Use these links to rapidly review the document
TABLE OF CONTENTS

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant ý
Filed by a Party other than the Registrant o

Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ý Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to § 240.14a-12

AVERY DENNISON CORPORATION
(Name of Registrant as Specified In Its Charter)

N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

---

Table of Contents

---

Table of Contents

Notice of 2019 Annual Meeting of Stockholders

To Our Stockholders:

        We cordially invite you to attend our 2019 Annual Meeting of Stockholders at 207 Goode Avenue, Glendale, California 91203 on Thursday, April 25, 2019 at 1:30 p.m. Pacific Time. At the meeting, we will conduct the following items of business:

        Our Board recommends that you vote FOR each of the director nominees in Item 1 and FOR Items 2 and 3.

        Stockholders of record as of February 25, 2019 are entitled to notice of, and to vote at, the meeting and any adjournment or postponement thereof.

        We will mail our Notice of Internet Availability of Proxy Materials, which includes instructions on how to access these materials on the Internet, on or before March 11, 2019. If you previously elected to receive a paper copy of our proxy materials, we will mail you our 2019 proxy statement; 2018 annual report, which includes letters to stockholders from our Chairman and our Chairman-Elect, President and Chief Executive Officer; and a proxy card on or about March 11, 2019.

        We want your shares to be represented and voted. You can vote as shown in the chart below.

        On behalf of the Board of Directors, management and employees of Avery Dennison, thank you for your continued support.

---

Table of Contents

OUR PLAN TO WIN

 

 

---

Table of Contents

TABLE OF CONTENTS

​

Avery Dennison Corporation  | 2019 Proxy Statement  | Table of Contents

---

Table of Contents

 

​

Avery Dennison Corporation  | 2019 Proxy Statement  | i

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | ii

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | iii

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | iv

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | v

---

Table of Contents

 

​

Avery Dennison Corporation  | 2019 Proxy Statement  | vi

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | vii

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | viii

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | ix

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | x

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | xi

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | xii

---

Table of Contents

PROXY STATEMENT

        We produce pressure-sensitive materials and a variety of tickets, tags, labels and other converted products. We sell most of our pressure-sensitive materials to label printers and converters that convert the materials into labels and other products through embossing, printing, stamping and die-cutting. We sell other pressure-sensitive materials in converted form as tapes and reflective sheeting. We also manufacture and sell a variety of other converted products and items not involving pressure-sensitive components, such as fasteners, tickets, tags, radio-frequency identification (RFID) inlays and tags, and imprinting equipment and related solutions, which serve the apparel and other end markets.

GOVERNANCE

        Under the oversight of our Board of Directors (our "Board"), we have designed our governance program to comply with applicable laws and regulations — including the rules of the Securities and Exchange Commission (SEC) and the listing standards of the New York Stock Exchange (NYSE) — and reflect best practices as informed by the practices of other large public companies, recommendations from our outside advisors, the voting guidelines of our stockholders and the policies of proxy advisory firms. The key features of our program are noted in the Governance Highlights section of the Proxy Summary; together they form a program that we believe is consistent and aligned with the Investor Stewardship Group's Corporate Governance Principles for U.S. Listed Companies.

        We encourage you to visit the Corporate Governance section of our website at www.averydennison.com/corporategovernance, where you can review and download the following documents:

•

Amended and Restated Certificate of Incorporation;



•

Amended and Restated Bylaws (our "Bylaws");



•

Corporate Governance Guidelines (our "Governance Guidelines");



•

Charters for our Board's Audit and Finance Committee (the "Audit Committee"), Compensation and Executive Personnel Committee (the "Compensation Committee"), and Governance and Social Responsibility Committee (the "Governance Committee");



•

Code of Conduct;



•

Code of Ethics for the Chief Executive Officer (CEO) and Senior Financial Officers; and



•

Audit Committee Complaint Procedures for Accounting and Auditing Matters.

        You can access these documents on our website using the links contained in this proxy statement, but should note that information on our website is not and should not be considered part of, nor is it incorporated by reference into, this proxy statement. You can also receive copies of these documents, without charge, by writing to our Corporate Secretary at Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 1

---

Table of Contents

CODE OF ETHICS

        We have adopted a Code of Ethics that requires our CEO, Chief Financial Officer (CFO) and Chief Accounting Officer (CAO) to act professionally and ethically in fulfilling their responsibilities.

        Supporting the principles reflected in our Code of Ethics, our controllership and internal audit functions ensure that we maintain a robust internal control environment, with the leaders of these functions regularly reporting to, and periodically meeting in executive session with, the Audit Committee.

        Our Code of Ethics is available on our website at www.averydennison.com/codeofethics. Only the Audit Committee or the Governance Committee can amend or waive the provisions of the Code of Ethics, and any amendments or waivers must be posted promptly on our website or timely filed with the SEC on a Current Report on Form 8-K. We last amended our Code of Ethics in April 2014.

CODE OF CONDUCT

        Our Code of Conduct applies to all of our directors, officers and employees. It has been translated into over 30 languages and our leaders affirm their commitment to complying with it when they first join our company and annually thereafter. We train employees on the Code of Conduct at least biannually, in addition to our online training program consisting of four courses per year covering specific risk areas from the Code of Conduct that designated computer-based employees are required to complete. To ensure that the policies and principles encompassed in our Code of Conduct reach all our employees, we develop and launch three "Talkabout" toolkits (also in over 30 languages) globally each year, which managers are required to use to engage in meaningful discussion with their teams regarding topics from the Code of Conduct. These toolkits consist of presentation slides, a leader discussion guide and an introductory subtitled video, which includes messages from our Chief Compliance Officer and other company leadership.

Recent Code Updates

        In 2017, we refreshed our Code of Conduct, which is available on our website at www.averydennison.com/codeofconduct, with updated leadership messages, additional guidance on certain higher risk areas, and case studies to provide additional guidance on more complex ethical situations. We introduced the updated Code of Conduct with manager and employee communications and created a pocket version for distribution to all employees. In 2018, we further updated our Code of Conduct to reflect our updated values of Integrity, Courage, External Focus, Diversity, Sustainability, Innovation, Teamwork and Excellence. These values will shape our culture and guide our behavior as we continue to grow. Our "Values in Action" campaign during the year provided our employees around the world the opportunity to demonstrate how they are living our values and helping maintain our values-based culture.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 2

​

---

Table of Contents

Ethics-Based Corporate Culture and Policies

        Reflecting the culture of our company since its inception, the ethics-based corporate policies and other matters discussed in our Code of Conduct are shown below. Our global supplier standards extend our commitment to many of these principles to our third party service providers, establishing our expectation that they also do business in an ethical manner.

Business Conduct GuideLine

        The GuideLine may be reached by (i) calling 800.461.9330 toll-free in the United States, 720.514.4400 direct with applicable charges from any location, or toll-free outside of the United States using the country-specific toll-free numbers found in our Code of Conduct or (ii) visiting averydennison.com/guidelinereport (averydennison.com/guidelinereport-eu in Europe). The hotline is operated by an independent third party and accepts reports in any language to accommodate the needs of our global workforce and customer/supplier base. All reports are investigated under the direction of our Chief Compliance Officer, in consultation with our law department and senior management and with oversight from the Governance Committee. We prohibit retaliation for good-faith reporting.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 3

​

---

Table of Contents

COMPLAINT PROCEDURES FOR ACCOUNTING AND AUDITING MATTERS

        These procedures relate to complaints of (i) fraud or deliberate error in the preparation, evaluation, review or audit of our financial statements or other financial reports; (ii) fraud or deliberate error in the recording or maintenance of our financial records; (iii) deficiencies in, or noncompliance with, our internal accounting controls; (iv) misrepresentation or false statement to or by a senior officer or accountant regarding any matter contained in our financial records, statements, or other reports; or (v) deviation from full and fair reporting of our financial condition. Any person, including third parties, may submit a good faith complaint regarding accounting and auditing matters and employees may do so without fear of dismissal or other retaliation. The Audit Committee oversees these procedures, which are available on our website at www.averydennison.com/auditprocedures. Investigations are conducted under the direction of our internal audit department in consultation with our Chief Compliance Officer, law department and senior management to the extent appropriate under the circumstances.

        Stockholders and other interested parties interested in communicating regarding these matters may make a confidential, anonymous report by contacting the Business Conduct GuideLine as described on the previous page or writing to the Audit and Finance Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.

STOCK OWNERSHIP POLICY

        Our stock ownership policy requires that non-employee directors acquire and maintain a minimum ownership interest in our company equal to $500,000 and our CEO and other NEOs acquire and maintain a minimum ownership interest in our company equal to 6x and 3x their annual base salary, respectively.

        The values of the following shares/units are considered in measuring compliance with our stock ownership policy: (i) shares beneficially owned or deemed to be beneficially owned, directly or indirectly, under federal securities laws; (ii) shares or units held in qualified and non-qualified employee benefit plans; (iii) unvested RSUs subject only to time-based vesting; and (iv) 50% of the value of unvested MSUs at the target payout level. Neither unvested PUs nor stock options are considered in measuring compliance.

