Ratification of PwC as the Company’s independent registered public accounting firm for the fiscal year ending September 28, 2019,October 2, 2021, requires the affirmative vote of a majority of the votes cast at the Annual Meeting, with the holders of shares of Class A Common Stock and Class B Common Stock voting together as a single class. Ratification of the selection of PwC by shareholders is not required by law. However, as a matter of policy, such selection is being submitted to the shareholders for ratification at the Annual Meeting. If the shareholders fail to ratify the selection of this firm, the Board will reconsider the matter.
The Stock Incentive Plan allows the Compensation and Leadership Development Committee the discretion to award a variety of equity-based incentives, including options to purchase shares of Class A Common Stock, stock appreciation rights, and other stock-based awards (including stock awards, performance unit awards, dividend equivalent rights and phantom shares to purchase or acquire shares of Class A Common Stock) (collectively, "Stock Incentives"). Subject to specific parameters set forth by the plan, the Compensation and Leadership Development Committee may by resolution authorize one or more officers of the Company and/or the Chairman of the Compensation and Leadership Development Committee to exercise its award granting and other discretionary authority.
The number of shares of Class A Common Stock reserved for issuance under the Stock Incentive Plan is currently 90,000,000, of which approximately 5,380,634 were available as of December 14, 2020 for future grants. If shareholders approve the amendment and restatement of the Stock Incentive Plan, the number of shares of Class A Common Stock reserved for issuance will be increased to 93,000,000. As of December 14, 2020, the market value for Class A Common Stock was $69.78 per share. For purposes of determining the number of shares of Class A Common Stock issued upon the exercise, settlement, or grant of a Stock Incentive, any shares of Class A Common Stock withheld to satisfy tax withholding obligations or any exercise price are considered as issued under the plan and the settlement of a stock appreciation right is treated as a settlement in shares of Class A Common Stock without regard to whether settlement was in cash or shares of stock.
The number of shares of Class A Common Stock as to which any Stock Incentive is granted and the persons to whom any Stock Incentive are granted is determined by the Compensation and Leadership Development Committee, subject to the provisions of the Stock Incentive Plan. To the extent not inconsistent with the terms of the Stock Incentive Plan, the Compensation and Leadership Development Committee may establish the terms of any Stock Incentive, including exercise or settlement price, terms of forfeiture, and any opportunity to defer receipt of settlement proceeds. Stock Incentives generally are not transferable or assignable during a holder's lifetime, subject to such terms in the Stock Incentive Plan as may be established by the Compensation and Leadership Development Committee.
Other than Stock Incentives granted as inducements to the hiring of an eligible service provider or Stock Incentives subject to performance criteria, any Stock Incentive granted to an employee is subject to a minimum vesting period of twelve (12) months, with permissible exceptions for death, disability, retirement, an involuntary termination of service, extraordinary corporate events such as a change in control, or other extenuating circumstance, as may be set forth by the applicable Stock Incentive materials or, in the absence of such provision, as the Compensation and Leadership Development Committee may subsequently determine. The proposed amendment and restatement of the Stock Incentive Plan conditions the vesting of any award in connection with a change in control on the participant experiencing a Separation from Service, as defined in the Stock Incentive Plan, within twenty-four (24) months after such change in control. The Compensation and Leadership Development Committee may also, in its discretion, provide for vesting in connection with a change in control in the event that any award is not effectively assumed, or equivalent value is not provided, as part of the transaction.
Any dividends payable on Class A Common Stock subject to a Stock Incentive will not be paid to the participant, if at all, any earlier than the date the underlying shares of Class A Common Stock become earned and/or vested.
Under the terms of the Stock Incentive Plan, the maximum number of shares of Class A Common Stock with respect to which (1) options, (2) stock appreciation rights and (3) other stock-based awards that are not settled in cash may be granted during any calendar year to any employee may not exceed 1,000,000, subject to adjustment in accordance with the adjustment provisions set forth in the Stock Incentive Plan and the maximum aggregate dollar amount that may be paid in any calendar year to any employee with respect to other stock-based awards that are payable in cash may not exceed $5,000,000.
The Committee may reduce the amount of any settlement proceeds otherwise due a participant under a Stock Incentive by any then outstanding indebtedness owed by the participant to the Company or any affiliate.
Eligibility
Officers, employees, directors, consultants, and other service providers of the Company and its affiliates are eligible for awards under the Stock Incentive Plan. However, only employees of the Company and its subsidiaries will be eligible to receive incentive stock options under the Stock Incentive Plan. As of December 14, 2020, there were approximately 139,000 officers and employees and twelve non-employee directors eligible to participate in the Stock Incentive Plan, however, only approximately 980 officers and employees and all of our non-employee directors were approved by the Compensation and Leadership Development Committee to receive awards under the Stock Incentive Plan in fiscal year 2020. Because consultants and other service providers may not be directly employed by the Company, it is not feasible to approximate the number of such consultants and other service providers that are eligible to participate in the Stock Incentive Plan.
Performance Criteria
Under the Stock Incentive Plan, at the time a Stock Incentive is granted, the Compensation and Leadership Development Committee may establish performance measures, if any, attributable to the payment, vesting, or other settlement of the Stock Incentive. Performance measures may be described in terms of Company-wide objectives or in terms of objectives that are related to performance of the division, affiliate, department or function within the Company or an affiliate in which the participant receiving the Stock Incentive is employed or on which the participant’s efforts have the most influence. The achievement of the performance measures established by the Compensation and Leadership Development Committee for any performance period will be determined without regard to the effect on such performance measures of any acquisition or disposition by the Company of a trade or business or of substantially all of the assets of a trade or business during the performance period. The performance measures established by the Compensation and Leadership Development Committee for any performance period under the Stock Incentive Plan may consist of one or more of the following:
•earnings per share and/or growth in earnings per share;
•operating cash flow and/or growth in operating cash flow;
•cash available;
•net income and/or growth in net income;
•revenue and/or growth in revenue;
•total shareholder return (measured as the total of the appreciation of, and dividends declared on, Class A Common Stock);
•return on invested capital;
•return on shareholder equity;
•return on assets;
•return on common book equity;
•operating income;
•EBIT, EBITDA or EBITDAR; or
•Company stock price performance.
The performance measures above may be established individually, alternatively, or in any combination, and measured either quarterly, annually, or cumulatively over a period of quarters or years, on an absolute basis or relative to a pre-established target, including in relation to previous quarters’ or years’ results or to a designated comparison group.
The Compensation and Leadership Development Committee may appropriately adjust any evaluation of performance under a performance measure to remove the effect of equity compensation expense under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“ASC 718”), amortization of acquired technology and intangibles, and significant impairments; litigation or claim judgments or settlements; the effect of changes in or provisions under tax law, accounting principles, or other such laws or provisions affecting reported results; accruals for restructuring and related programs; discontinued operations; gains and losses associated with the sale or closure of operations; other non-operating gains and losses; and any items that are extraordinary, unusual in nature, non-recurring, or infrequent in occurrence. In addition to the factors listed above, the proposed amendment and restatement of the Stock Incentive Plan also permits adjustment based on other non-operating gains and losses.
Federal Income Tax Consequences
The following discussion outlines generally the federal U.S. income tax consequences of participation in the Stock Incentive Plan based on tax laws in effect as of the record date of December 14, 2020 and existing laws, judicial decisions and administrative rulings and regulations, all of which are subject to change, prospectively or retroactively. In addition to these, a participant may also be subject to foreign, state and local income or other tax consequences including in the jurisdiction in which the participant works and/or resides. Individual circumstances may vary and each participant should rely on his or her own tax counsel for advice regarding federal income tax treatment under the Stock Incentive Plan.
Incentive Stock Options. A participant who exercises an incentive stock option will not be taxed at the time he or she exercises his or her option or a portion thereof. Instead, the participant will be taxed at the time he or she sells the shares of Class A Common Stock purchased pursuant to the incentive stock option. The participant will be taxed on the difference between the price he or she paid for the Class A Common Stock and the amount for which he or she sells the Class A Common Stock. If the participant does not sell the shares of Class A Common Stock prior to two years from the date of grant of the incentive stock option and one year from the date the stock is transferred to him or her, any subsequent gain on sale of the shares will be capital gain and the Company will not receive a corresponding deduction. If the participant sells the shares of stock at a gain prior to that time, the difference between the amount the participant paid for the Class A Common Stock and the lesser of fair market value on the date of exercise or the amount for which the stock is sold will be taxed as ordinary income, and the Company will receive a corresponding deduction subject to the limitations
under Section 162(m) of the Code. If the participant sells the shares of Class A Common Stock for less than the amount he or she paid for the stock prior to the one- or two- year period indicated, no amount will be taxed as ordinary income and the loss will be taxed as a capital loss. Exercise of an incentive stock option may subject a participant to, or increase a participant's liability for, the alternative minimum tax.
Nonqualified Stock Options. A participant will not recognize income upon the grant of a nonqualified option at any time prior to the exercise of the option or a portion thereof. At the time the participant exercises a nonqualified option or portion thereof, he or she will recognize compensation taxable as ordinary income in an amount equal to the excess of the fair market value of the Class A Common Stock on the date the option is exercised over the price paid for the stock, and the Company will then be entitled to a corresponding deduction subject to the limitations under Section 162(m) of the Code.
Depending upon the time period shares of Class A Common Stock are held after exercise, the sale or other taxable disposition of shares acquired through the exercise of a nonqualified option generally will result in a short- or long-term capital gain or loss equal to the difference between the amount realized on such disposition and the fair market value of such shares when the nonqualified option was exercised.
Special rules apply to a participant who exercises a nonqualified option by paying the exercise price, in whole or in part, by the transfer of shares of Class A Common Stock to the Company.
Other Stock Incentives. A participant will not recognize income upon the grant of a stock appreciation right, dividend equivalent right, stock award, performance unit award, or phantom share (collectively, the "Other Equity Incentives"). Generally, at the time a participant receives payment under any Other Equity Incentive, he or she will recognize compensation taxable as ordinary income in an amount equal to the cash or fair market value of the Class A Common Stock received (less the grant price in the case of a stock appreciation right), and the Company will then be entitled to a corresponding deduction subject to the limitations under Section 162(m) of the Code.
Except as noted below, a participant will not be taxed upon the grant of a stock award if such award is subject to a "substantial risk of forfeiture," as defined in the Code. When the shares of Class A Common Stock that are subject to the stock award are no longer subject to a substantial risk of forfeiture, the participant generally will recognize compensation taxable as ordinary income in an amount equal to the fair market value of the stock subject to the award at that time, less any amount paid for such stock, and the Company will then be entitled to a corresponding deduction subject to the limitations under Section 162(m) of the Code. If a participant so elects at the time of receipt of a stock award, he or she may include the fair market value of the stock subject to the award, less any amount paid for such stock, in income at that time and the Company will also be entitled to a corresponding deduction at that time subject to the limitations under Section 162(m) of the Code.
Section 162(m) of the Code. Section 162(m) of the Code generally limits to $1 million the amount that a publicly held corporation is allowed each year to deduct for the compensation paid to the corporation’s chief executive officer, the corporation’s chief financial officer and certain other current and former executive officers of the corporation, with certain exceptions for grandfathered compensation arrangements in effect on or prior to November 2, 2017.
Withholding Taxes
An employee participant may be liable for federal, state, and local tax withholding obligations as a result of the grant, exercise, vesting, or settlement of a Stock Incentive. The tax withholding obligations may be satisfied by payment in the form of cash, cash equivalents, or, if a participant elects with the permission of the Compensation and Leadership Development Committee, by a reduction in the number of shares to be received by the participant under the award.
Plan Benefits
Set forth below is a table that shows equity grants pursuant to the Stock Incentive Plan since inception through the record date of December 14, 2020. The amounts contained in the table include equity grants which may have been forfeited or canceled, but do not include equity grants pursuant to any dividend reinvestment program of the Company. Future benefits to be received by a person or group under the Stock Incentive Plan are not fully determinable at this time and will depend on individual and corporate performance and other determinations to be made by the Compensation and Leadership Development Committee during fiscal year 2021 and afterward.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Awards Under the Tyson Foods, Inc. 2000 Stock Incentive Plan Since Inception | |
| Name | | Stock Options | | Restricted Stock | | Restricted Stock with Performance Criteria | | Performance Shares (1) | | Other Stock Awards | |
| John Tyson | | 4,278,273 | | | 1,869,104 | | | 177,646 | | | 1,213,744 | | | — | | |
| Noel White | | 1,159,935 | | | 126,918 | | | 138,587 | | | 484,548 | | | — | | |
| Dean Banks | | 646,974 | | | 38,278 | | | 11,719 | | | 145,658 | | | 4,691 | | |
| Stewart Glendinning | | 167,920 | | | 16,875 | | | 13,273 | | | 86,019 | | | — | | |
| Chris Langholz | | 58,121 | | | 12,759 | | | 65,292 | | | 43,012 | | | — | | |
| All Current Executive Officers | | 8,703,332 | | | 2,462,620 | | | 766,742 | | | 3,127,135 | | | 4,691 | | |
| All Current Directors Who Are Not Executive Officers | | — | | | — | | | — | | | — | | | 188,570 | | (2) |
| All Employees (Other Than Current Executive Officers) | | 56,661,234 | | (3) | 19,638,313 | | | 887,001 | | | 6,610,883 | | | 3,143 | | |
(1) This amount represents the maximum number of shares of performance stock which would be awarded upon the achievement of specified performance criteria for the awards granted.
(2) This amount excludes 255,693 of stock awards granted to former non-employee directors.
(3) This amount includes 810,242 of stock appreciation rights.
Securities Authorized for Issuance Under Equity Compensation Plans
Set forth below is a table that shows certain information about our equity compensation plans as of October 3, 2020 (as previously included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 2020).
| | | | | | | | | | | | | | | | | | | | |
| | Number of securities to be issued on exercise of outstanding options (#) | | Weighted average exercise price of outstanding options ($) | | Number of securities remaining available for future issuance under equity compensation plans (excluding Securities reflected in the first column (#) (a) (b) |
| Equity compensation plans approved by security holders | | 5,951,473 | | | $ | 62.86 | | | 29,205,597 | |
| Equity compensation plans not approved by securities holders | | — | | | $ | — | | | — | |
| | 5,951,473 | | | $ | 62.86 | | | 29,205,597 | |
| (a) Shares available for future issuance as of October 3, 2020, under the Stock Incentive Plan (9,979,081), the Employee Stock Purchase Plan (11,578,908) and the Retirement Savings Plan (7,647,608) |
| (b) “Securities” and “shares” refer to the Company’s Class A Common Stock |
Board Recommendation
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE TYSON FOODS, INC. 2000 STOCK INCENTIVE PLAN.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED “FOR” APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE TYSON FOODS, INC. 2000 STOCK INCENTIVE PLAN UNLESS SHAREHOLDERS SPECIFY A CONTRARY VOTE.
