Table of Contents
Table of Contents
Performance with Purpose |
Performance with
Purpose is our vision to deliver top-tier financial
performance over the long term by integrating
sustainability into our business strategy, leaving a positive imprint on society and the environment. |
Table of Contents
Dear Fellow PepsiCo Shareholders:
|
|
Our approach is rooted in a few simple beliefs: We dont
just want to change the way we spend money. We want to change the way we
make it. We dont just want to be a great company. We want to be a good
company. We dont just want to succeed over the short term. We also want
to succeed over the long term. |
Indra K.
Nooyi
Chairman of the Board
of Directors
and Chief Executive Officer
I am pleased to invite you to attend
our 2017 Annual Meeting of Shareholders on Wednesday, May 3, 2017 at 9:00
a.m. Eastern Daylight Time. The Meeting will be held at the North Carolina
History Center in New Bern, North Carolina, the birthplace of Pepsi. We
hope you will attend, but for those who cannot, we will offer a live
webcast of our Annual Meeting on our website at www.pepsico.com under
Investors Events and
Presentations.
PepsiCo delivered
another year of strong operating performance in 2016
Despite a challenging macroeconomic
and geopolitical climate, PepsiCo delivered strong operating performance
in 2016 and made significant progress against key strategic initiatives,
including:
●Meeting or exceeding each
of our financial goals;
●Returning $7.2 billion in
cash to shareholders in the form of dividends and share repurchases and
increasing our annualized dividend per share for the 45th
consecutive year beginning with our June 2017
payment;
●Delivering over $1 billion
in productivity savings; and
●Redoubling our
efforts on marketplace execution, with PepsiCo ranking as the number-one,
best-in-class manufacturer in the latest Kantar Retail annual U.S.
PoweRanking® study. |
|
|
Our strategy
continues to be guided by Performance with Purpose
Our performance demonstrates what is
possible when a company does well by striving to do good. A decade ago we
launched Performance with Purpose PepsiCos vision to deliver top-tier
financial performance over the long-term by integrating sustainability
into our business strategy. This approach has served us well in
transforming the way we do business in a way that is responsible and
responsive to the needs of the world around us, in the face of new and
increasing opportunities, challenges and uncertainties.
While we are proud of the progress
we have made over the last ten years, our transformation journey is
ongoing. We recently announced new Performance with Purpose goals for the
next ten years that are designed to build on our progress and broaden our
efforts in a way that responds to changing consumer and societal needs.
These goals focus on building a healthier future for all of our
stakeholders, including by:
●Making healthier foods and beverages for our
consumers;
●Generating healthy growth for our retail and
foodservice partners;
●Contributing to a
healthier planet while boosting our bottom
line;
●Creating a healthy workplace and culture for our
associates; and
●Promoting
healthier communities wherever we
operate. |
|
PEPSICO 2017 PROXY
STATEMENT | 1 |
Table of Contents
Our Board is actively
engaged in Company strategy
As stewards of our Company, our
Board plays an essential role in determining PepsiCos strategic
priorities and provided important strategic direction for the new
Performance with Purpose goals. The full Board considers sustainability
issues an integral part of its business oversight, as sustainability
topics are integrated into, and not separate from, our business
strategy.
To align with our new Performance
with Purpose agenda, earlier this year, our Board refined the roles of its
Committees by creating a new Public Policy and Sustainability Committee.
The new Committee (which is comprised entirely of independent directors)
will assist the Board in providing more focused oversight over the
Companys policies, programs and related risks that concern key public
policy and sustainability matters.
In addition to sustainability
matters, our Board is actively engaged in Company strategy, regularly
discussing strategic priorities and, on an annual basis, dedicating a
multi-day meeting to an extensive review of the Companys strategic
plans.
PepsiCos Board is
comprised of diverse and independent directors with the skills and
experience to support our strategy and to position us for long-term
success
As our Companys strategy evolves,
so do the skills and experiences that the Board seeks in its director
nominees. The Board has a robust Board succession planning process
designed to identify individuals whose skills and experiences will enable
them to meaningfully contribute to the shaping of our business strategy.
At the same time, the Board believes it is equally important to benefit
from the valuable experience and continuity that longer-serving directors
bring to the Board and strives to maintain an appropriate balance of
tenure, diversity, skills and experience on the Board.
One of our long-serving directors,
Lloyd Trotter, will retire from the Board effective as of the 2017 Annual
Meeting. We thank Lloyd for his many years of service and are grateful for
his valuable contributions to our Board.
We are extremely proud of the
ongoing evolution of our Board and its track record on refreshment. Our
Board has added seven new directors since 2014. Last year, our Board
welcomed two new directors, Cesar Conde and Darren Walker, who each bring
new perspectives and ideas to the Board. Overall, the average tenure of
our independent director nominees is approximately five years. Fifty
percent of our director nominees are women or ethnically diverse
individuals and five are citizens of countries other than the United
States, providing management with a broad array of opinions and
perspectives that are representative of our global
businesses. |
|
|
Underpinning our
performance is our steadfast commitment to ethical business practices and
strong corporate governance
At PepsiCo, we believe acting
ethically and responsibly is not only the right thing to do, but also the
right thing for our business. We have adopted comprehensive corporate
standards and policies to govern our operations and facilitate
accountability for our actions.
We believe strong corporate
governance is the foundation for financial integrity, investor confidence
and sustainable performance, and we are focused on advancing our vision
with honesty, fairness and integrity. PepsiCo is honored to have been
named among Ethispheres Worlds Most Ethical Companies for the eleventh
consecutive year.
The feedback we
receive from our shareholders and other stakeholders is a cornerstone of
our corporate governance practices
We regularly receive input from our
shareholders and other stakeholders such as customers, consumers,
suppliers, associates, advocacy groups, governments and communities on
all aspects of our business, and these important external viewpoints
inform our decisions and our strategy.
We also recognize that we are
stewards of a great Company with the opportunity not only to make a
profit, but to do so in a way that makes a difference in the world. As we
continue our Performance with Purpose journey and deliver solutions to
shared challenges, we will need to work together with governments,
non-governmental organizations, scholars and other stakeholders and use
our collective strengths in ways that benefit everyone. Together, were
part of a growing movement that is redefining what it means to be a
successful corporation by broadening our perspective in a way that
responds to changing consumer and societal needs and focuses on building a
healthier future for all our stakeholders.
Your vote is
important
Whether or not you plan to attend
the Annual Meeting in person, we encourage you to vote promptly. You may
vote by telephone or over the Internet, or by completing, signing, dating
and returning the enclosed proxy card or voting instruction form if you
requested to receive printed proxy materials.
On behalf of our Board of Directors
and all of our PepsiCo associates, thank you for being a PepsiCo
shareholder and for your continued support of PepsiCo.
Sincerely, Indra K. Nooyi Chairman of the Board of Directors and Chief Executive
Officer March 17, 2017 |
2 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
Notice of 2017 Annual Meeting of Shareholders
Date and Time
Wednesday, May 3, 2017
9:00 a.m.
Eastern Daylight Time
Place
The North Carolina History Center at Tryon
Palace
529 South Front Street
New Bern, North Carolina 28562
Items to be Voted On
|
Elect as directors the 14 nominees
named in the attached Proxy Statement. |
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Ratify the appointment of KPMG LLP
as our independent registered public accounting firm for fiscal year
2017. |
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Provide advisory approval of
executive compensation. |
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Provide advisory vote on frequency
of future shareholder advisory approval of executive
compensation. |
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Act upon two shareholder proposals
described in the attached Proxy Statement, if properly
presented. |
Record Date
Holders of record of our Common Stock and
Convertible Preferred Stock as of the close of business on March 1, 2017 will be
entitled to notice of, and to vote at, the Annual Meeting.
By Order of the Board of
Directors,
Tony West
Corporate Secretary
March 17, 2017
Live Webcast
The Annual Meeting will be webcast
live on our website at www.pepsico.com under
InvestorsEvents and
Presentations beginning at 9:00 a.m.
Eastern Daylight Time on May 3, 2017. |
Proxy Voting
Your vote is very important. Whether
or not you plan to attend the Annual Meeting in person, please promptly
vote by telephone or over the Internet, or by completing, signing, dating
and returning your proxy card or voting instruction form so that your
shares will be represented at the Annual Meeting. |
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Advance Voting
Methods |
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Telephone |
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Internet |
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Mail |
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting of Shareholders to
be Held on May 3, 2017
Our Notice of Annual Meeting, Proxy
Statement and Annual Report for the fiscal year ended December 31, 2016
are available at www.pepsico.com/proxy17.
We are making the Proxy Statement
and the form of proxy first available on or about March 17,
2017. |
|
PEPSICO 2017 PROXY
STATEMENT | 3 |
Table of Contents
PROXY
STATEMENT SUMMARY
Proxy
Statement Summary |
|
|
We provide
below highlights of certain information in this Proxy Statement. As it is
only a summary, please refer to the complete Proxy Statement and 2016
Annual Report before you
vote. |
Proposal
1 Election of 14
Director Nominees |
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The
Board recommends a vote FOR all Director Nominees |
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Our Nominating and Corporate
Governance Committee and our Board have determined that each of the
nominees possess the right skills, qualifications and experience to
effectively oversee PepsiCos long-term business strategy |
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See Election of Directors (Proxy
Item No. 1) beginning on page 11 of this Proxy
Statement |
Director
Nominees
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Committee
Membership |
Name and Primary Occupation |
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Director Since |
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Age* |
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Independent |
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Audit |
|
Compensation |
|
Nominating and
Corporate Governance |
|
Public
Policy and Sustainability |
Shona L.
Brown Former Senior Advisor, Google
Inc. |
|
2009 |
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51 |
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● |
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** |
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|
● |
George W.
Buckley Former Chairman, President
and Chief Executive Officer, 3M Company |
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2012 |
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70 |
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● |
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Cesar
Conde Chairman, NBCUniversal International
Group and NBCUniversal Telemundo Enterprises |
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2016 |
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43 |
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● |
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● |
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Ian M.
Cook (PRESIDING DIRECTOR) Chairman,
President and Chief Executive Officer, Colgate-Palmolive
Company |
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2008 |
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64 |
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● |
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● |
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Dina
Dublon Former Executive Vice President
and Chief Financial Officer, JPMorgan Chase & Co. |
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2005 |
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63 |
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● |
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Rona A.
Fairhead Chairman, BBC Trust |
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2014 |
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55 |
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● |
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● |
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● |
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Richard W.
Fisher Former President and Chief Executive
Officer, Federal Reserve Bank of Dallas |
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2015 |
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67 |
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● |
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William R.
Johnson Operating Partner, Global Retail
and Consumer, Advent International Corporation; Former Chairman,
President and Chief Executive Officer, H.J. Heinz
Company |
|
2015 |
|
68 |
|
● |
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Indra K.
Nooyi Chairman of the Board and Chief
Executive Officer, PepsiCo |
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2001 |
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61 |
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David C. Page, MD
Director and President, Whitehead Institute for
Biomedical Research; Professor, Massachusetts Institute of
Technology |
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2014 |
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60 |
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● |
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● |
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● |
Robert C.
Pohlad President, Dakota Holdings,
LLC |
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2015 |
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62 |
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● |
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● |
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Daniel
Vasella, MD Former Chairman and Chief
Executive Officer, Novartis AG |
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2002 |
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63 |
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● |
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● |
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Darren
Walker President, Ford
Foundation |
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2016 |
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57 |
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● |
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● |
Alberto Weisser Former Chairman and Chief Executive Officer, Bunge
Limited |
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2011 |
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61 |
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● |
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Committee
Chair |
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Financial
Expert |
* |
Ages are as of
March 17, 2017. |
** |
Lloyd G. Trotter currently serves as
the Chair of the Compensation Committee. Mr. Trotter will not stand for
re-election and upon his retirement effective as of the 2017 Annual
Meeting of Shareholders, Shona L. Brown will become Chair of the
Compensation Committee. |
4 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
PROXY
STATEMENT SUMMARY
Director Nominee
Facts
We believe our director nominees bring a
well-rounded variety of diversity, skills, qualifications and experience, and
represent an effective mix of deep company knowledge and fresh
perspectives.
Diversity
50%
are women or ethnically diverse |
4
are women (including our CEO) |
5
are citizens of countries other than the United
States |
Expertise and
Independence
|
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4 of
5
Audit Committee member nominees are financial
experts
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13
of 14
director nominees have significant global experience
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13 of
14 director nominees are
independent
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Director Age* |
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Independent Director Tenure* (years of
service) |
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Average Age: 60.4 > 78% younger
than 65 |
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Average Tenure of
Independent Directors:
5.1
years |
Skills and
Qualifications
Director succession planning is a
robust, ongoing process at PepsiCo. Our Board regularly evaluates desired
attributes in light of the Companys strategy and needs.
Our director nominees bring to the
Board a balance of the following relevant skills, qualifications and
experience:** |
|
|
* |
Average age and tenure are
as of March 17, 2017. |
** |
The numbers in parentheses
represent the number of our 14 total director nominees who possess each of
the skills, qualifications and
experience. |
|
PEPSICO 2017 PROXY
STATEMENT | 5 |
Table of Contents
PROXY
STATEMENT SUMMARY
Corporate Governance
Highlights
Our Corporate Governance Policies
Reflect Best Practices
● |
Annual
election of all directors |
● |
Proxy access right for
shareholders |
● |
Majority-vote and director resignation policy for directors in
uncontested elections |
● |
Comprehensive, ongoing Board
succession planning process |
● |
Regular Board refreshment and mix of
tenure of directors |
● |
Annual Board and Committee
self-evaluations |
● |
Independent Presiding Director with
clearly defined and robust responsibilities |
● |
13 independent directors out of 14
director nominees |
● |
100%
independent Board Committees |
● |
Regular
executive sessions of independent directors at Board and Committee
meetings |
● |
Prohibition on hedging or pledging
Company stock |
● |
Rigorous director and executive
stock ownership requirements |
● |
99% average attendance of incumbent
directors at Board and Committee meetings |
● |
Active shareholder
engagement |
● |
Global Code of Conduct applicable to
directors and all employees |
Proposal
2 Ratify the appointment of KPMG LLP
as our independent registered public accounting firm for fiscal year
2017
|
|
The
Board recommends a vote FOR this proposal |
|
Our Board of Directors recommends
that shareholders vote FOR the ratification of the appointment of KPMG
as PepsiCos independent registered public accounting firm for fiscal year
2017 |
|
See Ratification of Appointment of
Independent Registered Public Accounting Firm (Proxy Item No. 2)
beginning on page 36 of this Proxy
Statement |
6 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
PROXY
STATEMENT SUMMARY
Proposal
3 Advisory Approval of Executive
Compensation
|
|
The
Board recommends a vote FOR this proposal |
|
Our Board recommends that
shareholders vote FOR the advisory approval of the compensation of our
named executive officers (NEOs or Named
Executive Officers) for the 2016 performance
year |
|
See Advisory Approval of Executive
Compensation (Proxy Item No. 3) on page 39 of this Proxy Statement and
Compensation Discussion and Analysis beginning on page 40 of this Proxy
Statement |
2016 PepsiCo Performance
Highlights
PepsiCo continued to deliver strong
results in 2016, while achieving a good balance between revenue performance and
productivity. In a challenging operating environment, we met or exceeded every
financial goal we set for 2016, including the following non-GAAP measures used
in our incentive pay programs.1
Organic Revenue Growth1 |
|
Core Constant Currency Earnings Per Share (EPS)
Growth1 |
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Free Cash Flow Excluding Certain
Items1 |
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Core Net Return on Invested Capital
(ROIC)1 |
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PepsiCos strong 2016 financial results
reflect the progress we made in advancing our most important strategic
priorities:
|
Innovation: We continued to advance our
portfolio transformation through our investment in R&D, which has
increased by 45% since 2011. In 2016, PepsiCo accounted for over 17% of
innovation sales at retail in the U.S., as measured by IRI2, -
more innovation than the next four innovation contributors
combined. |
|
Brand Building: We increased our spending on
advertising and marketing as a percentage of net revenue by 40 basis
points in 2016 to 6.7%. Our brand investments yielded market share
improvements in the U.S. and other key markets. |
|
Execution: We maintained our focus on
marketplace execution. This enabled PepsiCo to once again be the largest
driver of growth for our food and beverage retail partners in the U.S., as
we contributed 18% of the total retail sales growth of food and beverage
categories.2 |
|
Productivity: We delivered over $1 billion
of productivity savings during 2016. Our productivity agenda, focused on
driving both efficiency and effectiveness, has resulted in approximately
$1 billion in annual savings since 2012. |
|
Performance with Purpose: Continuing
PepsiCos decade-long commitment to delivering Performance with Purpose,
we launched an ambitious global sustainability agenda in 2016. The agenda
includes specific 2025 goals designed to continue transforming PepsiCos
product portfolio, contribute to a more sustainable global food system and
help make local communities more prosperous. |
|
Cash Return to Shareholders: We again increased our
annualized dividend and met our goal of returning $7 billion in cash to
shareholders through dividends and share
repurchases. |
Our total shareholder return (TSR)
reflects our strong 2016 results. We delivered 8% TSR, outpacing the median of
our proxy peer group.
____________________
1 |
For further information on these
financial measures, which are used as compensation performance measures
and are not in accordance with U.S. Generally Accepted Accounting
Principles (GAAP), please refer to the 2016 PepsiCo Performance
section of the Compensation Discussion and Analysis on page 40 of this
Proxy Statement and Exhibit A to this Proxy Statement. For 2016, Core
Constant Currency EPS Growth excludes the impact of the Venezuela
deconsolidation that occurred in 2015. |
2 |
Source: Information Resources,
Inc. Consulting Analysis for Total U.S. Multi-Outlet Plus Convenience for
the 52 weeks ending December 25, 2016. |
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PEPSICO 2017 PROXY
STATEMENT | 7 |
Table of Contents
PROXY
STATEMENT SUMMARY
Compensation
Highlights
Reflecting our pay-for-performance
compensation program, the strong results delivered for shareholders translated
into the payouts highlighted in the following table. We encourage you to also
review the full Compensation Discussion and Analysis beginning on page 40 of
this Proxy Statement for additional details.
|
Component |
Performance Against Incentive Metrics |
Payout
(% above target) |
|
|
|
|
|
2016 Annual Cash
Incentive |
PepsiCo met or exceeded
every financial goal for 2016 while making significant progress against
key strategic initiatives |
Average
for all NEOs +16% |
|
2014 Long-Term Incentives |
|
|
|
+34% |
PepsiCo
Equity Performance Units |
8.9% stock price compound annual growth rate over
the three-year performance period |
61st %ile TSR relative to S&P
500 (2014-2016) |
|
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+75%
|
Long-Term Cash
Awards |
10.4% average core constant currency EPS
growth3 (2014-2016) |
21.5% core net ROIC3 for 2016, a 510 basis
point increase (2014-2016) |
|
|
|
Compensation
Governance
The Compensation Committee oversees the
design and administration of PepsiCos executive compensation programs and
evaluates these programs against competitive practices, legal and regulatory
developments and corporate governance trends. The Compensation Committee has
incorporated the following market-leading governance features into our
programs:
What We Do |
|
✓Double-trigger change-in-control vesting of long-term
incentive awards
✓Responsible use of shares under our long-term incentive
program, with share utilization below our peer group median
✓Comprehensive clawback policy that applies to annual
incentive, long-term incentive and deferral programs
✓Rigorous stock ownership requirements that continue for
12 months beyond employment
✓Balanced mix of top-line and bottom-line metrics set
against rigorous measurable goals within our incentive
programs
✓Targets for performance metrics aligned to financial
goals communicated to shareholders |
What We Dont Do |
|
✗No employment agreements
✗No supplemental executive retirement plans
✗No resetting of financial targets for performance
awards
✗No hedging and pledging of Company stock
✗No tax gross-ups
✗No backdating or repricing of stock option
awards |
____________________
3 |
For further information on these
non-GAAP financial measures, which are used as compensation performance
measures, please refer to the 2016 PepsiCo Performance section of the
Compensation Discussion and Analysis on page 40 of this Proxy Statement
and Exhibit A to this Proxy Statement. For 2016, Core Constant Currency
EPS Growth excludes the impact of the Venezuela deconsolidation that
occurred in 2015. |
8 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
PROXY STATEMENT SUMMARY
Proposal
4 Advisory Vote on Frequency of
Future Shareholder Advisory Approval of Executive
Compensation |
|
The
Board recommends a vote of every ONE YEAR with respect to this
proposal
|
|
Our Board recommends that shareholders vote for every ONE YEAR with respect to how
frequently a shareholder advisory approval of the compensation of our Named Executive
Officers should occur |
|
See Advisory Vote on the Frequency of Future Shareholder Advisory Approval of Executive
Compensation (Proxy Item No. 4) on page 67 of this Proxy Statement |
Proposals
5-6 Shareholder
proposals |
|
The
Board recommends a vote AGAINST each of these
proposals |
|
|
|
See the Boards statements in
opposition of each shareholder proposal beginning on page 68 of this Proxy
Statement |
|
PEPSICO 2017 PROXY
STATEMENT | 9 |
Table of Contents
This Proxy Statement of
PepsiCo, Inc. (PepsiCo, the Company, we, us or our ) contains
statements reflecting our views about our future performance that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (Reform Act). Statements that constitute
forward-looking statements within the meaning of the Reform Act are generally
identified through the inclusion of words such as aim, anticipate,
believe, drive, estimate, expect, expressed confidence, forecast,
future, goal, guidance, intend, may, objective, outlook, plan,
position, potential, project, seek, should, strategy, target,
will or similar statements or variations of such words and other similar
expressions. Forward-looking statements are based on currently available
information, operating plans and projections about future events and trends.
They inherently involve risks and uncertainties that could cause actual results
to differ materially from those predicted in any such forward-looking statement.
Such risks and uncertainties include, but are not limited to: changes in demand
for PepsiCos products, as a result of changes in consumer preferences or
otherwise; changes in or failure to comply with, applicable laws and
regulations; imposition or proposed imposition of new or increased taxes aimed
at PepsiCos products; imposition of labeling or warning requirements on
PepsiCos products; changes in laws related to packaging and disposal of
PepsiCos products; PepsiCos ability to compete effectively; political
conditions, civil unrest or other developments and risks in the markets where
PepsiCos products are made, manufactured, distributed or sold; the ability to
protect information systems against, or effectively respond to, a cybersecurity
incident or other disruption; damage to PepsiCos reputation or brand image; and
the other factors discussed in the risk factors section of PepsiCos most recent
annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.
Investors are cautioned not to place undue reliance on any such forward-looking
statements, which speak only as of the date they are made. PepsiCo undertakes no
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise.
10 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
Election of Directors
(Proxy Item No. 1) |
|
Upon the recommendation of the Nominating
and Corporate Governance Committee, our Board of Directors has nominated the 14
directors identified on the following pages for election at the 2017 Annual
Meeting. The directors will hold office from election until the next Annual
Meeting of Shareholders and until their successors are elected and qualified or
until their death, resignation or removal.
All of the nominees are currently PepsiCo
directors who were elected by shareholders at the 2016 Annual Meeting, except
Darren Walker, who was elected to the Board effective September 21, 2016. Mr.
Walker was recommended for consideration to the Nominating and Corporate
Governance Committee by a non-management director. Lloyd G. Trotter has reached
the age of 72 and, pursuant to our policy, will not stand for re-election and
will retire from the Board of Directors effective as of the 2017 Annual Meeting.
As a result, the Board will be reduced to 14 directors effective as of the 2017
Annual Meeting. Our Board thanks Mr. Trotter for his many years of exemplary
service.
Our Board has a comprehensive, ongoing
director succession planning process designed to provide for a highly
independent, well-qualified Board, with the diversity, experience and background
to be effective and to provide strong oversight. Our Board constantly evaluates
the needs of the Company and adds new skills and qualifications to the Board as
necessary to best position the Company to navigate through a constantly changing
global landscape.
The Board looks for its current and
potential directors to have a broad range of skills, education, experiences and
qualifications that can be leveraged in order to benefit PepsiCo and its
shareholders. The Board is particularly interested in maintaining a mix of
skills, qualifications and experience that include the following:
Directors Skills,
Qualifications and Experience:
● |
Public Company
CEO |
● |
Science/Medical/Research/Innovation |
● |
Financial Expertise/Financial
Community |
● |
Information
Technology/Cybersecurity |
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Consumer
Products |
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Digital Marketing/New
Media/E-Commerce |
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Risk
Management |
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Diversity |
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Public Policy |
● |
Developing and Emerging
Markets/International Residence |
Additionally, directors are expected to
possess personal traits such as candor, integrity and professionalism and must
be able to commit significant time to the Companys oversight. For additional
information on the Board selection process, including the Boards consideration
of diversity, see Board Composition and Refreshment on pages 29-30 of this
Proxy Statement.
Director Nominees
Our Nominating and Corporate Governance
Committee and our Board have determined that each of the nominees possesses the
right skills, qualifications and experience to effectively oversee PepsiCos
long-term business strategy. Biographical information about each nominee, as
well as highlights of certain notable skills, qualifications and experience that
contributed to the nominees selection as a member of our Board of Directors and
nomination for re-election at our 2017 Annual Meeting, are included on the
following pages. We have also included a chart immediately after the biographies
to highlight the skills, qualifications and experience of the Board as a
whole.
Although our Board does not anticipate
that any of the nominees will be unable to stand for election as a director at
our Annual Meeting, if this occurs, proxies will be voted in favor of such other
person or persons as may be designated by our Nominating and Corporate
Governance Committee and our Board.
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Our Board of Directors recommends
that shareholders vote FOR the election of each of the following
directors: |
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PEPSICO 2017 PROXY
STATEMENT | 11 |
Table of Contents
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
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Shona L. Brown
Director Since: 2009
Age: 51
Independent Committee Memberships:
●Compensation (Chair effective as of the 2017 Annual Meeting of
Shareholders)
●Public
Policy and Sustainability |
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Shona L. Brown served as a Senior
Advisor to Google Inc., an Internet search and advertising technologies
corporation, from 2013 to 2015. Dr. Brown served as Senior Vice President
of Google.org, Google Inc.s philanthropic arm, from 2011 to 2012. Dr.
Brown served as Google Inc.s Senior Vice President, Business Operations
from 2006 to 2011 and Vice President, Business Operations from 2003
through 2006, leading internal business operations and people operations
in both roles. Previously, Dr. Brown was a partner at McKinsey &
Company, a management consulting firm. Dr. Brown also currently serves on
the boards of several private companies (including ClearStory Data;
Xperiel; BetterWorks; and Candor, Inc.) and several non-profit
organizations (including The Bridgespan Group; The Exploratorium; The
Nature Conservancy; Code for America; and the Center for Advanced Study in
the Behavioral Sciences at Stanford University).
Other Public Company
Directorships:
●Current:
Atlassian Corporation plc
●Previous (During
the Past 5 Years): None |
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Skills and Qualifications
Dr. Brown brings to our Board of
Directors broad knowledge of information technology and social media and a
critical perspective regarding the rapidly changing digital landscape
gained from her extensive experience at a world-recognized global
technology leader, Google. Dr. Brown also provides PepsiCo with the unique
perspective of building innovation into business and people operations
(including sustainability operations) at Google. In addition, through her
business experience at Google and McKinsey & Company, she brings a
deep expertise in building organizations optimized for adaptability,
growth and innovation, which benefits PepsiCo as we address similar issues
in an environment of evolving consumer preferences and regulatory
initiatives. Her perspective on public policy and sustainability-related
matters and the role of business in society gained from her experience
working with non-profit organizations are valuable as the Company
continues to focus on its Performance with Performance goals and pursue
strategies to drive sustainable long-term growth. |
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George W. Buckley
Director Since: 2012
Age: 70
Independent Committee Memberships:
●Audit |
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George Buckley served as Chairman,
President and Chief Executive Officer of 3M Company, a global innovation
company, from 2005 to 2012. Previously, from 1997 to 2005, Dr. Buckley
held several senior management roles, including Chairman and Chief
Executive Officer, at Brunswick Corporation, a boat and recreational
product manufacturer. Dr. Buckley currently serves on the boards of
several public and private companies, including as Chairman of Expro
International, a private international oil field service
company.
Other Public Company
Directorships:
●Current:
Smiths Group plc (non-executive Chairman); Stanley Black & Decker,
Inc. (non-executive Chairman); Hitachi Ltd.
●Previous (During
the Past 5 Years): Archer-Daniels-Midland Company (until 2013); 3M
Company (until 2012) |
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Skills and Qualifications
Through his leadership of 3M, Dr.
Buckley brings to our Board of Directors his expertise in integrating
research and development into business operations to create incremental
value through both line extensions and breakthrough innovation. In
addition to contributing great insight to PepsiCos innovation strategy
through his experience as a chief executive officer of public companies as
well as his public and private director experience, Dr. Buckley also
brings to the Board experience managing large global corporations across
multiple industries and markets; skills in operations, strategic planning,
information technology and financial matters; and valuable consumer
products insights.
