integrates robotic assembly lines for the automotive industry.
From December 2000 until his retirement in October 2008, Mr. Demilio served as the Chief Financial Officer of Magellan Health Services, Inc., a Nasdaq-listed managed specialty healthcare company that managed the delivery of behavioral healthcare treatment services, specialty pharmaceuticals and radiology services. Mr. Demilio has also been the General Counsel for Magellan Health Services, the Chief Financial Officer and General Counsel of Youth Services International, Inc., an attorney specializing in corporate and securities law with the law firms of Miles & Stockbridge and Piper & Marbury, a financial analyst for CareFirst BlueCross BlueShield of Maryland and a certified public accountant with Arthur Andersen LLP.
Mr. Demilio was selected to our Board of Directors because he possesses particular knowledge and experience in accounting, finance and capital structure, strategic planning and leadership of complex organizations and board practices of other major corporations.
Director since 2014
Class I Director:
Continuing in office until
Leonard Schlesinger was appointed to our Board of Directors in April 2014. Dr. Schlesinger has served as the Baker Foundation Professor of Business Administration at Harvard Business School, a role he returned to in July 2013 after serving as the President of Babson College from July 2008 until July 2013 and having held various positions at public and private companies. He also serves as a Director and Chair of the Audit Committee of DataPoint Capital Acquisition Corporation. From 1999 to 2007, Dr. Schlesinger held various executive positions at Limited Brands, Inc. (L Brands, Inc.), a formerly listed NYSE company, including Vice Chairman of the Board of Directors and Chief Operating Officer. While at Limited Brands, he was responsible for the operational and financial functions across the enterprise, including Express, Limited Stores, Victoria’s Secret Beauty, Bath and Body Works, C.O. Bigelow, Henri Bendel, and White Barn Candle Company. Dr. Schlesinger also served as Executive Vice President and Chief Operating Officer at Au Bon Pain Co., Inc. and as a director of numerous public and private retail, consumer products, and technology companies. Dr. Schlesinger has also held leadership roles at leading MBA and executive education programs and other academic institutions, including twenty years at Harvard Business School, where he served as the George Fisher Baker Jr. Professor of Business Administration. Dr. Schlesinger holds a Doctor of Business Administration from Harvard Business School, an MBA from Columbia University, and a Bachelor of Arts in American Civilization from Brown University.
Dr. Schlesinger was selected for our Board of Directors because he possesses extensive leadership, operational, financial, and business expertise from his significant and broad experience with numerous private and public retail companies.
Director since 2010
Class III Director:
Continuing in office until
Carlos Alberini has served on our Board of Directors since June 2010. Mr. Alberini currently serves as a member of the Board of Directors and Chief Executive Officer of Guess?, Inc., a NYSE-listed specialty retailer of apparel and accessories, since February 2019. Mr. Alberini previously served as the Chairman and Chief Executive Officer of Lucky Brand from February 2014 to February 2019. Mr. Alberini served as our Co-Chief Executive Officer from June 2010 through October 2012 and from July 2013 through January 2014, and he served as our sole Chief Executive Officer from October 2012 through July 2013. Mr. Alberini was President and Chief Operating Officer of Guess from December 2000 to June 2010. From May 2006 to July 2006, Mr. Alberini served as Interim Chief Financial Officer of Guess. Mr. Alberini served as a member of the Board of Directors of Guess from December 2000 to September 2011. Prior to Guess, Mr. Alberini served as Senior Vice President and Chief Financial Officer of Footstar, Inc., a retailer of footwear from October 1996 to December 2000. From May 1995 to October 1996, Mr. Alberini served as Vice President of Finance and Acting Chief Financial Officer of the Melville Corporation, a retail holding corporation. From 1987 to 1995, Mr. Alberini was with The Bon-Ton Stores, Inc., an operator of department stores, in various capacities, including Corporate Controller, Senior Vice President, Chief Financial Officer and Treasurer. Prior to that, Mr. Alberini served in various positions at PricewaterhouseCoopers LLP.
Mr. Alberini was selected to our Board of Directors because he possesses particular knowledge and experience in retail and merchandising, branded consumer goods, accounting, financing and capital finance, board practices of other large retail companies and leadership of complex organizations.
COMPANY LEADERSHIP, DIRECTORS & OFFICERS
2023 PROXY STATEMENT | 17
Director since 2016
Class III Director:
Continuing in office until
Keith Belling has served on our Board of Directors since April 2016, and previously served as an advisor to the Board of Directors from May 2015 to April 2016. Mr. Belling is the founder and former Chief Executive Officer of RightRice, a next generation rice brand that launched in February 2019, in Whole Foods Markets nationwide and on Amazon. Mr. Belling is also the co-founder and former Chairman and Chief Executive Officer of popchips, inc. (“popchips”) a leading better-for-you snack food business that launched in 2007. He previously served as popchips’ Chief Executive Officer from 2007 through 2012, leading the company to sales and distribution at over 30,000 retail stores across North America and the United Kingdom and served as the Chairman of the Board from 2007 through 2019. Mr. Belling has served as an advisor to several innovative consumer, real estate and technology companies, including Modern Meadow Inc., Olly Nutrition, and LBA Realty LLC. Mr. Belling also has founded other businesses, including e-commerce company AllBusiness.com, a leading small business portal, founded in 1998, where Mr. Belling formerly served as Chief Executive Officer and which was acquired by NBCi. Mr. Belling was a real estate attorney with Morrison & Foerster LLP, where he represented a diverse clientele including developers and real estate investors.
Mr. Belling was selected to our board because of his experience as a founder, leader, and entrepreneur of several innovative consumer companies, as well as his background and experience in the real estate sector.
Director since 2012
Class I Director:
Continuing in office until
Eri Chaya has served on our Board of Directors since 2012, and has served as our President, Chief Creative and Merchandising Officer since November 2017. Ms. Chaya leads product curation and integration, brand creative and business development for RH Interiors, Contemporary, Modern, Beach House, Ski House, Outdoor, Baby & Child and TEEN, across the Company’s physical, digital and print channels of distribution. Ms. Chaya previously served as RH’s Co-President, Chief Creative and Merchandising Officer and Director from May 2016 to November 2017, Chief Creative Officer from April 2008 to May 2016 and Vice President of Creative from July 2006 to April 2008. Prior to RH, Ms. Chaya was a creative director at Goodby, Silverstein and Partners, an international advertising agency, and a creative director at Banana Republic.
Ms. Chaya was selected to our Board of Directors because of her extensive knowledge and experience in design, product development, brand development, marketing and advertising.
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ANNUAL MEETING OF SHAREHOLDERS
Director since 2016
Class II Director:
Continuing in office until
Hilary Krane has served on our Board of Directors since her appointment in June 2016. Ms. Krane is currently the Chief Legal Officer for Creative Artists Agency. Up until February 2022, Ms. Krane served in various executive roles at Nike since 2010, including most recently as Executive Vice President, Chief Administrative Officer and General Counsel for NIKE, Inc. Prior to joining NIKE, Inc., Ms. Krane was General Counsel and Senior Vice President for Corporate Affairs at Levi Strauss & Co. from 2006 to 2010. From 1996 to 2006, she was a partner and assistant general counsel at PricewaterhouseCoopers LLP. Ms. Krane has been a director at the Federal Reserve Bank of San Francisco, Portland Branch since January 2018. Ms. Krane holds a Bachelor of Arts from Stanford University and a J.D. from the University of Chicago.
Ms. Krane was selected to our Board of Directors because of her extensive operational, compliance and business experience contributing to the growth and development of innovative and iconic global brands.
Director since 2013
Class II Director:
Continuing in office until
Katie Mitic is currently Co-Chief Executive Officer and Co-founder of SomethingElse, Inc., a direct-to-consumer beverage company that launched in 2019. From 2012 to 2017, Ms. Mitic was the Chief Executive Officer and Co-founder of Sitch, Inc., a startup building innovative mobile consumer products.
Prior to Sitch, Ms. Mitic served in executive leadership positions at innovative growth companies, including Facebook, Inc. and Palm, Inc. As Director of Platform & Mobile Marketing at Facebook, she grew developer products and partnerships globally. As Senior Vice President, Product Marketing at Palm, she expanded the company’s product lines and international footprint up until its acquisition by Hewlett-Packard. Earlier in her career, Ms. Mitic worked at NetDynamics (acquired by Sun Microsystems), where she launched the industry’s first application server, at Four11, where she built the industry-leading email service RocketMail (now Yahoo! Mail) and at Yahoo!, where she served as Vice President and General Manager. She currently serves on the Board of Directors and audit committee of TCV Acquisition Corp., a publicly held special purpose acquisition company. Additionally, she serves as a board member on private and non-profit boards, including DVx Ventures and LeanIn.Org.
Ms. Mitic received her B.A. from Stanford University and her M.B.A. from Harvard Business School.
Ms. Mitic was selected to our Board of Directors because of her extensive leadership, operational and entrepreneurial experience with innovative growth companies and global consumer technology companies.
COMPANY LEADERSHIP, DIRECTORS & OFFICERS
2023 PROXY STATEMENT | 19
Director since 2015
Class II Director
Continuing in office until
Ali Rowghani was appointed to our Board of Directors on January 22, 2015. Mr. Rowghani has served in executive leadership positions at innovative growth companies, including Twitter, Inc. and Pixar Animation Studios, Inc. At Twitter, Mr. Rowghani was hired as the Company’s first Chief Financial Officer in March 2010, and later served as Chief Operating Officer, with responsibility for business development, platform, media, product, and business analytics, from December 2012 to June 2014. Most recently, Mr. Rowghani was the Managing Director of the YCombinator Continuity Fund, which invests in growth-stage startups and which Mr. Rowghani helped launch in 2015.
Prior to Twitter, from June 2002 to February 2010, Mr. Rowghani served in various leadership roles at Pixar, including Chief Financial Officer and Senior Vice President, Strategic Planning, reporting to Pixar founder and President, Ed Catmull.
Mr. Rowghani holds a B.A. in International Relations and an M.B.A. from Stanford University.
Mr. Rowghani was selected to our Board of Directors because he possesses extensive operational, financial and leadership experience, and because of his expertise in scaling innovative and high-growth companies.
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ANNUAL MEETING OF SHAREHOLDERS
Below is a list of the names and ages, as of May 23, 2023, of our executive officers and a description of their business experience.
Gary Friedman has served as our Chairman and Chief Executive Officer of the Company, and Founder of the RH brand as we know it today, since January 2014. Previously, Mr. Friedman served as our Co-Chief Executive Officer and Director from July 2013 to January 2014, and as Chairman and Co-Chief Executive Officer from May 2010 to October 2012. From October 2012 to July 2013, Mr. Friedman served as Chairman Emeritus, Creator and Curator on an advisory basis, and as Chief Executive Officer and a member of our Board of Directors from March 2001 to October 2012, during which time he served as our Chairman from March 2005 to June 2008. Mr. Friedman joined RH from Williams-Sonoma, Inc. where he spent 14 years serving as President and Chief Operating Officer from May 2000 to March 2001, as Chief Merchandising Officer of Williams-Sonoma, Inc. and President of Retail from 1995 to 2000, and as Executive Vice President of Williams-Sonoma, Inc. and President of the Williams-Sonoma and Pottery Barn brands from 1993 to 2000 during which time Mr. Friedman was responsible for transforming Pottery Barn from a $50 million dollar table top and accessories business into a billion dollar plus home furnishings lifestyle brand. Mr. Friedman also developed and rolled out the revolutionary Williams-Sonoma Grande Cuisine stores, growing the brand from less than $100 million to almost $1 billion. Lastly, while at Williams-Sonoma Mr. Friedman spent several years conceptualizing and developing the West Elm brand, which launched shortly after he left the company. Mr. Friedman joined Williams-Sonoma in 1988 as Senior Vice President of Stores and Operations. Mr. Friedman began his retail career in 1977 as a stock-boy at the Gap store in Santa Rosa, California. He spent eleven years with Gap, and held the positions of Store Manager, District Manager and Regional Manager overseeing 63 stores in Southern California.
Eri Chaya has served as our President, Chief Creative and Merchandising Officer since November 2017 and on our Board of Directors since 2012. Ms. Chaya leads product curation and integration, brand creative and business development for RH Interiors, Contemporary, Modern, Beach House, Ski House, Outdoor, Baby & Child and TEEN, across the Company’s physical, digital and print channels of distribution. Ms. Chaya previously served as RH’s Co-President, Chief Creative and Merchandising Officer and Director from May 2016 to November 2017, Chief Creative Officer from April 2008 to May 2016 and Vice President of Creative from July 2006 to April 2008. Prior to RH, Ms. Chaya was a creative director at Goodby, Silverstein and Partners, an international advertising agency, and a creative director at Banana Republic.
