UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant x
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x | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12 |
KELLOGG COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49017-3534
Dear Shareowner:
It is my pleasure to invite you to attend the 20112012 Annual Meeting of Shareowners of Kellogg Company. The meeting will be held at 1:00 p.m. Eastern Time on April 29, 201120, 2012 at the W. K. Kellogg Auditorium, 50 West Van Buren Street, Battle Creek, Michigan.
The following pages contain the formal Notice of the Annual Meeting and the Proxy Statement. Please review this material for information concerning the business to be conducted at the meeting and the nominees for election as Directors.
We are pleased to take advantage of the Securities and Exchange Commission rules that allow companies to furnish proxy materials to their shareowners on the Internet. We believe these rules allow us to provide our Shareowners with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting.
Attendance at the Annual Meeting will be limited to Shareowners only. If you are a holder of record of Kellogg common stock and you plan to attend the meeting, please save your notice of electronic availability or proxy card, as the case may be, and bring it to the meeting to use as your admission ticket. If you plan to attend the meeting, but your shares are not registered in your own name, please request an admission ticket by writing to the following address: Kellogg Company Shareowner Services, One Kellogg Square, Battle Creek, MI 49017-3534. Evidence of your stock ownership, which you may obtain from your bank, stockbroker, etc., must accompany your letter.Shareowners without tickets will only be admitted to the meeting upon verification of stock ownership.
If any Shareowner needs special assistance at the meeting, please contact Shareowner Services at the address listed above.
Your vote is important. Whether or not you plan to attend the meeting, I urge you to vote your shares as soon as possible. You may vote your shares via a toll-free telephone number or over the Internet. If you received a paper copy of the proxy or voting instruction card by mail, you may sign, date and mail the card in the envelope provided.
Sincerely,
John Bryant
President and Chief Executive Officer
March 10, 20115, 2012
KELLOGG COMPANY
One Kellogg Square
Battle Creek, Michigan 49017-3534
NOTICE OF THE ANNUAL MEETING OF SHAREOWNERS
TO BE HELD APRIL 29, 201120, 2012
TO OUR SHAREOWNERS:
The 20112012 Annual Meeting of Shareowners of Kellogg Company, a Delaware corporation, will be held at 1:00 p.m. Eastern Time on April 29, 201120, 2012 at the W. K. Kellogg Auditorium, 50 West Van Buren Street, Battle Creek, Michigan, for the following purposes:
1. | To elect four Directors for a three-year term to expire at the |
2. | To |
To ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP for our |
To consider and act upon a Shareowner proposal to repeal classified board, if properly presented at the meeting; |
5. | To consider and act upon a Shareowner proposal to adopt simple majority vote, if properly presented at the meeting; |
To take action upon any other matters that may properly come before the meeting, or any adjournments thereof. |
Only Shareowners of record at the close of business on March 1, 2011February 27, 2012 will receive notice of and be entitled to vote at the meeting or any adjournments. We look forward to seeing you there.
By Order of the Board of Directors,
Gary Pilnick
Senior Vice President,
General Counsel, Corporate Development and Secretary
March 10, 20115, 2012
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREOWNERS
TO BE HELD ON FRIDAY, APRIL 29, 201120, 2012
Information About this Proxy Statement.
Why you received this proxy statement. You have received these proxy materials because our Board of Directors, which we refer to as the Board, is soliciting your proxy to vote your shares at the 20112012 Annual Meeting of Shareowners of Kellogg to be held at 1:00 p.m. Eastern Time at the W. K. Kellogg Auditorium, 50 West Van Buren Street, in Battle Creek, Michigan, on Friday, April 29, 2011,20, 2012, or any adjournments thereof. This proxy statement includes information that we are required to provide to you under the rules of the Securities and Exchange Commission and that is designed to assist you in voting your shares. On March 11, 2011,5, 2012, we began to mail to our Shareowners of record as of the close of business on March 1, 2011,February 27, 2012, either a notice containing instructions on how to access this proxy statement and our annual report online or a printed copy of these proxy materials. If you own our common stock in more than one account, such as individually and also jointly with your spouse, you may receive more than one notice or set of these proxy materials. To assist us in saving money and to serve you more efficiently, we encourage you to have all your accounts registered in the same name and address by contacting our transfer agent, Wells Fargo Shareowner Services, at P.O. Box 64854, St. Paul, MN 55164-0854; phone number: (877) 910-5385.
Notice of Electronic Availability of Proxy Statement and Annual Report.As permitted by Securities and Exchange Commission rules, we are making this proxy statement and our annual report available to our Shareowners electronically via the Internet. The notice of electronic availability contains instructions on how to access this proxy statement and our annual report and vote online. If you received a notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The notice also instructs you on how you may submit your proxy over the Internet or by telephone. If you received a notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the notice.
Summary Processing. The Securities and Exchange Commission’s rules permit us to print an individual’s multiple accounts on a single notice or set of annual meeting materials. This printing method is referred to as “summary processing” and may result in cost savings. To take advantage of this opportunity, we have summarized on one notice or set of annual meeting materials all of the accounts registered with the same tax identification number or duplicate name and address, unless we received contrary instructions from the impacted Shareowner prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the notice or annual meeting materials, as requested, to any Shareowner to which a single copy of those documents was delivered. If you prefer to receive separate copies of the notice or annual meeting materials, contact Broadridge Financial Solutions, Inc. at (800) 542-1061 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
If you are currently a Shareowner sharing an address with another Shareowner and wish to receive only one copy of future notices or annual meeting materials for your household, please contact Broadridge at the above phone number or address.
Who Can Vote — Record Date. The record date for determining Shareowners entitled to vote at the annual meeting is March 1, 2011.February 27, 2012. Each of the approximately 366,748,294356,920,618 shares of Kellogg common stock issued and outstanding on that date is entitled to one vote at the annual meeting.
How to Vote — Proxy Instructions. Instructions.If you received a notice of electronic availability, you can not vote your shares by filling out and returning the notice. The notice, however, provides instructions on how to vote by Internet, by telephone or by requesting and returning a paper proxy card or voting instruction card.
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If your shares are registered directly in your name with our transfer agent, you are considered, with respect to those shares, the shareowner of record. As the shareowner of record, you have the right to vote in person at the meeting. If your shares are held in a brokerage account or by another nominee or trustee, you are considered the beneficial owner of shares held in “street name.” As the beneficial owner, you are also invited to attend the meeting. Since a beneficial owner is not the shareowner of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from your broker, nominee or trustee that holds your shares, giving you the right to vote the shares at the meeting.
Whether you hold shares directly as a registered shareowner of record or beneficially in street name, you may vote without attending the meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your broker, nominee or trustee. In most cases, you will be able to do this by telephone, by using the Internet or by mail if you received a printed set of the proxy materials.
By Telephone or Internet — If you have telephone or Internet access, you may submit your proxy by following the instructions provided in the notice of electronic availability, or if you received a printed version of the proxy materials by mail, by following the instructions provided with your proxy materials and on your proxy card or voting instruction card. The telephone and Internet voting procedures have been set up for your convenience and have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. The deadline for voting by telephone or via the Internet is 11:59 p.m. Eastern Time on Thursday, April 28, 2011.19, 2012.
By Mail — If you received printed proxy materials, you may submit your proxy by mail by signing your proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your broker, nominee or trustee, and mailing it in the enclosed envelope.
If you wish to vote using the proxy card, complete, sign, and date your proxy card and return it to us before the meeting.
Whether you vote by telephone, over the Internet or by mail, you may specify whether your shares should be voted for all, some or none of the nominees for Director (Proposal 1); whether you approve, disapprove, or abstain from voting on the Kellogg Company Senior Executive Annual Incentive Plan (Proposal 2); whether youadvisory resolution to approve disapprove, or abstain from voting on Kellogg’s executive compensation (Proposal 3); whether you vote for advisory votes on executive compensation to occur every one, two or three years or abstain from voting (Proposal 4)2); whether you approve, disapprove or abstain from voting on the proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 20112012 (Proposal 5)3); and whether you approve, disapprove or abstain from voting on each of the Shareowner proposals, if properly presented at the meeting (Proposals 64 and 7)5).
When a properly executed proxy is received, the shares represented thereby, including shares held under our Dividend Reinvestment Plan, will be voted by the persons named as the proxy according to each Shareowner’s directions. Proxies will also be considered to be voting instructions to the applicable Trustee with respect to shares held in accounts under our Savings & Investment Plans and other employee benefit plans.
If the proxy is properly executed but you do not specify how you want to vote your shares on your proxy card or voting instruction card, or voting by telephone or over the Internet, we will vote them “For” the election of all nominees for Director as set forth under Proposal 1 — Election of Directors below, “For” Proposals 2 3 and 5, “1 Year” relating to the frequency of advisory votes on executive compensation as set forth under Proposal 43, and “Against” Proposals 64 and 7,5, and otherwise at the discretion of the persons named in the proxy card.
Revocation of Proxies.Proxies . If you are a shareowner of record, you may revoke your proxy at any time before it is exercised in any of three ways:
(1) | by submitting written notice of revocation to our Secretary; |
(2) | by submitting another proxy by telephone, via the Internet or by mail that is later dated and, if by mail, that is properly signed; or |
(3) | by voting in person at the meeting. |
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If your shares are held in street name, you must contact your broker, nominee or trustee to revoke and vote your proxy.
Quorum. A quorum of Shareowners is necessary to hold a valid meeting. A quorum will exist if the holders representing a majority of the votes entitled to be cast by the Shareowners at the annual meeting are present, in person or by proxy. Broker “non-votes” and abstentions are counted as present at the Annual Meeting for purposes of determining whether a quorum exists. A broker “non-vote” occurs when a nominee, such as a bank or broker, holding shares for a beneficial owner, does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Under current New York Stock Exchange rules, nominees would have discretionary voting power for ratification of PricewaterhouseCoopers LLP (Proposal 5)3), but not for voting on the election of Directors (Proposal 1), the Kellogg Company Senior Executive Annual Incentive Plan (Proposal 2); the advisory vote onresolution to approve Kellogg’s executive compensation (Proposal 3)2), the advisory vote on the frequency of advisory votes on executive compensation (Proposal 4) and the Shareowner proposals (Proposals 64 and 7)5).
Required Vote. Our Board has adopted a majority voting policy which applies to the election of Directors. Under this policy, any nominee for Director who receives a greater number of votes “withheld” from his or her election than votes “for” such election is required to offer his or her resignation following certification of the Shareowner vote. Our Board’s Nominating and Governance Committee would then consider the offer of resignation and make a recommendation to our independent Directors as to the action to be taken with respect to the offer. This policy does not apply in contested elections. For more information about this policy, see “Corporate Governance — Majority Voting for Directors; Director Resignation Policy.”
Under Delaware law, a nominee who receives a plurality of the votes cast at the Annual Meeting will be elected as a Director (subject to the resignation policy described above). The “plurality” standard means the nominees who receive the largest number of “for” votes cast are elected as Directors. Thus, the number of shares not voted for the election of a nominee (and the number of “withhold” votes cast with respect to that nominee) will not affect the determination of whether that nominee has received the necessary votes for election under Delaware law. However, the number of “withhold” votes with respect to a nominee will affect whether or not our Director resignation policy will apply to that individual. If any nominee is unable or declines to serve, proxies will be voted for the balance of those named and for such person as shall be designated by the Board to replace any such nominee. However, the Board does not anticipate that this will occur.
The option of one year, two years or three years that receives a majority of all the votes cast by Shareowners will be the frequency for the advisory vote on executive compensation (Proposal 4) that has been selected by Shareowners. However, in the event that no option under Proposal 4 receives a majority of the votes cast, we will consider the option that receives the most votes to be the option selected by Shareowners. The affirmative vote of the holders representing a majority of the shares present and entitled to vote at the annual meeting is necessary to approve the Kellogg Company Senior Executive Annual Incentive Plan (Proposal 2), to approveadvisory resolution on Kellogg’s executive compensation (Proposal 3)2), to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 20112012 (Proposal 5)3), and to approve the Shareowner proposals (Proposals 64 and 7)5).
Shares present but not voted because of abstention will have the effect of a “no” vote on Proposals 2, 3, 5, 64, and 7. Abstentions will not impact the outcome on Proposal 4.5. If you do not provide your broker or other nominee with instructions on how to vote your “street name” shares, your broker or nominee will not be permitted to vote them on non-routine matters (a broker “non-vote”) such as Proposals 1, 2, 3, 4, 6 and 7.5. Shares subject to a broker “non-vote” will not be considered entitled to vote with respect to Proposals 1, 2, 3, 4, 6 and 7,5, and will not affect the outcome on that proposal.Please note that brokers may no longer vote your shares on the election of directors in the absence of your specific instructions as to how to vote. We encourage you to provide instructions to your broker regarding the voting of your shares.
Other Business.We do not intend to bring any business before the meeting other than that set forth in the Notice of the Annual Meeting and described in this proxy statement. However, if any other business should properly come before the meeting, the persons named in the proxy card intend to vote in accordance with their
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best judgment on such business and on any matters dealing with the conduct of the meeting pursuant to the discretionary authority granted in the proxy.
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Costs.We pay for the preparation and mailing of the Notice of the Annual Meeting and proxy statement. We have also made arrangements with brokerage firms and other custodians, nominees, and fiduciaries for forwarding proxy-soliciting materials to the beneficial owners of the Kellogg common stock at our expense. In addition, we have retained D.F. King & Co., Inc. to aid in the solicitation of proxies by mail, telephone, facsimile, e-mail and personal solicitation. For these services, we will pay D.F. King & Co., Inc. a fee of $12,000,$14,000, plus reasonable expenses.
Directions to Annual Meeting.To obtain directions to attend the annual meeting and vote in person, please contact Investor Relations at (269) 961-2800 or at investor.relations@kellogg.com.
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Five Percent Holders.The following table shows each person who, based upon their most recent filings or correspondence with the SEC beneficially owns more than 5% of our common stock.
Name | Shares Beneficially Owned | Percent of Class on January 1, 2011 | Shares Beneficially Owned | Percent of Class on December 31, 2011 | ||||
Beneficial Owner | ||||||||
W.K.Kellogg Foundation Trust (1) c/o The Bank of New York Company, Inc. | 84,889,703(2) | 23.2% | ||||||
W.K.Kellogg Foundation Trust (1) c/o The Bank of New York Corporation | 83,228,741(2) | 23.3% | ||||||
One Wall Street | ||||||||
New York, NY 10286 | ||||||||
George Gund III | 31,872,035(3) | 8.7% | 31,519,395(3) | 8.8% | ||||
39 Mesa Street Suite 300 | ||||||||
San Francisco, CA 94129 | ||||||||
KeyCorp | 27,379,294(4) | 7.5% | 27,625,577(4) | 7.7% | ||||
127 Public Square | ||||||||
Cleveland, OH 44114-1306 |
(1) | The trustees of the W. K. Kellogg Foundation Trust (the “Kellogg Trust”) are Jim Jenness, Sterling Speirn, Wenda Moore and The Bank of New York Mellon Trust Company, N.A. The W. K. Kellogg Foundation, a Michigan charitable corporation (the “Kellogg Foundation”), is the sole beneficiary of the Kellogg Trust. The Kellogg Trust owns |
(2) | According to Schedule 13G/A filed with the SEC on February |
(3) | According to Schedule 13G/A filed with the SEC on February |
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(4) | According to a Schedule 13G/A filed with the SEC on February |
Officer and Director Stock Ownership. The following table shows the number of shares of Kellogg common stock beneficially owned as of January 15, 2011,2012, by each Director, each executive officer named in the Summary Compensation Table and all Directors and executive officers as a group.
Name | Shares(1) | Options(2) | Deferred Stock Units(3) | Total Beneficial Ownership(4) | Percentage | Shares(1) | Options(2) | Deferred Stock Units(3) | Total Beneficial Ownership(4) | Percentage | ||||||||||||||||||||||||||||||
Non-NEO Directors | ||||||||||||||||||||||||||||||||||||||||
Benjamin Carson Sr. | 29,725 | 25,000 | 0 | 54,725 | * | 33,166 | 25,000 | 0 | 58,166 | * | ||||||||||||||||||||||||||||||
John Dillon(5) | 38,099 | 35,000 | 0 | 73,099 | * | 46,451 | 30,000 | 0 | 76,451 | * | ||||||||||||||||||||||||||||||
Gordon Gund(6) | 61,098 | 33,331 | 61,654 | 156,083 | * | 64,776 | 30,890 | 65,486 | 161,152 | * | ||||||||||||||||||||||||||||||
Jim Jenness(7) | 118,347 | 431,410 | 12,348 | 562,105 | * | 133,955 | 431,410 | 12,745 | 578,110 | * | ||||||||||||||||||||||||||||||
Dorothy Johnson | 46,523 | 33,599 | 25,015 | 105,137 | * | 51,129 | 29,848 | 27,668 | 108,644 | * | ||||||||||||||||||||||||||||||
Donald Knauss | 9,249 | 6,931 | 0 | 16,180 | * | 12,092 | 6,931 | 0 | 19,023 | * | ||||||||||||||||||||||||||||||
Ann McLaughlin Korologos | 39,128 | 35,000 | 18,874 | 93,002 | * | 43,079 | 30,000 | 19,481 | 92,560 | * | ||||||||||||||||||||||||||||||
Rogelio Rebolledo | 7,226 | 2,534 | 0 | 9,760 | * | 10,004 | 2,534 | 0 | 12,538 | * | ||||||||||||||||||||||||||||||
Sterling Speirn(7) | 10,991 | 5,781 | 0 | 16,772 | * | 13,890 | 5,781 | 0 | 19,671 | * | ||||||||||||||||||||||||||||||
Robert Steele | 10,269 | 9,110 | 0 | 19,379 | * | 13,145 | 9,110 | 0 | 22,255 | * | ||||||||||||||||||||||||||||||
John Zabriskie | 39,338 | 25,000 | 29,562 | 93,900 | * | 42,905 | 25,000 | 32,497 | 100,402 | * | ||||||||||||||||||||||||||||||
Named Executive Officers | ||||||||||||||||||||||||||||||||||||||||
David Mackay | 290,271 | 1,566,840 | 3,940 | 1,861,051 | * | |||||||||||||||||||||||||||||||||||
John Bryant | 162,248 | 855,464 | 0 | 1,017,712 | * | 155,275 | 923,700 | 0 | 1,078,975 | * | ||||||||||||||||||||||||||||||
Ron Dissinger | 20,429 | 134,337 | 0 | 154,766 | * | 25,477 | 153,087 | 0 | 178,564 | * | ||||||||||||||||||||||||||||||
Brad Davidson | 71,031 | 196,128 | 0 | 267,159 | * | 63,077 | 267,938 | 0 | 331,015 | * | ||||||||||||||||||||||||||||||
Paul Norman | 63,551 | 216,026 | 0 | 279,577 | * | 59,434 | 226,066 | 0 | 285,500 | * | ||||||||||||||||||||||||||||||
Gary Pilnick | 71,745 | 385,643 | 0 | 457,388 | * | 72,202 | 369,932 | 0 | 442,134 | * | ||||||||||||||||||||||||||||||
All Directors and executive officers as a group (21 persons)(8) | 1,283,859 | 4,629,192 | 151,393 | 6,064,444 | 1.6 | % | ||||||||||||||||||||||||||||||||||
All Directors and executive officers as a group (19 persons)(9) | 884,590 | 2,741,486 | 157,877 | 3,783,953 | 1.1 | % |
* | Less than 1%. |
(1) | Represents the number of shares beneficially owned, excluding shares which may be acquired through exercise of stock options and units held under our deferred compensation plans. Includes the following number of shares held in Kellogg’s Grantor Trust for Non-Employee Directors which are subject to restrictions on investment: Dr. Carson, |
(2) | Represents options that were exercisable on January 15, |
(3) | Represents the number of common stock units held under our deferred compensation plans as of January 15, |
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(4) | None of the shares listed have been pledged as |
(5) | Includes 250 shares held for the benefit of a minor son, over which Mr. Dillon disclaims beneficial ownership. |
(6) | Includes 10,000 shares owned by Mr. Gund’s wife. Gordon Gund disclaims beneficial ownership of the shares beneficially owned by his wife and George Gund III. |
(7) | Does not include shares owned by the Kellogg Trust, as to which Mr. Jenness and Mr. Speirn, as trustees of the Kellogg Trust as of the date of this table, share voting and investment power, or shares as to which the Kellogg Trust or the Kellogg Foundation have current beneficial interest. |
(8) | Mr. Steele resigned as a Director on January 16, 2012. |
(9) | Includes |
Section 16(a) Beneficial Ownership Reporting Compliance.Compliance. Section 16(a) of the Securities Exchange Act of 1934 requires our Directors, executive officers, and greater-than-10% Shareowners to file reports with the SEC. SEC regulations require us to identify anyone who filed a required report late during the most recent fiscal year. Based on our review of these reports and written certifications provided to us, we believe that the filing requirements for all of these reporting persons were complied with.