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12 | PEPSICO 2017 PROXY
STATEMENT |
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Table of Contents
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
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Cesar Conde
Director Since: 2016
Age: 43
Independent Committee Memberships:
●Audit |
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Cesar Conde has served since 2015 as
Chairman of NBCUniversal International Group and NBCUniversal Telemundo
Enterprises, part of a global media and entertainment company. From 2013
to 2015, he served as Executive Vice President at NBCUniversal, where he
oversaw NBCUniversal International and NBCUniversal Digital Enterprises.
From 2009 to 2013, Mr. Conde served as President of Univision Networks, a
leading American media company with a portfolio of Spanish language
television networks, radio stations and digital platforms. From 2003 to
2009, Mr. Conde served in a variety of senior executive capacities at
Univision Networks and is credited with transforming it into a leading
global, multi-platform media brand. Prior to Univision, Mr. Conde served
as the White House Fellow for Secretary of State Colin L. Powell from 2002
to 2003.
Other Public Company
Directorships:
●Current:
Owens Corning
●Previous (During
the Past 5 Years): None |
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Skills and Qualifications
Mr. Conde is an experienced global
executive with a strong track record in business, finance and media. He
provides the Board with diverse and actionable perspectives on todays
consumer and media landscapes, and his unique insights are particularly
valuable as PepsiCo continues to build new digital marketing capabilities
and adapt to changing demographics around the world. Mr. Conde also brings
his market and consumer insights developed through his experience at
national and global media companies and his leadership of social and
corporate responsibility initiatives
worldwide. |
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Ian M. Cook
PRESIDING DIRECTOR
Director Since: 2008
Age: 64
Independent Committee Memberships:
●Nominating and Corporate Governance |
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Ian M. Cook has served as Chief
Executive Officer and a director of Colgate-Palmolive Company, a
multinational consumer products company, since 2007 and became Chairman of
its board in 2009. He has also served as President of Colgate-Palmolive
since 2005. Mr. Cook joined Colgate-Palmolive in the United Kingdom in
1976 and progressed through a series of senior management roles. In 2002,
he became Executive Vice President, North America and Europe. In 2004, he
became Chief Operating Officer, with responsibility for operations in
North America, Europe, Central Europe, Asia and Africa, and in 2005, he
became responsible for all Colgate-Palmolive operations worldwide. Mr.
Cook also serves on the boards of several non-profit organizations,
including the Consumer Goods Forum, Catalyst, Memorial Sloan Kettering
Cancer Center and New Visions for Public Schools.
Other Public Company
Directorships:
●Current:
Colgate-Palmolive Company
●Previous (During
the Past 5 Years): None |
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Skills and Qualifications
Mr. Cook brings to our Board of
Directors deep knowledge of the consumer products industry gained through
his many years leading a global consumer products company,
Colgate-Palmolive. He also contributes a broad understanding of industry
trends and his extensive global leadership experience gained from holding
a variety of senior management roles at Colgate-Palmolive in numerous
countries throughout the world. Mr. Cooks qualifications also include
expertise in finance, brand-building, talent development and succession
planning. |
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PEPSICO 2017 PROXY
STATEMENT | 13 |
Table of Contents
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
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Dina Dublon
Director Since: 2005
Age: 63
Independent Committee Memberships:
●Public Policy and
Sustainability (Chair)
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Dina Dublon served as Executive Vice
President and Chief Financial Officer at JPMorgan Chase & Co., a
leading global financial services company, from 1998 until her retirement
in 2004. In this role, she was responsible for financial management,
corporate treasury and investor relations. Ms. Dublon previously held
numerous positions at JPMorgan Chase & Co. and its predecessor
companies, including corporate treasurer, managing director of the
Financial Institutions Division and head of asset liability management.
Ms. Dublon also previously served on the faculty of Harvard Business
School and on the boards of several non-profit organizations, including
Womens Refugee Commission and the Global Fund for Women.
Other Public Company
Directorships:
●Current:
Deutsche Bank AG (supervisory board)
●Previous (During
the Past 5 Years): Accenture plc (until 2017);
Microsoft Corporation (until 2014)
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Skills and Qualifications
Ms. Dublon brings to our Board of
Directors deep expertise in financial, accounting, strategic and banking
matters and capital markets operations gained from her distinguished
career in the financial services industry, particularly through her role
as Executive Vice President and Chief Financial Officer of JPMorgan Chase
& Co. She also contributes valuable risk management insights obtained
through her experience at JPMorgan Chase & Co., as well as from her
service on the boards of several other public companies, including as the
Chair of Deutsche Bank AGs risk committee of the supervisory board. In
addition, Ms. Dublon offers unique perspectives on emerging markets,
public policy and sustainability-related matters gained while working with
global non-profit organizations focusing on womens issues and
initiatives. |
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Rona A. Fairhead
Director Since: 2014
Age: 55
Independent Committee Memberships:
●Compensation
●Nominating and Corporate Governance |
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Rona A. Fairhead has served since
2014 as Chairman of the BBC Trust, the governing body of the British
Broadcasting Corporation, a U.K.-based international public service
broadcaster. She is stepping down in April 2017 when the BBC governance
structure is changed and a new unitary board is created. From 2006 to
2013, she served as Chairman and Chief Executive Officer of the Financial
Times Group Limited, which was a division of Pearson plc, and, prior to
that, she served as Pearsons Chief Financial Officer. Pearson is an
international media and education company, and the Financial Times Group
provides financial news, data, commentary and analysis to the
international business community. Prior to joining Pearson, Mrs. Fairhead
held a variety of leadership positions at Bombardier Inc. and Imperial
Chemical Industries plc. Until 2014, she was a member of the United
Kingdom Governments Cabinet Office, where she chaired the Cabinet Office
Audit and Risk Committees. Mrs. Fairhead was a non-executive director of
HSBC Holdings plc from 2004 to 2016, and until 2015, also chaired the
board of HSBC North America Holdings Inc., the holding company for HSBC
Holdings plcs operations in the U.S.
Other Public Company
Directorships:
●Current:
None
●Previous (During
the Past 5 Years): HSBC Holdings
plc (until 2016);
Pearson plc (until 2013) |
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Skills and Qualifications
Mrs. Fairhead brings to our Board
of Directors business leadership, finance, succession planning and general
management experience gained from her leadership roles at the BBC Trust,
the Financial Times Group, Pearson and other global companies. She
contributes significant expertise in media and publishing from her
experience as Chairman of the BBC Trust and her former role at the
Financial Times Group. Mrs. Fairhead also offers her valuable perspectives
on risk management resulting from her experiences serving as chair of the
risk committee and financial system vulnerabilities committee of HSBC
Holdings plc and as chair of the United Kingdom Governments Cabinet
Office Risk Committee. In addition, Mrs. Fairhead brings global
marketplace insights developed through her leadership at global companies
across multiple industries. |
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14 | PEPSICO 2017 PROXY
STATEMENT |
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Table of Contents
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
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Richard W.
Fisher
Director Since: 2015
Age: 67
Independent Committee Memberships:
●Audit
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Richard W. Fisher served as
President and Chief Executive Officer of the Federal Reserve Bank of
Dallas from 2005 to 2015. Previously, from 2001 to 2005, Mr. Fisher was
Vice Chairman of Kissinger McLarty Associates, a strategic advisory firm.
From 1997 to 2001, Mr. Fisher served as Deputy U.S. Trade Representative
with the rank of Ambassador, during which he oversaw the implementation of
the North American Free Trade Agreement, the Bilateral Trade Agreement
with Vietnam and other trade agreements. During this tenure, Mr. Fisher
was also instrumental in China and Taiwan joining the World Trade
Organization. Mr. Fishers experience also includes serving as Managing
Partner of Fisher Capital Management, an SEC-registered investment
advisory firm, and Senior Manager of Brown Brothers Harriman & Co., a
private banking firm. He also serves on Harvard Universitys Board of
Overseers and, since 2015, as a Senior Advisor for Barclays
PLC.
Other Public Company
Directorships:
●Current:
AT&T Inc.
●Previous (During
the Past 5 Years): None |
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Skills and Qualifications
Mr. Fisher brings to our Board of
Directors deep knowledge of financial matters and financial expertise
gained from extensive experience that includes serving as President and
Chief Executive Officer of the Federal Reserve Bank of Dallas, Managing
Partner of Fisher Capital Management and Senior Manager of Brown Brothers
Harriman. Mr. Fisher also contributes his strategy, leadership and
management skills, and experience gained from chairing for five years a
Federal Reserve committee on information technology architecture and
cybersecurity risks. In addition, his global experience and expertise in
international trade and regulatory matters, including from his roles as
Deputy U.S. Trade Representative and Vice Chairman of Kissinger McLarty
Associates, are particularly valuable to PepsiCo. |
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William R.
Johnson
Director Since: 2015
Age: 68
Independent Committee Memberships:
●Audit
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William R. Johnson has served as
Operating Partner, Global Retail and Consumer, of Advent International
Corporation, a global private equity firm, since 2014. Previously, Mr.
Johnson served as Chairman, President and Chief Executive Officer of the
H.J. Heinz Company, a global packaged foods manufacturer, from 2000 until
his retirement in 2013. He joined Heinz in 1982 and held various positions
within the company before becoming President and Chief Operating Officer
in 1996, then assuming the position of President and Chief Executive
Officer in 1998. Mr. Johnson also serves as an Advisory Partner of Trian
Fund Management, L.P., an investment management firm.
Other Public Company
Directorships:
●Current:
United Parcel Service, Inc.; Emerson Electric Company
●Previous (During
the Past 5 Years): Education Management Corporation (until 2014);
H.J. Heinz Company (until 2013) |
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Skills and Qualifications
Mr. Johnson brings to our Board of
Directors extensive leadership skills and consumer packaged goods
expertise gained from serving as the Chairman, President and Chief
Executive Officer of Heinz. Through his leadership of Heinz and his public
company director experience, he offers deep experience in strategic
planning, operations, marketing, brand development, logistics and
financial expertise. Mr. Johnsons experience leading a global business
with a large, labor-intensive workforce is of particular value to the
Board. |
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PEPSICO 2017 PROXY
STATEMENT | 15 |
Table of Contents
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
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Indra K. Nooyi
Director Since: 2001
Age: 61
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Indra K. Nooyi has been PepsiCos
Chief Executive Officer (CEO) since 2006 and assumed the role of
Chairman of our Board of Directors in 2007. She was elected to our Board
and became President and Chief Financial Officer in 2001, after serving as
Senior Vice President and Chief Financial Officer since 2000. Ms. Nooyi
also served as PepsiCos Senior Vice President, Corporate Strategy and
Development from 1996 until 2000, and as PepsiCos Senior Vice President,
Strategic Planning from 1994 until 1996. Prior to joining PepsiCo, Ms.
Nooyi spent four years as Senior Vice President of Strategy, Planning and
Strategic Marketing for Asea Brown Boveri, Inc. She was also Vice
President and Director of Corporate Strategy and Planning at Motorola,
Inc. Ms. Nooyi also currently serves on the boards of several non-profit
organizations, including the U.S.-India Business Council, the Consumer
Goods Forum, Catalyst, Lincoln Center for the Performing Arts, Tsinghua
University School of Economics and Management, the World Economic Forum
and the Asia Society.
Other Public Company
Directorships:
●Current:
Schlumberger Limited
●Previous (During
the Past 5 Years): None |
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Skills and Qualifications
Ms. Nooyi brings to our Board of
Directors strong leadership skills, extensive strategic planning, business
and financial experience and broad strategic vision for our Company. Her
more than 20 years with PepsiCo have provided her with extensive knowledge
of the global food and beverage industry. Ms. Nooyi also contributes
invaluable perspectives on the global marketplace gained from her senior
management positions at PepsiCo and her memberships on global business
councils and forums. Her role as Chairman and CEO of PepsiCo creates a
critical link between management and the Board of Directors, enabling the
Board to perform its oversight function with the benefits of managements
perspectives on the business. |
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David C. Page,
MD
Director Since: 2014
Age: 60
Independent Committee Memberships:
●Compensation
●Public
Policy and Sustainability |
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David C. Page, MD, has served since
2005 as the Director and President of the Whitehead Institute for
Biomedical Research, an independent non-profit research and educational
institute affiliated with Massachusetts Institute of Technology (MIT).
In this role, he leads a group of scientists focused on cancer research,
genetics, genomics, developmental biology, stem cell research,
regenerative medicine, parasitic disease and plant biology. Dr. Pages own
research focuses on the genetic and genomic differences between males and
females, and the roles that these differences play in health and disease.
His honors include a MacArthur Prize Fellowship, Science magazines Top
Ten Scientific Advances of the Year (in 1992 and again in 2003) and the
2011 March of Dimes Prize in Developmental Biology. He is a member of the
National Academy of Sciences, the National Academy of Medicine and the
American Academy of Arts and Sciences. Dr. Page also serves as a professor
of biology at MIT and as an Investigator at the Howard Hughes Medical
Institute. He also serves on the board of the Society for Womens Health
Research.
Other Public Company
Directorships:
●Current:
None
●Previous (During
the Past 5 Years): None |
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Skills and Qualifications
Dr. Page brings to our Board of
Directors his scientific and medical expertise, gained from over 30 years
of experience in those fields, and unique perspective on the intersection
of academic and commercial scientific research of interest to companies in
the food and beverage industry. His perspectives are particularly valuable
in light of the Companys strategic focus on the areas of health and
wellness and nutrition. Dr. Pages experience with producing significant
scientific discoveries and innovative breakthroughs is highly relevant to
the Companys research and development initiatives, innovation pipeline
and sustainability goals in an environment of evolving consumer
preferences and regulatory initiatives. |
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16 | PEPSICO 2017 PROXY STATEMENT
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Table of Contents
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
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Robert C. Pohlad
Director Since: 2015
Age: 62
Independent Committee Memberships:
●Nominating and Corporate Governance |
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Robert C. Pohlad has served as
President of Dakota Holdings, LLC (and its predecessors), which operates
multiple businesses across a number of industries, including commercial
real estate, automotive sales and sports and entertainment, since 1987.
From 2002 until its acquisition by PepsiCo in 2010, Mr. Pohlad was
Chairman and Chief Executive Officer of PepsiAmericas, Inc., an
independent publicly traded company. PepsiAmericas, Inc. was formed from
several independent bottlers in 1998, and, under Mr. Pohlads tenure, it
grew to become the second-largest bottler of PepsiCo products at the time
of its acquisition. Previously, Mr. Pohlad held several other executive
positions at bottling companies. Mr. Pohlad is a member and chair of the
Board of Trustees of the University of Puget Sound, as well as a former
member and chair of the Board of Visitors of the University of Minnesota
Medical School.
Other Public Company
Directorships:
●Current:
None
●Previous (During
the Past 5 Years): None |
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Skills and Qualifications
Mr. Pohlad brings to our Board of
Directors extensive beverage and finance experience gained from the
20-plus years he spent in a variety of senior operational and executive
roles at PepsiAmericas, Inc. and its predecessors. Mr. Pohlad has a deep
understanding of leveraging large-scale distribution systems and global
brands, specifically with respect to beverage and bottling operations,
which is invaluable to PepsiCo. In addition, through his experience
operating businesses and investments in myriad fields, Mr. Pohlad has
gained expertise leading and developing strong management teams, creating
and implementing effective strategic plans, addressing succession planning
needs and brand-building. |
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Daniel Vasella,
MD
Director Since: 2002
Age: 63
Independent Committee Memberships:
●Compensation
●Nominating and Corporate Governance (Chair) |
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Daniel Vasella, MD, served as
Chairman of Novartis AG, a global innovative healthcare solutions company,
from 1999 to 2013 and as Chief Executive Officer of Novartis AG from 1996
to January 2010. From 1992 to 1996, Dr. Vasella held the positions of
Chief Executive Officer, Chief Operating Officer, Senior Vice President
and Head of Worldwide Development and Head of Corporate Marketing at
Sandoz Pharma Ltd. He also served at Sandoz Pharmaceuticals Corporation
from 1988 to 1992.
Other Public Company
Directorships:
●Current:
American Express Company; XBiotech Inc.
●Previous (During
the Past 5 Years): Novartis AG (until 2013) |
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Skills and Qualifications
Dr. Vasella brings to our Board of
Directors his expertise in the areas of health and wellness and nutrition,
topics of critical importance to PepsiCo, as well as his leadership
experience and global perspectives, which he obtained through his former
role as Chairman and Chief Executive Officer of Novartis. Through his
leadership of Novartis and his public company director experience, he also
offers to PepsiCo extensive business, operations, management and marketing
skills and experience developing corporate strategy, talent and succession
planning. In addition, he contributes his knowledge of and experience with
regulatory matters developed through his role leading a highly regulated,
global business in rapidly changing markets. |
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PEPSICO 2017 PROXY
STATEMENT | 17 |
Table of Contents
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
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Darren Walker
Director Since: 2016
Age: 57
Independent Committee Memberships:
●Public
Policy and Sustainability |
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Darren Walker has served since 2013
as President of the Ford Foundation, a philanthropic organization, and as
its Vice President for Education, Creativity and Free Expression from 2010
to 2013. Prior to the Ford Foundation, Mr. Walker joined the Rockefeller
Foundation, a philanthropic organization, in 2002 and served as a Vice
President responsible for foundation initiatives from 2005 to 2010. From
1995 to 2002, he was the Chief Operating Officer of Abyssinian Development
Corporation, a community development organization in Harlem in New York
City. Prior to that, Mr. Walker held various positions in finance and
banking at UBS AG. Mr. Walker currently serves on the boards of several
non-profit organizations, including Arcus Foundation, Friends of the High
Line and Carnegie Hall, and as a Vice Chairman of the New York City Ballet
and Vice President of Foundation for Art and Preservation of Embassies.
Mr. Walker also currently chairs the United States National Advisory Board
on Impact Investing and is a member of the Council on Foreign Relations
and the American Academy of Arts and Sciences.
Other Public Company
Directorships:
●Current:
None
●Previous (During
the Past 5 Years): None |
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Skills and Qualifications
Mr. Walker brings to our Board of
Directors his insight into the role of business in society gained through
his role as President of the Ford Foundation and his leadership at other
non-profit and philanthropic organizations. His experience with social and
community initiatives, perspectives on public policy and
sustainability-related matters and financial expertise are particularly
valuable as the Company continues to focus on its Performance with Purpose
goals and pursue strategies to drive sustainable long-term growth. In
addition, he offers a unique understanding of emerging markets and
communities gained through his experience and oversight of the Ford
Foundations operations. |
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Alberto Weisser
Director Since: 2011
Age: 61
Independent Committee Memberships:
●Audit
(Chair) |
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Alberto Weisser served as Chairman
and Chief Executive Officer of Bunge Limited, a global food, commodity and
agribusiness company, from 1999 until June 2013 and as Executive Chairman
until December 2013. Mr. Weisser previously served as Bunges Chief
Financial Officer from 1993 to 1999. Previously, Mr. Weisser worked at
BASF Group, a chemical company, in various finance-related positions. He
has served since 2015 as a Senior Advisor at Lazard Ltd, a financial
advisory and asset management firm, where he advises Lazard as a
consultant regarding global agribusiness and related-sectors. Mr. Weisser
is also an advisor to Temasek International Pte. Ltd., a Singapore-based
investment company, and a board member of the Council of the
Americas.
Other Public Company
Directorships:
●Current:
None
●Previous (During
the Past 5 Years): Bunge Limited (until 2013); International Paper
Company (until 2012) |
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Skills and Qualifications
Mr. Weisser brings to our Board of
Directors his extensive experience with and keen understanding of
commodities, gained from his role as Chairman and Chief Executive Officer
of Bunge Limited. These skills are particularly valuable to PepsiCo in
todays volatile economic environment. Mr. Weisser has deep knowledge of
the strategic, financial, risk and compliance issues facing a large,
diversified, publicly traded company, and significant global experience,
particularly with respect to emerging markets. Mr. Weisser also
contributes strong financial acumen and expertise resulting from his six
years of experience serving as Bunge Limiteds Chief Financial
Officer. |
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18 | PEPSICO 2017 PROXY STATEMENT
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Table of Contents
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
Skills, Qualifications and Experience of Our Director
Nominees
The table below includes some of the
skills, qualifications and experience of each director nominee that led our
Board of Directors to conclude that he or she is qualified to serve on our
Board. This high-level summary is not intended to be an exhaustive list of each
director nominees skills or contributions to the Board.
Skill/Qualification |
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Consumer Products |
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Risk Management |
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Public Policy |
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PEPSICO 2017 PROXY
STATEMENT | 19 |
Table of Contents
Corporate Governance at PepsiCo |
|
Our
Governance Philosophy
We believe strong
corporate governance is the foundation for financial integrity, investor
confidence and sustainable performance.
Strong corporate governance is and has
been a long-standing priority at PepsiCo. In 2002, the Board of Directors
adopted Corporate Governance Guidelines for the Company that established a
common set of expectations to assist the Board and its Committees in performing
their duties. The Board reviews these Guidelines at least annually, and updates
the Guidelines as necessary to reflect changing regulatory requirements,
evolving best practices and input from our shareholders and other
stakeholders.
Key Corporate Governance
Documents
The following documents are available
at www.pepsico.com4 under Who We
Are and are available in print upon written
request to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road,
Purchase, New York 10577: Corporate Governance Guidelines; Charters of our
Audit, Compensation, Nominating and Corporate Governance, and Public Policy and
Sustainability Committees of the Board and the Global Code of
Conduct.
Our
Global Code of Conduct
PepsiCo is proud of its
commitment to deliver sustained growth through empowered people acting with
responsibility and building trust.
This commitment is evidenced in part by
our robust Global Code of Conduct, which is designed to provide our directors
and employees with guidance on how to act legally and ethically while performing
work for PepsiCo. PepsiCo works hard to communicate its values clearly and
regularly throughout its operations, including by conducting an annual Global
Code of Conduct training program for employees. Annually, all of PepsiCos
directors and executives, including all of our executive officers, certify their
compliance with our Global Code of Conduct.
____________________
4 |
The information on our website is not, and shall not be
deemed to be, a part of this Proxy Statement or incorporated herein or
into any of our other filings with the Securities and Exchange Commission
(the SEC). |
20 | PEPSICO 2017 PROXY STATEMENT
|
|
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CORPORATE GOVERNANCE AT
PEPSICO
Shareholder
Engagement
We believe that regular,
transparent communication with our shareholders and other stakeholders is
essential to PepsiCos long-term success.
We value the views of our shareholders and
other stakeholders, and the input that we receive from them is a cornerstone of
our corporate governance practices. Through these engagements, we seek to ensure
that corporate governance at PepsiCo is not a formulaic exercise, but rather a
dynamic framework that can accommodate the demands of a rapidly changing
business environment while remaining responsive to the priorities of our
shareholders and other stakeholders.
Throughout 2016, members of our management
team met with a significant number of our shareholders to discuss our portfolio
strategy, financial and operating performance, capital allocation,
sustainability and corporate social responsibility initiatives, corporate
governance and executive compensation practices and to solicit feedback on these
and a variety of other topics. At least quarterly, the Board receives a report
on shareholder engagement and is provided with the opportunity to discuss and
ask questions about investor feedback. PepsiCos Corporate Governance Guidelines
require that our Presiding Director ensure that he or she is available for
consultation and direct communication, if requested by major
shareholders.
We also engaged with other key
stakeholders through our active participation in prestigious corporate
governance organizations such as the Harvard Law School Program on Corporate
Governance, the Stanford University Rock Center for Corporate Governance and the
Council of Institutional Investors.
Our engagement activities have resulted in
our receiving valuable feedback from our shareholders and other stakeholders who
have provided important external viewpoints that inform our decisions and our
strategy. For example, as a result of collaboration with our shareholders and
other stakeholders in recent years:
● |
The Board
amended our Corporate Governance Guidelines to specify the Boards
oversight role with respect to sustainability, an integral part of the
Companys business strategy, and refined the roles of its Committees by
establishing a new Public Policy and Sustainability Committee in early
2017, which will assist the Board in providing more focused oversight over
PepsiCos policies, programs and related risks that concern key public
policy and sustainability matters. |
● |
We announced
in 2016 our new Performance with Purpose sustainability goals for the next
ten years that are designed to build on our progress and broaden our
efforts in a way that responds to changing consumer and societal needs. We
also enhanced our disclosure of the Companys sustainability progress by
issuing an updated Sustainability Report and Global Reporting Initiative
(GRI) Report. |
● |
The Board
implemented a proxy access right for shareholders. |
● |
Taking into
account the strong support demonstrated by our shareholders and feedback
during individual meetings with shareholders, the Compensation Committee
implemented several changes to the long-term incentive program in 2016,
while determining to maintain the core structure of our overall executive
compensation program. |
● |
PepsiCo was a
Founding Partner of and is an active participant at the Berkeley Sustainable
Business and Investment Forum, a finance innovation forum focused on the
evolving concepts of risk management, capital allocation and sustainable
business practices with a focus on long-term value creation. |
In addition, we have had an ongoing
dialogue with various shareholders and other stakeholders on the important
topics of Board oversight of risk and strategy; management and Board succession
planning; capital allocation; corporate governance; PepsiCos Performance with
Purpose sustainability goals; water scarcity; nutrition; the impact of PepsiCos
supply chain on human rights and environmental matters; and various other
issues. In the two-month period prior to our 2016 Annual Meeting of
Shareholders, we contacted our 75 largest shareholders, representing over 43% of
our outstanding shares of Common Stock, to discuss a broad range of topics. Of
this group, shareholders representing nearly 23% of our outstanding shares of
Common Stock spoke with us prior to the 2016 Annual Meeting. Subsequent to the
2016 Annual Meeting, we continued our outreach efforts to develop a better
understanding of the feedback received from shareholders.
PepsiCo regularly meets with stakeholders,
often in collaboration with groups such as Ceres, a prominent nonprofit
organization that brings together investors, non-governmental organizations and
businesses in support of sustainability. During these meetings, our shareholders
and other stakeholders engage on such topics as climate change, water scarcity,
public health, human rights, sustainable agriculture, environmental impact and
sustainability reporting.
|
PEPSICO 2017 PROXY
STATEMENT | 21 |
Table of Contents
CORPORATE GOVERNANCE AT
PEPSICO
Our Commitment to
Sustainable Business Practices
PepsiCo is guided by
Performance with Purpose our vision to deliver top-tier financial performance
over the long term by integrating sustainability into our business
strategy.
We believe that continuously improving the
products we sell, operating responsibly to protect our planet and empowering
people around the world is what will enable PepsiCo to run a successful global
company that creates long-term value for society and our shareholders. Since
PepsiCo first articulated the concept in 2006, Performance with Purpose has been
woven into all aspects of our business.
PepsiCo is pleased to share the progress
we are making in our Performance with Purpose journey, and in October 2016 we
announced our new Performance with Purpose goals for the next ten years. These
goals broaden our efforts in a way that responds to changing consumer and
societal needs and focus on building a healthier future for all of our
stakeholders. The following are available on the Companys website at
www.pepsico.com under What We
BelieveSustainability Reporting:"
● |
Sustainability
Report, which presents our
sustainability goals and provides data, as well as examples of our efforts
to achieve those goals; and |
● |
GRI Report, which offers greater detail on PepsiCos activities in
a widely accepted format. |
To assist our Board in its oversight and
to align with our new Performance with Purpose agenda, the Board also refined
the roles of its Committees by establishing a new Public Policy and
Sustainability Committee in early 2017. The new Committee (which is comprised
entirely of independent directors) will assist the Board in providing more
focused oversight over the Companys policies, programs and related risks that
concern key public policy and sustainability matters.
Our Board of Directors
Our business and affairs are overseen by
our Board of Directors pursuant to the North Carolina Business Corporation Act
and our By-Laws. Members of the Board of Directors oversee the Companys
business by participating in Board and Committee meetings, by reviewing
materials provided to them and through discussions with the Chairman and CEO and
with key members of management.
Director Election Requirements and
Majority-Vote Policy
All members of the Board are elected
annually by our shareholders by a majority of the votes cast in an uncontested
election (i.e., an election where the number of nominees is not greater than the
number of directors to be elected), meaning that the number of votes cast for
a director must exceed the number of votes cast against that director in order
to elect the director to the Board. In a contested election, where the number of
director nominees exceeds the number of directors to be elected, directors will
be elected by a plurality vote. Under our Director Resignation Policy set forth
in our Corporate Governance Guidelines, if a director nominee in an uncontested
election receives more votes against than votes for his or her election, he
or she must offer to resign from the Board. The Nominating and Corporate
Governance Committee will make a recommendation to the Board on the resignation
offer. Within 90 days following certification of the shareholder vote, the
independent directors will determine, considering the best interests of the
Company and its shareholders, whether to accept the directors resignation, and
the Company will promptly publicly disclose such determination. A director who
offers to resign pursuant to this Policy may not be present during the
deliberations or voting by the Nominating and Corporate Governance Committee or
the Board as to whether to accept the resignation offer.