COMPANY LEADERSHIP, DIRECTORS & OFFICERS
2023 PROXY STATEMENT | 21
Jack Preston has served as our Chief Financial Officer since March 2019 and leads all financial functions, including strategic and financial planning, accounting, treasury, tax, internal audit, investor relations, as well as our legal, compliance and technology teams, across the Company’s multiple businesses and brands. Mr. Preston served as RH’s Senior Vice President, Finance and Chief Strategy Officer from August 2014 to March 2019, and Senior Vice President, Finance and Strategy from April 2013 to August 2014. Prior to RH, Mr. Preston worked for Bank of America Merrill Lynch for over 12 years, where he served as a Director in the consumer and retail investment banking group. Mr. Preston holds a bachelor of commerce degree from the Sauder School of Business at the University of British Columbia.
Chief Legal & Compliance Officer
Edward Lee has served as our Chief Legal & Compliance Officer since March 2019. Mr. Lee joined RH in October 2012 as Deputy General Counsel and was promoted to Chief Legal Officer in August 2015. Mr. Lee is also a member of the Disclosure Committee. Prior to RH, Mr. Lee was Vice President & Deputy General Counsel, Assistant Corporate Secretary at MGM Resorts International from January 2008 to October 2012. Mr. Lee holds a law degree from the University of California, Berkeley School of Law (Boalt Hall); an M.P.P. from Harvard University, The Kennedy School of Government; and a BA cum laude in Government/Public Policy from Pomona College.
Chief Gallery & Customer Officer
Stefan Duban has served as our Chief Gallery & Customer Officer since 2021 and is responsible for the global operations of the Company's Galleries, Interior Design, Hospitality, Trade, Contract, Outlet and the Gallery Optimization Teams. Mr. Duban is in his 23rd year at RH and began his career as a part-time sales associate in our Thousand Oaks, CA Gallery. He has held the positions of Gallery Leader, Vice President of Home Delivery, Vice President and Regional Field Leader, and most recently, Chief Gallery Officer of RH.
22 | 2023 PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
INTENTIONALLY LEFT BLANK
CORPORATE GOVERNANCE & DIRECTOR INDEPENDENCE
We have a number of policies and practices related to corporate governance and oversight of our business. A number of the more important policies and procedures are described in this section of the proxy statement.
CORPORATE GOVERNANCE GUIDELINES
Our Corporate Governance Guidelines specify the distribution of rights and responsibilities of our Board of Directors and detail the rules and procedures for making decisions on corporate affairs. In general, the shareholders elect our Board of Directors, which is responsible for overall governance of our Company, including selection and oversight of key leadership, and leadership is responsible for running our day-to-day operations.
Our Corporate Governance Guidelines are available on the Investor Relations section of our website, which is located at ir.rh.com, by clicking on “Governance.” The contents of our website are not incorporated by reference into this proxy statement and are not soliciting materials.
CODE OF ETHICS & CODE OF BUSINESS CONDUCT
We have adopted a code of ethics for our chief executive officer and senior financial officers. We have also adopted a code of business conduct applicable to our associates, officers and directors. Copies of these codes are available on the Investor Relations section of our website, which is located at ir.rh.com, by clicking on “Governance.” We expect that any amendment to, or waiver of, the requirements of the code of ethics for our chief executive officer and senior financial officers will be disclosed on our website and any waiver of the requirements of the code of business conduct relating to our executive officers and directors will be promptly disclosed to shareholders, in each case as required by applicable law or NYSE listing requirements.
COMPENSATION COMMITTEE INTERLOCKS & INSIDER PARTICIPATION
No member of the compensation committee of our Board of Directors has served as one of our officers or been employed as one of our associates at any time. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board of Directors. None of our executive officers serves as a member of the Board of Directors of any other company that has an executive officer serving as a member of our compensation committee. None of our directors or executive officers are members of the same family.
DELINQUENT SECTION 16(A) REPORTS
Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires the Company’s directors, executive officers and any person who owns more than 10% of the Company’s common stock to file initial reports of ownership and reports of changes in beneficial ownership with the SEC. Such persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file. The Company believes that all Section 16(a) filing requirements were met in a timely manner in fiscal 2022 except that the following Form 4s for transactions that occurred on March 31, 2022 were inadvertently filed one day late on April 5, 2022 due to administrative processing delays by the Company: Hilary Krane (one transaction); Edward Lee (six transactions); Eri Chaya (seven transactions); Gary Friedman (eight transactions); and Jack Preston (eight transactions).
COMPOSITION & QUALIFICATIONS OF OUR BOARD OF DIRECTORS
Our Board of Directors consists of nine directors, including our Chairman and Chief Executive Officer. Our certificate of incorporation provides that, subject to any rights applicable to any then-outstanding preferred stock, our Board of Directors shall consist of such number of directors as determined from time to time by resolution adopted by a majority of the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. Subject to any rights applicable to any then-outstanding preferred stock, any additional directorships resulting from an increase in the number of directors may only be filled by the directors then in office, unless otherwise required by law or by a resolution passed by our Board of Directors. The term of office for each director will be until his or her successor is elected at the applicable annual meeting of shareholders or his or her death, resignation or removal, whichever is earliest to occur.
Our Board of Directors is divided into three classes, with each director serving a three-year term, and one class being elected at each year’s annual meeting of shareholders. Our directors by class are as follows:
Class I: Eri Chaya, Mark Demilio and Leonard Schlesinger, with a term expiring at the 2025 annual meeting.
Class II: Hilary Krane, Katie Mitic and Ali Rowghani, with a term expiring at the Annual Meeting.
Class III: Gary Friedman, Carlos Alberini and Keith Belling, with a term expiring at the 2024 annual meeting.
NAME/ CURRENT POSITION
NAME/ CURRENT POSITION
We believe our Board of Directors should be composed of individuals with sophistication and experience in many substantive areas that impact our business. We believe experience, qualifications, or skills in the following areas are most important: (i) business expertise in general and specific familiarity with high growth business models; (ii) experience building high value and luxury brands; (iii) industry knowledge of retail and consumer; and (iv) domain expertise in specialized areas such as merchandising and advertising; sales and distribution; accounting, finance, and capital structure; strategic planning and leadership of complex organizations; legal/regulatory and government affairs; people leadership; and board practices of other major corporations. We believe that all our current board members possess the professional and personal qualifications necessary for board service, and have highlighted selected noteworthy attributes for each board member in their individual biographies and as otherwise summarized above.
2023 PROXY STATEMENT | 27
BOARD ASSESSMENT & DIVERSITY
Our Board of Directors strongly believes its effectiveness is enhanced by being comprised of individuals with diverse backgrounds, skills and experience that are relevant to the role of the Board of Directors and the needs of the business. Accordingly, our Board of Directors regularly reviews the changing needs of the business and the skills and experience resident in its members, with the intention that the board will be periodically “renewed” as certain directors rotate off and new directors are recruited. The Board of Directors commitment to diversity and “renewal” will be tempered by the need to balance change with continuity and experience.
Our current board composition is highly diverse in the areas of gender, age, ethnicity and business experience. We believe that our commitment to diversity is demonstrated by the current composition of our Board of Directors.
In September 2018, the State of California adopted legislation, Senate Bill 826, requiring companies headquartered in the state to meet specific gender diversity requirements on their board, which required us to have at least one female director by the end of December 31, 2019, and have at least three female directors by the end of December 31, 2021. Three of our nine directors are female. We were already in full compliance with the most stringent requirements of this legislation in advance of its adoption, and remain in compliance with all aspects of such legislation.
We believe that our approach to board qualifications and selection criteria is effective in identifying strong candidates to meet the needs of the Company and its constituencies and has resulted in a diverse Board of Directors.
28 | 2023 PROXY STATEMENT
Board Members Self-Identifying from Underrepresented Communities
We believe our Board of Directors also meets all of the standards set by the State of California in Assembly Bill 979, which required us to have one director from underrepresented communities by December 31, 2021, and three by December 31, 2022. Three of our directors have indicated that they are from underrepresented groups.
One director self-identified as Hispanic and/or Latino.
Two directors self-identified as either being of Asian and/or Middle Eastern heritage.
See the graphic under “—Composition and Qualifications of our Board of Directors” above for further information regarding the composition and experience of our current Board of Directors.
BOARD LEADERSHIP STRUCTURE; LEAD INDEPENDENT DIRECTOR
Our Corporate Governance Guidelines provide that the roles of Chairman of our Board of Directors and Chief Executive Officer may be either separate or combined, and our Board of Directors exercises its discretion in combining or separating these positions as it deems appropriate. Our Board of Directors believes that the combination or separation of these positions should continue to be considered as part of our succession planning process. Currently, the roles are combined, with Mr. Friedman serving as Chief Executive Officer and Chairman of our Board of Directors.
In July 2013, the Board of Directors created the position of Lead Independent Director and adopted a Lead Independent Director Charter, which is available on the Investor Relations section of our website, which is located at ir.rh.com, by clicking on “Governance.” The Lead Independent Director Charter provides that the Lead Independent Director shall serve in a lead capacity to coordinate the activities of the other non-employee directors, to help facilitate communication between the Board of Directors and leadership and perform such other duties and functions as directed by the board from time to time. The Lead Independent Director presides over executive sessions of non-management directors.
Mr. Demilio currently serves as our Lead Independent Director. We believe the appointment of Mr. Demilio as our Lead Independent Director is beneficial to the Company due to Mr. Demilio’s breadth of experience and ability to facilitate communication between leadership and the Board of Directors and devote significant time to the Company.
Our Corporate Governance Guidelines provide the flexibility for our Board of Directors to modify our leadership structure in the future as appropriate. We believe that our Company is well served by this flexible leadership structure.
2023 PROXY STATEMENT | 29
In accordance with our Corporate Governance Guidelines, the Board of Directors affirmatively determines that each independent director has 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) and meets the standards for independence as defined by applicable law and the rules of the NYSE.
Our Board of Directors undertook its annual review of the independence of our directors and considered whether any director has a material relationship with us that could compromise that director’s ability to exercise independent judgment in carrying out that director’s responsibilities. Our Board of Directors affirmatively determined that each of Mr. Alberini, Mr. Demilio, Ms. Krane, Ms. Mitic, Mr. Rowghani and Dr. Schlesinger is an “independent director,” as defined under the applicable rules of the NYSE and the SEC, and that the other members of the board are not independent. The board’s independence determination was based on information provided by our current directors. In particular, in making its determination that Mr. Alberini is an independent director, the Board of Directors considered that under the rules of the NYSE and the SEC, Mr. Alberini could be deemed independent for membership on the Board of Directors after February 2017 given that his prior service as the Company’s Co-Chief Executive Officer and Chief Executive Officer had occurred more than three years prior to such date. In addition, as of February 2019, Mr. Alberini also meets the enhanced independence standard for a director who has not served as an employee of the Company for more than five years. In reaching its conclusions regarding the independence of Mr. Alberini, the Board of Directors further considered Mr. Alberini’s time away from the management of RH, the fact that he had served as the chief executive officer of Lucky Brands, and the fact that he subsequently left Lucky Brands and is now serving as the chief executive officer of Guess?, Inc., a publicly traded company, listed on the NYSE, along with other prior and existing relationships between the Company and Mr. Alberini.
Further, the Board of Directors determined that each member of the Board of Directors’ audit committee, compensation committee and nominating and corporate governance committee satisfies independence standards applicable to each committee on which he or she serves. Although the Board of Directors determined that Mr. Alberini is an independent director under the applicable rules of the NYSE and the SEC, the Board of Directors has elected not to appoint Mr. Alberini to any of the committees of the Company that are required under applicable rules of the NYSE or SEC to be composed entirely of independent directors.
During fiscal 2022, our Board of Directors held a total of four meetings. Additionally, our independent directors met in a number of executive sessions presided over by our Lead Independent Director. During fiscal 2022, all of our director nominees and all of our incumbent directors attended at least 75% of the total meetings such directors were eligible to attend during the period in terms of the board, the committees of the board on which they served and independent or non-executive board meetings.
Agendas and topics for board and committee meetings are developed through discussions among leadership and members of our Board of Directors and its committees. Information and data that are important to the issues to be considered are distributed in advance of each meeting. Board meetings and background materials focus on key strategic, operational, financial, governance and compliance matters applicable to us.
30 | 2023 PROXY STATEMENT
COMMITTEE COMPOSITION & MEETINGS
In fiscal 2022, our Board of Directors had the following standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. All board committees are composed of independent directors. Committee membership and the number of meetings each committee held in fiscal 2022 are as follows:
NOM. & CORP.
|(1)||Designated by the board as an “audit committee financial expert.”|
|(2)||Mr. Demilio is currently the board’s Lead Independent Director.|
|(3)||Committee members had various informal meetings in fiscal 2022.|
Our Board of Directors has delegated various responsibilities and authorities to its three different committees, as described below and in the committee charters. The board committees regularly report on their activities and actions to the full Board of Directors as they deem appropriate and as the Board of Directors may request. Each member of the audit committee, the compensation committee and the nominating and corporate governance committee was appointed by our Board of Directors, which reviews committee composition from time to time.
The audit committee was established for the primary purpose of assisting the Board of Directors in overseeing the accounting and financial reporting processes of the Company and audits of its financial statements. The audit committee is responsible for, among other matters:
Appointing, retaining, compensating, evaluating, terminating and overseeing our independent registered public accounting firm;
Delineating relationships between our independent registered public accounting firm and our Company consistent with the rules of the NYSE and requesting information from our independent registered public accounting firm and leadership to determine the presence or absence of a conflict of interest;
Reviewing with our independent registered public accounting firm the scope and results of their audit;
Approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
Overseeing the financial reporting process and discussing with leadership and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;
Reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements;
Establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; and
Reviewing and approving related-person transactions.