        The Compensation Committee and the Governance Committee reviewed the stock ownership of our non-employee directors in December 2018 and February 2019, respectively. Both Committees noted that all of our non-employee directors have exceeded the minimum ownership level required by the policy, except for Messrs. Barrenechea and Lopez who became directors in September 2018 and February 2017, respectively, and have five years to reach the minimum ownership level. The Committee noted that, because they had made reasonable progress towards meeting the applicable level, Messrs. Barrenechea and Lopez were also in compliance with the policy. On average, the ownership of our non-employee directors was approximately 6x the minimum ownership level, aligning their interests with those of our stockholders and further incenting their focus on long-term stockholder value creation.

        The Compensation Committee reviewed officer stock ownership in December 2018 and determined that all of our NEOs were in compliance with our stock ownership policy.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 4

​

---

Table of Contents

INSIDER TRADING POLICY

        Our insider trading policy prohibits our directors, officers and employees from (i) engaging in transactions in our company's stock while in the possession of material non-public information; (ii) engaging in transactions in the stock of other companies while in possession of material non-public information that they become aware of in performing their duties; and (iii) disclosing material non-public information to unauthorized persons outside our company.

Limited Trading Windows

        Our insider trading policy restricts trading for directors and officers (including all NEOs) during blackout periods, which generally begin two weeks before the end of each fiscal quarter and end two business days after the release of earnings for the quarter.

Prohibition on Hedging and Pledging

        Our insider trading policy expressly prohibits our directors, officers and employees from purchasing financial instruments (such as prepaid variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of shares of our common stock they hold, directly or indirectly. In addition, directors and officers are expressly prohibited from — and our non-officer employees are strongly discouraged from — pledging any of their shares of common stock to secure personal loans or other obligations, including by holding such shares in a margin account.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 5

​

---

Table of Contents

SUSTAINABILITY

        Sustainability is one of our core values and has long been part of our approach to doing business, driving us to work collaboratively across our entire value chain to address the environmental and social impacts of our products. Our aim is to continually improve the sustainability of our products and processes to create shared value for all of our stakeholders.

        In 2018, leadership over ensuring meaningful progress towards achieving our 2025 sustainability goals transitioned from Mitch Butier, our President and CEO, to Deon Stander, Vice President and General Manager of our Retail Branding and Information Solutions (RBIS) business. Our Sustainability Council, now led by Mr. Stander and comprised of an expanded group of functional and business leaders to help drive broad accountability and accelerate our progress, meets bimonthly and updates our executive leadership team quarterly. The Council has the following four work streams to help focus its efforts, each of which is led by an internal leader from one of our businesses: operations; technology and innovation; products and solutions; and social impact and transparency. Board oversight over sustainability is primarily conducted by the Governance Committee, which receives a report from management at least once a year. In addition, our full Board hears from our business leaders on our sustainability initiatives during its regular review of our business strategies.

ENGAGING OUR STAKEHOLDERS

        We seek to ensure that our sustainability efforts are consistent with the expectations of our stakeholders, as shown below. We regularly communicate with individuals and organizations interested in how we do business generally and our sustainability efforts in particular, and also conduct stakeholder interviews as part of our regular sustainability materiality assessments. These assessments help set our sustainability agenda, allowing us to focus on the areas in which we can have the most impact.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 6

​

---

Table of Contents

ADVANCEMENTS TOWARDS 2025 SUSTAINABILITY GOALS

        We publicly report on our sustainability progress every two years. In September 2017, we issued our 2014-2016 Sustainability Report, summarizing our achievements against our 2015 sustainability goals and providing details on the 2025 sustainability goals we set in 2015. In the first three years of the 10-year horizon for our new goals, we have made meaningful progress, the key to which has been integrating sustainability into our underlying business strategies and engaging employees at all levels. We expect to issue our 2016-2018 Sustainability Report in the fall of 2019, describing our continued progress towards achieving our 2025 sustainability goals. We encourage you to review these reports, which contain greater information on the highlights summarized on the following page, on our website at www.averydennison.com/sustainability.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 7

​

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 8

​

---

Table of Contents

SOCIAL RESPONSIBILITY

AVERY DENNISON FOUNDATION

        With Board oversight from the Governance Committee, our social responsibility efforts reflect our spirit of community and help strengthen the places around the world in which we do business. We make most of our community investments through the Avery Dennison Foundation (the "Foundation"), which annually invests at least 5% of its assets from the prior year to advance women's empowerment, education and sustainability, and encourages employee engagement with a spirit of invention and innovation. The Foundation invests in communities by making grants to community-based organizations, promoting employee volunteerism and engagement, and awarding scholarships.

GLOBAL GRANTMAKING

        The Foundation's global grantmaking initiative is its primary means of giving. Grantmaking is also aided by our employees worldwide who help identify qualified NGOs. Grant decisions are guided by the priorities shown below, which are targeted to the communities in which our employees live and work.

EMPLOYEE ENGAGEMENT

        As the hands and heart of our company, our employees are critical to advancing the Foundation's efforts. Because they often have the best understanding of the needs of their communities, more than 150 employee teams coordinate volunteerism locally at our global locations. Nearly 50% of the Foundation's grants are enhanced with volunteer time from our employees.

        The Foundation also engages employees through the Granting Wishes program, which allows employees globally to recommend one-time grants to local NGOs. Employees often have a connection to the organizations they nominate through volunteerism or service on the organization's board. In the eight years since the Foundation launched Granting Wishes, more than 1,000 of our employees have taken part, enabling grants to more than 280 organizations.

SCHOLARSHIPS

        The Foundation provides scholarships to the children of our employees in the U.S. More than 620 scholarships have been awarded to U.S. college students.

        In China and India, the Foundation's InvEnt Scholarships have for more than a decade supported the next generation of innovators in science, technology, engineering and mathematics. By providing undergraduates with tuition assistance, an invention competition and professional development opportunities, the Foundation inspires the spirit of innovation in future engineers and technology workers. As part of their application, students submit ideas for an invention they then design during their scholarship year. Over 186 scholarships have been awarded to Chinese and Indian students who have demonstrated outstanding innovative spirit and strong practical competence.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 9

​

---

Table of Contents

OVERVIEW

        Our Board oversees, counsels and ensures management is serving the best interests of our company and stockholders, with the goal of maximizing the performance of our businesses to deliver long-term value.

2019 DIRECTOR NOMINEES

        Our Bylaws provide that our Board be comprised of between eight and 12 directors, with the exact number fixed from time to time by Board resolution. Our Board has fixed the current number of directors at 12, but plans to reduce the number of directors to 11 when Mr. Scarborough leaves the Board in April 2019. The nominees for election at the Annual Meeting — and the year of their initial appointment or election, current or most recent principal occupation, independence status, and committee memberships — are shown in the chart below.

AC = Audit & Finance Committee    CC = Compensation & Executive Personnel Committee    GC = Governance & Social Responsibility Committee
M = Member    C = Chair    LID = Lead Independent Director

        The ages of our director nominees range from 47 to 70, with an average age of 61. Their lengths of service range from less than one to 19 years, with an average tenure on our Board of approximately nine years. None of our directors serves on more than two other boards of SEC-reporting companies, except for Messrs. Anderson and Pyott, who are both retired and serve on three such other boards.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 10

---

Table of Contents

APPOINTMENT OF NEW INDEPENDENT DIRECTOR

        As part of its efforts to ensure regular Board refreshment, the Governance Committee oversaw our Board's search for a new independent director during 2018. The Committee engaged Spencer Stuart, an executive search firm, to assist it in identifying and evaluating potential candidates. Spencer Stuart identified a number of potential candidates (including Mark Barrenechea) who were initially evaluated by the Governance Committee and our Chairman, with input from other Board members and senior management.

        The Governance Committee and other members of our Board interviewed Mr. Barrenechea, uniformly supporting his candidacy based on the deep technology industry expertise he could bring to our Board as we continue refining our go-to market strategies in our high value product category of Intelligent Labels. Upon the recommendation of the Governance Committee, our Board unanimously appointed Mr. Barrenechea to our Board effective September 10, 2018, recognizing his senior leadership experience, technology experience, global exposure and public company board experience.

DEPARTURE OF CURRENT CHAIRMAN

        In February 2019, our Chairman, Dean Scarborough, notified our Board of his intention not to stand for reelection at the Annual Meeting so that he may focus on other endeavors. Mr. Scarborough's membership on, and chairmanship of, our Board will end on the date of the Annual Meeting. For information on our Board's leadership structure following Mr. Scarborough's departure, see the Board Leadership Structure section of this proxy statement.

BOARD MEETINGS AND ATTENDANCE

        Our Board met five times and acted twice by unanimous written consent during 2018. There were 21 Committee meetings during the year. All of our directors attended at least 82% of the aggregate number of Board and Committee meetings of which he or she was a member during 2018; the average attendance of all directors was 97%. Directors are strongly encouraged to attend our annual stockholder meetings under our Governance Guidelines and all of our directors attended the 2018 Annual Meeting.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 11

​

---

Table of Contents

GOVERNANCE GUIDELINES

        Our Governance Guidelines provide the governance framework for our company and reflect the values of our Board, as highlighted below. They are reviewed at least annually and amended from time to time to reflect changes in regulatory requirements, evolving market practices, recommendations from our advisors and feedback from our stockholders. Our Governance Guidelines were most recently amended in December 2018.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 12

​

---

Table of Contents

DIRECTOR INDEPENDENCE

        Our Governance Guidelines require that our Board be comprised of a majority of directors who satisfy the criteria for independence under NYSE listing standards. These standards also require that our audit, compensation and nominating committees be comprised entirely of independent directors. An independent director is one who meets the independence requirements of the NYSE and who our Board affirmatively determines has no material relationship with our company, directly or indirectly as a partner, stockholder or officer of an entity with which we have a relationship.