Vote Required
Approval of the amendment and restatement of the Tyson Foods, Inc. 2000 Stock Incentive Plan requires the affirmative vote of a majority of the votes of the holders of Class A Common Stock and Class B Common Stock cast at a meeting at which a quorum representing a majority of all such outstanding voting stock is, in person or by proxy, present and voting on the matter.
SHAREHOLDER PROPOSALS
The Company has received notice of the intention of shareholders to present twothree separate proposals for voting at the Annual Meeting. The texts of the shareholder proposals and supporting statements appear exactly as received by the Company. All statements contained in a shareholder proposal and supporting statement are the sole responsibility of the proponents of those shareholder proposals. The Company will provide the names, addresses and shareholdings (to the Company’s knowledge) of the proponents of any shareholder proposal upon request made to the Company’s corporate secretary by mail at 2200 West Don Tyson Parkway, Mail Stop CP004, Springdale, Arkansas 72762-6999, or by calling (479) 290-4524.
SHAREHOLDER PROPOSAL REGARDING CORPORATE LOBBYING
Whereas, we believe in full disclosure of our company’s direct and indirect lobbying activities and expenditures to assess whether Tyson’s lobbying is consistent with Tyson’s expressed goals and in the best interests of shareholders.
Resolved, the shareholders of Tyson Foods (“Tyson”) request the preparation of a report, updated annually, disclosing the following information:
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1. | Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications; |
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2. | Payments by Tyson used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient; |
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3. | Tyson’s membership in and payments to any tax-exempt organization that writes and endorses model legislation; |
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4. | Description of the decision-making process and oversight by management and the Board for making payments described in sections 2 and 3 above. |
For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Tyson is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels.
The report shall be presented to the Audit Committee or other relevant oversight committees and posted on Tyson’s website.
Supporting Statement
As shareholders, we encourage transparency and accountability in the use of corporate funds to influence legislation and regulation, both directly and indirectly. Tyson spent over $13 million on federal lobbying since 2010. These figures do not include lobbying expenditures to influence legislation in states, where Tyson also lobbies but disclosure is uneven or absent. Tyson has drawn attention for its lobbying at the federal level (“U.S. Farm Lobby Turns up Heat on Trump Team as NAFTA Talks Near,” Reuters, July 14, 2017), and also for its state lobbying on concentrated chicken farms in Kansas (“Tyson Championed Plan to Expand Number of Birds Allowed on Farms,” Garden City Telegram, March 9, 2018).
Tyson serves on the board of the Business Roundtable, which spent over $43 million on lobbying for 2016 and 2017 and is lobbying against the right of shareholders to file resolutions, and also on the boards of the North American Meat Institute (NAMI) and the National Chicken Council (NCC). Tyson fails to comprehensively disclose its trade association memberships, nor payments and the portions used for lobbying on its website. We are concerned that Tyson’s incomplete trade association disclosure presents reputational risk. For example, Tyson is committed to protect food safety and worker health and safety, yet the NCC submitted a petition to the USDA in favor of waiving line speeds limitations in poultry processing facilities (“Too Fast for Safety? Poultry Industry Wants to Speed Up the Slaughter Line,” NPR, October 27, 2017).
Board of Directors’ Statement
In Opposition to Shareholder Proposal Regarding Corporate Lobbying
The Board recommends that shareholders vote AGAINST this shareholder proposal. The Board believes that this proposal is not in the best interests of the Company or its shareholders and opposes it for the following reasons.
The focus of the proposal appears to be on ensuring the transparency and accountability of the Company’s lobbying and political activities. The Company has from time to time pursued and will continue to pursue efforts to help inform public policy decisions at both the state and federal levels that have the potential to affect our customers, team members, and the communities in which we operate. We believe, however, that the Company already has in place a number of policies and processes that ensure the transparency and accountability sought by the proposal. Our Code of Conduct requires us to adhere to strict laws governing corporate political activities, lobbying, and contributions that vary around the globe. For this reason, we have specific individuals with the responsibility of engaging in efforts to discuss legislation or government policy with political officials. The Code of Conduct is publicly available to all shareholders on our website at ir.tyson.com under “Corporate Governance”. We also disclose to the U.S. House and Senate corporate expenditures paid to trade associations that are involved with advocacy efforts, and our reports are publicly available at http://www.senate.gov/legislative/Public_Disclosure/LDA_reports.htm; and http://lobbyingdisclosure.house.gov.
In addition, the Company has a policy that ensures that any charitable donation or political contribution made by the Company complies with relevant laws. Any political contributions made by the Company will be made and reported in accordance with all applicable federal, state, and local laws. All political contributions from the Company must be made through the Company’s Government Relations department and must be approved by an officer in such department.
The Company also has a political action committee (“TYPAC”) that is a multicandidate committee. TYPAC is required to comply with all laws and files mandatory disclosures of receipts and disbursements with the Federal Election Commission, which are available at http://fec.gov/. Certain of the Company’s executive officers and Treasury team members are the officers of TYPAC, and contributors are salaried management team members. The Company’s senior vice president of global government affairs makes disbursement requests that the executive vice president and general counsel must approve. The Company’s Treasury department manages the bank account, makes deposits, writes disbursement checks, and files compliance reporting with the Federal Election Commission, and the Company’s Accounting department reconciles the bank statements to the account ledger quarterly.
The proposal also highlights a particular concern regarding the transparency of trade associations to which the Company may belong. Participation as a member of these associations comes with the understanding that we may not always agree with all of the positions of the organizations or other members, but that we believe that the associations take many positions and address many issues in a meaningful and influential manner and in a way that will be to the Company’s benefit. Furthermore, we continually evaluate our support of office-holders, industry groups, and other associations to focus on key supporters of initiatives of value to the interests of the Company and its shareholders. As noted, we have in place effective reporting and compliance procedures to ensure that our contributions are made in accordance with applicable law, and we closely monitor the appropriateness and effectiveness of the political activities undertaken by the most significant trade associations of which we are a member. And, as discussed above, the Company is required to, and does, make certain disclosures at the federal level related to federal political activity, specifically lobbying.
We believe that participating in the political process in a transparent manner is key to good governance and an important way to enhance shareholder value and promote healthy corporate citizenship. However, given the existing system of reporting and accountability already in place for the Company, the proposal would require the Company to produce duplicative information that we already disclose, incurring additional expense with no added benefit to shareholders. If adopted, because the proposal would apply only to Tyson and to no other company in its industry, it could also result in a competitive disadvantage for the Company.
For the reasons stated above, the Board recommends a vote AGAINST this proposal.
Board Recommendation
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE “AGAINST” THIS SHAREHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
“AGAINST” THIS SHAREHOLDER PROPOSAL UNLESS SHAREHOLDERS SPECIFY
A CONTRARY VOTE.
Vote Required
Approval of this shareholder proposal requires the affirmative vote of a majority of the votes cast at the Annual Meeting, with the holders of shares of Class A Common Stock and Class B Common Stock voting together as a single class.
SHAREHOLDER PROPOSAL REGARDINGREPORT ON HUMAN RIGHTS REPORTDUE DILIGENCE
Report on Human Rights Due Diligence
2019 -2021 – Tyson Foods
Whereas: Corporations have a responsibility to respect human rights within company-owned operations and through business relationships underUnder the UN Guiding Principles on Business and Human Rights.1 To meet this responsibility,Rights, companies are expected to conduct human rights due diligence informed byto meet the core internationalcorporate responsibility to respect human rights.1
Tyson’s business activities significantly impact fundamental human rights, instruments,including the rights to:
•life,
•freedom from discrimination,
•safe and healthy working conditions,
•freedom of association, organize a union, and bargain collectively free from intimidation and retaliation, and
•water, health, and a safe environment.
Processing workers’ health and safety are vulnerable under normal conditions.2 During the coronavirus pandemic, Tyson has maintained punitive attendance policies (with minor exceptions), inconsistent or insufficient access to assess, identify, prevent, and mitigate adverse human rights impacts.2
Industrial meat production exposes workers, farmers, and communities to actual and potential adverse human rights impacts. Inadequate regulatory frameworks do not sufficiently protect against these impacts. Poultry processing workers face serious labor rights violations, including injuries from unsafetesting, workstations ill-equipped for social distancing, high line speeds, and other hazards, exposureincomplete COVID-19 reporting,3 which has already resulted in over 10,000 reported positive cases and at least 35 worker deaths.4 If respect for workers’ rights and stronger protections are not implemented, additional deaths are inevitable.5
Further, Tyson’s international footprint presents human rights risks including forced labor.6 Failures in Tyson’s management of water quality risks and inadequate provision of remedy to toxins, wage and hour violations, sexual harassment, and workplace discrimination. Factory farming contributesimpacted communities interfere with the right to economic struggles for contract growers and family farmers, exploitationwater.7
Poor management of migrant farmworkers, and occupationalworker health and safety risks. Monoculture farmingexposes Tyson to grow animal feed requires heavy uselitigation, reputational, financial, and human capital management risks.8 Recently, families of chemical fertilizers and pesticides, impacting human health, soil and water quality, and biodiversity. An estimated 99% of U.S. farm animals are raised in confined animal feeding operations (CAFOs), which release high levels of toxic pollutants from animal waste intoTyson workers filed wrongful death lawsuits against the water and air.
Tyson faces community resistance to the expansion of its operations and footprint to meet growing demand for protein. In 2017, community protests in Kansas prevented construction of a new poultry processing plant, citing concerns about Tyson’s history of water pollution incidents and inadequate community consultation.company.39 A proactive assessmentUSDA complaint against Tyson alleges racial discrimination for failing to protect workers of Tyson’s salientcolor who are disproportionately impacted by COVID-19.10 Tyson faces two FTC complaints for misleading representations about worker treatment, the nature of relationships with farmers, and conditions at poultry farms in its supply chain.11
Worker voice in the design, implementation, and monitoring of human rights risks, informed by meaningful stakeholder consultation,due diligence, such as through a worker-driven social responsibility (WSR) model12 or labor unions, is necessary to respect human rights.This would mitigate adverse human rights impactshelp prevent harm, reduce fines for violations, stabilize the workforce of Tyson and threats toits suppliers, and preserve the company’s social license to operate and business opportunities.
While Tyson commits to respectoperate. There is inadequate disclosure on the outcomes of Tyson’s workplace commitments or implementation of human rights in its Code of Conduct and Supplier Code, adoption of principles is only the first step in effectively managing human rights risks. Tyson committeddue diligence to improve working conditions in 2017, but does not comprehensively report on implementation, monitoring efforts, or improvements in workers’ ability to exercise their rights.4 Tyson’s sustainability initiatives, which include a Social Baseline Study and land stewardship target, do not address all of Tyson’sadverse human rights impacts or cover the entire value chain. Tyson has yet to disclose progress towards implementing these efforts, or how they will be factored into business decisions, growth, and supplier expectations, to ensure they are embedded throughout the business.value chain.13 Giving workers and other impacted groups a leading role in this process—including a legally binding and enforceable grievance mechanism, as with WSR—has been identified as essential for effectiveness of interventions to address human rights risks.14
Resolved: Shareholders request the Board of Directors prepare a report, at reasonable cost and omitting proprietary information, on Tyson’s human rights due diligence process to assess, identify, prevent, mitigate, and mitigateremedy actual and potential human rights impacts.
Supporting Statement: The report should:
Include the human rights principles used to frame its risk assessments;
Outline•Identify and assess the human rights impacts of Tyson’s business activities, including company-owned operations, contract growers, and supply chain and plans to prevent and mitigate them;harm;
•Explain the types and extent of stakeholder consultation; and
Address Tyson’s plans to track•Discuss how Tyson tracks effectiveness of measures to assess, prevent, mitigate, and remedy adverseits human rights impacts.due diligence.
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1https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf
2https://www.hrw.org/report/2019/09/04/when-were-dead-and-buried-our-bones-will-keep-hurting/workers-rights-under-threat#
3 https://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdfthefern.org/ag_insider/covid-19-cases-appear-to-be-slowing-at-meat-plants-but-companies-arent-releasing-test-results/; https://www.bloomberg.com/news/articles/2020-06-03/tyson-reinstates-policy-that-penalizes-absentee-workers; https://www.nytimes.com/2020/06/15/opinion/coronavirus-tyson-poultry.html; https://www.washingtonpost.com/business/2020/07/30/tyson-foods-coronavirus-tests/
24https://thefern.org/2020/04/mapping-covid-19-in-meat-and-food-processing-plants; https://investigatemidwest.org/2020/04/16/tracking-covid-19s-impact-on-meatpacking-workers-and-industry
5https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/meat-poultry-processing-workers-employers.html; https://news.bloomberglaw.com/daily-labor-report/tyson-meatpackers-said-to-need-more-protection-from-coronavirus; https://www.propublica.org/article/emails-reveal-chaos-as-meatpacking-companies-fought-health-agencies-over-covid-19-outbreaks-in-their-plants
6 http://hrn.or.jp/wpHN/wp-content/uploads/2019/06/Labour-Rights-Violations-in-the-Thai-Poultry-Industry-within-the-Supply-Chains-of-Japanese-Companies-2019-2nd-Ed.pdf
7https://www.cullmantribune.com/2020/05/01/updated-lawsuit-filed-against-tyson-over-2019-spills/
8https://healfoodalliance.org/120-organizations-target-tyson-foods-for-failing-to-protect-workers-from-covid-19-2/; https://violationtracker.goodjobsfirst.org/parent/tyson-foods; http://nototyson.com
9 https://www.ohchr.org/en/professionalinterest/pages/coreinstruments.aspxwww.vbattorneys.com/hubfs/DOC%2001%20-%2005.15.20%20FS%20Original%20Complaint%20.pdf
10; https://img1.wsimg.com/blobby/go/690bc23d-7fcc-463f-85e1-62e6232cf993/downloads/2020.07.08-Food-Chain-Workers-v.-Tyson-Foods-T.pdf?ver=1594514994518
11https://www.ilo.org/declaration/lang--en/index.htm; http:files.constantcontact.com/0fcd97ad701/adf8e243-8c80-404b-9b1b-d534e570ee50.pdf; https://www.oecd.org/investment/mne/1922428.pdfwww.organicconsumers.org/sites/default/files/tyson_natural_ftc_complaint_07.2.2020.pdf
312https://wsr-network.org/what-is-wsr/statement-of-principles/
13https://www.corporatebenchmark.org/sites/default/files/chrb_2019_pdfs/Tyson%20Foods%20CHRB%202019%20Results%20on%2020190926%20at%20080325.pdf
14http://nototyson.com/www.msi-integrity.org/not-fit-for-purpose/
4https://www.tysonfoods.com/sites/default/files/2018-03/Commmitments%20for%20Continuous%20Improvement%20in%20the%20Workplace.pdf
Board of Directors’ Statement
In Opposition to Shareholder Proposal Regarding Report on Human Rights ReportDue Diligence
The Board recommends that shareholders vote AGAINST this shareholder proposal. The Board believes that this proposal is not in the best interests of the Company or its shareholders and opposes it for the following reasons.
