UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

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

Check the appropriate box:

              520 Lake Cook Road, Deerfield, Illinois 60015

NOTICE OF ANNUAL MEETING

AND PROXY STATEMENT

March 19, 2020

Dear Fellow Stockholders:

We are pleased to invite you to the 2020 Annual Meeting of Stockholders (“Annual Meeting”) of Fortune Brands Home & Security, Inc. on Tuesday, April 28, 2020 at 8:00 a.m. (CDT) at the Renaissance Chicago North Shore Hotel, 933 Skokie Boulevard, Northbrook, Illinois. The following matters will be considered at the Annual Meeting:

such other business as may properly come before the Annual Meeting.

Stockholders of record at the close of business on March 2, 2020, the record date for the Annual Meeting, are entitled to vote. Stockholders who wish to attend the Annual Meeting in person should review the entrance requirements on pages 46-47.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE. See pages 46-49 for voting instructions.

This Notice of Annual Meeting and Proxy Statement and accompanying proxy are first being distributed on or about March 19, 2020.

Important Notice Regarding the Availability of Proxy Materials

for the 2020 Annual Meeting of Stockholders to be Held on Tuesday, April 28, 2020.

This Notice of Annual Meeting and Proxy Statement and the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (“Form 10-K”) are available at www.proxyvote.com.

Annual Meeting Information

		Time and Date				Location				Record Date
		Tuesday, April 28, 2020 at 8:00 a.m. (CDT)				Renaissance Chicago North Shore Hotel 933 Skokie Boulevard, Northbrook, Illinois		March 2, 2020

These materials are provided in connection with the solicitation by the Board of Directors (the “Board”) of Fortune Brands Home & Security, Inc. (“Fortune Brands” or the “Company”) of proxies to be voted at our Annual Meeting or any adjournment or postponement of the Annual Meeting.

Agenda and Voting Recommendations

This summary highlights selected information in this Proxy Statement, as well as select business information, and does not contain all of the information that you should consider in deciding how to vote. Please read the complete Proxy Statement carefully before voting. The following table summarizes the items that will be voted on at our Annual Meeting of Stockholders, along with the Board’s voting recommendations.

See pages 46-49 for instructions on how to vote your shares.

2019 BUSINESS HIGHLIGHTS

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CORPORATE GOVERNANCE HIGHLIGHTS

Our Board is committed to maintaining a strong corporate governance program designed to promote the long-term interests of our shareholders and strengthen Board and management accountability. As a company, we’re committed to core values that include integrity and accountability. These practices are reflected in our corporate governance policies, which are described in more detail on pages 8-14 of the Proxy Statement and highlighted below:

SUCCESSFUL LEADERSHIP TRANSITION In January 2020, Nicholas Fink became our new Chief Executive Officer (“CEO”) following Christopher Klein’s retirement after 8 years as the Company’s CEO. Mr. Klein continues to serve as Executive Chairman of the Board of Directors and Mr. David Thomas, former Chairman, now serves as the Board’s Lead Independent Director.

Mr. Fink’s appointment is the result of our Board’s active engagement in a thoughtful and comprehensive multi-year succession planning process led by our former Chairman (Mr. Thomas) and the Chair of our Compensation Committee (Ms. Hackett), who worked with Mr. Klein to identify and develop talented internal candidates. Our Board determined that Mr. Fink’s leadership with industry-leading consumer brands and his proven track record of driving continued growth and performance improvement in our businesses, as well as his deep understanding of our markets, uniquely positioned him to lead our businesses in our Company’s next phase of growth.

BOARD REFRESHMENT Our Board welcomed Irial Finan as a Class II director in February 2019 in anticipation of Norman Wesley’s retirement from the Board following our Annual Shareholder Meeting in May 2019. Mr. Finan’s international consumer products experience with The Coca-Cola Company and its worldwide bottling operations brings valuable perspective to our Board. Mr. Finan serves on our Compensation Committee and our Nominating Committee.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) Management continues to focus on operating our businesses responsibly. For information about our 2019 ESG efforts, see our annual ESG report at www.fbhs.com/global-citizenship/esg. Although the Board’s Nominating & Corporate Governance Committee has been responsible for the oversight of ESG related matters, in February 2020 the Nominating & Corporate Governance Committee refreshed its charter to clarify the committee’s oversight role in the Company’s ESG initiatives and changed its name to the Nominating, Environmental, Social and Governance Committee (the “Nominating Committee”).

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COMPENSATION HIGHLIGHTS

COMPENSATION PRACTICES The Compensation Discussion & Analysis (CD&A) section beginning on page 17 includes additional detail on the following compensation highlights:

PAY FOR PERFORMANCE Our executive compensation program is designed to reward NEOs for the achievement of both short-term and long-term strategic and operational goals that lead to the creation of long-term stockholder value. The vast majority of each NEO’s annual target compensation is at-risk because the compensation that is actually paid is dependent upon Company (or business segment) performance and/or the Company’s stock price. In 2019:

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Summary of Qualification of Directors

The Board believes that all directors must possess a considerable amount of education and business management experience. The Board also believes that it is necessary for each of the Company’s directors to possess certain general qualities, while there are other skills and experiences that should be represented on the Board as a whole, but not necessarily by each individual director.

General qualities for all directors:

Specific experiences, qualifications, and backgrounds to be represented on the Board as a whole:

The process used by the Nominating Committee in recommending qualified director candidates is described below under Corporate Governance – Director Nomination Process (see page 9 of this Proxy Statement).

Election of Class III Directors

The Board consists of nine members and is divided into three classes, each having three year terms that expire in successive years. The term of Messrs. Nicholas I. Fink, A. D. David Mackay and David M. Thomas, each currently serving as Class III directors expires at the 2020 Annual Meeting of Stockholders. Mr. Fink was appointed by the Board to serve as a Class III Director in January 2020. The Board has nominated Messrs. Fink, Mackay and Thomas for a new term of three years expiring at the 2023 Annual Meeting of Stockholders and until their successors are duly elected and qualified. Shares cannot be voted for more than the number of nominees proposed for re-election.