2023 PROXY STATEMENT | 31
Our audit committee currently consists of Mr. Demilio, Ms. Krane and Ms. Mitic. Rule 10A-3 of the Exchange Act, and NYSE rules require us to have at least three audit committee members, all of whom are independent. Our Board of Directors has affirmatively determined that each of Mr. Demilio, Ms. Krane and Ms. Mitic meets the definition of “independent director” for purposes of serving on our audit committee under Rule 10A-3 of the Exchange Act and NYSE rules. In addition, our Board of Directors has determined that Mr. Demilio qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
Our Board of Directors has adopted a written charter for the audit committee, which is available on the Investor Relations section of our website, which is located at ir.rh.com, by clicking on “Governance.” The audit committee conducts an annual self-evaluation of its performance, as set forth in its charter.
The compensation committee was established for the primary purpose of assisting the Board of Directors in discharging its responsibilities relating to the compensation of the Company’s directors and executive officers, as further described in “Executive Compensation—Compensation Discussion & Analysis—Compensation Committee Review of Compensation.” The compensation committee is responsible for, among other matters:
Reviewing key associate compensation goals, policies, plans and programs;
Reviewing and approving the compensation of our Chief Executive Officer and other executive officers;
Reviewing and approving or recommending the compensation of our directors;
Reviewing employment agreements and other similar arrangements between us and our executive officers; and
Appointing and overseeing any independent compensation consultants.
Our compensation committee currently consists of Mr. Demilio and Dr. Schlesinger. Our Board of Directors has affirmatively determined that each member of the compensation committee meets applicable independence requirements for membership on a compensation committee in accordance with applicable rules of the NYSE.
Our Board of Directors adopted a written charter for the compensation committee, which is available on the Investor Relations section of our website, which is located at ir.rh.com, by clicking on “Governance.” The compensation committee conducts an annual self-evaluation of its performance, as set forth in its charter.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee was established for the primary purpose of assisting the Board of Directors in discharging its responsibilities relating to the election of directors. The nominating and corporate governance committee is responsible for, among other matters:
Identifying individuals qualified to become members of our Board of Directors, consistent with criteria approved by our Board of Directors;
Overseeing the organization of our Board of Directors to discharge the board’s duties and responsibilities properly and efficiently; and
Developing and recommending to our Board of Directors a set of corporate governance guidelines and principles.
Our nominating and corporate governance committee currently consists of Messrs. Demilio and Rowghani. Our Board of Directors has affirmatively determined that each member of the nominating and corporate governance committee meets applicable independence requirements for membership on a nominating and corporate governance committee in accordance with applicable rules of the NYSE.
32 | 2023 PROXY STATEMENT
Our Board of Directors adopted a written charter for the nominating and corporate governance committee, which is available on the Investor Relations section of our website, which is located at ir.rh.com, by clicking on “Governance.” The nominating and corporate governance committee conducts an annual self-evaluation of its performance, as set forth in its charter.
DIRECTOR NOMINATIONS; COMMUNICATION WITH DIRECTORS
Criteria for Nomination to the Board
In accordance with its charter, the nominating and corporate governance committee will consider candidates submitted by the Company’s shareholders, as well as candidates recommended by directors and leadership, for nomination to our Board of Directors. The nominating and corporate governance committee considers qualifications for the Board of Directors’ membership, which may include:
The highest personal and professional integrity;
Demonstrated exceptional ability and judgment;
Broad experience in business, finance or administration;
Familiarity with the Company’s industry;
Ability to serve the long-term interests of the Company’s shareholders;
Sufficient time available to devote to the affairs of the Company;
Ability to provide continuing service to promote stability and continuity in the boardroom and provide the benefit of familiarity and insight into the Company’s affairs that directors would accumulate during their tenure;
Ability to help the Board of Directors work as a collective body; and
Experience, areas of expertise, as well as other factors relative to the overall composition of the Board of Directors.
The nominating and corporate governance committee also considers such other factors as it deems appropriate, including diversity, the interplay of the candidate’s experience with the experience of other directors, and the extent to which the candidate would be a desirable addition to the Board of Directors and any committees of the Board of Directors. The nominating and corporate governance committee does not assign specific weights to particular criteria and no particular criteria is necessarily applicable to all nominees. The composition of our current Board of Directors includes diversity in the areas of gender, age, ethnicity and business experience.
The nominating and corporate governance committee further reviews and assesses the activities and associations of each candidate to address legal impediments, conflicts of interest, or other considerations that might hinder or prevent service on our Board of Directors. In making its selection, the nominating and corporate governance committee bears in mind that the foremost responsibility of a director of a company is to represent the interests of the shareholders as a whole.
Each director’s individual biography set forth above includes the key individual attributes, experience and skills of each director that led to the conclusion that each director should continue to serve as a member of our Board of Directors at this time, as reflected in the summary above. We believe the range of tenures of our directors creates a synergy between institutional knowledge and new perspectives.
2023 PROXY STATEMENT | 33
Shareholder Proposals for Nominees
In accordance with its charter, the nominating and corporate governance committee will consider potential nominees properly submitted by shareholders. Shareholders seeking to do so should provide the information set forth in the nominating and corporate governance committee’s charter regarding director nominations. The nominating and corporate governance committee will apply the same criteria for candidates proposed by shareholders as it does for candidates proposed by leadership or other directors.
To be considered for nomination by the nominating and corporate governance committee at next year’s annual meeting of shareholders, submissions by shareholders must be submitted in writing and must be received by the Corporate Secretary by the deadlines set forth in this proxy statement under “Proposals — Additional Information — Shareholder Proposals for the 2024 Annual Meeting” to ensure adequate time for meaningful consideration by the nominating and corporate governance committee. Each submission must include the following information:
The candidate’s name, age, business address and residence address;
The candidate’s biographical information, including educational information, principal occupation or employment, past work experience (including all positions held during the past five years), personal references, and service on boards of directors or other material positions that the candidate currently holds or has held during the prior three years;
The class and number of shares of the Company which are beneficially owned by the candidate;
Any potential conflicts of interest that might prevent or otherwise limit the candidate from service as an effective member;
Any other information pertinent to the qualification of the candidate;
The name and record address of the shareholder making the recommendation; and
The class and number of shares of the Company which are beneficially owned by such shareholder and the period of time such shares have been held, including whether such shares have been held in excess of one year prior to the date of the recommendation.
Information regarding requirements that must be followed by a shareholder who wishes to make a shareholder nomination for election to our Board of Directors for next year’s annual meeting is described in this proxy statement under “Proposals — Additional Information — Shareholder Proposals for the 2024 Annual Meeting.”
Communicating with Members of the Board of Directors
Any shareholder or any other interested party who wishes to communicate directly with (i) our entire Board of Directors, (ii) the non-management directors as a group, or (iii) the Lead Independent Director, may do so by corresponding with the Lead Independent Director at the following address: Lead Independent Director, c/o RH, Legal Dept., 15 Koch Road, Corte Madera, CA 94925, Attn: Corporate Secretary. All communications will be received, processed and then directed to the appropriate member(s) of our board other than, at the board’s request, certain items unrelated to the board’s duties, such as customer complaints, spam, junk mail, solicitations, employment inquires and similar items.
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SHAREHOLDER OUTREACH ACTIVITIES
We actively engage with major shareholders of the Company, which has been a practice of the Company since our initial public offering in 2012. At our recent special meeting of shareholders (held on April 4, 2023) (our “2023 Special Meeting”), approximately 52.7% of the votes cast by our shareholders supported our proposal to adopt the RH 2023 Stock Incentive Ownership Plan (the “2023 Equity Plan”). At our last annual meeting (held on June 30, 2022), approximately 97.7% of the votes cast by our shareholders supported our say-on-pay proposal. We are committed to the interests of our shareholders and the delivery of shareholder value through our focus on financial performance, including through capital allocation, optimization of free cash flow and increasing the operating margin of the business. We believe that, as part of this commitment, it is important to maintain an ongoing dialogue with shareholders, including with respect to feedback on our executive compensation programs.
In 2016, we launched a formalized annual shareholder outreach program in order to solicit additional input from shareholders with respect to corporate governance and executive compensation practices. This shareholder outreach effort has continued and evolved in each subsequent year. Along with our annual shareholder outreach program, throughout the year, members of our leadership team, including our Chief Financial Officer and Chairman and Chief Executive Officer, engage in regular shareholder and investor communications.
As part of our ongoing shareholder outreach efforts, we have provided explanations of our organizational and leadership structures and our continuing efforts to evolve and refine our organizational design and improve its alignment with the evolution of our business. In particular, we have highlighted that numerous business initiatives like the membership program have resulted in simplification of some aspects of our business, while other new initiatives require on-going leadership focus and efforts, and that the shifts in focus and responsibilities of our business and executive officers are designed to attune the organizational and leadership structures to the transformation of our business. This formalized shareholder outreach program is designed to solicit feedback from the Company’s shareholders with respect to a number of topics including those related to our executive pay practices, environmental, social and corporate governance programs and policies, as well as other topics of interest of our shareholders. This effort supplements the ongoing communications between our leadership and shareholders. We continue to receive feedback from our investors throughout the year as a result of our shareholder outreach program.
Shareholder Outreach Campaign & Feedback
We regularly engage in an annual shareholder outreach campaign in order to solicit the views of investors that we believe represent a substantial portion of our issued and outstanding shares as of the prior calendar year. We hold these discussions with shareholders with the objective of procuring feedback on topics that are of interest to these investors. The bulk of the feedback we receive in connection with the outreach campaign focuses on topics of governance and compensation practices as well as commentary on our proxy statement disclosures.
While our goal is to solicit the views of investors representing at least 50% of our issued and outstanding shares, our ability to reach shareholders depends in part on the concentration, or lack of concentration, of voting shares within our shareholder base as well as the fact that a number of our investors that had been previously contacted indicated there was not a need to have further conversations in the current annual shareholder outreach campaign with respect to governance and compensation practices, as their positions on the topics discussed had not changed in any significant way from previous conversations.
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In 2021, we solicited the views of institutional investors that we believe represented approximately 49% of our issued and outstanding shares owned by institutional investors as of December 31, 2020, and had discussions with, and received feedback from, investors representing approximately 24% of such outstanding shares.
In 2022, we solicited the views of institutional investors that we believe represented approximately 69% of our issued and outstanding shares owned by institutional investors as of December 31, 2021, and had discussions with, and received feedback from, investors representing approximately 24% of such outstanding shares.
In 2023, in connection with our 2023 Special Meeting and this Annual Meeting, we solicited the views of institutional investors that we believe represented approximately 74% of our issued and outstanding shares owned by institutional investors as of March 6, 2023, and had discussions with, and received feedback from, investors representing approximately 70% of such outstanding shares. As was the case in 2021 and 2022, a number of our investors that had been previously contacted indicated there was not a need to have further conversations in the current annual shareholder outreach campaign with respect to governance and compensation practices, as their positions on the topics discussed had not changed in any significant way from previous conversations.
With respect to the outreach and feedback received in 2023, we were particularly mindful to respond to each area of questions or comments from our investors regarding our executive compensation practices and our equity grant practices inasmuch as the 2023 Special Meeting was to approve the 2023 Equity Plan. Most of the comments we received in 2023 concerning our compensation practices focused on the number of shares requested pursuant to the 2023 Equity Plan. We have responded to these comments and questions, as well as requests for further clarification, by including additional disclosure in the proxy statement related to the Special Meeting and this proxy statement regarding our rationale for determining the incremental 3.0 million share authorization amount under the 2023 Equity Plan, as well as the inclusion of additional information in this proxy statement around our equity award practices and around our executive compensation program more generally.
In addition to the general feedback noted in the chart below, investors have expressed appreciation of our outreach efforts. The results of the shareholder outreach campaign, including concerns and feedback we received, were provided to our Board of Directors.