        Each year, our directors complete a questionnaire designed to solicit information that may have a bearing on the annual independence determination, including all relevant relationships they have with our company, directly or indirectly through our company's sale or purchase of products or services to or from the companies or firms by which they are employed. The Governance Committee reviews any relevant disclosures made in the questionnaires with our General Counsel/Corporate Secretary, as well as any transactions our company has with director-affiliated entities. In February 2019, the Governance Committee reviewed two relationships impacting the independence of our directors, namely Mr. Butier's service as our President and CEO and Mr. Scarborough's former service as our President and CEO.

        After review and discussion of the relevant facts and circumstances, the Governance Committee concluded that only Messrs. Butier and Scarborough had relationships that were disqualifying under NYSE listing standards, otherwise material or impairing of director independence. Upon recommendation of the Governance Committee, our Board affirmatively determined the ten directors named below to be independent, representing 83% of our current directors and 91% of our director nominees.

        For a discussion of the potential impact of tenure on director independence, see the Board Refreshment and Director Succession Planning of this proxy statement.

BOARD LEADERSHIP STRUCTURE

        Our Governance Guidelines give our Board — acting through its independent directors — the discretion to separate or combine the roles of Chairman and CEO as it deems appropriate based on the needs of our company at any given time. To facilitate this decision-making, the Governance Committee annually reviews our Board leadership structure, providing its recommendation on the appropriate structure for the following one-year term to our independent directors. Our independent directors do not view any particular Board leadership structure as necessarily preferable; rather, they make an informed annual determination taking into account, among other things, our financial position, business strategies and any feedback received from our stockholders.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 13

​

---

Table of Contents

ROBUST LEAD INDEPENDENT DIRECTOR ROLE

        Our Lead Independent Director balanced our non-independent Chairman and CEO roles in 2018, exercising critical duties in the boardroom to ensure effective and independent Board decision-making. Our Governance Guidelines clearly delineate these responsibilities, which are shown below. Mr. Pyott currently serves as our Lead Independent Director.

               

        In addition to these responsibilities, Mr. Pyott performed the following activities as Lead Independent Director in 2018:

•

Regularly consulted with each of the Chairman and CEO to help guide management's ongoing engagement with the Board on our strategic direction, including reviewing our business strategies and assessing acquisition opportunities;



•

Consulted regularly with our other independent directors;



•

Provided feedback to our Chairman and our CEO based on his discussions with our other independent directors; and



•

Met with members of senior management other than our CEO.

        Supplementing our Lead Independent Director in providing independent Board leadership are our Committee Chairs, all of whom are independent.

PRE-ANNUAL MEETING LEADERSHIP STRUCTURE

        Our Board currently has a Chairman, who as a recent former employee is not independent, a separate CEO, and a Lead Independent Director. The Governance Committee oversaw the evaluation of the performance of our Chairman and Lead Independent Director during the Board evaluation process conducted in the fourth quarter of 2018, noting that Messrs. Scarborough and Pyott received positive feedback from our independent directors in their respective roles. Based on these evaluations, we believe that our pre-Annual Meeting leadership structure has provided effective independent oversight of our company. During our ongoing engagement with our stockholders on governance matters, none of them expressed concerns with our pre-Annual Meeting Board leadership structure, which we believe reflects support for our robust and clearly delineated Lead Independent Director role.

POST-ANNUAL MEETING LEADERSHIP STRUCTURE

        In February 2019, in light of Mr. Scarborough's upcoming departure from our Board, the Governance Committee evaluated our Board leadership structure and recommended to our Board that Mr. Butier be elected as Chairman, noting that he has successfully led our company for the last three years and, with Mr. Scarborough's departure, is best positioned to lead our Board in overseeing our strategies to drive long-term value creation for our key stakeholders. The committee further noted that Mr. Butier has articulated and worked to realize the long-term vision for our company and that we could best continue our progress towards achieving our 2021 financial and 2025 sustainability goals with combined leadership in the boardroom at this time. Upon the recommendation of the Governance Committee, our Board unanimously elected Mr. Butier (with him and Mr. Scarborough abstaining) to serve as our Chairman, effective immediately after the Annual Meeting subject to his reelection.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 14

​

---

Table of Contents

        The Governance Committee also recommended that Mr. Pyott (with him abstaining) continue serving as Lead Independent Director. Retaining Mr. Pyott as Lead Independent Director will provide Mr. Butier valuable mentorship, independent guidance and leadership continuity as he transitions into the Chairman role. In addition, Mr. Pyott has significantly contributed to our executive compensation and governance programs through his strong, independent leadership of our Board. Upon the recommendation of the Governance Committee, our independent directors unanimously selected Mr. Pyott (with him abstaining) to continue serving as our Lead Independent Director, effective immediately after the Annual Meeting subject to his reelection.

BOARD COMMITTEES

        Each of our Board committees has a written charter that describes its purposes, membership and meeting structure, and responsibilities. These charters, which may be found on our website at www.averydennison.com/corporategovernance, are reviewed by the respective committee at least annually, with any recommended changes adopted upon approval by our Board. Amended charters are promptly posted on our website. The Charters for the Audit, Compensation and Governance Committees were last amended in December 2018, December 2018, and December 2016, respectively.

        Each of our Board committees has the ability to form and delegate authority to subcommittees and may obtain advice and assistance from internal or external consultants, legal counsel or other advisors at our expense. In addition, each committee annually evaluates its performance. The primary responsibilities, membership and meeting information for the three standing committees of our Board are summarized below and on the following page.

               

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 15

​

---

Table of Contents

              

 

               

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 16

​

---

Table of Contents

EXECUTIVE SESSIONS

        Our Board believes it is important to have executive sessions without our CEO or other members of management present, which were held at every regular Board meeting during 2018. Our non-management directors have robust and candid discussions at these executive sessions during which they critically evaluate the performance of our company, CEO and management. As Chairman, Mr. Scarborough presided over five executive sessions of non-management directors during 2018. As required by NYSE rules, our Board also conducts at least one executive session per year without our non-independent Chairman and our CEO. As Lead Independent Director, Mr. Pyott presided over the one executive session of independent directors held during 2018.

        Executive sessions were also scheduled for each regular meeting of the Audit, Compensation and Governance Committees held. These executive sessions generally excluded Mr. Scarborough, Mr. Butier and other members of management, unless the Committee requested Mr. Scarborough or one or more members of management to attend a portion of the session to provide information or perspective.

RISK OVERSIGHT

        Management is responsible for managing the day-to-day risks confronting our businesses, but our Board has responsibility for overseeing enterprise risk management (ERM). The teams leading our businesses have incorporated ERM into developing and executing their strategies, assessing the risks impacting their businesses, and identifying and implementing appropriate mitigating actions on an ongoing basis. In addition, in consultation with our head of risk management and senior management, these teams semiannually prepare a risk profile consisting of a heat map and a summary of their key risks and mitigating strategies, which are used to prepare a company risk profile based on identified business-specific risks as well as enterprise-wide risks.

        We also have robust global processes that support a strong internal control environment to promote the early identification and continued management of risks by our company's leadership. Our legal and compliance functions report into our General Counsel to provide independent evaluation of the challenges facing our businesses and our Vice President of Internal Audit reports to the Audit Committee in the conduct of his operational responsibilities, ensuring his independence from management.

        Our Board as a whole oversees risks related to our company and business strategies and operations, exercising this responsibility by considering the risks related to its decisions. Each year, our Board receives reports on the ERM process and the strategic plans and risks facing our businesses and company as a whole. These risks include financial risks, political risks, legal and regulatory risks, supply chain risks, competitive risks, information technology risks, and other risks related to the way in which we do business. Employees who lead various risk areas — such as information technology; environmental, health and safety; tax; sustainability; and corporate social responsibility — report periodically to Board Committees and occasionally to our full Board.

        Our Board has delegated elements of its risk oversight function to its Committees to better coordinate with management to serve the long-term interests of our company and stockholders. Our Board receives reports from its Committee Chairs regarding topics discussed at Committee meetings, which include the areas of risk overseen primarily by the Committees.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 17

---

Table of Contents

RISK OVERSIGHT

        The Audit Committee oversees our internal control environment and evaluates the effectiveness of our internal controls at least annually. Supplementing these processes, the Audit Committee periodically meets in executive session with each of our CEO, CFO, CAO, General Counsel, Vice President of Internal Audit, and representatives of our independent registered public accounting firm. The Governance Committee also meets semiannually with our Chief Compliance Officer to discuss, among other things, the investigation of allegations reported to our Business Conduct GuideLine.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 18

​

---

Table of Contents

RISKS ASSOCIATED WITH COMPENSATION POLICIES AND PRACTICES

        As described in the Compensation Discussion and Analysis section of this proxy statement, we maintain best practices in compensation that collectively encourage ongoing risk assessment and mitigation. The Compensation Committee periodically reviews our compensation programs to ensure that they do not provide incentives that encourage our employees to take excessive risks in managing their respective businesses or functional areas and conducted its most recent review in February 2018.