Each of the nominees has consented to be named as a nominee and to serve as a director, if elected. If any of them should become unavailable to serve as a director (which is not now expected), the Board may designate a substitute nominee. In that case, the persons named in the enclosed proxy card will vote for the substitute nominee designated by the Board.

The names of the nominees and the current Class I and Class II directors, along with their present positions, their principal occupations and employment during the last five years, any directorships held with other public companies during the past five years, their ages and the year first elected as a director of the Company, are set forth below. Each director’s individual qualifications and experiences that contribute to the Board’s effectiveness as a whole are also described in the following paragraphs.

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The Board of Directors recommends that you vote FOR the election of each nominee named above.

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Fortune Brands is committed to maintaining strong corporate governance practices that are good for our stockholders and our business. We are dedicated to maintaining these practices and upholding high standards of conduct.

Corporate Governance Principles

The Board adopted a set of Corporate Governance Principles which describe our corporate governance practices and address corporate governance issues such as Board composition and responsibilities, Board meeting procedures, the establishment of Board committees, management succession planning process and review of risks. The Corporate Governance Principles are available at https://ir.fbhs.com/governing-high-standards.

Director Independence

The Company’s Corporate Governance Principles provide that a majority of the members of the Board shall be independent directors. New York Stock Exchange requirements, as well as the Company’s committee charters, require that each member of the Audit, Compensation and Nominating Committees be independent. The Board applies the definition of independence found in the New York Stock Exchange Listed Company Manual in determining which directors are independent. When determining each director’s independence, the Board also considered charitable contributions made by the Company to organizations with which each director is affiliated.

Applying that definition, Messrs. Finan, Mackay, Morikis, Thomas, Waters and Mses. Hackett and Kilsby were affirmatively determined by the Board to be independent. Due to Messrs. Fink’s and Klein’s employment with the Company, they are not considered independent. In addition, Norman Wesley, who also served on the Board for a period of time during 2019, was determined to be independent.

None of the non-employee directors has any material relationship with the Company other than being a director and stockholder. Also, none of the non-employee directors have participated in any transaction or arrangement that interferes with such director’s independence.

Policies with Respect to Transactions with Related Persons

The Board adopted a Code of Business Conduct and Ethics which sets forth various policies and procedures intended to promote the ethical behavior of all of the Company’s employees, officers and directors (the “Code of Conduct”). The Board has established a Compliance Committee (comprised of management) which is responsible for administering and monitoring compliance with the Code of Conduct. The Compliance Committee periodically reports on the Company’s compliance efforts to the Audit Committee and the Board.

The Board has also established a Conflicts of Interest Committee (comprised of management) which is responsible for administering, interpreting and applying the Company’s Conflicts of Interest Policy, which describes the types of relationships that may constitute a conflict of interest with the Company. Under the Conflicts of Interest Policy, directors and executive officers are responsible for reporting any potential related person transaction (as defined in Item 404 of Regulation S-K) to the Conflicts of Interest Committee in advance of commencing a potential transaction. The Conflicts of Interest Committee will present to the Audit Committee any potential related party transaction. The Audit Committee will evaluate the transaction, determine whether the interest of the related person is material and approve or ratify, as the case may be, the transaction. In addition, the Company’s executive officers and directors annually complete a questionnaire on which they are required to disclose any related person transactions and potential conflicts of interest. The General Counsel reviews the responses to the questionnaires and, if a related person transaction is reported by a director or executive officer, submits the transaction for review by the Audit Committee. The Conflicts of Interest Committee also reviews potential conflicts of interest and reports findings involving any director of the Company to the Nominating Committee. The Nominating Committee will review any potential conflict of interest involving a member of the Board to determine whether such potential conflict would affect that director’s independence.

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Certain Relationships and Related Transactions

Since January 1, 2019, the Company did not participate in any transactions in which any of its directors, executive officers, any immediate family member of a director or executive officer or any beneficial owner of more than 5% of the Company’s common stock had a direct or indirect material interest.

Anti-Hedging and Anti-Pledging

The Company has a policy prohibiting directors, NEOs and other executives from hedging or pledging Company stock, including Company stock held indirectly, and from engaging in any derivative transactions designed to offset the decrease or increase in the market value of the Company’s stock.

Director Nomination Process

The Nominating Committee is responsible for, among other things, screening potential director candidates, recommending qualified candidates to the Board for nomination and assessing director independence.

When identifying director candidates, the Nominating Committee determines whether there are any evolving needs that require an expert in a particular field or other specific skills or experiences. When evaluating director candidates, the Nominating Committee first considers a candidate’s management experience and then considers issues of judgment, background, stature, conflicts of interest, integrity, ethics and commitment to the goal of maximizing stockholder value. The Nominating Committee also focuses on issues of diversity, such as diversity of gender, race and national origin, education, professional experience and differences in viewpoints and skills. In considering candidates for the Board, the Nominating Committee considers the entirety of each candidate’s credentials in the context of these standards.

Mr. Fink was identified as successor to Mr. Klein through the Board’s CEO succession planning process. In September 2019, Mr. Klein announced his decision to retire as CEO. At that time, the Board appointed Mr. Klein as Executive Chairman of the Board and Nicholas Fink as the new Chief Executive Officer, as well as a Class III member of the Board of Directors, all effective in January 2020.

With respect to the nomination of continuing directors for re-election, the individual’s contributions to the Board are considered. For the purpose of this Annual Meeting, the Nominating Committee recommended the nomination of Messrs. Fink, Mackay and Thomas as Class III directors.

In connection with future director elections, or at any time there is a vacancy on the Board, the Nominating Committee may retain a third-party search firm to assist in locating qualified candidates that meet the needs of the Board at that time.