Contrary to
We disagree with the implications raised in the proposal, the Company greatly valuesproposal. At Tyson, our top priority is the health and safety of itsour Team Members, their families and our communities. Moreover, early on in response to the COVID-19 pandemic, we put in place significant protections at all of our facilities that meet or exceed CDC and OSHA guidance for preventing COVID-19, including:
•Requiring all Team Members and non-Tyson visitors to wear Company issued surgical-style face masks while on Tyson premises.
•Supplying our Team Members who rely on group or public commuting with additional surgical-style facial coverings for their commute to and from work.
•In many locations, providing team members face masks to share with their family or housemates.
•Creating barriers and/or requiring face shields on production lines where social distancing is not possible.
•Installing barriers between break room tables and is focusedrecreational areas.
•Staggering shifts and breaks and reducing line speeds to decrease the number of team members in hallways, gathering places and on maintainingproduction lines.
•Barricading or marking seating in common areas and adding social distancing markers on the ground.
•Using social distancing monitors throughout the facility to manage compliance with best practices.
•Installing over 100 thermal scan temperature systems and providing thermometers in our plants.
•Providing educational and reference materials on COVID-19 to Team Members in more than 15 languages.
•Engaging third-party medical providers Matrix Medical and Axiom Medical to conduct onsite testing and case assessment of team members.
•Deploying a safety culturethird-party expert, Matrix Medical, to many facilities to conduct assessments of each facility’s implementation of appropriate COVID-19 mitigation measures; implementing appropriate recommendations; and seeking Matrix’s input regarding evolving COVID-19 policies and practices.
•Implementing a three-pronged testing approach designed with the goalhelp of eliminating workplace incidents, risks and hazards. We are committedoutside medical experts, including Matrix Medical, which includes ongoing, data driven (and random) testing of workers without symptoms. It also involves those who exhibit symptoms or have been in close contact with someone who has the virus. Medical experts believe this monitoring approach is the best way to making a positive impactscreen for COVID in an ongoing way that helps determine the communities in which we operate around the world by conducting business in a sustainable and ethical manner, and we support the principles contained within the United Nation’s Universal Declaration of Human Rights and the International Labor Organization Labor Standards.
The focusprevalence of the proposal appearsvirus and how to be on ensuringkeep it under control.
•To support our efforts, we created a chief medical officer position and are working to add almost 200 nurses and administrative support personnel to supplement the Company adopts and implements suitable efforts to respect the human rightsmore than 400 people currently part of the Company’scompany’s health services team.
•Tyson waived the waiting periods for and increased the amount of short-term disability benefits for COVID-19 and COVID-19 related symptoms and relaxed our attendance policies to allow team members andwith child or dependent care issues to stay home to address those issues instead of working.
More generally, the communities in which we operate. The Board agrees with the proponent on the importance of conductingthat human rights due diligence is important and the Company is strongly committed to promoting social responsibility and human rights in every area of ourits operations throughout the world. The Board believes the Company’s present policies and practices appropriately and adequately address the concerns raised in the proposal andproposal. Additionally, the Board believes that a separate human rights report is not an effective way for the Company to “assess, identify, prevent and mitigate actual and potential human rights impacts.”
Our
The Company’s human rights practices are grounded in ourits Code of Conduct, Core Values, and Team Member Promise, which outline the many rights, benefits, requirements and responsibilities enjoyed by and expected of team members. As mentioned by the proposal, our Code of Conduct requires us to commit to upholding the principles of human rights. Pursuant to our Code of Conduct, we doTeam Members. The Company does not tolerate child or forced labor in any of ourits operations or facilities, we strivefacilities. Further, the Company strives to comply with all applicable wage and hour laws, and we respect ourits employees’ rights to join or not join a trade union or to have recognized employee representation in accordance with local law. The Code of Conduct is publicly available to all shareholders on our website at ir.tyson.comhttp://ir.tyson.com/investor-home/ under “Corporate Governance”. Our“Governance.” The Company requires its Team Members and Board of Directors to complete Code of Conduct training annually. The Company’s Core Values - which defineof being honorable and operating with integrity, being faith-friendly and inclusive, serving as stewards of the resources entrusted to us, and providing a safe work environment form the foundation for who we are, what we do, and how we do it, - are the foundation of corporate sustainability at Tyson Foods and recognize that we strive to provide a safe work environment for our team members.affirmed annually by all Team Members. Finally, ourthe Team Member Promise is a commitment to making sure our team members have the tools, resources and support necessary to meet their responsibilities, be successful, and achieve their goals.
We
The Company is already engageengaged in a number of additional practices that further make the report requested by the proponent unnecessary. We maintain a social compliance audit program for our facilities. As part of that program, anfacilities designed, among other things, to ensure our Team Members understand their rights, benefits and responsibilities related to workplace conditions, which include worker treatment, voice, compensation, and safety. An independent third-party audits approximately twenty-five percent of our production facilities each year using Workplace Conditions Assessment criteria to verify our adherence to the four pillars of social compliance standards regarding labor, healththis program, and safety, environment, and business integrity. Thethose results of those audits are published in our annualthe Company’s sustainability report.report issued each year and available at https://www.tysonfoods.com/innovation/food-innovation/food-quality-leader/certifications-and-programs. Additionally, we recently joinedthe Company is a member of the United Nations Global Compact, which requires us to produce an annual report that reiterates ourcommunication of progress reiterating the Company’s commitment to the global compact and how we areit is upholding ourthe commitment to itsthe Compact’s principles, including those related to human rights. Finally, we utilize an independent third-party to maintainthe Company maintains an “Ethics Help Line” operated by an independent third party through both a toll-free phone number and a web-based reporting mechanism for team membersTeam Members, wherever located, to anonymously report suspected violations of our Code of Conduct or the law. The Ethics Help Line gives usprovides insight into how ourthe Company’s Code of Conduct is being implemented across ourthe organization, and the number of Ethics Help Line contacts and general areas of complaint, which are published in ourthe Company’s annual sustainability report.
In our supply chain, we depend
The Company depends on independent farmersagricultural partners to supply our plants with chicken, beef, pork,cattle, hogs, and turkey. Weturkey, and we strive to support farmersthem in their efforts to run their businesses wisely and to be independent and sustainable enterprises.While we dothe Company does not have responsibility for the day-to-day management of these operations, we dothe Company does require that farmers comply with all local, state, and federal regulations applicable to their operations.
In 2010, we implemented a Supplier Code of Conduct, which is incorporated into supply contracts, that sets forth the principles and high ethical standards that we strive to achieve and expect our supply partners to try to work towardachieve throughout the course of our business relationship. These principles and ethical standards include, among other things, a dedication to observing fair labor practices and having controls in place that: verify the employment eligibility of their employees; respect the right of employees to freely associate; ensure compliance with applicable wage and hour laws; and prohibit discrimination, forced labor, and child labor. WeThe Company fully expect ourexpects its supply partners to demonstrate a strong commitment to ethical behavior and to operate in a manner that strives to responsibly manage the impacts of their operations on their workers.
Lastly, we are committed to our role as a steward of the environment in the areas where we do business. We have committedIn addition to our commitment to support improved environmental practices on two million acres of corn production, by the end of 2020, which we believe is the largest-ever land stewardship commitment by a U.S. based protein company. In furtherance ofalso previously announced our announced goal of reducing greenhouse gas emissions thirty percent by 2030, we expect this will lower the greenhouse gas emissions generated by our supply chain by reducing the amount of fertilizer applied per acre of corn production and thereby reducing total nitrous oxide emissions.2030.
In light of our current policies and continuous efforts to protect human rights throughout our global operations, the preparation of an additional report as requested by this shareholder proposal is unnecessary and not in our shareholders’ best interest. Accordingly, the Board recommends that shareholders vote AGAINST this shareholder proposal.
Board Recommendation
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE “AGAINST” THIS SHAREHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
“AGAINST” THIS SHAREHOLDER PROPOSAL UNLESS SHAREHOLDERS SPECIFY
A CONTRARY VOTE.
Vote Required
Approval of this shareholder proposal requires the affirmative vote of a majority of the votes cast at the Annual Meeting, with the holders of shares of Class A Common Stock and Class B Common Stock voting together as a single class.
SHAREHOLDER PROPOSAL REGARDING SHARE VOTING
Give Each Share an Equal Vote
RESOLVED: That the shareholders of Tyson Foods, Inc. (“Tyson” or "Company") ask the board of directors to retain an investment banker to develop a plan for a recapitalization to result in one vote per share for all outstanding stock of the Company.
SUPPORTING STATEMENT
Our Company has two classes of stock, with publicly traded Class A shares accounting for approximately 30 percent of the voting power and Class B shares (which have 10 votes per share) accounting for the balance.
More than 85 percent of the S&P 1500 companies have just one class of shares with each share having one vote. For share offerings where there is more than one class of shares the Council for Institutional Investors (CII) recommends a seven year phase-out. The International Corporate Governance Network supports CII’s recommendation "to require a time-based sunset clause for dual class shares to revert to a traditional one-share/one-vote structure no more than seven years after a company’s IPO date."
We believe that the Company’s dual class stock structure system has not served the interest of all shareholders. In allowing certain shares more voting power, our company does not provide all shareholders an equal voice in our company's governance, and therefore severely limits the majority of shareholders' ability to provide effective feedback to management and the Board. Without equal voting rights, Class A shareholders cannot hold management and the Board accountable, resulting in entrenchment.
This entrenchment has insulated our company from having to answer for its failure to quickly address the impacts of the COVID-19 crisis.1 The failure to take all necessary actions to prioritize the well-being of employees, to act responsively to employee concerns, and to build trust in the company’s actions has not only led to COVID-19 outbreaks and closures of Tyson plants but has resulted in economic harm to our company and hurt investor confidence in company management.
Given these and other challenges we believe that the Company is now at a crossroads. That is why we believe that the Company should retain an investment-banking firm to make appropriate recommendations about methods to move towards the creation of one class of stock available to all investors.
Tyson is not a start-up, but a large-cap member of the S&P 500, with a broad base of investors. We believe that those public investors should have more of a say on governance and policy issues. We therefore urge the board to retain an investment banker that can make recommendations about control premium issues and about ways to move from the current structure to a single class of stock available to all investors.
We urge you to vote FOR this proposal.
_____________________
1 https://www.iccr.org/sites/default/files/page_attachments/investorstatementoncovid19riskstomeatsectorworkerswsig_06_.15.20.pdf
https://www.denverpost.com/2020/05/28/guest-commentary-meatpacking-industry-must-to-do-better-for-sake-of-economy/#comments-anchor
https://www.businessinsider.com/tyson-ends-covid-19-policy-as-more-workers-get-sick-2020-6
Board of Directors’ Statement
In Opposition to Shareholder Proposal Regarding Share Voting
The Board recommends that shareholders vote AGAINST this shareholder proposal. The Board believes that this proposal is not in the best interests of the Company or its shareholders and opposes it for the following reasons.
The Board believes that the capital structure provided for in our Restated Certificate of Incorporation is in the best interests of the Company and its shareholders. The capital structure with two classes of common stock (Class A common stock with one vote per share and Class B common stock with ten votes per share) has been in existence since we reincorporated in Delaware in 1986. Every investor purchasing a share of our Class A common stock is made aware of the dual-class structure, and we believe many are attracted to our stock because of the long-term stability that the Tyson Limited Partnership, our controlling shareholder, and the Tyson family have provided to the Company for many decades.
As an established company, Tyson Foods, Inc. has benefited from the leadership and vision the Tyson family has provided over the last 85 years. The Company was founded by John W. Tyson, with son Don Tyson leading the company for many years, grandson John H. Tyson currently serving as the Chairman of the Board of Directors, and great-grandson John R. Tyson currently serving as the Chief Sustainability Officer. As a direct result of the dual-class structure, the Tyson family has an enhanced interest in the long-term success of the Company, and they have provided stability in the face of short-term market pressures and outside influences throughout economic downturns and crises, including the ongoing COVID-19 pandemic.
Shareholders’ interests also have long been safeguarded through adherence to the Company’s Corporate Governance Principles and other corporate governance practices and principles that complement the share capital structure and reinforce the Company’s strong commitment to both long-term sustainability and shareholder value. Among our robust corporate governance practices are the following:
•Approximately 70% of our director nominees are “independent” under New York Stock Exchange listing standards;
•Independent directors comprise our Audit, Compensation and Leadership Development, and Governance and Nominating Committees;
•Independent directors meet in executive session at least quarterly;
•Our Chairman, Lead Independent Director, and CEO roles are separate;
•Diversity of tenure, experience, leadership, and thought among existing directors and director nominees is robust; and
•Deferred share grants for directors incentivize long-range planning and decision-making.
We believe the current capital structure is in the best interests of the Company and its shareholders. The support of the Class B shareholders has provided significant stability to the business and helped create a solid and loyal investor base, and the long history of Tyson family involvement in the Company has been one of its greatest strengths. The Board believes that elimination of the dual-class structure will not improve the corporate governance or the long-term financial performance of the Company.
For the reasons stated above, the Board recommends a vote AGAINST this proposal because it is not in the best interests of the Company or its shareholders.
Board Recommendation
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE “AGAINST” THIS SHAREHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
“AGAINST” THIS SHAREHOLDER PROPOSAL UNLESS SHAREHOLDERS SPECIFY A CONTRARY VOTE.
Vote Required
Approval of this shareholder proposal requires the affirmative vote of a majority of the votes cast at the Annual Meeting, with the holders of shares of Class A Common Stock and Class B Common Stock voting together as a single class.
SHAREHOLDER PROPOSAL REGARDING CORPORATE LOBBYING
Whereas, we believe in full disclosure of our Company’s direct and indirect lobbying activities and expenditures to assess whether Tyson Foods’ (“Tyson”) lobbying is consistent with Tyson’s expressed goals and in the best interests of shareholders.
Resolved, the shareholders of Tyson request the preparation of a report, updated annually, disclosing the following:
1.Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications;
2.Payments by Tyson used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient;
3.Tyson’s membership in and payments to any tax-exempt organization that writes and endorses model legislation; and,
4.Description of the decision-making process and oversight by management and the Board for making payments described in sections 2 and 3 above.
For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation, and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which Tyson is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at local, state and federal levels.
The report shall be presented to the Audit Committee or other relevant oversight committees and posted on Tyson’s website.
Supporting Statement:
We encourage transparency in Tyson’s use of funds to lobby. Tyson spent over
$15.4 million on federal lobbying from 2010 - 2019. This excludes state lobbying expenditures, where Tyson also lobbies but disclosure is uneven or absent. Tyson has drawn attention for leading the “lobbying effort to have the meat industry labeled ‘critical infrastructure’” as “slaughterhouses became coronavirus hot spots.”1
Tyson serves on the board of the National Chicken Council (NCC) and belongs to the National Cattlemen’s Beef Association. Unlike peer group members Coca-Cola, Kraft Heinz, Mondelez and PepsiCo, Tyson neither discloses memberships in, nor payments to trade associations and the amounts used for lobbying on its website.