        Based on the advice of its independent compensation consultant, Willis Towers Watson, the Compensation Committee noted the risk-mitigating features of our compensation policies and practices described below and on the following page, which are substantially the same as what they were at the time of the most recent review.

Governance and Oversight

•

The Compensation Committee has discretion to decrease Annual Incentive Plan (AIP) awards and long-term incentive (LTI) grants based on individual performance, including as a result of excessive risk-taking.



•

Our clawback policy serves as a deterrent to fraud or other misconduct in connection with our financial statements.



•

The Compensation Committee annually evaluates the performance of our CEO and other senior executives in the context of our company and business goals and their individual contributions.



•

Our stock ownership policy is rigorous and consistent with best practices, with a minimum ownership level of 6x base salary for our CEO and a requirement that 50% of the ownership level be held in vested shares.



•

We prohibit our officers from hedging or pledging company stock and require them to engage in stock transactions only during limited trading windows.

Pay Philosophy and Structure

•

Our programs prioritize incenting stockholder value creation, balanced by retention and other considerations.



•

The substantial majority of executive compensation is delivered in equity to motivate our company's pursuit of strong long-term performance and sustainable growth.



•

Our change of control and executive severance plans are reasonable and consistent with market practices, with change of control benefits provided on a double-trigger basis to mitigate the risk that such a transaction be pursued to advance personal interests rather than the best interests of our stockholders.



•

Our incentive compensation consists of short- and long-term performance objectives that cover different time periods and is balanced with objectives designed to incent strong annual financial performance and long-term economic and stockholder value creation, as well as between growth and efficient capital deployment.

Incentive Program Design

•

Our AIP and LTI awards incent annual profitable growth balanced with long-term financial value creation, using multiple performance objectives and providing realized compensation based primarily on our company's performance.



•

AIP awards are not guaranteed, with below-threshold performance potentially resulting in zero payout, payments subject to an overall cap of 200%, and individual modifiers for our NEOs generally capped at 100%.



•

Our equity award vehicles are performance-based, use multiple performance objectives, are subject to threshold and maximum payout opportunities, and have the following additional features that limit potential risk-taking:



•

Our performance units (PUs) cliff vest at the end of three years with the payout for the relative total stockholder return (TSR) component capped at 100% of target for any three-year performance period in which absolute TSR is negative to prevent management from being unduly enriched when stockholders experience loss, while still incenting executives to deliver relatively strong performance during challenging economic periods; and

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 19

​

---

Table of Contents

•

Our market-leveraged stock units (MSUs) vest over one-, two-, three- and four-year performance periods (with an average performance period of 2.5 years), with challenging performance objectives, including a threshold performance level of absolute TSR of (15)% and a target performance level of absolute TSR of 10%.

        Based on these and other factors, Willis Towers Watson determined that our compensation program strikes an appropriate pay-risk balance.

HUMAN CAPITAL MANAGEMENT

SUCCESSION PLANNING

        The Compensation Committee and our full Board conduct executive succession planning semiannually, developing and refining succession plans for our CEO and senior executives. Consistent with this practice, in April and October 2018, the Compensation Committee reviewed talent that is ready — or, with continued development on their current trajectory with mentorship and coaching from our current leaders, will be ready — to fill senior executive positions in the event of a vacancy. Those reviews were then further discussed with our full Board. In addition, the Compensation Committee reviews executive new hires, promotions, transfers and departures at its regularly-scheduled meetings.

LEADERSHIP DEVELOPMENT

        Our Board is actively involved in human capital management to identify and develop our future leaders. We maintain a robust performance review process and leadership development program for our employees. Senior management develops leadership at lower levels of our organization by identifying high potential talent and critical experts, cultivating the skills and capabilities to allow identified individuals to become our future leaders, and providing them with developmental opportunities. Through regular reports from management, our Board has the opportunity to meet business leaders and functional leaders in law, finance, information technology, compliance, and human resources. In addition, Board members have freedom of access to all employees, and are encouraged to visit our facilities to meet local management and attend company events.

DIVERSITY AND INCLUSION

        Diversity is one of our core values, reflecting our efforts to create an inclusive and respectful environment for people of all backgrounds and orientations and our recognition that we gain strength from diverse ideas and teams. The importance of diversity and inclusion to our company is evidenced by the inclusion of diversity-related targets in our 2025 sustainability goals. Diversity and inclusion at our company are championed primarily by our cross-functional and cross-divisional Diversity and Inclusion Council, currently co-chaired by Anne Hill, our Senior Vice President and Chief Human Resources Officer, and Deon Stander, the Vice President and General Manager of our RBIS business. Board oversight is conducted primarily through the Compensation Committee.

        In recent years, among other initiatives, we have focused on training our managers globally on unconscious bias, increasing the number of sites offering flexible work arrangements, and expanding our Women Empowered program that features interactive discussions among nominated participants to facilitate and enhance their development. We also evaluated our gender pay equity with positive results, developing plans to make identified adjustments to compensation for 2019. This year, we are formally launching employee resource groups, which are voluntary employee-led groups made up of individuals who join together based on common interests, backgrounds or demographic characteristics such as race, ethnicity or sexual orientation. In addition, we are establishing regional diversity and inclusion councils to provide leadership of initiatives that more strongly resonate with employees in their respective regions.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 20

​

---

Table of Contents

DIRECTOR EDUCATION

INITIAL ORIENTATION

        Our initial director orientation generally covers (i) our strategies, performance and leadership; (ii) investor messaging; (iii) the strategies and risks of our businesses; (iv) finance matters, including our financial reporting policies and practices, internal control environment, internal audit deployment, tax planning and compliance, and capital structure; (v) legal and compliance matters, including our governance policies and procedures, values and ethics program, and ERM; (vi) human capital management matters, including executive compensation, succession planning, leadership development and diversity and inclusion; and (vii) information technology and cybersecurity.

        In connection with his initial appointment to our Board in 2018, we provided incoming independent director Mark Barrenechea with information regarding our businesses, strategic plans and risk-mitigating actions, competitors, non-employee director compensation policies and other matters. Our CEO then met with Mr. Barrenechea to discuss these matters to ensure a smooth onboarding process. In October and December 2018, Mr. Barrenechea joined as an observer in our Board's Audit, Compensation and Governance Committee meetings to better understand their respective responsibilities.

CONTINUING EDUCATION

        Our continuing director education program consists of periodic visits to our facilities and management presentations regarding our business operations, strategies, risks and values and ethics. We provide updates on relevant topics of interest to our Board at and between meetings throughout the year, and provide access to a boardroom news resource platform for them to keep informed of emerging best practices. We also reimburse directors who attend continuing director education programs for fees and related expenses.

BOARD AND COMMITTEE EVALUATIONS

        The Governance Committee oversees and conducts an annual performance evaluation of our Board, Chairman, Lead Independent Director and Board Committees, including the Committee Chairs. Our Board views the process as integral to assessing its effectiveness and identifying improvement opportunities in the pursuit of continued excellence. Many of the improvements in our governance practices and Board processes were identified and implemented as a result of the annual evaluation process.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 21

​

---

Table of Contents

STOCKHOLDER ENGAGEMENT AND COMMUNICATIONS

        We value stockholder feedback on our governance, sustainability and executive compensation programs, and we actively solicit input through stockholder engagement on these matters to ensure that our programs reflect the changing business environment and stockholder expectations.

STOCKHOLDER ENGAGEMENT ON GOVERNANCE AND SUSTAINABILITY MATTERS IN 2018

        We continued our longstanding practice of open dialogue with stockholders in 2018. In advance of the 2018 Annual Meeting, we contacted our 35 largest institutional stockholders, representing over 55% of our then-outstanding shares. Board members, including our Lead Independent Director, and management were made available to answer questions and address concerns regarding the items being brought before the Annual Meeting. While we received responses from stockholders representing over 28% of our then-outstanding shares, none of them desired to substantively engage at that time.

        In the summer and fall, without the time pressures associated with proxy season, we contacted our 41 largest institutional stockholders, representing nearly 60% of our then-outstanding shares, to request a meeting with members of our Board and/or management. Proposed topics for these meetings included our business strategy and financial performance, executive compensation matters, Board composition and succession planning, and progress towards achieving our sustainability goals. We received responses from stockholders representing nearly 30% of our then-outstanding shares and spoke with stockholders representing over 25% of our then-outstanding shares. We substantively engaged with every stockholder who requested to do so and included our Lead Independent Director in engagements upon stockholder request.

CONTACTING OUR BOARD

        Our Board welcomes feedback from all our stockholders. We review correspondence submitted by stockholders, discussing any substantive feedback received with senior management and/or our Board as appropriate.

        Stockholders and other interested parties may contact our Board, Chairman, Lead Independent Director, any Committee or Committee Chair, or any other individual director concerning business matters by writing to: Board of Directors (or a particular subgroup or individual director), c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 22

​

---

Table of Contents

        Our Bylaws provide for a Board of between eight and 12 directors, with the exact number fixed by a resolution of our Board. In September 2018, in conjunction with Mr. Barrenechea's appointment and upon the recommendation of the Governance Committee, our Board fixed the number of directors at 12. In April 2019, our Board expects to fix the number of directors at 11 to reflect Mr. Scarborough's departure from the Board at the end of his current term. All nominees are standing for election for a one-year term expiring at the 2020 Annual Meeting.