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Shareholders requested that
We have continued to fine tune our proxy statement presentation, including providing more information in tables and charts rather than within lengthy narrative form in order to make the proxy statement easier to read and the information more accessible
Shareholders requested increased transparency into the metrics used in our annual (short-term) cash bonus or Leadership Incentive Program (“LIP”)
We have provided additional disclosure in our CD&A in order to explain the reasons we chose certain compensation metrics and to show how our program is aligned with shareholder interests. We have included additional disclosures concerning changes in our LIP metrics from year to year, including reasons for the fiscal 2022 selection of GAAP operating margin as the basis for the fiscal 2022 LIP
We have included substantial additional disclosure concerning the details of the multi-year option awards granted to our Chairman and Chief Executive Officer. The enhanced disclosure includes background information concerning the reason for the selection of stock price performance as the key performance metric used in the 2017 and 2020 awards as well as additional information regarding the terms and conditions of the awards in order to provide greater clarity concerning these grants. In particular, we have enhanced our disclosures concerning the operation of the dual condition performance measurement and selling restrictions in these awards that are tied to stock price performance over a long-term service period in order to incentivize sustained share price appreciation rather than short term price movements
Given our focus on innovation and business transformation as one of our key strategies, and our goal to use a performance metric that is objectively measurable, we have selected stock price performance as the key performance metric for these awards with a reliance on using out of the money stock price hurdles at the date of the grant. We believe that stock price appreciation is an appropriate performance metric inasmuch as stock price as a performance metric (i) measures the overall performance of the business, (ii) aligns well with our short-term and long-term goals, and (iii) is transparent, understandable and accessible to our shareholders and other key stakeholders, including our associates
2023 PROXY STATEMENT | 37
Shareholders requested information related to other performance metrics such as total shareholder return (“TSR”)
After receiving feedback from shareholders regarding the disclosure of other performance metrics for our business, we have been providing additional information regarding key metrics such as TSR in our Annual Report on Form 10-K and in our shareholder letters in which we report our financial results and we disclose similar information here in our proxy statement for convenience
We have also included a stock performance table to disclose a measure of TSR, as well as enhanced disclosures regarding TSR under the caption “Stock Performance” in our CD&A included below
Although we do not use TSR as a direct metric as part of our long-term incentive strategy, we believe that the stock price performance metric that we do use in equity awards is likely to be well correlated with other metrics such as TSR
Please see “—Fiscal 2022 Business Highlights” included below
We have continued to enhance our ESG disclosures including enhanced information about our corporate governance practices
Beginning in 2021, we added a new section to our proxy statement that provides substantial additional information regarding our corporate social responsibility program, including our approach to environmental, social and governance initiatives and other related topics relevant to the Company’s business. This year, we have also enhanced our disclosures with respect to, among other things, material sourcing, ethical manufacturing and workforce health and wellness
Our enhanced disclosures include, among other matters, additional information about our diversity profile, including certain metrics related to Waterworks, our response to the COVID-19 pandemic and other related information, such as our approach to cybersecurity risks
Please see the “Corporate Governance” and “Environmental, Social & Governance” sections of this proxy statement
We expanded our disclosures regarding our independence determinations with respect to our directors, in particular regarding our determination that Mr. Alberini is an independent director and our determinations regarding his appointment to any committees
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Shareholders also expressed a preference that equity awards granted to the executive officers
Our compensation program relies on equity and equity upside as a key method to align incentives between the leadership team and our investors. For example, we consider stock option awards, which only have value if the stock price increases above the stock option exercise price, a key component of our compensation program
Based on discussions and compensation reviews in prior years, we structured the 2017 Stock Option Award and 2020 Stock Option Award to our Chief Executive Officer, Mr. Friedman, in order to require substantial stock price appreciation from the price of our common stock on the date of grant in order to release restrictions on the shares underlying the award. We also required a four-year service period for the Chief Executive Officer in order to assure that these price objectives would be measured on a sustained basis rather than at a single moment in time
We believe the four-year structure of the award aligns and incentivizes Mr. Friedman to take a multi-year and long-term approach in leading the Company
Shareholders requested increased transparency around peer group or other competitive measurements used by the Company for our pay-for-performance alignment
We have enhanced our disclosure regarding the use of a “market check” as one of the compensation factors that we have employed to assess our compensation practices
We have used “market check” information in connection with multi-year equity awards we have made to our Chief Executive Officer as well as compensation decisions with respect to our executive officers and other members of our senior leadership team. Please see the section “Executive Compensation—Analyses of Competitive Market Practices”
2023 PROXY STATEMENT | 39
Shareholders requested information about how we set the size of the 2023 Equity Plan at 3.0 million authorized shares
In connection with the filing of our amended and restated proxy statement with respect to the Special Meeting we provided enhanced disclosure concerning our rationale in setting the incremental 3.0 million authorized shares under the 2023 Equity Plan. The four key factors that drove the determination with respect to sizing the 2023 Equity Plan were as follows:
First, we have made steady repurchases of shares over the past five years. Since our June 2022 announcement of an increase in our share repurchase program for an aggregate incremental share repurchase authorization of $2.45 billion through the date of this proxy statement, we have repurchased approximately 3.7 million shares for an aggregate repurchase price of $1.0 billion, which repurchase completely offsets the entire amount of the authorized 3.0 million shares under the 2023 Equity Plan
Second, we expect the 2023 Equity Plan will be sufficient to cover our requirements for the next three to five years, but the exact lifespan of the 2023 Equity Plan will depend on various factors that cannot be predicted in advance with absolute precision, including the rate at which we expand the business internationally and possible acquisitions we may undertake as part of our business strategy
Third, we had not made refresh equity grants to most of our associates in any significant way since April 2020 at the time we solicited shareholder approval of the 2023 Equity Plan and we expected some level of catch up award activity in light of the cadence of our recent grants
Fourth, we had approximately 1.6 million shares that remained unused when the 2012 Stock Incentive Plan (“2012 Plan”) expired and that we determined should be carried over into the 2023 Equity Plan. Accordingly, the net amount of incremental shares in the 2023 Equity Plan is approximately 1.4 million shares
Shareholders have requested further disclosure about the nature of our Chairman and Chief Executive Officer’s multi-year awards and in particular have requested additional information given the complex terms of the award and the manner in which the performance metrics are measured over time
Our 2017 and 2020 equity awards to our Chairman and Chief Executive Officer were designed to create alignment with driving long term performance of our business over time primarily measured through performance metrics linked to stock price. Given the complexity of the awards terms and conditions, some investors have requested increase disclosure concerning the detailed operation of these awards. In light of this request, we have both increased the disclosures regarding these equity awards over time and simplified them in order to provide a clearer presentation of the performance characteristic of the award.
In addition, in those circumstances where we make a multi-year equity award to an executive officer, we intend to disclose details concerning the multi-year nature of the award and the details of how the award’s performance metrics operate
We have followed a practice of making multi-year equity awards to our Chairman and Chief Executive Officer based upon a four-year cycle
40 | 2023 PROXY STATEMENT
We have provided substantial additional disclosure concerning these multi-year awards and the performance metrics used in each of these awards. In particular, we provided a multi-year equity award to the Chairman and Chief Executive Officer in the second quarter of fiscal 2013 and in the second quarter of fiscal 2017
The 2017 award included performance requirements linked to stock price objectives well in excess of the stock price on the date of the grant with the objective of measuring stock price performance over a minimum service period from the date of the grant. We believe that the 2017 grant was very successful due to the alignment of the performance objectives with long term stock price appreciation over a minimum four-year service period and the stock price performance during this period substantially exceeded the stock price thresholds set forth in the award
Based upon the experience we had with the 2017 award, we granted our Chairman and Chief Executive Officer an additional multi-year equity award in fiscal 2020 that is designed to track the methodology of the 2017 award. The 2020 award includes a new minimum four-year service period commencing in May 2021 on the date at which the 2017 award performance hurdles were achieved. We have included enhanced disclosure concerning these multi-year equity awards to our Chairman and Chief Executive Officer in our CD&A in order to explain the intent and details behind these large equity awards as well as the fact that:
Following the 2017 award and 2020 award, we did not grant further equity awards to Mr. Friedman in fiscal 2018 or fiscal 2019 or in fiscal 2021 or fiscal 2022
Given the multi-year nature of the 2020 Stock Option Award, the compensation committee does not intend to grant an annual equity award to Mr. Friedman in 2023 or thereafter on an annual refresh basis
The compensation committee expects to recommend awards to Mr. Friedman consistent with the multi-year nature of his last three equity awards which would only be applicable for the end of the four-year service period of the 2020 Stock Option Award
The multi-year 2020 Stock Option Award structure arose out of a purposefully driven conversation and discussion between the compensation committee and Mr. Friedman and is believed to incentivize Mr. Friedman and align him with a long-term view in leading the Company. Please see section entitled “—2020 Stock Option Award to Chairman and Chief Executive Officer”
2023 PROXY STATEMENT | 41
As a result of the ongoing evolution of our business, we continuously adjust the structure and operation of our executive leadership team to meet the needs of our business and optimize the outcome of our initiatives. We frequently implement changes to our organizational design in order to more closely align our leadership structure with the changing needs of the business
We have launched numerous initiatives that have become integral to the ongoing development of our business including, among others: (i) our membership program; (ii) the introduction of RH Hospitality in many of our new Gallery locations; (iii) the transformation of our real estate both through the introduction of new Galleries and changes in the real estate development model; (iv) ongoing restructuring and improvements to our distribution centers, transportation network and supply chain; (v) the introduction and expansion of design services as part of our Gallery operations; (vi) improvements in our home delivery and outlet model, including the introduction of reverse logistics; (vii) improvements in our product assortment including the introduction of new categories such as RH Modern, RH Beach House and RH Ski House; and (viii) expansion of our business into international markets. While some of these initiatives such as the ongoing development of RH Hospitality have required us to add incremental leadership positions, others have simplified our business
Our efforts architecting a new operating platform, inclusive of our distribution center network redesign, the redesign of our reverse logistics and outlet business, and the reconceptualization of our home delivery and customer experience, are driving lower costs and reductions in inventory levels. Likewise, the adoption of a membership model has resulted in simplification in our business and corresponding reduction in certain leadership personnel. Many of the efforts to improve our organizational design have resulted in changes in our home office operations and increased responsibilities for our senior leadership team
We have provided ongoing disclosure concerning the roles of our senior leadership personnel, including our named executive officers. Over the last several years, we have increased the scope of responsibility for our named executive officers, including Ms. Chaya, who has worked closely with our Chief Executive Officer. Ms. Chaya, our President, Chief Creative and Merchandising Officer oversees our product assortment and merchandising as well as related parts of our business including our Source Books and web presence. Mr. Duban oversees the Company's Galleries, Interior Design, Hospitality, Trade, Contract and Outlet. Mr. Preston oversees all of the Company’s financial functions (including strategic and financial planning, accounting, treasury, tax, internal audit and investor relations) as well as our legal, compliance and information technology teams
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BOARD’S ROLE IN RISK OVERSIGHT
Our Board of Directors is responsible for overseeing our risk management process. Our Board of Directors focuses on our general risk management strategy, including the most significant risks facing us, and oversees the implementation of risk mitigation strategies by leadership. Our Board of Directors is also apprised by leadership of particular risk management matters in connection with the board’s general oversight and approval of corporate matters and significant transactions. In addition, each of the board committees is responsible for risk management under its area of responsibility and consistent with its charter and such other responsibilities as may be delegated to them by the Board of Directors from time to time. See “Environmental, Social and Governance—Board Oversight of Cybersecurity Matters.”
DIRECTOR & EXECUTIVE STOCK OWNERSHIP GUIDELINES
Our board has adopted stock ownership guidelines applicable to all directors and executive officers of the Company in order to further align the financial interest of our directors and executive officers with the interest of our investors. The guidelines provide that executive officers should own RH stock with a value at least equal to six times annual base salary for the Chief Executive Officer and two times annual base salary for our other executive officers. The guidelines provide that non-management directors should own RH stock with a value at least equal to two times the amount of the annual cash retainer paid to directors. Executive officers and directors are expected to achieve the stock ownership levels under these guidelines by the later of five years from the effective date of the guideline or the date of their hire, promotion or appointment, except for the Chief Executive Officer for whom these guidelines were effective immediately upon their adoption in May 2018.
All executive officers and non-management directors are in compliance with the guidelines.
Our Chairman and Chief Executive Officer, Mr. Friedman, has consistently maintained a significant equity ownership interest in the Company and, as of May 23, 2023, beneficially owns approximately 21.1% of the Company’s common stock which, based on the average closing price for RH stock for fiscal 2022, was valued at approximately 976.7 times his annual base salary for fiscal 2022, far above the multiple of six times salary minimum ownership requirement. The foregoing calculation was based on shares owned directly, shares owned indirectly and reported as beneficially owned for Section 16 reporting purposes, and the “in the money” value of stock options, restricted stock and restricted stock units that are no longer subject to vesting or selling restrictions. Additional information regarding the shareholdings of our other named executive officers and directors is set forth in this proxy statement in the section entitled “Security Ownership of Top Shareholders & Leadership.”
2023 PROXY STATEMENT | 43
STOCK TRADING PRACTICES
We maintain an insider trading policy that, among other things, prohibits our officers, including our named executive officers, directors and associates from trading during quarterly blackout periods and contains other restrictions on trading activities designed to avoid circumstances where Company insiders may be deemed to have traded on material nonpublic information.
Under the insider trading policy, we also prohibit short sales, hedging and similar transactions designed to decrease the risks associated with holding the Company’s securities, pledging the Company’s securities as collateral for loans and transactions involving derivative securities relating to our common stock. Our insider trading policy also requires that all associates with titles of vice president or higher, including our named executive officers, and all members of our Board of Directors pre-clear any proposed open market transactions.
10b5-1 Trading Plans
Each of our executive officers and directors may enter into a written plan (“10b5-1 Trading Plan”) for the automatic trading of securities in accordance with Rule 10b5-1 of the Exchange Act. It has been the practice of the named executive officers to disclose on Form 4 filed with the SEC whether any sale or other transfer of shares reported has been made pursuant to a 10b5-1 Trading Plan.