Outstanding Board
Attendance
Regular attendance at Board meetings and
the Annual Meeting is expected of each director. In fiscal year 2016, our Board
of Directors held six meetings and our Committees held 19 meetings in the
aggregate. In fiscal year 2016, no incumbent director attended fewer than 75% of
the total number of Board and applicable Committee meetings (held during the
period that such director served) and average attendance of our incumbent
directors at Board and applicable Committee meetings (held during the period
that such director served) was 99%. Thirteen of the 14 directors then serving
attended the 2016 Annual Meeting of Shareholders.
22 | PEPSICO 2017 PROXY STATEMENT
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CORPORATE GOVERNANCE AT
PEPSICO
Board Leadership Structure
PepsiCos governing documents allow the
roles of Chairman of the Board and CEO to be filled by the same or different
individuals. This approach allows the Board flexibility to determine whether the
two roles should be separate or combined based upon the Companys needs and the
Boards assessment of the Companys leadership from time to time. Although our
Board regularly considers and is open to different structures as circumstances
may warrant, the Board believes that the current arrangement of having a strong
independent Presiding Director combined with the leadership of our Chairman and
CEO is in the best interests of PepsiCo and its shareholders at this time. As
part of its most recent Board leadership assessment, the Board gave thorough
consideration to the strategic goals of the Company, the unique opportunities
and challenges PepsiCo is facing, the various capabilities of our directors, the
dynamics of our Board, best practices in the market, the current industry
environment and the status of PepsiCos progress with respect to key strategic
initiatives, among other factors, in determining that this leadership structure
continues to strike the right balance between effective independent oversight of
PepsiCos business and Board activities and consistent corporate
leadership.
The independent directors believe that our
current Chairman of the Board and CEO, Indra K. Nooyi, as an experienced leader
with extensive knowledge of the Company and the food and beverage industry,
serves as a highly effective bridge between the Board and management and
provides the vision and leadership to execute on the Companys strategy and
create shareholder value. As the Company continues to implement its ongoing
business transformation, the independent directors believe that the Company is
best served by having the architect and leader of that strategy as Chairman of
the Board.
Our Corporate Governance Guidelines
provide that if the Chairman of the Board is not an independent director, an
independent director shall be designated as the Presiding Director by the
independent members of the Board based on the recommendation of the Nominating
and Corporate Governance Committee. The independent director who is designated
as the Presiding Director is expected to serve in that role for a three-year
term. The Board evaluates the Presiding Directors performance annually under
the guidance of the Nominating and Corporate Governance Committee. The duties of
our Presiding Director are consistent with the responsibilities generally held
by lead directors at other public companies.
Presiding Director
Duties: |
● |
Presides at
all meetings of the Board at which the Chairman of the Board is not
present, including executive sessions of the independent directors
|
● |
Serves as a
liaison between the Chairman of the Board and the independent directors
|
● |
Has
authority to approve information sent to the Board |
● |
Approves
meeting agendas for the Board |
● |
Approves
meeting schedules to assure that there is sufficient time for discussion
of all agenda items |
● |
Has the
authority to call meetings of the independent directors |
● |
If requested
by major shareholders, ensures that he or she is available for
consultation and direct communication |
In recognition of his skills in overseeing
the Companys strong governance policies and practices and his overall
leadership and communication abilities, the independent members of the Board of
Directors re-elected Ian M. Cook as the Presiding Director of the Board in
February 2016 for another three-year term. Mr. Cook is an engaged and active
director who, as a current chief executive officer of a multinational consumer
products company, is uniquely positioned to work collaboratively with our
Chairman and CEO, while providing strong independent oversight. In addition to
the above responsibilities and assisting the Board of Directors in the
fulfillment of its responsibilities in general, Mr. Cook, as the Presiding
Director, has over the past few years performed additional duties
including:
● |
meeting with the Chairman and CEO
after the executive sessions of independent directors held at each
regularly scheduled Board meeting to provide feedback on the independent
directors deliberations; |
● |
regularly speaking with the Chairman
and CEO between Board meetings to discuss matters of concern, often
following consultation with the other independent directors;
|
● |
meeting regularly with members of
senior management other than the Chairman and CEO; and |
● |
meeting with
shareholders. |
|
PEPSICO 2017 PROXY
STATEMENT | 23 |
Table of Contents
CORPORATE GOVERNANCE AT
PEPSICO
Director Independence
Independence
Determination
The Companys Corporate Governance
Guidelines provide that an independent director is a director who meets the New
York Stock Exchange definition of independence, as determined by the Board. This
definition is included in the Corporate Governance Guidelines, which are
available at www.pepsico.com under Who We
AreCorporate Governance. In making a
determination of whether a director is independent, the Board of Directors
considers all relevant facts and circumstances, including but not limited to the
directors commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships.
Consistent with these considerations, the
Board of Directors has affirmatively determined that all of our non-management
director nominees, who are listed below, are independent within the meaning of
the rules of the New York Stock Exchange. The Board also determined that Lloyd
G. Trotter, who will retire from the Board of Directors effective as of the 2017
Annual Meeting, is independent. The Board had previously determined that Alberto
Ibargüen, who served on the Board during a portion of 2016, was
independent.
Independent Director
Nominees |
Shona L. Brown |
Dina Dublon |
William R.
Johnson |
Daniel
Vasella |
George W.
Buckley |
Rona A. Fairhead |
David C. Page |
Darren Walker |
Cesar Conde |
Richard W.
Fisher |
Robert C. Pohlad |
Alberto
Weisser |
Ian M. Cook |
|
|
|
In arriving at the foregoing independence
determination, the Board of Directors thoroughly considered the relationships
described under Transactions with Related Persons on page 25 of this Proxy
Statement and determined that they do not impair Mr. Pohlads independence or
his ability to exercise independent judgment in carrying out the
responsibilities of a director.
Executive Sessions of Independent
Directors
The independent directors hold regularly
scheduled executive sessions of the Board and its Committees without Company
management present. These executive sessions are chaired by the Presiding
Director (at Board meetings) or by the Committee Chairs (at Committee meetings).
The independent directors met in executive session at all of the regularly
scheduled Board and Committee meetings held in 2016.
Related Person Transactions
The Board of Directors has adopted written
Related Person Transaction Policies and Procedures that generally apply to any
transaction or series of transactions:
● |
in which the Company or a subsidiary
was or is a participant; |
● |
where the amount involved exceeds or
is expected to exceed $120,000 since the beginning of the Companys last
completed fiscal year; and |
● |
the related person (i.e., a
director, director nominee, executive officer, greater than five percent
beneficial owner of the Companys Common Stock, or any immediate family
member of any of the foregoing) has or will have a direct or indirect
material interest. |
The transactions described above are
submitted to the Audit Committee for review and approval or
ratification.
Review and Approval of
Transactions with Related Persons
In determining whether to approve, ratify
or disapprove of the entry into a related person transaction, the Audit
Committee considers all relevant facts and circumstances and takes into account,
among other factors:
● |
whether the transaction is on terms
no less favorable than terms generally available to an unaffiliated third
party under the same or similar circumstances; |
● |
whether the transaction would impair
the independence of an outside director; and |
● |
whether the transaction would
present an improper conflict of interest for any director or executive
officer of the Company. |
24 | PEPSICO 2017 PROXY STATEMENT
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CORPORATE GOVERNANCE AT
PEPSICO
The Audit Committee has considered and
adopted standing pre-approvals under the policy for limited transactions with
related persons. The Companys General Counsel maintains a list of transactions
deemed pre-approved under the policy for review by any Board member.
Transactions with Related
Persons
Robert C. Pohlad, a director of the
Company, indirectly owns one-third of the voting interests in the Minnesota
Twins, a Major League Baseball team, and the remaining voting interests are
indirectly owned by his brothers, William Pohlad and James Pohlad. The majority
of the non-voting interests in the Minnesota Twins are owned indirectly by Mr.
Pohlad and members of his immediate family and through trusts for the benefit of
Mr. Pohlads descendants and descendants of members of his immediate family.
Members of Mr. Pohlads immediate family are employed by the Minnesota Twins,
including James Pohlad, who serves as Executive Chair and Chairman of the Board.
In fiscal year 2016, PepsiCo made payments to the Minnesota Twins of
approximately $730,000 in connection with a sponsorship agreement, and PepsiCo
received payments of approximately $670,000 from the Minnesota Twins and an
independent third party in connection with the sale of PepsiCo products at the
Minnesota Twins stadium. Transactions between the Minnesota Twins and PepsiCo,
individually and in the aggregate, represented less than 1% of the annual
revenues of the Minnesota Twins and PepsiCo in each of 2016, 2015 and 2014. The
sponsorship agreement and sale of PepsiCo products are ongoing, and Mr. Pohlad
is not involved in negotiating these arms-length transactions.
In addition, Mr. Pohlads wife, Rebecca
Pohlad, and their children are beneficiaries of irrevocable trusts that own
Christen Group, LLC (Christen
Group) and Mr. Pohlads father-in-law, Paul
Christen, is an executive officer of Christen Group. In fiscal year 2016,
PepsiCo made payments of approximately $170,000 to Christen Group in connection
with the leasing of a distribution center owned by Christen Group. PepsiCo
entered into the lease in August 2013, prior to Christen Groups acquisition of
the distribution center in December 2013. The lease expires in October 2023 and
the terms of this leasing transaction remain unchanged from prior years.
Transactions between Christen Group and PepsiCo, individually and in the
aggregate, are not material to PepsiCo, Mr. Pohlad, any of Mr. Pohlads family
members, or Christen Group.
The Board thoroughly considered these
relationships and determined that they do not impair Mr. Pohlads independence
or his ability to exercise independent judgment in carrying out the
responsibilities of a director.
In addition, Jennifer Carey,
daughter-in-law of Albert P. Carey, PepsiCos CEO, North America, is a Director
of Retail Sales at PepsiCo and received total compensation of approximately
$145,000 in 2016. She also participates in the general welfare and benefit plans
of PepsiCo. Ms. Careys compensation was established in accordance with
PepsiCos employment and compensation practices applicable to employees with
equivalent qualifications and responsibilities and holding similar positions.
Mr. Carey does not have a material interest in his daughter-in-laws employment,
nor does he share a household with her.
|
PEPSICO 2017 PROXY
STATEMENT | 25 |
Table of Contents
CORPORATE GOVERNANCE AT
PEPSICO
Committees of the Board of
Directors
The Board of Directors has four
Committees: Audit, Compensation, Nominating and Corporate Governance, and Public
Policy and Sustainability. The table below indicates the members of each Board
committee:
|
Audit |
|
Compensation |
|
Nominating and
Corporate Governance |
|
Public
Policy and Sustainability |
Shona L. Brown*
|
|
|
● |
|
|
|
● |
George W. Buckley
|
|
|
|
|
|
|
|
Cesar
Conde |
● |
|
|
|
|
|
|
Ian M. Cook
(Presiding
Director) |
|
|
|
|
● |
|
|
Dina Dublon
|
|
|
|
|
|
|
|
Rona A. Fairhead
|
|
|
● |
|
● |
|
|
Richard W.
Fisher |
|
|
|
|
|
|
|
William R. Johnson
|
|
|
|
|
|
|
|
Indra K. Nooyi
|
|
|
|
|
|
|
|
David C. Page
|
|
|
● |
|
|
|
● |
Robert C. Pohlad
|
|
|
|
|
● |
|
|
Lloyd G.
Trotter* |
|
|
|
|
● |
|
|
Daniel Vasella
|
|
|
● |
|
|
|
|
Darren Walker
|
|
|
|
|
|
|
● |
Alberto
Weisser |
|
|
|
|
|
|
|
|
Committee Chair |
|
Financial
Expert |
* |
Effective as of the 2017 Annual
Meeting, Lloyd G. Trotter will not stand for re-election and will retire
from the Board and its Committees, and Shona L. Brown will become Chair of
the Compensation Committee. |
26 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
CORPORATE GOVERNANCE AT PEPSICO
Audit
Committee |
|
Primary Responsibilities
●Engaging and overseeing the
Companys independent registered public accounting firm (taking into
account the vote on shareholder ratification) and considering the
independence, qualifications and performance of the independent registered
public accounting firm
●Approving all audit and
permissible non-audit services to be performed by the independent
registered public accounting firm
●Reviewing and evaluating the
performance of the lead audit partner of the independent registered public
accounting firm and periodically considering whether there should be a
rotation of the independent registered public accounting
firm
●Overseeing the quality and
integrity of PepsiCos financial statements and its related internal
control over financial reporting, including reviewing with management and
the independent registered public accounting firm PepsiCos annual audited
and quarterly financial statements and other financial disclosures,
including earnings releases
●Reviewing and approving the
internal audit departments audit plan, staffing, budget and
responsibilities
●Reviewing PepsiCos compliance
with legal and regulatory requirements, by reviewing and discussing the
implementation and effectiveness of PepsiCos compliance
program
●Establishing procedures for the
receipt, retention and treatment of complaints received by the Company
regarding (a) accounting, internal accounting controls or auditing matters
and other federal securities law matters and (b) confidential, anonymous
submissions by employees of concerns regarding accounting or auditing
matters or other federal securities law
matters
●Reviewing and assessing the
guidelines and policies governing PepsiCos risk management and oversight
processes, and assisting the Boards oversight of PepsiCos financial,
compliance and employee safety risks
●Reviewing related person
transactions
Financial Expertise, Financial Literacy and
Independence
The Board of Directors has
determined that George W. Buckley, Richard W. Fisher, William R. Johnson
and Alberto Weisser, members of our Audit Committee, satisfy the criteria
adopted by the SEC to serve as audit committee financial
experts.
In addition, the Board of Directors
has determined that George W. Buckley, Cesar Conde, Richard W. Fisher,
William R. Johnson and Alberto Weisser, constituting all members of our
Audit Committee, are independent directors pursuant to the requirements
under the Securities Exchange Act of 1934, as amended (the
Exchange Act), and the New York Stock Exchange corporate governance listing
standards, and are financially literate within the meaning of the New York
Stock Exchange corporate governance listing standards.
Report
The Audit Committee Report is set
forth beginning on page 36 of this Proxy Statement. Robert C. Pohlad and
Darren Walker, who were members of the Audit Committee when it approved
the Audit Committee Report, no longer serve as members of the Audit
Committee effective March 9, 2017. |
|
|
Met nine times in 2016
Current Committee Members Alberto
Weisser (Chair) George W. Buckley Cesar Conde Richard W.
Fisher William R.
Johnson
|
|
|
PEPSICO 2017 PROXY
STATEMENT | 27 |
Table of Contents
CORPORATE GOVERNANCE AT PEPSICO
Compensation Committee |
|
Primary Responsibilities
●Overseeing policies relating to
compensation of the Companys executives and making recommendations to the
Board with respect to such policies
●Overseeing engagement with
shareholders on executive compensation
matters
●Overseeing the design of all
material employee benefit plans and programs of the Company, its
subsidiaries and divisions
●Meeting at least annually with
the CEO to discuss the CEOs self-assessment in achieving individual and
corporate performance goals and objectives
●Evaluating and discussing with
the independent directors the performance of the CEO and recommending the
CEOs compensation to the independent directors based on the CEOs
performance
●Overseeing the evaluation of the
executive officers and other key executives deemed to be under the
Compensation Committees purview and evaluating and approving the
individual elements of total compensation for such
officers
●Evaluating its relationship with
any compensation consultant for any conflicts of interest and assessing
the independence of any compensation consultant, legal counsel or other
advisors
●Reviewing and reporting to the
Board with respect to director compensation and stock ownership
guidelines
Additional information on the roles
and responsibilities of the Compensation Committee is provided in the
Compensation Discussion and Analysis beginning on page 40 of this Proxy
Statement.
Independence
The Compensation Committee is
comprised entirely of directors who are independent under the New York
Stock Exchange corporate governance listing standards for directors and
compensation committee members, and who are also outside directors for
purposes of Section 162(m) of the Internal Revenue Code and non-employee
directors for purposes of Section 16 of the Exchange Act.
Report
The Compensation Committee Report is
set forth on page 65 of this Proxy Statement. |
|
|
Met five times in 2016
Current Committee Members Lloyd
G. Trotter (Chair) Shona L. Brown Rona A. Fairhead David C.
Page Daniel
Vasella
|
|
Compensation
Advisor
The Compensation Committee has engaged
Frederic W. Cook & Co., Inc. (FW
Cook) as its independent external advisor.
The Compensation Committee reviewed its relationship with FW Cook, considered FW
Cooks independence and the existence of potential conflicts of interest, and
determined that the engagement of FW Cook did not raise any conflict of interest
or other issues that would adversely impact FW Cooks independence. In reaching
this conclusion, the Compensation Committee considered various factors,
including the six factors set forth in the SEC and New York Stock Exchange
corporate governance listing standards regarding compensation advisor conflicts
of interest and independence.
Compensation Committee Interlocks
and Insider Participation
Shona L. Brown, Rona A. Fairhead, Alberto
Ibargüen, David C. Page, Lloyd G. Trotter and Daniel Vasella served on the
Companys Compensation Committee during all or a portion of the 2016 fiscal
year. No member of the Compensation Committee is now, or was during 2016, an
officer or employee of the Company. No member of the Compensation Committee had
any relationship with the Company or any of its subsidiaries during 2016
pursuant to which disclosure would be required under applicable SEC rules
pertaining to the disclosure of transactions with related persons. None of the
executive officers of the Company currently serves or served during 2016 on the
board of directors or compensation committee of another company at any time
during which an executive officer of such other company served on PepsiCos
Board of Directors or Compensation Committee.
28 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
CORPORATE GOVERNANCE AT PEPSICO
Nominating
and Corporate Governance Committee |
|
Primary Responsibilities
●Developing criteria and qualifications, including
criteria to assess independence, for selecting director candidates and
identifying qualified candidates for membership on the Board and its
Committees
●Developing and recommending to the Board corporate
governance guidelines and other corporate policies and otherwise
performing a leadership role in shaping the Companys corporate governance
policies and practices
●Reviewing Board succession plans and overseeing the
development of the process and protocols regarding succession plans for
the Companys CEO
●Making recommendations to the Board concerning the
composition, size, structure and activities of the Board and its
Committees
●Overseeing the process for evaluating the Board and its
Committees, including assessing and reporting to the Board on the
performance of the Board and its Committees
Independence
The Nominating and Corporate
Governance Committee is comprised entirely of directors who meet the
independence requirements under the New York Stock Exchange corporate
governance listing standards. |
|
|
Met five times in 2016
Current Committee Members
Daniel Vasella (Chair) Ian M. Cook Rona A.
Fairhead Robert C. Pohlad Lloyd G. Trotter |
|
Public Policy
and Sustainability Committee |
|
Primary Responsibilities
●Reviewing and monitoring key public policy trends,
issues and regulatory matters and the Companys engagement in the public
policy process
●Overseeing the Companys Political Contributions Policy
and reviewing the Companys political activities and
expenditures
●Reviewing the Companys sustainability initiatives and
engagement
●Assisting in the Boards oversight of risks related to
matters overseen by the Committee
Independence
The Public Policy and Sustainability
Committee is comprised entirely of directors who meet the independence
requirements under the New York Stock Exchange corporate governance
listing standards. |
|
|
Established in 2017
Current Committee Members
Dina Dublon (Chair) Shona L. Brown David C.
Page Darren Walker |
|
Board
Composition and Refreshment
We believe the Board benefits from a mix
of new directors who bring fresh perspectives and longer-serving directors who
bring valuable experience, continuity and a deep understanding of the Company.
The Board strives to maintain an appropriate balance of tenure, turnover,
diversity, skills and experience. To promote thoughtful Board refreshment, we
have:
● |
adopted a policy in
which no director may stand for election to the Board after reaching the
age of 72; |
● |
developed a
comprehensive, ongoing Board succession planning process; and |
● |
implemented an annual
Board and Committee self-assessment process. |
Since the beginning of 2014, seven
directors have joined the Board. The average age of our director nominees is
60.4 years. The average tenure of our independent director nominees and all our
director nominees is 5.1 years and 5.9 years, respectively.
Comprehensive, Ongoing Process for
Board Succession Planning and Selection and Nomination of
Directors
The Board regularly reviews potential
vacancies on the Board and maintains an evergreen compilation of potential
candidates that it regularly reviews at Board meetings. The Nominating and
Corporate Governance Committee assists this process by considering prospective
candidates and identifying appropriate individuals for the Boards further
consideration.
In fulfilling its responsibility to
identify qualified candidates for membership on the Board, the Nominating and
Corporate Governance Committee considers the following attributes of candidates:
(i) relevant knowledge, diversity
|
PEPSICO 2017 PROXY
STATEMENT | 29 |
Table of Contents
CORPORATE GOVERNANCE AT PEPSICO
of background and experience in areas
including business, finance, accounting, technology, marketing, international
business and government; (ii) personal qualities of leadership, character,
judgment and whether the candidate possesses a reputation in the community at
large of integrity, trust, respect, competence and adherence to the highest
ethical standards; (iii) roles and contributions valuable to the business
community; and (iv) whether the candidate is free of conflicts and has the time
required for preparation, participation and attendance at meetings. Throughout
the director selection and nomination process, the Board adheres to the
Companys philosophy of maintaining an environment free from discrimination on
the basis of race, color, religion, sex, sexual orientation, gender identity,
age, national origin, disability, veteran status or any other protected category
under applicable law.
From time to time, the Nominating and
Corporate Governance Committee engages consulting firms to perform searches for
director candidates who meet the current needs of the Board. If a consulting
firm is retained to assist in the search process for a director, a fee is paid
to such firm.
The Nominating and Corporate Governance
Committee also assists the Board in considering succession planning for Board
positions such as the Presiding Director and chairs of the committees. The Board
elected a new chair of our Nominating and Corporate Governance Committee in
2015, a new chair of our Audit Committee in 2016 and a new chair of our
Compensation Committee in 2017 (effective as of the 2017 Annual Meeting of
Shareholders).
Consideration of Board
Diversity
The Nominating and Corporate Governance
Committee and the Board are keenly focused on ensuring that a wide range
of backgrounds and experiences are represented on our Board. Fifty percent
of our director nominees are women or ethnically diverse
individuals. |
The Nominating and Corporate Governance
Committee seeks a Board with diverse opinions and perspectives that is
representative of our global business. While not a formal policy, PepsiCos
director nomination processes call for the consideration of a range of types of
diversity, including race, gender, ethnicity, culture, nationality and
geography. In fact, diversity is one of the enumerated criteria that the Board
has identified as critical in maintaining among its current and potential
directors. The Board annually assesses the diversity of its members as part of
its self-assessment process.
Shareholder Recommendations and
Nominations of Director Candidates
The Nominating and Corporate Governance
Committee will consider recommendations for director nominees made by
shareholders and evaluate them using the same criteria as for other candidates.
Recommendations received from shareholders are reviewed by the Chair of the
Nominating and Corporate Governance Committee to determine whether each
candidate meets the minimum criteria set forth in the Corporate Governance
Guidelines, and if so, whether the candidates expertise and particular set of
skills and background fit the current needs of the Board. Any shareholder
recommendation must be sent to the Corporate Secretary of PepsiCo at 700
Anderson Hill Road, Purchase, New York 10577 and must include detailed
background information regarding the suggested candidate that demonstrates how
the individual meets the Board membership criteria.
We amended our By-Laws to permit proxy
access for shareholders. Shareholders who wish to nominate directors for
inclusion in our Proxy Statement or directly at an Annual Meeting in accordance
with the procedures in our By-Laws should see 2018 Shareholder Proposals and
Director Nominations on pages 78-79 of this Proxy Statement for further
information.
Board
and Committee Self-Assessments
Our Board continually seeks to improve its
performance. Pursuant to New York Stock Exchange requirements, PepsiCos
Corporate Governance Guidelines and the Charters of each of the Boards
Committees, the Board and each of its Committees are required to conduct a
self-evaluation at least annually. Our processes enable directors to provide
anonymous and confidential feedback on topics including:
● |
Board/Committee information and materials; |
● |
Board/Committee meeting mechanics
and structure; |
● |
Board/Committee
composition; |
● |
Board/Committee responsibilities and
accountability; |
● |
Board meeting content and conduct;
and |
● |
overall performance of Board
members. |
30 | PEPSICO 2017 PROXY STATEMENT
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CORPORATE GOVERNANCE AT PEPSICO
To promote effectiveness of the Board and
each Committee, the self-assessment results are reviewed and addressed by the
Nominating and Corporate Governance Committee, the members of each Committee and
the independent directors both alone in an executive session led by the
Presiding Director and with members of management.
This process helps identify opportunities
to continue to enhance the performance of the Board and the Committees and
consider implementing practices and procedures as appropriate. The Nominating
and Corporate Governance Committee annually reviews the format of the evaluation
process and periodically considers whether individual director interviews and/or
third-party assessments should be conducted to supplement the Board and
Committee self-assessment process. The Board also reviews the Nominating and
Corporate Governance Committees periodic recommendations concerning the
performance of the Board, each of its Committees and the Presiding Director.
While this formal self-evaluation is conducted on an annual basis, directors
share perspectives, feedback and suggestions year-round.
The
Boards Oversight of Risk Management
The Board recognizes that the achievement
of our strategic and operating objectives involves taking risks. The Board has
oversight responsibility for PepsiCos integrated risk management framework,
which is designed to identify, assess, prioritize, address, manage, monitor and
communicate these risks across the Companys operations, and foster a corporate
culture of integrity and risk awareness. Consistent with this approach, one of
the Boards primary responsibilities is overseeing and interacting with senior
management with respect to key aspects of the Companys business, including risk
assessment and risk mitigation of the Companys top risks.
In addition, the Board has tasked
designated Committees of the Board to assist with the oversight of certain
categories of risk management, and the Committees report to the Board regularly
on these matters.
● |
The Audit
Committee reviews and assesses the guidelines and policies governing the
Companys risk management and oversight processes and assists with the
Boards oversight of financial, compliance and employee safety risks
facing the Company; |
● |
The Compensation Committee reviews
the Companys employee compensation policies and practices to assess
whether such policies and practices could lead to unnecessary risk-taking
behavior; and |
● |
In 2017, the Board established a
Public Policy and Sustainability Committee to assist the Board in its
oversight of the Companys policies, programs and related risks that
concern key public policy and sustainability
matters. |
In addition, throughout the year, the
Board and the relevant Committees receive updates from management with respect
to various enterprise risk management issues and dedicate a portion of their
meetings to reviewing and discussing specific risk topics in greater
detail.
The Companys integrated risk management
framework also includes both division-level and key country risk committees that
are comprised of cross-functional senior management teams and that work together
to identify, assess, prioritize and address division- and country-specific
business risks. The Companys senior management engages with and reports to
PepsiCos Board of Directors and the relevant Committees on a regular basis to
address high-priority risks.
At its February 2017 meeting, the
Compensation Committee reviewed the results of the 2016 annual compensation risk
assessment and concluded that the risks arising from the Companys overall
compensation programs are not reasonably likely to have a material adverse
effect on the Company.
The Company believes that the Boards
leadership structure, discussed in detail under Board Leadership Structure on
page 23 of this Proxy Statement, supports the risk oversight function of the
Board by providing for open communication between management and the Board. In
addition, strong independent directors chair the various Committees involved in
assisting with risk oversight, and all directors are involved in the risk
oversight function.
The
Boards Role in Strategy Oversight
The Board has deep experience and
expertise in the areas of strategy development and governance. Setting the
strategic course of the Company involves a high level of constructive engagement
between management and the Board. Our entire
Board acts as a strategy committee and regularly discusses the strategic
priorities of our Company, taking into consideration global economic, consumer
and other significant trends, as well as changes in the food and beverage
industries and regulatory initiatives. In addition to dedicating a multi-day
meeting to an extensive review of the Companys strategic plans annually, the
Board receives information and updates from management with respect to strategy
throughout the year and discusses strategy at almost every Board meeting.
PepsiCos independent directors also hold regularly scheduled executive sessions
without Company management present, at which strategy is discussed. In addition,
the Board regularly discusses and reviews feedback on strategy from our
shareholders and stakeholders.
|
PEPSICO 2017 PROXY
STATEMENT | 31 |
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CORPORATE GOVERNANCE AT PEPSICO
The
Boards Role in Talent Development
The Board believes that talent development
is vital to PepsiCos continued success. Our Boards involvement in leadership
development and succession planning is systematic and ongoing, and the Board
provides input on important decisions in each of these areas. The Board has
primary responsibility for succession planning for the CEO and oversight of
other executive officer positions, and the Nominating and Corporate Governance
Committee oversees the development of the process and protocols regarding
succession plans for the CEO. To assist the Board, the CEO annually provides the
Board with an assessment of senior managers and their potential to succeed to
the position of CEO, developed in consultation with the Presiding Director and
the Chair of the Nominating and Corporate Governance Committee. The Board meets
regularly with high-potential executives, both in small group and one-on-one
settings.