It is the Nominating Committee’s policy to consider director candidates recommended by stockholders, if such recommendations are properly submitted to the Company. Stockholders that wish to recommend an individual as a director candidate for consideration by the Nominating Committee can do so by writing to the Secretary of Fortune Brands at 520 Lake Cook Road, Deerfield, Illinois 60015. Recommendations must include the proposed nominee’s name, biographical data and qualifications, as well as other information that would be required if the stockholder were actually nominating the recommended candidate pursuant to the procedures for such nominations provided in our Bylaws. The Nominating Committee will consider the candidate and the candidate’s qualifications in the same manner in which it evaluates nominees identified by the Nominating Committee. The Nominating Committee may contact the stockholder making the nomination to discuss the qualifications of the candidate and the stockholder’s reasons for making the nomination. Members of the Nominating Committee may then interview the candidate if the committee deems the candidate to be appropriate. The Nominating Committee may use the services of a third-party search firm to provide additional information about the candidate prior to making a recommendation to the Board.

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The nomination process is designed to ensure that the Nominating Committee fulfills its responsibility to recommend candidates that are properly qualified to serve the Company for the benefit of all of its stockholders, consistent with the standards established under the Company’s Corporate Governance Principles.

Communication with the Board

The Board and management encourage communication from the Company’s stockholders. Stockholders who wish to communicate with the Company’s management should direct their communication to the Chief Executive Officer or the Secretary of Fortune Brands at 520 Lake Cook Road, Deerfield, Illinois 60015. Stockholders, or other interested parties, who wish to communicate with the non-management directors or any individual director should direct their communication c/o the Secretary at the address above. The Secretary will forward communications intended for the Board to the Chairman of the Board, or, if intended for an individual director, to that director. If multiple communications are received on a similar topic, the Secretary may, in his or her discretion, forward only representative correspondence. Any communications that are abusive, in bad taste or present safety or security concerns may be handled differently.

Board Leadership Structure

Since the Company became an independent stand-alone company in 2011, the position of the Chairman and the Chief Executive Officer have been separate. To support an effective succession and transition of the Chief Executive Officer role to Mr. Fink, which took effect on January 6, 2020, the Board determined that the appropriate Board leadership structure is for Mr. Klein, formerly Chief Executive Officer, to serve as Executive Chairman. We believe that this structure is appropriate for the Company because it allows Mr. Klein, with his unique experience as the former Chief Executive Officer, to lead the Board and to support Mr. Fink during this time of transition.

In connection with Mr. Klein’s transition to Executive Chairman, the Board also appointed Mr. Thomas as Lead Independent Director. As Lead Independent Director, Mr. Thomas serves as a liaison between senior management and the Company’s independent directors and presides at executive sessions of the Board. The role of the Lead Independent Director was created to provide effective oversight and reinforce the Board’s independence. We believe that the leadership structure currently utilized by the Board provides effective independent Board leadership and oversight.

The Board does not believe that a single leadership structure is right at all times, so the Board periodically reviews its leadership structure to determine, based on the circumstances at the time, whether other leadership structures might be appropriate for the Company. The Board has been and remains committed to maintaining strong corporate governance and appropriate independent oversight of management.

Executive Sessions

Pursuant to the Company’s Corporate Governance Principles, non-management directors of the Board are required to meet on a regularly scheduled basis without the presence of management. Prior to 2020, the non-executive Chairman of the Board led these sessions. Starting in 2020, the Lead Director leads these sessions. In addition, Board Committees also meet regularly in executive session without the presence of management.

Meeting Attendance

The Board of Directors met five times in 2019. Each director attended more than 75% of the total meetings of the Board and committees of the Board of which the director was a member during 2019 with one exception. Due to unexpected personal family circumstances, Mr. Finan was unable to attend our July Board and Committee meetings, resulting in his attendance dropping slightly below 75%. Pursuant to the Company’s Corporate Governance Principles, all directors are encouraged to attend the Annual Meeting of Shareholders. All of the directors attended the Company’s 2019 Annual Meeting of Stockholders.

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Risk Management

The responsibility for the day-to-day management of risks lies with the Company’s management team; however, the Board has an active role, as a whole and also at the committee level, in overseeing the strategy and process for managing the Company’s risks. The Board regularly reviews information regarding the Company’s business strategy, leadership development, resource allocation, succession planning, credit, liquidity and operations, as well as the risks associated with each. The Company’s overall risk management program consists of periodic management discussions analyzing and mitigating risks, an annual review of risks associated with each of the Company’s operating businesses and an annual review of risks related to the Company’s compensation programs and practices.

Annually, management identifies both external risks (i.e., economic) and internal risks (i.e., strategic, operational, financial and compliance), assesses the impact of these risks and determines how to mitigate such risks. The Audit Committee manages the Company’s risk management program and reviews the results of the annual assessment. Management also provides the Audit Committee with quarterly updates on the Company’s risks, which includes an update on cybersecurity related risks. In addition, the Audit Committee oversees management of the Company’s financial risks.

The Compensation Committee is responsible for overseeing the management of risks relating to the compensation paid to the Company’s executives and the Company’s compensation plans. Annually, the Compensation Committee’s independent compensation consultant conducts an assessment of the risks associated with the Company’s executive compensation policies and practices. The compensation consultant conducts a more extensive review of all of the Company’s broad-based compensation incentive arrangements every few years. In 2019, the compensation consultant conducted the broader review of all compensation arrangements. For more information about that assessment see “Compensation Risks” below.

The Nominating Committee manages risks associated with the independence of the Board, potential conflicts of interest of Board members, and the Company’s corporate governance structure, as well as management of risks associated with the environment, health and safety, diversity, philanthropy, global citizenship and other social and governance programs and policies.

While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about all of the risks described above. The Board’s assignment of responsibility for the oversight of specific risks to its committees enables the entire Board, under the leadership of the Executive Chairman and the Chief Executive Officer, to better monitor the risks of the Company and more effectively develop strategic direction, taking into account the magnitude of the various risks facing the Company.

