Joseph M. McFarland III

About Joseph M. McFarland III

Joseph M. McFarland III is Executive Vice President, Stores at Lowe’s Companies, Inc., a role he has held since August 2018, following senior leadership positions at J.C. Penney (EVP Chief Customer Officer; EVP Stores) and The Home Depot (Divisional President) . He is 55 years old . Under Lowe’s Total Home strategy, fiscal 2024 delivered sales over $83 billion with diluted EPS of $12.23 (adjusted EPS $11.99), while PSUs for the 2022–2024 cycle paid out at 91.84% (3-year adjusted ROIC of 35.4% vs 36.0% target; TSR at S&P 500 median) . Lowe’s reported positive 1-, 3-, and 5-year TSR and outperformed its compensation peer group over those horizons .

Past Roles

Organization	Role	Years	Strategic impact (as disclosed)
J.C. Penney Company, Inc.	EVP, Chief Customer Officer	Mar 2018–Aug 2018	Not disclosed
J.C. Penney Company, Inc.	EVP, Stores	2016–Mar 2018	Not disclosed
The Home Depot, Inc.	Divisional President	2007–2015	Not disclosed

External Roles

No external directorships or board roles disclosed for McFarland .

Fixed Compensation

Metric	FY 2022	FY 2023	FY 2024
Base Salary ($)	832,291	857,704	875,815
Target Bonus (% of Base Salary)	100% (NEOs)	100% (NEOs)	100% (NEOs)
Actual Annual Incentive Paid ($)	1,064,000	540,096	860,401
All Other Compensation ($)	33,903	8,384	13,829
Total Compensation ($)	5,674,302	5,793,930	6,351,513

Notes:

2024 annual incentive payout for NEOs was 98.24% of target .

Performance Compensation

Annual Incentive Program (FY 2024 structure and outcomes)

Metric	Weight	Outcome vs Target	Payout factor driver
Sales	40%	Between threshold and target (set vs guidance midpoint; wider bands for macro uncertainty)	Contributed to 98.24% overall payout
Operating Income (as adjusted)	40%	Between threshold and target (excludes $177M gain from Canada sale)	Contributed to 98.24% overall payout
Inventory Turnover	10%	Above target	Contributed to higher factor
Pro Sales Growth	10%	Above target	Contributed to higher factor

Overall FY 2024 AIP paid at 98.24% of target for NEOs, including McFarland .

PSUs (Performance Share Units)

PSU Cycle	Metric(s)	Target	Actual/Outcome	Payout
2022–2024	3-year average ROIC; TSR modifier vs S&P 500 median	ROIC target 36.0%	Adjusted ROIC 35.4%; TSR at median (modifier 1.00x)	91.84% of target

2024 Equity Grants (McFarland)

Instrument	Grant Date	Quantity/Terms	Vesting
PSUs	4/1/2024	Threshold 2,949; Target 8,804; Max 17,608	Earned over FY 2024–2026 per ROIC; TSR modifier; no dividends
Stock Options	4/1/2024	12,947 @ $249.28 exercise price	3 annual installments on 4/1/2025, 4/1/2026, 4/1/2027; 10-year term
RSAs (time-vested)	4/1/2024	4,402 shares	Cliff vest after 3 years (4/1/2027); dividends during vesting

Equity Ownership & Alignment

Item	Detail
Total beneficial ownership	225,948 shares; <1% of class; includes 171,849 issuable within 60 days via options/PSUs/DSUs
Unvested RSAs (by vest date)	4/1/2025: 4,645; 6/15/2025: 5,380; 4/1/2027: 4,402
Options (exercisable/unexercisable)	Exercisable: 43,810 @ $114.07 (exp 10/1/2028); 30,190 @ $108.93 (4/1/2029); 41,988 @ $80.42 (4/1/2030); 16,179 @ $191.32 (4/1/2031). Unexercisable: 5,285 @ $202.40 (vests 4/1/2025); 10,978 @ $199.97 (vests 4/1/2025 & 4/1/2026); 12,947 @ $249.28 (vests 2025–2027)
Unearned PSUs (as of 1/31/2025)	31,296 units; indicative value $8,138,212 at $260.04 close
Ownership guidelines (EVP)	4.0x base salary; all current NEOs in compliance
Hedging/pledging	Hedging prohibited; pledging/margin prohibited; pre-clearance and blackout rules apply