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Board-Adopted Corporate Governance Guidelines. We operate under corporate governance principles and practices (the “Guidelines”) that are designed to maximize long-term Shareowner value, align the interests of the Board and management with those of our Shareowners and promote high ethical conduct among our Directors and employees. The Board has focused on continuing to build upon our strong corporate governance practices over the years. The Guidelines include the following:
A majority of the Directors, and all of the members of the Audit, Compensation, and Nominating and Governance Committees, are required to meet the independence requirements of the New York Stock Exchange.
One of the Directors is designated a Lead Director, who chairs and may call executive session meetings of independent, non-employee Directors, approves proposed meeting agendas and schedules, and establishes a method for Shareowners and other interested parties to use in communicating with the Board.
The Board reviews CEO succession planning at least once per year.
The Board and each Board committee have the power to hire independent legal, financial or other advisors as they may deem necessary, at our expense.
Non-employee Directors meet in executive session at least three times annually.
The Board and Board committees conduct annual self-evaluations.
The independent members of the Board use the recommendations from the Nominating and Governance Committee and Compensation Committee to conduct an annual review of the CEO’s performance and determine the CEO’s compensation.
Non-employee Directors who change their principal responsibility or occupation from that held when they were elected shall offer his or her resignation for the Board to consider continued appropriateness of Board membership under the circumstances.
Directors have access to Kellogg officers and employees.
Continuing education is provided to Directors consistent with our Board education policy.
No Director may be nominated for a new term if he or she would be seventy-two or older at the time of election;election, unless the Board determines that it is in the best interest of Kellogg to re-nominate the independent Director for up to one additional term due to his or her unique capabilities or special circumstances.
No Director shall serve as a Director,director, officer or employee of a competitor.
No Director should serve on more than four other boards of public companies in addition to Kellogg.
All Directors are expected to comply with stock ownership guidelines for Directors, under which they are generally expected to hold at least five times their annual cash retainer in stock and stock equivalents.
Board Leadership Structure; Communication with the Board.The following section describes Kellogg’s Board leadership structure, the reasons why the structure is in place at this time, the roles of various positions, and related key governance practices.
Our Board is composed of 10nine independent Directors, Mr. Jenness, the executive Chairman of the Board and Mr. Bryant, Chief Executive Officer. In addition, as provided in our Guidelines, the Board has designated one of the independent directors as Lead Director. The Board has established sixseven standing Committees — audit, compensation, nominating and governance, consumer marketing, manufacturing, social responsibility and
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public policy, consumer marketing, and executive. Each of the Board Committees is composed solely of independent Directors (other than the Executive Committee), each with a different independent Director serving as Committee chair. We believe that the mix of experienced independent and management Directors that make up our Board, along with the independent role of our Lead Director and our independent Board Committees, benefits Kellogg and its Shareowners.
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The Board believes that it is beneficial to Kellogg and its Shareowners to designate one of the Directors as a Lead Director. The Lead Director serves a variety of roles including, reviewing and approving Board agendas, meeting materials and schedules to confirm the appropriate topics are reviewed and sufficient time is allocated to each; serving as liaison between the Chairman of the Board, Chief Executive Officer and the non-management Directors;Directors (however, each director has direct access to both the CEO and Chairman); presiding at the executive sessions of independent Directors and at all other meetings of the Board of Directors at which the Chairman of the Board is not present; and calling an executive session of independent Directors at any time, consistent with the Guidelines. Gordon Gund, an independent Director and the Chairman of the Nominating and Governance Committee, is currently our Lead Director. Mr. Gund is an effective Lead Director for Kellogg due to, among other things, his independence, hiscommitment to ethics, communication skills, deep strategic and operational understanding of Kellogg obtained while serving as a Kellogg Director, and his corporate governance knowledge acquired during his tenure as a member of the governance committees of two Fortune 500 companies. Mr. Gund may be contacted at gordon.gund@kellogg.com. Any communications which Shareowners or interested parties may wish to send to the Board may be directly sent to Mr. Gund at this e-mail address.
With respect to the roles of Chairman and CEO, the Guidelines provide that the roles may be separated or combined, and the Board exercises its discretion in combining or separating these positions as it deems appropriate in light of prevailing circumstances. The Board believes that the combination or separation of these positions should continue to be considered as part of the succession planning process. Since 2006, the roles have been separated, with Mr. Jenness serving as Chairman. Mr. Jenness has been closely involved with Kellogg for over thirty years in various roles including Chief Executive Officer and Director. During that time, Mr. Jenness was Chief Executive Officer of Integrated Merchandising Systems LLC, a market leader in outsource management for retail promotion and branded merchandising. He also served in various positions of increasing responsibility at Leo Burnett Company, Kellogg’s major advertising agency partner, for many years, including as Vice Chairman, Chief Operating Officer and Director. Mr. Jenness generously volunteers as senior director of Children’s Memorial Hospital of Chicago and on the Mercy Home for Boys and Girls Board of Regents and its Strategic Planning Committee. He serves as a director of Kimberly-Clark Corporation, and will become the Lead Director immediately following their 2012 Annual Meeting of Shareholders. He also serves on the DePaul University College of Commerce Advisory Council, as Vice Chairman of DePaul’s Board of Trustees, and is co-trustee of the W.K. Kellogg Foundation Trust. Given his unique knowledge, experience, and relationship with both the Board and management, his continued role as executive Chairman provides significant value for Kellogg and its Shareowners.
Our Board conducts an annual evaluation to determine whether it and its Committees are functioning effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be appropriate for Kellogg and its Shareowners. Our Guidelines provide the flexibility for our Board to modify our leadership structure in the future as appropriate. We believe that Kellogg, like many U.S. companies, has been well-served by this flexible leadership structure.
Board Oversight of Enterprise Risk.The Board utilizes our Enterprise Risk Management (ERM) process to assist in fulfilling its oversight of our risks. Management, whichwho is responsible for day-to-day risk management, conducts a risk assessment of Kellogg’s business annually. The risk assessment process is global in nature and has been developed to identify and assess Kellogg’s current and emerging risks, including the nature of the risk, as well as to identify steps to mitigate and manage the controllable aspects of each risk. Several hundred of our key business leaders, functional heads and other managers are surveyed and/or interviewed to develop this information.
While risk oversight is a full Board responsibility, the responsibility for monitoring the ERM process has been delegated to the Audit Committee. As such, one of the leaders of the ERM process is the Vice President, Internal Audit and Compliance, who reports directly to the Chair of the Audit Committee. The Audit Committee
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receives at each meeting (or the full Board for those meetings when the Audit Committee does not meet) an update on the key enterprise risks, including current status and action items.
The results of the risk assessment are reviewed with the Audit Committee and the full Board. The centerpiece of the assessment is the discussion of key risks which includes the potential magnitude and likelihood of each risk. As part of the process for each risk, management identifies the nature of the risk, the senior executive responsible for managing the risk, the potential impact, management’s initiatives to manage the risk, the most recent Board or Committee update, and the timing of the next scheduled Board or Committee review. In addition to the enterprise-wide assessment, each business unit discusses its risk assessment as part of its annual business plan review with the Board.
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The results of the risk assessmentsassessment are then integrated into the Board’s processes. Oversight responsibility for each risk is allocated among the full Board and its Committees, and specific Board and Committee agendas are developed accordingly. Each Committee chair works directly with Kellogg’s key senior executive responsible for the matters allocated to the Committee to develop agenda topics, review materials to be discussed with the Committee, and otherwise discuss those topics relating to the particular Committee. Through this process each key risk is reviewed at least annually, with many topics reviewed on several occasions throughout the year.
Due to the dynamic nature of risk and the overall statusBoard or Audit Committee’s oversight at each meeting of Kellogg’s enterprise and business unit risks, are updated and a summary of key risks is reviewed at each Audit Committee meeting and adjustments are made to Board and Committee agendas throughout the year so that enterprise risks are reviewed at the relevant times. This process facilitates the Board’s ability to fulfill its oversight responsibilities of Kellogg’s risks.
Majority Voting for Directors; Director Resignation Policy. In an uncontested election of Directors (that is, an election where the number of nominees is equal to the number of seats open) any nominee for Director who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall promptly tender his or her resignation to the Nominating and Governance Committee (following certification of the Shareowner vote) for consideration in accordance with the following procedures.
The Nominating and Governance Committee would promptly consider such resignation and recommend to the Qualified Independent Directors (as defined below) the action to be taken with respect to such offered resignation, which may include (1) accepting the resignation; (2) maintaining the Director but addressing what the Qualified Independent Directors believe to be the underlying cause of the withheld votes; (3) determining that the Director will not be renominated in the future for election; or (4) rejecting the resignation. The Nominating and Governance Committee would consider all relevant factors including, without limitation, (a) the stated reasons why votes were withheld from such Director; (b) any alternatives for curing the underlying cause of the withheld votes; (c) the tenure and qualifications of the Director; (d) the Director’s past and expected future contributions to Kellogg; (e) our Director criteria; (f) our Corporate Governance Guidelines; and (g) the overall composition of the Board, including whether accepting the resignation would cause Kellogg to fail to meet any applicable SEC or NYSE requirement.
The Qualified Independent Directors would act on the Nominating and Governance Committee’s recommendation no later than 90 days following the date of the Shareowners’ meeting where the election occurred. In considering the Nominating and Governance Committee’s recommendation, the Qualified Independent Directors would consider the factors considered by the Nominating and Governance Committee and such additional information and factors the Board believes to be relevant. Following the Qualified Independent Directors’ decision, Kellogg would promptly disclose in a current report on Form 8-K the decision whether to accept the resignation as tendered (providing a full explanation of the process by which the decision was reached and, if applicable, the reasons for rejecting the tendered resignation).
To the extent that any resignation is accepted, the Nominating and Governance Committee would recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board.
Any Director who tenders his or her resignation pursuant to this provision would not participate in the Nominating and Governance Committee’s recommendation or Qualified Independent Directors’ consideration regarding whether to accept the tendered resignation. Prior to voting, the Qualified Independent Directors would afford the Director an opportunity to provide any information or statement that he or she deems relevant. If a majority of the members of the Nominating and Governance Committee received a greater number of votes “withheld”
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“withheld” from their election than votes “for” their election at the same election, then the remaining Qualified Independent Directors who are on the Board who did not receive a greater number of votes “withheld” from their election than votes “for” their election (or who were not standing for election) would consider the matter directly or may appoint a Board committee amongst themselves solely for the purpose of considering the tendered resignations that would make the recommendation to the Board whether to accept or reject them.
For purposes of this policy, the term “Qualified Independent Directors” means:
All Directors who (1) are independent Directors (as defined in accordance with the NYSE Corporate Governance Rules) and (2) are not required to offer their resignation in accordance with this policy.
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If there are fewer than three independent Directors then serving on the Board who are not required to offer their resignations in accordance with this policy, then the Qualified Independent Directors shall mean all of the independent Directors and each independent Director who is required to offer his or her resignation in accordance with this Policy shall recuse himself or herself from the deliberations and voting only with respect to his or her individual offer to resign.
Director Independence. The Board has determined that all current Directors (other than Mr. Jenness and Mr. Bryant) are independent based on the following standards: (a) no entity (other than a charitable entity) of which such a Director is an employee in any position or any immediate family member (as defined) is an executive officer, made payments to, or received payments from, Kellogg and its subsidiaries in any of the 2011, 2010 2009, or 20082009 fiscal years in excess of the greater of (1) $1,000,000 or (2) two percent of that entity’s annual consolidated gross revenues; (b) no such Director, or any immediate family member employed as an executive officer of Kellogg or its subsidiaries, received in any twelve month period within the last three years more than $120,000 per year in direct compensation from Kellogg or its subsidiaries, other than Director and committee fees and pension or other forms of deferred compensation for prior service not contingent in any way on continued service; (c) Kellogg did not employ such Director in any position, or any immediate family member as an executive officer, during the past three years; (d) no such Director was a current partner or employee of a firm that is Kellogg’s internal or external auditor (“Auditor”), no immediate family member of such Director was a current partner of the Auditor or an employee of the Auditor who personally worked on our audit, and no Director or immediate family member of such Director was during the past three years a partner or employee of the Auditor and personally worked on our audit within that time; (e) no such Director or immediate family member served as an executive officer of another company during the past three years at the same time as a current executive officer of Kellogg served on the compensation committee of such company; and (f) no other material relationship exists between any such Director and Kellogg or our subsidiaries.
The Board also consideredconsiders from time to time commercial ordinary-course transactions with respect to several Directors as it assessedassesses independence status, including transactions relating to purchasing supplies, selling product and marketing arrangements. The Board has concluded that these transactions did not impair Director independence for a variety of reasons including that the amounts in question were considerably under the thresholds set forth in our independence standards and the relationships were not deemed material.
Shareowner Recommendations for Director Nominees. The Nominating and Governance Committee will consider Shareowner nominations for membership on the Board. For the 20122013 Annual Meeting of Shareowners, nominations may be submitted to the Office of the Secretary, Kellogg Company, One Kellogg Square, Battle Creek, Michigan 49017, which will forward them to the Chairman of the Nominating and Governance Committee. Recommendations must be in writing and we must receive the recommendation not earlier than November 12, 20115, 2012 and not later than December 12, 2011.5, 2012. Recommendations must also include certain other requirements specified in our bylaws.
When filling a vacancy on the Board, the Nominating and Governance Committee identifies the desired skills and experience of a new Director and nominates individuals who it believes can strengthen the board’sBoard’s capability and further diversify the collective experience represented by the then-current Directors. The Nominating and Governance Committee may, as it has done in the past, engage third parties to assist in the search and provide recommendations. Also, Directors are generally asked to recommend candidates for the position. The candidates would be evaluated based on the process outlined in the Corporate Governance
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Guidelines and the Nominating and Governance Committee charter, and the same process would be used for all candidates, including candidates recommended by Shareowners.
Attendance at Annual Meetings. All Directors properly nominated for election are expected to attend the Annual Meeting of Shareowners. All of our Directors attended the 20102011 Annual Meeting of Shareowners except for Mr. Dillon, who had a previously-scheduled family engagement.Shareowners.
Code of Conduct/Ethics. We have adopted the Code of Conduct for Kellogg Company Directors and Global Code of Ethics for Kellogg Company employees (including the chief executive officer, chief financial officer and corporate controller). Any amendments to or waivers of the Global Code of Ethics applicable to our chief
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executive officer, chief financial officer or corporate controller will be posted on www.kelloggcompany.com. There were no amendments to or waivers of the Global Code of Ethics in 2010.2011.
Availability of Corporate Governance Documents.Documents. Copies of the Corporate Governance Guidelines, the Charters of the Audit, Compensation, and Nominating and Governance Committees of the Board, the Code of Conduct for Kellogg Company Directors, and Global Code of Ethics for Kellogg Company employees can be found on the Kellogg Company website at www.kelloggcompany.com under “Investor Relations”, then “Corporate Governance.” Shareowners may also request a free copy of these documents from: Kellogg Company Consumer Affairs, P.O. Box CAMB, Battle Creek, Michigan 49016-1986 (phone: (800) 961-1413), the Investor Relations Department at that same address (phone: (269) 961-2800) or investor.relations@kellogg.com.
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BOARD AND COMMITTEE MEMBERSHIP
In 2010,2011, the Board had the following standing committees: Audit, Compensation, Nominating and Governance, Consumer Marketing, Manufacturing, Social Responsibility and Public Policy, Consumer Marketing and Executive.
The Board held 87 meetings in 2010.2011. All of the incumbent Directors attended at least 75% of the total number of meetings of the Board and of all Board committees of which the Directors were members during 2010.2011.
The table below provides 20102011 membership and meeting information for each Board committee as of January 1,December 31, 2011:
Name | Audit | Compensation | Nominating and Governance | Social Responsibility and Public Policy | Consumer Marketing | Executive | Audit | Compensation | Nominating and Governance | Consumer Marketing | Manufacturing | Social Responsibility and Public Policy | Executive | |||||||||||||||||||||||||||||||||||||||
John Bryant(1) | ü | |||||||||||||||||||||||||||||||||||||||||||||||||||
Benjamin Carson | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||||||||||||||||||||||||
John Dillon | ü | Chair | ü | ü | ü | Chair | ü | ü | ü | |||||||||||||||||||||||||||||||||||||||||||
Gordon Gund | ü | Chair | ü | ü | ü | Chair | ü | ü | ||||||||||||||||||||||||||||||||||||||||||||
Jim Jenness(1) | Chair | Chair | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dorothy Johnson | Chair | ü | ü | ü | Chair | ü | ||||||||||||||||||||||||||||||||||||||||||||||
Don Knauss | ü | ü | ü | ü | Chair | ü | ||||||||||||||||||||||||||||||||||||||||||||||
Ann McLaughlin Korologos | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||||||||||||||||||||||||
David Mackay(1) | ü | |||||||||||||||||||||||||||||||||||||||||||||||||||
Rogelio Rebolledo | ü | ü | ü | |||||||||||||||||||||||||||||||||||||||||||||||||
Rogelio Rebolledo(2) | ü | Chair | ü | ü | ||||||||||||||||||||||||||||||||||||||||||||||||
Sterling Speirn | ü | ü | ü | ü | ü | |||||||||||||||||||||||||||||||||||||||||||||||
Robert Steele | ü | Chair | ü | |||||||||||||||||||||||||||||||||||||||||||||||||
Robert Steele(2) | ü | ü | Chair | ü | ||||||||||||||||||||||||||||||||||||||||||||||||
John Zabriskie | Chair | ü | ü | ü | Chair | ü | ü | ü | ü | |||||||||||||||||||||||||||||||||||||||||||
2010 Meetings | 7 | 6 | 4 | 2 | 2 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||
2011 Meetings | 7 | 5 | 4 | 3 | 5 | 2 | 0 |
(1) | Mr. Jenness |
(2) | Mr. |
Audit Committee. Pursuant to a written charter, the Audit Committee, among other things, assists the Board in monitoring the integrity of our financial statements, the independence and performance of our independent registered public accounting firm, the performance of our internal audit function, our Enterprise Risk Management process, our compliance with legal and regulatory requirements, and other related matters. The Audit Committee, or its Chair, also pre-approves all audit, internal control-related and permitted non-audit engagements and services by the independent registered public accounting firm and their affiliates. It also discusses and/or reviews specified matters with, and receives specified information or assurances from, Kellogg management and the independent registered public accounting firm. The Committee also has the sole authority to appoint, subject to Shareowner ratification, or replace the independent registered public accounting firm, which directly reports to the Audit Committee, and is directly responsible for the compensation and oversight of the independent registered public accounting firm. Each member of the Audit Committee has been determined by the Board to be an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of SEC Regulation S-K. Each member has experience actively supervising a principal financial officer and/or principal accounting officer. Each of the Committee members meets the independence requirements of the New York Stock Exchange.
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Compensation Committee. Pursuant to a written charter, the Compensation Committee, among other things, (a) reviews and approves the compensation philosophy and principles for senior executives; (b) reviews
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and makes recommendations for the compensation of senior management personnel and monitors overall compensation for senior executives, including reviewing risks arising from Kellogg’s compensation policies and practices; (c) reviews and recommends the compensation of the Chief Executive Officer; (d) has sole authority to retain or terminate any compensation consultant used to evaluate senior executive compensation; (e) oversees and administers employee benefit plans to the extent provided in those plans; and (f) reviews trends in management compensation. The Committee may form and delegate authority to subcommittees or the Chair when appropriate. The Compensation Committee, or its Chair, also pre-approves all engagements and services to be performed by any consultants to the Compensation Committee. To assist the Compensation Committee in discharging its responsibilities, the Committee has retained an independent compensation consultant — Frederic W. Cook. The consultant reports directly to the Compensation Committee. Other than the work it performs for the Compensation Committee and the Board, Frederic W. Cook does not provide any consulting services to Kellogg or its executive officers.