Compensation Risks

The Compensation Committee’s compensation consultant conducts an annual assessment of the risks associated with the compensation policies and practices used to compensate the Company’s executives and reports on the assessment to the Compensation Committee. In 2019 the Company’s compensation consultant analyzed the elements of executive compensation to determine whether any portion of executive compensation encouraged excessive risk taking and whether incentive designs include appropriate risk-mitigation provisions. After reviewing the compensation consultant’s analysis, the Compensation Committee concluded that none of the Company’s executive compensation arrangements encourage excessive risk taking and are consistent with the structure and design of other companies of similar size and industry sector. The Company utilizes the following risk-mitigating design features:

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As described in our Compensation Discussion and Analysis, compensation decisions are made using a combination of objective and subjective considerations designed to mitigate excessive risk taking by executives.

Board Committees

The Board established an Audit Committee, a Compensation Committee, an Executive Committee and a Nominating, Environmental, Social and Governance Committee. A list of current Committee memberships may be found on the Company’s website at https://ir.fbhs.com/committees-and-charters. The Committee memberships as of the date of this Proxy Statement are set forth below:

 An “X” indicates membership on the committee.

 A “C” indicates that the director serves as the chair of the committee.

Audit Committee

The Audit Committee’s primary function is to assist the Board in overseeing the (i) integrity of the Company’s financial statements, the financial reporting process and the Company’s system of internal controls; (ii) Company’s compliance with legal and regulatory requirements; (iii) independence and qualifications of the Company’s external auditors; (iv) performance of the Company’s external and internal auditors; and (v) the Company’s enterprise risk management program, which includes oversight of cybersecurity related risks.

Each member of the Audit Committee (Messrs. Mackay, Morikis, Thomas and Waters), is financially literate. Each of Messrs. Mackay, Thomas and Waters has accounting or financial management expertise and is an audit committee financial expert as defined in Item 407(d)(5)(ii) and (iii) of Regulation S-K under the Exchange Act. As required by its charter, each Audit Committee member has also been determined by our Board to be independent as such term is defined in the Exchange Act and the New York Stock Exchange Listed Company Manual. The Audit Committee met nine times in 2019.

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Compensation Committee

The Compensation Committee’s primary function is to assist the Board in attracting and retaining high quality leadership by (i) developing and critically reviewing the Company’s executive compensation program design and pay philosophy; and (ii) setting the compensation of the Company’s executive officers, which includes the presidents of the Company’s principal business segments, in a manner that is consistent with competitive practices and Company, business segment and individual performance.

As required by its charter, each member of the Compensation Committee (Messrs. Finan, Mackay and Morikis and Mses. Hackett and Kilsby) has been determined by our Board to be independent as such term is defined in the Exchange Act and the New York Stock Exchange Listed Company Manual. The Compensation Committee met five times in 2019.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has (i) served as one of the Company’s officers or employees, or (ii) had a relationship requiring disclosure under Item 404 of Regulation S-K.

Compensation Committee Procedures

The Compensation Committee directs management to prepare financial data to be used by the Compensation Committee in determining executive compensation. In addition, members of the Company’s human resources department assist in the preparation of executive compensation tally sheets and historical information describing compensation paid to executives, program design and plan provisions and the Compensation Committee’s independent consultant provides market data for use in determining executive compensation. The Compensation Committee is presented with recommendations from management and from the Committee’s independent compensation consultant as to the level and type of compensation and related program designs provided to the Company’s executive officers. Members of the Company’s legal department provide the Compensation Committee with general advice on laws applicable to executive compensation.

The Chief Executive Officer attends meetings of the Compensation Committee, except for portions of meetings where his performance or compensation is being discussed. The Chief Executive Officer’s feedback about each officer’s performance is essential in the Compensation Committee’s determination of the officer’s salary, target annual incentive and long-term equity compensation determinations. See pages 17-29 of this Proxy Statement for more information about how the Compensation Committee determined the executive officers’ compensation in 2019.

Compensation Committee Consultant

The Compensation Committee engages an outside compensation consultant. Meridian Compensation Partners, LLC (“Meridian”) was retained directly by and reports directly to the Compensation Committee. In 2019, Meridian provided the following services and information to the Compensation Committee:

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The Compensation Committee has authorized Meridian to interact with management in connection with advising the Compensation Committee. Meridian is included in discussions with management on matters being brought to the Compensation Committee for consideration. Meridian is prohibited from performing any services for management outside of services needed in connection with advising the Compensation and Nominating Committees. The Compensation Committee has assessed Meridian’s independence and concluded that Meridian’s work for the Compensation Committee does not raise any conflict of interest.

Executive Committee

The Executive Committee did not meet in 2019. The Executive Committee has all the authority of the full Board, except for specific powers that are required by law to be exercised by the full Board. The Executive Committee may not amend the Company’s charter, adopt an agreement of merger, recommend actions for stockholder approval, amend or repeal the Bylaws, elect or appoint any director or remove an officer or director, amend or repeal any resolutions of the Board, fix the Board’s compensation, and unless expressly authorized by the Board, declare a dividend, authorize the issuance of stock or adopt a certificate of merger.

Nominating, Environmental, Social and Governance Committee

Although the Board’s Nominating Committee has been responsible for oversight of environmental, global citizenship and related matters, in February 2020 the Nominating Committee refreshed its charter to clarify the committee’s oversight role in the Company’s ESG initiatives and changed its name to the Nominating, Environmental, Social and Governance Committee. The Nominating Committee’s primary functions are to (i) provide recommendations to the Board with respect to the organization and function of the Board and its committees; (ii) recruit, identify and recommend potential director candidates and nominees; (iii) review the qualifications and independence of directors and provide recommendations to the Board regarding composition of the committees; (iv) develop and recommend changes to the Company’s corporate governance framework including the Company’s corporate governance principles; (v) oversee the process of the evaluation of the Board and management; and (vi) oversee the Company’s environmental, social and governance programs, policies and related risks. The Nominating Committee also makes recommendations to the Board regarding the level and composition of compensation for non-employee directors and grants annual equity awards to non-employee directors.

As required by its charter, each member of the Nominating Committee (Messrs. Finan, Thomas and Waters and Mses. Hackett and Kilsby) has been determined by our Board to be independent as such term is defined in the Exchange Act and the New York Stock Exchange Listed Company Manual. The Nominating Committee met five times in 2019.