Political Contributions Policy
In 2005, the Board of Directors adopted a
Political Contributions Policy for the Company, which is amended from time to
time. The Political Contributions Policy, together with other policies and
procedures of the Company, guide PepsiCos approach to political contributions.
As specified in its Charter, the Public Policy and Sustainability Committee
oversees this policy and is responsible for reviewing the Companys key public
policy trends, issues and regulatory matters, its engagement in the public
policy process and the Companys political activities and expenditures,
responsibilities previously held by our Nominating and Corporate Governance
Committee. PepsiCos Board receives information regarding the Companys public
policy initiatives and developments at every regularly scheduled Board
meeting.
In keeping with our goal of
transparency, our Political Contributions Policy and our annual U.S. political
contributions are posted at www.pepsico.com under
What We BelievePolicies. Additionally, over the years, we have significantly enhanced
our website disclosure of political spending and lobbying activities by
including the following information:
● |
a link to
PepsiCos quarterly federal lobbying reports; |
● |
the total annual amount of PepsiCos
federal lobbying-related expenditures in the United
States; |
● |
information about our key lobbying
priorities and our Boards oversight of political spending and lobbying
activities; |
● |
a list of U.S. trade associations
and policy groups that lobby on behalf of PepsiCo to which PepsiCo
contributes over $25,000 annually; and |
● |
the names of the lobbyists with
which we directly contract. |
Communications with the Board
The PepsiCo Corporate Law Department
reviews all communications sent to the Board of Directors and regularly provides
to the Board a summary of communications that relate to the functions of the
Board or a Board Committee or that otherwise warrant Board attention. Copies of
such communications are also made available to the Board. Directors may at any
time discuss the Board communications received by the Company. In addition, the
Corporate Law Department may forward certain communications only to the
Presiding Director, the Chair of the relevant Committee or the individual Board
member to whom a communication is directed. Concerns relating to PepsiCos
accounting, internal accounting controls or auditing matters will be referred
directly to members of the Audit Committee. Those items that are unrelated to
the duties and responsibilities of the Board or its Committees may not be
provided to the Board by the Corporate Law Department, including, without
limitation, business solicitations, advertisements and surveys; requests for
donations and sponsorships; job referral materials such as resumes;
product-related communications; unsolicited ideas and business proposals; and
material that is determined to be illegal or otherwise inappropriate.
Shareholders and other interested parties
may send communications directed to the Board, a Committee of the Board,
Presiding Director, independent directors as a group or an individual director
by any of the following means:
By
Phone |
|
By
Mail |
|
Online |
|
1-866-626-0633 |
|
|
PepsiCo Board of
Directors ATTN: Corporate Secretary PepsiCo, Inc. 700 Anderson Hill Road Purchase, New York
10577 |
|
|
Submit a communication
through our website www.pepsico.com under
Who We AreCorporate
GovernanceContact the Board |
32 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
2016 Director
Compensation |
|
Non-employee directors are compensated for
their service on the Board as described below. Directors who are employees of
the Company receive no additional compensation for serving as
directors.
Annual Compensation
Each non-employee director receives annual
compensation of $110,000 in the form of an annual cash retainer and $165,000 in
the form of an annual equity retainer.
Annual Director
Compensation |
Additional
Compensation |
|
An additional $30,000 cash retainer
●Nominating and Corporate Governance Committee
Chair
●Public Policy and Sustainability Committee
Chair
An additional $40,000 cash retainer
●Audit Committee Chair
●Compensation Committee Chair
An additional $50,000 cash retainer
●Presiding Director |
The $165,000 annual equity retainer is
provided in phantom units of PepsiCo Common Stock that are immediately vested
and are payable on the first day of the calendar quarter following the first
anniversary of the directors retirement or resignation from PepsiCos Board of
Directors. The number of phantom units of PepsiCo Common Stock granted to each
director on October 1, 2016 was determined by dividing the $165,000 equity
retainer value by the closing price of PepsiCo Common Stock on the next business
day following the grant date, which was $108.25. As such, each director was
granted 1,524 phantom units, each representing the right to receive one share of
PepsiCo Common Stock and dividend equivalents. Dividend equivalents are
reinvested in additional phantom units. Directors may also elect to defer their
cash compensation into phantom units payable at the end of the deferral period
selected by the directors.
Directors are reimbursed for expenses
incurred to attend Board and Committee meetings and receive business travel and
accident insurance coverage. Directors do not receive any meeting fees.
Directors do not have a retirement plan or receive any benefits such as life or
medical insurance. Directors are eligible for matching of charitable
contributions through the PepsiCo Foundation, which is generally available to
all PepsiCo employees.
Initial Share Grant
Each newly appointed non-employee director
receives a one-time grant of 1,000 shares of PepsiCo Common Stock when he or she
joins the Board. These shares are immediately vested but must be held until the
director leaves the Board.
Governance Features
Our compensation program for non-employee
directors operates with the following governance features which are similar to
programs for our executive officers:
Stock Ownership
Requirements. To reinforce our ownership
philosophy, non-employee directors are required to own shares of PepsiCo Common
Stock equal to at least $550,000 (five times the annual cash retainer). Shares
or phantom units of PepsiCo Common Stock held either directly by the
non-employee director (or immediate family members), in the directors deferred
compensation account, or in a trust for the benefit of immediate family members,
count towards satisfying the requirement.
|
PEPSICO 2017 PROXY
STATEMENT | 33 |
Table of Contents
2016 DIRECTOR
COMPENSATION
Non-employee directors have five years
from their appointment to meet their stock ownership requirement. All of our
non-employee directors have met or are on track to meet their objectives within
the five-year time requirement.
Clawback Provision.
Under the terms of our long-term
incentive plans, non-employee directors who violate PepsiCos Global Code of
Conduct, who violate applicable non-compete provisions, or who engage in gross
misconduct may be subject to financial consequences. Our long-term incentive
plans permit PepsiCo to cancel a non-employee directors outstanding equity
awards if PepsiCo determines that the non-employee director has committed any
such violation. The long-term incentive plans also permit PepsiCo to claw back
all gains from exercised stock options received within the 12 months preceding
the violation.
Prohibition on Hedging and
Pledging. Our insider trading policy
prohibits all directors (including non-employee directors) from using any
strategies or products (such as derivative securities or short-selling
techniques) to hedge against the potential changes in the value of PepsiCo
Common Stock. In addition, directors may not hold PepsiCo securities in a margin
account or pledge PepsiCo stock or PepsiCo stock options as collateral for a
loan.
Limited Trading
Windows. Our directors (including
non-employee directors) can only transact in PepsiCo securities during approved
trading windows after satisfying mandatory clearance requirements.
34 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
2016 DIRECTOR
COMPENSATION
2016 Non-Employee Director
Compensation
The following table summarizes the
compensation of the non-employee directors for the fiscal year ended December
31, 2016.
Name |
|
Fees
Earned or Paid in Cash ($)(1) |
|
Stock Awards ($)(2) |
|
All
Other Compensation ($)(3) |
|
Total ($) |
Shona L. Brown |
|
110,000 |
|
165,000 |
|
|
|
275,000 |
George W. Buckley |
|
110,000 |
|
165,000 |
|
|
|
275,000 |
Cesar Conde(4) |
|
82,500 |
|
360,535 |
|
|
|
443,035 |
Ian
M. Cook |
|
160,000 |
|
165,000 |
|
|
|
325,000 |
Dina
Dublon(5) |
|
126,667 |
|
165,000 |
|
10,000 |
|
301,667 |
Rona
A. Fairhead |
|
110,000 |
|
165,000 |
|
|
|
275,000 |
Richard W. Fisher |
|
110,000 |
|
165,000 |
|
|
|
275,000 |
Alberto Ibargüen(6) |
|
45,833 |
|
|
|
|
|
45,833 |
William R. Johnson |
|
110,000 |
|
165,000 |
|
|
|
275,000 |
David C. Page |
|
110,000 |
|
165,000 |
|
20,000 |
|
295,000 |
Robert C. Pohlad |
|
110,000 |
|
165,000 |
|
|
|
275,000 |
Lloyd G. Trotter |
|
150,000 |
|
165,000 |
|
10,000 |
|
325,000 |
Daniel Vasella |
|
140,000 |
|
165,000 |
|
10,000 |
|
315,000 |
Darren Walker(7) |
|
18,333 |
|
271,625 |
|
|
|
289,958 |
Alberto
Weisser(8) |
|
133,333 |
|
165,000 |
|
|
|
298,333 |
(1) |
The retainer fee reflects a
payment of $55,000 made in arrears in June 2016 for service during the
period December 1, 2015 through May 31, 2016 and a payment of $55,000 made
in arrears in December 2016 for service during the period June 1, 2016
through November 30, 2016. The following directors elected to defer their
2015-2016 cash compensation into PepsiCos director deferral program: Dr.
Buckley deferred his $110,000 retainer fees into 1,097 phantom stock
units; Mr. Trotter deferred his $150,000 retainer fees into 1,496 phantom
stock units; Dr. Vasella deferred his $140,000 retainer fees into 1,396
phantom stock units. The number of phantom units of PepsiCo Common Stock
each director deferred on June 1, 2016 and December 1, 2016 was determined
by dividing their deferred cash compensation by the closing price of
PepsiCo Common Stock on the grant date, which was $101.57 and $99.03,
respectively. |
(2) |
The amounts reported for stock
awards represent the full grant date fair value of the phantom stock units
granted in 2016 calculated in accordance with the accounting guidance on
share-based payments. |
(3) |
The amounts reported in this
column include PepsiCo Foundation matching gift and other charitable
contributions or commitments. PepsiCo Foundation matching gift
contributions are available to all PepsiCo employees and PepsiCo
non-employee directors. Under the matching gift program, the PepsiCo
Foundation matches cash or stock donations to recognized tax-exempt
organizations, with PepsiCo Foundation annual contributions capped at
$10,000. If an eligible individual is a member of a qualified board of a
tax-exempt organization and makes a financial contribution to such
organization, such individual is eligible for a double-match, increasing
the annual cap to $20,000. |
(4) |
Upon joining the Board on March
4, 2016, Mr. Conde received the one-time grant of 1,000 shares of PepsiCo
Common Stock granted to all new directors. He also received a pro-rated
annual cash retainer of $27,500 for service from March 4, 2016 through May
31, 2016 and a pro-rated annual equity retainer of $96,250 for service
from March 4, 2016 through September 30, 2016. He also received the
$55,000 annual cash retainer for service from June 1, 2016 through
November 30, 2016 and $165,000 annual equity retainer on October 1, 2016
to compensate him for the period October 1, 2016 through September 30,
2017. |
(5) |
Ms. Dublon rotated from her role
as Chair of the Audit Committee effective May 4, 2016; therefore her
retainer fee includes a pro-rata amount of $16,667 for service from
December 1, 2015 to May 4, 2016. |
(6) |
Mr. Ibargüen retired from the
Board effective May 4, 2016; therefore, his retainer fee includes a
pro-rata amount of $45,833 for service from December 1, 2015 to May 4,
2016. |
(7) |
Upon joining the Board on
September 21, 2016, Mr. Walker received the one-time grant of 1,000 shares
of PepsiCo Common Stock granted to all new directors. He also received a
pro-rated annual cash retainer of $18,333 for service from September 21,
2016 through November 30, 2016 and the $165,000 annual equity retainer on
October 1, 2016 to compensate him for the period October 1, 2016 through
September 30, 2017. |
(8) |
Mr. Weisser became Chair of the
Audit Committee effective May 4, 2016; therefore, his retainer fee
includes a pro-rata amount of $23,333 for service from May 4, 2016 to
November 30, 2016. |
|
PEPSICO 2017 PROXY
STATEMENT | 35 |
Table of Contents
Ratification of Appointment
of Independent Registered |
Public Accounting Firm (Proxy Item No.
2) |
The Audit Committee is directly
responsible for the appointment, compensation, retention and oversight of the
independent registered public accounting firm (taking into account the vote on
shareholder ratification). The Audit Committee has appointed KPMG LLP
(KPMG) as
PepsiCos independent registered public accounting firm for fiscal year 2017.
KPMG has served as PepsiCos independent registered public accounting firm since
1990. While we are not required by our By-Laws or otherwise to seek shareholder
ratification of the appointment of KPMG as our independent registered public
accounting firm, we are doing so as a matter of good corporate governance. If
the shareholders do not ratify the appointment, the Audit Committee will take
the vote into consideration when determining whether or not to retain KPMG. The
Audit Committee believes that the continued retention of KPMG as our independent
registered public accounting firm is in the best interests of our
shareholders.
Representatives of KPMG are expected to be
present and available to answer appropriate questions at the 2017 Annual Meeting
and will have an opportunity to make statements during the meeting if they
desire to do so.
|
|
|
|
|
|
|
|
|
|
Our Board of
Directors recommends that shareholders vote FOR the ratification of the
appointment of KPMG as PepsiCos independent registered public accounting
firm for fiscal year 2017. |
|
|
|
|
|
|
|
|
|
Audit Committee Report
PepsiCos Audit Committee reports to, and
acts on behalf of, the Board. The Audit Committee is comprised solely of
directors who satisfy applicable independence, financial literacy and other
requirements of the New York Stock Exchange and applicable securities laws. A
majority of the members of the Audit Committee are audit committee financial
experts as defined by SEC rules and regulations.
The Audit Committees purpose and
responsibilities are set forth in its charter, which is approved and adopted by
the Board and is available on PepsiCos website at www.pepsico.com under Who We AreCorporate
Governance. The Audit Committees Charter is
reviewed at least annually and updated, as appropriate, to address changes in
regulatory requirements, authoritative guidance, evolving oversight practices
and investor feedback.
During 2016, the Audit Committee met nine
times and fulfilled each of its duties and responsibilities as outlined in its
charter, including reviewing and assessing the guidelines and policies governing
PepsiCos risk management and oversight processes, receiving an update on
PepsiCos Law Departments compliance with Part 205 of Section 307 of the
Sarbanes-Oxley Act of 2002 regarding standards of professional conduct for
attorneys and regularly meeting separately with PepsiCos General Counsel, Chief
Compliance & Ethics Officer, General Auditor and Chief Financial Officer
(see page 27 of this Proxy Statement for additional information regarding the
Audit Committees responsibilities).
Selection and Oversight of the
Independent Registered Public Accounting Firm. The Audit Committee assists the Board with its oversight of PepsiCos
independent registered public accounting firms qualifications and independence.
The Audit Committee is responsible for appointing, compensating, retaining and
overseeing the work of PepsiCos independent registered public accounting firm,
including reviewing and evaluating the performance of the lead audit partner as
well as overseeing the required rotation and selection of the lead audit
partner, and, through the Audit Committee Chair as its representative, reviewing
and considering the selection of the lead audit partner. KPMG has served as
PepsiCos independent registered public accounting firm since 1990, and KPMGs
current lead audit partner was selected in 2013.
The Audit Committee recognizes the
importance of maintaining the independence of PepsiCos auditor, both in fact
and in appearance. In 2016, the Audit Committee received and reviewed the
written disclosures and the letter from KPMG required by applicable requirements
of the Public Company Accounting Oversight Board (PCAOB) regarding KPMGs
communications with the Audit Committee concerning independence, and discussed
with KPMG the firms independence from PepsiCo and management. These discussions
included, among other things, a review of the nature of, and fees paid to KPMG
for, non-audit services and the compatibility of such services with maintaining
KPMGs independence (see page 38 of this Proxy Statement for additional
information). The Audit Committee concurred with KPMGs conclusion that they are
independent from PepsiCo and its management.
36 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM (PROXY ITEM NO. 2)
The Audit Committee also periodically
considers whether there should be a rotation of PepsiCos independent registered
public accounting firm. In addition to KPMGs independence from PepsiCo and
management, the Audit Committee also considers several other factors in deciding
whether to re-engage KPMG, including: the quality of KPMGs staff, work and
quality control; KPMGs policies related to independence; KPMGs global reach;
and KPMGs capability and expertise to perform an audit of PepsiCos financial
statements and internal control over financial reporting, given the breadth and
complexity of PepsiCos business and global footprint. The Audit Committee also
reviewed with KPMG the most recent report of the PCAOB on its inspection of
KPMG.
Based on the foregoing, the Audit
Committee has retained KPMG as PepsiCos independent registered public
accounting firm for the fiscal year 2017 and recommends that shareholders ratify
this appointment (see page 36 of this Proxy Statement for additional information
regarding the shareholder vote).
Review and Recommendation Regarding
Financial Statements. Management has primary
responsibility for PepsiCos financial statements and the financial reporting
process, including establishing effective internal control over financial
reporting. KPMG is responsible for auditing those financial statements and
internal control over financial reporting and expressing an opinion on the
conformity of PepsiCos audited financial statements with generally accepted
accounting principles and on the effectiveness of PepsiCos internal control
over financial reporting. The Audit Committee does not itself prepare financial
statements or perform audits, and its members are not auditors or certifiers of
PepsiCos financial statements.
In the performance of its oversight
function, the Audit Committee met with management and KPMG to review and discuss
PepsiCos audited financial statements and internal control over financial
reporting, asked management and KPMG questions relating to such matters and
discussed with KPMG the matters required to be discussed by applicable PCAOB
auditing standards. These meetings and discussions included a review of the
critical accounting policies applied by PepsiCo in the preparation of its
financial statements and the quality (and not just the acceptability) of the
accounting principles utilized, the reasonableness of significant accounting
estimates and judgments, and the disclosures in PepsiCos consolidated financial
statements. Based on the reviews and discussions described in this report, the
Audit Committee recommended to the Board that the audited financial statements
be included in the Annual Report on Form 10-K for the fiscal year ended
December 31, 2016, for filing with the SEC.
The Audit Committee
Alberto Weisser,
Chair |
William R.
Johnson |
George W.
Buckley |
Robert C.
Pohlad |
Cesar Conde |
Darren Walker |
Richard W.
Fisher |
|
The information contained in the above
report will not be deemed to be soliciting material or filed with the SEC,
nor will this information be incorporated into any future filing under the
Securities Act of 1933, as amended (the Securities Act), or the Exchange Act
except to the extent the Company specifically incorporates such report by
reference.
|
PEPSICO 2017 PROXY
STATEMENT | 37 |
Table of Contents
RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROXY ITEM NO.
2)
Audit and Other Fees
The following table presents fees incurred
for professional audit services rendered by KPMG, the Companys independent
registered public accounting firm, for the audit of the Companys annual
consolidated financial statements for fiscal 2016 and fiscal 2015, and fees
billed for other services rendered by KPMG in fiscal 2016 and fiscal 2015. The
Audit Committee has pre-approved all fees paid to KPMG in accordance with the
Policy for Pre-Approval of Audit, Audit-Related and Non-Audit Services, as
discussed below.
|
|
|
2016 |
|
|
2015 |
Audit fees(1) |
|
$ |
21,209,000 |
|
$ |
22,641,000 |
Audit-related fees(2) |
|
$ |
2,390,000 |
|
$ |
2,545,000 |
Tax
fees(3) |
|
$ |
910,000 |
|
$ |
1,018,000 |
All other
fees(4) |
|
$ |
0 |
|
$ |
80,000 |
(1) |
Audit fees for fiscal 2016 and
fiscal 2015 consisted of fees for the audits of the Companys annual
consolidated financial statements, the audit of the effectiveness of the
Companys internal control over financial reporting, the reviews of the
financial statements included in the Companys Quarterly Reports on Form
10-Q and services related to statutory audit filings or
engagements. |
(2) |
Audit-related fees for fiscal
2016 and fiscal 2015 consisted primarily of audits of certain employee
benefit plans, due diligence reviews and other procedures performed in
connection with business transactions, agreed upon procedures reports,
attestation reports and the issuance of comfort letters. |
(3) |
Tax fees for fiscal 2016 and
fiscal 2015 consisted primarily of international tax compliance
services. |
(4) |
All other fees for fiscal 2015
consisted of fees for services/assistance with operational process
assessments. |
Pre-Approval Policy and Procedures
We understand the need for the independent
registered public accounting firm to maintain its objectivity and independence,
both in appearance and in fact, in its audit of PepsiCos consolidated financial
statements. Accordingly, the Audit Committee has adopted the PepsiCo Policy for
Pre-Approval of Audit, Audit-Related and Non-Audit Services. The policy provides
that the Audit Committee will engage the independent registered public
accounting firm for the audit of PepsiCos consolidated financial statements and
audit-related, tax and other non-audit services in accordance with the terms of
the policy. The policy provides that on an annual basis the independent
registered public accounting firms global lead audit partner will review with
the Audit Committee the services the independent registered public accounting
firm expects to provide in the coming year and the related fee estimates, and
that the Audit Committee will consider for pre-approval a schedule of such
services. The policy further provides that the Audit Committee will specifically
pre-approve engagements of the independent registered public accounting firm for
services that are not pre-approved through the annual process. The Audit
Committee Chair is authorized under the policy to pre-approve any audit,
audit-related, tax or other non-audit services between Audit Committee meetings,
provided such interim pre-approvals are reviewed with the full Audit Committee
at its next meeting. In addition, PepsiCo provides the Audit Committee with a
status report at each of its regularly scheduled meetings regarding audit,
audit-related, tax and other non-audit services that the independent registered
public accounting firm has been pre-approved to perform, has been asked to
provide or may be expected to provide during the balance of the year.
38 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
Advisory Approval of Executive Compensation |
(Proxy Item
No. 3) |
Pursuant to Section 14A of the Exchange
Act, the Company asks shareholders to cast an advisory vote to approve the
compensation of our Named Executive Officers disclosed in the Executive
Compensation section beginning on page 40 of this Proxy Statement. While this
vote is non-binding, PepsiCo values the opinions of its shareholders and,
consistent with our record of shareholder engagement, will consider the outcome
of the vote when making future compensation decisions.
In considering your vote, we invite you to
review the Compensation Discussion and Analysis beginning on page 40 of this
Proxy Statement. As described in the Compensation Discussion and Analysis, we
believe that PepsiCos executive compensation programs effectively align the
interests of our executive officers with those of our shareholders by tying a
significant portion of their compensation to PepsiCos performance and by
providing a competitive level of compensation needed to recruit, retain and
motivate talented executives critical to PepsiCos long-term success.
We are asking our shareholders to vote
FOR, in an advisory vote, the following resolution:
Resolved, the shareholders of PepsiCo
approve, on an advisory basis, the compensation of the Companys Named Executive
Officers as disclosed pursuant to Item 402 of Regulation S-K, including the
Compensation Discussion and Analysis, the 2016 Summary Compensation Table, the
other compensation tables and the related notes and narratives on pages 40-65 of
this Proxy Statement for the 2017 Annual Meeting of Shareholders.
The Board has adopted a policy of
providing annual advisory approvals of the compensation of our NEOs. The next
advisory approval of executive compensation will occur at the 2018 Annual
Meeting of Shareholders, unless the Board of Directors modifies its policy on
the frequency of holding such advisory approvals based on the outcome of Proxy
Item No. 4 on page 67 of this Proxy Statement to be voted on by the
shareholders.
|
|
|
|
|
|
|
|
|
|
Our Board of
Directors recommends that shareholders vote FOR the compensation of our
Named Executive Officers. |
|
|
|
|
|
|
|
|
|
|
PEPSICO 2017 PROXY
STATEMENT | 39 |
Table of Contents
Compensation Discussion and Analysis
PepsiCos executive compensation programs
are designed to align the interests of PepsiCos executive officers with those
of our shareholders:
● |
We provide market-competitive programs that enable PepsiCo to
attract and retain highly talented individuals with pay directly linked to
the achievement of performance goals designed to foster the creation of
sustainable long-term shareholder value. |
● |
Our pay-for-performance
principles dictate that our executive officers should only receive target
payouts when PepsiCo achieves its financial goals. For this reason, our
Compensation Committee sets financial targets for incentive pay that align
with the external guidance communicated to
shareholders. |
2016 PepsiCo
Performance
PepsiCo continued to deliver strong
results in 2016, while achieving a good balance between revenue performance and
productivity. In a challenging operating environment, we met or exceeded every
financial goal we set for 2016, including the following non-GAAP measures used
in our incentive pay programs.5
Organic Revenue Growth5
|
|
Core
Constant Currency
EPS Growth5
|
|
Free
Cash Flow Excluding Certain Items5
|
|
Core Net
ROIC5
|
|
|
|
|
|
|
|
PepsiCos strong 2016 financial results reflect the
progress we made in advancing our most important strategic
priorities:
|
|
Innovation: We continued to advance our
portfolio transformation through our investment in R&D, which has
increased by 45% since 2011. In 2016, PepsiCo accounted for over 17% of
innovation sales at retail in the U.S., as measured by IRI6, -
more innovation than the next four innovation contributors combined.
|
|
|
Brand Building: We increased our spending on
advertising and marketing as a percentage of net revenue by 40 basis
points in 2016 to 6.7%. Our brand investments yielded market share
improvements in the U.S. and other key markets. |
|
|
Execution: We maintained our focus on
marketplace execution. This enabled PepsiCo to once again be the largest
driver of growth for our food and beverage retail partners in the U.S., as
we contributed 18% of the total retail sales growth of food and beverage
categories.6 |
|
|
Productivity: We delivered over $1 billion of
productivity savings during 2016. Our productivity agenda, focused on
driving both efficiency and effectiveness, has resulted in approximately
$1 billion in annual savings since 2012. |
|
|
Performance with Purpose: Continuing
PepsiCos decade-long commitment to delivering Performance with Purpose,
we launched an ambitious global sustainability agenda in 2016. The agenda
includes specific 2025 goals designed to continue transforming PepsiCos
product portfolio, contribute to a more sustainable global food system and
help make local communities more prosperous. |
|
|
Cash Return to Shareholders:
We again increased our annualized dividend and met our goal of returning
$7 billion in cash to shareholders through dividends and share
repurchases. |
Our TSR reflects our
strong 2016 results. We delivered 8% TSR, outpacing the
median of our proxy
peer group.
____________________
5 |
To evaluate performance in a manner consistent with how management
evaluates our operating results and trends, the Compensation Committee
applies certain business performance metrics that are measured on a
non-GAAP basis to both long-term and annual incentive awards. Please refer
to Exhibit A to this Proxy Statement for a description and reconciliation
of these non-GAAP financial measures relative to reported GAAP financial
measures, and to pages 57-61 and 73-75 of PepsiCos 2016 Annual Report on
Form 10-K for the fiscal year ended December 31, 2016 for a more detailed
description of the items excluded from these measures. For 2016, Core
Constant Currency EPS Growth excludes the impact of the Venezuela
deconsolidation that occurred in 2015. |
6 |
Source: Information Resources,
Inc. Consulting Analysis for Total U.S. Multi-Outlet Plus Convenience for
the 52 weeks ending December 25, 2016. |
40 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
EXECUTIVE
COMPENSATION
Impact of 2016 PepsiCo Performance
on CEO Pay
Chairman and CEO
Pay Decisions
The Board of Directors evaluates Ms.
Nooyis performance and makes incentive pay decisions through a holistic
assessment of her delivery of PepsiCos financial goals and her progress against
PepsiCos strategic priorities to sustain long-term shareholder value. In 2016,
Ms. Nooyi provided extraordinary strategic leadership in a volatile
macroeconomic environment. She drove PepsiCo to achieve strong financial
performance that met or exceeded each of the financial goals we set for 2016. At
the same time, she made significant progress in strengthening PepsiCo for
long-term success through her focus on brand-building, innovation, productivity
and marketplace execution, as well as her continued commitment to delivering
Performance with Purpose.
The Board recognized Ms. Nooyis 2016
performance by awarding her an annual cash incentive award of $5.25 million and
a 2017 Long-Term Incentive (LTI) award with a grant date value of
$14.0 million. The actual payout Ms. Nooyi realizes on her 2017 LTI award will
depend upon achievement of critical operating and relative stock performance
targets established by the Compensation Committee for the 2017-2019 performance
period. After reviewing market data and other factors, the Board maintained Ms.
Nooyis annual salary at $1.7 million for 2017.
CEO Pay-For-Performance
Alignment
The PepsiCo TSR shown in the table above
illustrates the year-to-year return, including stock price appreciation and
reinvested dividends, on PepsiCos Common Stock on a calendar year basis,
indexed to a 2013 base year. The table also illustrates the year-to-year growth
of PepsiCos Core Constant Currency EPS Growth(2) on a fiscal year
basis, indexed to a 2013 base year.
(1) |
The above chart is different than the 2016 Summary Compensation
Table on page 55 of this Proxy Statement. SEC rules require disclosure of
stock-settled awards in the year granted and disclosure of cash-settled
awards in the year in which the relevant performance criteria are
satisfied, whether or not payment is actually made in that year.