We are concerned Tyson’s lack of lobbying and trade association disclosure presents reputational risk. For example, Tyson states it is committed to protecting food safety and worker health and safety, yet the NCC lobbied to have the meat industry designated an essential industry2 while at least six Tyson workers died.3 The NCC also lobbied the USDA to increase line processing speeds that increase dangerous conditions for meatpacking workers, the majority of which are people of color.4 Tyson uses the Global Reporting Initiative for sustainability reporting, yet currently fails to report “any differences between its lobbying positions and any stated policies, goals, or other public positions” under Standard 415.
Approximately 60% of the independent shareholders voted for this proposal at the 2020 annual meeting.
We urge Tyson to expand its lobbying disclosure.
_____________________
1https://www.nytimes.com/2020/04/29/business/coronavirus-trump-meat-plants.html
Board of Directors’ Statement
In Opposition to Shareholder Proposal Regarding Lobbying
The Board recommends that shareholders vote AGAINST this shareholder proposal. The Board believes that this proposal is not in the best interests of the Company or its shareholders and opposes it for the following reasons.
As an initial matter, we note that the proposal overstates the actual amount the Company paid for certain lobbying activities. The focus of the proposal appears to be on ensuring the transparency and accountability of the Company’s lobbying and political
activities. The Company has from time to time pursued and will continue to pursue efforts to help inform public policy decisionmakers at both the state and federal levels that have the potential to affect our customers, team members, and the communities in which we operate. We believe, however, that the Company already has in place a number of policies and processes that ensure the transparency and accountability sought by the proposal. Our Code of Conduct, which each Team Member reviews and certifies annually, requires us to adhere to strict laws governing corporate political activities, lobbying, and contributions that vary around the globe. For this reason, we have specific individuals with the responsibility of engaging in efforts to discuss legislation or government policy with political officials. The Code of Conduct is publicly available to all shareholders on our website at http://ir.tyson.com/investor-home/ under “Governance”. We also disclose to the U.S. House and Senate corporate expenditures paid to trade associations that are involved with advocacy efforts, and our reports are publicly available at http://www.senate.gov/legislative/Public_Disclosure/LDA_reports.htm; and http://lobbyingdisclosure.house.gov.
In addition, the Company has a policy requiring that all political contributions made by the Company will be made and reported in accordance with all applicable federal, state, and local laws. All political contributions from the Company must be made through the Company’s Government Affairs department and must be approved by an officer in such department.
The Company also has a political action committee (“TYPAC”) that is a multicandidate committee. TYPAC is required to comply with all laws and files mandatory disclosures of receipts and disbursements with the Federal Election Commission, which are available at http://fec.gov/. Certain of the Company’s executive officers and other team members are the officers of TYPAC, and contributors are salaried management team members. The Company’s senior vice president of global government affairs must approve disbursement requests.
The proposal also highlights a particular concern regarding the transparency of trade associations to which the Company may belong. Participation as a member of these associations comes with the understanding that we may not always agree with all of the positions of the organizations or other members, but we believe that the associations take many positions and address many issues in a meaningful and influential manner and in a way that can be to the Company’s benefit. Furthermore, we continually evaluate our support of officeholders, industry groups, and other associations to focus on key supporters of initiatives of value to the interests of the Company and its shareholders. As noted, we have in place reporting and compliance policies and procedures to ensure that our contributions are made in accordance with applicable laws and regulations, and we closely monitor the appropriateness and effectiveness of the political activities undertaken by the most significant trade associations of which we are a member. And, as discussed above, the Company is required to, and does, make certain disclosures at the federal level related to federal political activity, specifically lobbying.
We believe that participating in the political process in a transparent manner is key to good governance and an important way to enhance shareholder value and promote healthy corporate citizenship. However, given the existing system of reporting and accountability already in place for the Company, the proposal would require the Company to produce duplicative information that we already disclose, incurring additional expense with no added benefit to shareholders.
For the reasons stated above, the Board recommends a vote AGAINST this proposal.
Board Recommendation
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE “AGAINST” THIS SHAREHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
“AGAINST” THIS SHAREHOLDER PROPOSAL UNLESS SHAREHOLDERS SPECIFY
A CONTRARY VOTE.
Vote Required
Approval of this shareholder proposal requires the affirmative vote of a majority of the votes cast at the Annual Meeting, with the holders of shares of Class A Common Stock and Class B Common Stock voting together as a single class.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis provides information regarding the compensation paid to our Chairman, our fiscal year 2018 Chief Executive Officer, our current Chief Financial Officer, and certain other executive officers who were the most highly compensated in fiscal year 2018 and our former Chief Financial Officer.2020. These individuals, referred to as “named executive officers” or “NEOs,” are identified below along with their offices held during fiscal year 2018:2020:
•John H. Tyson, Chairman of the Board (“Chairman”)
Tom Hayes, President and•Noel White, Chief Executive Officer (“CEO”) (through September 30, 2018)
•Dean Banks, President
•Stewart T. Glendinning, Executive Vice President and Chief Financial Officer (“CFO”) (effective February 10, 2018)
Sally Grimes, Group•Chris Langholz, President Prepared FoodsInternational
Noel On July 31, 2020, Mr. White Group President Fresh Meatsnotified the Board that he was stepping down as the CEO of the Company, effective October 3, 2020. Mr. White remains a member of the Board and International (through September 30, 2018)
Dennis Leatherby, Formeremployee of the Company and was appointed Executive Vice President and Chief Financial Officer (through February 10, 2018)
In September 2018,Chairman of the Company announced thatBoard, effective October 3, 2020. On July 31, 2020, the Board appointed Mr. Hayes would step down asBanks to the position of President and CEO, effective September 30, 2018, andas of October 3, 2020. Mr. White would assume that role on such date. In connection with this management change,Banks had served as President of the Company entered into a separation and release agreement with Mr. Hayes and an amended and restated employment agreement with Mr. White. The terms of each are described further below.since December 20, 2019. For purposes of this Compensation Discussion and Analysis, the term “CEO” refers to Mr. Hayes.White.
In addition, in November 2017, the Company announced that Mr. Leatherby would step down as Chief Financial Officer, effective February 10, 2018, Mr. Glendinning would assume that role on such date, and following which Mr. Leatherby would remain employed by the Company until April 6, 2018. In connection with this management change, the Company entered into a separation and release agreement with Mr. Leatherby and an employment agreement with Mr. Glendinning. The terms of each are described further below. For purposes of this Compensation Discussion and Analysis, the term “CFO” refers to Mr. Glendinning.
Compensation Philosophy and Objectives
Our executive compensation programphilosophy is designed to provide a competitive level of compensation necessary to attract, motivate and retain talented and experienced executives and to motivate them to achieve short- and long-term corporate goals that enhance shareholder value. Consistent with this philosophy, the following are the key objectives of our executive compensation program.
Shareholder Alignment. One of the primary objectives of our executive compensation philosophy isWe work to appropriately link executive pay with the Company’s financial performance and the creation of shareholder value. We believe that linking executive compensation to corporate performance results in a better alignment of compensation with corporate goals and shareholder interests.value creation.
Attract, Motivate and Retain Key Employees. Our executive compensation program is shaped by the competitive market for management talent in the food industry and at other public and private companies. We believeshape our executive compensation shouldto be competitive with the organizations with which we compete for talent. As such, it is our goal to provide compensation at levels (bothtalent in terms of benefits providedthe food industry and amounts paid)with other public and private companies so that we can attract, motivate and retain superior executive talent for the long-term.
Link Pay to Performance. We believe that as an executive’s responsibility increases, a larger portion of his or her total compensation should be “at-risk” incentive compensation (both short-term and long-term), subject to corporate, segment, individual, stock price and/or earnings performance measures. Our compensation program is designed to link pay to performance by makingmake a substantial portion of total executive compensation variable, or “at-risk,” through incentive awards based on Company earnings and performance goals. As performance goals are met or exceeded, executives are rewarded commensurately.
How We Determine Compensation
Role of the Compensation and Leadership Development Committee. In general, the Compensation and Leadership Development Committee (the “Compensation Committee”) works with management and external experts to set the Company’s executive compensation philosophy and objectives and to compensate key executives in accordance with such philosophy and objectives.accordingly. More specifically, the Compensation Committee periodically reviews and approves approves:
•the Company’s stated compensation philosophy, corporate goals and objectives relevant to management compensation and total compensation policy to evaluate whether they support business objectives, create shareholder value, are consistent with shareholder interests, attract, motivate and retain key executive talent and link compensation to corporate performance. The Compensation Committee also annually reviews the composition of performance;
•the peer groupsgroup used for competitive pay/performance benchmarking. Periodically the Compensation Committee compares total compensation for our NEOs and other executive officers to relevant external benchmarks. A discussion of the peer group and external benchmarks used in establishing compensation is
set forth below under the headingbenchmarking (see “Role of Compensation Consultants/Benchmarking.” below for more details); and
•the total compensation for NEOs and other executive officers.
The Compensation Committee’s charter describes additional duties and responsibilities of the Compensation Committee with respect to the administration, oversight and determination of executive compensation. A copy of the Compensation Committee’s charter can be found on the Company’s Investor Relations website at http://ir.tyson.com.ir.tyson.com.
The Compensation Committee works with the intention thatintends for its decisions willto be consistent with tax regulations, relevant law and NYSE listing requirements while also ensuring that compensation matters are handled in a manner satisfactory to the Company’s principal shareholder. Because the Company meets the definition of a “controlled company” under NYSE corporate governance rules, the Compensation Committee is not required to determine the compensation of our CEO in its sole discretion.CEO. However, the Compensation Committee has approved the employment contracts and total compensation for the chief executive officer position since 2003.
The Compensation Committee is expressly authorized in its charter to retain outside legal, accounting or other advisors or experts at the Company’s expense. For fiscal year 20182020 compensation decisions, the Compensation Committee used general industry and peer group information provided to the Company by Korn Ferry (“Korn Ferry”).
Say on Pay. Approximately 98%98.1% of the votes cast at the 20172020 Annual Meeting of Shareholders on the non-binding advisory vote on our named executive officer compensation were voted in support of our executive compensation program. Consistent with our shareholders’ approval, the Compensation Committee continued to apply the same effective principles and philosophy it has used in prior years while also monitoring market trends and best practices to determine executive compensation and will continue to consider shareholder concerns and feedback in the future.feedback.
Executive Officer Compensation Structure. Our executive officers are compensated based on a pay structure (including salary, target annual cash performance incentive, and equitylong-term (i.e. equity) grants) determined for their respective roles and job grades within the Company’s job grade structure. The pay structure for an executive is designed to take into accountconsiders the role, scope, capabilities and experience of the executive. An executive officer’s job grade level designation is made by the CEO, subject to Compensation Committee approvals.
Our executive compensation structure is periodically reviewed by our human resources group and senior management based on their collective review of information about the Compensation Peer Group (as discussed below) and recommendations provided by the Company’s compensation consultant (Korn Ferry during fiscal year 2018)2020) together with analysis of market analysistrends and data of executive compensation trends of hundreds ofat large public and private companies (“General Industry Data”). The most recent review was during fiscal year 2018. The General Industry Data, as updated from time to time, is used as the benchmark for the Company’s executive compensation structure because the Compensation Committee believes it serves as a stable representation of national pay levels.2020. The Compensation Committee and the Company’s human resources group periodically review the executive compensation structure and updated market analysis (particularly the compensation practices of the Compensation Peer Group, discussed below) with senior management and suggest modifications as they deem necessary to ensure that our executive officers and key employees are generally compensated in accordance with our compensation philosophy and objectives. For a more detailed discussion regarding decisions with respect to each element and amount of compensation provided for in the grade structure, see the section below titled “Elements of Compensation.”
Interaction Between the Compensation Committee and Management. GradeJob grade level designations for all executive officers (other than for Messrs. Tyson, White and Banks) and key employment contract terms (other than Mr. Tyson, Mr. Hayes and, following his promotion, Mr. White) are determined by the then-serving chief executive officerCEO in consultation with the Company’s human resources group. The Company’s human resources group then presents a summary of the key terms of each executive officer’s contract, including grade level designations,proposed compensation to the Compensation Committee. The Compensation Committee reviews and discusses the contractsproposed compensation terms and will meet with the Company’s human resources group as it deems necessary to discuss any questions or issues it has regarding these decisions. Once all questions and issues have been addressed to the satisfaction of the Compensation Committee, the Compensation Committee will ultimately ratify the employment contractscompensation terms and grade level designations.
Role of Compensation Consultants/Benchmarking. Since fiscal year 2001, the Company has retained Korn Ferry or its predecessor to periodically identify, and provide datamarket analyses and market analysestrend information regarding compensation practices of, a certain group of publicly traded companies in the protein and packaged foods industries (which we refer to as the “Compensation Peer Group”) and to periodically updatereview the General Industry Data. The companies listed below made up the Compensation Peer Group for performance-based equity awards during fiscal year 20182020 and for reviewing Mr. Hayes’Messrs. White’s, Banks’, Glendinning’s and Langholz’s compensation. The Compensation Peer Group for fiscal year 20182020 consisted of the same companies included in the Compensation Peer Group for fiscal year 2017 except Dean Foods Companyyears 2018 and McCormick & Co., Inc. These companies were removed for fiscal year 2018 because their revenues or market capitalization were not deemed to be aligned with the Company or the rest of the Compensation Peer Group.2019.
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| Archer-Daniels-Midland Company | | Hormel Foods Corporation |
| Bunge Limited | | The J.M. Smucker Company |
| Campbell Soup Company | | Kellogg Company |
| Coca-Cola Co. | | Kraft Heinz Co. |
| ConAgra Foods, Inc. | | Mondelez International, Inc. |
| General Mills, Inc. | | PepsiCo, Inc. |
| The Hershey Company | | Pilgrim’s Pride Corporation |
Korn Ferry furnishes the datamarket analyses and analysestrend information to our human resources group, which is then presented to the Compensation Committee. The Compensation Committee uses this information in its review of compensation for the NEOs and compensation levels within our grade structure to determine whether the compensation levels are consistentassess consistency with our compensation philosophy and our objective of providing competitive compensation that attracts, motivates and retains executive talent.objectives.
Market data is one of many factors considered by the Compensation Committee and management when setting compensation. For determining fiscal year 20182020 executive compensation, in addition to market practices, the Compensation Committee considered individual experience and past performance inside or outside the Company, compensation history, role and responsibilities within the Company, tenure with the Company and associated institutional knowledge, long-term potential with the Company, leadership contributions, industry expertise, past and future performance objectives and the value of the position within the Company.