The Board has determined that each member of the Compensation Committee meets the definition of independence under our corporate governance guidelines and the requirements of the New York Stock Exchange and further qualifies as a non-employee Director for purposes of Rule 16b-3 under the Securities Exchange Act of 1934. The members of the Compensation Committee are not current or former employees of Kellogg and are not eligible to participate in any of our executive compensation programs. Additionally, the Compensation Committee operates in a manner designed to meet the tax deductibility criteria included in Section 162(m) of the Internal Revenue Code.
As noted above, the Compensation Committee is charged with overseeing the review and assessment of risks arising from Kellogg’s compensation policies and practices. In 2010, theThe Compensation Committee reviewedreviews annually the potential for excessive risk in the Company’s compensation program; including views from independent experts, the SEC, and design features considered to encourage excessive risk taking and Kellogg’s approach to those features. Kellogg uses a number of approaches to mitigate excessive risk taking, including significant weighting towards long-term incentive compensation, emphasizing qualitative goals in addition to a variety of quantitative metrics, and equity ownership guidelines. As a result of this review, together with input from the independent compensation consultant, the Compensation Committee determined that the risks arising from Kellogg’s compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on Kellogg.
For additional information about the Compensation Committee’s processes for establishing and overseeing executive compensation, refer to “Compensation Discussion and Analysis — Compensation Approach.”
Manufacturing Committee. Pursuant to a written charter, the Manufacturing Committee, among other things, assists the Board in discharging its oversight responsibilities with respect to topics relating to the Company’s manufacturing practices, with the primary focus on the Company’s food quality and safety, manufacturing facility operations, and people strategies. As it deems appropriate, the Committee reviews policies, programs and practices, and provides strategic advice and counsel concerning the matters set forth above including, but not limited to, food safety, employee health and safety, capacity utilization and planning, contingency planning, productivity programs, commodity purchasing and hedging programs, people utilization and people strategies.
Nominating and Governance Committee. Pursuant to a written charter, the Nominating and Governance Committee, among other things, assists the Board by (a) identifying and reviewing the qualifications of candidates for Director and in determining the criteria for new Directors; (b) recommends nominees for Director to the Board; (c) recommends committee assignments; (d) reviews annually the Board’s compliance with the Corporate Governance Guidelines; (e) reviews annually the Corporate Governance Guidelines and recommends changes to the Board; (f) monitors the performance of Directors and conducts performance evaluations of each Director before the Director’s renomination to the Board; (g) administers the annual evaluation of the Board; (h) provides annually an evaluation of CEO performance used by the independent members of the Board in their annual review of CEO performance; (i) considers and evaluates potential waivers of the CodesCode of Conduct and Ethics
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for Directors and Global Code of Ethics for senior officers (for which there were none in 2010)2011); (j) makes a report to the Board on CEO succession planning at least annually; (k) provides an annual review of the independence of Directors to the Board; (l) reviews and recommends to the Board responses to Shareowner proposals; and (m) reviews Director compensation. The Chair of the Nominating and Governance Committee, as Lead Director, also presides at executive sessions of independent Directors of the Board. Each of the Nominating and Governance Committee members meets the independence requirements of the New York Stock Exchange.
Social Responsibility and Public Policy Committee. Pursuant to a written charter, the Social Responsibility and Public Policy Committee, among other things, oversees Kellogg’s social, public policy, political, environmental occupational safetysustainability, and health trends, issues and concerns, both domestic and foreign. To assist the Board, the Committee, as it deems appropriate, reviews policies, programs and practices, employee andconcerning community affairs, health and safety, ethical business conduct, employment and equal opportunity matters, diversity and inclusion,
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sustainability, corporate responsibility, environment protection,consumer affairs, public policy, government relations, philanthropic activities and charitable contributions. This commitment means investing in and enriching communities in which we conduct business, as well as encouraging employee involvement in these activities.
Consumer Marketing Committee. Pursuant to a written charter, the Consumer Marketing Committee assists the Board by reviewing Kellogg’s marketing activities, including capabilities, strategies, execution and approach to investment, supporting our global brand portfolio as it serves our overall strategy and goals. In addition, the Committee serves as a consultant to management and makes recommendations to the Board of Directors, as deemed appropriate, relating to Kellogg’s marketing activity.
Executive Committee. Pursuant to a written charter, the Executive Committee is generally empowered to act on behalf of the Board between meetings of the Board, with some exceptions.
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PROPOSAL 1 — ELECTION OF DIRECTORS
Kellogg Company is the world’s leading producer of cereal and a leading producer of conveniencesnacks and frozen foods, including cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles, and veggie foods. Kellogg products are manufactured and marketed globally. As such, we believe that in order for our Board to effectively guide Kellogg to long-term sustainable, dependable performance, it should be composed of individuals with sophistication and experience in the many disciplines that impact our business. In order to best serve Kellogg and our Shareowners, we seek to have a Board, as a whole, that is competent in key corporate disciplines, including, accounting and financial acumen, business judgment, crisis management, governance, leadership, people management, risk management, social responsibility and reputational issues, and strategy and strategic planning. In addition, the Board must have specific knowledge related to Kellogg’s industry such as, expertise in branded consumer products and consumer dynamics, health and nutrition, international markets, manufacturing and supply chain, marketing, regulatory and government affairs, the retail environment, and sales and distribution.
The Nominating and Governance Committee believes that all directorsDirectors must, at a minimum, meet the criteria set forth in the Board’s Code of Conduct and the Corporate Governance Guidelines, which specify, among other things, that the Nominating and Governance Committee will consider criteria such as independence, diversity, age, skills and experience in the context of the needs of the Board. In addressing issues of diversity in particular, the Nominating and Governance Committee considers a nominee’s differences in viewpoint, professional experience, background, education, skill, age, race, gender and national origin. The Nominating and Governance Committee believes that diversity of backgrounds and viewpoints is a key attribute for a director nominee. The Committee seeks a diverse Board that is representative of our global business, Shareowners, consumers, customers, and employees. While the Nominating and Governance Committee carefully considers diversity when considering directors, it has not established a formal policy regarding diversity. The Nominating and Governance Committee also will consider a combination of factors for each director, including (1) the nominee’s ability to represent all Shareowners without a conflict of interest; (2) the nominee’s ability to work in and promote a productive environment; (3) whether the director has sufficient time and willingness to fulfill the substantial duties and responsibilities of a Director; (4) whether the nominee has demonstrated the high level of character and integrity that we expect; (5) whether the nominee possesses the broad professional and leadership experience and skills necessary to effectively respond to the complex issues encountered by a multi-national, publicly-traded company; and (6) the nominee’s ability to apply sound and independent business judgment.
The Nominating and Governance Committee has determined that all of our Directors meet the criteria and qualifications set forth in the Board’s Code of Conduct, the Corporate Governance Guidelines and the criteria set forth above for director nominees. Moreover, each Director possesses the following critical personal qualities and attributes that we believe are essential for the proper functioning of the Board to allow it to fulfill its duties for our Shareowners: accountability, ethical character, governance, integrity, leadership, risk management, and the ability to exercise sound business judgment. In addition, our Directors have the mature confidence to assess and challenge the way things are done and recommend alternative solutions, a keen awareness of the business and social realities of the global environment in which Kellogg operates, the independence and high performance standards necessary to fulfill its oversight function, and the humility and style to interface openly and constructively with other Directors. Finally, the Director biographies below include a non-exclusive list of other key experiences and qualifications that further qualify the individual to serve on the Board. These collective qualities, skills, experiences and attributes are essential to our Board’s ability to exercise its oversight function for Kellogg and its Shareowners, and guide the long-term sustainable, dependable performance of Kellogg.
Our amended restated certificate of incorporation and bylaws provide that the Board shall be composed of not less than seven and no more than fifteen Directors divided into three classes as nearly equal in number as possible, and that each Director shall be elected for a term of three years with the term of one class expiring each year.
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Four Directors are to be re-elected at the 20112012 Annual Meeting to serve for a term ending at the 20142015 Annual Meeting of Shareowners, and the proxies cannot be voted for a greater number of persons than the number of nominees named. There are currently twelveeleven members of the Board.
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The Board recommends that the Shareowners vote “FOR” the following nominees:Benjamin Carson, John Bryant, Rogelio Rebolledo, Sterling SpeirnDillon, Jim Jenness and John Zabriskie.Don Knauss. Each nominee was proposed for re-election by the Nominating and Governance Committee for consideration by the Board and proposal to the Shareowners. In accordance with Kellogg’s Corporate Governance Guidelines, the Nominating and Governance Committee recommended and the Board determined that it is in the best interest of Kellogg to waive the retirement age requirement with respect to Mr. Dillon and to re-nominate him for one additional term. Mr. Dillon plays a key role on a number of our committees. In addition to serving on the Nominating and Governance and Audit Committees and chairing our Compensation Committee, Mr. Dillon is a key member of our Manufacturing Committee because of his expertise in important enterprise risk areas for Kellogg, including manufacturing and supply chain, that require both institutional and industry experience. In addition, waiving the retirement age requirement for Mr. Dillon allows leadership continuity on the Compensation Committee by allowing him to serve a full five years as Chairman. Due to Mr. Dillon’s central role on the board and in the direction of Kellogg, we believe that his continued service on the Board is in the best interests of Kellogg.
Nominees for Election for a Three-Year Term Expiring at the 2014 Annual Meeting
JOHN BRYANT.Mr. Bryant, age 45, has served as a Kellogg Director since July 2010. On January 2, 2011, he assumed the role as our President and Chief Executive Officer after having served as our Executive Vice President and Chief Operating Officer since August 2008. Mr. Bryant joined Kellogg in March 1998, working in support of the global strategic planning process. He was appointed Senior Vice President and Chief Financial Officer, Kellogg USA, in August 2000, was appointed as Kellogg’s Chief Financial Officer in February 2002 and was appointed Executive Vice President later in 2002. He also assumed responsibility for the Natural and Frozen Foods Division, Kellogg USA, in September 2003. He was appointed Executive Vice President and President, Kellogg International in June 2004 and was appointed Executive Vice President and Chief Financial Officer, Kellogg Company, President, Kellogg International in December 2006. In July 2007, Mr. Bryant was appointed Executive Vice President and Chief Financial Officer, Kellogg Company, President, Kellogg North America and in August 2008, he was appointed Executive Vice President, Chief Operating Officer and Chief Financial Officer. Mr. Bryant served as Chief Financial Officer through December 2009.
As a result of these professional and other experiences, Mr. Bryant possesses particular knowledge and experience in a variety of areas, including accounting and finance, branded consumer products and consumer dynamics, crisis management, health and nutrition, international markets, marketing, people management, the retail environment, strategy and strategic planning, and has public company board experience that strengthens the Board’s collective knowledge, capabilities and experience.
ROGELIO REBOLLEDO.Mr. Rebolledo, age 66, has served as a Kellogg Director since October 2008. In 2007, Mr. Rebolledo retired from his position as chairman of PBG Mexico, the Mexican operations of Pepsi Bottling Group, Inc. He began his 30-year career with PepsiCo Inc. at Sabritas, the salty snack food unit of Frito-Lay International in Mexico. He was responsible for the development of the international Frito-Lay business, first in Latin America and then in Asia and Europe. From 2001 to 2003, he was president and chief executive officer of Frito-Lay International. He also served as president and chief executive officer of Pepsi Bottling Group’s Mexico operations from January 2004 until being named chairman. Mr. Rebolledo currently serves as a director of Best Buy Co., Inc., and within the past five years, has also served as a director of The Pepsi Bottling Group, Applebees Inc. and Grupo ALFA.
As a result of these professional and other experiences, Mr. Rebolledo has been determined to be an ‘Audit Committee Financial Expert’ under the SEC’s rules and regulations, possesses particular knowledge and experience in a variety of areas, including accounting and financial acumen, international markets, manufacturing and supply chain, marketing, the retail environment, and sales and distribution, and has public company board experience (including specific experience in auditing and marketing oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
STERLING SPEIRN.Mr. Speirn, age 63, has served as a Kellogg Director since March 2007. He is President and Chief Executive Officer of the W. K. Kellogg Foundation. He is also a trustee of the W. K. Kellogg Foundation Trust. Prior to joining the W. K. Kellogg Foundation in January 2006, he was President of Peninsula Community Foundation from November 1992 through 2005 and served as a director of the Center for Venture Philanthropy, which he co-founded in 1999.
As a result of these professional and other experiences, Mr. Speirn possesses particular knowledge and experience in a variety of areas, including crisis management, health and nutrition, people management, regulatory and government affairs, social responsibility and reputational issues, and strategy and strategic planning and has public company board experience (including specific experience in marketing and social responsibility oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
JOHN ZABRISKIE.Dr. Zabriskie, age 71, has served as a Kellogg Director since 1995. He is also co-founder and Director of PureTech Ventures, LLC, a firm that co-founds life science companies. In 1999, he retired as
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Chief Executive Officer of NEN Life Science Products, Inc., a position he had held since 1997. From November 1995 to January 1997, Dr. Zabriskie served as President and Chief Executive Officer of Pharmacia & Upjohn, Inc. Dr. Zabriskie is a director of Array Biopharma, Inc. and ARCA biopharma, Inc.
As a result of these professional and other experiences, Dr. Zabriskie has been determined to be an ‘Audit Committee Financial Expert’ under the SEC’s rules and regulations, possesses particular knowledge and experience in a variety of areas, including accounting and financial acumen, crisis management, health and nutrition, manufacturing and supply chain, and sales and distribution, and has public company board experience (including specific experience in audit, compensation, and governance oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
Continuing Directors to Serve Until the 20132015 Annual Meeting
BENJAMIN CARSON.Dr. Carson, age 59,60, has served as a Kellogg Director since 1997. He is Professor and Director of Pediatric Neurosurgery, The Johns Hopkins Medical Institutions, a position he has held since 1984, as well as Professor of Oncology, Plastic Surgery, Pediatrics and Neurosurgery at The Johns Hopkins Medical Institutions. Dr. Carson is also an accomplished author and frequent speaker on a variety of topics, including pediatric neurology, motivation and self-help for children, and community involvement. Dr. Carson is a director of Costco Wholesale Corporation.
As a result of these professional and other experiences, Dr. Carson possesses particular knowledge and experience in a variety of areas, including crisis management, health and nutrition, regulatory and government affairs, the retail environment, and social responsibility and reputational issues, and provides diversity of background and viewpoint by virtue of his academic record. Dr. Carson has public company board experience (including specific experience in compensation, governance, marketing and social responsibility oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
GORDON GUND.Mr. Gund, age 71, has served as a Kellogg Director since 1986. He is Chairman and Chief Executive Officer of Gund Investment Corporation, which manages diversified investment activities. He is also a director of Corning Incorporated.
As a result of these professional and other experiences, Mr. Gund possesses particular knowledge and experience in a variety of areas, including international markets, people management, regulatory and government affairs, social responsibility and reputational issues, and strategy and strategic planning, and has public company board experience (including specific experience in compensation, governance and marketing oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
DOROTHY JOHNSON.Ms. Johnson, age 70, has served as a Kellogg Director since 1998. Ms. Johnson is President of the Ahlburg Company, a philanthropic consulting agency, a position she has held since February 2000, and President Emeritus of the Council of Michigan Foundations, which she led as President and Chief Executive Officer from 1975 to 2000. She is also on the Board of Directors of Grand Valley State University and has been a member of the Board of Trustees of the W. K. Kellogg Foundation since 1980. Within the past five years, Ms. Johnson has also served as a director of AAA Michigan and The League.
As a result of these professional and other experiences, Ms. Johnson possesses particular knowledge and experience in a variety of areas, including branded consumer products and consumer dynamics, crisis management, people management, regulatory and government affairs, and social responsibility and reputational issues, and has public and private company board experience (including specific experience in marketing and social responsibility oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
ANN MCLAUGHLIN KOROLOGOS.Ms. McLaughlin Korologos, age 69, has served as a Kellogg Director since 1989. She served as Chairman of the Board of Trustees of RAND Corporation from April 2004 to April 2009. She is Chairman Emeritus of The Aspen Institute, a nonprofit organization, and is a former U.S. Secretary of Labor. She is also a director of AMR Corporation (and its subsidiary, American Airlines), Host Hotels & Resorts, Inc., Harman International Industries, Inc. and Vulcan Materials Company, and within the past five years, has also served as a director of Microsoft Corporation and Fannie Mae.
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As a result of these professional and other experiences, Ms. Korologos possesses particular knowledge and experience in a variety of areas, including health and nutrition, international markets, marketing, regulatory and government affairs, and social responsibility and reputational issues, and has public company board experience (including specific experience in compensation, diversity, governance, and social responsibility oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
Continuing Directors to Serve Until the 2012 Annual Meeting
JOHN DILLON.Mr. Dillon, age 72,73, has served as a Kellogg Director since 2000. He is Senior Advisor of Evercore Partners. He retired in October 2003 as Chairman of the Board and Chief Executive Officer of International Paper Company, a position he held since 1996, and retired as Chairman of the Business Roundtable in June 2003. He is a director of E. I. du Pont de Nemours and Company, and withinWithin the past five years, he has also served as a director of Caterpillar Inc. and E. I. du Pont de Nemours and Company.
As a result of these professional and other experiences, Mr. Dillon has been determined to be an ‘Audit Committee Financial Expert’ under the SEC’s rules and regulations, possesses particular knowledge and experience in a variety of areas, including accounting and financial acumen, international markets, manufacturing and supply chain, sales and distribution, and strategy and strategic planning, and has public company board experience (including specific experience in auditing, compensation, governance, and governancemanufacturing oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
JIM JENNESS.Mr. Jenness, age 64,65, has been Kellogg Chairman since February 2005 and has served as a Kellogg Director since 2000. He was our Chief Executive Officer from February 2005 through December 30, 2006, and Chief Executive Officer of Integrated Merchandising Systems, LLC, a leader in outsource management of retail promotion and branded merchandising, from 1997 to December 2004. Before joining Integrated Merchandising Systems, Mr. Jenness served as Vice Chairman and Chief Operating Officer of the Leo Burnett Company from 1996 to 1997 and, before that, as Global Vice Chairman North America and Latin America from 1993 to 1996. He has also been a trustee of the W. K. Kellogg Foundation Trust since 2005, and is a director of Kimberly-Clark Corporation.Corporation and will become Lead Director immediately following their 2012 Annual Meeting of Shareholders.
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As a result of these professional and other experiences, Mr. Jenness possesses particular knowledge and experience in a variety of areas, including branded consumer products and consumer dynamics, health and nutrition, marketing, people management, regulatory and government affairs, strategy and strategic planning, and has public company board experience (including specific experience in compensation oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
DON KNAUSS.Mr. Knauss, age 60,61, has served as a Kellogg Director since December 2007. Mr. Knauss was elected Chairman and Chief Executive Officer of The Clorox Company in October 2006. He was executive vice president of The Coca-Cola Company and president and chief operating officer for Coca-Cola North America from February 2004 until August 2006. Previously, he was president of the Retail Division of Coca-Cola North America from January 2003 through February 2004 and president and chief executive officer of The Minute Maid Company, a division of The Coca-Cola Company, from January 2000 until January 2003 and President of Coca-Cola Southern Africa from March 1998 until January 2000. Prior to that, he held various positions in marketing and sales with PepsiCo, Inc. and Procter & Gamble, and served as an officer in the United States Marine Corps. Mr. Knauss is a director of URS Corporation.