Consistent with these rules, Ms. Nooyis 2016 compensation reflected in
the 2016 Summary Compensation Table includes the Performance Stock Units
(PSUs) granted in 2016 and her Long-Term Cash (LTC) Award granted
in 2014, which is based on performance over the 2014-2016 performance
period and paid out in March 2017. |
(2) |
Please refer to Exhibit A to this Proxy Statement for a description
and reconciliation of this non-GAAP financial measure relative to the
reported GAAP financial measure, and to pages 57-61 and 73-75 of PepsiCos
2016 Annual Report on Form 10-K for the fiscal year ended December 31,
2016 for a more detailed description of the items excluded from this
measure. For 2016, Core Constant Currency EPS Growth excludes the impact
of the Venezuela deconsolidation that occurred in 2015. |
(3) |
LTI awards for the 2016
performance year consist of PSUs (66%) and LTC Awards (34%) under our
current LTI program design (further described in the 2016 & 2017
Long-Term Incentive Award Design section on page 49 of this Proxy
Statement) and differ from the value reported in the 2016 Summary
Compensation Table under SEC disclosure rules. PSU and LTC Award values
for each performance year are approved by the Board and granted the
following year. For example, the PSU and LTC Award values for the 2016
performance year were approved by the Board and granted in
2017. |
|
PEPSICO 2017 PROXY
STATEMENT | 41 |
Table of Contents
EXECUTIVE
COMPENSATION
Strong Compensation
Governance
The Compensation Committee oversees the
design and administration of PepsiCos executive compensation programs and
evaluates these programs against competitive practices, legal and regulatory
developments and corporate governance trends. The Compensation Committee has
incorporated the following market-leading governance features into our
programs:
What We Do |
✓Double-trigger change-in-control vesting of long-term incentive
awards
✓Responsible use of shares
under our long-term incentive program, with share utilization below our
peer group median
✓Comprehensive clawback
policy that applies to annual incentive, long-term incentive and deferral
programs
✓Rigorous stock ownership requirements that continue for 12 months
beyond employment
✓Balanced mix of top-line
and bottom-line metrics set against rigorous measurable goals within our
incentive programs
✓Targets for performance metrics aligned to financial goals
communicated to shareholders |
What We
Dont Do |
✗No employment
agreements
✗No supplemental executive
retirement plans
✗No resetting of financial
targets for performance awards
✗No hedging and pledging of
Company stock
✗No tax
gross-ups
✗No backdating or repricing
of stock option awards |
Engagement with Our
Shareholders
PepsiCo has a longstanding practice of
engaging with shareholders on executive compensation matters. In the two-month
period before the 2016 Annual Meeting of Shareholders, we contacted our 75
largest shareholders, representing over 43% of our outstanding shares of Common
Stock, to discuss a broad range of topics, including executive compensation. Of
this group, shareholders representing nearly 23% of our outstanding shares of
Common Stock spoke with us prior to the 2016 Annual Meeting. Subsequent to the
2016 Annual Meeting, we continued our outreach efforts to develop a better
understanding of the feedback received from shareholders. Our Compensation
Committee considered shareholder feedback in its annual review of program
components, targets and payouts to maintain awareness of emerging executive
compensation practices, ensure the continued strength of our pay-for-performance
alignment and maintain strong shareholder support.
|
|
At our
2016 Annual Meeting, shareholders again showed strong support for our
executive compensation programs with 95% of the votes cast approving our
advisory resolution. |
The Compensation Committee determined to
maintain the core structure of our overall executive compensation program for
2017, taking into account:
● |
the strong support
demonstrated by our shareholders on our advisory resolution on executive
compensation, |
● |
feedback during individual meetings with shareholders;
and |
● |
the significant changes made
to our LTI program in 2016, as described in the 2016 & 2017 Long-Term
Incentive Award Design section on page 49 of this Proxy
Statement. |
42 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
EXECUTIVE
COMPENSATION
Our Named Executive
Officers
This Compensation Discussion and Analysis
describes the compensation of the following NEOs:
Name and Title |
|
|
Indra K. Nooyi |
|
Chairman of the Board and
CEO, PepsiCo |
Hugh F. Johnston |
|
Vice Chairman, Executive Vice President
(EVP) and Chief Financial Officer (CFO), PepsiCo |
Albert P. Carey |
|
CEO, North
America |
Sanjeev Chadha |
|
CEO, Asia, Middle East and North Africa
(AMENA) |
Mehmood
Khan |
|
Vice Chairman, EVP and Chief Scientific Officer
(CSO), Global Research &
Development |
2016 Target Pay Mix for Named
Executive Officers
To align pay levels for NEOs with the
Companys performance, our pay mix places the greatest emphasis on
performance-based incentives.
Chairman and CEO Target Pay Mix
|
|
NEO Average Target
Pay Mix (Excluding Chairman and CEO)
|
Performance-Based Compensation 91% |
|
Performance-Based Compensation 85% |
|
|
|
Components of Our Executive
Compensation Program
The primary components of our executive
compensation programs, summarized in the following table, ensure that pay is
directly linked to the creation of sustainable long-term shareholder
value.
Type |
|
Component |
|
Objective |
Fixed Compensation |
|
Base
Salary |
|
●Provide
market-competitive fixed pay reflective of an executives role,
responsibilities and individual performance in order to attract and retain
top talent |
Performance-Based Compensation |
|
Annual Incentive |
|
●Drive Company and
business unit performance, including growth in revenue and profitability, free cash flow and share of retail
sales
●Deliver individual
performance against specific business imperatives, such as improving operating efficiencies,
driving sustainable innovation, increasing
customer satisfaction and managing and
developing a diverse and talented
workforce |
Long-Term Incentive |
|
●Align executive
officers rewards with returns delivered to PepsiCos shareholders
●Incentivize
achievement of long-term value creation through stock performance objectives and critical operating
performance objectives over a three-year
period
|
|
PEPSICO 2017 PROXY
STATEMENT | 43 |
Table of Contents
EXECUTIVE
COMPENSATION
Base Salary
The Compensation Committee annually
reviews our NEOs salaries, and annual salary increases are not automatic or
guaranteed. When considering any adjustments, the Compensation Committee takes
into account market data, internal pay equity, job responsibilities and
individual performance. The base salaries paid to our NEOs in fiscal year 2016
are presented in the 2016 Summary Compensation Table on page 55 of this Proxy
Statement. The Summary Compensation Table reflects the adjustments set forth
below to annual base salaries effective February 2016, except for Mr. Carey,
whose annual base salary was increased from $900,000 to $1,000,000 upon his
April 2016 promotion to CEO, North America. There were no changes to the NEOs
annual base salaries for 2017.
Name |
|
2015 Annual Base Salary ($000) |
|
2016 Annual Base Salary ($000) |
|
Percentage Increase |
Indra K. Nooyi |
|
1,650 |
|
1,700 |
|
3% |
Hugh
F. Johnston |
|
900 |
|
950 |
|
6% |
Albert P. Carey |
|
860 |
|
1,000 |
|
16% |
Sanjeev Chadha |
|
750 |
|
750 |
|
0% |
Mehmood Khan |
|
700 |
|
750 |
|
7% |
2016 Annual Incentive
Award
We provide annual cash incentive
opportunities to our NEOs under the PepsiCo, Inc. Executive Incentive
Compensation Plan (EICP). Awards granted under the EICP
are designed to drive Company, business unit and individual
performance.
When determining the actual annual
incentive award payable to each executive officer, the Compensation Committee
considers both business and individual performance. The graphic below
illustrates the weighting of performance metrics for each NEO, with the
exception of the Chairman and CEO, whose annual cash award is determined by the
Compensation Committee and the independent members of the Board based on their
assessment of the Companys performance and her leadership.
44 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
EXECUTIVE COMPENSATION
Business
Performance Metrics. Our annual
incentive program applies metrics that executives directly influence to ensure a
link between annual performance and actual incentive payments. The performance
measures used in the annual incentive program relate to Company-wide performance
or business-unit performance depending on the NEOs position and scope of
responsibility. The 2016 performance metrics used by the Compensation Committee
for each NEO are listed in the table below:
|
|
Business
Performance Metrics |
Name |
|
Business |
|
Organic Revenue7 |
|
Core Constant Currency EPS7 |
|
Free
Cash Flow Excluding Certain Items7 |
|
Core
Net ROIC7 |
|
Core Constant Currency Net
Income7 |
|
Core Constant Currency Operating Profit7 |
|
Share
of Retail Sales(1) |
Indra K. Nooyi |
|
PepsiCo |
|
● |
|
● |
|
● |
|
● |
|
|
|
|
|
● |
Hugh
F. Johnston |
|
PepsiCo |
|
● |
|
|
|
● |
|
|
|
● |
|
|
|
● |
Albert P. Carey |
|
North
America(2) |
|
● |
|
|
|
● |
|
|
|
|
|
● |
|
● |
Sanjeev Chadha |
|
AMENA |
|
● |
|
|
|
● |
|
|
|
|
|
● |
|
● |
Mehmood Khan |
|
PepsiCo |
|
● |
|
|
|
● |
|
|
|
● |
|
|
|
● |
(1) |
Share of Retail Sales
represents food and beverage share of retail sales in certain categories
and markets in which PepsiCo operates. |
(2) |
Effective in April of 2016, Mr.
Carey was promoted to CEO, North America, which includes North America
Beverages (NAB), Frito-Lay North America (FLNA) and Quaker Foods North
America (QFNA). Therefore, the business performance for Mr. Careys
2016 bonus was evaluated against NAB through March and North America for
the remainder of the year. |
Business
Results. In determining annual
incentive awards for 2016, the Compensation Committee considered actual Company
performance against the pre-established performance targets noted in the table
below. Our executive officers performance targets were set at levels necessary
to meet or exceed the financial goals we set for 2016. This ensures that our
executive officers are motivated to deliver on our financial goals communicated
to shareholders.
Performance
Metrics7 |
|
Financial
Goals |
|
Performance
Targets |
|
Actual
Results |
Organic Revenue
Growth |
|
Approximately 4% |
|
3.7% |
|
3.7% |
Core Constant Currency EPS Growth |
|
8% |
|
8% |
|
11.8% |
Free Cash Flow Excluding
Certain Items |
|
>$7B |
|
$7.8B |
|
$7.8B |
Core Net ROIC Improvement |
|
+50bps |
|
+50bps |
|
+190bps |
Core Constant Currency Net Income Growth |
|
* |
|
5.7% |
|
9.3% |
* |
PepsiCo does not publicly
disclose net income goals. |
PepsiCos business unit performance
targets and share of retail sales targets, which were intended to be
challenging, are not disclosed because such disclosure would result in
competitive harm to PepsiCo. The business unit targets for revenue, cash flow
and operating profit were set at levels necessary to deliver our financial goals
communicated to shareholders.
Individual
Performance Metrics. The Compensation
Committee evaluates individual performance based on metrics related to an
individuals contribution to PepsiCos strategic business imperatives, such as
improving operating efficiencies, driving sustainable innovation, increasing
customer satisfaction and managing and developing a diverse and talented
workforce. The strategic business imperatives are intended to be challenging.
They can be both qualitative and quantitative and vary for each executive
officer.
____________________
7 |
Please refer to Exhibit A to this
Proxy Statement for a description and reconciliation of these non-GAAP
financial measures relative to reported GAAP financial measures, and to
pages 57-61 and 73-75 of PepsiCos 2016 Annual Report on Form 10-K for the
fiscal year ended December 31, 2016 for a more detailed description of the
items excluded from these measures. For 2016, Core Constant Currency Net
Income Growth and Core Constant Currency EPS Growth exclude the impact of
the Venezuela deconsolidation that occurred in
2015. |
|
PEPSICO 2017 PROXY
STATEMENT | 45 |
Table of Contents
EXECUTIVE COMPENSATION
Individual
Results. In determining annual
incentive awards for 2016, the Compensation Committee considered the following
individual accomplishments by the NEOs, other than the Chairman and
CEO.
Hugh F.
Johnston Vice Chairman, EVP and CFO,
PepsiCo |
|
During 2016, Mr. Johnstons
leadership was critical to PepsiCos strong financial returns. Mr.
Johnston drove strong financial and cash flow management, reflected in
PepsiCo meeting or exceeding its financial goals announced to
shareholders. Mr. Johnston remained focused on generating cash flow
through more efficient working capital management and continued tight
controls over capital spending. This led to attractive shareholder returns
with PepsiCo returning $7.2 billion to shareholders through dividends and
share repurchases in 2016. |
Albert P.
Carey CEO, North America |
|
Mr. Carey led PepsiCos North
America businesses to deliver strong results in 2016. With Mr. Careys
attention to innovation, execution and brand investment, FLNA and NAB each
had strong, well-balanced performance, with volume gains and
high-single-digit core constant currency operating profit
growth.8 At the same time, QFNA continued to transform in 2016.
Under Mr. Careys leadership focused on better together across beverages
and snacks, PepsiCo was ranked as the number-one, best-in-class
manufacturer in the latest Kantar Retail annual U.S. PoweRanking®
study. |
Sanjeev
Chadha CEO, AMENA |
|
Mr. Chadha navigated AMENA through
political and macroeconomic volatility in many parts of the region to
deliver solid performance. While operating profit was challenged, AMENA
grew organic revenue8 with particularly strong performance in
China and Egypt, which grew organic revenue8 in double digits.
This growth was driven by Mr. Chadhas focus on innovation and increasing
marketing effectiveness. Under Mr. Chadhas leadership, AMENA delivered
strong productivity savings to reinvest in developing new capabilities
that we believe will enable future performance. |
Mehmood
Khan Vice Chairman, EVP and CSO, Global Research &
Development |
|
In his role as CSO, Dr. Khan is
instrumental in leading PepsiCos innovation efforts from ideation to
commercialization. Under Dr. Khans leadership, PepsiCo continued to
extend our innovation advantage by growing new platforms and focusing on
more efficient allocation of development resources. Under PepsiCos
innovation agenda, net revenue from new products, defined as products
introduced within the past three years, has averaged more than $5 billion
since 2013. In 2016, Dr. Khan also led the development of PepsiCos new
global sustainability agenda that sets new Performance with Purpose goals
designed to continue transforming PepsiCos portfolio, contribute to a
more sustainable global food system and help make local communities more
prosperous. |
Overall
Results. The following table
summarizes the actual annual incentive awards paid to the NEOs in March 2017.
The Chairman and CEOs annual incentive award is determined by the Compensation
Committee based on its assessment of the Companys performance and her
leadership. Awards for the other NEOs are based on 2016 business and individual
performance in the context of the target annual incentive opportunity and the
potential range of payouts.
Name |
|
Target Annual Incentive (%
of Base Salary) |
|
Range of Potential Payouts
Based on Business & Individual Results
($000) |
|
Actual Annual Incentive Award
($000) |
|
Actual Annual Incentive as
a % of Target Annual Incentive |
Indra K. Nooyi |
|
225% |
|
0 7,650 |
|
5,250 |
|
137% |
Hugh
F. Johnston |
|
150% |
|
0 2,886 |
|
1,696 |
|
119% |
Albert P. Carey |
|
150% |
|
0 2,962 |
|
1,720 |
|
118% |
Sanjeev Chadha |
|
150% |
|
0 2,278 |
|
1,001 |
|
89% |
Mehmood Khan |
|
130% |
|
0 1,974 |
|
1,160 |
|
119% |
____________________
8 |
Please refer to Exhibit A to this
Proxy Statement for a description and reconciliation of these non-GAAP
financial measures relative to reported GAAP financial measures, and to
pages 57-61 and 73-75 of PepsiCos 2016 Annual Report on Form 10-K for the
fiscal year ended December 31, 2016 for a more detailed description of the
items excluded from these measures. |
46 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
EXECUTIVE
COMPENSATION
Long-Term Incentive Awards
2014
& 2015 Long-Term Incentive Award Design
PepsiCos LTI program is 100%
performance-based. Awards granted to executive officers in 2014 and 2015
included two distinct components, PepsiCo Equity Performance Units
(PEPunits) and LTC Awards. Each executives target grant value is based on his or
her role. Actual awards can range from 0% to 125% of target grant value based on
individual performance. Awards vest after three years if the executive is still
employed with us.
PEPunits
PEPunits strengthen the alignment with
long-term shareholder value creation. They provide our executive officers with
an opportunity to earn shares of PepsiCo Common Stock with a value that adjusts
based on absolute changes in PepsiCos stock price, as well as PepsiCos TSR
relative to the S&P 500 over a three-year performance period.
|
Absolute
Stock Price Performance |
|
|
|
PEP stock price growth over a
3-year performance period |
|
|
0 -
150% |
PepsiCo stock price at end of performance period* |
|
* Stock price is based on
average share price for the 90 calendar days prior to the grant date or
vesting date, as applicable |
PepsiCo stock price at beginning of
performance period* |
|
|
|
|
The adjustment will be 0% if we
do not deliver positive 3-year TSR. Also, adjustment of 100% requires a 5%
compound annual growth rate (CAGR) in stock price
over the performance period. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relative TSR
Performance |
|
|
|
TSR performance relative to other
S&P 500 companies over a 3-year performance
period |
+ / -
25% |
|
|
|
|
|
|
|
|
Linear interpolation is used when
ranking falls between percentages shown. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Payout |
0 - 175% of
Target |
|
|
Long-Term Cash Award
The LTC Award complements the PEPunits by
incentivizing our executive officers to focus on critical operating performance
objectives that we believe will translate to sustainable shareholder returns
over the long-term. The LTC Award is denominated and paid in cash, reflecting
PepsiCos responsible use of shares under our LTI program.
50% weighting |
Earnings Per
Share |
3-year average of annual core
constant currency EPS growth rates |
A metric followed by shareholders
that incorporates key elements of financial success, including top-line
growth in revenue, expense control, the effectiveness of investments made
in the business over time, and bottom-line profitability. |
|
|
|
|
|
|
|
50% weighting |
Return on Invested Capital |
3-year cumulative increase in
core net ROIC |
A key metric that aligns with our
financial goals communicated to shareholders to improve both capital
spending and working capital management, enabling us to continue to
improve the efficiency of our asset base. |
|
|
|
|
|
|
|
Payout |
0 - 175% of
Target |
|
PEPSICO 2017 PROXY
STATEMENT | 47 |
Table of Contents
EXECUTIVE
COMPENSATION
Long-Term Incentive Award
Payouts
2014 PEPunit
Payout
The 2014 PEPunits paid out at 34% above
target in light of the strong absolute and relative stock price performance over
the three-year performance period.
3-Year Absolute Stock Price
Performance |
|
3-Year Relative TSR Percentile vs.
S&P 500 |
|
|
|
●The absolute stock
price adjustment is +23% based on PepsiCos stock price CAGR of 8.9% over
the three-year performance period (March 1, 2014 through March 1,
2017). |
|
●The relative TSR adjustment is +11% based on PepsiCos
TSR of 37% for the three-year performance period ending on December 31,
2016, ranking in the 61st percentile relative to the S&P 500.
|
Name |
PEPunits
Granted |
|
PEPunits
Earned |
|
Payout Above
Target |
Indra K. Nooyi |
108,673 |
|
145,622 |
|
+ 34% |
Hugh
F. Johnston |
31,870 |
|
42,706 |
|
+ 34% |
Albert P. Carey |
31,243 |
|
41,866 |
|
+ 34% |
Sanjeev Chadha |
24,075 |
|
32,261 |
|
+ 34% |
Mehmood Khan |
18,809 |
|
25,204 |
|
+ 34% |
2014 Long-Term Cash Award
Payout
As a result of exceptional three-year
operating performance, the 2014 LTC Award paid out 75% above target.
3-Year Avg. Core Constant Currency
EPS Growth9 |
|
3-Year Core Net ROIC
Improvement9 |
|
|
|
●PepsiCos actual
three-year (2014-2016) average core constant currency EPS
growth9 of 10.4% exceeded the target of 7.0% set by the
Compensation Committee in March 2014. The impact on EPS from actual share
buybacks versus planned buybacks did not result in a change to the final
payout. |
|
●PepsiCos actual three-year (2014-2016) core net
ROIC9 improved from 16.4% to 21.5% over the three-year
performance period, a 510bps increase that exceeded the 150bps target set
by the Compensation Committee in March
2014. |
Name |
LTC Granted
($000) |
|
LTC Earned
($000) |
|
Payout Above
Target |
Indra K. Nooyi |
5,200 |
|
9,100 |
|
+ 75% |
Hugh
F. Johnston |
1,525 |
|
2,669 |
|
+ 75% |
Albert P. Carey |
1,495 |
|
2,616 |
|
+ 75% |
Sanjeev Chadha |
1,152 |
|
2,016 |
|
+ 75% |
Mehmood Khan |
900 |
|
1,575 |
|
+ 75% |
____________________
9 |
Please refer to Exhibit A to this
Proxy Statement for a description and reconciliation of these non-GAAP
financial measures relative to reported GAAP financial measures, and to
pages 57-61 and 73-75 of PepsiCos 2016 Annual Report on Form 10-K for the
fiscal year ended December 31, 2016 for a more detailed description of the
items excluded from these measures. For 2016, Core Constant Currency EPS
Growth excludes the impact of the Venezuela deconsolidation that occurred
in 2015. |
48 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
EXECUTIVE
COMPENSATION
2016 & 2017 Long-Term
Incentive Award Design
Beginning with the 2016 LTI award, we made
significant changes to our LTI program, which were intended to simplify the
program and better balance our mix of cash- and equity-based incentives. The new
design, outlined below, ensures an appropriate level of focus on successfully
attaining critical operating goals and sustained appreciation in shareholder
value.
PepsiCos current LTI program for awards
granted to executive officers consists of PSUs and LTC Awards. Our LTI design
continues to be 100% performance-based, with payouts based on performance
against operating and market-focused metrics. Awards vest after three years if
the executive is still employed with us.
Performance Stock
Units
The PSUs maintain the operating metrics
from the prior LTC Award. The PSUs will pay out in PepsiCo shares, plus
dividends accrued over the vesting period on earned shares.
50% weighting |
Earnings Per
Share |
3-year average of annual core
constant currency EPS growth rates |
|
|
|
|
|
|
|
50% weighting |
Return on Invested Capital |
3-year cumulative increase in
core net ROIC |
|
|
|
|
|
|
|
Payout |
0 - 175% of
Target |
Long-Term Cash
Award
The LTC Award focuses on relative TSR
performance. The LTC Award is denominated and will pay out in cash.
0 -
200% |
Relative TSR Performance |
TSR performance relative to our
proxy peer group over a 3-year performance period |
|
Target payout requires us to
deliver positive 3-year TSR. Linear interpolation is used when ranking
falls between percentages shown. |
|
|
|
|
|
|
|
Payout |
0 - 200% of
Target |
Special Award Payout
In September 2016, the Compensation
Committee also certified the achievement of the three-year performance goals
applicable to the special performance-based award granted to Dr. Khan in July
2013. Based on PepsiCos TSR performance relative to the S&P 500 over the
three-year performance period, Dr. Khans PSUs paid out at 108% of target and
37,457 shares were delivered to him in September 2016.
|
PEPSICO 2017 PROXY
STATEMENT | 49 |
Table of Contents
EXECUTIVE
COMPENSATION
Retirement
Programs
Our NEOs participate in the same
retirement programs as other similarly situated employees and receive no
enhancements in determining their benefits versus other employees. The Companys
retirement programs are designed to facilitate the retirement of employees who
have performed at PepsiCo over the long term. The Company maintains defined
benefit pension plans for the majority of U.S. salaried employees hired before
January 1, 2011 and defined contribution pension plans for U.S. employees hired
in 2011 and later. A separate retirement plan is also maintained for certain
employees working outside the U.S. who are unable to participate in their home
country retirement plans. The terms of the Companys retirement plans are
substantially the same for all participating employees and are described in the
introduction to the 2016 Pension Benefits Table beginning on page 61 of this
Proxy Statement.
Our NEOs are also eligible for retiree
medical coverage on the same terms as other similarly situated employees.
PepsiCo does not provide executive officers any special benefit plans such as
executive life insurance, and the Company does not provide any enhanced
retirement benefit formulas to our NEOs.
Benefits and
Perquisites
Benefits. Executive officers receive the same healthcare benefits as other
similarly situated employees. U.S.-based medical benefits are the same for all
participants in the Companys healthcare program. However, our executive
officers are required to pay two to three times as much as non-executive
employees for their coverage. International medical benefit plans vary, but
executives typically receive the benefits offered in the relevant broad-based
plan.
PepsiCos global mobility program
facilitates the assignment of employees to positions in other countries by
minimizing any financial detriment or gain to the employee from the
international assignment. As CEO of AMENA, Mr. Chadha participates in the global
mobility program on an international assignment in Dubai, United Arab Emirates.
Under the program, Mr. Chadhas compensation package is linked to the U.S.
compensation structure as a result of being considered global talent with
continued PepsiCo assignments outside his home country. Mr. Chadha economically
pays taxes at a U.S. income tax rate on compensation and receives housing and
other allowances to reflect the incremental cost of living in his work location,
as compared to the U.S.
In addition, executive officers who
relocate at PepsiCos request are supported under the relocation program
available to all PepsiCo salaried employees. The program covers relocation
expenses, such as household goods shipment, and applicable reimbursement of
taxes associated with moving.
Perquisites. Consistent with our pay-for-performance philosophy, we limit
executive perquisites to a Company car allowance, an annual physical and limited
personal use of Company aircraft and ground transportation.
Based on an independent security study,
the Compensation Committee generally requires Ms. Nooyi to use company aircraft
and ground transportation for all travel (personal and business) to enhance her
personal safety and to increase her time available for business purposes.
However, Ms. Nooyi is permitted to use commercial aviation provided that the
PepsiCo Global Security Team has assessed the trip itinerary in advance,
determined whether the risk of using commercial aviation is acceptable and
established a travel security protocol commensurate with the identified
risk.
Executives are fully responsible for
personal income tax liability associated with personal use of Company ground
transportation and Company aircraft. Business Unit CEOs must reimburse PepsiCo
for the full variable operating cost of personal flights in excess of a limited
number of hours per year as established by the Compensation Committee. Personal
use of Company ground transportation and Company aircraft for executive officers
other than the Chairman and CEO must be approved by the Chairman and CEO on a
case-by-case basis.
Executive
Deferral
Under the PepsiCo Executive Income
Deferral Program (the EIDP), most U.S.-based executives can elect to defer up to 75% of
their base salary and up to 100% of their annual cash incentive awards into
phantom investment funds on a tax-deferred basis. Executives may elect to have
their deferral accounts notionally invested in market-based funds, including the
PepsiCo Common Stock Fund. The EIDP does not guarantee a rate of return, and
none of the funds provide above market earnings. PepsiCo does not match any
executives deferrals.
The PepsiCo EIDP is a non-qualified and
unfunded program in which account balances are unsecured and at risk. This means
that the participants balances are subject to the claims of PepsiCos creditors
and may be forfeited in the event of the Companys bankruptcy. The narrative
accompanying the 2016 Non-Qualified Deferred Compensation Table beginning on
page 63 of this Proxy Statement describes the material features of the
EIDP.
50 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
EXECUTIVE
COMPENSATION
Peer Group
The Compensation Committee utilizes a peer
group to evaluate whether executive officer pay levels are aligned with Company
performance on a relative basis. The Compensation Committee primarily identifies
companies that are of comparable size (based on revenue and market
capitalization), maintain strong consumer brands, have an innovative culture,
compete with PepsiCo for executive talent and/or possess significant
international operations.
PepsiCo 2016
Compensation Peer Group |
|
|
|
3M Company Abbott
Laboratories Anheuser-Busch InBev SA/NV Apple, Inc. The Coca-Cola
Company Colgate-Palmolive Company General Electric
Company General Mills, Inc. Groupe Danone Hewlett-Packard
Company International Business Machines Corp. Johnson &
Johnson |
|
Kellogg Company The
Kraft Heinz Company McDonalds Corporation Mondelēz International,
Inc. Nestlé S.A. Nike, Inc. The Procter & Gamble Company Unilever
PLC United
Parcel Service, Inc. Wal-Mart Stores, Inc. The Walt Disney Company |
PepsiCo vs. Peer
Group |
|
|
|
* |
Based on the four fiscal quarters
ended prior to December 31, 2016 and publicly available as of March 1,
2017 |
|
** |
Based on 2016
year-end |
There were no changes to the peer group
with respect to the 2016 performance year. Effective for the 2017 performance
year, the Compensation Committee made updates to ensure that the peer group
continues to remain appropriate in light of changes in business profile and
relative size. Abbott Laboratories, Hewlett-Packard Company, and Kellogg Company
were removed and Pfizer Inc., Microsoft Corporation and Starbucks Corporation
were added to the peer group.
Governance Features of Our
Executive Compensation Programs
We believe that PepsiCos compensation
programs should ensure that our executives remain accountable for business
results and take responsibility for the assets of the business and its
employees. Consistent with this objective, our Board of Directors has
incorporated strong governance features into our executive compensation
programs.