In fiscal year 2018,2020, the data, market analyses, trend information and recommendations described above and input with respect to the CFO’sCEO’s employment contract and director compensation were the only consulting services provided by Korn Ferry to the Company. Neither the Compensation Committee nor the Company believes that the provision of these services by Korn Ferry raised any conflicts of interest.
How NEOs Are Compensated
It has been the Company’s practice to enter into employment contracts with its executive officers, including its Chairman and CEO. Once compensation decisions were made and an employment contract was executed, the executive officer was entitled to receive the compensation provided for in his or her contract until it was terminated or amended. Following fiscal year 2018, the Company determined officer employment contracts (other than for the Chairman and the CEO) were not consistent with market practice and asked all the Company’s officers to voluntarily terminate his or her contracts, which each did. For a more detailed discussion of each NEO’s employment contract in effect during fiscal year 2018, see the section titled “Employment Contracts” in this Proxy Statement.
John Tyson. On November 9, 2017, concurrent with the expiration of his previous employment contract, Mr. Tyson entered into an amended and restated employment contract, which provides for, among other things, (i) an increased minimum annual base salary of $1,050,000 and (ii) an indefinite term (consistent with other officer contracts then in effect), subject to the Board of Directors’ right to terminate the agreement at any time upon written notice to Mr. Tyson. Any such termination without cause is subject to the Company’s obligation to pay, in a lump sum, an amount equal to two years of his base salary and two times his target annual cash bonus, plus continued medical coverage for life. Such termination will also trigger vesting of Mr. Tyson’s equity awards that are outstanding as of the date of termination.
The terms of Mr. Tyson’s contract were approved by the Compensation Committee prior to execution. In addition to his base salary, which may be adjusted by the Compensation Committee from time to time, Mr. Tyson is entitled to participate in the Company’s annual cash and long-term equity incentive plans, on terms and at levels determined by the Compensation Committee. Decisions regarding whether to increase Mr. Tyson’s base salary and his participation in the Company’s cash and equity performance incentive payment programs are made annually by the Compensation Committee. For a more detailed analysis regarding these decisions, see the section titled “Elements of Compensation” in this Proxy Statement.
Tom Hayes. Mr. Hayes entered into an amended and restated employment contract with the Company in November 2016, the terms of which were approved by the Compensation Committee prior to execution. Under his employment contract, Mr. Hayes was entitled to a base salary of $1,150,000, subject to adjustment by the Compensation Committee from time to time, and to participate in the Company’s annual cash and long-term equity incentive plans, on terms and at levels determined by the Compensation Committee, generally intended
to be consistent with the plans in place for other NEOs and commensurate with the duties and responsibilities of a chief executive officer. Decisions regarding whether to increase Mr. Hayes’ base salary and his participation in the Company’s cash and equity performance incentive payment programs were to be made annually by the Compensation Committee. For a more detailed analysis regarding these decisions, see the section titled “Elements of Compensation” in this Proxy Statement.
In September 2018, the Company announced that Mr. Hayes would step down as CEO, effective September 30, 2018. Mr. Hayes remained an employee of the Company until December 1, 2018, at which time the Company and Mr. Hayes entered into a separation and release agreement (the “Hayes Separation and Release Agreement”). The Hayes Separation and Release Agreement provides for (i) a pro-rated bonus of $313,486 for the portion of fiscal year 2019 in which he was employed by the Company and (ii) his annual salary of $1,207,500 and annual target bonus of $1,811,250 for each of the two years following his separation from the Company, to be paid in equal, bi-weekly installments. Furthermore, his unvested restricted stock with performance criteria and performance shares vested on a pro-rata basis, but only to the extent the performance criteria are satisfied. These benefits are consistent with severance benefits provided under his employment contract. In exchange for these benefits, Mr. Hayes agreed to a non-competition agreement for two years beginning December 1, 2018.
Other NEOs. The compensation payable to Mr. Glendinning, Ms. Grimes, and Mr. White was based on their respective employment contracts in effect during fiscal year 2018 and their respective positions and grade level within the organization.
Mr. Glendinning, Ms. Grimes and Mr. White entered into an employment contract with the Company on December 11, 2017, August 29, 2014, and November 15, 2013, respectively, each of which was in effect during fiscal year 2018. Following fiscal year 2018, Mr. White and the Company entered into an amended and restated employment contract in connection with his promotion to the position of chief executive officer, as discussed further below. The decision to approve the employment contracts that were operativecompensation payable during fiscal year 2018 and the compensation payable thereunder2020 was based upon recommendations by the Company’s then-serving chief executive officerCEO and human resources group and advice from Korn Ferry. Under these contracts, Mr. Glendinning, Ms. Grimes and Mr. White were entitled toThe approved compensation terms provided for a base salary, subject to adjustment by the Company from time to time, and to participateparticipation in the Company’s annual cash and long-term equity incentive plans on terms and at levels determined by the Company’s senior management and as approved by the Compensation Committee when deemed required. Annual adjustments to compensation are determined after reviewing the market data, individual and Company performance and internal pay equity based on position with the organization. In addition, in the case of Mr. Langholz, his fiscal 2020 compensation was determined at the time he joined the Company in October 2019 based on the competitive market and the Company’s historical compensation practices. For a more detailed analysis regarding these decisions, see the section titled “Elements of Compensation” in this Proxy Statement.
In connection with his appointment to President and Chief Executive Officer, Mr. White entered into an amended and restated employment agreement with the Company on October 4, 2018. The employment agreement provides for, among other things, an annual base salary of $1,150,000, participation in the Company’s annual performance incentive programs on terms and in amounts as determined by the Compensation Committee, eligibility for equity awards under the Company’s equity incentive plans on terms and in amounts as determined by the Compensation Committee, and participation in the Company’s benefit plans. The employment agreement also provides that upon a termination by the Company (other than for “cause” or by reason of death or permanent disability) or if Mr. White resigns for “good reason,” the Company will pay Mr. White an amount equal to two years of his base salary and two times his target annual cash bonus, to be paid out over two years, plus continued medical coverage for up to 18 months. Additionally, Mr. White is entitled to personal use of Company-owned aircraft in a manner consistent with the Company’s policy governing aircraft use by executive officers. Current Company policy is to reimburse taxes associated with any approved personal use of Company-owned aircraft. The employment agreement contains a non-competition restriction for a period of 24 months post termination and a 36-month post-termination non-solicitation restriction.
Dennis Leatherby. During fiscal year 2018 until April 6, 2018. Mr. Leatherby was employed pursuant to an employment contract with the Company entered into on November 14, 2012. Mr. Leatherby was entitled to a base salary, which may have been adjusted by the Company from time to time, and to participate in the Company’s annual cash and long-term equity incentive plans, on terms and at levels determined by the Company’s senior management and as approved by the Compensation Committee when deemed required.
As discussed above, shortly following the conclusion of fiscal year 2017, the Company announced that Mr. Leatherby would step down as chief financial officer effective February 10, 2018, following which he would remain employed by the Company until April 6, 2018. In connection with this separation, the Company and Mr. Leatherby entered into a separation and release agreement (the “Leatherby Separation and Release Agreement”). Pursuant to the Leatherby Separation and Release Agreement, Mr. Leatherby, or his estate, as applicable, received (i) a prorated portion of his target fiscal year 2018 annual performance incentive payment; (ii) with respect to restricted stock with performance criteria and performance stock awards held by Mr. Leatherby, the awards vested on a pro-rata basis, but only to the extent the performance criteria are satisfied; (iii) with respect to stock options held by Mr. Leatherby, such grants vested, and Mr. Leatherby had one year subsequent to his employment to exercise the vested options; (iv) continued annual life insurance premiums (plus reimbursement of taxes based on the withholding rates for supplemental wages) under the Executive Life Insurance Program; (v) an amount equal to two years of Mr. Leatherby’s final base salary; and (vi) Company-subsidized health coverage under COBRA for Mr. Leatherby and his eligible dependents. In exchange for these benefits, Mr. Leatherby agreed to a two-year non-competition agreement beginning April 6, 2018. Mr. Leatherby passed away on August 6, 2018, and certain compensation due to Mr. Leatherby pursuant to the Leatherby Separation and Release Agreement may have accrued to his estate.
Elements of Compensation
The Company’s executive compensation program consists of:
•base salary;
•annual performance incentive payments;
equity-based•long-term incentive compensation;
•financial, retirement and welfare benefit plans; and
•certain defined perquisites.
Compensation Mix
Because of the ability of executive officers to directly influence the overall performance of the Company, and consistent with our philosophy of linking pay to performance, it is our goal to allocate a significant portion of compensation paid to our executive officers to performance-based, short- and long-term incentive programs. In addition, as an executive officer’s responsibility and ability to affect financial results of the Company increases, base salary becomes a smaller component of total compensation and long-term, equity-based compensation becomes a larger component of total compensation, further aligning the executive officer’s interests with those of the Company and its shareholders. The following table illustrates the mix of totaltarget compensation components for Messrs. Tyson, White, Banks, Glendinning and Hayes, individually,Langholz.
| | | | | | | | | | | | | | | | | | | | |
| | | | Target Equity Based Incentives |
| Name | | Base Salary | Target Annual Cash Incentive | Stock Options | Restricted Stock with Performance Criteria | Performance Stock |
| Tyson/White/Banks | | 13% | 23% | 16% | 16% | 32% |
| Glendinning/Langholz | | 21% | 27% | 13% | 13% | 26% |
For Messrs. Tyson, White and Mr.Banks, approximately 87% of their target compensation is variable and approximately 64% is equity-based incentives. For Messrs. Glendinning Ms. Grimes and Mr. White, as a group, based onLangholz, approximately 79% of their target compensation paid in fiscal year 2018. The mix of total compensation for Mr. Glendinning, Ms. Grimesis variable and Mr. White, as a group, does not include Mr. Glendinning’s sign-on bonus of $2,700,000. The percentages for Mr. Tyson in the table do not sum to 100% due to rounding.
|
| | | | | | |
| Compensation Element | | 2018 Total Compensation
Mix for
Mr. Tyson | | 2018 Total Compensation Mix for Mr. Hayes | | 2018 Total Compensation Mix for Mr. Glendinning, Ms. Grimes and Mr. White |
| Base Salary | | 10.5% | | 12.7% | | 15.3% |
| Performance Incentive Payment | | 12.1% | | 14.7% | | 14.0% |
| Equity-Based Compensation | | 58.0% | | 64.0% | | 60.0% |
| Financial, Retirement and Welfare Benefit Plans and Perquisites | | 19.5% | | 8.6% | | 10.7% |
In comparison to the compensation mix for fiscal year 2017, performance incentive payments our NEOs received for fiscal year 2018 represent a smaller percentage of each their total compensation primarily because fiscal year 2017 Company performance was approximately 130% of that year’s target, while fiscal year 2018 performance was approximately 69% of target.52% is equity-based incentives. For details regarding fiscal year 20182020 performance, see the below subsection titled “Annual Performance Incentive Payments” in this Proxy Statement. Mr. Leatherby is not included in the above table as a result of his departure from the Company in April 2018.
Base Salary
Each NEO’sof Messrs. Tyson’s, White’s and Banks’ employment contract sets an amount for base salary. The Compensation Committee approved such amounts for Messrs. Tyson and HayesWhite as part of its process in approving their respective employment contracts, and has the ability toCompensation Committee can adjust base salary as it deems appropriate. Theappropriate, except that the base salary under Mr. Tyson’s employment contract can be increased but not decreased. The CEO has discretion to set and adjust base salary amounts for all other NEOs based on each NEO’s role, capabilities, experience and performance. In determining whether to adjust (or, in the case of
new hires, setting) an NEO’s base salary, the Compensation Committee or the CEO, as applicable, considers (i) the Compensation Peer Group and General Industry Data for the NEO’s role, as applicable, (ii) the individual’s past performance and experience, (iii) the NEO’s capabilities, (iv) the NEO’s potential for advancement within the Company, (v) changes in level and scope of responsibility for the NEO, and (vi) salaries of other Company executive officers. No requisite weight is assigned to any factor by the CEO or the Compensation Committee.
The table below discloses the base salary in effect for each NEO (other than Messrs. GlendinningBanks and Leatherby)Langholz) at the end of fiscal years 20172019 and 2018. Mr. Glendinning was2020. Messrs. Banks and Langholz were not an employeeemployees of the Company at the end of fiscal year 2017, and Mr. Leatherby was not an employee of the Company at the end of fiscal year 2018. Each NEO listed2019. As noted below, (except for Mr. White) received an annual salary increase during fiscal year 2018. Mr. Tyson’s salary increase wasincreased approximately 14% to $1,200,000 and Mr. White’s salary increased approximately 8.7%, in connectioneach case, to further align with his new employment contract and was based, in part, on comparative data supplied by Korn Ferry. Mr. White did not receive a salary increase because he was deemed to be compensated commensurate with his position and experience. Mr. Glendinning’s initialthe base salary was determined based on market data provided by Korn Ferry, his prior work experiences including as a chief executive officer,levels for comparable positions in the Compensation Peer Group and internal pay equity considerations.General Industry Data.
|
| | | | | | |
| Name | | End of
Fiscal Year
2017 Salary
($) | | End of
Fiscal Year
2018 Salary
($) |
| John Tyson | | 928,818 |
| | 1,050,000 |
|
| Tom Hayes | | 1,150,000 |
| | 1,207,500 |
|
| Sally Grimes | | 750,000 |
| | 780,000 |
|
| Noel White | | 850,000 |
| | 850,000 |
|
| | | | | | | | | | | | | | |
| Name | | End of Fiscal Year 2019 Salary ($) | | End of Fiscal Year 2020 Salary ($) |
| John H. Tyson | | 1,050,000 | | 1,200,000 |
| Noel White | | 1,150,000 | | 1,250,000 |
| Dean Banks | | — | | 1,150,000 |
| Stewart Glendinning | | 775,000 | | 775,000 |
| Chris Langholz | | — | | 600,000 |
Annual Performance Incentive Payments
Employment contracts with Messrs. Tyson, White and Banks and employment terms with our other NEOs provided them an opportunity to receive performanceannual incentive payments. In fiscal year 2018,2020, the cash performanceannual incentive plan in place for senior executive officers was the Executive Incentive Plan. This plan is designed to align the interests of management towards the achievement of common corporate goals while attempting to maximize the Company’s ability under then-existing tax laws to deduct for tax purposes any payments made under the Executive Incentive Plan.goals. An NEO selected to participate in the Executive Incentive Plan is not eligible to participate in other cash performance incentive payment plans maintained by the Company. For fiscal year 2018,2020, the Compensation Committee designated all NEOs, as well as other executive officers, as eligible participants under the Executive Incentive Plan. Pursuant to the terms of his separation from the Company in April 2018, Mr. Leatherby became entitled to a prorated portion of his 2018 target annual bonus.