All 10b5-1 Trading Plans entered into by our executive officers and directors must comply with our insider trading policy, and any 10b5-1 Trading Plan must be pre-cleared in advance by the Company’s corporate compliance officer. A number of members of our leadership team and directors have adopted 10b5-1 Trading Plans and are encouraged to do so.
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ANNUAL MEETING ATTENDANCE
We do not have a policy that requires our directors to attend the annual meeting of shareholders. Two of our directors attended the 2022 annual meeting.
COMPENSATION OF DIRECTORS
We compensate all non-employee members of our Board of Directors as follows:
|(1)||In March 2016, upon his appointment as Lead Independent Director, Mr. Demilio received a stock option for 20,000 shares, which vested in five equal installments over five years, subject to his continuing service as the Lead Independent Director. In May 2020, in connection with his service as Lead Independent Director, Mr. Demilio received a refresh stock option for 30,000 shares, which vests in five equal installments over five years, subject to his continuous service as the Lead Independent Director.|
|(2)||Based on the average closing price of our common stock on the date of grant, determined using the closing prices for the ten consecutive trading days prior to and inclusive of the date of grant, which shares vest in full on the one-year anniversary of the date of grant. Grants are made for service for the period between the annual meeting of shareholders for the fiscal year in which the grant was made and the annual meeting of shareholders for the following fiscal year.|
Annual equity grants described above are granted on the date of the annual meeting of shareholders each year.
Mr. Friedman and Ms. Chaya, as current officers of the Company, did not receive any compensation for board service for fiscal 2022. All directors receive reimbursement for reasonable out-of-pocket expenses incurred in connection with meetings of our Board of Directors.
2023 PROXY STATEMENT | 45
The following table shows the compensation earned by all non-employee directors during fiscal 2022:
|(1)||Reflects the aggregate grant date fair value of the awards of restricted stock made in fiscal 2022, computed in accordance with FASB ASC 718. See Note 18—Stock-Based Compensation in our audited consolidated financial statements contained in our 2022 Annual Report. Amounts shown do not reflect compensation actually received or that may be realized in the future by the director.|
At January 28, 2023, the last day of fiscal 2022, the aggregate number of unvested restricted stock awards and unexercised stock options held by each of our directors, other than Mr. Friedman and Ms. Chaya, is set forth below. Information regarding equity awards held by Mr. Friedman and Ms. Chaya is set forth in the table above entitled “— Outstanding Equity Awards at Fiscal Year-End.”
|(1)||All restricted stock awards listed above will vest as to 100% of the shares on June 30, 2023.|
|(2)||Mr. Demilio was granted options to purchase 20,000 shares of stock in connection with his appointment as Lead Independent Director on March 9, 2016. Such options vested pro rata over five years such that they were fully vested on March 9, 2021. Mr. Demilio was granted options to purchase 30,000 shares of stock on May 5, 2020. Such options vest pro rata over five years such that they will be fully vested on May 5, 2025, subject to Mr. Demilio’s continued service as Lead Independent Director.|
46 | 2023 PROXY STATEMENT
Fiscal 2022 Business Highlights
To assist you in reviewing the proposals to be acted upon at our Annual Meeting, we call your attention to certain headlines about the Company’s 2022 operational and financial performance set forth below that are relevant to the matters discussed in this proxy statement.
Below we highlight certain aspects of the Company’s strong recent performance, including fiscal 2022 financial performance and stock price performance, as well as our approach to equity compensation for our executive officers in relation to the Company’s business performance. The following business highlights are only a summary. For more complete information about these topics, please review the 2022 Annual Report and the entirety of this proxy statement.
Fiscal 2022 Financial Performance
Fiscal 2022 was another outstanding year for the RH brand. While revenues of $3.590 billion were below the pandemic peak of 2021, we have continued to see strong demand for our products. Highlights of our strong fiscal 2022 financial performance include:
GAAP net revenues decreased 4.5% to $3.590 billion versus $3.759 billion in fiscal 2021
Adjusted net revenues decreased 4.5% to $3.590 billion versus $3.758 billion in fiscal 2021
GAAP operating margin decreased 460 basis points to 20.1% versus 24.7% in fiscal 2021
Adjusted operating margin decreased 360 basis points to 22.0% versus 25.6% in fiscal 2021
GAAP net income decreased 23.2% to $529 million versus $689 million in fiscal 2021
Adjusted net income decreased 31.0% to $529 million versus $767 million in fiscal 2021
GAAP diluted earnings per share decreased 10.1% to $19.90 versus $22.13 in fiscal 2021
Adjusted diluted earnings per share decreased 23.2% to $20.06 versus $26.12 in fiscal 2021
Other Financial Measures(1)
We generated $230 million of free cash flow in fiscal 2022, inclusive of $55 million relating to the portion of repayments of convertible senior notes attributable to debt discount upon settlement
We ended fiscal 2022 with $1.011 billion of net debt and $1.508 billion of cash on our balance sheet (2)
|(1)||Reconciliations of GAAP to non-GAAP financial measures for adjusted net revenues, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, free cash flow and net debt are provided in the tables included in Annex A to this proxy statement.|
|(2)||We define “net debt” as total debt less cash and cash equivalents.|
2023 PROXY STATEMENT | 47
Equity Compensation Framework
We believe that compensation paid to our executive officers should be structured to align with the performance of the business. We achieve this alignment in part by providing a substantial portion of compensation to our executive officers in the form of equity awards. This approach generally aligns executive compensation with shareholder stock price appreciation. In addition, we have structured the equity awards made to our Chairman and Chief Executive Officer to have a substantial performance component. Performance for these purposes is measured by stock price appreciation over a minimum four-year service period. We believe that our approach to equity compensation for our executive officers has contributed to our overall business performance and the long-term appreciation in our share price.
We believe that compensation paid to our executive officers should be closely aligned with the performance of the Company, on both a short-term and long-term basis. The compensation committee’s decision-making regarding executive compensation in any given fiscal year is informed in part by the financial performance of the Company as well as the strategic and business initiatives pursued by the Company during the year and over time. The Company undergoes an annual process to assess the compensation of its senior leadership team to assure that there is strong alignment with the Company’s performance goals and long-term business strategy.
In terms of equity compensation for our executive officers, we have instituted a number of investor friendly practices in connection with stock-based incentive awards. The Company recognizes the dilutive impact of stock-based incentive awards on our shareholders. We strive to balance the impact of dilution with our need to attract and retain talent. In addition, we rely on a number of other measures to address the dilutive effects of equity awards including: (i) use of longer term vesting with respect to many equity awards, a large number of which have a seven year vesting measurement period, (ii) back-end loaded vesting with respect to some of our equity grants, (iii) avoiding mechanistic or formulaic grant practices that may create expectations around annual refresh grants that are not linked to market and business conditions, and (iv) repurchase of shares under our share repurchase programs as an offsetting mechanism to reduce dilution from equity awards.
See “Executive Compensation—Compensation Discussion & Analysis” below for additional information regarding equity awards to our executive officers.
2020 Stock Option Award to Chairman and Chief Executive Officer
In fiscal 2020, the Company granted a multi-year stock option award (the “2020 Stock Option Award”) to the Chairman and Chief Executive Officer that is tied to the Company’s future stock price performance and the continuing service of the Chairman and Chief Executive Officer over time. The Company has determined that linking the Chairman and Chief Executive Officer’s equity award to future stock price performance is an important construct to align the Chairman and Chief Executive Officer’s compensation with the overall financial performance of the Company over time.
In fiscal 2017, the compensation committee determined to grant to the Chairman and Chief Executive Officer a multi-year equity award under the 2012 Stock Incentive Plan to purchase 1,000,000 shares of the Company’s common stock with performance conditions tied to stock price performance, which the compensation committee determined to be a transparent and accessible measure of overall value that aligned the Chairman and Chief Executive Officer’s compensation with a long-term view in leading the Company and with the returns experienced by investors over time.
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The 2017 multi-year stock option award structure was implemented as a result of the compensation committee’s extensive efforts to create an award that created strong alignment between the Chairman and Chief Executive Officer and the objectives of the Company’s shareholders. In its fiscal 2019 annual review of executive compensation, the compensation committee affirmed the effectiveness of the multi-year equity structure. The Company’s financial and operational performance improved and its stock price performed exceptionally well during the years following the 2017 multi-year stock option award to the Chairman and Chief Executive Officer. The 2017 multi-year stock option award required substantial stock price appreciation from the Company’s share price on the date of grant: the stock price performance targets in Mr. Friedman’s 2017 multi-year stock option award were set at $100, $125 and $150 per share, measured over a minimum four-year time period from the date of grant and represented premiums to the grant-date stock price of 105.7%, 157.1% and 208.5%, respectively. As of February 2, 2018, the last trading day of fiscal 2017, the closing price of the Company’s common stock was $92.04 per share, a substantial increase over the price at the time of the equity award to Mr. Friedman in May 2017. As of February 1, 2019, the last trading day of fiscal 2018, the closing price of the Company’s common stock had further increased to $133.64 per share, and as of January 31, 2020, the last trading day of fiscal 2019, the closing price of the Company’s common stock had further increased to $208.75 per share.
The 2020 Stock Option Award has the same overall time-based and performance-based structure as the 2017 multi-year stock option award made to Mr. Friedman, except that the stock price performance levels, the exercise price and the number of shares covered by the new award have been adjusted to take into account current market conditions, including the RH common stock price and the number of RH shares outstanding. Based on the strong performance of the Company’s stock price since the date of the 2017 multi-year stock option award, the compensation committee concluded in fiscal 2020 that all of the performance hurdles under the award would be met in May 2021. Mindful of this positive outcome, the 2020 Stock Option Award was structured to resume with a new four-year performance period that commences upon completion of the performance measurement period for the 2017 multi-year stock option award. Accordingly, the new award provides for the continuation of essentially the same performance methodology used in the 2017 multi-year stock option award using enhanced stock price levels that are substantially above the RH stock price at the time of 2020 grant.
See “Executive Compensation—Compensation Discussion & Analysis” below for additional information regarding the equity compensation of our Chairman and Chief Executive Officer.
2023 PROXY STATEMENT | 49
Share Price Performance
We have achieved extremely strong share price appreciation measured both in the mid-term and long-term. We believe our executive compensation strategy with respect to equity grants is strongly aligned with our long-term share price performance and has contributed to the strong financial returns that we have generated for investors over the long-term.
Measured at the end of fiscal 2022, our share price decreased by approximately 17% during fiscal 2022 reflecting, in part we believe, the impact of macroeconomic factors such as increased inflation, rising interest and mortgage rates, uncertainties in the global financial markets and the slowdown in the housing market, as well as the give-back in demand trends in our business during fiscal 2022 related to the shift in consumer demand away from home furnishings in the aftermath of the COVID-19 pandemic. The share price has, however, appreciated substantially when measured over the medium and long term through the end of fiscal 2022 as described further in the table below. Since our initial public offering in 2012, our share price has increased more than 1,100%.
(1)Stock prices are rounded to the nearest whole dollar amount.
(2)Measured from the IPO price.
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INTENTIONALLY LEFT BLANK
environmental, social & governance
Our environmental, social and certain other governance efforts are implemented through our environmental, social and governance (“ESG”) programs, which are designed to align our approach to ESG issues with the interests of our people, customers and shareholders and their respective ESG concerns.
Our ESG programs consist of, and are organized under, four key components:
Product Safety & Compliance
Responsible Sourcing & Vendor Compliance
Environmental & Sustainability
We believe that these four key components of our ESG programs enhance and elevate our brand presence and are aligned with the Company’s long-term strategic goals as a provider of luxury home furnishings.
In order to implement our ESG programs, we collaborate and work with a variety of third-parties, many of which are non-profit organizations that provide and/or monitor standards addressing various aspects of ESG concerns. We work directly with some of these organizations or we rely upon vendors that adhere to standards set by these kinds of third parties. Some of these third-party organizations that we rely upon as part of our ESG programs include among others, Habitat for Humanity, Good360, Benchmark International, Assent, GoodWeave, Label STEP and Fair Working Conditions. More information on our ESG program and ESG efforts and the work we do with these kinds of third parties is available on the Investor Relations section of our website, which is located at ir.rh.com, by clicking on “Governance – Environmental, Social & Governance.”
We observe a number of practices that are designed to support environmental stewardship through sustainability. We seek to address environmental considerations through our programs, including issues related to deforestation, waste, energy use, recycling and conservation of resources used in building materials.
We have strategically aligned our sustainability and environmental programs with the materials we use to make our products, the paper we use to print our Source Books and the iconic and historical buildings we chose to renovate and restore as part of our portfolio of Design Galleries.
We have pioneered a number of product collections that incorporate the use of reclaimed and repurposed wood from older buildings where these materials can be procured. We also work with our vendors to support responsible wood sourcing practices and compliance with applicable regulations concerning the origin of new wood and other product inputs.
Our Source Books are printed – and have been printed for a number of years – on Forest Stewardship Council (or FSC) Certified Catalog Paper. FSC is a third party certification organization that evaluates those who manage the care of forests. Using FSC certified paper in the production of our Source Books is designed to assure that paper is not contributing to destructive practices in forestry such as illegal logging, conversion of natural forests to other land uses, the liquidation of high conservation value forests, civil rights violations and genetic modification of forest species.