Risk
Mitigation
PepsiCos executive compensation programs
include features intended to discourage employees from taking unnecessary and
excessive risks that could threaten the financial health and viability of the
Company, including:
● |
Balanced Performance
Metrics: The annual cash incentive
program utilizes balanced financial metrics consisting of top-line metrics
(such as organic revenue), bottom-line metrics (such as operating profit),
market-based metrics (such as share of retail sales), and metrics designed
to enhance capital management (such as cash flow). |
● |
Accountability for Prior Business
Unit Results: Half of the annual
incentive award for any executive officer who assumes a new leadership
position in a different business unit is determined based on the prior
business units results. This encourages the executive officer to remain
accountable for the results of the long-term strategies he or she
established in the prior business unit. |
● |
Emphasis on Long-Term Shareholder
Value Creation: LTI awards are the most
significant element of executive officer pay and focus executives on
creating long-term shareholder value, measured in terms of absolute stock
price growth, stock price changes relative to a comparator group, and
delivering exceptional long-term operating results. |
● |
Clawback
Provisions: Under PepsiCos annual
incentive, LTI and executive deferral programs, the Company has the right
to cancel and recoup awards and gains from an executive in certain
circumstances, such as if he or she engages in gross misconduct, violates
applicable non-compete provisions, or causes or contributes to the need
for an adjustment to the Companys financial results through gross
negligence or misconduct. |
|
PEPSICO 2017 PROXY
STATEMENT | 51 |
Table of Contents
EXECUTIVE
COMPENSATION
Stock Ownership
Requirements
Under PepsiCos stock ownership
guidelines, executive officers are required to own shares of PepsiCo Common
Stock equal in value to a specified multiple of their annual base salary, as set
forth below:
Stock Ownership
Requirements |
CEO |
|
41 times annual
salary The value of shares and share
equivalents of PepsiCos Common Stock held by PepsiCos Chairman
and CEO as of March 1, 2017 |
CFO, Business Unit
CEOs |
|
|
All Other Executive
Officers |
|
|
Shares of PepsiCo Common Stock or
equivalents held by the executive officer (or immediate family members) in the
401(k) plan, in a deferred compensation account, or in a trust for the benefit
of immediate family members count towards satisfying the requirement.
Unexercised stock options and unvested PSUs, Restricted Stock Units
(RSUs)
and PEPunits do not count towards satisfying the applicable stock ownership
requirement.
Executive officers have five years from
the date they first become subject to a particular level of stock ownership to
meet the stock ownership requirement. All of our executive officers have met or
are on track to meet their ownership requirements within the five-year
period.
Executive officers who terminate or retire
from PepsiCo are required to continue to hold 100% of the shares needed to meet
the applicable level of stock ownership until at least six months after
termination or retirement and to continue to hold at least 50% of the shares
needed to meet the applicable level of stock ownership until at least twelve
months after termination or retirement.
Share Retention
Policy
To ensure that our executive officers
exhibit a strong commitment to PepsiCo stock ownership, the Board adopted a
Share Retention Policy in 2002. The policy limits the proceeds that an executive
officer may receive in cash upon exercise of stock options during each calendar
year to 20% of the aggregate value of all of the executive officers
in-the-money vested stock options. Any proceeds in excess of this 20% limit must
be held in shares of PepsiCo Common Stock for at least one year after the date
of exercise. In addition, executive officers are required to hold at least 50%
of the shares, net of applicable tax withholding, received upon the vesting and
payout of PEPunits and PSUs in furtherance of PepsiCos stock ownership
guidelines.
Executive officers who maintain the
required level of stock ownership are exempt from the Share Retention
Policy.
No Employment
Contracts
None of our NEOs have an employment
contract or separation agreement, and we do not maintain formal programs or
policies that guarantee cash severance or continued access to health and welfare
benefits in the event of an involuntary termination of employment. Consistent
with our approach of rewarding performance, employment is not guaranteed, and
either the Company or the NEO may terminate the employment relationship at any
time. In some cases, the Compensation Committee or the Board may agree to
provide separation payments and benefits to departing executives upon their
termination. Such terminations are addressed on a case-by-case basis, taking
into consideration the nature of the termination and a variety of other
factors.
52 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
EXECUTIVE
COMPENSATION
Change in Control
Provisions
NEOs are not eligible to receive any cash
severance, continued health and welfare benefits, pension service credit, tax
gross-ups or any other change-in-control benefits other than change-in-control
protections under the shareholder-approved PepsiCo, Inc. Long-Term Incentive
Plan.
The PepsiCo, Inc. Long-Term Incentive Plan
provides non-employee directors and all employees, including executive officers,
change-in-control protection for their LTI awards. Outstanding unvested awards
vest, and performance-based awards are paid at target, even if results are above
target, in the event that the participant is terminated without cause or resigns
for good reason within two years following a change-in-control of PepsiCo (i.e.,
double trigger vesting) or if the acquiring entity fails to assume the awards.
We utilize double trigger vesting to ensure management talent will be
available to assist in the successful integration following a change-in-control
and to align with prevailing governance practices.
Prohibition on Hedging and
Pledging
Our insider trading policy prohibits
employees, including executive officers, from using any strategies or products
(such as derivative securities or short-selling techniques) to hedge against the
potential changes in the value of PepsiCo Common Stock. In addition, employees,
including executive officers, may not hold PepsiCo securities in a margin
account or pledge PepsiCo stock or PepsiCo stock options as collateral for a
loan.
Limited Trading
Windows
Executive officers can only transact in
PepsiCo securities during approved trading windows after satisfying mandatory
clearance requirements.
Responsible Equity Grant
Practices
PepsiCos equity grant practices ensure
all grants are made on fixed grant dates and at exercise prices or grant prices
equal to the fair market value of PepsiCo Common Stock on such
dates.
● |
Stock option, PSU and RSU grants are
awarded under our shareholder-approved LTI plan at fair market value,
defined as the average of the high and low stock prices rounded up to the
nearest quarter on the date of grant. Further, PEPunit payouts are
determined based on the average share price for the 90 days prior to the
grant and vesting date. These formulas mitigate the impact of our stock
prices intra-day volatility when setting the grant price of equity
awards. |
● |
PepsiCo does not backdate, reprice
or grant stock options retroactively. Our shareholder-approved LTI plan
prohibits repricing of awards or exchanges of underwater options for cash
or other securities without shareholder approval. |
● |
Under our shareholder-approved LTI
plan, stock options, RSUs, PSUs, PEPunits and LTC Awards generally require
a three-year minimum vesting period. |
● |
PepsiCo is responsible in the use of
shares under our LTI program, with share utilization below our peer group
median. |
Tax Considerations
In establishing total compensation for the
executive officers, the Compensation Committee considers the effect of Section
162(m) of the Internal Revenue Code. Section 162(m) generally disallows a tax
deduction for compensation over $1 million paid for any fiscal year to the CEO
and the three other highest paid executive officers other than the CFO, unless
the compensation qualifies as performance-based. While the Compensation
Committee generally seeks to preserve the deductibility of most compensation
paid to executive officers, the primary objective of the compensation program is
to support the Companys business strategy. Thus, the Compensation Committee
believes it should have flexibility in awarding compensation, even though some
compensation awards may result in non-deductible compensation
expenses.
PEPunits, PSUs and LTC Awards were granted
under the shareholder-approved PepsiCo, Inc. Long-Term Incentive Plan and are
intended to qualify as performance-based compensation deductible under Section
162(m). The Compensation Committee set payouts for the 2014-2016 award cycle
based on maximum achievement of a core constant currency net income target of
$10 billion. Annual incentive awards are paid based on achievement of
performance measures under the shareholder-approved EICP. Because the annual
incentive awards are intended to be deductible as performance-based compensation
under Section 162(m), the Compensation Committee set the payout for 2016 based
on maximum achievement of a core constant currency net income target of $7
billion. There can be no guarantee that the LTI or annual incentive awards will
be treated as qualified performance-based compensation under Section
162(m).
|
PEPSICO 2017 PROXY
STATEMENT | 53 |
Table of Contents
EXECUTIVE
COMPENSATION
Our Decision Making
Process
Compensation Committee |
The Compensation
Committee oversees the design and administration of PepsiCos executive
compensation programs and evaluates these programs against competitive
practices, legal and regulatory developments and corporate governance
trends. |
● |
Approves performance goals and other objectives
of the Chairman and CEO |
● |
Based on the Committees assessment of
performance, recommends CEO compensation to the independent members of the
Board without input from management |
● |
Approves executive officer compensation based
on Company performance, market pay data, responsibilities and other
factors |
● |
Sets the specific performance targets for
executive officer incentive awards |
● |
Establishes the peer group companies used to
benchmark Company performance and executive officer compensation |
● |
Confirms that total compensation paid to each
executive officer is appropriate based on the Companys financial
performance relative to the peer group |
● |
Reports to the Board regarding director
compensation and stock ownership guidelines |
● |
References tally sheets, which provide the
total value that executive officers would receive upon a variety of
termination scenarios |
Independent Advisor |
The Compensation
Committee has engaged FW Cook as its independent external advisor. The
Compensation Committee considers analysis and advice from FW Cook when
making compensation decisions. |
● |
Provides recommendations on Chairman and CEO
compensation directly to the Compensation Committee, without consulting
management |
● |
Attends Compensation Committee meetings, and
has direct access to Compensation Committee members without management
involvement |
● |
The services performed by FW Cook have been
limited to executive and director compensation consulting; FW Cook is
prohibited from undertaking any other work with PepsiCo management or
employees |
PepsiCo Management |
PepsiCos
Management team is responsible for providing input to the Compensation
Committee with respect to compensation decisions for PepsiCos executive
officers (other than the Chairman and CEO) based on market conditions,
Company performance, and individual executive officer
performance. |
● |
Provides input regarding PepsiCos business
strategy and performance |
● |
The Chairman and CEO provides the Compensation
Committee with a self-assessment based on achievement of the agreed-upon
objectives and other leadership accomplishments |
● |
The Chairman and CEO provides the Compensation
Committee with her performance evaluations and pay recommendations for other executive
officers |
54 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
EXECUTIVE
COMPENSATION
2016 Summary Compensation
Table
The following table summarizes the
compensation of the NEOs for the fiscal year ended December 31, 2016 in
accordance with SEC rules. We encourage you to also review page 41 for a
description of how Chairman and CEO compensation is viewed by PepsiCos
Board.
|
|
|
|
|
|
|
|
Non-Equity Incentive
Plan Compensation ($) |
|
Change in Pension Value
and Non-Qualified Deferred Compensation Earnings
($)(7) |
|
|
|
|
Name and Principal Position(1) |
|
Year |
|
Salary ($)(2) |
|
Stock Awards ($)(3) |
|
Subtotal for Annual Payouts
($)(4) |
|
Subtotal for Long-Term Payouts
($)(5) |
|
Total for Annual
and Long-Term Payouts ($)(6) |
|
|
All Other Compensation ($)(8) |
|
Total ($) |
Indra K. Nooyi |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Board and CEO |
|
2016 |
|
1,725,000 |
|
8,910,015 |
|
5,250,000 |
|
9,100,000 |
|
14,350,000 |
|
4,614,819 |
|
183,582 |
|
29,783,416 |
|
|
2015 |
|
1,642,308 |
|
6,251,479 |
|
5,250,000 |
|
8,675,000 |
|
13,925,000 |
|
4,255,683 |
|
370,520 |
|
26,444,990 |
|
|
2014 |
|
1,600,000 |
|
5,497,767 |
|
5,000,000 |
|
6,835,000 |
|
11,835,000 |
|
3,397,742 |
|
155,065 |
|
22,485,574 |
Hugh
F. Johnston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice
Chairman, EVP and CFO |
|
2016 |
|
960,577 |
|
3,465,039 |
|
1,695,800 |
|
2,668,750 |
|
4,364,550 |
|
1,480,835 |
|
35,834 |
|
10,306,835 |
|
|
2015 |
|
900,000 |
|
2,222,763 |
|
1,653,800 |
|
2,429,000 |
|
4,082,800 |
|
1,329,932 |
|
25,350 |
|
8,560,845 |
|
|
2014 |
|
845,000 |
|
1,612,303 |
|
1,483,300 |
|
1,667,740 |
|
3,151,040 |
|
1,567,834 |
|
25,350 |
|
7,201,527 |
Albert P. Carey |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO,
North America |
|
2016 |
|
984,615 |
|
3,326,394 |
|
1,719,900 |
|
2,616,250 |
|
4,336,150 |
|
1,372,511 |
|
51,629 |
|
10,071,299 |
|
|
2015 |
|
860,000 |
|
2,236,620 |
|
1,896,300 |
|
2,255,500 |
|
4,151,800 |
|
414,680 |
|
81,288 |
|
7,744,388 |
|
|
2014 |
|
860,000 |
|
3,580,567 |
|
1,790,500 |
|
1,421,680 |
|
3,212,180 |
|
|
|
59,402 |
|
7,712,149 |
Sanjeev Chadha |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO,
AMENA |
|
2016 |
|
764,423 |
|
2,268,781 |
|
1,001,300 |
|
2,016,000 |
|
3,017,300 |
|
1,336,704 |
|
155,848 |
|
7,543,056 |
|
|
2015 |
|
738,461 |
|
1,519,438 |
|
1,119,400 |
|
|
|
1,119,400 |
|
687,539 |
|
213,094 |
|
4,277,932 |
|
|
2014 |
|
675,000 |
|
4,217,998 |
|
961,900 |
|
|
|
961,900 |
|
832,560 |
|
152,083 |
|
6,839,541 |
Mehmood Khan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice Chairman, EVP and
CSO |
|
2016 |
|
756,731 |
|
1,980,036 |
|
1,160,300 |
|
1,575,000 |
|
2,735,300 |
|
875,254 |
|
75,725 |
|
6,423,046 |
(1) |
Dr. Khan was not an NEO for 2014 or 2015, and as a
result, only his 2016 compensation information is included. |
(2) |
In 2016, the salary amounts reflect the actual base
salary payments made to the NEOs during the fiscal year, which included a
53rd week. |
(3) |
The amounts reported for stock awards represent the
aggregate grant date fair value of stock awards calculated in accordance
with the accounting guidance on share-based payments. For a discussion of
the assumptions and methodologies used in calculating the grant date fair
value of these awards, please see Note 6 to the Companys consolidated
financial statements in the Companys Annual Report on Form 10-K for the
applicable fiscal year. |
|
For 2016, the amounts reported in this column represent
the grant date fair value of PSU awards. If PepsiCo were to exceed its
performance targets, grant recipients may earn up to 175% of the target
number of PSUs granted. The following table reflects the grant date fair
value of the PSU awards at below-threshold, target and maximum performance
earn-out levels. |
|
|
|
Value of 2016 PSU
Awards |
|
Name |
|
Below Threshold |
|
At Target Level ($) |
|
At Maximum 175% Level ($) |
|
Indra K. Nooyi |
|
|
|
8,910,015 |
|
15,592,526 |
|
Hugh
F. Johnston |
|
|
|
3,465,039 |
|
6,063,818 |
|
Albert P. Carey |
|
|
|
3,326,394 |
|
5,821,189 |
|
Sanjeev Chadha |
|
|
|
2,268,781 |
|
3,970,367 |
|
Mehmood Khan |
|
|
|
1,980,036 |
|
3,465,063 |
(4) |
As described in the 2016 Annual
Incentive Award section of the Compensation Discussion and Analysis on
pages 44-46 of this Proxy Statement, the amounts reported reflect
compensation earned for performance under the annual incentive
compensation program for that year, paid in March of the subsequent
year. |
|
PEPSICO 2017 PROXY
STATEMENT | 55 |
Table of Contents
EXECUTIVE
COMPENSATION
(5) |
As described in the 2014 &
2015 Long-Term Incentive Award Design section of the Compensation
Discussion and Analysis on page 47 of this Proxy Statement, the Long-Term
Payout amounts reported for 2016 reflect compensation earned for
performance over a three-year (2014-2016) period under the LTC Award
granted in 2014 and paid in March 2017. Mr. Chadha did not receive a LTC
Award in 2012 and 2013. |
(6) |
Represents the total of the
Annual Payouts and Long-Term Payouts of Non-Equity Incentive Plan
compensation. |
(7) |
The amounts reported reflect the
aggregate change in the actuarial present value of each NEOs accumulated
benefit under the defined benefit pension plans in which they participate.
The change in pension value reflects changes in age, service and earnings
during 2016. During the years presented,
PepsiCo did not pay above-market or preferential rates on any
non-qualified deferred compensation. |
(8) |
The following table provides the
details for the amounts reported for 2016 for each
NEO: |
|
Name |
|
Personal Use of Company Aircraft(A) ($) |
|
Personal Use of
Ground Transportation(A) ($) |
|
Car Allowance ($) |
|
Global Mobility(B) ($) |
|
Tax Reimbursement(C) ($) |
|
Total All
Other Compensation(D) ($) |
|
Indra K. Nooyi |
|
149,882 |
|
33,700 |
|
|
|
|
|
|
|
183,582 |
|
Hugh
F. Johnston |
|
4,561 |
|
|
|
25,350 |
|
|
|
|
|
35,834 |
|
Albert P. Carey |
|
26,279 |
|
|
|
25,350 |
|
|
|
|
|
51,629 |
|
Sanjeev Chadha(E) |
|
31,277 |
|
|
|
29,949 |
|
94,622 |
|
|
|
155,848 |
|
Mehmood Khan |
|
45,897 |
|
|
|
25,350 |
|
|
|
|
|
75,725 |
|
(A) |
Personal use of Company aircraft
and ground transportation is valued based on the aggregate incremental
cost to the Company. The aggregate incremental cost is calculated based on
the variable operating costs that were incurred as a result of personal
use of the aircraft (such as fuel, maintenance, landing fees, crew
expenses, catering and en-route charges) or ground transportation (such as
fuel and the drivers compensation). Infrequently, an executives spouse
or other family member may fly on the Company aircraft or share ground
transportation as an additional passenger. There is no incremental cost
associated with such usage. The NEOs are fully responsible for all
personal income taxes associated with any personal use of Company aircraft
and ground transportation. |
|
(B) |
The amount reported reflects the
expense for benefits provided pursuant to PepsiCos standard global
mobility program as a result of Mr. Chadhas international assignment in
Dubai, United Arab Emirates. These benefits include housing,
cost-of-living and home-leave allowances, and household goods storage.
The global mobility program facilitates the assignment of employees to
positions outside their home country by minimizing any financial detriment
or gain to the employee from the international assignment. |
|
(C) |
For Mr. Chadha, this reflects the
total net amount of tax equalization designed to cover taxes on his
compensation in excess of the taxes he would have incurred in the United
States. The total net tax equalization amount is a negative amount and is
therefore disclosed as zero. |
|
(D) |
The total also includes the cost
of an annual physical exam for Mr. Johnston and Dr. Khan. |
|
(E) |
Mr. Chadhas car allowance and
global mobility program benefits were paid in United Arab Emirates Dirham
and converted into U.S. dollars based on an average exchange rate of 1.00
AED = 0.272 USD for 2016. |
56 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
EXECUTIVE
COMPENSATION
2016 Grants of Plan-Based
Awards
The following table summarizes grants of
annual incentive awards, LTC Awards and PSUs provided to NEOs in 2016. LTC
Awards and PSUs granted in 2016 recognized 2015 performance. The material terms
of PepsiCos annual and LTI programs are described in the Compensation
Discussion and Analysis beginning on page 40 of this Proxy Statement.
|
|
|
|
|
|
|
Estimated Future
Payouts Under Non-Equity Incentive Plan
Awards |
|
Estimated Future
Payouts Under Equity Incentive Plan Awards |
|
Grant Date Fair Value of
Stock and Option Awards(2) ($) |
Name |
|
Grant Date(1) |
|
Grant
Type |
|
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
Indra K. Nooyi |
|
|
|
Annual Incentive |
(3) |
|
|
|
3,825,000 |
|
7,650,000 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
Long-Term Cash |
(4) |
|
|
|
4,590,000 |
|
9,180,000 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
PSUs |
(5) |
|
|
|
|
|
|
|
|
|
90,228 |
|
157,899 |
|
8,910,015 |
Hugh
F. Johnston |
|
|
|
Annual Incentive |
(3) |
|
|
|
1,425,000 |
|
2,885,625 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
Long-Term Cash |
(4) |
|
|
|
1,785,000 |
|
3,570,000 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
PSUs |
(5) |
|
|
|
|
|
|
|
|
|
35,089 |
|
61,406 |
|
3,465,039 |
Albert P. Carey |
|
|
|
Annual Incentive |
(3)(6) |
|
|
|
1,462,500 |
|
2,961,563 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
Long-Term Cash |
(4) |
|
|
|
1,713,600 |
|
3,427,200 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
PSUs |
(5) |
|
|
|
|
|
|
|
|
|
33,685 |
|
58,949 |
|
3,326,394 |
Sanjeev Chadha |
|
|
|
Annual Incentive |
(3) |
|
|
|
1,125,000 |
|
2,278,125 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
Long-Term Cash |
(4) |
|
|
|
1,168,750 |
|
2,337,500 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
PSUs |
(5) |
|
|
|
|
|
|
|
|
|
22,975 |
|
40,206 |
|
2,268,781 |
Mehmood Khan |
|
|
|
Annual Incentive |
(3) |
|
|
|
975,000 |
|
1,974,375 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
Long-Term Cash |
(4) |
|
|
|
1,020,000 |
|
2,040,000 |
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
PSUs |
(5) |
|
|
|
|
|
|
|
|
|
20,051 |
|
35,089 |
|
1,980,036 |
(1) |
Consistent with prior years, 2016
PSUs and LTC Awards were approved by the Compensation Committee at its
regularly scheduled meeting in February. The approval date for the awards
was February 4, 2016 and the grant date was March 1, 2016. |
(2) |
The amounts reported represent
the aggregate grant date fair value of all PSUs granted to NEOs in 2016
calculated in accordance with the accounting guidance on share-based
payments. For a discussion of the assumptions and methodologies used in
calculating the grant date fair value of the PSUs reported, please see
Note 6 to the Companys consolidated financial statements in the Companys
2016 Annual Report on Form 10-K for the fiscal year ended December 31,
2016. |
(3) |
The amounts reported reflect the
potential range of 2016 annual cash incentive awards under the
shareholder-approved EICP, as described under 2016 Annual Incentive
Award section in the Compensation Discussion and Analysis beginning on
page 44 of this Proxy Statement. |
(4) |
The amounts reported reflect the
potential range of 2016 LTC Award payouts under the shareholder-approved
PepsiCo, Inc. Long-Term Incentive Plan. The actual LTC Award earned is
determined based on the level of achievement attained with respect to the
pre-established performance targets based on PepsiCos TSR relative to
the proxy peer group over the three-year performance period and will be
paid out on the third anniversary of the grant date. |
(5) |
The actual number of shares of
PepsiCo Common Stock that are earned for the 2016 PSUs is determined based
on the level of achievement attained with respect to core constant
currency EPS growth and cumulative core net ROIC improvement consistent
with the pre-established payout scale determined for the three-year
performance period. If PepsiCo performs below the pre-established
performance targets, the number of PSUs earned will be reduced below the
target number. The amounts reported in the target column reflect the
number of PSUs that may be paid out if the performance targets are
achieved at 100%, and the amounts reported in the maximum column reflect
the maximum number of PSUs that will be paid out if the performance
targets are exceeded. |
|
The PSUs earned by NEOs will vest
and be paid out in shares of PepsiCo Common Stock on the third anniversary
of the grant date subject to pro-rata vesting upon retirement between ages
55 and 61, inclusive, with at least 10 years of service, and full vesting
upon retirement at age 62 and older with at least 10 years of service, in
each case subject to achievement of the applicable performance targets
over the full three-year performance period. As of 2016 fiscal year-end,
Ms. Nooyi, Mr. Johnston and Mr. Chadha are eligible for pro-rata vesting
and Mr. Carey is eligible for full vesting. Notwithstanding the level of
performance achieved, the Compensation Committee retains the discretion to
reduce the number of shares issued in settlement of the 2016 PSU
awards. |
(6) |
Mr. Careys target and maximum
bonus reflect a pro-rated increase based on his promotion to CEO, North
America, effective April 2016. |
|
PEPSICO 2017 PROXY
STATEMENT | 57 |
Table of Contents
EXECUTIVE
COMPENSATION
2016 Outstanding Equity
Awards at Fiscal Year-End
The following table lists all outstanding
stock option, PEPunit and PSU awards as of December 31, 2016 for the NEOs. The
material terms and conditions of the equity awards reported in this table are
described in the Long-Term Incentive Awards section of the Compensation
Discussion and Analysis beginning on page 47 of this Proxy Statement. No LTI
award granted to an NEO has been transferred to any other person, trust or
entity.
|
Option
Awards |
|
Stock Awards(1)(2) |
Name |
Number
of Securities Underlying Unexercised Options
(#) Exercisable |
|
Option Exercise
Price ($) |
|
Option Grant Date |
|
Option Vesting
Date |
|
Option Expiration Date |
|
Grant
Date |
|
Vesting Date |
|
Number of Shares or
Units of
Stock That Have Not Vested |
|
|
Market Value of
Shares or
Units of Stock That Have Not Vested |
|
Equity Incentive
Plan
Awards: Number of Unearned Shares,
Units or Other Rights
That Have Not
Vested(3)
(#) |
|
|
Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights That Have Not Vested
($) |
Indra K. Nooyi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
392,157 |
|
63.75 |
|
3/1/2011 |
|
3/1/2014 |
|
2/28/2021 |
|
3/1/2016 |
|
3/1/2019 |
|
|
|
|
|
|
90,228 |
|
|
9,440,556 |
|
360,902 |
|
66.50 |
|
4/12/2010 |
|
4/12/2013 |
|
4/11/2020 |
|
3/1/2015 |
|
3/1/2018 |
|
|
|
|
|
|
90,680 |
|
|
9,487,848 |
|
452,830 |
|
53.00 |
|
2/6/2009 |
|
2/1/2012 |
|
1/31/2019 |
|
3/1/2014 |
|
3/1/2017 |
|
|
|
|
|
|
108,673 |
|
|
11,370,456 |
|
374,899 |
|
68.75 |
|
2/1/2008 |
|
2/1/2011 |
|
1/31/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hugh F. Johnston |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,275 |
|
63.75 |
|
3/1/2011 |
|
3/1/2014 |
|
2/28/2021 |
|
3/1/2016 |
|
3/1/2019 |
|
|
|
|
|
|
35,089 |
|
|
3,671,362 |
|
43,856 |
|
66.50 |
|
4/12/2010 |
|
4/12/2013 |
|
4/11/2020 |
|
3/1/2015 |
|
3/1/2018 |
|
|
|
|
|
|
32,242 |
|
|
3,373,480 |
|
|
|
|
|
|
|
|
|
|
|
3/1/2014 |
|
3/1/2017 |
|
|
|
|
|
|
31,870 |
|
|
3,334,558 |
|
|
|
|
|
|
|
|
|
|
|
7/19/2013 |
|
7/19/2018 |
|
62,427 |
(4) |
|
6,531,737 |
|
|
|
|
|
Albert P. Carey |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,863 |
|
63.75 |
|
3/1/2011 |
|
3/1/2014 |
|
2/28/2021 |
|
3/1/2016 |
|
3/1/2019 |
|
|
|
|
|
|
33,685 |
|
|
3,524,462 |
|
50,827 |
|
66.50 |
|
4/12/2010 |
|
4/12/2013 |
|
4/11/2020 |
|
3/1/2015 |
|
3/1/2018 |
|
|
|
|
|
|
32,443 |
|
|
3,394,511 |
|
|
|
|
|
|
|
|
|
|
|
11/21/2014 |
|
3/1/2017 |
|
|
|
|
|
|
20,253 |
(5) |
|
2,119,071 |
|
|
|
|
|
|
|
|
|
|
|
3/1/2014 |
|
3/1/2017 |
|
|
|
|
|
|
31,243 |
|
|
3,268,955 |
Sanjeev Chadha |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/1/2016 |
|
3/1/2019 |
|
|
|
|
|
|
22,975 |
|
|
2,403,874 |
|
|
|
|
|
|
|
|
|
|
|
3/1/2015 |
|
3/1/2018 |
|
|
|
|
|
|
22,040 |
|
|
2,306,045 |
|
|
|
|
|
|
|
|
|
|
|
11/21/2014 |
|
3/1/2018 |
|
|
|
|
|
|
31,480 |
(6) |
|
3,293,752 |
|
|
|
|
|
|
|
|
|
|
|
3/1/2014 |
|
3/1/2017 |
|
|
|
|
|
|
24,075 |
|
|
2,518,967 |
Mehmood Khan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,588 |
|
63.75 |
|
3/1/2011 |
|
3/1/2014 |
|
2/28/2021 |
|
3/1/2016 |
|
3/1/2019 |
|
|
|
|
|
|
20,051 |
|
|
2,097,936 |
|
50,526 |
|
66.50 |
|
4/12/2010 |
|
4/12/2013 |
|
4/11/2020 |
|
3/1/2015 |
|
3/1/2018 |
|
|
|
|
|
|
19,264 |
|
|
2,015,592 |
|
63,396 |
|
53.00 |
|
2/6/2009 |
|
2/1/2012 |
|
1/31/2019 |
|
3/1/2014 |
|
3/1/2017 |
|
|
|
|
|
|
18,809 |
|
|
1,967,986 |
58 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
EXECUTIVE
COMPENSATION
(1) |
With the exception of the special
awards discussed in footnotes (4), (5) and (6) below, each of the PEPunit
and PSU awards listed in the table vests three years after the grant date,
subject to continued service with PepsiCo through the vesting date and
achievement of applicable performance targets during a three-year
performance period. Each of the awards that are not special awards will
vest on a pro-rata basis upon retirement between ages 55 and 61,
inclusive, with at least 10 years of service, and will vest in full upon
retirement at age 62 or older with at least 10 years of service, subject
to achievement of applicable performance targets. As of 2016 fiscal
year-end, Ms. Nooyi, Mr. Johnston and Mr. Chadha are eligible for pro-rata
vesting and Mr. Carey is eligible for full vesting. |
(2) |
The market value of unvested
PEPunits and PSUs reflected in the table has been calculated by
multiplying the number of unvested PEPunits and PSUs by $104.63, PepsiCos
closing stock price on December 30, 2016, the last trading day of the 2016
fiscal year. |
(3) |
The numbers displayed in this
column reflect the target number of PEPunits and PSUs awarded.