Other Corporate Governance Resources

The Company’s Corporate Governance Principles, the Company’s Code of Business Conduct and Ethics and the Company’s Code of Ethics for Senior Financial Officers are available on the Company’s website at https://ir.fbhs.com/governing-high-standards. The charters of each committee are also available on the Company’s website at https://ir.fbhs.com/committees-and-charters. A copy of our ESG report is also available on the Company’s website at https://fbhs.com/global-citizenship/esg.

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Fortune Brands is committed to attracting and retaining qualified and experienced directors that contribute to the Board’s effectiveness and the Company’s goal of maximizing stockholder value. To accomplish this, the Company maintains a non-employee director compensation program that consists of cash fees and Company stock. During 2019, the Board did not make any changes to the structure of or the amounts provided under the non-employee director compensation program. Below is a description of the non-employee director compensation program.

Cash Fees

During 2019, the annual cash fee for services as a non-employee director of the Company was $90,000. The members of the Audit Committee (Messrs. Mackay, Morikis, Thomas and Waters) and the Compensation Committee (Mses. Hackett and Kilsby and Messrs. Finan, Mackay and Morikis) received an additional annual cash fee of $7,500 for their service on each of these committees. In addition, the chairperson of each of the Audit, Compensation and Nominating Committees received an additional annual cash fee of $15,000 for such service (Mr. Waters, Ms. Hackett and Mr. Thomas, respectively). Mr. Thomas received an additional annual cash fee of $200,000 for his service as non-executive Chairman of the Board during 2019. Directors may elect to receive payment of their cash fees in Company stock rather than cash.

In January 2020, Mr. Klein assumed the role of Executive Chairman of the Board and Mr. Thomas assumed the role of Lead Independent Director. As a result of the change in the Board leadership structure, the Board eliminated the additional annual cash fee of $200,000 for service as the non-executive Chairman of the Board and approved an annual fee of $50,000 for service as the Lead Independent Director, effective January 2020.

Stock Awards

In May 2019, each non-employee director received an annual stock grant that was based on a set dollar value of $135,000. The number of shares granted was determined by dividing the dollar value of the annual stock grant ($135,000) by the closing price of the Company’s stock on the grant date ($55.16), rounded to the nearest share. Accordingly, 2,447 shares of Company stock were granted to each of the non-employee directors. Directors may elect to defer receipt of their annual stock awards until the January following the year in which the individual ceases serving as a director of the Company.

Director Stock Ownership Guidelines

To further align the Board’s interests with those of stockholders, the Board maintains Stock Ownership Guidelines for non-employee directors. The guidelines encourage non-employee directors to own Company stock with a fair market value equal to five times the annual cash fee ($450,000 based on the annual fee currently set at $90,000). The guidelines allow directors five years from the date of the director’s election to the Board to meet the guidelines. All of our directors currently meet the multiple or fall within the five year time period allowed to meet the multiple under the Stock Ownership Guidelines. For information about the beneficial ownership of the Company’s securities held by directors and executive officers, see “Certain Information Regarding Security Holdings” on pages 44-45.

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* Although Messrs. Fink and Klein currently serve as members of the Board, they do not receive any additional compensation for such service. Mr. Finan joined the Board in February 2019 and Wesley retired from the Board in May 2019.

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This Compensation Discussion and Analysis (“CD&A”) describes the Company’s executive compensation program and explains how the Compensation Committee made compensation decisions for the following Named Executive Officers (the “NEOs”) in 2019:

This CD&A is divided into the following main sections:

EXECUTIVE SUMMARY¹

Leadership Succession Planning

The Compensation Committee and Board have spent a considerable amount of time working on a CEO succession plan over the past several years. On an annual basis, the Board reviews executive succession, including the succession of the Chief Executive Officer. With Mr. Klein’s decision to retire as Chief Executive Officer in January 2020, the Board determined that Mr. Fink would succeed him. The Board evaluated the Company’s leadership structure and decided that Mr. Klein would transition to the role of Executive Chairman and Mr. Thomas would transition from non-executive Chairman to Lead Director.

2019 Business and Financial Highlights

The Company executed on a number of important actions that drove growth in each of our business segments in 2019 despite softer growth in the housing market and industry challenges including tariffs. The Company delivered solid performance in spite of the headwinds it faced, growing Net Sales 5% and earnings per share 15% and 8% on a before charges/gains basis in 2019. We also returned $123 million to shareholders through dividends and repurchased $100 million of our shares, raised $700 million in new financing at an attractive fixed rate while affirming our investment grade rating and extended our $1.25 billion revolving credit facility. We believe that the actions taken in 2019 have positioned the Company to continue to grow and create value for stockholders in the future.

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The following graphics highlight our performance on key Company metrics since 2012, the first year after the Company went public.^*

2019 Compensation Highlights

The Company’s compensation programs and practices are designed to pay for performance and to align management’s interests with those of the Company’s stockholders while attracting, motivating and retaining superior talent to lead our Company. The Compensation Committee believes that our compensation program helps drive Company performance by providing a significant amount of compensation in the form of equity, by utilizing both short-term and long-term incentives that are tied to Company performance, and by making efforts to balance fixed (base salary) and variable (annual cash incentive and equity) compensation. A significant portion of NEO compensation is dependent on Company performance, including stock price performance, business segment growth, improving operational efficiencies and other strategic initiatives. Our incentive compensation programs are designed to link the pay of our executives with the value delivered to shareholders.

After reviewing competitive market data and in recognition of market trends, the Compensation Committee changed the mix of annual equity award grants to be more heavily weighted towards equity tied to the achievement of long-term financial performance goals. Beginning with the 2019 annual equity grant, the mix of equity awarded was changed to 50% performance share awards (“PSAs”) and 25% each in restricted stock units (“RSUs”) and stock options compared to the equally weighted mix (1/3 of each) of PSAs, RSUs and stock options granted in prior years. In addition, the Compensation Committee adjusted the metrics used in the 2019 annual cash incentive plan and the 2019-2021 PSAs. For the annual cash incentive plan, return on net tangible assets (“RONTA”) replaced return on invested capital (“ROIC”) for Fortune Brands executives. For the 2019-2021 PSAs, ROIC replaced RONTA. The Committee approved these changes in the metrics as it believes that ROIC serves as a better long-term metric than RONTA. The Committee also increased the minimum payout percentage for the 2019-2021 PSAs from 0% to 50% to better align with market data. Under the 2019-2021 PSA design, PSAs will not vest (0% payout) if performance is below the minimum performance threshold.