This RH proxy statement, as well as previous proxy statements, have also been printed with FSC Paper and Waterworks utilizes FSC paper for printing its bi-annual newspaper, Waterworks Made.
In 2023, we plan to expand the use of FSC certified paper at the RH Home Office.
We also promote a paperless alternative to Source Books through the presentation of our product assortment digitally. Our associates use iPads and other devices to showcase our product assortment to our customers in our Galleries. This service allows our customers to shop our entire merchandise assortment in our retail Galleries.
We work closely with our delivery network, distribution centers, home office facilities teams, Galleries and Outlets to divert packaging, product and other forms of waste from landfills. We have instituted a number of other initiatives to reuse and repurpose materials in lieu of traditional waste practices.
In 2015, we established a program with Habitat for Humanity to donate products in support of this organization as part of our philanthropy and sustainability efforts. We donate to Habitat for Humanity merchandise that does do not meet our “first quality” standards and these “second quality” and “third quality” products are diverted from landfills and used by Habitat for Humanity. Our program with Habitat for Humanity started in Tracy, California and now includes Galleries, Outlets and distribution centers across the U.S. and Canada. In 2019, Habitat for Humanity Greater Vancouver awarded RH a Community Donor Award as a Silver Level Donor.
Certain RH Baby & Child merchandise have received GREENGUARD Gold certification, the highest level of certification under GREENGUARD, requiring that such products meet strict chemical emissions limits and screening procedures.
In early 2023, to further align with our goal to support environmental stewardship, a portion of our Home Office campus transitioned to “No Mow” grass. This type of grass is more resilient to drought and requires annual mowing, further reducing emissions from gas powered lawn equipment.
Waste & Packaging
We work closely with our delivery centers, distribution centers, home office facilities teams, Galleries and Outlets to assist in finding resources and other options to help divert product and packaging waste from landfills. For example, we look for ways to divert products that do not meet our quality standards, such as products that cannot be sold through our Galleries and Outlets as a result of damage or returns. These “second quality” and “third quality” products have been proactively donated through product diversion programs resulting in an estimated waste diverted from landfills, as shown below:
We also have guidelines and procedures in place with our in-sourced home delivery teams and our third-party home delivery partners to offer to collect and recycle packaging materials from our customers at the time of the product delivery and installation process. Waterworks currently purchases packaging material that is Sustainable Forestry Initiative (SFI) certified.
In fiscal 2022, Waterworks engaged with a local organization to recycle 606 pounds (.303 tons) of e-waste and 9,800 pounds (4.9 tons) of metal.
Recycling & Composting
We have plans to expand the recycling and composting efforts with respect to the RH Home Office by partnering with its local waste hauler, making available a broader range of applicable waste receptacles and educating associates on recycling and composting best practices.
RH Electricity Consumption
We monitor our electricity consumption across our Galleries and Showrooms, Outlets, distribution centers, manufacturing site and home offices. Our plan is to use the data from our electricity consumption through our U.S. and Canadian operations to drive efficiencies and improvement. Below is a four-year look back at our electricity consumption in kilowatt-hours (kWh) at locations we are able to monitor on a fiscal year basis.
|(1)||Consists of 4 Distribution Centers (“DCs”), 66 Galleries, 16 Home Delivery Centers (“HDCs”), 32 Outlets and 8 other facilities in the U.S. and 2 Galleries and 1 Outlet in Canada.|
|(2)||Consists of 3 DCs, 65 Galleries, 19 HDCs, 32 Outlets and 11 other facilities in the U.S. and 2 Galleries and 1 Outlet in Canada.|
|(3)||A majority of RH facilities were temporarily closed from March to June in 2020 due to the start of the COVID-19 pandemic.|
|(4)||Consists of 4 DCs, 67 Galleries, 25 HDCs, 33 Outlets, and 11 other facilities in the U.S. and 2 Galleries and 1 Outlet in Canada.|
|(5)||Consists of 4 DCs, 63 Galleries, 21 HDCs, 33 Outlets, and 9 other facilities in the U.S. and 2 Galleries and 1 Outlet in Canada.|
|(6)||In 2022 we closed certain HDCs, Galleries and temporary locations.|
The previous table was derived from information provided to us by ENGIE Insight Services Inc., our third-party energy infrastructure and building services provider that helps manage our electricity usage in certain of our select locations and facilities. We do not currently have data for all of our facilities as some of our locations, for example, are part of an integrated multi-tenant commercial complex such as a mall or shopping center where electricity usage is co-mingled with other tenants and is managed by our landlord. We collect and use the data referenced above in order to monitor our electricity usage and to conserve electricity use at these locations. We cannot assure that the results shown for our locations monitored by ENGIE Insight Services are representative of other locations for which we do not have the same access to data regarding electricity use.
We believe our greatest savings impact in terms of electricity usage has been driven by elements of our lighting campaign. Through a targeted approach to our lighting systems, we have expanded the use of LED bulbs in many of our Galleries. We strive to make further gains through the continuation of this initiative during 2023, resulting in the conversion of more of our lighting to energy efficient LED alternatives.
We have also been reviewing potential options to include renewable sources in our energy portfolio.
As part of our real estate development projects, we address energy efficiency as one important factor in our development efforts. Some of our new Galleries have incorporated more energy efficient alternatives including, in some instances, LEED certified standards. As an example, in September 2016, we opened RH Austin, The Gallery at The Domain at 11720 Domain Boulevard which is a LEED Gold Certified building. In 2015, we opened our distribution center in Patterson, California which is also a LEED Gold Certified building. In 2020, we opened another distribution center in Ontario, California which is also a LEED Certified building.
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Architectural & Design Legacy
Since 2011, RH has opened 29 new Galleries. As part of our development of new Galleries, RH has updated and renovated a number of historic buildings, including among others our Gallery locations in Boston, Chicago, Greenwich, San Francisco, New York, New Jersey (under development) and England (under development). These projects enable RH to preserve important architectural contributions and have the additional benefit of reusing and repurposing substantial amounts of legacy building materials that are preserved in these Gallery redesigns. In contrast to new construction, these redesigned historical buildings rely on substantial amounts of the original building materials where possible. In many instances, we have been able to preserve substantial elements of the original building and super structure, as well as important design elements of the historic features of these locations. By preserving a significant portion of the original building, we are able to conserve the amount of new building materials that are used in these projects.
RH has great respect for architectural design and history and has reestablished the relevance of several historic and landmark buildings, giving them renewed purpose and bringing them to modern use. It is often the case that developing a new building from the ground up is more economical than restoring and renovating a historic building. When we choose to renovate historic landmark buildings, we approach the project as an investment in our brand elevation and real estate transformation strategy, as well as an investment in a long-term sustainable approach to Gallery development. Many of these landmark buildings are in a state of disrepair at the time we take possession of them and through our careful restoration we redevelop them into Galleries that reinforce our luxury brand aesthetic and highly differentiated, elevated customer experience.
In April 2013, we opened RH Boston, The Gallery at the Historic Museum of Natural History at 234 Berkeley Street in Boston, Massachusetts. We restored this landmark building that was originally designed in 1862 by distinguished architect William G. Preston and was only the second building to be erected in Boston's famous Back Bay. Our restoration efforts earned us the Preservation Achievement Award through the Boston Preservation Alliance.
In May 2014, we opened RH Greenwich, The Gallery at the Historic Post Office at 310 Greenwich Avenue in Greenwich, Connecticut. We restored this storied neoclassical building that was originally built in 1917. This building sits in the heart of Greenwich Avenue’s Historic District and is listed on the National Register of Historic Places.
In October 2015, we opened RH Chicago, The Gallery at the Three Arts Club at 1300 North Dearborn Parkway on Chicago’s famed Historic Gold Coast. We restored this landmark building, which was designed in 1914 by distinguished architectural firm Holabird & Roche and was inaugurated as a residence for young women studying music, drama and the visual arts. We restored the entire structure with great respect for its original vision in collaboration with the Commission on Chicago Landmarks. The Gold Coast district, where RH Chicago is located, is listed on the National Register of Historic Places and the Three Arts Club was named a Chicago Landmark in 1981.
In September 2018, we opened RH New York, The Gallery in the Historic Meatpacking District at the intersection of Little West 12th Street, Ninth Avenue and Gansevoort Street. We restored this historic landmark building that was originally owned by John Jacob Astor in the late 19th century. The Meatpacking District, where RH New York is located, is listed on the National Register of Historic Places.
In December 2018, we reopened Ma(i)sonry as RH Wine Vault as part of RH Yountville in the heart of wine country at 6711 Washington Street, Yountville, California. We restored this landmark building, which was originally designed in 1902 by its owner and vintner Charles Rovegno with the help of Angelo Brovelli, a local mason responsible for many of Napa County's idyllic stone bridges. This historic structure is listed on the National Register of Historic Places as well as on the Napa County Historic Resources Inventory.
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In May 2022, we opened RH San Francisco, The Gallery at the Historic Bethlehem Steel Building at the corner of Illinois & 20th Streets, San Francisco, California in the second quarter of fiscal 2022. Originally constructed in 1917 and designed in the Classical Revival style by preeminent San Francisco architect Frederick H. Meyer, we restored this landmark building with great respect for its original vision. The Historic Bethlehem Steel Building is listed on the National Register of Historic Places.
In September 2022, we opened RH Guesthouse at 55 Gansevoort Street in New York, New York. The 55 Gansevoort building is located in the Gansevoort Market Historic District which is listed on the National Register of Historic Places. Our restoration of this historic landmark building, which dates to 1887, was designed by architect Joseph M. Dunn.
We are developing RH England, The Gallery at the Historic Aynho Park. The earliest records indicate that a London mercer bought the manor of Aynho in 1545. The manor house at Aynho Park has been remodeled many times since it was built. We acquired Aynho Park in 2020 and intend to continue to redevelop, restore and breathe new life into this iconic historic site, which is considered to be a building of exceptional interest under the National Heritage List for England.
We are developing RH Morristown in New Jersey, The Gallery at the Historic Alnwick Hall, also known as the Abbey. Alnwick Hall was built in 1904 for Edward P. Meany, the New Jersey Judge Advocate General and director of the American Telephone and Telegraph Company. Edward P. Meany based the design of the house off of the Alnwick Castle in Northumberland, England. We look forward to bringing new life to this prominent landmark in Morristown.
We are developing RH London in the UK, The Gallery at the Historic 7 Burlington Gardens, also known as Queensberry House situated in Mayfair. The building was constructed in 1725 and was named after the fair that was typically held in May, every two weeks for about 80 years. At one point in time, it served as a branch of the Bank of England.
Aligned with our efforts to honor the legacy of great architecture and design, Waterworks supports the Institute of Classical Architecture and Art, the Nantucket Historical Association and the Sir John Soane’s Museum Foundation. Waterworks believes in supporting non-profit organizations that educate professionals and the general public in architecture, design and its allied arts in furtherance of their preservation for future generations.
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We care about the well-being of our people, customers, and communities, which is an important factor that influences our actions in many areas of our business operations. Our ESG programs are designed in part to support the ethical treatment of people, including our associates, customers, vendors and other stakeholders. We seek to promote workplace health and favorable working conditions for our people.
Our goal is to have the right person in every position throughout our organization. We have a policy that prohibits us from discriminating against any applicant or associate. This policy governs all aspects of employment, including recruitment, hiring, training, promotion, compensation, discipline, job assignments, benefits, transfer and discharge.
RH is committed to providing a productive work environment free of unlawful harassment. Our company policies prohibit any form of harassment that has the purpose or effect of unreasonably interfering with an individual’s work performance, or that creates an intimidating, hostile, abusive or offensive work environment.
We maintain an open door policy where our associates are encouraged to stop by to discuss any suggestions or address any concerns they might have. We believe that most work-related obstacles can be best addressed through open and honest communications.
We maintain an anonymous hotline where submitted complaints, concerns and grievances are reviewed and addressed with the objective that no associate submitting such complaints will be disciplined, penalized or otherwise retaliated against for raising a good-faith concern either through the hotline or under our open door policy.
In 2021, RH undertook a variety of steps to continue to protect the health, safety and well-being of our associates and customers in response to the COVID-19 pandemic. The practices we adopted with respect to COVID-19 in addressing the health and safety of our associates and customers represented a substantial investment in order to promote health and wellness consistent with responsible business operations. These measures have changed over time in response to the evolution in applicable legal requirements as well as changes in the status of the pandemic. RH continues to update its policies and procedures in response to changing conditions, including the latest virus trends and government guidance.
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We believe deeply that the “right” people are our greatest asset. Our success is thus dependent upon our ability to retain continued service of our key personnel, particularly our Chairman and Chief Executive Officer, and to attract, retain and motivate qualified leaders and associates across all parts of our organization, including Galleries, Hospitality, Outlets, Showrooms, distribution centers, home delivery centers and customer delight centers.