As a result of these professional and other experiences, Mr. Knauss has been determined to be an ‘Audit Committee Financial Expert’ under the SEC’s rules and regulations, possesses particular knowledge and experience in a variety of areas, including accounting and financial acumen, branded consumer products and consumer dynamics, manufacturing and supply chain, the retail environment, and sales and distribution, and has public company board experience (including specific experience in auditing, manufacturing, and marketing oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
ROBERT STEELE.Continuing Directors to Serve Until the 2014 Annual Meeting
JOHN BRYANT.Mr. Steele,Bryant, age 55,46, has served as a Kellogg Director since July 2007.2010. In January 2011, he was appointed President and Chief Executive Officer after having served as our Executive Vice President and Chief Operating Officer since August 2008. Mr. Bryant joined Kellogg in March 1998, and was promoted during the next eight years to a number of key financial and executive leadership roles. He was appointed Executive Vice Chairman — Global HealthPresident and Well-Being of Procter & GambleChief Financial Officer, Kellogg Company, President, Kellogg International in July 2007. He was Group President —
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Global Household Care from April 2006 toDecember 2006. In July 2007, Mr. Bryant was appointed Executive Vice President and GroupChief Financial Officer, Kellogg Company, President, —Kellogg North America from July 2004 through April 2006. Prior to that,and in August 2008, he was appointed Executive Vice President, North America from July 2000Chief Operating Officer and Chief Financial Officer. Mr. Bryant served as Chief Financial Officer through July 2004.December 2009.
As a result of these professional and other experiences, Mr. SteeleBryant possesses particular knowledge and experience in a variety of areas, including accounting and finance, branded consumer products and consumer dynamics, crisis management, health and nutrition, international markets, marketing, people management, the retail environment, strategy and strategic planning, and has public company board experience that strengthens the Board’s collective knowledge, capabilities and experience.
ROGELIO REBOLLEDO.Mr. Rebolledo, age 67, has served as a Kellogg Director since October 2008. In 2007, Mr. Rebolledo retired from his position as chairman of PBG Mexico, the Mexican operations of Pepsi Bottling Group, Inc. He began his 30-year career with PepsiCo Inc. at Sabritas, the salty snack food unit of Frito-Lay International in Mexico. He was responsible for the development of the international Frito-Lay business, first in Latin America and then in Asia and Europe. From 2001 to 2003, he was president and chief executive officer of Frito-Lay International. He also served as president and chief executive officer of Pepsi Bottling Group’s Mexico operations from January 2004 until being named chairman. Mr. Rebolledo currently serves as a director of Best Buy Co., Inc., and within the past five years, has also served as a director of The Pepsi Bottling Group, Applebees Inc. and Grupo ALFA.
As a result of these professional and other experiences, Mr. Rebolledo has been determined to be an ‘Audit Committee Financial Expert’ under the SEC’s rules and regulations, possesses particular knowledge and experience in a variety of areas, including accounting and financial acumen, branded consumer products and consumer dynamics,international markets, manufacturing and supply chain, marketing, and the retail environment, and sales and distribution, and has public company board experience (including specific experience in auditing, compensation, and marketing oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
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STERLING SPEIRN.Mr. Speirn, age 64, has served as a Kellogg Director since March 2007. He is President and Chief Executive Officer of the W. K. Kellogg Foundation. He is also a trustee of the W. K. Kellogg Foundation Trust. Prior to joining the W. K. Kellogg Foundation in January 2006, he was President of Peninsula Community Foundation from November 1992 through 2005 and served as a director of the Center for Venture Philanthropy, which he co-founded in 1999.
As a result of these professional and other experiences, Mr. Speirn possesses particular knowledge and experience in a variety of areas, including crisis management, health and nutrition, people management, regulatory and government affairs, social responsibility and reputational issues, and strategy and strategic planning and has public company board experience (including specific experience in manufacturing, marketing, and social responsibility oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
JOHN ZABRISKIE.Dr. Zabriskie, age 72, has served as a Kellogg Director since 1995. He is also co-founder and Director of PureTech Ventures, LLC, a firm that co-founds life science companies. In 1999, he retired as Chief Executive Officer of NEN Life Science Products, Inc., a position he had held since 1997. From November 1995 to January 1997, Dr. Zabriskie served as President and Chief Executive Officer of Pharmacia & Upjohn, Inc. Dr. Zabriskie is a director of Array Biopharma, Inc. and ARCA biopharma, Inc.
As a result of these professional and other experiences, Dr. Zabriskie has been determined to be an ‘Audit Committee Financial Expert’ under the SEC’s rules and regulations, possesses particular knowledge and experience in a variety of areas, including accounting and financial acumen, crisis management, health and nutrition, manufacturing and supply chain, and sales and distribution, and has public company board experience (including specific experience in audit, compensation, governance, and manufacturing oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
Continuing Directors to Serve Until the 2013 Annual Meeting
GORDON GUND.Mr. Gund, age 72, has served as a Kellogg Director since 1986. He is Chairman and Chief Executive Officer of Gund Investment Corporation, which manages diversified investment activities. He is also a director of Corning Incorporated.
As a result of these professional and other experiences, Mr. Gund possesses particular knowledge and experience in a variety of areas, including international markets, people management, regulatory and government affairs, social responsibility and reputational issues, and strategy and strategic planning, and has public company board experience (including specific experience in compensation, governance and marketing oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
DOROTHY JOHNSON.Ms. Johnson, age 71, has served as a Kellogg Director since 1998. Ms. Johnson is President of the Ahlburg Company, a philanthropic consulting agency, a position she has held since February 2000, and President Emeritus of the Council of Michigan Foundations, which she led as President and Chief Executive Officer from 1975 to 2000. She has been a member of the Board of Trustees of the W. K. Kellogg Foundation since 1980. Within the past five years, Ms. Johnson has also served as a director of AAA Michigan, Grand Valley State University and The League.
As a result of these professional and other experiences, Ms. Johnson possesses particular knowledge and experience in a variety of areas, including branded consumer products and consumer dynamics, crisis management, people management, regulatory and government affairs, and social responsibility and reputational issues, and has public and private company board experience (including specific experience in marketing and social responsibility oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
ANN MCLAUGHLIN KOROLOGOS.Ms. McLaughlin Korologos, age 70, has served as a Kellogg Director since 1989. She served as Chairman of the Board of Trustees of RAND Corporation from April 2004 to April 2009. She is Chairman Emeritus of The Aspen Institute, a nonprofit organization, and is a former U.S. Secretary of Labor. She is also a director of AMR Corporation (and its subsidiary, American Airlines), Host Hotels & Resorts, Inc., Harman International Industries, Inc. and Vulcan Materials Company, and within the past five years, has also served as a director of Microsoft Corporation and Fannie Mae.
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As a result of these professional and other experiences, Ms. Korologos possesses particular knowledge and experience in a variety of areas, including health and nutrition, international markets, marketing, regulatory and government affairs, and social responsibility and reputational issues, and has public company board experience (including specific experience in audit, compensation, diversity, governance, and social responsibility oversight) that strengthens the Board’s collective knowledge, capabilities and experience.
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20102011 DIRECTOR COMPENSATION AND BENEFITS
Only non-employee Directors receive compensation for their services as Directors. For information about the compensation of Mr. Mackay and Mr. Bryant, refer to “Executive Compensation” beginning on page 39.40. Because Mr. Jenness, our Chairman of the Board, is not a named executive officer, we have included the compensation he receives as a Kellogg employee in the Directors’ Compensation Table.
Our 20102011 compensation for non-employee Directors was comprised of cash (annualannual retainers and committee meeting fees) and stock awardsequity-based grants to further align with shareowners. The annual pay is designed to attract and retain diverse, highly-qualified, seasoned, and independent professionals to represent all of our Shareowners, and is targeted at the median of our peer group. Refer to “Compensation Discussion and Analysis — Compensation Approach” for a description of the companies that make up our peer group. The Nominating and Governance Committee reviews our Director compensation program on an annual basis with Frederic W. Cook, the independent compensation consultant, including the competitiveness and appropriateness of the program. Although the Nominating and Governance Committee conducts this review on an annual basis, its general practice is to consider adjustments to Director compensation every other year. Based on its 2010 review, the Nominating and Governance Committee shifted meeting fees into the directors’ annual cash retainer and increased committee chairman compensation. The meeting fees were reallocated to bring the cash compensation structure in line with our peer group and the overall market. The slight increases to the committee chairman compensation improves alignment of those fees by targeting their compensation at the median of our peer group.
Our compensation is also designed to create alignment between our Directors and our Shareowners through the use of equity-based grants. In 2010,2011, approximately two-thirds of non-employee Director pay was in equity and approximately one-third in cash. Actual annual pay varies somewhat among non-employee Directors based primarily on Board committee memberships, committee chair responsibilities, meetings attended and whether a Director elects to defer his or her fees.responsibilities.
Mr. Jenness, our executive Chairman of the Board received compensation in 20102011 equal to $755,000,$800,000, which is comprised of the same long-term incentives granted to non-employee Directors (2,600(2,485 shares of restricted stock) with the balance paid in cash over the year. Mr. Jenness received this equity grant on the same day the annual long-term incentives were granted to otherthe non-employee Directors of Kellogg.Directors. The shares of restricted stock vested immediately,at the time of the grant, but, similar to the other Directors, Mr. Jenness must hold the shares as long as he is a Kellogg Director. The Board, following a review by the independent compensation consultant, determined the total compensation amount for Mr. Jenness to be reasonable and competitive. Refer to “Employment Agreements — Mr. Jenness” for a description of the employment agreement with Mr. Jenness.
Compensation as of January 1,December 31, 2011 for non-employee Directors consisted of the following:
Type of Compensation | Amount | Amount | ||||||
Annual Cash Retainer(1) | $ | 88,000 | $ | 88,000 | ||||
Annual Stock Awards Retainer | 2,600 shares | 2,485 shares | ||||||
Annual Retainer for Committee Chair: | ||||||||
Audit Committee | $ | 17,500 | $ | 17,500 | ||||
Compensation Committee | $ | 12,500 | $ | 12,500 | ||||
All Other Committees | $ | 10,000 | $ | 10,000 | ||||
Board or Committee Attendance Fee (per meeting attended): | $ | 0 |
(1) | The annual cash retainer is paid in quarterly installments. |
Stock Awards. Stock awards are granted eachin early May 1 or the next business day and for non-employee Directors are automatically deferred pursuant to the Kellogg Company Grantor Trust for Non-Employee Directors. Under the terms of the Grantor Trust, shares are available to a Director only upon termination of service on the Board.
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Business Expenses. Kellogg pays for the business expenses related to directors attending Kellogg meetings, including room, meals and transportation to and from boardBoard and committeeCommittee meetings. On rare occasions, a Director’s spouse accompanies a Director when traveling on Kellogg business. At times, a Director travels to and from Kellogg meetings on Kellogg corporate aircraft. Directors are also eligible to be reimbursed for attendance at qualified Director education programs.
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Director and Officer Liability Insurance and Travel Accident Insurance. Director and officer liability insurance (“D&O Insurance”) insures our Directors and officers against certain losses that they are legally required to pay as a result of their actions while performing duties on our behalf. Our D&O Insurance policy does not break out the premium for Directors versus officers and, therefore, a dollar amount cannot be assigned for individual Directors. Travel accident insurance provides benefits to each Director in the event of death or disability (permanent and total) during travel on Kellogg corporate aircraft. Our travel accident insurance policy also covers employees and others while traveling on Kellogg corporate aircraft and, therefore, a dollar amount cannot be assigned for individual Directors.
Elective Deferral Program. Under the Deferred Compensation Plan for Non-Employee Directors, non-employee Directors may each year irrevocably elect to defer all or a portion of their boardBoard and Committee Chair annual cash retainer committee Chair annual retainers and committee meeting fees payable for the following year. The amount deferred is credited to an account in the form of units equivalent to the fair market value of our common stock. If the Board declares dividends, a fractional unit representing the dividend is credited to the account of each participating Director. A participant’s account balance is paid in cash or stock, at the election of the Director, upon termination of service as a Director. The balance is paid in a lump sum or over a period from one to ten years at the election of the Director and the unpaid account balance accrues interest annually at the prime rate in effect when the termination of service occurred.
Minimum Stock Ownership Requirement. All non-employee Directors are expected to comply with stock ownership guidelines, under which they are expected to hold at least five times the annual cash retainer ($440,000 — five times the $88,000 retainer) in stock or stock equivalents, subject to a five-year phase-in period for newly-elected Directors. As of January 1,December 31, 2011, all of the non-employee Directors met or were on track to meetexceeded this requirement. Mr. Bryant and Mr. Jenness are expected to comply with the stock ownership guidelines described in “Compensation Discussion and Analysis — Executive Compensation Policies — Executive Stock Ownership Guidelines.”
Kellogg Matching Grant Program. Directors are eligible to participate in our Corporate Citizenship Fund Matching Grant Program, which is also available to all of our active, full-time U.S. employees. Under this program, our Corporate Citizenship Fund matches 100 percent of donations made to eligible organizations up to a maximum of $10,000 per calendar year for each individual. These limits apply to both employees and Directors.
Discontinued Programs.Program. Prior to December 1995, we had a Director’s Charitable Awards Program pursuant to which each Director could name up to four organizations to which Kellogg would contribute an aggregate of $1 million upon the death of the Director. In 1995, the Board discontinued this program for Directors first elected after December 1995. In 2010,2011, the following Directors who were first elected to the Board in 1995 or earlier, continued to be eligible to participate in this program: Mr. Gund, Ms. McLaughlin Korologos and Dr. Zabriskie. We funded the cost of this program for two out of the three eligible Directors through the purchase of insurance policies prior to 2008. We will make cash payments in the future under this program if insurance proceeds are not available at the time of the Director’s death. There were no cash payments made in 20102011 with respect to this program; however, in 2010,2011, we recognized nonpension postretirement benefits expense associated with this obligation as follows: Mr. Gund — $24,223,$23,773, Ms. McLaughlin Korologos — $20,655$20,665 and Dr. Zabriskie — $25,047.$24,482. These benefits are not reflected in the Directors’ Compensation Table.
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DIRECTORS’ COMPENSATION TABLE
The individual components of the total compensation calculation reflected in the table below are as follows:
Fees and Retainers. The amounts shown under the heading “Fees Earned or Paid in Cash” consist of annual retainers and per meeting attendance fees earned by or paid in cash to our non-employee Directors in 2010.2011. For Mr. Jenness, the amount represents his annual cash compensation as executive Chairman of the Board.
Stock Awards. The amounts disclosed under the heading “Stock Awards” consist of the annual grant of deferred shares of common stock, whichand, for non-employee Directors, the shares are placed in the Kellogg Company Grantor Trust for Non-Employee Directors. The dollar amounts for the awards represent the grant-date fair value calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 (Compensation — Stock Compensation).
All Other Compensation. Perquisites and other compensation are limited in scope and primarily comprised of charitable matching contributions made under our Corporate Citizenship Fund Matching Grant Program, which is a broad-based program at Kellogg.
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Option Awards ($)(4) | Non-equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | Option Awards ($)(4) | Non-equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compensation ($)(7) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||
Benjamin Carson Sr. | 86,500 | 142,324 | — | — | — | 0 | 228,824 | 88,000 | 141,024 | — | — | — | 0 | 229,024 | ||||||||||||||||||||||||||||||||||||||||||
John Dillon | 112,000 | 142,324 | — | — | — | 10,000 | 264,324 | 100,500 | 141,024 | — | — | — | 0 | 241,524 | ||||||||||||||||||||||||||||||||||||||||||
Gordon Gund | 101,000 | 142,324 | — | — | — | 10,000 | 253,324 | 98,000 | 141,024 | — | — | — | 10,000 | 249,024 | ||||||||||||||||||||||||||||||||||||||||||
Jim Jenness | 612,596 | 142,324 | — | — | 103,869(8) | 107,110 | 965,899 | 658,996 | 141,024 | — | — | 108,823 | (8) | 171,244 | 1,080,087 | |||||||||||||||||||||||||||||||||||||||||
Dorothy Johnson | 93,500 | 142,324 | — | — | — | 10,000 | 245,824 | 98,000 | 141,024 | — | — | — | 10,000 | 249,024 | ||||||||||||||||||||||||||||||||||||||||||
Donald Knauss | 87,500 | 142,324 | — | — | — | 10,000 | 239,824 | 98,000 | 141,024 | — | — | — | 0 | 239,024 | ||||||||||||||||||||||||||||||||||||||||||
Ann Mclaughlin Korologos | 91,000 | 142,324 | — | — | — | 5,500 | 238,824 | |||||||||||||||||||||||||||||||||||||||||||||||||
Ann McLaughlin Korologos | 88,000 | 141,024 | — | — | — | 6,500 | 235,524 | |||||||||||||||||||||||||||||||||||||||||||||||||
Rogelio Rebolledo | 89,500 | 142,324 | — | — | — | 0 | 231,824 | 88,000 | 141,024 | — | — | — | 0 | 229,024 | ||||||||||||||||||||||||||||||||||||||||||
Sterling Speirn | 83,500 | 142,324 | — | — | — | 0 | 225,824 | 88,000 | 141,024 | — | — | — | 4,900 | 233,924 | ||||||||||||||||||||||||||||||||||||||||||
Robert Steele | 99,500 | 142,324 | — | — | — | 0 | 241,824 | 98,000 | 141,024 | — | — | — | 0 | 239,024 | ||||||||||||||||||||||||||||||||||||||||||
John Zabriskie | 112,000 | 142,324 | — | — | — | 0 | 254,324 | 105,500 | 141,024 | — | — | — | 0 | 246,524 |
(1) | The aggregate dollar amount of all fees earned or paid in cash for services as a non-employee Director, including annual board and committee chair retainer |
(2) | Other than for Mr. Jenness, the amount reflects the grant-date fair value calculated in accordance with FASB ASC Topic 718 for the annual grant of |
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(3) | For Mr. Jenness, the amount reflects the grant-date fair value calculated in accordance with FASB ASC Topic 718 for the annual grant of |
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(4) | As of |
(5) | Kellogg does not have a non-equity incentive plan for non-employee Directors. |
(6) | Kellogg does not have a pension plan for non-employee Directors and does not pay above-market or preferential rates on non-qualified deferred compensation for non-employee Directors. |
(7) | Represents charitable matching contributions made under our Corporate Citizenship Fund Matching Grant Program: |
(8) | As Chairman, Mr. Jenness is covered as an employee by our U.S. Pension Plans provided to other U.S.-based NEOs. The benefit was scheduled to begin on January 1, 2008, however, Mr. Jenness continued as an employee beyond that date. Therefore, Mr. Jenness does not receive any further benefit other than interest credited to his January 1, 2008 benefit from that date until the date of actual commencement. The increase represents the interest earned as of December 31, 2011. |
(9) | Mr. Steele resigned as a Director on January |
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COMPENSATION DISCUSSION AND ANALYSIS
Introduction. This discussion and analysis includes compensation for six of Kellogg’s executive officers. We are required to provideprovides information regarding the compensation program in place for our CEO, CFO, and the three other most highly-compensated executive officers; however, for this proxy statement we included information concerning an additional executive officer to provide visibility into the compensation for our top business leaders.officers. In this proxy statement, we refer to our CEO, CFO and the other fourthree individuals as our “Named Executive Officers” or “NEOs.”
In order to present Kellogg’s executive compensation programs in a simple and understandable manner, the Compensation Discussion and Analysis has been organized into the following sections:
I. | Executive Summary |
II. | Core Principles |
III. | Compensation Approach |
IV. | Compensation Plans and Design |
V. | Compensation Policies |
It is important to read this section in conjunction with the detailed tables and narrative descriptions under “Executive Compensation” beginning on page 3940 of this proxy statement.
I.Executive Summary. This executive summary highlights core principles of our compensation program, the approach followed by the Compensation Committee, and key actions and decisions in 2010.a 2011 overview.
Core Principles. We operate in a competitive and challenging industry. We believe that our executive compensation program for our NEOs should be designed to (a) provide a competitive level of total compensation necessary to attract and retain talented and experienced executives; (b) appropriately motivate them to contribute to our short- and long-term success; and (c) help drive long-term total return tofor our Shareowners. Accordingly, the Core Principles that underlieunderpin our executive compensation program include payPay for performance,Performance, Shareowner alignment,Alignment, Values-Based and mitigating risk.Mitigating Risk. A detailed description of these principles is included in this Compensation Discussion and Analysis, and the following is a brief overview of each.