        Each of the 11 nominees is presently serving on our Board and has consented to being named in this proxy statement and serving if elected by our stockholders.

MAJORITY VOTING STANDARD; UNELECTED DIRECTOR RESIGNATION REQUIREMENT

        Our Bylaws provide for the approval by a majority of votes cast for the election of directors in uncontested elections like this one and require that an incumbent director who is not re-elected tender his or her resignation from our Board. Our Board, excluding the tendering director, is required to determine whether to accept the resignation — taking into account the recommendation of the Governance Committee and any other factors it considers appropriate — and publicly disclose its decision regarding the tendered resignation, including its rationale for the decision, within 90 days from the date election results are certified. In contested elections, plurality voting is the standard for the election of directors.

        In voting for the election of directors, each share has one vote for each position to be filled and there is no cumulative voting.

RECOMMENDATION OF BOARD OF DIRECTORS

        Our Board of Directors recommends that you vote FOR each of the director nominees.     The persons named as proxies will vote for the election of each of the 11 nominees, unless you specify otherwise. If any director nominee were to become unavailable prior to the Annual Meeting, your proxy would be voted for a substitute nominee designated by our Board or we would decrease the size of our Board.

SELECTION OF DIRECTOR NOMINEES

        Director nominees are generally recommended by the Governance Committee for nomination by our Board and election by our stockholders. Director nominees may also be recommended by the Governance Committee for appointment to our Board, with their election by stockholders taking place at the next Annual Meeting. Our Board believes that our directors reflect a balance of skills, qualifications and demographics that allows them to effectively discharge their oversight responsibilities.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 23

---

Table of Contents

        For incumbent directors, the Governance Committee also evaluates contributions to our Board and Committees, attendance at Board and Committee meetings, compliance with our stock ownership policy, and mandatory retirement dates to assist with director succession planning. The Governance Committee does not assign specific weights to the criteria and no particular criterion is necessarily applicable to all nominees.

        The Governance Committee reviews the qualifications of any candidate with those of our current directors in assessing how our Board can most effectively fulfill its oversight responsibilities. Sources for identifying potential nominees include current Board members, senior management, executive search firms, and our stockholders.

STOCKHOLDER SUBMISSION OF DIRECTOR NOMINEES

Advance Notice Nominees

        Stockholders may recommend director candidates by submitting the candidate's name, together with his or her biographical information, professional experience and written consent to nomination, to Governance and Social Responsibility Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203. To be considered at the 2020 Annual Meeting, advance notice stockholder nominations must comply with the requirements described in the last section of this proxy statement. The Governance Committee considers stockholder nominees on the same basis as it considers all other nominees.

Proxy Access Nominees

        A stockholder, or a group of no more than 20 stockholders, owning at least 3% of our company's stock continuously for at least three years is permitted to submit director nominees (up to 20% of the Board) for inclusion in our proxy materials, subject to the requirements specified in our Bylaws. For further information on submitting proxy access nominees, please refer to the last section of this proxy statement.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 24

​

---

Table of Contents

BOARD MATRIX

        Our director nominees bring a balance of skills, qualifications and demographic backgrounds in overseeing our company, as shown in the matrix below. The Governance Committee regularly evaluates the skills and qualifications desirable for our Board to best meet the changing needs of our business.

BOARD REFRESHMENT AND DIRECTOR SUCCESSION PLANNING

        Our Board's ongoing director succession planning is designed to ensure an independent, well-qualified Board, with diversity in experience and background to effectively provide strong oversight.

NO TERM LIMITS

        Our Governance Guidelines reflect our Board's belief that directors should not be subject to term limits. While term limits could help facilitate fresh ideas and viewpoints being brought to the Board, our Board believes they could result in the premature loss of a director who over a period of time has become well-versed in our strategies, operations and risks and is continuing to provide valuable contributions to Board deliberations. We believe that our Board's decision not to establish term limits at this time is consistent with the prevailing practice among companies in the S&P 500.

        Our Board recognizes that certain governance stakeholders have suggested that longer-serving directors may have decreased independence and objectivity; however, our Board believes that arbitrarily removing knowledgeable directors and losing the oversight consistency they bring — particularly during periods of either executive management change, such as our recent CEO and CFO transitions, or Board change, such as Mr. Scarborough's April 2019 departure

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 25

​

---

Table of Contents

from our Board after having served as Chairman for the past nine years — weighs against implementing term limits at this time. Ultimately, our Board believes that it is its responsibility to establish appropriate board refreshment policies, in light of our strategies, leadership team and financial position at any particular time, exercising its discretion in the best interest of our company and stockholders.

POLICIES AND RECENT ACTIONS SUPPORTING REGULAR BOARD REFRESHMENT

        Our Board has adopted the policies described below to facilitate regular refreshment of our Board and ensure that it continues to independently challenge our management.

        Upon the recommendation of the Governance Committee, Messrs. Barrenechea and Lopez were appointed to our Board as independent directors in September 2018 and February 2017, respectively. In connection with our CEO transition, Mr. Butier joined our Board as a non-independent director in May 2016. Mr. Scarborough's service as our Chairman and director will end upon the expiration of his current term in April 2019. We believe that this recent experience with both joining and departing directors demonstrates our Board's commitment to regular refreshment.

AGE AND TENURE

        The average age of our director nominees is 61, which we believe is comparable to the average board age in the S&P 500 and within the 60-63 year band in which the plurality of these companies fall. The average tenure of our director nominees is approximately nine years, which we believe is comparable to the average tenure for companies in the S&P 500 and within the 6-10 year band in which the majority of these companies fall. The charts below show the age and tenure of our director nominees, which we believe reflects a balance between newer directors who bring fresh ideas and insights and longer-serving directors with deep institutional knowledge of our Board and company.

Director Nominees

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 26

​

---

Table of Contents

DIRECTOR DIVERSITY

        Our Governance Guidelines reflect that the Governance Committee's assessment of the qualifications of director candidates includes consideration of demographic characteristics such as race, gender and ethnicity. Although neither the Governance Committee nor our Board has a formal policy regarding the consideration of diversity in selecting director nominees, the Governance Committee seeks to recommend individuals with a broad diversity of experience, profession, skill, geographic representation and demographic background, including characteristics such as race, gender and ethnicity. While diversity is a consideration, nominees are not chosen or excluded solely or primarily on that basis; rather, the Governance Committee focuses on skills, experience and background that can complement our existing Board in light of the diverse and global nature of our businesses and operations.

        Our Board recognizes the benefits of racial, ethnic and gender diversity in the boardroom, including better reflecting our global customer base and the healthy debate that results from different viewpoints that may stem from diverse backgrounds. The racial, ethnic and gender diversity of our 2019 director nominees is shown in the chart below.

2019 DIRECTOR NOMINEES

        The following pages provide information on the directors nominated for election at the Annual Meeting, including his or her age, board leadership roles, and business experience during at least the past five years. We also indicate the name of any other public company board on which each nominee currently serves, or has served during the past five years; for these purposes, "public company" means one that is required to file reports with the SEC.

        In addition to the information presented regarding each nominee's experience and qualifications that led our Board to conclude that he or she should serve as a director — which includes senior leadership experience, industry experience, global exposure, financial sophistication, and public company board experience — we believe that each of them has integrity and adheres to our high ethical standards. Each nominee also has demonstrated the ability to exercise sound judgment and is committed to serving the long-term interests of our stockholders.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 27

​

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 28

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 29

​

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 30

​

---

Table of Contents

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 31

​

---

Table of Contents

DIRECTOR COMPENSATION

MEDIAN TARGET 2018 COMPENSATION

        The components of our non-employee director compensation program for 2018 are summarized in the charts below and described thereafter.

        Our 2017 Incentive Award Plan, which was approved by our stockholders in April 2017, limits the sum of the grant date fair value of equity awards and the amount of any cash compensation, in each case granted to any non-employee director during any calendar year, to $600,000.

POST-ANNUAL MEETING COMPENSATION

        In February 2019, the Compensation Committee considered our non-employee director compensation program, which had not changed the level of compensation received by our non-employee directors other than our Lead Independent Director since May 2016. At the Compensation Committee's request, Willis Towers Watson reviewed trends in director compensation and assessed the competitiveness of all components of our program, including cash compensation (Board and Committee Chair retainers), equity grants, total direct compensation (annual cash plus equity), total remuneration, our stock ownership policy and the additional retainer for the Lead Independent Director.

        Using benchmarking data from public filings of companies ranked in the Fortune 375-500, Willis Towers Watson recommended that the annual equity grant be increased by $15,000 to increase the proportion of compensation delivered in equity to 60%. This change would bring total non-employee director compensation to $255,000, the projected median non-employee director compensation of our Fortune 375-500 peers in 2021, the next time the Compensation Committee currently plans to review the program. Based on Willis Towers Watson's recommendation, the Compensation Committee recommended to our Board that the amount of annual equity compensation granted to non-employee directors be increased to $155,000, with grants continuing to be in the form of RSUs that vest in one year.

        After consideration of the advice from the independent compensation consultant, the recommendation of the Compensation Committee, and further discussion, our Board approved the revised program, effective as of the date of the Annual Meeting.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 32

---

Table of Contents

STOCK OWNERSHIP POLICY

        Our stock ownership policy requires non-employee directors to own $500,000 of our company stock, 50% of which must be held in vested shares. Stock option gains are not considered towards measuring policy compliance; only shares owned directly or in a trust, deferred stock units (DSUs) and unvested RSUs count for these purposes.