For fiscal 2022, the combined teams at RH and Waterworks are approximately 6,200 people comprised of full-time, part-time and temporary associates, including those based in our retail and outlet locations as of January 28, 2023. In fiscal 2021, we began to include Waterworks associates as part of our workforce diversity metrics, which includes the charts on our “Our People,” our “Gender Diversity” and on our “Racial and Ethnic Diversity.”
For us, the provision of a comprehensive benefits program is an investment in our associates. We recognize the value our associates bring to RH and to Waterworks, and we are committed to offering an array of opportunities from which they can choose. We offer the following to eligible associates:
Medical, Dental and Vision Insurance
Employee Assistance Program
Health and Dependent Care Flexible Spending Accounts
401(K) Retirement Savings Plan
Transit and Parking Benefits (Pre-Tax)
Health Savings Account
Other Wellness Benefits
Short and Long-Term Disability Insurance
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Workforce Health & Wellness
RH is committed to protecting the health and safety of our associates in the design, manufacturing, distribution, retail, and delivery of our products and services. The RH Health & Safety Program follows the Plan-Do-Check-Act model to establish processes, identify controls, and facilitate continuing improvement. Through this program we are dedicated to preventing accidents, injuries and illnesses by implementing and maintaining effective health and safety practices and policies. We recognize the importance of integrating safety practices into all aspects of our business and strive for continuous improvement.
One of the key benefits of prioritizing associate’s health and safety is that it leads to increased productivity and efficiency. Associates who feel safe and secure in their workplace are more likely to be engaged and motivated, which can lead to increased productivity and better performance. In addition, creating a culture of safety and well-being can reduce the number of workplace accidents and injuries, which can lead to reduced downtime and costs associated with workers' compensation claims. In 2022, we reduced the number of beyond first aid injuries by 22.2% from the prior year. Improved case management and partnership with our business leaders led to a significant reduction in Lost Days (number of days that an associate is absent from work due to work injury) by 47.7% from 2021.
In May 2022, we implemented the RH Workplace Nurse Line, available 24/7 in English and Spanish. The Nurse Line connects our associates and leaders with a medical professional that can advise on care. The registered nurse guides our associates and leaders in making medical treatment decisions. Nurse Line conducts a follow-up call with our injured associate if the case is first aid only. Associates may call back Nurse Line at any time to seek further assistance or if the injury worsens. The Nurse Line is connected to our insurance carrier and any injury that requires medical treatment automatically generates a claim.
In October 2022, we partnered with AlertMedia to promote the safety of our people during critical events, such as inclement weather, earthquake, tornado, hurricane, power outages, security risks, civil unrest, etc. The platform monitors global threats around our locations 24/7, validates the information, and provides the Safety & Security team the necessary details to take action. The Safety & Security Team can then use AlertMedia to inform business leaders or communicate important information directly to our associates and leaders. The partnership expands the capacity of our Safety & Security operation, improves business contingency, and reduces response time for critical events. We chose AlertMedia to keep our people safe, informed and connected.
Prioritizing associates' health and safety is essential for regulatory compliance. RH complies with various local, state, and federal laws and regulations related to workplace health and safety. By prioritizing employee health and safety, we can facilitate compliance with relevant laws and regulations, reducing the risk of legal and financial impacts.
Prioritizing employee health and safety is a critical aspect of RH's ESG practices. It is not only an ethical and social responsibility but also a key factor in improving business performance, attracting and retaining top talent, enhancing reputation and brand image, and facilitating regulatory compliance. By creating a safe and healthy working environment, we can achieve long-term success and contribute to a more sustainable and socially responsible business ecosystem.
To further take care of our people in 2022, we offered the following additional perks and initiated new home office programs, including:
Opening a wellness studio at the Home Office, providing employees an opportunity to work out and focus on health and fitness;
Providing home office employees an opportunity to take the flu shot on-site free of charge;
Partnering with Headspace to provide employees the opportunity to focus on their mental health; and
Partnering with Peloton to provide corporate discounts to RH associates.
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We maintain a diverse workforce. RH is an equal opportunity employer, and we believe in meritocratic hiring. We strongly believe our performance is enhanced by our workforce being comprised of individuals with diverse backgrounds, skills and experience that align with the needs of our business.
We believe this approach naturally leads to a gender and ethnically diverse workforce. We believe that our commitment to diversity is demonstrated by the composition of our workforce.
The following charts present the gender, racial and ethnic composition of our workforce over the past four fiscal years. As part of our workforce diversity metrics for fiscal 2021, we included 330 people at Waterworks. For fiscal 2022, our metrics included approximately 400 people at Waterworks.
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Racial and Ethnic Diversity
For topics related to the composition of our board and its diversity please refer to “—Composition and Qualifications of our Board of Directors” under the section “Corporate Governance.”
We expect our values and principles to be maintained throughout our business, including our supply chain. We require our vendors to adhere to our Vendor Code of Conduct (the “Vendor Code of Conduct”), which can be found on our Investor Relations section of our website, which is located at ir.rh.com under “Governance—Environmental, Social & Governance,” as well as other requirements. Our Vendor Code of Conduct is designed to promote the principles of fair and ethical treatment of workers, compliance with all applicable local laws, rules and regulations, and transparency to allow for accountability and reasonable substantiation of compliance.
Through our Vendor Code of Conduct, as well as other requirements such as our vendor operations manual, our vendors must agree to adhere to numerous workplace standards and principles, including compliance with laws and requirements relating to wages and compensation, the support of freedom of association, the prevention of unlawful discrimination and the promotion of the health, safety and dignity of people that work for vendors participating in our supply chain.
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To monitor compliance of vendors with the Vendor Code of Conduct and other applicable requirements necessary to promote the production of safe products that meet RH’s standards in appropriate working conditions, we rely on our Social and Vendor Compliance Program and our Product Safety and Compliance Program. Both of these programs leverage third-party organizations in order to monitor that our vendors are adhering to our expected standards.
We have partnered with international non-profit organizations including Fair Working Conditions, GoodWeave, and Label STEP, to monitor our third party vendors with respect to working conditions and compliance with labor standards. Our approach includes working with mission-minded organizations that can monitor our suppliers’ factories, workshops, and home based work, and can take other measures to support our vendors in complying with standards related to working conditions and responsible practices.
Our suppliers are expected to acknowledge adherence to our Vendor Code of Conduct and other requirements which set forth numerous vendor obligations and rules related to compliance with applicable working conditions and other standards in support of responsible business practices. Vendors in our network must participate in our Social and Vendor Compliance Program, which authorizes us and our agents access to conduct inspections and audits of vendors’ facilities.
We have partnered with Benchmark International to monitor for products made with endangered plant species or plant species that are harvested illegally. Benchmark International, LLC is an accredited, independent auditing and testing lab with world-wide expertise in the areas of the U.S. Lacey Act & EUTR compliance, TSCA compliance and wood testing.
RH and Waterworks continue to partner with Assent, an industry-leading supply chain data management company that enhances automation and accuracy when collecting, submitting or managing data related to ESG, product safety & compliance and vendor compliance. Assent has automated our processes such as vendor onboarding and other vendor compliance processes.
We have established guidelines around the use in our supply chain of conflict minerals (which we define to include columbite-tantalite (coltan), cassiterite, gold, wolframite, and their derivatives, which are limited to tantalum, tin and tungsten) sourced from central African countries to address concerns over the exploitation and trade of minerals that supports ongoing conflicts in the region.
We require our vendors to conduct their sourcing in compliance with local and internationally recognized laws and with commonly viewed best industry practices with respect to animal welfare. We do not condone the mistreatment of animals. We monitor certain animal and natural products such as those made with down and feathers, including a number of measures and practices in support of our efforts to obtain down and feathers from ethical and humane sources. We offer alternatives to down and feathers with respect to many of our products to provide for additional customer choice and preference. We also comply with and monitor bans in certain states and municipalities on the sale of fur, and we monitor supply chain traceability with regard to the sources of our Belgian linen.
Since 2021, RH has partnered with Benchmark International, LLC to support due diligence on the wood raw materials and components used in RH products. This partnership focuses on building transparency throughout RH supply chains to identify, evaluate, and mitigate risk associated with wood materials potentially taken, possessed, transported, or sold in contravention of domestic, tribal, or foreign law, as required by the U.S. Lacey Act.
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We continue to evaluate risks and update our approach to monitoring ethical production across our supply chain. Taking into account many factors, including but not limited to the country of manufacturing, origin of raw materials, product category and data from the Department of Labor (Bureau of International Labor Affairs) we have created a comprehensive vendor product program to monitor and address human rights risks in our supply chain.
As one element of this program, we partner with third parties that assist in monitoring vendor production facilities, including labor and other practices. GoodWeave – a non-profit organization that is focused on the elimination of child labor in the rug supply chain – provides us with assistance with respect to handwoven rug production. We also partner with Label STEP, a fair trade non-profit organization committed to worker wellbeing in the rug industry.
Our overall vendor product program is centered around the core belief of “Continuous Improvement”. We believe that vendor facility audits provide an opportunity to identify areas for improvement in operations and standards and opportunities to enhance vendor practices over a period of time. The corrective actions (CAPS) generated from each audit incorporates practical solutions and practices which can be implemented on factory floors on a regular and consistent basis. Fair Working Conditions (FWC) combines trainings with corrective action to encourage vendors and factories to make sustainable long term change. Having on the ground support and partnership from third party partners is instrumental in guiding vendors with the objective of their ongoing adherence to our Vendor Code of Conduct.
Product Safety & Compliance
We maintain a product safety and compliance program in support of our efforts to sell products that are safe and to protect our customers and our people. We seek to maintain a level of safety of our products through a range of measures to assess and identify opportunities to promote prompt responses to any identified issues. Our safety assurance measures include a variety of monitoring procedures and practices such as inspection and testing of samples, site visits of our vendors’ production facilities and inspection of inbound shipments at our distribution facilities.
The RH Product Safety & Compliance team works in partnership with our vendors, third-party laboratories, and technical experts in connection with testing for regulatory, industry, and brand standards. We believe that partnering with accredited labs across the globe helps RH to monitor products and materials for issues of safety and quality.
As part of the adoption of any new product, the RH Product Safety & Compliance team reviews products at the individual SKU level as well as across collections of similar products to address product safety and regulatory requirements and establish the appropriate test protocols to be applied. We work closely with third-party testing laboratories to execute product testing in accordance with RH’s specifications.
In 2022, we partnered with ICW, a cloud based product safety & compliance testing platform that streamlines testing of RH products. ICW enables RH to track testing progress, increase efficiencies around testing and use data analytics to drive compliance decisions and mitigate risk.
In addition to certifications and testing, we actively monitor CPSC and other industry related safety alerts and product recalls are listed on our website. Often these recalls are conducted on a voluntary basis to avoid any potential harm. As such, our notices provide detailed updates of the products that are recalled, the reason, and the reimbursement, replacement or refund opportunities.
Through our Product Safety & Compliance testing program, RH also monitors various chemicals that may be hazardous to human health and/or the environment.
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The GREENGUARD standard is used to determine emissions caused by Volatile Organic Compounds (VOCs) from building materials, finishes and furnishings. We require certain RH Baby & Child merchandise to have received GREENGUARD Gold certification, the highest level of certification under GREENGUARD, requiring that such products meet strict chemical emissions limits and screening them for over 10,000 chemicals and more than 360 VOCs. We are in the process of expanding our offering of GREENGUARD certified collections to include additional products beyond those currently offered under this standard. We currently offer one of the largest assortments of GREENGUARD Gold certified baby and child furniture with over 3,300 baby and child products certified. Along with RH Baby & Child products, we also have a small selection of RH Main Brand products and collections GREENGUARD certified.
RH follows a number of approaches in relation to charitable donations and other aspects of philanthropy. As part of various Gallery Development projects, RH has donated products and design services to civic centers, local charities and schools in order to engender community goodwill. Since 2016, we have donated close to $47 million of product at cost to a variety of charities and non-profit organizations related to the communities where we live and work. Additionally, RH sponsors local community charities in connection with Gallery opening events. We have made numerous donations to third party charities in connection with our business operations. Examples of non-profit organizations to whom we have made donations include Art Institute Chicago, Joffrey Ballet, Chicago Children’s Choir, The Denver Art Museum, Children’s Hospital Colorado, RxArt, The Art of Elysium, Moffitt Cancer Center, Children’s Mercy Hospital Kansas City, Dell Children’s Medical Center of Central Texas, Just Keep Livin’ Foundation, After-School All-Stars Las Vegas, Seattle Art Museum, Norton Museum of Art, SickKids Foundation, Doernbecher Children’s Hospital Foundation, The First Art Museum, Free Arts NYC, Friends of the Highline, Children’s Cancer Research Fund, Columbus Museum of Art, 3Arts, Two x Two, Crossroads School for the Arts, Tipping Point and Eat.Learn.Play.