The Board believes that the principles guiding our executive compensation program continue to link executive compensation with the Company’s long-term performance.

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Equity-based compensation aligns executives’ interests with stockholders, drives performance and facilitates retention

Equity and incentive compensation are strongly linked to increasing Company performance

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2019 NEO Annual Total Target Compensation

The following chart summarizes annual total target compensation awarded to each NEO (other than Mr. Banyard) in 2019:

RESULTS OF THE 2019 SAY-ON-PAY VOTE

In 2019, we sought an advisory vote from our stockholders on NEO compensation (commonly referred to as “Say-on-Pay”). More than 93% of the votes cast were in support of the Company’s NEO compensation program as described in the 2019 Proxy Statement. The Compensation Committee did not make any changes to the design of the Company’s executive compensation program in response to the 2019 Say-on-Pay vote. The Compensation Committee did, however, increase the mix of equity awarded to consist of 50% PSAs to increase the focus on the achievement of long-term performance goals. The Compensation Committee believes the Company’s executive compensation program provides rewards that motivate our NEOs to maximize long-term stockholder value and encourage long-term retention.

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PHILOSOPHY AND PROCESS FOR AWARDING NEO COMPENSATION

Philosophy of the Executive Compensation Program

Our executive compensation program is designed to reward NEOs for the achievement of both short-term and long-term strategic and operational goals that lead to the creation of long-term stockholder value. The executive compensation program is designed to:

Compensation Peer Group and Market Data

When setting annual NEO compensation, the Compensation Committee uses compensation data from a group of similarly sized peer companies to evaluate compensation arrangements against those of the Company (the “Peer Group”). Annually, the Committee reviews and assesses the appropriateness of the Peer Group. Meridian made recommendations to modify the composition of the Peer Group to be used for evaluating 2019 executive compensation decisions and the Compensation Committee approved the recommended modifications. Accordingly, the 2019 Peer Group excluded Armstrong World Industries, Inc. (due to revenue comparability) and USG Corporation (due to acquisition) and added two new companies, JELD-WEN Holding, Inc. and Whirlpool Corporation based on their classification as companies with similar revenue and market capitalization and operating in similar cyclical industries. Fortune Brands 2018 revenue was $5.48 billion and market capitalization was $5.37 billion compared to the 2019 Peer Group median 2018 revenue of $7.7 billion and market capitalization of $8.4 billion. The 2019 Peer Group consisted of the following companies:

Meridian provided the Compensation Committee with competitive data for use in evaluating and setting 2019 NEO base salary, annual cash incentive awards and annual long-term incentive awards (“market data”). The market data primarily consisted of peer group data from Aon, with revenue size adjusted general industry and proxy data providing a supplemental viewpoint.

The Compensation Committee believes that compensation decisions are complex and require a deliberate review of Company performance, peer compensation levels, responsibilities of the role, experience and impact of individual executives, and individual performance. In determining executive compensation, the Compensation Committee considers all forms of compensation and uses appropriate tools – such as tally sheets and market data – to review the value delivered by each component of compensation to each executive. When evaluating total target compensation, the Compensation Committee generally strives to set NEO compensation around the 50^th percentile of the market data. The Compensation Committee may, however, determine that it is appropriate for total target compensation or any particular element of compensation to exceed or fall below the 50th percentile of the market data with respect to any individual. The factors that might influence the amount of compensation awarded include market competition for a particular position, retention considerations, an individual’s performance, possession of a unique skill or knowledge set, proven leadership capabilities or other business experience and internal pay equity.

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Evaluating NEO Performance

At the end of 2019, the Compensation Committee, in conjunction with the non-executive Chairman and other non-management members of the Board, conducted a formal evaluation of the Company’s Chief Executive Officer (the “CEO”) to analyze his performance against strategic, financial and operational goals established at the beginning of the year. Following the annual performance review, the Compensation Committee then sets the CEO’s annual total target compensation after reviewing related recommendations and market data from Meridian. The CEO reviews and evaluates each of the other NEOs performance against strategic, financial and operational goals established at the beginning of the year and then presents his evaluations to the Compensation Committee. The Compensation Committee reviews the CEO’s recommendations and market data from Meridian and then independently sets each of the other NEO’s annual total target compensation.

Maintaining Best Practices Regarding Executive Compensation

The Compensation Committee maintains policies and procedures that it believes represent best practices in corporate governance that effectively protect the interests of our stockholders. The chart below summarizes these policies and procedures.

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TYPES AND AMOUNTS OF NEO COMPENSATION AWARDED IN 2019

Pay-at-Risk Compensation

As part of 2019 annual target compensation, the Company provided both fixed (base salary) and variable (annual cash incentive and equity) compensation to the NEOs. The vast majority of annual target compensation is at risk because the compensation that is actually paid is dependent upon Company (or business segment) performance and/or the Company’s stock price. As a result, the amount of compensation actually paid to an NEO may vary from the NEO’s target compensation that was awarded by the Compensation Committee. The following charts show each element of 2019 annual target compensation, including the mix of short-term and long- term incentives, as well as the amount of pay-at-risk for the CEO and the average for the other NEOs (excluding Mr. Banyard as he did not participate in the Company’s 2019 annual compensation program because his employment commenced in November 2019).

2019 Compensation

Base Salary

Base salaries provide a fixed level of cash compensation for each NEO and are paid in order to attract and retain our NEOs. The Compensation Committee sets each NEO’s base salary to be appropriate and commensurate with the NEO’s position, experience and performance.