• | Pay for Performance. Our compensation program is designed to have a significant portion of an NEO’s actual pay linked to the Company’s actual performance. We accomplish this by utilizing “performance-based” pay programs like our annual incentive, three-year executive performance and stock option plans, and by limiting perquisites. |
• | Shareowner Alignment. We align the interest of our NEOs with Shareowners by encouraging our NEOs to have a meaningful personal financial stake in Kellogg. We gain this alignment by maintaining stock ownership guidelines, having a significant portion of an NEO’s target compensation stock-based, and using compensation plan goals that are tied to key financial metrics of the Company. |
• | Values-Based. Our NEOs are evaluated on the behaviors they exhibit as they drive results. The compensation program links the “what” each NEO contributes as well as “how” an NEO makes those contributions. |
• | Mitigating Risk. Our compensation program is designed to mitigate risks relating to our business. The program accomplishes this by balancing short-term and rolling three-year incentives, which uses various financial metrics to ensure the business grows in a balanced manner. In addition, we use clawback provisions to |
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Compensation Approach. The approach utilized by the Compensation Committee is a key feature that ensures that actual compensation and plan design are consistent with the Core Principles. Our compensation
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approach is a multi-step process based on (a) independent decision-making, (b) utilizing peer group data to appropriately target compensation levels, (c) targeting compensation at the 50th percentile of the peer group, (d) following a consistent, rigorous target setting process, and (e) utilizing verification tools to ensure appropriate decisions are being made.
Key Decisions / ActionsOverview. In 2010,2011, the Compensation Committee took the following actions:
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• |
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• | Additional |
• | Compensation Risk Assessment(Mitigating Risk). In |
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II.Core Principles. Our compensation program is based on the following core principles—each of which is more fully described below.
Pay for Performance,
Shareowner Alignment,
Values-Based, and
Mitigating Risk.
1. | Pay for Performance. The fundamental principle underlying our compensation programs is pay for performance. That is, linking the amount of actual pay to the performance of Kellogg and each NEO. |
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We accomplish this in several ways, including ensuring that target pay levels aremarket based, utilizing “performance-based” pay, andlimiting perquisites (each of which is more fully described below). The |
a. | Market Driven |
b. | Performance-based Compensation. A significant portion of our NEOs’ target compensation is “performance-based” pay tied to both short-term performance (Annual Incentive Plan awards) and long-term performance (Executive Performance Plan awards and stock options). These awards link pay amounts to our level of performance with respect to achieving our strategic and operational goals. As employees assume greater responsibility, a larger portion of their total compensation is performance based. In other words, the more senior the executive, the greater percentage of their pay is performance based. For our CEO, 87% of |
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Performance-Based Compensation
The chartschart above highlighthighlights for each NEO the percentage contribution of each element of the 20102011 target compensation. The charts demonstratechart demonstrates how base salary (fixed component) contributes less for the CEO from a percentage standpoint than the other NEOs. One result of this structure is that, generally speaking, the difference between actual total compensation for the CEO as compared to that of the other NEOs will be greater the better Kellogg performs.
c. | Limited Perquisites. To further ensure pay for performance, executives receive limited perquisites, as shown on page |
2. | Shareowner Alignment. Aligning the interests of our executives with Shareowners is an important way to drive behaviors that will generate long-term Shareowner value. We align these interests by using equity awards that have along-term focus and by maintaining robuststock ownership guidelines (each of which is more fully described below). Equity-based incentives are an effective method of facilitating stock ownership and further aligning the interests of executives with those of our Shareowners. Consequently, a significant portion of our NEOs’ total target compensation is comprised of equity-based incentives |
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a. | Longer-Term Focus. Our Executive Performance Plan is a stock-based, pay for performance, multi-year incentive plan intended to focus senior management on achieving critical operational goals over three-year periods. These goals are tied to key financial measures (such as |
b. | Stock Ownership Guidelines. Kellogg has established robust share ownership guidelines to strengthen the ongoing and continued link between the interests of NEOs and Shareowners. The CEO is expected to own shares equal to at least six times |
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3. |
Acting with integrity and respect;
Being accountable for our actions and results;
Being passionate about our business, our brands and our food;
Having the humility and hunger to learn;
Striving for simplicity; and
Loving success.
4. | Mitigating Risk. The compensation program |
• | Clawback Policies. We maintain clawback provisions relating to our Annual Incentive Plan, Stock Options, and Executive Performance Plan programs. The provisions allow Kellogg to recoup performance-based gains by executive officers (and other program participants) for violations of Kellogg policy or misconduct causing a financial restatement. |
III.Compensation Approach. Our compensation approach is based on (1) independent decision making, (2) utilizingpeer group data to appropriately target compensation levels, (3) targeting compensation at the50th percentile of the peer group, (4) following a consistent, rigorous target settingprocess, and (5) utilizingverification tools to ensure appropriate decisions are being made. Each is described more fully below.
1. | Independence. Our Compensation Committee is responsible for administering the compensation program for executive officers of Kellogg. The members of the Compensation Committee are fully independent. None of the Compensation Committee members are current or former employees of Kellogg, and they are not eligible to participate in any of our executive compensation programs. For more information, see “Board and Committee Membership — Compensation Committee.” In addition, the Compensation Committee has utilized an independent compensation consultant for many years, and engaged Frederic W. Cook & Co. as its independent compensation consultant |
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prohibited from providing any consulting or other services to Kellogg or our executive officers other than the work performed on behalf of the Compensation Committee or the Board. |
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2. | Peer Group. We benchmark ourselves against comparable companies (our “compensation peer group”) to ensure that our executive officer compensation is competitive in the marketplace. The Compensation Committee uses peer group data to benchmark our compensation with respect to base salary, target annual and long-term incentives and total compensation. For |
Campbell Soup Co. | ||||
Clorox Co. | ||||
The Coca-Cola Co. | PepsiCo Inc. | |||
Colgate-Palmolive Co. | Sara Lee Corporation | |||
ConAgra Foods, Inc. | Kimberly-Clark Corporation | Whirlpool Corp. | ||
Dr. Pepper Snapple Group Inc. | Kraft Foods Inc. | Yum! Brands, Inc. | ||
Estee Lauder Companies, Inc. | Mattel, Inc. |
We believe that our compensation peer group is representative of the market in which we compete for talent. The size of the group has been established so as to provide sufficient benchmarking data across the range of senior positions in Kellogg. Our compensation peer group companies were chosen because of their leadership positions in branded consumer products and their overall relevance to Kellogg. The quality of these organizations has allowed Kellogg to maintain a high level of continuity in the peer group, over many years, providing a consistent measure for benchmarking compensation.
The composition of our compensation peer group has changed over time based on market events such as mergers and other business combinations. Consequently, the Compensation Committee periodically reviews the compensation peer group to confirm that it continues to be an appropriate benchmark for our program. In 2010, the Committee reviewed a variety of potential companies, and considered a variety of factors in their assessment including (1) the company’s business focus, (2) whether the company considers Kellogg to be a peer, (3) the company’s revenue, operating income, assets, equity and market capitalization, and (4) whether the company competes with Kellogg for customers with similar products and/or services. Based on that analysis, the Compensation Committee decided to expand our compensation peer group in effect for 2011 to include the following additional companies: Dr. Pepper Snapple Group Inc., Estee Lauder Companies, Inc., Hormel Foods Corp., Mattel, Inc., McDonald’s Corp., NIKE, Inc., Whirlpool Corp. and Yum! Brands, Inc.
3. | 50th Percentile. All components of our executive compensation package are targeted at the 50th percentile of our compensation peer group. We believe targeting the 50th percentile allows Kellogg to recruit the best talent for the organization, while providing a good balance between paying for performance and controlling our compensation expense. Once we set compensation at the 50th percentile, actual pay will depend largely upon the Company’s performance versus our performance peer group. Again, the design drives pay for performance. Our “performance peer group” consists of |
4. | Process. Each year, the Compensation Committee follows a consistent, rigorous process to determine compensation for the |
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5. | Verification Tools. The Compensation Committee utilizes several tools to help verify that the design of our program is consistent with our Core Principles and that the amount of compensation is within appropriate competitive parameters. For example, each year, the Compensation Committee reviews “pay tallies”, which includes |
IV.Compensation Plans and Design. NEO compensation includes a combination of annual cash and long-term incentive compensation. Annual cash compensation for NEOs is comprised of base salary and the AIP. Long-term incentives consist of stock option grants and three-year EPP.
Total Compensation. The target for total compensation and each element of total compensation is the 50th percentile of our compensation peer group. In setting the compensation for each NEO, the Compensation Committee considers individual performance, experience in the role and contributions to achieving our business strategy. We apply the same Core Principles and Compensation Approach in determining the compensation for all of our NEOs, including the CEO, as discussed above under “Core Principles — Pay for Performance.”CEO. The Compensation Committee also exercises appropriate business judgment in how it applies the standard approaches to the facts and circumstances associated with each NEO.
We are unable to compare actual to target compensation on a percentile basis for our NEOs because actual compensation percentiles for the preceding fiscal year are not available. The companies in our compensation peer group do not all report actual compensation on the same twelve month basis. Even if this information were available we do not believe it would provide Shareowners with a fair understanding of our executive compensation program because actual compensation can be impacted by a variety of factors, including changes in stock prices, company performance and vesting of retirement benefits.
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Key elements of our 20102011 NEO compensation program are as follows.
Element | Purpose | Characteristics | ||
Base Salaries | Compensates executives for their level of responsibility and sustained individual performance. Also, helps attract and retain strong talent. | Fixed component; | ||
Annual Incentives (AIP) | Promotes achieving our annual corporate and business unit financial goals, as well as individual goals. | Performance-based cash opportunity; amount varies based on company and business results, and individual performance. | ||
Long-Term Incentives (EPP and Options) | Promotes achieving (a) our long-term corporate financial goals through the Executive Performance Plan and (b) stock price appreciation through stock options. | Performance-based equity opportunity; amounts earned/realized will vary from the targeted grant-date fair value based on actual financial and stock price performance. | ||
Retirement Plans | Provides an appropriate level of replacement income upon retirement. Also, provides an incentive for a long-term career with Kellogg, which is a key objective. | Fixed component; however, | ||
Post-Termination Compensation | Facilitates attracting and retaining high caliber executives in a competitive labor market in which formal severance plans are common. | Contingent component; only payable if the executive’s employment is terminated under certain circumstances. |
Base Salaries. Base salaries for NEOs are targeted at the 50th percentile of the compensation peer group, and are set based on an NEO’s experience, proficiency, and sustained performance in role. The Compensation Committee judged each NEO’s base salary for 20102011 to be appropriately positioned relative to the 50th percentile based on this analysis. Annually, the Compensation Committee evaluates whether to award base salary merit increases, including considering changes in an NEO’s role and/or responsibility. In 2010,2011, the NEOs received base salary merit increases, which fell within Kellogg’s merit budget guidelines for all employees, except for increases due to changes in position or responsibilities.
Mr. Bryant was promoted to his position as CEO at the start of 2011 and received a base salary increase consistent with his new position and responsibilities. To determine the appropriate base salary, the Compensation Committee, together with input from the independent compensation consultant, considered a number of factors including the median base salary level for CEOs within the compensation peer group, Mr. Bryant’s experience, and his then current salary. Salary increases for Messrs. Davidson, Norman, and Pilnick were all within the range of 2% to 3%, which the Committee judged to be appropriate based on their performance and the respective position of their salaries to the 50th percentile. In Mr. Dissinger’s case, the Committee felt that it was appropriate to bring his salary more in line with the 50th percentile consistent with his experience and performance. Consequently, the Compensation Committee increased Mr. Dissinger’s salary by 12%.
Annual Incentives. Annual incentive awards to the NEOs are paid under the terms of the Kellogg Senior Executive Annual Incentive Plan (“AIP”), which was approved by the Shareowners and is administered by the Compensation Committee. Awards granted to NEOs under the terms of the AIP are designed to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. The Compensation Committee uses a judgment-based methodology in exercising negative discretion to determine the actual payout for each NEO in accordance with Section 162(m). As part of this methodology, at the beginning of fiscal 2010, 2011,
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the Compensation Committee established for each NEO annual incentive opportunities as a percentage of an executive’s base salary (“AIP Target”). The AIP targets for each NEO are based on the 50th percentile of the compensation peer group.
Each year, the Compensation Committee sets performance ranges (which we refer to as “bandwidths”) centered on targets for internal operating profit, internal net sales, and cash flow to help determine what percentage of the AIP Target would be paid out to each NEO. The targets and bandwidths are based on our operating plan for the fiscal year and are designed to achieve our objectives for sustainable, dependable growth. Targets are then compared with the forecasted performance of the performance peer group to ensure that our operating plan targets are reasonable and sufficiently challenging relative to the forecasted performance for the performance peer group.
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Operating plan targets generally fall within the median forecasted performance for the performance peer group with the maximum and minimum of the bandwidth falling within the top and bottom quartiles, respectively, of the performance peer group forecast. Consequently, actual performance above the forecasted median of the performance peer group would generally result in annual incentive payments above the target level, with payments at the maximum level being made for performance in the forecasted top quartile of the performance peer group. Conversely, performance below the median would generally result in annual incentive payments below the target level, with no payment being made for performance below a minimum threshold (generally set in the bottom quartile).
The actual percent of the AIP Target paid to our NEOs each year can range from 0% to 200% of the target opportunity, based primarily upon corporate performance against internal net sales, internal operating profit, and cash flow. Operating profit, performance is weighted 60%, and net sales and cash flow performance are both weighted 50%, 30% and 20%., respectively. The Compensation Committee and management believe that by using these metrics Kellogg is encouraging profitable top line growth and cash generation for Shareowners.
Our measure of internal operating profit and internal net sales excludes the impact of changes in foreign currency exchange rates, and, if applicable, acquisitions, dispositions and shipping day differences. For these reasons, internal operating profit and internal net sales are not comparable to the GAAP measures of operating profit and net sales. In addition, the target performance goals for internal operating profit and internal net sales used in the AIP reflect certain budgeted assumptions relating to foreign currency exchange rates, acquisitions, dispositions and shipping day differences in our operating plan to facilitate year-to-year comparisons. Finally, we measure cash flow, another non-GAAP measure, by reducing operating cash flow by an amount equal to Kellogg’s capital expenditures. Consequently, results reported in our financial statements may differ from performance against our AIP goals.
In addition to operating results, each NEO is held accountable for the achievement ofachieving annual goals set at the start of the fiscal year relating to current organizational capabilities and future organizational requirements. Consistent with our commitment to a balanced approach between individual performance and adherence to our Core Principles, each NEO’s performance is assessed both against his level of individual achievement against these agreed upon goals and the alignment of his behavior in achieving those goals with our core values. We refer to this as balancing the “what” and the “how” of individual performance.
For 2010,2011, the corporate target performance goal for internal net sales growth was 2.4%4.3%, internal operating profit growth was 8.7%0%, and cash flow was $1.26$1.17 billion. It is important to note that the operating profit target was set recognizing that operating profit would be impacted by a variety of factors, including the approximate 5-6 point impact of reinstating incentive compensation costs in 2011. The actual payout multiplierfactor applied for each metric is calculated based on how 20102011 results comparecompared to each target performance goal. 2010 was a challenging year for Kellogg, with Kellogg’sFor 2011, our corporate performance exceeded the internal net sales down 1%,growth target by 0.2%. Our performance fell short of the internal operating profit flat compared togrowth target by 2.9% and the prior year, and cash flow at $534 million (after a voluntary pension contribution of $467 million, net of tax benefit). This performance did not satisfy the minimum threshold for the corporate performances goals. After considering Kellogg’s financial performancetarget by approximately $170 million. Based on these results discussed above and the individual performance of each NEO,exercising its judgment-based methodology, the Compensation Committee determined that no annual incentives would be81% of the AIP Target would be paid out to anyour NEOs for 2011, before taking individual performance into consideration. Based on Mr. Norman’s individual performance in 2011, the Compensation Committee awarded him an AIP amount equal to 101% of our NEOs. his AIP Target. The Compensation Committee considered a number of factors in assessing his individual performance including his leadership on delivering strong financial results and improving Kellogg’s foundation in various markets, and the increased management
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role he played as he was transitioning key leadership positions. The Compensation Committee also noted Mr. Norman’s efforts in strengthening the organization by enhancing leadership talent in Latin America, Europe and Asia Pacific. The Compensation Committee also considered Mr. Pilnick’s individual performance in 2011 and awarded him an AIP amount equal to 116% of his AIP Target. The Compensation Committee considered a number of factors in assessing his individual performance including his work to enhance the organization by driving corporate development initiatives, the leadership he provided with respect to legal and compliance matters, and his role relating to the Company’s regulatory activities.
The chart below includes information about the 20102011 AIP for each NEO.
AIP Target | AIP Maximum Amount($) | 2010 AIP Payout ($)(2) | AIP Target | AIP Maximum | 2011 AIP Payout (Paid in March 2012) | |||||||||||||||||||||||||||||||
% of Base Salary(1) | Amount($) | % of Base Salary(1) | Amount($) | Amount($) | % of AIP Target | Amount of AIP Payout ($)(2) | ||||||||||||||||||||||||||||||
David Mackay | 150 | % | 1,767,450 | 3,534,900 | 0 | |||||||||||||||||||||||||||||||
John Bryant | 115 | % | 957,260 | 1,914,520 | 0 | 135 | % | 1,350,000 | 2,700,000 | 81 | % | 1,093,500 | ||||||||||||||||||||||||
Ron Dissinger | 75 | % | 372,300 | 744,600 | 0 | 90 | % | 500,850 | 1,001,700 | 81 | % | 405,700 | ||||||||||||||||||||||||
Brad Davidson | 90 | % | 604,890 | 1,209,780 | 0 | 100 | % | 691,000 | 1,382,000 | 81 | % | 559,800 | ||||||||||||||||||||||||
Paul Norman | 90 | % | 576,000 | 1,152,000 | 0 | 100 | % | 654,400 | 1,308,800 | 101 | % | 661,000 | ||||||||||||||||||||||||
Gary Pilnick | 75 | % | 418,275 | 836,550 | 0 | 80 | % | 456,160 | 912,320 | 116 | % | 529,200 |
(1) | For AIP purposes, incentive opportunities are based on executives’ salary levels at the last day of the fiscal year |
(2) | Based on Kellogg’s performance and each NEO’s individual performance, as described above. |
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Long-Term Incentives. Long-term incentives are provided to our executives under the 2009 Long-Term Incentive Plan (or LTIP), which was approved by Shareowners. These incentives are intended to promote achieving our long-term corporate financial goals and earnings growth. The LTIP allows for grants of stock options, stock appreciation rights, restricted shares and performance shares and units (such as Executive Performance Plan awards), and is intended to meet the deductibility requirements of Section 162(m) of the Internal Revenue Code as performance-based pay (resulting in paid awards being tax deductible to Kellogg). The total amount of long-term incentives for the NEOs (based on the grant date expected value) is targeted at the 50th percentile of the compensation peer group.
All of the 20102011 long-term incentive opportunity for the NEOs was provided through equity-based awards, which the Compensation Committee believes best achieves several of the Core Principles, including Pay for Performance and Shareowner Alignment. For 2010,2011, the Compensation Committee determined that the NEOs would receive 70% of their total long-term incentive opportunity in stock options and the remaining 30% in performance shares (granted under the Executive Performance Plan, as discussed below). The Compensation Committee established this mix of awards after considering our Core Principles, compensation peer group practices and cost implications.
• | Stock Options. The Compensation Committee believes stock options align NEOs with Shareowners because the options provide value to the NEO only if our stock price increases after the grants are made. Stock option awards for our NEOs are determined on a position-by-position basis using survey data for corresponding positions in our compensation peer group. Individual awards may vary from target levels based on the individual’s performance, ability to impact financial performance and future potential. The exercise price for the options is set at the closing trading price on the date of grant, options vest over 3 years, and |
The options granted in 20102011 vest and become exercisable in three equal annual installments with one-third vesting on February 20, 201118, 2012 (the first anniversary of the grant date), one-third vesting on February 20, 201218, 2013 (the second anniversary of the grant date) and the final third vesting on February 20, 201318, 2014 (the third anniversary of the grant date). The per-share exercise price for the stock options is $53.20,$53.01, the closing trading price of Kellogg common stock on the date of the grant. Approximately 82%88% of the stock options
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covered by the 20102011 grant were made to employees other than the NEOs. The number of stock options granted in 2010 remained2011 is targeted at 2009 levels, except due to changes in position or responsibilities.the 50th percentile of the compensation peer group.