        Directors are prohibited from hedging or pledging our common stock.

EQUITY COMPENSATION

        The 2018 equity grant to non-employee directors was made in the form of RSUs that vest on the one-year anniversary of the grant date, consistent with the one-year term to which directors are elected. Unvested RSUs (i) fully vest upon a director's death, disability, retirement from our Board after reaching age 72 or termination of service within 24 months after a change of control and (ii) are generally cancelled in the event a director voluntarily resigns, is not re-elected by stockholders or is otherwise asked to leave our Board. On May 1, 2018, each of our then-serving directors was granted 1,336 RSUs with a grant date value of approximately $140,000 based on the fair market value of our common stock on that date.

        On September 10, 2018, the date of his appointment to our Board, Mr. Barrenechea received a prorated equity grant for the remainder of the term expiring at the 2019 Annual Meeting consisting of 880 RSUs with a grant date value of approximately $93,333 based on the fair market value of our common stock on that date.

DEFERRABLE CASH COMPENSATION

        Cash retainers are paid semiannually and prorated for any director's partial service during the year. Directors are also reimbursed for travel expenses incurred to attend Board meetings and continuing director education events.

        Our non-employee directors may choose to receive this compensation in (i) cash, either paid directly or deferred into an account under our Directors Variable Deferred Compensation Program (DVDCP), which accrues earnings at the rate of return of certain bond and equity investment funds managed by a third party; (ii) DSUs credited to an individual account pursuant to our Directors Deferred Equity Compensation Program (DDECP); or (iii) a combination of cash and DSUs. None of our current non-employee directors currently participates in the DVDCP and nine of them currently participate in the DDECP. When a director participating in the DDECP retires or otherwise ceases serving as a director, the dollar value of the DSUs in his or her account is divided by the closing price of our common stock on the last date of the director's service, with the resulting number of shares of our common stock issued to the director. Dividend equivalents, representing the value of dividends per share paid on shares of our common stock calculated with reference to the number of DSUs held as of a dividend record date, are reinvested on the applicable payable date in the form of additional DSUs credited to the accounts of directors participating in the DDECP.

MATCHING GIFT PROGRAM

        We match up to $10,000 per year of a non-employee director's contributions to charitable organizations or educational institutions.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 33

​

---

Table of Contents

DIRECTOR COMPENSATION TABLE

---

(1)

Mr. Butier does not appear in the table because he was employed by our company in 2018 and did not receive any additional compensation to serve as director. Amounts represent retainers earned as shown in the table below. At their election, the following directors deferred their cash compensation through the DDECP, with the following balances of DSUs in their accounts as of December 29, 2018, the last day of our 2018 fiscal year: Alford — 17,479; Anderson — 9,234; Barker — 28,920; Barrenechea — 173; Hicks — 13,263; Lopez — 591; Pyott — 49,895; Stewart — 37,335; and Sullivan — 9,129.

(2)

Amounts reflect the grant date fair value of 1,336 RSUs granted on May 1, 2018, except for amount for Mr. Barrenechea, which reflects the grant date fair value of 880 RSUs granted on September 10, 2018 in connection with his appointment to our Board. The fair value of RSUs was determined based on the fair market value of our common stock on the grant date. Each non-employee director serving as of December 29, 2018 held 1,977 unvested RSUs, except for Messrs. Barrenechea and Lopez, who held 880 and 1,633 unvested RSUs, respectively.

(3)

We do not currently have a retirement benefit program for non-employee directors. Amount for Mr. Pyott does not reflect the $(3,491) change in present value of his accumulated benefits, based on an interest rate of 3.68% as of December 29, 2018, under a director retirement plan the accrual of benefits under which was frozen in 2002. This amount has been excluded from the table in accordance with SEC rules.

(4)

Amounts reflect our matching gifts for contributions made to charitable organizations or educational institutions.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 34

​

---

Table of Contents

        After considering the preliminary voting results of the advisory vote on the frequency of our say-on-pay vote at our 2017 Annual Meeting, our Board determined to hold say-on-pay votes annually, at least until the next advisory vote on the frequency of our say-on-pay vote (expected to occur at our 2023 Annual Meeting).

        In this Item 2, our stockholders are being asked to vote on the following resolution:

        RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the Company's Named Executive Officers (NEOs), as described in the Compensation Discussion and Analysis and Executive Compensation Tables sections of the Company's 2019 proxy statement.

RECOMMENDATION OF BOARD OF DIRECTORS

        We remain committed to ongoing engagement with our stockholders to seek their feedback and discuss why we believe our executive compensation program properly aligns with our strategies by incenting our leaders to deliver strong financial performance and create superior long-term, sustainable value for our customers, employees, investors and communities. Our Board of Directors recommends that you vote FOR approval, on an advisory basis, of our executive compensation. Properly dated and signed proxies will be so voted unless you specify otherwise.

MEANING OF ADVISORY VOTE

        The advisory vote is a vote to approve the compensation of our NEOs, as described in the Compensation Discussion and Analysis (CD&A) and Executive Compensation Tables sections of this proxy statement. It is not a vote on our general compensation policies or any specific element of compensation, the compensation of our non-employee directors, our CEO pay ratio, or the features of our compensation program designed to prevent excessive risk-taking as described in Risks Associated with Compensation Policies and Practices.

        The results of the advisory vote are not binding on our Board. However, in accordance with SEC regulations, the Compensation Committee will disclose the extent to which it takes into account the results of the vote in the CD&A of our 2020 proxy statement.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 35

​

---

Table of Contents

        The Compensation and Executive Personnel Committee (referred to in this report as the "Committee") of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis (CD&A) required by Item 402(b) of Regulation S-K with management and, based on its review and those discussions, has recommended to our Board of Directors that the CD&A be included in our 2019 proxy statement and thereby be incorporated by reference into our 2018 Annual Report on Form 10-K.

        The Committee welcomes feedback regarding our executive compensation program. Stockholders may communicate with the Committee by writing to the Compensation and Executive Personnel Committee Chair, c/o Corporate Secretary, Avery Dennison Corporation, 207 Goode Avenue, Glendale, California 91203.

Julia A. Stewart, Chair
Bradley A. Alford
Ken C. Hicks
David E. I. Pyott
Martha N. Sullivan

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 36

​

---

Table of Contents

        This Compensation Discussion and Analysis (CD&A) describes the principles and practices underlying our executive compensation program and the decisions made by the Compensation and Executive Personnel Committee of our Board of Directors (referred to in this CD&A as the "Committee") related to 2018 compensation. This CD&A contains the sections shown below.

•

Executive Summary

–

Business Strategy Overview

–

Delivering Financial Targets

–

2018 Financial Performance

–

Disciplined Capital Allocation

–

Three- and Five-Year Cumulative TSR Outperformance

–

2018 Say-on-Pay Vote and Stockholder Feedback During 2018 Engagement

–

2018 NEOs

–

Overview of Pay Philosophy and Executive Compensation Components

–

Strong Compensation Governance Practices

•

Summary of Compensation Decisions for 2018

•

Discussion of Compensation Components and Decisions Impacting 2018 Compensation

–

Base Salary

–

2018 AIP Awards

–

2018 Grants of LTI Awards

–

2018 Vesting of Previously Granted LTI Awards

–

Perquisites

–

Relocation and Other Temporary Benefits

–

General Benefits

–

Severance Benefits

•

Compensation-Setting Tools

•

Independent Oversight and Expertise

•

Other Considerations

EXECUTIVE SUMMARY

BUSINESS STRATEGY OVERVIEW

        Over the last several years, we have successfully executed our business strategies, which are designed to create long-term, sustainable value for our customers, employees and stockholders and improve the communities in which we operate. From our stockholders' perspective, we believe that value is best measured by our total stockholder return (TSR) and cumulative economic value added (EVA), both of which are performance objectives used in our long-term incentive (LTI) compensation program and inform how we set our goals for sales growth, margin improvement, asset efficiency, return on total capital (ROTC) and capital allocation.

        We communicated long-term goals in 2014 for, among other things, the organic sales growth, GAAP operating margin, double-digit adjusted earnings per share (EPS) growth and ROTC we planned to achieve by 2018, raising the bar from the five-year goals we established in 2012 and substantially achieved through 2015. We met or exceeded each of our 2018 targets.

        In March 2017, we announced new long-term goals for 2021 for our three reporting segments — Label and Graphic Materials (LGM), Retail Branding and Information Solutions (RBIS), and Industrial and Healthcare Materials (IHM) — and our company as a whole, targeting continued solid organic sales growth, GAAP operating margin expansion, double-digit adjusted EPS growth on a compound annual basis, and ROTC we planned to achieve by 2021.

   

---

*

This CD&A contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from the results, performance or achievements expressed or implied thereby. For a detailed discussion of these risks, see Part I, Item 1a, "Risk Factors" and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our 2018 Annual Report on Form 10-K, filed on February 27, 2019 with the SEC (our "2018 Annual Report"). Stockholders should note that statements contained in this CD&A regarding our company and business performance targets and goals should not be interpreted as management's expectations, estimates of results or other guidance.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 37

---

Table of Contents

        To achieve our goals, we have been consistently executing four key strategies. First, we are focused on driving outsized growth in high value product categories (organically and through acquisitions) to improve our portfolio mix over time. Product categories are defined as high value when they serve markets that are growing faster than gross domestic product (GDP), represent large pools of potential profit and leverage our core capabilities. Examples include our specialty and durable label materials, graphic and reflective solutions, industrial tapes, and radio-frequency identification (RFID) inlays and tags. In 2018, we delivered above-average growth in these categories, while also enhancing our exposure to them through continuing to integrate the acquisitions we made in 2017.