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For 2019, the Compensation Committee increased the annual base salaries for each NEO to better align with competitive market data and in recognition of each individual’s prior year performance (with Mr. Klein’s input on the performance of each NEO other than himself) or to reflect a change in position. When Mr. Fink was promoted from President of the Global Plumbing Group to President and Chief Operating Officer of Fortune Brands in March 2019, he received an additional increase to his base salary to bring his compensation in line with market data for a position of similar scope. Below is the 2019 and 2018 annual base salary for each NEO (other than Mr. Banyard):

Annual Cash Incentive

The Compensation Committee believes that annual cash incentive awards reinforce a pay-for-performance culture because the payment is based on the financial and operational results of the Company, (or applicable business segments), and helps the Company maintain a competitive compensation program. Annually, the Compensation Committee sets a target percentage of base salary used to determine each NEO’s cash incentive.

In 2019 the Compensation Committee did not make any adjustments to the target percentage of base salary used to determine each NEO’s annual incentive award, except for Mr. Fink. When Mr. Fink was promoted to the role of President and Chief Operating Officer in March 2019, his target percentage was increased from 75% to 95% for the period of March to December. The increase in Mr. Fink’s target percentage was made to bring his compensation in line with market data for a position of similar scope. As a result, Mr. Fink’s 2019 annual cash incentive award was prorated to reflect the portion of the year in which his target was set at 75% and 95%, respectively. The target percentage for each NEO (other than Mr. Banyard) for 2019 was:

Annually, the Compensation Committee also sets the minimum, target and maximum annual performance metrics and goals used to determine each NEO’s annual cash incentive award. The annual incentive payouts are based on the achievement of the performance goals and can range from 0% to 200% of target. To establish challenging performance goals under the annual incentive program, the Compensation Committee reviewed the target performance goals and actual results for awards paid in 2018, and the 2019 expected growth rate in the home products market, as well as key assumptions relating to share gains, pricing, material inflation and productivity.

For 2019, the Compensation Committee approved the following performance metrics for annual incentive awards:

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The Compensation Committee changed the operational efficiency metric used to determine Messrs. Klein’s, Hallinan’s and Fink’s 2019 annual incentive awards from ROIC to RONTA as RONTA was viewed by the Compensation Committee as a better metric to measure short-term, or annual, Company performance.

The Compensation Committee believes that the performance measures chosen for the 2019 annual incentive awards focus executives on maximizing long-term stockholder value (EPS), operational efficiency (RONTA, OM and WCE) and profitability (OI, OM and Sales). The following table sets forth the minimum, target and maximum financial performance measures, the actual performance results, the percentage payout and the amount paid to each NEO for the 2019 annual cash incentive awards:

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Long-Term Equity Awards

The Compensation Committee believes that equity compensation aligns management’s interests with those of stockholders, reinforces a pay-for-performance culture and helps the Company maintain a competitive compensation program. Annually, the Compensation Committee sets a target equity award value and determines the types of equity to award.

In setting 2019 target long-term equity award values, the Compensation Committee (together with Mr. Klein for NEOs other than himself) considered competitive market data, the individual performance and the competitiveness of total compensation of each of the NEOs. The target long-term equity award values granted to the NEOs were increased to align award values with market data, in recognition of their prior year performance and to provide an increased value to enhance long-term retention. Mr. Hallinan received a larger equity grant to bring his total compensation in line with the market data for his position. Messrs. Fink and Finley each received more significant increases in their long-term equity award target value, commensurate with their respective promotions and to align with the market data for their new roles (Mr. Fink as Chief Operating Officer and Mr. Finley as President of Doors & Security). Below is the 2019 target equity award value and the 2018 target award value for each NEO (other than Mr. Banyard):

Prior to 2019, the mix of annual equity awards was one-third each of PSAs, RSUs and stock options. For 2019, the Compensation Committee changed the mix of annual equity awards to reflect market practice and to increase the focus on performance-based equity awards that are achieved based on long-term financial performance goals. Accordingly, the 2019 annual equity grants made to our NEOs consisted of 50% PSAs, 25% RSUs and 25% stock options.

Performance Share Awards: PSAs awarded to the NEOs in 2019 will be settled in shares of the Company’s common stock only if the Company exceeds specified EBITDA (weighted 75%) and ROIC (weighted 25%), performance goals during the cumulative performance period from January 1, 2019 through December 31, 2021. Payouts may range from 50% to 200% of the target award based on performance. PSAs will be settled following completion of the performance period and certification of the performance results by the Compensation Committee (in early 2022).

In 2019, the Compensation Committee changed the minimum payout range from 0% to 50% to be more in line with market practice. If the Company fails to achieve the minimum performance threshold, none of the PSAs will vest.

The Compensation Committee based the performance goals on EBITDA and ROIC because it believes that these metrics incentivize management to grow earnings in a focused and efficient way that rewards operating excellence and aligns the interests of management with our stockholders. The operational efficiency metric used to determine the 2019-2021 PSAs was changed from RONTA to ROIC as the Compensation Committee believes that ROIC is a better measure of long-term Company performance. The Compensation Committee believes that awarding PSAs with a cumulative three year performance goal drives long-term sustained growth and, as a result, management is rewarded if the long-term growth goals are exceeded. In establishing performance goals for PSAs, the Compensation Committee considered the Company’s strategic operating plan, the expected three year compound market growth rate, as well as key assumptions relating to share gains, pricing, material inflation and productivity.

RSUs and Stock Options: The Compensation Committee believes that both RSUs and stock options incent NEOs to increase stockholder returns and align the interests of NEOs with stockholders. RSUs granted to the NEOs

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vest in three equal annual installments, assuming the NEO remains employed through each annual vesting date. RSUs serve as a long-term retention tool in a cyclical business because the NEOs must remain employed with the Company through each of the three annual vesting dates to receive all of the shares. The Compensation Committee believes that RSUs represent at-risk compensation since their value is linked directly to share price, which may increase or reduce the value of the RSUs over the vesting period.

Stock options allow an NEO to purchase a specific number of shares of Company stock at a fixed price (i.e., the share price set on the grant date). The 2019 stock options vest in three equal annual installments, assuming the NEO remains employed through each vesting date, and expire ten years from the grant date. The Compensation Committee believes that stock options are performance-based and at-risk because the NEOs only realize value to the extent the Company’s stock price increases after the grant date.