PerformanceAnnual incentive eligibility under the Executive Incentive Plan is based on one or more performance measures established at the beginning of each fiscal year by the Compensation Committee. For fiscal year 2018,2020, the Compensation Committee selected Adjusted Operating Income as the performance measure under the plan. “Operating Income” is the Company’s operating income (which takes into account accruals for performanceannual incentive payments) before interest and taxes, and “Adjusted Operating Income” for purposes of performanceannual incentive payments means Operating Income but takes into account any unusual or unique items, such as one-time gains or losses. The Compensation Committee believes Adjusted Operating Income is an appropriate metric of Company performance to utilize in making performance-based compensation decisions because it is a good indicator of value creation and is used by senior management to evaluate the day-to-day performance of the business. For
The fiscal year 2018,2020 performance levels were set by the Compensation Committee at the beginning of fiscal year 2020 and prior to the onset of the COVID-19 global pandemic. When establishing the performance levels, the Compensation Committee considered the Company’s expected performance for the year as well as assumptions regarding commodity prices, growth, and the overall market at the time the targets were set. The fiscal year 2020 target goal was set at a performance level that exceeded prior year actual Adjusted Operating Income performance and which was expected to be a challenging goal to attain. Accordingly, for fiscal year 2020, the Compensation Committee set the threshold level of Adjusted Operating Income for 50% of target performance incentive payments at $2.840$2.60 billion, the target Adjusted Operating Income level for 100% of target performance incentive payments at $3.550$3.25 billion, and a maximum level of Adjusted Operating Income for 200% of target performance incentive payments at $4.260$3.90 billion.
Target performanceannual incentive payment eligibility under the Executive Incentive Plan, expressed as a percentage of base salary, is established each year by the Compensation Committee. The Compensation Committee sets each NEO’s ultimate performance incentive payment eligibility to include an adjustment above the NEO’s initial targeted eligibility to allow the Compensation Committee to recognize variations in individual and business unit performance and maintain tax deductibility under then-existing tax laws of incentive payments when possible. For fiscal year 2018, Messrs. Tyson and Hayes were awarded higher ultimate performance incentive payment eligibility by the Compensation Committee given their respective levels of responsibility and ability to affect shareholder value relative to the other NEOs.performance. In determining actual performanceannual incentive payments, the Compensation Committee has the discretion to award amounts below, but not above, the eligibility level pertaining to Adjusted Operating Income.
Actual Adjusted Operating Income for purposes of performanceannual incentive payments for fiscal year 20182020 was approximately $3.114$3.237 billion, resulting in the NEOs’ eligibility for performanceannual incentive payments ofat approximately 69.28%99% of their respective target eligibilities. Actual Adjusted Operating Income reflected the Company’s strong performance during the fiscal year, which was viewed by the Compensation Committee to be particularly strong as the performance results took into account the additional costs related to the Company’s COVID-19 response.
At the end of fiscal year 2018,2020, the Compensation Committee reviewed each NEO’s (excluding Mr. Leatherby, who received a prorated target performance incentive payment upon his separation from the Company) eligibility based on this Adjusted Operating Income amount and the individual performance of each with our CEO and other members of management and the Board. Based on this review, the Compensation Committee awarded the NEOs listed below the performanceannual incentive payment amounts set forth in the following table.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Salary at 2020 Fiscal Year End ($) | | Eligibility at Target Adjusted OI of $3.25 billion (100% of target annual incentive payment)
($) | | Eligibility at
Target Adjusted
OI (expressed as
percentage of
base salary) | | Maximum Eligibility at Actual Adjusted OI
($) | | Actual Annual Incentive Payment for Fiscal Year 2020 ($)(1) |
| John H. Tyson | | 1,200,000 | | 2,160,000 | | 180% | | 2,138,400 | | 1,761,792 |
| Noel White | | 1,250,000 | | 2,250,000 | | 180% | | 2,227,500 | | 1,849,528 |
| Dean Banks | | 1,150,000 | | 2,070,000 | | 180% | | 2,049,300 | | 1,343,733 |
| Stewart Glendinning | | 775,000 | | 1,023,000 | | 132% | | 1,012,769 | | 852,500 |
| Chris Langholz | | 600,000 | | 792,000 | | 132% | | 784,079 | | 608,446 |
|
| | | | | | | | | | | | | | |
| Name | | Salary at 2018
Fiscal Year-
End
($) | | Eligibility at Target Adjusted OI of $3.55 billion (100% of target performance incentive payment) ($) | | Eligibility at
Target Adjusted
OI (expressed as
percentage of
base salary) | | Maximum Eligibility at Actual Adjusted OI of $3.114 billion (69.28% of target performance incentive payment) ($) | | Actual
Performance
Incentive
Payment for
Fiscal Year
2018
($) |
| John Tyson | | 1,050,000 |
| | 1,890,000 |
| | 180% | | 1,309,392 |
| | 1,205,998 |
|
| Tom Hayes | | 1,207,500 |
| | 2,173,500 |
| | 180% | | 1,505,801 |
| | 1,392,688 |
|
| Stewart Glendinning | | 725,000 |
| | 957,000 |
| | 132% | | 660,009 |
| | 497,699 |
|
| Sally Grimes | | 780,000 |
| | 1,029,600 |
| | 132% | | 713,306 |
| | 693,818 |
|
| Noel White | | 850,000 |
| | 1,326,000 |
| | 156% | | 918,653 |
| | 856,707 |
|
| Mr. Glendinning’s performance incentive payment for fiscal year 2018 was prorated based on his not being with the Company for the full fiscal year. |
(1) Amounts for Messrs. Banks and Langholz were prorated based on their start dates after the beginning of the fiscal year.
Following the conclusion of fiscal year 2020, the Compensation Committee evaluated the Company’s performance in light of the unprecedented circumstances in fiscal year 2020. In fiscal year 2020, the Company incurred significant direct incremental expenses related to COVID-19, which reduced Adjusted Operating Income for purposes of determining the payment under the Executive Incentive Plan which decreased the cash payouts under that plan. The Compensation Committee determined that participants in the Executive Incentive Plan, including the NEOs, should receive additional incentive compensation to recognize their extraordinary efforts during an unprecedented time. Accordingly, the participants in the Executive Incentive Plan, including the NEOs, received an additional grant of restricted stock units (“RSU”). The value of the additional RSU grant approximated the decreased payout under the Executive Incentive Plan from the impact of the direct incremental expenses related to COVID-19. The RSUs, which further align the NEOs’ compensation with that of the Company’s stockholders and include an additional retentive element in the Company’s executive compensation program, vest in two annual installments subject to the NEO’s continued employment through the applicable vesting dates. With respect to the Company’s separate broad-based annual incentive program, the direct incremental expenses related to COVID-19 were deemed extraordinary and unusual and therefore were excluded from Adjusted Operating Income, which increased the cash payout under that program. The following table sets forth the number of shares subject to the RSU awards granted to each of the NEOs in early fiscal year 2021:
| | | | | | | | |
| Name | | Shares Granted |
| John Tyson | | 17,780.705 |
| Noel White | | 18,686.203 |
| Dean Banks | | 13,582.483 |
| Stewart Glendinning | | 8,643.398 |
| Chris Langholz | | 6,173.856 |
Equity-Based Compensation
We believe equity-basedlong-term incentive compensation awarded annually is an effective long-term incentive formotivates executives and managers to create value for shareholders as the value of such compensation has a strong correlation to the appreciation of the Company’s stock price. The Compensation Committee believes that equity-basedlong-term incentive compensation allows the Company to provide employees with an incentive different from base salary and cash performanceannual incentive payments, with equity-basedlong-term incentive compensation increasing in value when the Company share price increases. Messrs. Tyson’s, White’s and Hayes’Banks’ employment contracts provide for equity-based compensation as determined by the Compensation Committee. The remaining NEOs’ employment contracts providedcompensation terms provide for equity-basedlong-term incentive compensation consistent with that provided to other employees in such NEO’s job grade level. In addition, in connection with his appointment to CFO, Mr. Glendinning received an additional equity award, with the amount of the award determined based on market data, compensation forfeited at Mr. Glendinning’s prior employer when he joined the Company, Mr. Glendinning’s prior work experiences including as a chief executive officer, and internal pay equity considerations. For details regarding these awards, see the table titled “Grants of Plan-Based Awards During Fiscal Year 2018”2020” in this Proxy Statement. All equity-basedlong-term incentive compensation is issued under the Stock Incentive Plan.
The amounts and types of equity-basedlong-term incentive compensation to be awarded within the job grade levels are determined by management and/or the Compensation Committee with a view towards aligningto align the interests of executives and other managers with the interests of the Company’s shareholders. In determining these amounts, management and the Compensation Committee consider the relationship of long-term incentive stock based compensation to cash compensation, the goal of providing additional incentives to executives and
managers to increase shareholder value and the value of equity-basedlong-term incentive compensation awarded to NEOs and other executives to awards made to executives in similar positions within the applicable peer group. In connection with his departure, Mr. Leatherby did not participate in the fiscal year 2018 equity compensation program.
For fiscal year 2018,2020, the dollar value of annual equitylong-term incentive compensation was weighted 25%, 25% and 50% among stock options, restricted stock with performance criteria (“restricted stock”), and performance stock, respectively, as discussed further below. From time to time, the Company may award additional equity compensation in connection with hiring, retention, and promotions. Accordingly, in connection(i) Mr. Banks received stock awards prorated with his hiring bystart date in December 2019, consistent with his job grade level and other similarly situated NEOs that received stock awards in November 2019 as part of the Company,Company’s annual equity grants, and (ii) Mr. GlendinningLangholz received an additional restricted stock award of stock options.to compensate him for amounts forfeited upon accepting employment with the Company. For details regarding equity awards granted to the NEOs in fiscal year 2018,2020, see the table titled “Grants of Plan-Based Awards During Fiscal Year 2018”2020” in this Proxy Statement.
Stock Options. Stock option awards comprised approximately 25% of the NEOs’ annual equity-basedlong-term incentive compensation for fiscal year 2018.2020. Stock options are typically awarded and approved annually by the Compensation Committee prior to or on a pre-determined grant date. The grant date for fiscal year awards usually occurs four business days after the Company announces fiscal year-end financial results, absent subsequent Compensation Committee action to the contrary. The actual number of stock options granted during fiscal year 20182020 was determined by dividing the target award dollar value assigned by the CEO or Compensation Committee, as applicable, for stock options by the grant date fair value of such stock options. The exercise price for option awards is the closing price for our Class A Common Stock as reported on the NYSE on the grant date. Option awards expire ten years after the grant date. The Company does not backdate, re-price or grant equitystock option awards retroactively. All stock options vest in equal annual increments on each of the first, second and third anniversary of the grant dates of the awards and become fully vested after three years, subject to certain exceptions in the event of the death disability or retirementdisability of the executive officer.officer or certain other termination events. For the fiscal year 20182020 stock option awards, the Compensation Committee set the grant date of November 17, 2017 at its May 3, 2017 meeting18, 2019 and approved the awards at its November 8, 20176, 2019 meeting.
Restricted Stock with Performance Criteria. Restricted stock awards comprised approximately 25% of the NEOs’ annual equity-basedlong-term incentive compensation for fiscal year 2018.2020. The actual number of shares of restricted stock granted during fiscal year 20182020 was determined by dividing the target dollar value assigned by the CEO or Compensation Committee, as applicable, for restricted stock by the closing price of the Company’s stock on the grant date. For example, if the designated dollar value for restricted stock was $200,000 and the closing stock price on the grant date was $50 per share, the executive received a grant of 4,000 shares of restricted stock.
Restricted stock awards represent the right to vest in shares of Class A Common Stock if one or more performance criteria are met within the time period indicated in the grant. Performance criteria are measured over a multi-year period, and, if the performance criteria are achieved, the award vests. These awards were granted with a performance-based vesting condition intended to qualify the awards as performance-based compensation under then-existing tax laws. The right to vest in the shares of Class A Common Stock under a restricted stock award is conditioned upon the executive officer remaining continuously in the employment of the Company from the grant date through the vesting date, subject to certain exceptions in the event of the death disability or retirementdisability of the executive officer.officer or certain other termination events.
On November 8, 2017,6, 2019, the Compensation Committee determined the performance criterion pertaining toapproved the restricted stock awards to be granted on November 17, 201718, 2019 and determined the performance criterion pertaining to such awards would be the Company’s achievement of a cumulative $125 million Adjusted Operating Income for the 20182020 through 20202022 fiscal years. These awards ultimately did not qualify as performance-based compensation under federal tax laws as further discussed in the section titled “Tax and Accounting Considerations” in this Proxy Statement.
Performance Stock. Performance stock awards comprised approximately 50% of the NEOs’ annual equity-basedlong-term incentive compensation for fiscal year 2018.2020. Performance stock awards represent the right to receive shares of Class A Common Stock if certain performance criteria are met within the time period indicated in the grant. The target number of shares of performance stock granted during fiscal year 20182020 was determined by dividing the dollar value assigned by the CEO or Compensation Committee, as applicable, for performance
stock by the closing price of the Company’s stock on the grant date. The Compensation Committee approved the fiscal year 20182020 performance stock awards at its November 8, 20176, 2019 meeting with a grant date of November 17, 2017.18, 2019. Performance criteria are measured three years from the beginning of the fiscal year in which the performance stock is awarded, and, if the performance criteria are achieved, the award vests as set forth below. The right to receive Class A Common Stock under a performance stock award is conditioned upon the executive officer remaining continuously in the employment of the Company from the grant date through the vesting date, subject to certain exceptions involvingin the event of the death disability or retirementdisability of the executive officer.officer or certain other termination events.
On an annual basis, the Company’s senior management, Compensation Committee and human resources group meet to discuss the performance criteria options and levels to be considered for the following year’s grants. Through the course of its review and discussions, the Compensation Committee chooses such performance criteria that the Compensation Committee believes provide the appropriate balance between (i) significant performance measures aimed at increasing shareholder value if achieved, and (ii) performance measures that are reasonably attainable so as to motivate the officers to achieve the performance goals.
The performance criteria adopted by the Compensation Committee for performance stock awards granted in fiscal year 20182020 were as follows:
•achievement of a cumulative Adjusted Operating Income target over the 2018, 20192020, 2021 and 20202022 fiscal years (the “cumulative Operating Income criterion”); and
•a comparison of the relative total shareholder return of the Company’s Class A Common Stock relative to the relative total shareholder return of the Compensation Peer Group over the 2018, 20192020, 2021 and 20202022 fiscal years (the “relative total shareholder criterion”).
The Compensation Committee utilized Adjusted Operating Income as an element in both the Company’s annual incentive program and long-term incentive program in recognition that this measure is viewed as a core driver of the Company’s performance and shareholder value creation. In designing the Company’s executive compensation program, the Compensation Committee supplemented this measure in the long-term incentive program with a relative total shareholder return comparison measure in order to strike an appropriate balance with respect to incentivizing top-line growth and shareholder returns over both the short-term and long-term horizons.