• | Executive Performance Plan. The Executive Performance Plan (“EPP”) is a stock-based, pay for performance, multi-year incentive plan intended to focus senior management on achieving critical multi-year operational goals. These goals, such as |
2010-20122011-2013 EPP. Similar to the AIP, awards granted to NEOs under the terms of the EPP are designed to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. The Compensation Committee approves the targets and bandwidths for the 2010-20122011-2013 EPP in the same manner as the targets and bandwidths for the AIP. The bandwidths are based on our long-range operating plan, and are intended to be realistic and reasonable, but challenging, in order to drive sustainable growth.
The Compensation Committee and management believe that the metrics for the 2010-20122011-2013 EPP — internal net sales growth and internal operating profit growth — emphasize the importance of revenue and profit and are strongly linked to performance of Kellogg and Shareowner value. Similar to the AIP, once the Compensation Committee confirms the performance level delivered is at the level for which the NEOs are eligible to receive a payout under the EPP, the Compensation Committee uses a judgment-based methodology in exercising downward, negative discretion to determine the actual
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payout for each NEO. However, unlike the AIP, the Compensation Committee does not consider individual performance in determining payouts. The Compensation Committee weighs only company performance when determining actual payouts under the EPP.
The Compensation Committee setsets each individual’s target at 30% of his or her total long-term incentive opportunity. Participants in the EPP have the opportunity to earn between 0% and 200% of their EPP target, however, dividends are not paid on unvested EPP awards. For the 2010-20122011-2013 EPP, the corporate target performance goal for compound annual internal net sales growth is 3% and for compound annual internal operating profit growth is 5%. The 2010-20122011-2013 EPP cycle began on January 3, 20102, 2011 (first day of fiscal 2010)2011) and concludes on December 29, 201227, 2013 (last day of fiscal 2012)2013). The 2010-20122011-2013 EPP award opportunities, presented in number of potential shares that can be earned, are included in the Grant of Plan-Based Awards Table on page 4344 of this proxy statement.
2008-20102009-2011 EPP. ForThe 2009-2011 EPP was focused on delivering cost savings. The 2009-2011 EPP was designed to improve Kellogg’s overall cost structure by generating sustainable cost savings that would continue to impact Kellogg’s cost structure going forward. Targets and bandwidths were established by the 2008-2010 EPP awards,Compensation Committee in a similar manner used for the AIP program at the beginning of fiscal 2009.
The performance period ended on January 1,December 31, 2011 (the last day of fiscal 2010)2011). In February 2011,2012, after Kellogg’s 20102011 annual audited financial statements were completed, the Compensation Committee reviewed our performance versus the compound annual internal operating profit growthcost savings target established in 20082009 for purposes of Section 162(m). The Compensation Committee determined that the target set for purposes of Section 162(m) had been reached. The Compensation Committee then used a judgment-based methodology in exercising downward, negative discretion to determine the actual payout for each NEO.
While the overall savings during this period exceeded the $1 billion target, some of the savings generated were not sustainable, and a portion of the savings was reinvested back into the business to strengthen our supply chain. Based on their review, as well as input from the Compensation Committee’s independent consultant, Kellogg achieved “sustainable” cost savings of $926 million from plant initiatives, procurement, logistics, productivity from capital investments, and overhead. In addition, our independent accountants performed procedures to assist the Committee in evaluating the cost savings projects used to determine awards under the Plan. As part ofdiscussed above, those savings that
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were not deemed sustainable were not included in the calculations to determine the awards for the NEOs because they did not qualify under the 2009-2011 EPP. Based on this information and in exercising its judgment-based methodology, the Compensation Committee established at the beginning of fiscal 2008 for each NEO the EPP target amounts (“EPP Target”). An executive can earn a maximum of 200% of his EPP Target. In addition, the Compensation Committee approved performance ranges (which we refer to as “bandwidths”) for compound annual growth of internal operating profit. The Compensation Committee approved the targets and bandwidths for the 2008-2010 EPP in the same manner as the targets and bandwidths for the AIP.
For the period covering fiscal years 2008-2010, Kellogg achieved 4.7% compound annual growth of internal operating profit, which, if unadjusted, would have resulted in a payout of 118% of the 2008-2010 EPP target share amount. However, operating profit in 2010 increased due to a significantly lower AIP payment in 2010 as compared to 2009. If the 2010 AIP had been paid at target, the compound annual internal operating profit growth rate for 2008-2010 would have been 2.8%, which would have resulted in a 69% payout under the 2008-2010 EPP. The Compensation Committee determined that it would be appropriate to pay the 2008-2010 EPP at a level that included the impact of a target bonus payout. In doing so, the Compensation Committee determined the actual payout would be 69%82% of the 2008-20102009-2011 EPP target share amount. The 2008-20102009-2011 EPP awards vested in February 2011.2012.
The chart below includes information about 2008-20102009-2011 EPP opportunities and actual payouts:
EPP Target Amount(#) | EPP Maximum Amount(#) | 2008-2010 EPP Payout (paid in February 2011) | EPP Target Amount(#) | EPP Maximum Amount(#) | 2009-2011 EPP Payout (paid in February 2012) | |||||||||||||||||||||||||||||||||||
% of EPP Target | Amount(#) | Amount($)(1) | % of EPP Target | Amount(#) | Amount($)(1) | |||||||||||||||||||||||||||||||||||
David Mackay | 38,300 | 76,600 | 69 | % | 26,427 | 1,405,652 | ||||||||||||||||||||||||||||||||||
John Bryant | 9,900 | 19,800 | 69 | % | 6,831 | 363,341 | 16,100 | 32,200 | 82 | % | 13,202 | 693,501 | ||||||||||||||||||||||||||||
Ron Dissinger | 2,200 | 4,400 | 69 | % | 1,518 | 80,742 | 2,200 | 4,400 | 82 | % | 1,804 | 94,764 | ||||||||||||||||||||||||||||
Brad Davidson | 4,900 | 9,800 | 69 | % | 3,381 | 179,835 | 8,300 | 16,600 | 82 | % | 6,806 | 357,519 | ||||||||||||||||||||||||||||
Paul Norman | 5,300 | 10,600 | 69 | % | 3,657 | 194,516 | 6,200 | 12,400 | 82 | % | 5,084 | 267,063 | ||||||||||||||||||||||||||||
Gary Pilnick | 5,600 | 11,200 | 69 | % | 3,864 | 205,526 | 5,000 | 10,000 | 82 | % | 4,100 | 215,373 |
(1) | The payout amount is calculated by multiplying the earned shares by the closing price of our common stock on February |
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• | Restricted Stock. We award restricted shares from time to time to selected executives and employees based on a variety of factors, including facilitating recruiting and retaining key executives. On |
• | Post-Termination Compensation. The NEOs are covered by arrangements which specify payments in the event the executive’s employment is terminated. These severance benefits, which are competitive with the compensation peer group and general industry practices, are payable if and only if the executive’s employment is terminated without cause. The Kellogg Severance Benefit Plan Policy and the Change in Control Policy have been established primarily to attract and retain talented and experienced executives and further motivate them to contribute to our short- and long-term success for the benefit of our Shareowners. Kellogg’s severance program is consistent with market practices, and cash severance for our current NEOs is payable in the amount of two times the current annual salary plus two times target annual incentive awards prior to separation. In addition, in 2011, the Compensation Committee reduced severance benefits for newly-named senior executives to more closely align with the 50th percentile of our compensation peer group. Cash severance for new CEO direct reports is now payable in the amount of two times the current annual salary. The potential severance amount no longer includes annual incentive awards for newly-named senior executives. Cash compensation following a change in control for our NEOs is payable in the amount of two times the current annual salary plus two times the highest annual incentive award during the three years before the change in control. For more information, please refer to “Potential Post-Employment Payments,” which begins on page |
• | Retirement Plans. Our CEO, CFO and other NEOs are eligible to participate in Kellogg-provided pension plans which provide benefits based on years of service and pay (salary plus annual incentive only) to a broad base of employees. The amount of an employee’s compensation is an integral component of determining the benefits provided under pension and savings plan formulas, and thus, an individual’s performance over time will influence the level of his or her retirement benefits. Amounts earned under long-term incentive programs such as EPP, gains from stock options and awards of restricted stock arenot included when determining retirement benefits for any employee (including executives). In addition, we do not pay above-market interest rates on amounts deferred under our savings and investment plans. For more information, please refer to “Retirement and Non-Qualified Defined Contribution and Deferred Compensation Plans,” which begins on page |
• | Perquisites. The Compensation Committee believes that it has taken a conservative approach to perquisites. For example, Kellogg does not provide company cars or club memberships to its NEOs. |
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Pursuant to a policy adopted by the Board, our CEO is generally required, when practical, to use company aircraft for personal travel for security reasons. |
• | Employee Stock Purchase Plan. We have a tax-qualified employee stock purchase plan that is made available to substantially all U.S. employees, which allows participants to acquire Kellogg stock at a discount price. The purpose of the plan is to encourage employees at all levels to purchase stock and become Shareowners. The plan allows participants to buy Kellogg stock at a 5% discount to the market price. Under applicable tax law, no plan participant may purchase more than $25,000 in market value (based on the market value of Kellogg stock on the last trading day prior to the beginning of the enrollment period for each subscription period) of Kellogg stock in any calendar year. |
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V.Executive Compensation Policies.
• | Executive Stock Ownership Guidelines. In order to preserve the linkage between the interests of senior executives and those of Shareowners, senior executives are expected to establish and maintain a significant level of direct stock ownership. This can be achieved in a variety of ways, including by retaining stock received upon exercise of options or the vesting of stock awards (including EPP awards), participating in the Employee Stock Purchase Plan and purchasing stock in the open market. |
Chief Executive Officer and Executive Chairman | 6x annual base salary | |
| 3x annual base salary | |
Other senior executives | 2x annual base salary |
These executives have five years from the date they first become subject to a particular level of the guidelines or from the date of a material increase in their base salary to meet them. All of our NEOs and other senior executives currently meet or are on track to meet their ownership guideline. The Compensation Committee reviews compliance with the guidelines on an annual basis. Executives who are not in compliance with the guidelines may not sell stock without prior approval from our Chief Executive Officer, except for stock sales used to fund the payment of taxes and transaction costs incurred in connection with the exercise of options and the vesting of stock awards.
• | Practices Regarding the Grant of Equity Awards. The Compensation Committee has generally followed a practice of making all option grants to executive officers on a single date each year. Prior to the relevant Compensation Committee meeting, the Compensation Committee reviews an overall stock option pool for all participating employees (approximately |
The Board grants these annual awards at its regularly-scheduled meeting in mid-February. The February meeting usually occurs within 2 or 3 weeks following our final earnings release for the previous fiscal year. We believe that it is appropriate that annual awards be made at a time when material information regarding our performance for the preceding year has been disclosed. We do not otherwise have any program, plan or practice to time annual option grants to our executives in coordination with the release of material non-public information. EPP Awards are granted at the same time as options.
While most of our option awards to NEOs have historically been made pursuant to our annual grant program, the Compensation Committee and Board retain the discretion to make additional awards of options or restricted stock to executives at other times for recruiting or retention purposes. We do not have any program, plan or practice to time “off-cycle” awards in coordination with the release of material non-public information.
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All option awards made to our NEOs, or any of our other employees, or Directors, are made pursuant to our LTIP. The exercise price of options under the LTIP is set at the closing trading price on the date of grant. We do not have any program, plan or practice of awarding options and setting the exercise price based on the stock’s price on a date other than the grant date, and we do not have a practice of determining the exercise price of option grants by using average prices (or lowest prices) of our common stock in a period preceding, surrounding or following the grant date. All grants to NEOs are made by the Board itself and not pursuant to delegated authority. Pursuant to authority delegated by the Board and subject to the Compensation Committee-approved allocation, awards of options to employees below the executive level are made by our CEO.
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• | Securities Trading Policy. Our securities trading policy prohibits our Directors, executives and other employees from engaging in any transaction in which they may profit from short-term speculative swings in the value of our securities. This includes “short |
• | Clawback Policies. We maintain clawback provisions relating to stock option exercises. Under these clawback provisions, if an executive voluntarily leaves our employment to work for a competitor within one year after any option exercise, then the executive must repay to Kellogg any gains realized from such exercise (but reduced by any tax withholding or tax obligations). Beginning with our stock option grants in 2009, we have expanded the scope of our clawback provisions. In the event of certain violations of Kellogg policy and, in the case of executive officers, misconduct causing a financial restatement, any gains realized from the exercise of stock options are now subject to recoupment depending on the facts and circumstances of the event. Furthermore, the Compensation Committee approved in February 2010 similar clawback provisions in Kellogg’s AIP and EPP programs. |
• | Deductibility of Compensation and Other Related Issues. Section 162(m) of the Internal Revenue Code includes potential limitations on the deductibility of compensation in excess of $1 million paid to the company’s CEO and three other most highly compensated executive officers (other than our principal financial officer) serving on the last day of the year. Based on the regulations issued by the Internal Revenue Service, we believe we have taken the necessary actions to ensure the deductibility of payments under the AIP and with respect to stock options and performance shares granted under our plans, whenever possible. We intend to continue to take the necessary actions to maintain the deductibility of compensation resulting from these types of awards. In contrast, restricted stock granted under our plans generally does not qualify as “performance-based compensation” under Section 162(m). Therefore, the vesting of restricted stock in some cases will result in a loss of tax deductibility of compensation. While we view preserving tax deductibility as an important objective, we believe the primary purpose of our compensation program is to support our strategy and the long-term interests of our shareowners. In specific instances we have and in the future may authorize compensation arrangements that are not fully tax deductible but which promote other important objectives of Kellogg and of our executive compensation program. |
We require any executive base salary above $950,000 (after pre-tax deductions for benefits and similar items) to be deferred into deferred stock units under our Executive Deferral Program. This policy ensures that all base salary will be deductible under Section 162(m) of the Internal Revenue Code. The deferred amounts are credited to an account in the form of units that are equivalent to the fair market value of our common stock. The units are payable in cash upon the executive’s termination from employment. The only NEO affected by thisNo compensation was deferred under the policy in 2010 was2011, including for Mr. Mackay who deferred $68,078 of his salary.Bryant, whose base salary fell below $950,000 due to pre-tax deductions.
The Compensation Committee also reviews projections of the estimated accounting (pro forma expense) and tax impact of all material elements of the executive compensation program. Generally, accounting expense is accrued over the requisite service period of the particular pay element (generally equal to the performance period) and Kellogg realizes a tax deduction upon the payment to/realization by the executive. As a result of the impact options with an accelerated ownership feature (“AOF”) have on our overall non-cash compensation expense, the Compensation Committee and the Board began taking a variety of actions to reduce the impact of AOF options beginning in 2003. On April 25, 2008, the Compensation Committee eliminated the AOF feature from all outstanding stock options in exchange for cash compensation.
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As detailed in its charter, the Compensation Committee of the Board oversees our compensation program on behalf of the Board. In the performance of its oversight function, the Compensation Committee, among other things, reviewed and discussed with management the Compensation Discussion and Analysis set forth in this proxy statement.
Based upon the review and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended January 1,December 31, 2011 and our proxy statement to be filed in connection with our 20112012 Annual Meeting of Shareowners, each of which will be filed with the SEC.
COMPENSATION COMMITTEE
John Dillon, Chair
Gordon Gund
Ann McLaughlin Korologos
John Zabriskie
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The following narrative, tables and footnotes describe the “total compensation” earned during 2008, 2009, 2010 and 20102011 by our NEOs. The total compensation presented below does not reflect the actual compensation received by our NEOs or the target compensation of our NEOs in 2008, 2009, 2010 and 2010.2011. The actual value realized by our NEOs in 20102011 from long-term incentives (options and restricted stock)2008-2010 EPP) is presented in the Option Exercises and Stock Vested Table on page 4947 of this proxy statement. Target annual and long-term incentive awards for 20102011 are presented in the Grants of Plan-Based Awards tableTable on page 4344 of this proxy statement.
The individual components of the total compensation calculation reflected in the Summary Compensation Table are broken out below:
Salary. Base salary earned during 2010.2011. Refer to “Compensation Discussion and Analysis — Compensation Plans and Design — Base Salaries.”
Bonus. We did not pay any discretionary bonuses to our NEOs in 2010. Other than in 2010, each2011. Each NEO earned an annual performance-based cash incentive under our AIP, as discussed below under “Non-Equity Incentive Plan Compensation.” Refer to “Compensation Discussion and Analysis — Compensation Plans and Design — Annual Incentives.”
Stock Awards. The awards disclosed under the heading “Stock Awards” consist of EPP awards and restricted stock awards. The dollar amounts for the awards represent the grant-date fair value calculated in accordance with Financial Accounting Standards Board Accounting Standards CodificationFASB ASC Topic 718 (“FASB 718”) for each NEO. Refer to Notes 1 and 7 to the Consolidated Financial Statements included in our annual Report on Form 10-K for the year ended January 1,December 31, 2011. Details about the EPP awards granted in 20102011 are included in the Grant of Plan-Based Awards Table below. Refer to “Compensation Discussion and Analysis —Compensation Plans and Design — Long-Term Incentives” for additional information. The grant-date fair value of the stock-based awards will likely vary from the actual amount the NEO receives. The actual value the NEO receives will depend on the number of shares earned and the price of our common stock when the shares vest.
Option Awards. The awards disclosed under the heading “Option Awards” consist of annual option grants (each a “regular option”) and, for 2008, accelerated ownership feature (“AOF”) option grants (each an “AOF option”“option”). The dollar amounts for the awards represent the grant-date fair value calculated in accordance with FASB ASC Topic 718 for each NEO. Refer to Notes 1 and 7 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended January 1,December 31, 2011. Details about the option awards made during 20102011 are included in the Grant of Plan-Based Awards Table below. Refer to “Compensation Discussion and Analysis —Compensation Plans and Design — Long-Term Incentives — Stock Options” for additional information. The grant-date fair value of the stock option awards will likely vary from the actual value the NEO receives. The actual value the NEO receives will depend on the number of shares exercised and the price of our common stock on the date exercised. For 2008, the amounts disclosed under the heading “Option Awards” also include the recognition of accounting expense under FASB 718 by Kellogg for the cancellation of the AOF on all outstanding options as discussed below.
Directors and employees began receiving “original” AOF options over seventeen years ago in order to create greater stock ownership by encouraging Directors and employees to exercise valuable stock options and retain the shares received as a result of the option exercise. Under the terms of the original option grant, a new option, or “AOF option,” was received when Kellogg stock was used to pay the exercise price of a stock option and related taxes. For AOF options, the expiration date was the same as the original option and the option exercise price was the fair market value our common stock on the date the AOF option was granted.
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Beginning in 2003, the Compensation Committee and the Board began taking a variety of actions to reduce the impact of AOF options. On April 25, 2008, the Compensation Committee approved the elimination of the AOF (commonly referred to as a “reload” feature) from all outstanding stock options (approximately 900 people). The elimination of the AOF from all outstanding options did not otherwise affect or change the underlying stock options. In exchange for the value of the AOF, holders of AOFs received cash compensation. The price to be paid to holders of AOFs was determined with the assistance of a third-party actuarial consultant who calculated the value of the AOF option feature for each grant year.
Non-Equity Incentive Plan Compensation. The amount of Non-Equity Incentive Plan Compensation consists of the Kellogg Senior Executive Annual Incentive Plan (“AIP”) awards granted and earned (if any) in 2011, 2010 2009 and in 2008.2009. At the outset of each year, the Compensation Committee grants AIP awards to the CEO, CFO and the other NEOs. Such awards are based on our performance each year and are paid in March following the completed year. For information on these awards refer to “Compensation Discussion and Analysis —Compensation Plans and Design — Annual Incentives.”