        Second, we are focused on delivering solid growth in our base businesses by carefully balancing volume, price and mix; reducing complexity; and tailoring our go-to-market strategies.

        Third, we remain highly focused on continuously improving productivity to expand margins, enhance our competitiveness (particularly in our base businesses) and provide a funding source for reinvestment. Product reengineering and enterprise lean sigma are the primary levers we use in executing this strategy.

        Our fourth key strategy is to be a highly disciplined allocator of capital. This is reflected in how we deploy capital for organic growth and productivity and our acquisition criteria, as well as our approach to stockholder distributions (dividends and share repurchases).

DELIVERING FINANCIAL TARGETS

        Our five-year financial goals through 2018, three of which are not in accordance with generally accepted accounting principles in the United States of America (GAAP), included an organic sales growth target of 4% to 5% and a GAAP operating margin target of 9% to 10% in 2018. We also targeted double-digit adjusted EPS growth and ROTC of at least 16% in 2018. The combination of our growth and ROTC targets is a proxy for growth in EVA, one of the performance objectives used in our LTI compensation program. As shown on the following page, we achieved or exceeded our five-year commitments through 2018.

        Organic sales change, adjusted EPS and ROTC — as well as sales change ex. currency and free cash flow, which are used later in this CD&A — are non-GAAP financial measures that we provide investors to assist them in assessing our performance and operating trends. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable financial measures under GAAP, are defined in the following pages of this CD&A, and are reconciled from GAAP in Appendix A of this proxy statement.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 38

​

---

Table of Contents

        For the 2014-2018 period, on a five-year compound annual basis (with 2013 as the base period), GAAP reported net sales, reported EPS and reported net income grew by 3.1%, 19.9% and 17.0%, respectively.

        In March 2017, we announced our five-year financial goals through 2021, targeting continued solid organic sales growth, GAAP operating margin of at least 11% in 2021, double-digit adjusted EPS growth on a compound annual basis, and ROTC of at least 17% in 2021. As shown below, based on our results of the first two years of this five-year period, we are on track to deliver these targets.

        For the 2017-2018 period, on a two-year compound annual basis (with 2016 as the base period), GAAP reported net sales, reported EPS and reported net income increased by 8.5%, 22.1% and 20.7%, respectively.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 39

​

---

Table of Contents

2018 FINANCIAL PERFORMANCE^†

        Fiscal year 2018 marked our seventh consecutive year of strong top-line growth, operating margin expansion and double-digit adjusted EPS growth. We exceeded our financial goals for the year, with the accomplishments shown below. The non-GAAP financial measures used below are reconciled from GAAP in Appendix A of this proxy statement.

•

Achieved net sales of approximately $7.2 billion, an increase of 8.2% over prior year.



•

Excluding the impact of currency, sales grew by 6.9%. On an organic basis, sales grew by 5.5%, driven by growth in high value product categories and sales in emerging markets.



•

Reported EPS significantly increased from $3.13 in 2017 to $5.28 in 2018 due to the combined effects of 2017 tax charges related to the enactment of the U.S. Tax Cuts and Jobs Act (TCJA) and a net tax benefit from a discrete foreign tax planning action, the combined effect of volume and mix, and benefits from productivity initiatives. These benefits were partially offset by settlement charges resulting from the 2018 termination of our U.S. pension plan, higher restructuring charges, higher employee-related costs, growth investments and the net impact of pricing and raw material inflation.



•

Adjusted EPS increased from $5.00 to $6.06 due to the combined effect of volume and mix, as well as benefits from productivity initiatives, partially offset by higher employee-related costs, growth investments and the net impact of pricing and raw material inflation. Adjusted EPS exceeded the high end of the $5.70 to $5.95 annual guidance range we gave to our stockholders in January 2018.



•

With net cash provided by operating activities of $457.9 million, delivered free cash flow of $429.2 million. Free cash flow refers to cash flow provided by operating activities, less payments for property, plant and equipment, software and other deferred charges, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from sales (purchases) of investments and proceeds from insurance. Free cash flow is also adjusted for the cash contributions related to the termination of our U.S. pension plan.



•

On net income of $467.4 million, achieved return on total capital (ROTC) of 18.6%.

DISCIPLINED CAPITAL ALLOCATION

        We have consistently executed our disciplined approach to capital allocation, balancing our investments in organic growth, productivity and acquisitions of targeted companies, while continuing to return cash to stockholders through dividends and share repurchases. In 2018, we delivered ROTC of nearly 19% and invested $256.6 million in capital expenditures to support future growth and productivity improvement, made $3.8 million in equity investments, paid $175.0 million in dividends, and repurchased $392.9 million to shares of our common stock.

        We have invested in our businesses to support organic growth and pursued targeted acquisitions that support our strategy of increasing our exposure to high value product categories. We increased our spending on capital expenditures in 2018 by over 13% compared to prior year to enable future growth of our businesses, improve our profitability and expand our margins. In addition, we continued integrating the following acquisitions we made in 2017: (i) Hanita Coatings Rural Cooperative Association Limited, an Israel-based pressure-sensitive manufacturer of

   

---

†

For complete information regarding our 2018 performance, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" — in particular the information contained under the heading "Non-GAAP Financial Measures" — and our audited consolidated financial statements and notes thereto contained in our 2018 Annual Report.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 40

​

---

Table of Contents

specialty films and laminates; (ii) Yongle Tape Ltd., a China-based manufacturer of specialty tapes and related products used in a variety of industrial markets; and (iii) Finesse Medical Limited, an Ireland-based manufacturer of healthcare products used in the management of wound care and skin conditions. We also made equity investments in two start-up companies developing innovative technological solutions, and negotiated a further equity investment in a small company in which we first invested in 2016, for which payment was made in early 2019.

        Over the last five years, we have allocated over $2 billion to dividends and share repurchases. In 2018, we deployed approximately $568 million to (i) repurchase nearly four million shares at an aggregate cost of nearly $393 million and (ii) pay an annual dividend of $2.01 per share for an aggregate amount of $175 million. We have paid quarterly dividends for decades and most recently raised our quarterly dividend rate by 16% in April 2018. Given the lower price of our common stock during the second half of the year, as well as our substantially decreased use of capital for acquisitions and equity investments, we repurchased a significantly greater dollar amount in shares in 2018 compared to prior years.

THREE- AND FIVE-YEAR CUMULATIVE TSR OUTPERFORMANCE

        As shown below, despite negative TSR in 2018, we delivered cumulative TSR for the 2016-2018 three-year period and the 2014-2018 five-year period that significantly outperformed the S&P 500® and the median of the S&P 500 Industrials and Materials subsets (we are a member of the Materials subset, but share many characteristics with members of the Industrials subset; investors have informed us that they look at both subsets in evaluating our relative performance, as we do internally). TSR measures the return we have provided to our stockholders, including stock price appreciation and dividends paid (assuming reinvestment of dividends).

        We believe that our longer-term TSR is a more meaningful measure of our performance than our one-year TSR, which can be significantly impacted by short-term market volatility that may be unrelated to our underlying performance. For example, although we delivered strong performance in 2018 — exceeding the high end of our adjusted EPS guidance for the year — our 2018 TSR was negative.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 41

​

---

Table of Contents

2018 SAY-ON-PAY VOTE AND STOCKHOLDER FEEDBACK DURING 2018 ENGAGEMENT

        We continued our practice of maintaining proactive ongoing dialogue with stockholders in 2018. The Committee made significant changes to our executive compensation program in recent years — including replacing regular grants of stock options and time-vesting restricted stock units (RSUs) with performance-based market-leveraged stock units (MSUs), capping Annual Incentive Plan (AIP) awards at 200% of target, and establishing additional guardrails on PU and MSU performance criteria — to address direct feedback from our stockholders and more closely align our executive compensation program with our financial profile and business strategies, demonstrating the Committee's commitment to paying for performance and being responsive to stockholder feedback. In 2018, during our ongoing stockholder engagement program, we discussed our executive compensation program with some of our stockholders, who generally expressed support for its current structure.

Results and Analysis of 2018 Vote

        At the 2018 Annual Meeting, approximately 93% of our stockholders approved, on an advisory basis, our executive compensation. The level of support we received was consistent with the high approval rates we have received in the last three years. The Committee believes that our high approval rates in recent years, along with the positive feedback we received during our engagement with stockholders, reflects strong support of the changes to our compensation program made in recent years, as well as our consistently improving CD&A disclosure.

Stockholder Engagement Process

        We value stockholder feedback on our executive compensation policies and practices, and we actively seek it through our stockholder engagement program. Our ongoing engagement program regarding these matters takes place throughout the year, generally as shown in the graphic below.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 42

​

---

Table of Contents

Feedback During 2018 Engagement

        We continued our longstanding practice of ongoing dialogue with stockholders in 2018. In advance of the 2018 Annual Meeting, we contacted our 35 largest institutional stockholders, representing over 55% of our then-outstanding shares. Board members, including our Lead Independent Director, and members of management were made available to answer questions and address concerns regarding the items being brought before the Annual Meeting. While we received responses from stockholders representing over 28% of our then-outstanding shares, none of them desired to substantively engage at that time.