Employment Terms

Provision	Key Terms
Severance Plan (Qualified Termination; EVP)	Cash severance equal to 2× (base salary + target annual bonus), paid over 24 months; continued health coverage up to 12 months; outplacement up to a year
McFarland—Qualified Termination (illustrative at 1/31/2025)	Severance $3,511,200; Welfare benefits $14,471; Total $3,525,671
Change-in-Control Agreements (double-trigger)	Benefits payable only if termination without cause/for good reason within 24 months after CoC; severance = 2.99× present value of base + annual incentive + welfare costs; legal fee coverage; no 280G gross-up (best net cutback applies)
Equity on Change-in-Control	Options become fully exercisable; RSAs fully vest; PSU performance period ends as of fiscal quarter before CoC and earns based on performance; post-termination 24-month non-compete (and longer if awards vest later)
McFarland—CoC + Qualifying Termination (illustrative at 1/31/2025)	Severance $4,871,229; Options $1,103,386; RSAs $3,751,597; PSUs $4,378,814; Welfare $76,901; Total $14,181,926
Clawbacks	No-fault restatement recovery; fault-based recovery for misconduct causing significant financial or reputational harm
Trading policies	Strict insider trading and trading-window/preclearance policy; blackout periods; restrictions on certain transactions (e.g., broker DRIPs for officers/directors)

Performance & Track Record

Strategic execution: Lowe’s Total Home strategy prioritized Pro penetration and online growth; refreshed strategy in Dec 2024 to expand home services, loyalty ecosystem, and space productivity .
Fiscal 2024 results: Sales >$83B; diluted EPS $12.23 (adjusted $11.99); operating margin 12.5% (adjusted 12.3%) .
Incentive outcomes: 2024 annual incentive at 98.24% of target; 2022–2024 PSUs at 91.84% of target (ROIC slightly below target; TSR at S&P 500 median) .
Say-on-pay: 92% approval in 2024; program maintained for 2024 .
Peer benchmarking: Peer group includes Home Depot, Walmart, Target, Costco, NIKE, TJX, CVS, Walgreens, Kroger, Dollar General, Best Buy, Starbucks, Macy’s; Lowe’s ranked ~75th percentile in market cap and ~79th percentile in operating income versus peers as of Jan 31, 2025 .

Related Party Transactions (Governance lens)

McFarland’s brothers: Christopher (employed June 2019–Jan 2025; ~ $251,000 cash comp incl severance; 201 RSAs) and Jonathan (employed since June 2020; ~ $183,000 cash comp; 81 RSAs); reviewed and approved under related-party policy .

Compensation Structure Analysis

Year-over-year mix: Significant portion of McFarland’s compensation is at-risk (AIP + PSUs + options + RSAs); multi-year PSU performance and option appreciation directly link pay to ROIC and TSR .
Shift to RSUs vs options: 2024 LTI mix maintained (50% PSUs, 25% options, 25% RSAs), balancing performance leverage and retention .
Metric rigor: AIP targets aligned to guidance with widened bands for macro uncertainty; operating income adjusted to exclude a prior transaction gain consistent with guidelines .
Clawbacks and conduct: Dual clawbacks and strict trading/hedging/pledging prohibitions strengthen alignment and risk controls .

Equity Vesting Schedule (Upcoming events)

Date	Shares	Instrument
4/1/2025	4,645	Unvested RSAs vest
6/15/2025	5,380	Unvested RSAs vest
4/1/2025	5,285	Unexercisable options (@$202.40) vest
4/1/2025 & 4/1/2026	10,978 (total)	Unexercisable options (@$199.97) vest across two tranches
4/1/2025–4/1/2027	12,947	2024 options (@$249.28) vest in 3 annual installments
4/1/2027	4,402	2024 RSAs cliff vest

Say‑on‑Pay & Shareholder Feedback

92% say‑on‑pay approval in 2024; ongoing robust investor engagement on compensation design; metrics tied to strategy and value creation .

Expertise & Qualifications

Retail operations and store leadership across big-box home improvement and department store formats; Lowe’s EVP Stores since Aug 2018 .

Investment Implications

Pay-for-performance alignment: AIP and PSUs link payouts to sales, operating income, ROIC, and TSR, with 2024 payout at 98.24% and 2022–2024 PSUs at 91.84%, indicating balanced sensitivity to operating leverage and capital efficiency .
Near-term selling pressure: Multiple 2025 vesting events (RSAs and options) could add supply; however, blackout periods, pre-clearance, and hedging/pledging prohibitions mitigate unmanaged selling risk .
Retention and CoC protections: EVP severance (2× base+bonus) and double-trigger CoC terms (2.99× plus equity acceleration) provide retention but cap tax gross-ups via “best net” approach; non-compete covenants reduce post-departure risk .
Governance watchpoints: Related party employment (brothers) was reviewed/approved; continue monitoring for perception risk though policy controls are in place .
Overall: McFarland’s incentives emphasize operational execution and long-term value creation within Lowe’s Total Home strategy; strong say-on-pay support and robust clawbacks/trading controls enhance alignment and reduce governance risk .