Notwithstanding the level of performance achieved, the Compensation
Committee retains the discretion to reduce the number of shares issued in
settlement of these awards. |
(4) |
The reported award reflects a
special PSU award granted to Mr. Johnston. In September 2016, the
Compensation Committee certified the level of performance achieved with
respect to the three-year performance goals for this award. Based on
PepsiCos TSR performance relative to the S&P 500 over the three-year
performance period, Mr. Johnston may receive 108% of target for this
award. The award remains subject to time-based vesting and is scheduled to
vest on July 19, 2018, subject to continued employment through the vesting
date. In addition, notwithstanding the level of performance achieved, the
Compensation Committee retains the discretion to reduce the number of
shares issued in settlement of this award. |
(5) |
The reported award reflects a
special PSU award granted to Mr. Carey. This award vested on March 1, 2017
and remains subject to the achievement of pre-established performance
targets over a three-year performance period ending fiscal year-end 2017.
Mr. Carey may receive 0% to 125% of the PSUs granted depending on the
performance level achieved. Notwithstanding the level of performance
achieved, the Compensation Committee retains the discretion to reduce the
number of shares issued in settlement of these awards. |
(6) |
The reported award reflects a
special PSU award granted to Mr. Chadha. This award is scheduled to vest
on March 1, 2018, subject to the achievement of pre-established
performance targets over a three-year performance period, and subject to
continued employment through the vesting date. Mr. Chadha may receive 0%
to 125% of the PSUs granted depending on the performance level achieved.
Notwithstanding the level of performance achieved, the Compensation
Committee retains the discretion to reduce the number of shares issued in
settlement of these awards. |
|
PEPSICO 2017 PROXY
STATEMENT | 59 |
Table of Contents
EXECUTIVE
COMPENSATION
2016 Option Exercises and
Stock Vested
|
Option
Awards(1)
|
|
Stock
Awards(2) |
Name |
Number of Shares Acquired
on Exercise (#) |
|
Value Realized on
Exercise ($)(3) |
|
Number of Shares Acquired
on Vesting (#) |
|
Value Realized on
Vesting ($)(3) |
Indra K. Nooyi |
304,220 |
|
11,655,578 |
|
157,921 |
|
15,570,221 |
Hugh
F. Johnston |
118,125 |
|
4,455,773 |
|
44,218 |
|
4,359,674 |
Albert P. Carey |
170,003 |
|
8,087,133 |
|
41,060 |
|
4,048,311 |
Sanjeev Chadha |
|
|
|
|
8,364 |
|
824,649 |
Mehmood Khan |
30,137 |
|
1,160,047 |
|
63,609 |
|
6,572,290 |
(1) |
All stock option exercises during
2016 were executed within the final three years of the options term and
in a manner consistent with PepsiCos Share Retention Policy, which is
described in the Governance Features of Our Executive Compensation
Programs section of the Compensation Discussion and Analysis beginning on
page 51 of this Proxy Statement. |
(2) |
The following table lists
PEPunit, RSU and PSU awards that vested in 2016 for the NEOs. The PEPunits
vested on March 1, 2016 based upon the level of achievement attained with
respect to the pre-established absolute and relative stock price
performance for the three-year performance period. The PSUs granted on
March 1, 2013 vested on March 1, 2016 based upon the level of achievement
attained with respect to the pre-established Company performance for the
three-year performance period. |
Name |
|
Type |
|
Grant Date |
|
Payout
Date |
|
Number of Shares Granted
(#) |
|
Number of Shares
Acquired on Vesting (#) |
|
Value Realized on
Vesting ($) |
|
Dividend Equivalents
Paid ($) |
Indra K. Nooyi |
|
PEPunit |
|
3/1/2013 |
|
3/1/2016 |
|
108,911 |
|
157,921 |
|
15,570,221 |
|
|
Hugh
F. Johnston |
|
PEPunit |
|
3/1/2013 |
|
3/1/2016 |
|
30,495 |
|
44,218 |
|
4,359,674 |
|
|
Albert P. Carey |
|
PEPunit |
|
3/1/2013 |
|
3/1/2016 |
|
28,317 |
|
41,060 |
|
4,048,311 |
|
|
Sanjeev Chadha(A) |
|
PSU |
|
3/1/2013 |
|
3/1/2016 |
|
3,036 |
|
5,267 |
|
519,300 |
|
39,687 |
Sanjeev Chadha(A) |
|
RSU(B) |
|
3/1/2013 |
|
3/1/2016 |
|
9,109 |
|
3,097 |
|
305,349 |
|
23,336 |
Mehmood Khan |
|
PSU(C) |
|
7/19/2013 |
|
9/21/2016 |
|
34,682 |
|
37,457 |
|
3,993,834 |
|
323,535 |
Mehmood Khan |
|
PEPunit |
|
3/1/2013 |
|
3/1/2016 |
|
18,036 |
|
26,152 |
|
2,578,456 |
|
|
(A) |
Mr. Chadha did not participate in
the LTI program for executive officers in 2013. In 2013, his annual grant
consisted of 75% time-based RSUs and 25% PSUs that paid out at 173.5% of
target, based on achievement of pre-established targets. |
(B) |
Mr. Chadha reached early
retirement eligibility in 2015, and therefore 6,012 shares of his 2013 RSU
award were paid out in 2015. The remaining 3,097 shares were paid out upon
vesting in 2016. |
(C) |
This award was a special award
granted to Dr. Khan in 2013. The award vested on July 19, 2016 and paid
out based on the Companys relative TSR performance over the three-year
performance period, as described under the Special Award Payout section
in the Compensation Discussion and Analysis on page 49 of this Proxy
Statement. |
(3) |
The value realized on exercise of
stock options is equal to the amount per share at which the NEO sold
shares acquired on exercise (all of which occurred on the date of
exercise), minus the exercise price of the stock options, times the number
of shares acquired on exercise of the options. The value realized on
vesting of stock awards is equal to the average of the high and low market
prices of PepsiCo Common Stock on the date of vesting, times the number of
shares acquired upon vesting. The number of shares and value realized on
vesting includes shares that were withheld at the time of vesting to
satisfy tax withholding requirements. |
60 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
EXECUTIVE
COMPENSATION
2016 Pension Benefits
A summary of the pension benefit plans
sponsored by PepsiCo that our NEOs participated in during 2016 are described in
the table below. Benefits for the NEOs who participate in these plans are
determined using the same formula as for other eligible employees. NEOs receive
no additional years of credited service or other enhancements in determining
their benefits that are not available to other eligible employees in each
plan.
|
PepsiCo
Salaried Employees Retirement Plan (Salaried Plan)(1) |
Pension
Equalization Plan (PEP) |
PepsiCo
International Retirement Plan - Defined Benefit
Program (PIRP-DB) |
Eligible NEOs |
●Indra K. Nooyi (early retirement eligible)
●Hugh F. Johnston (early retirement eligible)
●Albert P. Carey (retirement eligible)
●Mehmood Khan |
Sanjeev Chadha (early retirement
eligible) |
Type of Plan |
Qualified defined benefit pension
plan |
Non-qualified defined benefit
pension plan |
Non-qualified defined benefit
pension plan |
Eligibility |
U.S. salaried employees hired prior
to January 1, 2011 |
Employees eligible to participate in
the Salaried Plan whose benefits under the Salaried Plan are affected by
limitations imposed by the Internal Revenue Code on qualified plan
compensation or benefits |
Generally covers non-U.S. citizens
hired prior to January 1, 2011 who were an active participant in a defined
benefit retirement plan sponsored by their home country and were unable to
remain in that plan during their assignment outside their home country,
designated for participation by PepsiCo |
Form of Payment Upon
Retirement |
Benefits payable as a single life
annuity, a single lump sum distribution, a joint and survivor annuity, a
10-year certain annuity or a combination of a partial lump sum and an
annuity |
●Benefits accrued and vested prior to December 31, 2004
are generally paid in the same form and at the same time the Salaried Plan
benefits are commenced
●Benefits accrued or vested after December 31, 2004 are
paid at termination (subject to a six-month delay under Section 409A of
the Internal Revenue Code), in the form of a lump sum |
Benefits payable as a single life
annuity, a single lump sum distribution, a joint and survivor annuity, a
10-year certain annuity or a combination of a partial lump sum and an
annuity |
Benefit Timing |
●Normal retirement benefits payable at age 65 with 5
years of service
●Unreduced early retirement benefits payable as early as
age 62 with 10 years of service
●Reduced early retirement benefit payable at age 55 with
10 years of service, determined by reducing the normal retirement benefit
by 4% for each year benefits begin prior to age 62 |
Retirement Benefit
Formula |
A single life annuity beginning at
normal retirement age determined as follows:
●3% for each year of service up to 10 years, plus 1% for
each year of service in excess of 10, multiplied by the executives
highest consecutive five-year average monthly earnings (base salary and
annual incentive compensation)
●Reduced by 0.43% of the executives highest consecutive
five-year average monthly earnings up to his or her monthly Social
Security covered compensation, multiplied by the executives years of
service up to 35 |
●Same terms and conditions as the Salaried Plan as
determined without regard to the Internal Revenue Code limitations on
compensation and benefits
●Offset by the actual benefit payable under the Salaried
Plan |
●Substantially the same as the formula under the Salaried
Plan and the PEP, without the Social Security offset
●Offset by retirement benefits paid under any Company
plan or government mandated retirement
program |
|
PEPSICO 2017 PROXY
STATEMENT | 61 |
Table of Contents
EXECUTIVE
COMPENSATION
|
PepsiCo
Salaried Employees Retirement Plan (Salaried Plan)(1) |
Pension
Equalization Plan (PEP) |
PepsiCo
International Retirement Plan - Defined Benefit
Program (PIRP-DB) |
Disability/Death
Benefits |
●All participants who become disabled after 10 years of
service and remain disabled until retirement receive continued service for
the length of their disability
●If the participant becomes deceased, the spouse of an
employee who is retirement eligible is entitled to a pension equal to the
survivor benefit under the 50% joint and survivor option. The surviving
spouse or estate of an active participant is also entitled to a one-time
payment equal to the lump sum benefit accrued at death, offset by the lump
sum value of any surviving spouses benefit that might be payable. This
special death benefit is paid by the Company and not from the plan
|
If the participant becomes deceased,
the spouse of an employee is entitled to a pension equal to the survivor
benefit under the 50% joint and survivor option |
Deferred Vested
Benefits |
●For a participant with five or more years of service who
terminates employment prior to attaining either age 55 with 10 years of
service or age 65 with 5 years of service
●Benefit is equal to the retirement benefit formula
amount calculated using the potential years of credited service had the
participant remained employed to age 65 pro-rated by a fraction, the
numerator of which is the participants credited years of service at
termination and the denominator of which is the participants potential
years of credited service had the participant remained employed to age 65
●Deferred vested benefits under the Salaried Plan and
PIRP-DB are payable in an annuity commencing at age 65, however, a
participant may elect to commence benefits as early as age 55 on an
actuarially reduced basis to reflect the longer payment period. A
participant who terminates from the Salaried Plan is eligible for a
one-time lump sum benefit within 365 days of termination, provided that
the participant does not have a PEP benefit that vested prior to 2005. A
participant who terminates from the PIRP-DB is also eligible for a
one-time lump sum benefit within 365 days of termination. Deferred vested
benefits under PEP are payable in an annuity at the later of age 55 or
termination (subject to a six month delay under Section 409A of the
Internal Revenue Code) |
(1) |
In 2016, the Salaried Plan was
amended as part of a reorganization of our U.S. qualified defined benefit
plans, which became effective on January 1, 2017. The benefits offered to
the plans participants, as described above, were unchanged. The result of
the reorganization was the creation of one plan including primarily active
participants and another plan including primarily inactive
participants. |
The Present Value of Accumulated Benefit
reported in the 2016 Pension Benefits Table below represents the accumulated
benefit obligation for benefits earned to date, based on age, service and
earnings through the plans measurement date of December 31, 2016.
Name |
|
Plan Name |
|
Number of Years Credited Service (#) |
|
Present Value of Accumulated Benefit ($)(1) |
|
Payments During Last Fiscal Year ($) |
Indra K. Nooyi |
|
PepsiCo Salaried Employees
Retirement Plan |
|
22.8 |
|
1,180,809 |
|
|
|
|
PepsiCo Pension
Equalization Plan |
|
|
|
26,749,140 |
|
|
Hugh
F. Johnston |
|
PepsiCo Salaried Employees Retirement
Plan |
|
26.8 |
|
923,910 |
|
|
|
|
PepsiCo Pension Equalization Plan |
|
|
|
7,777,080 |
|
|
Albert P. Carey |
|
PepsiCo Salaried Employees
Retirement Plan |
|
35.6 |
|
1,510,409 |
|
|
|
|
PepsiCo Pension
Equalization Plan |
|
|
|
13,204,064 |
|
|
Sanjeev Chadha |
|
PepsiCo International Retirement
Plan |
|
23.1 |
|
5,088,329 |
|
|
Mehmood Khan |
|
PepsiCo Salaried Employees
Retirement Plan |
|
9.0 |
|
617,790 |
|
|
|
|
PepsiCo Pension Equalization Plan |
|
|
|
3,857,179 |
|
|
(1) |
These amounts have been
calculated using actuarial methods and assumptions shown below in the
fiscal year-end valuation under the guidance on employers accounting for
pensions with the assumption, required by SEC disclosure rules, that each
NEO remains in service until retirement at the earliest date when
unreduced retirement benefits would be available (i.e., age 62 or
older): |
● |
Discount rate of 4.36% for the
PepsiCo Salaried Employees Retirement Plan, 4.17% for the PepsiCo Pension
Equalization Plan, and 4.39% for the PepsiCo International Retirement
Plan; and |
● |
Benefits were converted to lump sums
based on a 5.75% lump sum conversion rate at
retirement. |
62 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
EXECUTIVE COMPENSATION
2016
Non-Qualified Deferred Compensation
Executive Income Deferral
Program
Eligible NEOs |
●Indra K. Nooyi
●Hugh F. Johnston
●Albert P. Carey
●Mehmood Khan |
Description |
Non-qualified and unfunded program
that allows certain U.S.-based eligible employees to defer a portion of
their annual compensation to a later date |
Deferral Limits |
Eligible PepsiCo executives may
defer up to 75% of base salary and 100% of annual incentive cash
compensation. The Company does not provide a matching contribution on any
deferrals |
Return on Plan
Balance |
Executives earn a return on their
notional accounts based on investments in the phantom funds selected by
the executives (listed in footnote (3) below) from a list of phantom funds
made available by the Company. The EIDP does not guarantee a rate of
return and none of the funds provide above market
earnings |
Distributions |
●At the time of election to defer, executives are
required to choose to receive future payments on either a specific date or
upon separation from service
●Notwithstanding a participants payment election,
deferrals made after 2000 are paid in a lump sum at the time of separation
from service in cases in which separation (other than retirement) occurs
prior to the elected payment date
●Payments of deferrals made after 2004 to executives who
are specified employees under Section 409A of the Internal Revenue Code
that are triggered by a separation from service are delayed six months
following separation |
Form of
Payment |
Made in cash and received as a lump sum or in
installments (quarterly, semi-annually or annually) over a period of up to
20 years |
For additional detail on PepsiCos
EIDP, refer to the Executive Deferral section of the Compensation
Discussion and Analysis on page 50 of this Proxy
Statement.
Name |
Executive Contributions in Last Fiscal
Year ($) |
|
Registrant Contributions in
Last Fiscal Year ($) |
|
Aggregate Earnings in
Last Fiscal Year ($)(1) |
|
Aggregate Withdrawals/ Distributions ($)(2) |
|
Aggregate Balance at Last
Fiscal Year End ($)(3) |
Indra K. Nooyi |
|
|
|
|
544,415 |
|
|
|
12,101,206 |
Hugh
F. Johnston |
|
|
|
|
161,430 |
|
336,404 |
|
2,236,187 |
Albert P. Carey |
|
|
|
|
|
|
|
|
|
Mehmood Khan |
|
|
|
|
|
|
|
|
|
(1) |
PepsiCo does not provide
above-market or preferential rates and, as a result, the notional earnings
are not included in the 2016 Summary Compensation Table. |
(2) |
The amount reported for Mr.
Johnston represents the final distribution of a portion of his previously
deferred 2002 and 2003 annual incentive compensation. |
(3) |
None of the amounts reported in
this column are reflected in the 2016 Summary Compensation Table. Deferral
balances of NEOs under the EIDP were notionally invested in the following
phantom funds and earned the following rates of return in 2016: (i)
PepsiCo Common Stock: 6.93% and (ii) Defined Applicable Federal Rate (AFR)
Fund: 2.68%. |
|
PEPSICO 2017 PROXY
STATEMENT | 63 |
Table of Contents
EXECUTIVE COMPENSATION
Potential Payments on Termination or Change in
Control
Termination of
Employment/Retirement
None of our NEOs have any arrangement that
provides for severance payments or severance benefits.
In the event an NEO retires, terminates or
resigns from PepsiCo for any reason as of fiscal year-end, he or she would be
entitled to:
● |
the pension value disclosed in the 2016 Pension
Benefits table on page 62 of this Proxy Statement; and |
● |
the outstanding balance disclosed in the 2016
Non-Qualified Deferred Compensation table on page 63 of this Proxy
Statement. |
Our NEOs unvested annual LTI awards vest
on a pro-rata basis upon retirement between ages 55 and 61, inclusive, and fully
vest upon death, disability or retirement on or after age 62. In order to be
retirement eligible, an executive must be at least age 55 with 10 or more years
of service. For special awards, no accelerated vesting occurs upon retirement.
In the event of death or long-term disability, special awards fully vest. Even
after vesting, PEPunits, PSUs and LTC Awards remain subject to achievement of
pre-established performance targets.
The following table sets forth, for each
NEO, the value of the unvested PEPunits, PSUs, RSUs and LTC Awards and accrued
dividend equivalents on PSUs and RSUs that would vest or be forfeited if the
NEOs employment terminated on December 31, 2016, the last day of the 2016
fiscal year, due to termination without cause, retirement, death or long-term
disability:
|
Termination/Retirement ($ in millions)(1) |
|
Death/Long-Term
Disability ($ in millions)(1) |
Name |
Vest |
|
Forfeit |
|
Vest |
|
Forfeit |
Indra K. Nooyi |
28.8 |
|
17.0 |
|
17.0 |
|
|
Hugh
F. Johnston |
9.4 |
|
13.4 |
|
13.4 |
|
|
Albert P. Carey |
15.4 |
|
2.2 |
|
2.2 |
|
|
Sanjeev Chadha |
6.7 |
|
7.7 |
|
7.7 |
|
|
Mehmood Khan |
|
|
9.2 |
|
9.2 |
|
|
(1) |
The PEPunits, PSUs and RSUs were
valued at a price of $104.63, PepsiCos closing stock price on December
30, 2016, the last trading day of the 2016 fiscal year. Death and
Long-Term Disability vesting amounts do not include the value of vested
stock options that have already been earned or unvested PEPunits, PSUs,
RSUs and LTC Awards that an executive may have earned due to fulfilling
the retirement eligibility criteria. As of 2016 fiscal year-end, Ms.
Nooyi, Mr. Johnston and Mr. Chadha are eligible for pro-rata vesting and
Mr. Carey is eligible for full vesting of annual LTI awards. For a list of
earned vested stock options, see the 2016 Outstanding Equity Awards at
Fiscal Year-End table beginning on page 58 of this Proxy
Statement. |
64 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
EXECUTIVE
COMPENSATION
Change in Control
PepsiCo has a long history of maintaining
a double trigger vesting policy. This means that unvested stock options,
PEPunits, PSUs, RSUs and LTC Awards only vest if the participant is terminated
without cause or resigns for good reason within two years following a change in
control of PepsiCo or if the acquirer fails to assume or replace the outstanding
awards.
For each NEO, the following table
illustrates:
● |
the value of PEPunits, PSUs, RSUs,
LTC Awards and accrued dividend equivalents on PSUs and RSUs that would
vest upon a change in control of PepsiCo without termination of
employment; and |
● |
the value of the PEPunits, PSUs,
RSUs, LTC Awards and accrued dividend equivalents on PSUs and RSUs that
would vest upon an NEOs termination without cause or resignation for good
reason if the acquirer does not assume or replace the outstanding awards
at the time of the change in control. |
|
Change in Control ($ in
millions) |
Name |
Total Benefit: Change
in Control Only |
|
Total
Benefit: Qualifying Termination upon Change in
Control(1) |
Indra K. Nooyi |
|
|
17.0 |
Hugh
F. Johnston |
|
|
13.4 |
Albert P. Carey |
|
|
2.2 |
Sanjeev Chadha |
|
|
7.7 |
Mehmood Khan |
|
|
9.2 |
(1) |
The amounts reported in this
column assume that both the change in control and termination occurred on
December 31, 2016, the last day of the 2016 fiscal year. The PEPunits,
PSUs and RSUs were valued based on PepsiCos $104.63 closing stock price
on December 30, 2016, the last trading day of 2016. Amounts do not include
vested options that have already been earned due to continued service or
unvested PEPunits, PSUs, RSUs and LTC Awards that an executive may have
earned due to fulfilling the retirement eligibility criteria. As of 2016
fiscal year-end, Ms. Nooyi, Mr. Johnston and Mr. Chadha are eligible for
pro-rata vesting and Mr. Carey is eligible for full vesting of annual LTI
awards. For a list of earned vested stock options, please see the 2016
Outstanding Equity Awards at Fiscal Year-End table beginning on page 58 of
this Proxy Statement. |
Compensation Committee Report
The Compensation Committee has reviewed
and discussed the foregoing Compensation Discussion and Analysis with
management. Based on this review and discussion, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this Proxy Statement and incorporated by reference into
the Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2016.
The Compensation
Committee
Lloyd G. Trotter,
Chair |
David C. Page |
Shona L. Brown |
Daniel
Vasella |
Rona A. Fairhead |
|
The information contained in the above
report will not be deemed to be soliciting material or filed with the SEC,
nor will this information be incorporated into any future filing under the
Securities Act or the Exchange Act except to the extent the Company specifically
incorporates such report by reference.
|
PEPSICO 2017 PROXY
STATEMENT | 65 |
Table of Contents
EXECUTIVE COMPENSATION
Securities Authorized for Issuance under Equity Compensation
Plans
The following table provides information
as of December 31, 2016 with respect to the shares of PepsiCo Common Stock that
may be issued under our equity compensation plans.
Plan
Category |
|
Number of securities to be
issued upon exercise of outstanding options, warrants and
rights(a) |
|
|
Weighted-average exercise
price of outstanding options, warrants and
rights(b) |
|
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column(a))(c) |
|
Equity compensation plans approved |
|
33,254,186 |
(2) |
|
$71.03 |
(3) |
|
81,858,403 |
(4) |
by
security holders(1) |
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved |
|
|
|
|
|
|
|
|
|
by
security holders(5) |
|
|
|
|
|
|
|
|
|
Total |
|
33,254,186 |
|
|
$71.03 |
(3) |
|
81,858,403 |
|
(1) |
Includes the PepsiCo, Inc. Long-Term
Incentive Plan (the Long-Term Incentive
Plan) and the 2003 Long-Term Incentive
Plan (the 2003 Plan). |
(2) |
This amount includes 532,701
PEPunits and 8,236,804 PSUs and RSUs that, if and when vested, will be
settled in shares of PepsiCo Common Stock. This amount also includes
253,943 phantom units under the PepsiCo Director Deferral Program that
will be settled in shares of Common Stock pursuant to the Long-Term
Incentive Plan at the end of the applicable deferral period. For PSUs for
which the performance period has ended as of December 31, 2016, the
amounts reported in the table reflect the actual number of PSUs earned
above and below target levels based on actual performance measured at the
end of the performance period. The amounts reported in the table assume
target level performance for PEPunits and PSUs for which the performance
period has not ended as of December 31, 2016. If maximum earn-out levels
are assumed for such PEPunits and PSUs, the total number of shares of
PepsiCo Common Stock to be issued upon exercise and/or settlement of
outstanding awards as of December 31, 2016 is 34,091,649. |
(3) |
Weighted-average exercise
price of outstanding options only. |
(4)
|
The shareholder-approved Long-Term
Incentive Plan is the only equity compensation plan under which PepsiCo
currently issues equity awards. The Long-Term Incentive Plan, as amended
and restated, was approved by the Board on March 3, 2016 and by the
Companys shareholders on May 4, 2016. As of May 2, 2007, the Long-Term
Incentive Plan superseded the Companys prior plan, the
shareholder-approved 2003 Plan, and no further awards were made under the
2003 Plan. The Long-Term Incentive Plan permits the award of stock
options, stock appreciation rights, restricted and unrestricted shares,
restricted stock units and performance shares and units. The Long-Term
Incentive Plan authorizes a number of shares for issuance equal to
195,000,000 plus the number of shares underlying awards under the
Companys prior equity compensation plans that are canceled or expired
after May 2, 2007 without delivery of shares. Under the Long-Term
Incentive Plan, any stock option granted reduces the available number of
shares on a one-to-one basis, any RSU or other full value award granted
before May 5, 2010 reduces the available number of shares on a one-to-one
basis and any RSU or other full value award granted on or after May 5,
2010 reduces the available number of shares on a one-to-three
basis. |
(5) |
The table does not include
information for equity compensation plans assumed by PepsiCo in connection
with PepsiCos acquisition of The Pepsi Bottling Group, Inc.
(PBG) in 2010. As of December 31, 2016, 959,283 shares of PepsiCo
Common Stock were issuable upon the exercise of outstanding options
granted under the PBG plans prior to the acquisition of PBG at a
weighted-average exercise price of $40.81. No additional stock options or
other awards may be granted under the PBG
plans. |
66 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
Advisory Vote on the Frequency of Future Shareholder
Advisory Approval of Executive Compensation
|
(Proxy Item No.
4) |
Pursuant to Section 14A of the Exchange
Act, we are asking shareholders to recommend, in an advisory vote, whether
future shareholder advisory approval of the compensation of our NEOs should
occur every one, two or three years. While this vote is non-binding, PepsiCo
values the opinions of its shareholders and will consider the outcome of the
vote when determining the frequency of future shareholder advisory approvals of
executive compensation.
At PepsiCos 2011 Annual Meeting, a
majority of PepsiCos shareholders expressed a preference for annual shareholder
advisory votes on executive compensation and PepsiCos Board adopted this
practice.
Consistent with our current practice and
based on shareholder preference and current prevailing market practice, the
Board recommends an annual frequency for the shareholder advisory vote on
executive compensation.
|
|
|
|
|
|
|
|
|
|
Our Board of
Directors recommends that shareholders vote for every ONE YEAR with
respect to how frequently a shareholder advisory approval of the
compensation of our Named Executive Officers should
occur. |
|
|
|
|
|
|
|
|
|
|
PEPSICO 2017 PROXY
STATEMENT | 67 |
Table of Contents
Shareholder Proposals (Proxy Item Nos.
5-6) |
|
Shareholders have
submitted the following proposals for the reasons stated. The shareholder
proposals will be voted on at our 2017 Annual Meeting if properly presented by
the shareholder proponent or by a qualified representative on behalf of the
shareholder proponent. Some of the shareholder proposals contain assertions
about PepsiCo that we believe are incorrect. We have not attempted to refute all
of these inaccuracies. However, our Board of Directors has recommended a vote
against each of these proposals for the reasons set forth following each
proposal.
Shareholder Proposal Regarding Pesticide Pollution (Proxy Item No.