        In the summer and fall, we contacted our 41 largest institutional stockholders, representing nearly 60% of our then-outstanding shares, to request a meeting with members of our Board and/or management. As a result of these efforts, we received responses from stockholders representing nearly 30% of our then-outstanding shares and spoke with stockholders representing over 25% of our then-outstanding shares. We substantively engaged with every stockholder who requested to do so and included our Lead Independent Director (who is also a member of the Committee, as well as the Governance Committee) in engagements upon stockholder request.

2018 NAMED EXECUTIVE OFFICERS (NEOs)

        In this CD&A and the Executive Compensation Tables section of this proxy statement, we provide compensation information for our 2018 NEOs, who are identified in the chart below.

OVERVIEW OF PAY PHILOSOPHY AND EXECUTIVE COMPENSATION COMPONENTS

        Our executive compensation program reflects the Committee's philosophy that a substantial majority of compensation should be tied to our success in meeting our performance objectives and creating stockholder value, providing higher compensation when we deliver superior, sustained performance. The objective of this strategy is to motivate our executives to achieve our annual and long-term financial goals and recognize their contributions to delivering strong performance.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 43

---

Table of Contents

        Incentive compensation for the year consisted of target award opportunities under our AIP and our LTI compensation program, with payouts determined based on our performance against goals established by the Committee in February 2018. The Committee structures annual incentive compensation to reward NEOs based on corporate or business performance to motivate them and align their compensation with stockholder interests, giving consideration to their individual contributions in achieving our financial results. Our LTI awards provide upside opportunity for exceeding performance targets and downside risk (up to and including cancellation) for failing to achieve threshold performance, with EVA targets consistent with our externally communicated long-term financial goals for earnings growth and ROTC. AIP targets are established at or above the midpoint of the guidance we give to our stockholders on our anticipated annual performance and consistent with the achievement of our long-term financial goals.

Elements of Total Direct Compensation for Corporate NEOs

        As shown in the graph below, the substantial majority of our NEOs' 2018 target TDC was performance-based.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 44

​

---

Table of Contents

        Over the past five years, our cumulative TSR increased by 100% while the total compensation of our CEO decreased by approximately 28%. In the graph below, CEO pay reflects the compensation of our former CEO, Mr. Scarborough, for 2014 and 2015, and the compensation of our current CEO, Mr. Butier, from 2016 to 2018.

Five-Year CEO Pay and Cumulative TSR

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 45

​

---

Table of Contents

STRONG COMPENSATION GOVERNANCE PRACTICES

        Our executive compensation program incorporates the best practices shown below, which the Committee believes ensure that it serves the long-term interests of our stockholders.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 46

​

---

Table of Contents

SUMMARY OF COMPENSATION DECISIONS FOR 2018

        The Committee designs executive compensation to pay for performance, with the target TDC of NEOs established to incent strong financial performance and stockholder value creation, giving consideration to the market median of companies similar in size, global scope and complexity with which we compete for executive talent, role responsibilities, individual performance, tenure, retention and succession. This compensation is primarily performance-based, meaning that our executives may ultimately not realize some or all of these components of compensation if we fail to achieve our financial objectives. In 2018, approximately 86% and 70% of the TDC of our CEO and average of our other NEOs, respectively, was performance-based.

        In determining 2018 NEO compensation, the Committee considered the following:

•

Company/Business Performance — Our company's overall financial performance, including our 2018 adjusted sales growth, adjusted EPS, and free cash flow for our corporate NEOs, and, for our business NEOs, the performance of their respective business;



•

Stockholder Returns — Our TSR on an absolute basis, as well as relative to a predetermined group of peer companies;



•

Annual Individual Performance — Our CEO's performance against the predetermined and objectively measurable strategic objectives established for him at the beginning of the year and the individual contributions of our other NEOs;



•

Competitiveness — Market pay practices and company performance relative to peers; and



•

Responsiveness to Investors — The results of our 2018 say-on-pay vote and feedback on our executive compensation received during our ongoing stockholder engagement program.

        The key elements of 2018 NEO target TDC are described in the table shown below. While we provide consistent, market-competitive TDC opportunities for our NEOs, the actual compensation they realize varies year-to-year based primarily on company and business performance; for 2018, the incentive compensation realized by our NEOs was based solely on such performance.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 47

​

---

Table of Contents

        In addition to the primary elements of our executive compensation program described above, we also provide our NEOs with limited perquisites and benefits that the Committee believes are comparable to those offered by other multinational public companies.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 48

​

---

Table of Contents

DISCUSSION OF COMPENSATION COMPONENTS AND
DECISIONS IMPACTING 2018 COMPENSATION

        The Committee aims to have base salaries at or around the market median, with the substantial majority of NEO compensation consisting of incentive compensation to advance the Committee's pay-for-performance philosophy, driving higher realized compensation when our financial performance is stronger and lower realized compensation when our financial performance is weaker. In addition, prioritizing pay-for-performance provides the Committee with the flexibility to respond to changing business conditions, manage compensation to reflect career progression, and adjust compensation to reflect differences in executive experience and performance.

BASE SALARY

        Increases in base salary are generally based on the average percentage merit increase given to our U.S. employees, subject to increase or decrease based on the NEO's performance and the market median for positions with similar scope and responsibility. In February 2018, the Committee approved base salary increases of approximately 3% for our NEOs, consistent with the average increase for our U.S. employees, except for (i) Mr. Butier, whose base salary was not increased for the reasons described above, and (ii) Mr. Lovins, whose base salary was increased by 9% to move his salary closer to the market median after he completed a year of service as our CFO.

2018 AIP AWARDS

        The 2018 AIP was designed to incent management to create long-term stockholder value. NEOs are not eligible for guaranteed AIP awards. AIP awards are determined for each fiscal year using the formula below. In contrast to the general AIP formula shown, individual modifiers for NEOs are generally capped at 100% (although the Committee retains the discretion to determine higher individual modifiers up to 150%).

Target AIP Opportunities

        As a percentage of 2018 year-end base salary, the target AIP opportunities for 2018 were 125% for Mr. Butier; 75% for Messrs. Gravanis and Lovins; 60% for Ms. Miller; and 50% for Mr. Stander. In February 2018, Mr. Lovins' target AIP opportunity was increased from 60% to 75% of base salary to move his annual incentive closer to the market median after he completed a year of service as our CFO.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 49

​

---

Table of Contents

AIP Performance Objectives and Weightings; Target-Setting Principles

        The following performance objectives and weightings for the 2018 AIP were established and weighted by the Committee, in consultation with Willis Towers Watson. Our CEO, Chief Human Resources Officer and CFO participated during portions of the meetings during which the Committee reviewed and recommended performance objectives for our AIP and analyzed our performance against these objectives.

        For our business NEOs (Messrs. Gravanis and Stander), the Committee determined to link 75% of the AIP financial modifier to their respective business' results and 25% to corporate results. Business performance objectives were designed to be achievable only if the respective business improved upon its 2017 performance and delivered results consistent with the achievement of its 2021 financial targets.

2018 AIP TARGETS

        In setting the targets for these objectives, the Committee aimed to ensure consistency with our 2021 financial targets and require adjusted sales growth and adjusted EPS improvement from the results achieved in the prior year. These were the same objectives and weightings used for the 2017 AIP to continue incenting our NEOs to increase sales on an organic basis, improve profitability, and generate strong free cash flow.

        Target adjusted sales growth was set consistent with our 2017-2021 target of 4%+ and slightly lower than what we achieved in 2017, reflecting uncertainty both in the retail apparel market served by our RBIS business and in the early success of our transformation plan to improve the financial performance and trajectory of this business. Target adjusted EPS was established above the midpoint of the annual guidance we gave to investors in January 2018 and represented an 18% increase from our 2017 results for this measure. Although we did not externally communicate a free cash flow target as part of our 2021 goals, we expect our businesses to generate strong free cash flow, an important metric used internally and by our investors in evaluating our performance. Our 2018 target for free cash flow was 9% higher than the free cash flow we generated in 2017, despite a planned increase in capital expenditures to support our future growth.

​

Avery Dennison Corporation  | 2019 Proxy Statement  | 50

---

Table of Contents

Financial Modifiers

        Financial modifiers are capped at 200%. Consistent with prior years, in evaluating our achievement of these performance objectives, the Committee had the discretion to exclude the impact, positive or negative, of extraordinary items such as acquisitions and divestitures; restructuring and integration actions not included in our annual net income plan; changes in accounting principles, tax codes or related regulations and rulings; extraordinary events such as natural disasters, terrorism and war; costs related to the early extinguishment of debt; costs of litigation outside the normal course of business; and non-cash charges associated with the impairment of long-lived assets.

        The table below shows the 2018 AIP financial modifiers for our NEOs. As shown, the target level was exceeded for two of the three performance objectives established for our corporate NEOs; three of the four performance objectives established for our LGM business NEO; and all four of the performance objectives established for our RBIS business NEO. Our corporate and business performance resulted in AIP financial modifiers of 123% for our corporate NEOs, 116% for our LGM business NEO, and 144% for our RBIS business NEO.