2017-2019 Performance Share Awards Payout

In 2017, the Compensation Committee awarded all of the NEOs PSAs to be settled in early 2020 if the Company achieved certain EBITDA and RONTA goals during the cumulative performance period from January 1, 2017 through December 31, 2019, with EBITDA weighted 75% and RONTA weighted 25%. The Compensation Committee certified a payout level of 49.4%. The threshold, target and maximum goals for cumulative EBITDA and average RONTA from January 1, 2017 through December 31, 2019 and the Company’s actual results were as follows:

Based on the achievement of the 2017-2019 EBITDA and RONTA performance goals, the NEOs received the following number of shares of Company stock pursuant to the terms of the award agreements:

Retention Award

In February 2019, the Compensation Committee granted RSUs to Mr. Finley, with a grant date fair value equal to $499,979 (10,462 RSUs) as a retention award and in recognition of his prior year performance. This award will vest on the second anniversary of the grant date, subject to Mr. Finley remaining employed through the vesting date.

New Hire Compensation Arrangement

Mr. Banyard commenced employment with the Company as President of Cabinets in November 2019 and did not participate in the Company’s annual executive compensation program in 2019. In setting Mr. Banyard’s initial compensation terms, the Compensation Committee considered market data, the breadth of experience that Mr. Banyard brings to the role, the amount of compensation received by Mr. Banyard from his prior employer and the amount of compensation that Mr. Banyard was forfeiting from his prior employer. After considering those factors, the Compensation Committee established an initial base salary of $720,000 and awarded him a sign-on cash award in the amount of $725,000 and an RSU grant with a fair market value equal to $2,749,989 (43,497 RSUs). The RSUs will vest in three equal annual installments, assuming that Mr. Banyard remains employed through each of the vesting dates.

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Benefits

Retirement

All of the NEOs are eligible for retirement benefits through the Fortune Brands Home & Security Retirement Savings Plan (the “Qualified Savings Plan”), a tax-qualified defined contribution 401(k) plan. The Compensation Committee believes that the Qualified Savings Plan benefits are consistent with competitive pay practices and are an important element in attracting and retaining talent in a competitive market.

In addition to the Qualified Savings Plan, the Company provides non-qualified retirement benefits for contributions that would have been made under the tax-qualified plan but for limitations imposed by the Internal Revenue Code (the “Code”). Please see the narratives and the “2019 Nonqualified Deferred Compensation” table on page 35 of this Proxy Statement for further information regarding these retirement benefits.

The Company maintains frozen tax-qualified defined benefit pension plans and non-qualified defined benefit pension plans. Messrs. Klein and Hallinan are the only NEOs entitled to a benefit under these plans. Benefit accruals were frozen in 2016, which means that Messrs. Klein and Hallinan did not accrue any additional benefits in 2019.

Severance

The Company has Agreements for the Payment of Benefits Following Termination of Employment (the “Severance Agreements”) with each NEO. Under the terms of the Severance Agreements, each NEO is entitled to severance benefits upon a “qualifying termination of employment” (i.e., termination by the Company without “cause” or by the NEO for “good reason”) or in the event of a qualifying termination of employment following a change in control.

The Compensation Committee believes that it is appropriate to provide NEOs with the protections afforded under these Severance Agreements and that doing so helps the Company remain competitive with market practice and attract and retain superior talent. The Compensation Committee also believes that these Severance Agreements promote management independence and keeps management focused on the Company’s business in the face of any potential change in control events.

All of the Agreements contain “double-trigger” change in control provisions, which means that there must be both a change in control of the Company (or applicable business) and a qualifying termination of employment (i.e., termination by the Company without “cause” or by the NEO for “good reason”) before any enhanced benefits can be paid following a change in control.

The NEOs are not entitled to any tax gross ups under the Severance Agreements, including those related to the change-in-control related excise taxes imposed under the Code. Please see the “2019 Potential Payments Upon Termination or Change in Control” table, as well as the narratives that follow for further information regarding the Severance Agreements and the treatment of outstanding equity upon a qualifying termination of employment or a change in control on pages 36-37.

Perquisites

In 2019, the Company provided a limited number of perquisites to the NEOs, which included limited annual use of Company aircraft by Mr. Klein (the cost of which he reimbursed to the Company based on the cost of a first class airplane ticket for each personal flight). All NEOs were provided with an executive health program that provides all NEOs with annual medical examinations. The Company also provides broad-based plans, which are generally available to employees such as reimbursement of certain relocation expenses incurred when the Company requires an employee to relocate, a match on charitable contributions and company product purchase programs.

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Policies

Clawback Policy

The Company has a policy that allows it to recoup all or part of annual cash incentives or PSAs if there is a: (1) significant or material restatement of the Company’s financial statements covering any of the three fiscal years preceding the grant or payment; or (2) restatement of the Company’s financial statements for any year which results from fraud or willful misconduct committed by an award holder. The Company also has the right to recoup all or part of an executive’s other equity awards under the terms and conditions of these awards.

Stock Ownership Guidelines

The Company maintains stock ownership guidelines for NEOs and other Company executives, which require them to hold a number of shares equal to a multiple of their annual base salary. The ownership guidelines are as follows:

Executives have five years from the date of hire or date of promotion to acquire the requisite amount of stock and are required to hold 50% of net shares acquired from the vesting of PSAs and RSUs until the ownership guidelines are met. All of the NEOs currently meet the multiple or fall within the time period allowed to meet the multiple under the stock ownership guidelines. The Compensation Committee periodically reviews the guidelines against Peer Group practices.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Compensation Committee

Ann F. Hackett, Chair

Irial Finan

Susan S. Kilsby

A.D. David Mackay

John G. Morikis

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In connection with Mr. Fink’s relocation of his personal residence in 2018, column H includes primarily moving and storage fees in the amount of $4,299 and reimbursement for taxes in the amount of $1,979 which were made to make Mr. Fink whole for expenses incurred.