Change in Pension Value. The amounts disclosed under the heading “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” represent the actuarial increase during 2011, 2010 and 2009 and 2008 in
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the pension value provided under the pension plans. Kellogg does not pay above-market or preferential rates on non-qualified deferred compensation for employees, including the NEOs. A detailed narrative and tabular discussion about our pension plans and non-qualified deferred compensation plans, our contributions to our pension plans and the estimated actuarial increase in the value of our pension plans are presented under the heading “Retirement and Non-Qualified Defined Contribution and Deferred Compensation Plans.”
All Other Compensation. Consistent with our emphasis on performance-based pay, perquisites and other compensation are limited in scope and in 2010 and 20092011 were primarily comprised of retirement benefit contributions and the cost of death benefits. In 2008, the cash compensation paid in connection with the one-time elimination of the AOF from existing options represented a significant portion of “All Other Compensation.”
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It is important to note that the information required by the Summary Compensation Table does not necessarily reflect the target or actual compensation for our NEOs in 2011, 2010 2009 and in 2008.2009.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||||||||
David Mackay, | 2010 | 1,171,766 | 0 | 1,664,625 | 2,878,121 | 0 | 1,923,000 | 334,924 | 7,972,436 | |||||||||||||||||||||||||||
President and Chief Executive Officer (Retired as of 1/1/2011) | 2009 | 1,194,237 | 0 | 1,228,890 | 2,262,613 | 2,760,000 | 3,611,000 | 362,707 | 11,419,447 | |||||||||||||||||||||||||||
2008 | 1,136,545 | 0 | 1,803,547 | 3,535,733 | 2,601,300 | 1,849,000 | 1,375,213 | 12,301,338 | ||||||||||||||||||||||||||||
John Bryant (6) | 2010 | 824,914 | 0 | 776,825 | 1,345,569 | 0 | 413,000 | 116,780 | 3,477,088 | |||||||||||||||||||||||||||
President and Chief Executive Officer (as of 1/2/2011) | 2009 | 830,763 | 0 | 573,482 | 1,057,808 | 1,508,800 | 665,000 | 90,409 | 4,726,262 | |||||||||||||||||||||||||||
2008 | 697,613 | 0 | 1,958,241 | 963,612 | 992,000 | 222,000 | 486,315 | 5,319,781 | ||||||||||||||||||||||||||||
Ron Dissinger | 2010 | 492,612 | 0 | 289,500 | 501,904 | 0 | 345,000 | 72,076 | 1,701,092 | |||||||||||||||||||||||||||
Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||||||||||
Brad Davidson | 2010 | 667,000 | 0 | 400,475 | 691,572 | 0 | 941,000 | 120,398 | 2,820,445 | |||||||||||||||||||||||||||
Senior Vice President Kellogg Company, President, Kellogg North America | 2009 | 675,000 | 0 | 295,646 | 543,674 | 959,400 | 1,663,000 | 138,454 | 4,275,174 | |||||||||||||||||||||||||||
2008 | 588,384 | 0 | 1,296,491 | 513,751 | 842,000 | 831,000 | 238,939 | 4,310,565 | ||||||||||||||||||||||||||||
Paul Norman | 2010 | 630,770 | 0 | 381,175 | 656,680 | 0 | 669,000 | 80,999 | 2,418,624 | |||||||||||||||||||||||||||
Senior Vice President Kellogg Company, President, Kellogg International | 2009 | 623,079 | 0 | 220,844 | 405,821 | 885,600 | 1,189,000 | 66,245 | 3,390,589 | |||||||||||||||||||||||||||
2008 | 573,000 | 0 | 889,027 | 585,969 | 672,000 | 421,000 | 179,004 | 3,320,000 | ||||||||||||||||||||||||||||
Gary Pilnick | 2010 | 554,310 | 0 | 821,280 | 419,596 | 0 | 209,000 | 64,390 | 2,068,576 | |||||||||||||||||||||||||||
Senior Vice President, General Counsel, Corporate Development & Secretary |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||||||||
John Bryant | 2011 | 1,000,012 | 0 | 1,482,848 | 2,316,594 | 1,093,500 | 635,000 | 67,159 | 6,595,113 | |||||||||||||||||||||||||||
President and Chief Executive | 2010 | 824,914 | 0 | 776,825 | 1,345,569 | 0 | 413,000 | 116,780 | 3,477,088 | |||||||||||||||||||||||||||
Officer (as of 1/2/2011) | 2009 | 830,763 | 0 | 573,482 | 1,057,808 | 1,508,800 | 665,000 | 90,409 | 4,726,262 | |||||||||||||||||||||||||||
Ron Dissinger | 2011 | 542,632 | 0 | 362,368 | 566,580 | 405,700 | 709,000 | 110,668 | 2,696,948 | |||||||||||||||||||||||||||
Senior Vice President and Chief Financial Officer | 2010 | 492,612 | 0 | 289,500 | 501,904 | 0 | 345,000 | 72,076 | 1,701,092 | |||||||||||||||||||||||||||
Brad Davidson | 2011 | 686,640 | 0 | 519,712 | 809,970 | 559,800 | 1,299,000 | 161,838 | 4,036,960 | |||||||||||||||||||||||||||
Senior Vice President Kellogg Company, | | 2010 2009 | | | 667,000 675,000 | | | 0 0 | | | 400,475 295,646 | | | 691,572 543,674 | |
| 0 959,400 |
| | 941,000 1,663,000 | | | 120,398 138,454 | | | 2,820,445 4,275,174 | | |||||||||
Paul Norman | 2011 | 669,138 | 0 | 410,048 | 639,996 | 661,000 | 971,000 | 53,889 | 3,405,071 | |||||||||||||||||||||||||||
Senior Vice President Kellogg Company, | | 2010 2009 | | | 630,770 623,079 | | | 0 0 | | | 381,175 220,844 | | | 656,680 405,821 | |
| 0 885,600 |
| | 669,000 1,189,000 | | | 80,999 66,245 | | | 2,418,624 3,390,589 | | |||||||||
Gary Pilnick | 2011 | 567,320 | 0 | 300,384 | 470,820 | 529,200 | 313,000 | 36,955 | 2,217,679 | |||||||||||||||||||||||||||
Senior Vice President, General Counsel, Corporate Development & Secretary | 2010 | 554,310 | 0 | 821,280 | 419,596 | 0 | 209,000 | 64,390 | 2,068,576 |
(1) | Reflects the grant-date fair value of stock awards calculated in accordance with FASB ASC Topic 718 for each NEO. Refer to Notes 1 and 7 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended |
EPP ($) | Restricted Stock ($) | Total ($) | ||||||||||||||||||||||||||||||
David Mackay | 2010 | 1,664,625 | 0 | 1,664,625 | ||||||||||||||||||||||||||||
2009 | 1,228,890 | 0 | 1,228,890 | |||||||||||||||||||||||||||||
2008 | 1,803,547 | 0 | 1,803,547 | EPP ($) | Restricted Stock ($) | Total ($) | ||||||||||||||||||||||||||
John Bryant | 2010 | 776,825 | 0 | 776,825 | 2011 | 1,482,848 | 0 | 1,482,848 | ||||||||||||||||||||||||
2009 | 573,482 | 0 | 573,482 | 2010 | 776,825 | 0 | 776,825 | |||||||||||||||||||||||||
2008 | 466,191 | 1,492,050 | 1,958,241 | 2009 | 573,482 | 0 | 573,482 | |||||||||||||||||||||||||
Ron Dissinger | 2010 | 289,500 | 0 | 289,500 | 2011 | 362,368 | 0 | 362,368 | ||||||||||||||||||||||||
2010 | 289,500 | 0 | 289,500 | |||||||||||||||||||||||||||||
Brad Davidson | 2010 | 400,475 | 0 | 400,475 | 2011 | 519,712 | 0 | 519,712 | ||||||||||||||||||||||||
2009 | 295,646 | 0 | 295,646 | 2010 | 400,475 | 0 | 400,475 | |||||||||||||||||||||||||
2008 | 230,741 | 1,065,750 | 1,296,491 | 2009 | 295,646 | 0 | 295,646 | |||||||||||||||||||||||||
Paul Norman | 2010 | 381,175 | 0 | 381,175 | 2011 | 410,048 | 0 | 410,048 | ||||||||||||||||||||||||
2009 | 220,844 | 0 | 220,844 | 2010 | 381,175 | 0 | 381,175 | |||||||||||||||||||||||||
2008 | 249,577 | 639,450 | 889,027 | 2009 | 220,844 | 0 | 220,844 | |||||||||||||||||||||||||
Gary Pilnick | 2010 | 241,250 | 580,030 | 821,280 | 2011 | 300,384 | 0 | 300,384 | ||||||||||||||||||||||||
2010 | 241,250 | 580,030 | 821,280 |
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(2) | If the highest level of performance conditions are achieved, then the grant-date fair value of the stock awards for each NEO is as follows, Mr. |
(3) | Represents the grant-date fair value calculated in accordance with FASB ASC Topic 718 for each NEO for stock option |
Regular Options($) | AOF Options($) | AOF Modification($)(b) | Total ($) | |||||||||||||||||
David Mackay | 2010 | 2,878,121 | 0 | 0 | 2,878,121 | |||||||||||||||
2009 | 2,262,613 | 0 | 0 | 2,262,613 | ||||||||||||||||
2008 | 3,114,474 | 0 | 421,259 | 3,535,733 | ||||||||||||||||
John Bryant | 2010 | 1,345,569 | 0 | 0 | 1,345,569 | |||||||||||||||
2009 | 1,057,808 | 0 | 0 | 1,057,808 | ||||||||||||||||
2008 | 803,548 | 0 | 160,064 | 963,612 | ||||||||||||||||
Ron Dissinger | 2010 | 501,904 | 0 | 0 | 501,904 | |||||||||||||||
Brad Davidson | 2010 | 691,572 | 0 | 0 | 691,572 | |||||||||||||||
2009 | 543,674 | 0 | 0 | 543,674 | ||||||||||||||||
2008 | 401,774 | 86,802 | (a) | 25,175 | 513,751 | |||||||||||||||
Paul Norman | 2010 | 656,680 | 0 | 0 | 656,680 | |||||||||||||||
2009 | 405,821 | 0 | 0 | 405,821 | ||||||||||||||||
2008 | 432,754 | 102,051 | (a) | 51,164 | 585,969 | |||||||||||||||
Gary Pilnick | 2010 | 419,596 | 0 | 0 | 419,596 |
(4) | Solely represents the actuarial increase during 2011 (for 2011 compensation), 2010 (for 2010 compensation) |
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(5) | The table below presents an itemized account of “All Other Compensation” provided in |
Kellogg Contributions to S&I and Restoration Plans(a) ($) | Company Paid Death Benefit(b) ($) | Financial Planning Assistance(c) ($) | Non-Business Aircraft Usage(d) ($) | Physical Health Exams(e) ($) | Total ($) | Kellogg Contributions to S&I and Restoration Plans(a) ($) | Company Paid Death Benefit(b) ($) | Financial Planning Assistance(c) ($) | Non-Business Aircraft Usage(d) ($) | Physical Exams(e) ($) | Total ($) | |||||||||||||||||||||||||||||||||||||
David Mackay | 157,271 | 161,589 | 6,000 | 2,739 | 7,325 | 334,924 | ||||||||||||||||||||||||||||||||||||||||||
John Bryant | 93,349 | 13,450 | 3,750 | 0 | 6,231 | 116,780 | 40,000 | 12,952 | 5,000 | 6,707 | 2,500 | 67,159 | ||||||||||||||||||||||||||||||||||||
Ron Dissinger | 35,912 | 30,164 | 6,000 | 0 | 0 | 72,076 | 21,705 | 79,338 | 6,000 | 0 | 3,625 | 110,668 | ||||||||||||||||||||||||||||||||||||
Brad Davidson | 65,056 | 44,461 | 6,000 | 0 | 4,881 | 120,398 | 26,366 | 98,187 | 5,308 | 25,431 | 6,546 | 161,838 | ||||||||||||||||||||||||||||||||||||
Paul Norman | 59,932 | 8,976 | 6,000 | 0 | 6,091 | 80,999 | 26,766 | 8,218 | 6,000 | 4,238 | 8,667 | 53,889 | ||||||||||||||||||||||||||||||||||||
Gary Pilnick | 45,628 | 7,044 | 4,367 | 0 | 7,351 | 64,390 | 22,693 | 6,939 | 0 | 0 | 7,323 | 36,955 |
(a) | For information about our Savings & Investment Plan and Restoration Plan, refer to “Retirement and Non-Qualified Defined Contribution and Deferred Compensation Plans — Non-Qualified Deferred Compensation” beginning on page |
(b) | Annual cost for Kellogg-paid life insurance, Kellogg-paid accidental death and dismemberment, Executive Survivor Income Plan (Kellogg funded death benefit provided to executive employees). |
(c) | Reflects reimbursement for financial and tax planning assistance. |
(d) | The |
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situations under the foregoing methodology because the costs would not be incremental. Kellogg does not pay its NEOs any amounts in respect of taxes (so called gross up payments) on income imputed to them for non-business aircraft usage. |
(e) | Actual cost of a physical health exam. |
In addition to the foregoing compensation, the NEOs also participated in health and welfare benefit programs, including vacation and medical, dental, prescription drug and disability coverage. These programs are generally available and comparable to those programs provided to all U.S. salaried employees.
Grant of Plan-Based Awards Table
During 2010,2011, we granted the following plan-based awards to our NEOs:
1. | Stock Options; |
2. |
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Information with respect to each of these awards on a grant-by-grant basis is set forth in the table below. For a detailed discussion of each of these awards and their material terms, refer to “Executive Compensation —Summary Compensation Table” and “Compensation Discussion and Analysis — Compensation Plans and Design” above.
Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant-date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||||||
Thresh- old ($) | Target ($) | Max- imum ($) | Thresh- old (#) | Target (#) | Max- imum (#) | |||||||||||||||||||||||||||||||||||||||
David Mackay | ||||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/19/2010 | 321,700 | 53.20 | 2,878,121 | (1) | |||||||||||||||||||||||||||||||||||||||
2010 AIP (2) | 0 | 1,767,450 | 3,534,900 | |||||||||||||||||||||||||||||||||||||||||
2010-12 EPP | 2/19/2010 | 0 | 34,500 | 69,000 | 1,664,625 | (3) | ||||||||||||||||||||||||||||||||||||||
John Bryant | ||||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/19/2010 | 150,400 | 53.20 | 1,345,569 | (1) | |||||||||||||||||||||||||||||||||||||||
2010 AIP (2) | 0 | 957,260 | 1,914,520 | |||||||||||||||||||||||||||||||||||||||||
2010-12 EPP | 2/19/2010 | 0 | 16,100 | 32,200 | 776,825 | (3) | ||||||||||||||||||||||||||||||||||||||
Ron Dissinger | ||||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/19/2010 | 56,100 | 53.20 | 501,904 | (1) | |||||||||||||||||||||||||||||||||||||||
2010 AIP (2) | 0 | 372,300 | 744,600 | |||||||||||||||||||||||||||||||||||||||||
2010-12 EPP | 2/19/2010 | 0 | 6,000 | 12,000 | 289,500 | (3) | ||||||||||||||||||||||||||||||||||||||
Brad Davidson | ||||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/19/2010 | 77,300 | 53.20 | 691,572 | (1) | |||||||||||||||||||||||||||||||||||||||
2010 AIP (2) | 0 | 585,000 | 1,170,000 | |||||||||||||||||||||||||||||||||||||||||
2010-12 EPP | 2/19/2010 | 0 | 8,300 | 16,600 | 400,475 | (3) | ||||||||||||||||||||||||||||||||||||||
Paul Norman | ||||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/19/2010 | 73,400 | 53.20 | 656,680 | (1) | |||||||||||||||||||||||||||||||||||||||
2010 AIP (2) | 0 | 540,000 | 1,080,000 | |||||||||||||||||||||||||||||||||||||||||
2010-12 EPP | 2/19/2010 | 0 | 7,900 | 15,800 | 381,175 | (3) | ||||||||||||||||||||||||||||||||||||||
Gary Pilnick | ||||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/19/2010 | 46,900 | 53.20 | 419,596 | (1) | |||||||||||||||||||||||||||||||||||||||
2010 AIP (2) | 0 | 418,275 | 836,550 | |||||||||||||||||||||||||||||||||||||||||
2010-12 EPP | 2/19/2010 | 0 | 5,000 | 10,000 | 241,250 | (3) | ||||||||||||||||||||||||||||||||||||||
Restricted stock | 2/23/2010 | 11,000 | 580,030 | (4) |
Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Estimated or Base Price of Option Awards ($/Sh) | Grant-date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||||
Thresh- old ($) | Target ($) | Max- imum ($) | Thresh- old (#) | Target (#) | Max- imum (#) | |||||||||||||||||||||||||||||||||||||
John Bryant | ||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/18/2011 | 290,300 | 53.01 | 2,316,594 | (1) | |||||||||||||||||||||||||||||||||||||
2011 AIP(2) | 0 | 1,350,000 | 2,700,000 | |||||||||||||||||||||||||||||||||||||||
2011-13 EPP | 2/18/2011 | 0 | 31,100 | 62,200 | 1,482,848 | (3) | ||||||||||||||||||||||||||||||||||||
Ron Dissinger | ||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/18/2011 | 71,000 | 53.01 | 566,580 | (1) | |||||||||||||||||||||||||||||||||||||
2011 AIP(2) | 0 | 500,850 | 1,001,700 | |||||||||||||||||||||||||||||||||||||||
2011-13 EPP | 2/18/2011 | 0 | 7,600 | 15,200 | 362,368 | (3) | ||||||||||||||||||||||||||||||||||||
Brad Davidson | ||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/18/2011 | 101,500 | 53.01 | 809,970 | (1) | |||||||||||||||||||||||||||||||||||||
2011 AIP(2) | 0 | 691,000 | 1,382,000 | |||||||||||||||||||||||||||||||||||||||
2011-13 EPP | 2/18/2011 | 0 | 10,900 | 21,800 | 519,712 | (3) | ||||||||||||||||||||||||||||||||||||
Paul Norman | ||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/18/2011 | 80,200 | 53.01 | 639,996 | (1) | |||||||||||||||||||||||||||||||||||||
2011 AIP(2) | 0 | 654,400 | 1,308,800 | |||||||||||||||||||||||||||||||||||||||
2011-13 EPP | 2/18/2011 | 0 | 8,600 | 17,200 | 410,048 | (3) | ||||||||||||||||||||||||||||||||||||
Gary Pilnick | ||||||||||||||||||||||||||||||||||||||||||
Stock options | 2/18/2011 | 59,000 | 53.01 | 470,820 | (1) | |||||||||||||||||||||||||||||||||||||
2011 AIP(2) | 0 | 456,160 | 912,320 | |||||||||||||||||||||||||||||||||||||||
2011-13 EPP | 2/18/2011 | 0 | 6,300 | 12,600 | 300,384 | (3) |
(1) | Represents the grant-date fair value calculated in accordance with FASB ASC Topic 718. Refer to Notes 1 and 7 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended |
(2) | Represents estimated possible payouts on the grant date for annual performance cash awards granted in |
44
therefore, these awards are earned in the year of grant. See the column captioned “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table for the actual payout amounts related to the |
(3) | Represents the grant-date fair value calculated in accordance with FASB ASC Topic 718. Refer to Notes 1 and 7 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended |
44
Outstanding Equity Awards at Fiscal Year-End Table
The following equity awards granted to our NEOs were outstanding as of the end of fiscal 2010:2011:
Stock Options (disclosed under the “Option Awards” columns). Represents annual option grants made in February of each year to our NEOs.
Restricted Stock Awards (disclosed under the “Stock Awards” columns). In 2008, in order2010, as part of an ongoing effort to enhance the retention and continuity of our senior operating team, each of Mr. Bryant, Mr. Davidson and Mr. Norman received a restricted stock award. In 2010, Mr. Pilnick received a restricted stock award for a similar reason.
2008-2010 EPP Grants (disclosed under the “Stock Awards” columns). The 2008-2010 EPP cycle began on December 30, 2007 (first day of fiscal 2008) and concluded on January 1, 2011 (last day of fiscal 2010). Dividends are not paid on unvested EPP awards. The 2008-2010 awards are based on compound annual growth of internal operating profit. The ultimate value of the awards will depend on the number of shares earned and the price of our common stock at the time awards are issued. See “Compensation Discussion and Analysis — Compensation Plans and Design — Long-Term Incentives — Executive Performance Plan — 2008-2010 EPP” for additional information, including the actual amount of the awards that were paid out on or about February 22, 2011.award.