Each performance criterion accounts for one-half of the performance stock award and is subject to the achievement of performance goals as set forth in the below tables. With respect to the cumulative Adjusted Operating Income criterion, the Adjusted Operating Income measure selected is based on management’s projected earnings for the Company over a three-year period. The targeted performance goal was established at a level that was designed to be reasonably attainable so as to motivate the officers to achieve or exceed the goal. Also, in selecting the cumulative Adjusted Operating Income criterion, the Compensation Committee recognized the importance placed by senior management on this measure in its evaluation of the day-to-day performance of the business. Based on the percentage of the Adjusted Operating Income measure achieved, our NEOs (other than Mr. Leatherby) are entitled to receive upon achievement of the Adjusted Operating Income goals the number of shares as set forth in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Percentage of Cumulative Adjusted Operating Income Goal Achieved | |
| 80% | | 100% | | 120% | |
| John H. Tyson | | 8,335 | | | 16,670 | | | 33,340 | | | Number of Shares Awarded* |
| Noel White | | 8,891 | | | 17,781 | | | 35,563 | | |
| Dean Banks | | 5,860 | | | 11,719 | | | 23,438 | | |
| Stewart Glendinning | | 2,639 | | | 5,278 | | | 10,557 | | |
| Chris Langholz | | 2,084 | | | 4,167 | | | 8,335 | | |
| * Amounts rounded down to the nearest share and may differ from the amounts reported in the table entitled “Grants of Plan-Based Awards During Fiscal Year 2020” due to rounding differences. |
|
| | | | | | | | | | | |
| Name | | Percentage of Cumulative Adjusted Operating Income Goal Achieved | |
| | 80% | | 100% | | 120% | |
| John Tyson | | 8,416 |
| | 16,833 |
|
| 33,666 |
|
| Number of Shares Awarded* |
| Tom Hayes | | 8,817 |
| | 17,634 |
|
| 35,269 |
|
|
| Stewart Glendinning | | 4,565 |
| | 9,130 |
|
| 18,260 |
|
|
| Sally Grimes | | 3,206 |
| | 6,412 |
|
| 12,825 |
|
|
| Noel White | | 4,328 |
| | 8,657 |
|
| 17,314 |
|
|
| * Amounts rounded down to the nearest share and may differ from the amounts reported in the table entitled “Grants of Plan-Based Awards During Fiscal Year 2018” due to rounding differences. |
With respect to the relative total shareholder return criterion, the NEO is entitled to receive the number of shares set forth below, based on the percentile ranking of the Company’s total shareholder return compared to the Compensation Peer Group members’ total shareholder return during the measurement period:
|
| | | | | | | | | | | |
| Name | | Percentile of Companies’ Relative Total Shareholder Return* | |
| | 30th | | 50th | | 80th | |
| John Tyson | | 8,416 |
| | 16,833 |
| | 33,666 |
| | Number of Shares Awarded* |
| Tom Hayes | | 8,817 |
| | 17,634 |
| | 35,269 |
| |
| Stewart Glendinning | | 4,565 |
| | 9,130 |
| | 18,260 |
| |
| Sally Grimes | | 3,206 |
| | 6,412 |
| | 12,825 |
| |
| Noel White | | 4,328 |
| | 8,657 |
| | 17,314 |
| |
| * Amounts rounded down to the nearest share and may differ from the amounts reported in the table entitled “Grants of Plan-Based Awards During Fiscal Year 2018” due to rounding differences. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Percentile of Companies’ Relative Total Shareholder Return* | |
| 30th | | 50th | | 80th | |
| John H. Tyson | | 8,335 | | | 16,670 | | | 33,340 | | | Number of Shares Awarded* |
| Noel White | | 8,891 | | | 17,781 | | | 35,563 | | |
| Dean Banks | | 5,860 | | | 11,719 | | | 23,438 | | |
| Stewart Glendinning | | 2,639 | | | 5,278 | | | 10,557 | | |
| Chris Langholz | | 2,084 | | | 4,167 | | | 8,335 | | |
| * Amounts rounded down to the nearest share and may differ from the amounts reported in the table entitled “Grants of Plan-Based Awards During Fiscal Year 2020” due to rounding differences. |
Following certification of the Company’s fiscal year 20182020 performance and stock price performance relative to certain peers, the Compensation Committee approved the vesting of performance sharesstock awarded to the then-serving NEOs in fiscal year 20162018 based on the Company’s achievement of (i) three years’ cumulative earnings before interest and taxesadjusted operating income (“EBIT”AOI”) of $9.092$9.609 billion where the three-year cumulative target was $6.877$11.326 billion and (ii) a Total Shareholder Return Comparison (“rTSR”) among the stock price performance ranking of third against the fifteen other companies in the compensation peer group (the
Company did not exceed the performance of 30th percentile of its fourteen peers) during the performance period for purposes of this award in the following amounts:
|
| | | | | | |
| Name | | Number of Shares of Performance Stock |
| | Stock Price Criterion (200%) | | Cumulative EBIT Criterion (180.52%) |
| John Tyson | | 50,101.670 |
| | 45,221.767 |
|
| Tom Hayes | | 16,864.950 |
| | 15,222.304 |
|
| Sally Grimes | | 16,864.950 |
| | 15,222.304 |
|
| Noel White | | 25,062.240 |
| | 22,621.178 |
|
| Dennis Leatherby | | 13,190.630 |
| | 11,905.870 |
|
| | | | | | | | | | | | | | |
| Name | | Number of Shares of Performance Stock |
| rTSR Criterion (0%) | | Cumulative AOI Criterion (62.1%) |
| John H. Tyson | | — | | | 10,453.540 | |
| Noel White | | — | | | 5,376.106 | |
| Stewart Glendinning | | — | | | 5,669.847 | |
Financial, Retirement and Welfare Benefit Plans
Our NEOs are eligible to participate in the Company’s financial, retirement and welfare benefit plans that are generally available to all employees of the Company. The NEOs are also eligible to participate in certain plans, described below, that are only available to contractedcertain eligible officers and managers. We believe these benefits are a basic component in attracting, motivating and retaining executives and are comparable to the benefits offered by the companies in our peer groups according to market data.
Deferred Compensation Plan. The Supplemental Executive Retirement Plan (“SERP”) is a nonqualified deferred compensation plan providing a retirement benefit to certain officers of the Company, including all NEOs.Messrs. Tyson, White and Glendinning. The SERP also provided participants as of July 1, 2014 (including Messrs. Leatherby and(only for Mr. White) life insurance protection. The SERP allows participating officers to supplement the officers’ existing anticipated retirement payments and benefits. In fiscal year 2018, the Compensation Committee elected to freeze benefits under the SERP on December 31, 2018. Additional information about our SERP is included in the narrative text following the section titled “Pension Benefits” in this Proxy Statement.
Retirement Plans. We also provide the following qualified and nonqualified plans to the NEOs:
•Employee Stock Purchase Plan;
•Retirement Savings Plan;
•Executive Savings Plan; and
•Executive Long-Term Disability Plan.
The Employee Stock Purchase Plan is a nonqualified benefit plan available to all NEOs and most U.S.-based employees (some bargaining units do not participate). The purpose of the plan is to encourage employees to acquire stock in the Company by offering employees who participate a way to purchase our Class A Common Stock on terms better than those available to a typical investor. Participants are eligible to participate on the first day of the month following 59 days of service and can contribute (on an after tax basis) up to 20% of base pay to this plan per pay period. After one year of service the Company will match 25% of the first 10% of base pay contributed. The plan provides for 100% immediate vesting.
The Retirement Savings Plan is a qualified benefit plan (401(k)) available to all NEOs and most U.S.-based employees (some bargaining units do not participate). The plan allows employees who participate to save money for retirement while deferring income taxes on the amount saved and any earnings on those amounts until the funds are withdrawn. Participants may elect how their accounts are invested from a numberselection of investment options. Participants are eligible to participate on the first day of the month following 59 days of service and can
contribute from 2% to 60% of eligible pay to this plan per pay period, subject to IRS annual limits on contributions and compensation. After one year of service the Company will matchmatches 100% of the first 3% of base pay contributed, plus 50% of the next 2% contributed. This plan provides for 100% immediate vesting.
The Executive Savings Plan is a nonqualified deferred compensation plan available to the NEOs and other highly compensated U.S.-based employees of the Company. The plan is available for those who wish to defer additional dollars over and above the IRS limits for qualified plans. After reaching the annual IRS limits in the Retirement Savings Plan, participants can begin deferring up to 60% of base pay into this plan. Participants can also defer up to 100% of the annual performance incentive payment to this plan. All deferrals and payout elections to this plan must be elected by December 31 of the year prior to the deferral year. This plan provides Company matching contributions in the same manner and amount as the Retirement Savings Plan not otherwise matched under the Retirement Savings Plan. In addition, NEOs and certain other participants receive a non-elective Company contribution equal to 4% of their base salary and annual incentive plan payment. Participants in fiscal year 2018 were able to elect thenotional investment options mirroring those available under the Retirement Savings Plan plus an investment option paying the prime rate as reported in the Wall Street Journal plus two hundred basis points.Plan. This plan provides for 100% immediate vesting. Additional information on the Executive Savings Plan can be found in the narrative text following the table titled “Nonqualified Deferred Compensation for Fiscal Year 2018”2020” in this Proxy Statement.
OfficersU.S.-based officers and certain U.S.-based managers of the Company who are party to a written employment contract (including the NEOs) participate in the Executive Long-Term Disability Plan. This plan replaces (tax free) up to 60% of “insured earnings” to a maximum benefit of $25,000 per month. “Insured
“Insured Earnings” include salary, annual performance incentive payment and the value of the most recent annual stock option, restricted stock and performance stock awards. The value of the premiums paid by the Company are included in the participant’s taxable income.
Welfare Benefit Plans. Our NEOs and other executives participate in our broad-based employee welfare plans, including medical, dental, vision and other insurance. These plans and benefits are available to all salaried employees.
Perquisites
We provide certain perquisites that the Compensation Committee believes are reasonable and consistent with our overall compensation program. The Company pays taxes owed by the NEOs on certain of these perquisites. The value of these perquisites and the estimated income taxes thereon are imputed as income to the executive. The Compensation Committee believes that these personal benefits provide executives with benefits that balance our compensation program and help attract executive talent. The Compensation Committee reviews the perquisites on a periodic basis to evaluate whether they are appropriate in light ofgiven the Company’s total compensation program and market practice. For the last completed fiscal year, Messrs.Mr. Tyson, Hayes,Mr. White and WhiteMr. Banks were permitted by their employment contracts to personal use of Company-owned aircraft (subject to certain contractual limits), and all other NEOs were eligible for personal use of Company-owned aircraft in the CEO’s discretion, subject to an overall limit established by the Compensation Committee. In addition, all NEOs are eligible to participate inreceive the Executive Rewards Allowance, pursuant to which they receive an annual cash allowance of $12,000 that can be used for an array of items based on the NEO’s needs. Additionally, Mr. Langholz received certain payments typically made to expatriates. The attributed costs of the perquisites described above for the NEOs for fiscal year 20182020 are included in the “All Other Compensation” column of the “Summary Compensation Table for Fiscal Year 2018”2020” in this Proxy Statement.
Employment Contracts and Executive Severance Plan
The Company maintained employment contracts with each NEOMessrs. Tyson, White and Banks during fiscal year 2018.2020. A summary description of these contracts is provided below. The other NEOs, other than Messrs. Tyson, White and Banks, are participants in the Company’s Executive Severance Plan (the “Executive Severance Plan”), as described below.
John H. Tyson. Mr. Tyson entered into an amended and restated employment contract with the Company on November 9, 2017, the terms of which was in effect during fiscal year 2018. Thewere approved by the Compensation Committee prior to execution. Mr. Tyson’s employment contract providedprovides for, among other things, a minimum annual base salary $1,050.000, participation in the Company’s annual performance incentive payment program on terms and in amounts as determined by the Compensation Committee, eligibility for equity awards under the Company’s equity incentive plans on terms and in amounts as determined by the Compensation Committee, continued annual payments of $175,196 from his SERP account and participation in the Company’s benefit plans. Accordingly, Mr. Tyson is also entitled to certain perquisites, including personal use of Company-owned aircraft for up to 275 hours per year, use of Company security personnel consistent with past practice (the expense for which the Company estimates to be $80 per hour), security services of up to $50,000 annually and payment of an annual premium on a $7,500,000 life insurance policy. The Company has also agreed to reimburse Mr. Tyson and gross-up any tax liability incurred by Mr. Tyson from the receipt of any perquisites. The employment contract is for a perpetual term, subject to the Board of Directors’ right to terminate the agreementcontract at any time upon written notice to Mr. Tyson. Any such termination without cause is subject to the Company’s obligation to pay, in a lump sum, an amount equal to two years of his base salary and two times his target annual cash bonus, plus continued medical coverage for life. Such termination will also trigger vesting of Mr. Tyson’s equity awards that are outstanding as of the date of termination.
Tom Hayes. Noel White.Mr. HayesWhite entered into an amended and restated employment contract with the Company in November 2016,on October 1, 2018, the terms of which were approved by the Compensation Committee prior to execution. Mr. White’s employment contract provided for, aamong other things, an annual base salary of $1,150,000, participation in the Company’s annual performance incentive programs on terms and in amounts as determined by the Compensation Committee, eligibility for equity awards under the Company’s performanceequity incentive payment program and equity plans on terms and in amounts consistent with thoseas determined by the Compensation Committee, and participation in the Company’s benefit plans. Mr. White’s employment contract also provided that upon a termination by the Company (other than for “cause” or by reason of death or permanent disability) or if Mr. White resigned for “good reason”, the Company would pay Mr. White an amount equal to other senior executive-level employees, subjecttwo years of his base salary and two times his target annual cash bonus, to the discretion of the
Compensation Committee.be paid out over two years, plus continued medical coverage for up to 18 months. Additionally, Mr. Hayes wasWhite is entitled to personal use of Company-owned aircraft onin a manner consistent with the same termsCompany’s policy governing aircraft use by executive officers. Current Company policy is to reimburse taxes associated with any approved personal use of Company-owned aircraft. The employment contract contained a non-competition restriction for a period of 24 months post-termination and conditions as such use is made available to similarly situated executives.a 36 month post-termination non-solicitation restriction.
In September 2018, the Company announced thatconnection with Mr. Hayes was stepping down as its President and ChiefWhite’s appointment to Executive Officer effective September 30, 2018. The CompanyVice Chairman, Mr. White entered into a separation and release agreement with Mr. Hayes as described above, whichthe Executive Vice Chairman Employment Agreement on October 3, 2020. The Executive Vice Chairman Employment Agreement provides for, benefits consistent with severance benefits provided under his employment contract.