RH also provides local donations to communities where our associates live and work, and in the case of the northern California wildfires in recent years, donated goods to help support rest areas for first responders, temporary shelters for fire victims, and the relief and rebuilding efforts of those who were affected by the fires. Other examples of organizations to whom we have made donations include: UCSF Benioff Children’s Hospital, UCSF Dec My Room, San Francisco Toy Program, SchoolsRule Marin, Furniture Bank of Central Ohio, The Michael J. Fox Foundation for Parkinson’s Research, PlumpJack Foundation, Slide Ranch, The BreastFest, Helix School, Dress for a Cure, Mercy Home for Boys & Girls, 826DC, 826Valencia, Homeward Bound of Marin, Gilead House, Make-A-Wish Foundation of Greater Bay Area, Conolly Ranch, Vina Capital Foundation (Covid Relief), and many local schools and smaller nonprofit organizations close to our Galleries, distribution centers and corporate office.
Waterworks has donated close to $40,000 in products and $11,000 in funds to non-profits and organizations in the surrounding communities. In addition to this they have sponsored volunteer day programs for its associates with various local non-profit organizations such as with Pratt Nature Center, Habitat for Humanity, Golden Heart Ranch, and Kips Bay Boys & Girls Club. Since 2014, Waterworks has been an active and regular supporter of Ann’s Place, a non-profit organization that serves and supports individuals with cancer.
Rain Room Donation to the Los Angeles County Museum of Art
As part of the launch of our contemporary art program in 2013, RH acquired the first edition of Rain Room by the art collective Random International in 2012. The Rain Room was exhibited at London’s Barbican Centre, The Museum of Modern Art in New York and the Los Angeles County Museum of Art (LACMA). In 2016, we ultimately decided to donate the Rain Room to LACMA as part of LACMA’s permanent collection.
2022 Holiday Giving Campaign
In November 2022, RH initiated an associate giving campaign in collaboration with World Central Kitchen whereby every donation made by associates would be matched dollar for dollar up to $250,000 by RH. All donations collected went toward providing fresh meals to people in response to crises situations across the world.
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We have numerous governance policies and practices as noted above in this proxy statement in the section entitled “Corporate Governance” regarding our Board of Directors and overall governance framework.
At RH, we’re committed to conducting our affairs in accordance with all applicable laws, rules and regulations of the countries in which we do business. Our Code of Business Conduct (the “Code of Conduct”) applies to everyone at RH, including our associates, officers and directors, in addition to certain independent contractors, consultants and advisors who work at our facilities or on the Company’s behalf. We also have a Code of Ethics for our Chief Executive Officer and Senior Financial Officers that promotes honest and ethical conduct and compliance.
Our Code of Conduct is designed to promote honest and ethical conduct, including (i) the promotion of honest and ethical business practices, (ii) the handling of actual or apparent conflicts of interest between personal and professional relationships, (iii) compliance with governmental laws, rules and regulations, (iv) prompt internal reporting of violations, and (v) accountability for adherence to the requirements of the Code of Conduct. A few of the topics and issues covered by our Code of Conduct include:
Conflicts of Interest
Political Contributions & Lobbying
U.S. Sanctions Compliance Policy
Gifts & Entertainment
RH’s Chief Compliance Officer oversees and administers the Company’s corporate and compliance policies with the objective of (i) fostering a culture that integrates compliance and ethics into business processes and practices and (ii) maintaining and monitoring a system for reporting and investigating potential compliance and ethics concerns.
The Chief Compliance Officer reports regularly to the Audit Committee of the Board of Directors and/or the Nominating and Governance Committee as appropriate with regard to (i) the Company’s compliance with applicable laws and regulations, (ii) relevant topics concerning the Company’s corporate governance, and (iii) any other material matters within the responsibility of the Chief Compliance Officer.
We further discuss some of our compliance and governance policies and practices below.
Our anti-corruption policy supplements our Code of Conduct and requires compliance with the U.S. Foreign Corrupt Practices Act and the growing body of international anti-corruption laws and prohibits the Company and our affiliates, directors, officers, associates, agents and representatives from unduly influencing officials or foreign governments and political officials. Oversight for this policy falls under RH’s Chief Compliance Officer.
We require our vendors to comply with our anti-corruption standards including periodically renewing certifications to the Company of the vendor’s compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other applicable anti-corruption laws and regulations.
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As part of our broader anti-corruption efforts, we have adopted processes and procedures with the objective of avoiding transactions with countries sanctioned by the U.S. government. Among other compliance measures, we monitor business activity and third parties to reduce the risk of conducting transactions with sanctioned parties, specifically including persons and entities identified on the Specially Designated Nationals and Blocked Persons list maintained by the U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”).
We additionally have an expenditure and signature authority policy that is refreshed annually by our Board of Directors that covers the expenditure limits of our associates, including executives by level, and that further typically limits associates from binding the Company to contractual obligations outside of their principal areas of responsibilities.
Conflict Minerals Policy
We seek to source safe, quality products made in a manner consistent with our values of ethical business conduct, the use of responsible social and environmental practices and the protection of human rights. We maintain a Conflict Minerals Policy that is incorporated into our Vendor Operations Manual, which our suppliers are able to access via a secure website. We expect that our direct suppliers will comply with our Conflict Minerals Policy and that they will (i) provide appropriate information and conduct necessary due diligence to facilitate our disclosures under Form SD regarding sources of conflict minerals within our supply chain pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, (ii) implement and communicate to their relevant personnel and suppliers policies that are consistent with our Conflict Minerals Policy, (iii) put in place procedures and contractual provisions for the traceability of conflict minerals, working with their suppliers as applicable, (iv) use reasonable efforts to source conflict minerals from smelters and refiners that have been validated by a recognized, independent third party as DRC conflict free, and (v) adopt a risk management strategy with respect to identified risks in the supply chain that is consistent with our Conflict Minerals Policy.
Information Security and Information Security Incident Response Plan
The safeguarding of confidential and sensitive information, including proprietary information, is critical to the success of our business as well as the continued availability of our information assets.
Our approach to the identification, monitoring and management of data security risks has been developed pursuant to a number of different approaches to mitigate cybersecurity threats, including the adoption of technical, policy and administrative cybersecurity controls as well as reliance on RH’s Information Security Incident Response Plan and cybersecurity training.
The Company conducts various risks assessments in the area of cybersecurity including periodic independent information security risk audits. Through these assessments, the Company seeks to evaluate its information security posture against a benchmark prescribed by independent third-party firms with expertise in this area.
The type of sensitive information we may address in our business operations include, without limitation, data related to our customers, associates, temporary associates, contractors, or the personal identity of a business partner or other content specific to an individual. Some examples of this information include credit or debit card numbers and other similar sensitive information.
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Our Privacy Policies detail how we collect, use, disclose and safeguard the information our customers’ provide us through our websites and mobile software systems, as well as our physical properties such as our Galleries, Outlets, distribution centers, etc. We uphold our customers’ privacy rights through a number of measures. We offer our customers opportunities to unsubscribe to promotion communications, opt-out of information transfers to third-parties, and request deletion of personal information.
Our information security incident response plan provides a framework for our response to a cyber-security incident, and includes procedures to identify, assess and mitigate the source of a cyber-security breach, to minimize damage where possible and to restore normal operations as promptly as practicable.
We categorize our data assets and tailor our security architecture to protect them using a criticality approach. By using an industry-accepted critical security controls framework to measure our cyber-security and protocols, we are able to monitor the use and performance of our:
Backup and recovery systems
Endpoint detection, response and configuration
Our information security incident response plan provides a framework for our response to a cyber-security incident, and includes procedures to identify, assess and mitigate the source of a cyber-security breach, to minimize damage where possible and to restore normal operations as promptly as practicable.
Cyber Liability Insurance Policy
We maintain a cyber liability insurance policy that covers certain losses and liabilities arising from cyber-attacks and data breaches. Subject to its terms and limitations, our policy includes coverage for business interruption and other costs associated with a covered breach event such as forensic consultants, notice to affected individuals and certain defense and litigation proceedings. The coverage limits and self-insured retentions are reviewed on an annual basis.
Board Oversight of Cybersecurity Matters
The Audit Committee assumes primary responsibility at the board level for the monitoring and oversight of cybersecurity issues and risks related to information security. The Company regularly reports to the Audit Committee, typically on a quarterly basis, regarding information security and cybersecurity matters, including the results of risk assessments and third party audits as well as the Company’s adoption of security enhancements to mitigate risk related to cybersecurity threats. See “Corporate Governance—Board’s Role in Risk Oversight.” Ms. Mitic, a member of our Audit Committee, has specific applicable experience that relates to the importance of information security around personal information of consumers. We believe that Ms. Mitic’s current experience at eBay, Inc. as well as her prior experience at Yahoo! and Facebook, is particularly relevant in relation to our Board’s review and monitoring of cybersecurity topics.
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Our investment policy requires that investment assets held by us meet the objective of safety and preservation of principal while providing sufficient liquidity to meet the operating cash requirements of the Company, with the objective of investing funds at favorable yields with minimum risk.
U.S. Sanctions Compliance Policy
Our U.S. sanctions compliance policy requires that we screen our vendors to reduce the risk of transactions with countries and parties that are embargoed and sanctioned by the U.S. government.
Our SOX whistleblower policy addresses the reporting of certain categories of misconduct, including misconduct related to accounting practices, internal accounting controls or auditing matters, and prohibits retaliation against those reporting such misconduct. Submissions may be made on an anonymous basis. We also have other programs to allow for reporting of potential misconduct in other aspects of our business.
Disclosure Committee & Charter
We have a Disclosure Committee to assist the Chief Executive Officer and Chief Financial Officer in fulfilling their responsibility for oversight of the establishment, maintenance, review and evaluation of controls and other procedures designed to ensure that information required to be disclosed by the Company in its publicly filed reports pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms, that the Company’s public disclosures are materially accurate and complete and otherwise comply with applicable disclosure requirements, and that there exists an open avenue of communication regarding disclosure such that senior leadership can make informed decisions relating to materiality and disclosure obligations.
Membership of the Committee is designated by our Chief Executive Officer and includes executives representing key areas of the Company’s operations that may be relevant to the Company’s filings with the SEC and other public disclosures, including senior representatives from the following key areas of the Company: finance and accounting, legal, tax, compliance, risk, internal audit.
Chief Compliance Officer & Charter
In 2020, the Board of Directors formally established a charter that sets forth certain responsibilities and requirements applicable to our Chief Compliance Officer, inclusive of overseeing and administering the Company’s corporate and compliance policies with the objective of fostering a culture that integrates compliance and ethics into business processes and practices and maintaining and monitoring a system for reporting and investigating potential compliance and ethics concerns. The Chief Compliance Officer reports regularly to the Audit Committee and/or the Nominating and Governance Committee as appropriate with regard to the Company’s compliance with applicable laws and regulations, relevant topics concerning the Company’s corporate governance, and any other material matters within the responsibility of the Chief Compliance Officer.
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Other Appropriate Uses of Corporate Funds
To provide further assurance around the appropriate use of corporate funds for business purposes and to further assist with mitigation of risks around conflicts of interest and corruption, we have adopted several policies and guidelines that cover such items as (i) the authority of our associates to bind the company to certain contractual obligations, and (ii) limitations and controls around expenditures related to travel, entertaining and gifting and other expenses.
We generally do not use corporate funds to make contributions to support or oppose federal, state or local political parties, candidates or campaigns or offer our Galleries in support of such efforts. Our statement on political activity is available on the Investor Relations section of our website, which is located at ir.rh.com under “Governance.”
OUR CONTINUED EFFORTS & INNOVATION
One of our core values is innovation. We value innovation, taking risks and boldly going where no company has gone before. We believe you’re either striving to get better, or allowing yourself to get worse – there is no such thing as staying the same. The power of innovation comes from leveraging the creative minds and spirit of all of our people, at all levels of the organization. We strive to build an environment that encourages people to challenge conventional thinking, and to ask “why?” and “why not?” We embrace those people who have the courage to put forth new ideas and breathe new life into our company. Innovation is at the core of what we do.
We continue to evolve and innovate our programs and our approach to ESG matters.
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COMPENSATION DISCUSSION & ANALYSIS
We believe that continually analyzing and refining our compensation program enables us to achieve the key goals of our compensation philosophy and supports ongoing improvements in our financial performance. We align our executive compensation practices to the business objectives of our Company in order to drive ongoing improvements in our financial performance. This compensation discussion and analysis (“CD&A”) explains the strategy, design, and decision-making processes of our compensation programs and practices in fiscal 2022 for our named executive officers. This CD&A is intended to provide perspective on the compensation information contained in the compensation tables that follow this discussion. This CD&A also discusses how the fiscal 2022 compensation of our named executive officers aligns with the key goals of our compensation philosophy, namely, attracting and retaining the best talent and driving financial performance. We also discuss how we use our compensation programs, including equity programs, to encourage an ownership and stakeholder perspective among our named executive officers by providing them with a long-term interest in the growth and financial performance of our Company that aligns with the interests of our shareholders.
The following table shows the total shareholder return for our common stock during the five fiscal year periods indicated below. The first row of the table indicates the cumulative return of an investor purchasing one share of RH common stock at the market close on February 2, 2018 and its value (percentage increase or decrease) at the associated fiscal year ends indicated in the table. The table then assumes a scenario where $100 was invested at the market close on February 2, 2018 in RH common stock, which is equivalent to 1.09 shares (if fractional shares were permitted), and its value (percentage increase or decrease) at the associated fiscal year ends indicated in the table.