2009-2011 EPP Grants (disclosed under the “Stock Awards” columns). The 2009-2011 EPP cycle began on January 4, 2009 (first day of fiscal 2009) and concludesconcluded on December 31, 2011 (last day of fiscal 2011). Dividends are not paid on unvested EPP awards. The 2009-2011 awards are based on annual cost savings. The ultimate value of the awards will depend on the number of shares earned and the price of our common stock at the time awards are issued. See “Compensation Discussion and Analysis — Compensation Plans and Design — Long-Term Incentives — Executive Performance Plan — 2009-2011 EPP” for additional information, including the actual amount of the awards that vested February 17, 2012.
2010-2012 EPP Grants (disclosed under the “Stock Awards” columns). The 2010-2012 EPP cycle began on January 3, 2010 (first day of fiscal 2010) and concludes on December 29, 2012 (last day of fiscal 2012). Dividends are not paid on unvested EPP awards. The 2010-2012 awards are based on internal net sales growth and internal operating profit growth. The ultimate value of the awards will depend on the number of shares earned and the price of our common stock at the time awards are issued.
2011-2013 EPP Grants (disclosed under the “Stock Awards” columns). The 2011-2013 EPP cycle began on January 2, 2011 (first day of fiscal 2011) and concludes on December 28, 2013 (last day of fiscal 2013). Dividends are not paid on unvested EPP awards. The 2011-2013 awards are based on internal net sales growth and internal operating profit growth. The ultimate value of the awards will depend on the number of shares earned and the price of our common stock at the time awards are issued.
45
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(3) | Option Exercise Price ($)(4) | Option Expiration Date(5) | Number of Shares or Units of Stock That Have Not Vested (#)(6) | Market Value of Shares or Units of Stock That Have Not Vested ($)(7) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(8) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(9) | |||||||||||||||||||||||||||
David Mackay | ||||||||||||||||||||||||||||||||||||
Regular Options | 166,100 | 0 | 44.46 | 2/17/2016 | ||||||||||||||||||||||||||||||||
341,300 | 0 | 49.78 | 2/16/2017 | |||||||||||||||||||||||||||||||||
321,700 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||||
0 | 214,467 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||||
0 | 321,700 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||||
AOF Options | 13,611 | 0 | 49.92 | 2/16/2011 | ||||||||||||||||||||||||||||||||
90,565 | 0 | 53.58 | 2/16/2011 | |||||||||||||||||||||||||||||||||
128,511 | 0 | 49.92 | 3/26/2011 | |||||||||||||||||||||||||||||||||
80,553 | 0 | 53.58 | 3/26/2011 | |||||||||||||||||||||||||||||||||
50,770 | 0 | 46.29 | 2/22/2012 | |||||||||||||||||||||||||||||||||
71,333 | 0 | 53.58 | 2/22/2012 | |||||||||||||||||||||||||||||||||
87,931 | 0 | 49.92 | 2/21/2013 | |||||||||||||||||||||||||||||||||
Restricted Stock | 0 | 0 | ||||||||||||||||||||||||||||||||||
2008-10 EPP (12) | 76,600 | 3,912,728 | ||||||||||||||||||||||||||||||||||
2009-11 EPP | 69,000 | 3,524,520 | ||||||||||||||||||||||||||||||||||
2010-12 EPP | 69,000 | 3,524,520 | ||||||||||||||||||||||||||||||||||
John Bryant | ||||||||||||||||||||||||||||||||||||
Regular Options | 125,500 | 0 | 38.93 | 2/20/2014 | ||||||||||||||||||||||||||||||||
95,000 | 0 | 44.04 | 2/18/2015 | |||||||||||||||||||||||||||||||||
105,000 | 0 | 44.46 | 2/17/2016 | |||||||||||||||||||||||||||||||||
82,700 | 0 | 49.78 | 2/16/2017 | |||||||||||||||||||||||||||||||||
83,000 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||||
50,133 | 100,267 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||||
0 | 150,400 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||||
AOF Options | 18,245 | 0 | 49.92 | 2/16/2011 | ||||||||||||||||||||||||||||||||
10,441 | 0 | 53.58 | 2/16/2011 | |||||||||||||||||||||||||||||||||
33,999 | 0 | 46.12 | 2/22/2012 | |||||||||||||||||||||||||||||||||
17,118 | 0 | 49.92 | 2/22/2012 | |||||||||||||||||||||||||||||||||
48,994 | 0 | 53.58 | 2/22/2012 | |||||||||||||||||||||||||||||||||
39,528 | 0 | 49.92 | 2/21/2013 | |||||||||||||||||||||||||||||||||
45,540 | 0 | 53.58 | 2/21/2013 | |||||||||||||||||||||||||||||||||
Restricted Stock | 35,000 | (13) | 1,787,800 | |||||||||||||||||||||||||||||||||
2008-10 EPP (12) | 19,800 | 1,011,384 | ||||||||||||||||||||||||||||||||||
2009-11 EPP | 32,200 | 1,644,776 | ||||||||||||||||||||||||||||||||||
2010-12 EPP | 32,200 | 1,644,776 | ||||||||||||||||||||||||||||||||||
Ron Dissinger | ||||||||||||||||||||||||||||||||||||
Regular Options | 15,000 | 0 | 38.93 | 2/20/2014 | ||||||||||||||||||||||||||||||||
12,000 | 0 | 44.04 | 2/18/2015 | |||||||||||||||||||||||||||||||||
11,300 | 0 | 44.46 | 2/17/2016 | |||||||||||||||||||||||||||||||||
16,700 | 0 | 49.78 | 2/16/2017 | |||||||||||||||||||||||||||||||||
18,100 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||||
6,666 | 13,334 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||||
0 | 56,100 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||||
AOF Options | 1,346 | 0 | 53.34 | 2/16/2011 | ||||||||||||||||||||||||||||||||
4,376 | 0 | 46.25 | 2/22/2012 | |||||||||||||||||||||||||||||||||
2,740 | 0 | 49.58 | 2/22/2012 | |||||||||||||||||||||||||||||||||
7,588 | 0 | 53.34 | 2/22/2012 | |||||||||||||||||||||||||||||||||
1,640 | 0 | 46.25 | 2/21/2013 | |||||||||||||||||||||||||||||||||
5,093 | 0 | 49.58 | 2/21/2013 | |||||||||||||||||||||||||||||||||
6,421 | 0 | 53.34 | 2/21/2013 | |||||||||||||||||||||||||||||||||
Restricted Stock | 0 | 0 | ||||||||||||||||||||||||||||||||||
2008-10 EPP (12) | 4,400 | 224,752 | ||||||||||||||||||||||||||||||||||
2009-11 EPP | 4,400 | 224,752 | ||||||||||||||||||||||||||||||||||
2010-12 EPP | 12,000 | 612,960 | ||||||||||||||||||||||||||||||||||
Brad Davidson | ||||||||||||||||||||||||||||||||||||
Regular Options | 45,000 | 0 | 49.78 | 2/16/2017 | ||||||||||||||||||||||||||||||||
41,500 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||||
25,766 | 51,534 | (10) | �� | 40.17 | 2/20/2019 | |||||||||||||||||||||||||||||||
0 | 77,300 | (11) | 53.20 | 2/19/2020 |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(3) | Option Exercise Price ($)(4) | Option Expiration Date(5) | Number of Shares or Units of Stock That Have Not Vested (#)(6) | Market Value of Shares or Units of Stock That Have Not Vested ($)(7) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(8) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(9) | |||||||||||||||||||||||||
John Bryant | ||||||||||||||||||||||||||||||||||
Regular Options | 39,528 | 0 | 49.92 | 2/21/2013 | ||||||||||||||||||||||||||||||
45,540 | 0 | 53.58 | 2/21/2013 | |||||||||||||||||||||||||||||||
125,500 | 0 | 38.93 | 2/20/2014 | |||||||||||||||||||||||||||||||
95,000 | 0 | 44.04 | 2/18/2015 | |||||||||||||||||||||||||||||||
105,000 | 0 | 44.46 | 2/17/2016 | |||||||||||||||||||||||||||||||
82,700 | 0 | 49.78 | 2/16/2017 | |||||||||||||||||||||||||||||||
83,000 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||
100,266 | 50,134 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||
50,133 | 100,267 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||
0 | 290,300 | (12) | 53.01 | 2/18/2021 | ||||||||||||||||||||||||||||||
2009-11 EPP(13) | 32,200 | 1,628,354 | ||||||||||||||||||||||||||||||||
2010-12 EPP | 32,200 | 1,628,354 | ||||||||||||||||||||||||||||||||
2011-13 EPP | 62,200 | 3,145,454 | ||||||||||||||||||||||||||||||||
Ron Dissinger | ||||||||||||||||||||||||||||||||||
Regular Options | 6,421 | 0 | 53.34 | 2/21/2013 | ||||||||||||||||||||||||||||||
7,500 | 0 | 38.93 | 2/20/2014 | |||||||||||||||||||||||||||||||
12,000 | 0 | 44.04 | 2/18/2015 | |||||||||||||||||||||||||||||||
11,300 | 0 | 44.46 | 2/17/2016 | |||||||||||||||||||||||||||||||
16,700 | 0 | 49.78 | 2/16/2017 | |||||||||||||||||||||||||||||||
18,100 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||
13,332 | 6,668 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||
18,700 | 37,400 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||
0 | 71,000 | (12) | 53.01 | 2/18/2021 | ||||||||||||||||||||||||||||||
2009-11 EPP(13) | 4,400 | 222,508 | ||||||||||||||||||||||||||||||||
2010-12 EPP | 12,000 | 606,840 | ||||||||||||||||||||||||||||||||
2011-13 EPP | 15,200 | 768,664 | ||||||||||||||||||||||||||||||||
Brad Davidson | ||||||||||||||||||||||||||||||||||
Regular Options | 10,462 | 0 | 49.63 | 2/21/2013 | ||||||||||||||||||||||||||||||
8,310 | 0 | 51.14 | 2/21/2013 | |||||||||||||||||||||||||||||||
45,000 | 0 | 49.78 | 2/16/2017 | |||||||||||||||||||||||||||||||
41,500 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||
51,532 | 25,768 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||
25,766 | 51,534 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||
0 | 101,500 | (12) | 53.01 | 2/18/2021 | ||||||||||||||||||||||||||||||
2009-11 EPP(13) | 16,600 | 839,462 | ||||||||||||||||||||||||||||||||
2010-12 EPP | 16,600 | 839,462 | ||||||||||||||||||||||||||||||||
2011-13 EPP | 21,800 | 1,102,426 | ||||||||||||||||||||||||||||||||
Paul Norman | ||||||||||||||||||||||||||||||||||
Regular Options | 48,000 | 0 | 49.78 | 2/16/2017 | ||||||||||||||||||||||||||||||
44,700 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||
38,466 | 19,234 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||
24,466 | 48,934 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||
0 | 80,200 | (12) | 53.01 | 2/18/2021 | ||||||||||||||||||||||||||||||
2009-11 EPP(13) | 12,400 | 627,068 | ||||||||||||||||||||||||||||||||
2010-12 EPP | 15,800 | 799,006 | ||||||||||||||||||||||||||||||||
2011-13 EPP | 17,200 | 869,804 | ||||||||||||||||||||||||||||||||
Gary Pilnick | ||||||||||||||||||||||||||||||||||
Regular Options | 82,100 | 0 | 38.93 | 2/20/2014 | ||||||||||||||||||||||||||||||
48,200 | 0 | 44.04 | 2/18/2015 | |||||||||||||||||||||||||||||||
48,200 | 0 | 44.46 | 2/17/2016 | |||||||||||||||||||||||||||||||
46,700 | 0 | 49.78 | 2/16/2017 | |||||||||||||||||||||||||||||||
46,900 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||
31,266 | 15,634 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||
15,633 | 31,267 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||
0 | 59,000 | (12) | 53.01 | 2/18/2021 | ||||||||||||||||||||||||||||||
Restricted Stock | 11,000 | (14) | 556,270 | |||||||||||||||||||||||||||||||
2009-11 EPP(13) | 10,000 | 505,700 | ||||||||||||||||||||||||||||||||
2010-12 EPP | 10,000 | 505,700 | ||||||||||||||||||||||||||||||||
2011-13 EPP | 12,600 | 637,182 |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(3) | Option Exercise Price ($)(4) | Option Expiration Date(5) | Number of Shares or Units of Stock That Have Not Vested (#)(6) | Market Value of Shares or Units of Stock That Have Not Vested ($)(7) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(8) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(9) | |||||||||||||||||||||||||||
AOF Options | 6,070 | 0 | 49.63 | 2/16/2011 | ||||||||||||||||||||||||||||||||
4,727 | 0 | 51.14 | 2/16/2011 | |||||||||||||||||||||||||||||||||
2,760 | 0 | 51.14 | 2/22/2012 | |||||||||||||||||||||||||||||||||
10,462 | 0 | 49.63 | 2/21/2013 | |||||||||||||||||||||||||||||||||
8,310 | 0 | 51.14 | 2/21/2013 | |||||||||||||||||||||||||||||||||
Restricted Stock | 25,000 | (13) | 1,277,000 | |||||||||||||||||||||||||||||||||
2008-10 EPP (12) | 9,800 | 500,584 | ||||||||||||||||||||||||||||||||||
2009-11 EPP | 16,600 | 847,928 | ||||||||||||||||||||||||||||||||||
2010-12 EPP | 16,600 | 847,928 | ||||||||||||||||||||||||||||||||||
Paul Norman | ||||||||||||||||||||||||||||||||||||
Regular Options | 48,000 | 0 | 49.78 | 2/16/2017 | ||||||||||||||||||||||||||||||||
44,700 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||||
19,233 | 38,467 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||||
0 | 73,400 | (11) | 53.20 | 2/20/2019 | ||||||||||||||||||||||||||||||||
AOF Options | 1,160 | 0 | 47.60 | 2/22/2012 | ||||||||||||||||||||||||||||||||
8,761 | 0 | 49.92 | 2/22/2012 | |||||||||||||||||||||||||||||||||
8,757 | 0 | 51.85 | 2/22/2012 | |||||||||||||||||||||||||||||||||
16,526 | 0 | 51.14 | 2/22/2012 | |||||||||||||||||||||||||||||||||
4,764 | 0 | 49.92 | 2/21/2013 | |||||||||||||||||||||||||||||||||
12,881 | 0 | 51.85 | 2/21/2013 | |||||||||||||||||||||||||||||||||
7,545 | 0 | 51.14 | 2/21/2013 | |||||||||||||||||||||||||||||||||
Restricted Stock | 15,000 | (13) | 766,200 | |||||||||||||||||||||||||||||||||
2008-10 EPP (12) | 10,600 | 541,448 | ||||||||||||||||||||||||||||||||||
2009-11 EPP | 12,400 | 633,392 | ||||||||||||||||||||||||||||||||||
2010-12 EPP | 15,800 | 807,064 | ||||||||||||||||||||||||||||||||||
Gary Pilnick | ||||||||||||||||||||||||||||||||||||
Regular Options | 82,100 | 0 | 38.93 | 2/20/2014 | ||||||||||||||||||||||||||||||||
48,200 | 0 | 44.04 | 2/18/2015 | |||||||||||||||||||||||||||||||||
48,200 | 0 | 44.46 | 2/17/2016 | |||||||||||||||||||||||||||||||||
46,700 | 0 | 49.78 | 2/16/2017 | |||||||||||||||||||||||||||||||||
46,900 | 0 | 51.04 | 2/22/2018 | |||||||||||||||||||||||||||||||||
15,633 | 31,267 | (10) | 40.17 | 2/20/2019 | ||||||||||||||||||||||||||||||||
0 | 46,900 | (11) | 53.20 | 2/19/2020 | ||||||||||||||||||||||||||||||||
AOF Options | 11,224 | 0 | 49.99 | 2/16/2011 | ||||||||||||||||||||||||||||||||
8,203 | 0 | 53.29 | 2/16/2011 | |||||||||||||||||||||||||||||||||
24,541 | 0 | 53.29 | 2/22/2012 | |||||||||||||||||||||||||||||||||
21,761 | 0 | 49.99 | 2/21/2013 | |||||||||||||||||||||||||||||||||
915 | 0 | 53.29 | 2/21/2013 | |||||||||||||||||||||||||||||||||
Restricted Stock | 11,000 | (14) | 561,880 | |||||||||||||||||||||||||||||||||
2008-10 EPP (12) | 11,200 | 572,096 | ||||||||||||||||||||||||||||||||||
2009-11 EPP | 10,000 | 510,800 | ||||||||||||||||||||||||||||||||||
2010-12 EPP | 10,000 | 510,800 |
(1) | On an award-by-award basis, the number of securities underlying unexercised options that are exercisable and that are not reported in Column 3 — “Number of Securities Underlying Unexercised Unearned Options.” |
(2) | On an award-by-award basis, the number of securities underlying unexercised options that are unexercisable and that are not reported in Column 3 — “Number of Securities Underlying Unexercised Unearned Options.” |
(3) | On an award-by-award basis, there were no shares underlying unexercised options awarded under any equity incentive plan that have not been earned. |
47
(4) | The exercise price for each option reported in Columns 1 and 2 — “Number of Securities Underlying Unexercised Options” and Column 3 — “Number of Securities Underlying Unexercised Unearned Options.” |
(5) | The expiration date for each option reported in Columns 1 and 2 — “Number of Securities Underlying Unexercised Options” and Column 3 — “Number of Securities Underlying Unexercised Unearned Options.” |
(6) | The total number of shares of stock that have not vested and that are not reported in Column 8 — “Number of Unearned Shares, Units or Other Rights That Have Not Vested.” |
(7) | Represents the number of shares of stock that have not vested and that are not reported in Column 9 — “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested” multiplied by the closing price of our common stock on December |
(8) | Represents the “maximum” number of shares that could be earned under outstanding EPP awards. The cycle for the |
(9) | Represents the “maximum” number of shares that could be earned under outstanding EPP awards multiplied by the closing price of our common stock on December |
(10) | One-third of these options vested on February 20, 2010; one-third vested on February 20, 2011; and one-third |
(11) | One-third of these options vested on February 19, 2011; one-third |
(12) | One-third of these options vested on February 18, 2012; one-third will vest on February 18, 2013; and one-third will vest on February 18, 2014. |
(13) | Vested and paid out on or about February |
(14) | Vests on February 23, 2013. |
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Option Exercises and Stock Vested Table
With respect to our NEOs, this table shows the stock options exercised by such officers during 20102011 (disclosed under the “Option Awards” columns). The dollar value reflects the totalpre-tax value realized by such
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officers (Kellogg stock price at exercise minus the option’s exercise price), not the grant-date fair value or recognized compensation expense disclosed elsewhere in this proxy statement. Value from these option exercises were only realized to the extent our stock price increased relative to the stock price at grant (exercise price). These options have been granted to the NEOs since 2001. Consequently, the value realized by the executives upon exercise of the options was actually earned over a period of up to 10 years. This table also shows the stock awards paid out under the 2007-20092008-2010 EPP. The 2007-2009 EPP cycle began on December 31, 2006 (first day of fiscal 2007) and concluded on January 2, 2010 (last day of fiscal 2009). Although the performance period ended on January 2, 2010, each NEO had to be actively employed by Kellogg on the date the awards vested (February 16, 2010) in order to receive the payout.
Option Awards | Stock Awards (1) | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
David Mackay | 300,284 | 2,353,091 | 60,900 | 3,203,340 | ||||||||||||
John Bryant | 0 | 0 | 14,700 | 773,220 | ||||||||||||
Ron Dissinger | 0 | 0 | 2,550 | 134,130 | ||||||||||||
Brad Davidson | 0 | 0 | 7,950 | 418,170 | ||||||||||||
Paul Norman | 0 | 0 | 7,950 | 418,170 | ||||||||||||
Gary Pilnick | 1,021 | 4,966 | 8,400 | 441,840 |