Other NEOs. Theamong other things, an annual base salary of $1,250,000 for the fiscal year 2018 employment contracts with Mr. Glendinning, Ms. Grimes, Mr. Whitebeginning October 4, 2020; $1,150,000 for the fiscal year beginning October 3, 2021; and Mr. Leatherby, which are described below in more detail, provided$1,000,000 for base salarythe period beginning October 2, 2022 and ending December 31, 2023. The Executive Vice Chairman Employment Agreement also provides for the possibility of special equity incentive awards as approved by the Compensation Committee, and participation in the Company’s performance incentive payment programs, equity plans and employee benefit plans. The employment contracts for Mr. Glendinning, Ms. Grimes,Additionally, Mr. White remains entitled to personal use
of Company-owned aircraft in a manner consistent with the Company’s policy governing aircraft use by executive officers. The Executive Vice Chairman Employment Agreement contains a non-competition restriction for a period of 24 months post termination and a 36-month post-termination non-solicitation restriction.
Dean Banks. In connection with his appointment to President, Mr. Leatherby wereBanks entered into an employment contract with the Company on December 11, 2017, August 29, 2014, November 15, 2013, and November 14, 2012, respectively.
6, 2019, the terms of which were approved by the Compensation Committee prior to execution. As part of his initial appointment, Mr. Glendinning’s contract provided for an annual base salary of $725,000. He alsoBanks received a sign-on bonuspayment of $2,700,000, which$5,000,000 to compensate him for amounts forfeited upon accepting employment with the Company. Mr. GlendinningBanks will be required to repay this sign-on payment should he (i) voluntarily terminate his employment with the Company prior to December 20, 2021, the two year anniversary of December 11, 2017 (the “Start Date”)his commencement of employment with the Company or (ii) have not relocated and established a permanent residence in the Northwest Arkansas area prior to the one-year anniversaryDecember 20, 2020. Mr. Banks’ employment contract provided for, among other things, an annual base salary of the Start Date. Mr. Glendinning also became eligible to participate$1,150,000, participation in the Company’s annual performance incentive payment programprograms on terms and in amounts as determined by the Compensation Committee, eligibility for equity awards under the Company’s equity incentive plans on terms and in amounts consistent with those provided to other senior executive-level employees, subject toas determined by the discretion of management.
Ms. Grimes’ contract provided for an annual base salary of $582,400, which had increased to $780,000 at the end of fiscal year 2018. Ms. Grimes was also eligible to participateCompensation Committee, and participation in the Company’s performance incentive payment programbenefit plans. Mr. Banks’ employment contract also provided that upon a termination by the Company (other than for “cause” or by reason of death or permanent disability) or if Mr. Banks resigned for “good reason,” the Company would pay Mr. Banks an amount equal to two years of his base salary and equity plans on terms andtwo times his target annual cash bonus, to be paid out over two years, plus continued medical coverage for up to 18 months. Additionally, Mr. Banks is entitled to personal use of Company-owned aircraft in amountsa manner consistent with those provided to other senior executive-level employees, subject to the discretion of management.
Mr. White’s contract in effect during fiscal year 2018 provided for an annual base salary of $725,000, which had increased to $850,000 at the end of fiscal year 2018. Mr. White was also eligible to participate in the Company’s performance incentive payment program and equity plans on terms and in amounts consistent with those provided to other senior executive-level employees, subject to the discretion of management. Thepolicy governing aircraft use by executive officers. Current Company also agreedpolicy is to reimburse Mr. White and gross-uptaxes associated with any tax liability incurred by him through hisapproved personal use of Company-owned aircraft. The employment contract contained a non-competition restriction for a period of 24 months post termination and a 36-month post termination non-solicitation restriction. In connection with his promotionMr. Banks’ appointment to President and Chief Executive Officer subsequent to fiscal year-end, Mr. WhiteCEO, he entered into an amended and restatedin the CEO employment contract with the Company on October 4, 2018, as described above.3, 2020. The CEO employment contract is generally consistent with the terms of Mr. Banks’ 2019 employment contract, except that his base salary was increased to $1,200,000.
PriorExecutive Severance Plan
Messrs. Glendinning and Langholz are participants in the Executive Severance Plan, which provides eligible employees with certain severance benefits upon a qualifying involuntary or voluntary termination of employment.
Upon a qualifying involuntary termination, the participating NEO will be eligible for (i) cash severance benefits equal to Mr. Leatherby’s departure from the Company,two times his contract provided for anor her annual base salary, payable in installments in accordance with the Company’s normal payroll schedule, (ii) COBRA reimbursements for up to two years of $566,500, which had increasedcontinued coverage, and (iii) 12-months of outplacement assistance. A qualifying involuntary termination includes termination of employment by the Company without cause or by the participating NEO for good reason. Upon a qualifying voluntary termination, the participating NEO will be eligible for (x) cash severance benefits equal to $700,000one times his or her annual base salary, payable in installments in accordance with the Company’s normal payroll schedule and (y) COBRA reimbursements for one year of continued coverage. A qualifying voluntary termination is a termination of employment by a participating NEO with at least five years of consecutive service with the timeCompany who provides a qualifying 12-month prior notice to the Company of his departure. Mr. Leatherbyor her election to terminate employment. In addition, participating NEOs in the Executive Severance Plan are also eligible to receive a payout under the Company’s annual incentive plan for the year of termination, provided that the NEO was alsoemployed for at least 60 days during the applicable fiscal year. For terminations that occur in the first through third quarters of the fiscal year, the payout will be equal to the NEO’s target opportunity under the annual incentive plan and prorated for the NEO’s service during the year. For terminations that occur in the fourth quarter of the fiscal year, any payout under the annual incentive plan will be determined based on actual Company performance and prorated for the NEO’s service during the year.
An otherwise eligible employee is not eligible to participate in the Company’s performance incentive payment program and equity plans on terms and in amounts consistentExecutive Severance Plan if he or she (i) has a written employment contract with those provided to other senior executive-level employees, subject to the discretion of management. In November 2017, the Company announcedor any affiliate on his or her date of termination or (ii) is otherwise covered by any other plan or similar arrangement that Mr. Leatherby would step down as Chief Financial Officer effective February 10, 2018, following whichaddresses severance pay or any similar benefits, regardless of whether he would remain employed by the Company until April 6, 2018. In connection with this separation, the Company and Mr. Leatherby entered into a separation and release agreement as described above.or she receives any severance pay or benefits under such contract, plan or similar arrangement.
Notwithstanding the term of any employment contract, the Company has the right to terminate the contract at any time upon written notice subject to the obligation, if terminated without cause or for good reason, to continue to pay base salary for a period specified in the contract and subject to provisions relating to the early vesting of certain equity-based compensation. Severance information is more particularly described in the section titled “Potential Payments Upon Termination” in this Proxy Statement. The termination of employment contracts as described above in the section “How NEOs Are Compensated” did not trigger any severance obligations. Future severance obligations will be determined under a new executive severance plan.
Certain Benefits Upon a Change in Control
Employment Contracts. Each employment contract in effect during fiscal year 2018 between the Company and our NEOs provided for certain benefits payable to the NEO following a change in control of the Company. The Compensation Committee believes thesethat change in control benefits which going forwarded will be provided for in other plans and policies, are an important part of the total executive compensation program because they protect the Company’s interest in the continuity and stability of the executive group. The Compensation Committee also believes that the change in control benefits are necessary to retain and attract highly qualified executives and help to keep them focused on minimizing interruptions in business operations by reducing any concerns they may have of being terminated prematurely and without cause during any ownership transition.
Impact of Change in Control on the SERP. No later than thirty days after a change in control of the Company, a grantor trust created under the SERP will be funded with the present value of the higher of (i) the minimum defined benefit or (ii) all accrued benefits for each participant under the SERP. Participants will vest in a benefit equal to the amount calculated under the general provisions of the SERP as of the effective date of the change in control, but without regard to any age or service requirements, if following the change in control the SERP is terminated in a manner that adversely affects a participant or a participant experiences a termination of employment (other than a voluntary resignation without good reason or an involuntary termination for cause). For this purpose, “good reason” means: (i) a
substantial adverse change in position, duties, title or responsibilities; (ii) any material reduction in base salary or annual performance incentive opportunity or benefit plan coverages; (iii) any relocation required by the Company to an office or location more than 25 miles from the current location; or (iv) failure by a successor to assume the plan. Payment of the amount calculated as of the effective date of the change in control would begin following termination of employment, regardless of age, on an actuarially adjusted basis.
Executive Life Insurance Program. Following a change in control of the Company, the Company will continue to pay the annual life insurance premiums (plus a tax gross-up based on the withholding rates for supplemental wages) under the Executive Life Insurance Program for active participants on the date of the change in control up to the earlier of termination of employment or age 62.
Change in control information is more particularly described in the section titled “Potential Payments Upon a Change in Control” in this Proxy Statement.
Tax and Accounting Considerations
Limits on Deductibility of Compensation. Section 162(m) of the Internal Revenue Code generally prevents public corporations from deducting as a business expense that portion of compensation paid to certain of the Company’s executive officers that exceeds $1,000,000. Historically, there was an exception to this $1,000,000 deduction limit for compensation that qualified as “performance-based compensation” under Section 162(m). In connection with federal legislation signed into law on December 22, 2017, referred to as the Tax Cuts and Jobs Act (the “Tax Act”), the performance-based compensation exception was repealed for taxable years beginning on or after January 1, 2018. In addition, the Tax Act expanded the group of covered employees under Section 162(m) to include the chief financial officer and mandated that once an individual is treated as a covered employee for a given year, that individual will be treated as a covered employee for all subsequent years. Accordingly, any compensation paid to our covered executive officers in excess of $1 million in any one year will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. In the past, the goal of the Compensation Committee was to comply with the requirements of Section 162(m), to the extent possible and consistent with the Company’s compensation objectives, to avoid losing this deduction. However, the Compensation Committee retained discretion to elect to provide compensation outside those requirements when it deemed it necessary to achieve the Company’s compensation objectives.
Compensation Expense. The Company accounts for equity-based awards by recognizing the compensation expense of the equity award to an employee based on the fair value of the award on the grant date. The Company has determined the fair value of these awards based on the assumptions set forth in Note 1415 to our fiscal year 20182020 audited financial statements included in our Form 10-K for the fiscal year ended September 29, 2018.October 3, 2020. Compensation expense of deferred cash awards are based on the amount of the award. The compensation expense for stock options, stock appreciation rights, restricted stock, phantom stock, performance stock and deferred cash is ratably recognized over the vesting period.
Stock Ownership Requirements
The Company’s stock ownership requirements require senior officers (which includes the NEOs) and directors to maintain a minimum equity stake in the Company. These requirements were put into place to strengthen the alignment between the interestinterests of the Company’s directors and senior officers and the interests of its shareholders.shareholders and are periodically reviewed by the Company’s compensation consultant.
The requirements set forth the minimum amount of shares of Company stock a director and certain officers must own. Participants’ holdings are reviewed by the Company annually. Each officer subject to the requirements has five years from the effective date of their current employment contractappointment to a role with share ownership requirements to achieve the applicable level of ownership. Directors have five years from the later of the Company’s annual meeting of shareholders held on February 1, 2013 or his or her initial election as director.director to achieve the required share ownership level.
For officers, the levels are based on a multiple of the officer’s salary. Officers that are promoted into new grades will be assigned the appropriate ownership levels based on the new grade and will have five years from the date of their promotion to comply with their new ownership requirements. The CEO’s current ownership level is six times annual salary, the President’s current ownership level is five times annual salary and the remaining NEOs’ levels are currently two times annual salary. In fiscal year 2021, Dean Banks was appointed President and Chief Executive Officer and his ownership level was increased to six times annual salary. For directors, the level is four times the annual cash retainer (exclusive of any retainer amounts attributable to positions of Lead Independent Director or committee chairmanships), which they must attain within five years of being elected as a director.chairs). As of December 10, 2018,14, 2020, all continuing NEOs and directors were in compliancecomplied with the stock ownership requirements.requirements or were on track to comply within the five-year period.
The Company’s Securities Trading Policy prohibits all directors, officers (including all NEOs), and employees generally from engaging in any hedging transactions with respect to the Company’s shares or other securities. For purposes of this policy, “hedging transactions” means any and all transactions designed to hedge or offset any decrease in the market value of the Company’s securities, including the purchase of financial instruments such as prepaid variable forward contracts, equity swaps, collars, exchange funds, puts, calls, and arbitrage trading. This policy does permit those subject to the foregoing prohibitions to enter into pre-arranged trading plans, commonly referred to as 10b5-1 plans, provided such plan is entered into outside of the Company’s regular blackout periods, the person entering such plan is not in possession of material, non-public information about the Company, and such plan is approved by the Company’s Law Department. Blackout periods begin prior to the end of each fiscal quarter and continue through the first full trading day after the Company’s earnings are made publicly available for such reporting period, though the Company may implement additional blackout periods at other times. Risk Considerations in our Overall Compensation Program
We believe that the Company’s compensation program is structured in such a way as to discourage excessive risk-taking. In making this determination, we considered various aspects of our compensation program, including the mix of fixed and performance-based compensation for management and other key employees. The Company’s performance-based compensation awards are designed to reward both short- and long-term performance. By linking a portion of total compensation to the Company’s long-term performance, we seek to mitigate short-term risks that could be detrimental to the Company’s long-term best interests and the creation of shareholder value. Another aspect we considered is our practice of increasing an individual’s long-term incentive equity-based performance compensation as a percentage of his or her total compensation as his or her responsibility and ability to affect the financial results of the Company increases. Such
long-term equity-based performance awards are subject to multi-year vesting periods and derive their value from the Company’s total performance, which we believe further encourages decision-making that is in the long-term best interests of the Company and its shareholders. Finally, we considered our stock ownership guidelines for executive officers and directors, which are designed to strengthen the alignment between the interests of our Board of Directors and executive officers and the Company’s shareholders. We believe these guidelines discourage excessive risk-taking that could be detrimental to the long-term interests of the Company, its performance or our stock price. In conclusion, we believe that the Company’s
compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on the Company.
REPORT OF THE COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE
We, the Compensation and Leadership Development Committee of the Board of Directors of Tyson Foods, Inc., have reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on such review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in Tyson Foods, Inc.’s Annual Report on Form 10-K for the fiscal year ended September 29, 2018.October 3, 2020.
Compensation and Leadership Development Committee of the Board of Directors
Gaurdie E. Banister Jr., Chair
Kevin M. McNamara
Jeffrey K. Schomburger*Schomburger
* Mr. Schomburger was appointed to the Compensation and Leadership Development Committee in November 2017
grant date fair values for the performance stock awards are computed in accordance with the rules described in footnote (1). Descriptions of these awards and the performance criteria are provided in the subsection titled “Elements of Compensation—Equity-Based Compensation—Performance Stock” in the section titled “Compensation Discussion and Analysis” in this Proxy Statement.