5)
Trillium Asset Management, LLC, on behalf
of Susan Meade, c/o Trillium Asset Management, LLC, Two Financial Center, 60
South Street, Suite 1100, Boston, MA 02111, who owns 400 shares of PepsiCo
Common Stock; The Sustainability Group, on behalf of the William B. Perkins
Trust, c/o The Sustainability Group, 230 Congress Street, Boston, MA 02110,
which owns at least $2,000 in market value of PepsiCo Common Stock; Domini
Social Investments LLC, on behalf of Domini Social Equity Fund, 532 Broadway,
9th Floor, New York, NY 10012, which owns more than 239,000 shares of
PepsiCo Common Stock; the School Sisters of Notre Dame Cooperative Investment
Fund, 345 Belden Hill Road, Wilton, CT 06897, which owns 16 shares of PepsiCo
Common Stock; the Benedictine Sisters of Baltimore, Emmanuel Monastery, 2229
West Joppa Road, Lutherville, MD 21093, which owns 200 shares of PepsiCo Common
Stock; and the Benedictine Sisters of Mount St. Scholastica, Inc., 801 South 8th
Street, Atchison, KS 66002, which owns 445 shares of PepsiCo Common Stock, have
submitted the following proposal:
Pesticide
Pollution
Numerous studies document the correlation
between pesticide exposure and increased cancer risk. According to the U.S.
Presidents Cancer Panel, approximately forty chemicals found in EPA-registered
pesticides are classified as known, probable, or possible carcinogens. In July
2016, scientists and health providers released a scientific Consensus Statement
as a national call to action to reduce exposures to chemicals including
pesticides.
Practices such as applying glyphosate to
crops before harvesting - a protocol that makes harvesting easier but may result
in increased pesticide residues on crops - are raising concerns. In 2016, the
Food and Drug Administration announced that it planned to begin testing for
glyphosate residues on some foods.
Neonicotinoids have been implicated as a
contributor to the decline in pollinators. With crops reliant on pollinators
valued between $235-$577 billion, chronic declines in these populations pose a
threat to our economy and global food system.
Consumer interest in knowing how food is
grown and its impacts on health and the environment is increasing. According to
a Consumers Reports survey, 86 percent of people believe it is critical to
reduce pesticide exposure.
Given these concerns, regulatory actions
are increasing:
● |
In 2013, the EU banned three
neonicotinoids; |
● |
In 2016, Minnesota enacted
restrictions on neonicotinoids, and is seeking legislative authority to
regulate seeds treated with pesticides before theyre
planted; |
● |
In 2015, the EPA proposed a ban on
the insectide chlorpyrifos for agricultural
use; |
● |
In 2016, California regulators
proposed rules banning farmers from spraying pesticides within a quarter
mile of schools or daycare facilities. |
Further, several companies are tracking
and reducing pesticides use:
● |
Unilever discloses amounts of
pesticides avoided by farmers using Integrated Pest Management (IPM)
practices; |
● |
Whole Foods has committed to reduce
pesticide use and its Responsibly Grown Pesticide Policy targets
pesticides which pose the greatest risk to consumers [and]
pollinators; |
● |
Syscos IPM Program reduced
pesticide use by nearly 900,000 pounds over three years. Sysco also tracks
pesticides avoided that affect
pollinators. |
68 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
SHAREHOLDER
PROPOSALS
PepsiCos disclosures, in contrast, do not
provide sufficient information to determine how it is effectively managing
pesticide risks. PepsiCos Sustainable Farming Initiative, which addresses only
a portion of the total supply chain, guides growers to optimize the use of
pesticides. However, it does not disclose metrics, detailed goals, or progress.
Further, PepsiCos Performance with Purpose 2025 Agenda, which provides specific
details on a range of sustainability-related issues, is notably silent on
pesticides.
Resolved: Shareholders request that the Board publicly report on company strategies
and policy options to protect public health and pollinators through reduced
pesticide usage in PepsiCos supply chain.
Supporting Statement: While the company has the discretion to determine its precise
content, proponents recommend that the requested report include:
● |
Quantitative metrics tracking the
amount of pesticides used and avoided, along with the class of pesticides
used, reported annually, |
● |
Overall goals to reduce pesticide
use and/or toxicity; and |
● |
Measures including technical
assistance and incentives provided to growers, to avoid or minimize the
use of pesticides. |
|
|
|
|
|
|
|
|
|
|
Our Board of
Directors recommends that the shareholders vote AGAINST this proposal
for the following reasons: |
|
|
|
|
|
|
|
|
|
The Board believes that the report
requested by this proposal is unnecessary in light of the Companys current
policies and programs promoting sustainable agriculture, including the
responsible use of agrochemicals. Moreover, PepsiCos shareholders rejected
similar proposals in 2015 and 2016, which received support from less than 8% and
9%, respectively, of votes cast.
We recognize the contribution of
pesticides, among other environmental stressors, and their potential impact on
beneficial pollinators, such as bees, as an important issue within PepsiCos
supply chain, and we have been and continue to implement procedures and policies
to address the use of pesticides in our supply chain and minimize their
unintended impacts.
Despite such potential unintended impacts,
pesticides provide benefits to the food chain, such as improved crop yield, food
quality and safety and cost. Positive environmental benefits have been realized
over time from pesticide use, such as a smaller land use footprint for the same
production. In addition, pesticide use is regulated by agencies responsible for
ensuring public safety and we require that our suppliers comply with all laws
and regulations applicable to their operations. Pesticide application technology
and best management practices also continue to improve to reduce environmental
and worker impact.
PepsiCo
continues to support sustainable agriculture by expanding best practices with
our growers and suppliers, including through our Sustainable Agriculture Policy
and our Sustainable Farming Initiative (SFI).
PepsiCo sources agricultural materials
within a complex, global supply chain involving independent farmers, large
agribusinesses, intermediaries and company-owned farms. We require that our
suppliers comply with all laws and regulations applicable to their operations.
Given the importance of agricultural materials to our business, we are also
focused on incorporating the best thinking, practices and technology to support
sustainable agriculture within PepsiCos global and diverse farming supply
chain, including through our Performance with Purpose goals, Sustainable
Agriculture Policy and our SFI.
Through our policies and initiatives, we
aim to optimize the use of pesticides, nutrients and other agrochemicals and
support sustainable practices that substitute natural controls for some
agrochemicals, foster ecosystem balance, reduce greenhouse gas emissions and
mitigate crop losses. Sustainable protection of plants against pests includes
prevention and monitoring of pest problems, using control methods only when
necessary, and targeting only the pests that cause crop production
problems.
Our Performance with Purpose goals include
a goal, through our SFI or equivalent industry programs, to strive to
sustainably source our direct agricultural raw materials by 2020 and to seek to
sustainably source our non-direct major agricultural raw material ingredients by
2025. To achieve this goal, we are, among other things, extending our SFI across
additional key crops and investing to close compliance gaps so that more growers
can meet the minimum SFI standards.
|
PEPSICO 2017 PROXY
STATEMENT | 69 |
Table of Contents
SHAREHOLDER PROPOSALS
Our Sustainable Agriculture Policy sets
standards of performance and expectations for growers across our diverse, global
supply chain, including compliance with governmental laws, regulations and
industry standards, as well as a broad-based objective specifically addressing
optimization of agrochemical and nutrient management. The policy also recognizes
the need to responsibly manage water runoff and the risks of pollution or
contamination of ground or surface water with pesticides.
Working with farmers and non-governmental
organizations, PepsiCo has developed the SFI to be a comprehensive framework to
gauge environmental, social and economic impacts associated with our
agricultural supply chain and help us meet the goals of our Sustainable
Agricultural Policy. The SFI has been successfully implemented across a wide
variety of farms from smallholder farms to large agribusinesses. In 2015, the
SFI continued to expand its coverage globally and was implemented across 15
countries, with active programs representing 28,000 growers in our supply chain
(up from 600 in 2014) and over 800,000 acres of direct cropping land, doubling
the acres represented in 2014. Going forward, we intend to work with growers and
suppliers to source sustainably and with increasing traceability. The SFI
framework is a holistic framework containing nine environmental, four social and
three economic sustainability indicators, with detailed criteria and global
standards completed for each. Agrochemicals is one of these indicators and
provides a platform through which PepsiCo gathers additional information on
pesticide management and application, including measures to enable safe, legal
and responsible use while minimizing agrochemical application through practices
such as Integrated Pest Management.
Please also refer to our website at
www.pepsico.com
under What We
BelieveSustainability Reporting for more
information on PepsiCos focus on sustainable agriculture.
PepsiCo is proud
of its consistent public disclosure on issues of
sustainability.
PepsiCo reports on a wide range of
critical environmental, social and governance issues impacting our business.
PepsiCos corporate sustainability report, which is available on our website
at www.pepsico.com under What We BelieveSustainability
Reporting, describes our substantial efforts
to address the environmental impacts of our operations. Our 2015 GRI Report,
which is publicly available at the same location, offers greater detail on
PepsiCo sustainability activities in a widely accepted format.
While we are
sensitive to the concerns raised by this proposal, we do not believe that
preparing the report requested by the proposal would be a good use of the
Companys resources.
Our disclosures on sustainability are
designed to be interconnected to ensure PepsiCo manages against the unintended
consequences of focusing on just one issue, and we therefore do not believe it
makes sense to segregate the issue of pesticide pollution for a single-issue
report. We believe our resources would be better used in the continuation of our
current policies and practices regarding our supply chain impact, which we
believe address the concerns raised in the proposal.
While we remain focused on working with
our partners and external organizations to continue to support sustainable
agriculture across our supply chain and to consistently provide public
disclosure on sustainability, we do not believe the detailed report requested by
the proposal on this single issue is in the best interests of the Company or its
shareholders.
Our Board of Directors recommends that
shareholders vote AGAINST this proposal.
Shareholder Proposal Regarding Implementation of Holy Land
Principles (Proxy Item No. 6)
Holy Land Principles, Inc., P.O. Box
15128, Capitol Hill, Washington, D.C. 20003, which owns 55 shares of PepsiCo
Common Stock, has submitted the following proposal:
HOLY LAND PRINCIPLES
PEPSICO RESOLUTION
WHEREAS, PepsiCo has operations in
Palestine-Israel;
WHEREAS, achieving a lasting peace in the
Holy Land -- with security for Israel and justice for Palestinians -- encourages
us to promote a means for establishing justice and equality;
WHEREAS, fair employment should be the
hallmark of any American company at home or abroad and is a requisite for any
just society;
WHEREAS, Holy Land Principles Inc., a
non-profit organization, has proposed a set of equal opportunity employment
principles to serve as guidelines for corporations in
Palestine-Israel.
70 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
SHAREHOLDER PROPOSALS
These are:
1. |
Adhere to equal and fair
employment practices in hiring, compensation, training, professional
education, advancement and governance without discrimination based on
national, racial, ethnic or religious identity. |
2. |
Identify underrepresented
employee groups and initiate active recruitment efforts to increase the
number of underrepresented employees. |
3. |
Develop training programs that
will prepare substantial numbers of current minority employees for skilled
jobs, including the expansion of existing programs and the creation of new
programs to train, upgrade, and improve the skills of minority
employees. |
4. |
Maintain a work environment that
is respectful of all national, racial, ethnic and religious
groups. |
5. |
Ensure that layoff, recall and
termination procedures do not favor a particular national, racial, ethnic
or religious group. |
6. |
Not make military service a
precondition or qualification for employment for any position, other than
those positions that specifically require such experience, for the
fulfillment of an employees particular responsibilities. |
7. |
Not accept subsidies, tax
incentives or other benefits that lead to the direct advantage of one
national, racial, ethnic or religious group over another. |
8. |
Appoint staff to monitor,
oversee, set timetables, and publicly report on their progress in
implementing the Holy Land Principles. |
RESOLVED: Shareholders request the Board
of Directors to:
Make all possible lawful efforts to
implement and/or increase activity on each of the eight Holy Land Principles.
SUPPORTING STATEMENT
The proponent believes that PepsiCo
benefits by hiring from the widest available talent pool. An employees ability
to do the job should be the primary consideration in hiring and promotion
decisions.
Implementation of the Holy Land Principles
-- which are pro-Jewish, pro-Palestinian and pro-company -- will demonstrate
concern for human rights and equality of opportunity in its international
operations.
Please vote your proxy FOR these
concerns.
|
|
|
|
|
|
|
|
|
|
Our Board of
Directors recommends that the shareholders vote AGAINST this proposal
for the following reasons: |
|
|
|
|
|
|
|
|
|
PepsiCo already has in place robust and
comprehensive policies and procedures that promote equal and fair employment
practices, diversity and inclusion, and respect in the workplace. We believe a
policy limited to a specific geographic area such as the one described in the
proposal is not necessary or useful. Moreover, PepsiCos shareholders rejected a
similar proposal in 2016, which received support from less than 4% of votes
cast.
PepsiCos
Values, Global Code of Conduct and other existing policies and procedures
already address the concerns of this proposal and demonstrate the Companys
focus on fair employment practices, diversity and inclusion, and respect in the
workplace that we apply globally.
PepsiCos Global
Anti-Harassment/Anti-Discrimination Policy sets forth a zero-tolerance policy
towards any type of harassment or discrimination based on race, color, religion,
sex, sexual orientation, gender identity, age, national origin, disability or
veteran status, or any other protected category under applicable
law.
|
PEPSICO 2017 PROXY
STATEMENT | 71 |
Table of Contents
SHAREHOLDER PROPOSALS
PepsiCos Values, which require that we
must always strive to respect others and succeed together and win with
diversity and inclusion, and Global Code of Conduct reinforce this policy. The
Global Code prohibits discrimination or unfair treatment in matters that involve
recruiting, hiring, training, promoting, compensation or any other term or
condition of employment, and provides that employment decisions must always be
based on merit, qualifications and job-related performance, without regard to
non-job-related characteristics. The Global Code further provides that PepsiCo
associates should never discriminate or deny equal opportunity and should give
qualified individuals the chance to develop their abilities and advance within
our Company. The Global Code also prohibits harassment, or conduct of any kind
that creates an intimidating, offensive or hostile work environment. Our Global
Code is available on the Companys website at www.pepsico.com under Who We AreGlobal Code of
Conduct. Our Human Rights Workplace Policy,
Global Code of Conduct and Supplier Code of Conduct articulate our standards for
our employees and people who do business with us.
Respecting human
rights is fundamental to PepsiCos values, policies and business
strategy.
Our respect for human rights is guided by
the United Nations (UN) Universal Declaration of Human Rights and the International
Labor Organization Declaration of Fundamental Principles and Rights at Work. As
a signatory to the UN Global Compact, our policies, operations and strategies
support universally accepted principles, including those for human rights and
labor standards. For example, our Human Rights Workplace Policy emphasizes that
PepsiCo respects the dignity of our workers in the workplace, deals fairly and
honestly with our associates regarding wages, benefits and other conditions of
employment, does not tolerate discrimination and works to ensure equal
opportunity for all associates.
As part of our Performance with Purpose
2025 goals, we recently announced our goal to significantly broaden our focus on
respecting human rights across our supply chain, by continuing to advance
respect for human rights in our operations and with third-party suppliers
consistent with the UN Guiding Principles on Business and Human Rights and by
extending the principles of our Supplier Code of Conduct to all franchisees and
joint venture partners. Please refer to our latest GRI report, which is publicly
available along with our latest corporate sustainability report on our website
at www.pepsico.com under
What We BelieveSustainability
Reporting, for more information on PepsiCos
goal on advancing respect for human rights.
At PepsiCo, we
believe acting ethically and responsibly is not only the right thing to do, but
also the right thing for our business.
We believe PepsiCos robust global
policies and practices in the areas of equal opportunity, human rights and
diversity already address the goal of the proposal for PepsiCo to demonstrate
concern for human rights and equality of opportunity in [our] international
operations. We believe these policies work best when they are applied in a
consistent manner across each of the markets in which PepsiCo operates around
the world, including Israel and Palestine, and that implementing a unique policy
for a specific geographical area would neither be necessary nor useful. These
principles may also require additional reporting and metrics beyond our current
practice, which impose an unnecessary administrative burden and expense of
little added value to our business or to our employees. It is therefore our
belief that implementing the proposal is not in the best interests of PepsiCo,
our employees or our shareholders.
Our Board of Directors recommends that
shareholders vote AGAINST this proposal.
72 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
Ownership of PepsiCo Common Stock |
|
Stock
Ownership of Officers and Directors
The following table shows, as of March 1,
2017, the number of shares of our Common Stock beneficially owned and the number
of phantom units of our Common Stock held in the Companys income deferral
programs by each director (including each nominee), by each of the NEOs
identified in the 2016 Summary Compensation Table on page 55 of this Proxy
Statement, and by all directors and executive officers as a group. Each phantom
unit represents the economic equivalent of one share of our Common Stock. Except
as otherwise noted, the directors and executive officers exercise sole voting
and investment power over their shares shown in the table. None of the shares
are subject to pledge.
As of March 1, 2017, the directors and
executive officers as a group beneficially owned less than 1% of our outstanding
Common Stock, and none of the directors or executive officers owned any shares
of our outstanding Convertible Preferred Stock.
Name of Individual or
Group |
|
Number of Shares of PepsiCo
Common Stock Beneficially Owned(1) |
|
Number of Phantom Units of
PepsiCo Common Stock Held in PepsiCos
Deferral Programs(2) |
|
Total |
Shona L. Brown |
|
1,000 |
|
25,261 |
|
26,261 |
George W. Buckley |
|
1,000 |
|
14,406 |
|
15,406 |
Albert P. Carey |
|
254,353 |
|
|
|
254,353 |
Sanjeev Chadha |
|
38,743 |
|
|
|
38,743 |
Cesar Conde |
|
1,000 |
|
2,525 |
|
3,525 |
Ian
M. Cook |
|
3,569 |
|
23,237 |
|
26,806 |
Dina
Dublon |
|
2,455 |
|
24,378 |
|
26,833 |
Rona
A. Fairhead |
|
700 |
|
6,411 |
|
7,111 |
Richard W. Fisher |
|
1,000 |
|
4,261 |
|
5,261 |
William R. Johnson(3) |
|
3,765 |
|
4,261 |
|
8,026 |
Hugh
F. Johnston |
|
21,160 |
|
21,516 |
|
42,676 |
Mehmood Khan |
|
237,473 |
|
|
|
237,473 |
Indra K. Nooyi |
|
1,791,956 |
|
52,427 |
|
1,844,383 |
David C. Page |
|
1,000 |
|
4,851 |
|
5,851 |
Robert C. Pohlad(4) |
|
1,144,659 |
|
4,261 |
|
1,148,920 |
Lloyd G. Trotter |
|
1,000 |
|
39,397 |
|
40,397 |
Daniel Vasella |
|
14,011 |
|
40,841 |
|
54,852 |
Darren Walker |
|
1,000 |
|
1,535 |
|
2,535 |
Alberto Weisser |
|
1,000 |
|
13,309 |
|
14,309 |
All directors and executive officers as a group
(26 persons) |
|
3,755,320 |
|
297,988 |
|
4,053,308 |
(1) |
The shares shown include the
following shares that directors and executive officers have the right to
acquire within 60 days after March 1, 2017: (1) through the exercise of
vested stock options: Albert P. Carey, 95,690 shares; Mehmood Khan,
184,510 shares; Indra K. Nooyi, 1,205,889 shares; and all directors and
executive officers as a group, 1,592,249 shares; and (2) pursuant to other
equity awards: Mr. Carey, 22,126 shares; Mr. Chadha 19,485 shares; Dr.
Khan, 13,763 shares; Mr. Johnston, 20,907 shares; Ms. Nooyi, 71,750
shares; and all directors and executive officers as a group, 201,736
shares. In addition, the amounts reported include Common Stock equivalent
amounts attributed to the following executive officers based on their
respective holdings in the PepsiCo Savings Plan: Mr. Carey, 106 shares;
Mr. Johnston, 253 shares; Dr. Khan, 194 shares; Ms. Nooyi, 8,300 shares;
and all executive officers as a group, 11,522 shares. |
(2) |
Reflects phantom units of our
Common Stock held in the PepsiCo Executive Income Deferral Program and the
PepsiCo Director Deferral Program. |
(3) |
The shares shown for William R.
Johnson include (i) 2,102 shares held jointly with his spouse over which
Mr. Johnson has shared voting and investment power, (ii) 187 shares held
in a trust with his spouse over which Mr. Johnson has shared voting and
investment power, and (iii) 476 shares held in trusts over which Mr.
Johnson has sole voting and investment power. |
(4) |
The shares shown for Robert C.
Pohlad include 900,000 shares held in a limited liability company over
which Mr. Pohlad has shared voting and investment power and 27 shares held
indirectly by his spouse. |
|
PEPSICO 2017 PROXY
STATEMENT | 73 |
Table of Contents
OWNERSHIP OF PEPSICO COMMON STOCK
Stock
Ownership of Certain Beneficial Owners
The following table sets forth information
regarding persons or groups known to the Company to be beneficial owners of more
than 5% of our outstanding Common Stock or Convertible Preferred
Stock.
Name and Address of Beneficial
Owner |
Number of Shares of Common
Stock Beneficially Owned |
|
|
Percent of
Class Outstanding(1) |
|
BlackRock, Inc. |
|
|
|
|
|
55
East 52nd Street |
84,771,044 |
(2) |
|
5.9 |
% |
New
York, NY 10055 |
|
|
|
|
|
The
Vanguard Group |
|
|
|
|
|
100
Vanguard Blvd. |
106,089,173 |
(3) |
|
7.4 |
% |
Malvern, PA 19355 |
|
|
|
|
|
(1) |
Based on the number of shares of
Common Stock outstanding and entitled to vote at the 2017 Annual Meeting
as of our record date, March 1, 2017. |
(2) |
Based solely on the Schedule
13G/A filed by BlackRock, Inc. with the SEC on January 25, 2017 regarding
its holdings as of December 31, 2016. BlackRock, Inc. also reported that,
as of December 31, 2016, it had sole voting power for 71,482,447 shares of
our Common Stock, sole dispositive power for 84,771,044 shares of our
Common Stock and shared voting power for and shared dispositive power for
0 shares of our Common Stock. |
(3) |
Based solely on the Schedule
13G/A filed by the Vanguard Group with the SEC on February 10, 2017
regarding its holdings as of December 31, 2016. The Vanguard Group also
reported that, as of December 31, 2016, it had sole voting power for
2,246,975 shares of our Common Stock, sole dispositive power for
103,558,684 shares of our Common Stock, shared voting power for 300,494
shares of our Common Stock and shared dispositive power for 2,530,489
shares of our Common Stock. |
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Exchange Act requires
our directors and executive officers and the beneficial owners of more than 10%
of our Common Stock to file reports of ownership and changes in ownership of our
Common Stock and Convertible Preferred Stock. We received written
representations from each director and executive officer who did not file an
annual statement with the SEC on Form 5 that no Form 5 was due. To the best of
our knowledge, based on a review of those reports and written representations,
we believe that all required reports were filed on time with the SEC for fiscal
2016.
74 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of Contents
Information About the Annual Meeting |
|
Voting Procedures
Who may vote at the Annual
Meeting?
Only shareholders of record of our Common
Stock and Convertible Preferred Stock as of the close of business on our record
date, March 1, 2017, are entitled to receive notice of and to vote at the Annual
Meeting and at any postponement or adjournment of the meeting. As of the record
date, there were 1,428,242,663 shares of our Common Stock outstanding and
entitled to vote at the Annual Meeting and each share of our Common Stock is
entitled to one vote. In addition, as of the record date there were 121,853
shares of Convertible Preferred Stock outstanding and entitled to 604,696 votes
at the Annual Meeting (which number is equal to the number of shares of Common
Stock into which such shares of Convertible Preferred Stock could be converted
on the record date, rounded to the nearest share).
How do I vote?
Whether you are a shareholder of record (that
is, if your shares are registered in your own
name with our transfer agent) or a
beneficial owner of shares held in street
name (that is, if you hold your shares through a broker, bank or other holder of
record), you can vote any one of four
ways:
● |
Via the
Internet. You may vote by
visiting the website and entering the control number found in the Notice
of Internet Availability of Proxy Materials (the Notice of Internet Availability), proxy card or voting instruction form. |
● |
By
Telephone. You may vote by
calling the toll-free number found in the proxy card or voting instruction
form or provided on the website listed on the Notice of Internet
Availability. |
● |
By Mail. If you received or requested printed copies of the
proxy materials by mail, you may vote by proxy by filling out the proxy
card (if you are a shareholder of record) or voting instruction form (if
you are a beneficial owner) and sending it back in the envelope
provided. |
● |
In Person. If you are a shareholder of record and you plan to attend the
Annual Meeting, you are encouraged to vote beforehand by Internet,
telephone or mail. You also may vote in person at the Annual Meeting.
Bring your printed proxy card if you received one by mail. Otherwise, the
Company will give shareholders of record a ballot at the Annual Meeting.
If you are a beneficial owner, you must obtain a legal proxy from the
organization that holds your shares if you wish to attend the Annual
Meeting and vote in person. |
What happens if I do not give specific
voting instructions when I deliver my proxy?
● |
Shareholder of
Record. The persons named as
proxies will vote your shares in accordance with your instructions. Except
as noted below with respect to shares held in the PepsiCo Savings
Plan/PepsiCo Hourly 401(k) Plan, if your properly executed proxy does not
contain voting instructions, the persons named as proxies will vote your
shares in accordance with the voting recommendations of the
Board. |
● |
Beneficial Owner of Shares Held in Street Name.
If you are the beneficial
owner of shares held in street name, you have the right to direct your
bank or broker how to vote your shares, and it is required to vote your
shares in accordance with your instructions. If you do not give
instructions to your bank or brokerage firm, under New York Stock Exchange
rules, it will nevertheless be entitled to vote your shares with respect
to routine matters, but it will not be permitted to vote your shares
with respect to non-routine matters. In the case of a non-routine
matter, your shares will be considered broker non-votes on that
proposal. |
Proposal No. 2 (ratification of the
appointment of the independent registered public accounting firm) is a matter
the Company believes will be considered routine.
Proposal No. 1 (election of directors),
Proposal No. 3 (advisory approval of executive compensation), Proposal No. 4
(advisory vote on frequency of future shareholder advisory approval of executive
compensation) and Shareholder Proposal Nos. 5-6 are matters the Company believes
will be considered non-routine.
If you are a beneficial owner and do not
give voting instructions to your bank or brokerage firm on certain matters, your
bank or broker may vote your shares with respect to Proposal No. 2, but not
Proposal Nos. 1, 3 or 4 or Shareholder Proposal Nos. 5-6.
|
PEPSICO 2017 PROXY
STATEMENT | 75 |
Table of Contents
INFORMATION ABOUT THE
ANNUAL MEETING
Can employees who participate in
PepsiCos Savings Plan/PepsiCo Hourly 401(k) Plan vote?
Yes. If you are an employee who
participates in the PepsiCo Savings Plan/PepsiCo Hourly 401(k) Plan (a portion
of which constitutes an Employee Stock Ownership Plan), you can vote the shares
(if any) that are deemed to be in your account in the PepsiCo Savings
Plan/PepsiCo Hourly 401(k) Plan as of the close of business on March 1, 2017.
To do so, you must sign and return the
proxy card or vote by the Internet or telephone, as instructed in the proxy
materials you received in connection with these shares in the PepsiCo Savings
Plan/PepsiCo Hourly 401(k) Plan. Voting instructions must be received no later
than 11:59 p.m. Eastern Daylight Time on April 30, 2017, so that the trustee
(who votes the shares on behalf of the participants of the PepsiCo Savings
Plan/PepsiCo Hourly 401(k) Plan) has adequate time to tabulate the voting
instructions. The trustee will vote those shares you instruct. If you do not
provide voting instructions, the trustee will vote your PepsiCo Savings
Plan/PepsiCo Hourly 401(k) Plan shares in the same proportion as the PepsiCo
Savings Plan/PepsiCo Hourly 401(k) Plan shares of other participants for which
the trustee has received proper voting instructions.
What constitutes a quorum in order
to hold and transact business at the Annual Meeting?
The presence in person or by proxy of the
holders of record of a majority of the votes entitled to be cast on a matter
constitutes a quorum for action on that matter. Votes for and against,
abstentions and broker non-votes will all be counted as present to determine
whether a quorum has been established. Once a share of the Companys Common
Stock or Convertible Preferred Stock is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and any adjournments of the meeting unless a new record date is or must
be set for the adjourned meeting. If a quorum is not present at the opening of
the meeting, the meeting may be adjourned from time to time by the vote of a
majority of the votes cast on the motion to adjourn.
What is the voting requirement to
approve each of the proposals?
Assuming the existence of a quorum at the
Annual Meeting:
● |
Each director nominated pursuant to Proposal No. 1 must
receive a vote for their election from a majority of the votes
cast; |
● |
For Proposal No. 4 regarding the advisory vote on the frequency
of future advisory approvals of executive compensation, the frequency
option (i.e., every one year, two years or three years) that receives the
most votes cast will be considered to be the frequency that has been
selected by shareholders; and |
● |
For all other matters, the
affirmative vote of a majority of the votes cast is required to approve
each proposal. |
Abstentions and broker non-votes are not
treated as cast either for or against a matter, and therefore will not affect
the outcome of the vote.
Can I revoke my proxy or change my
vote after I have voted?
You may revoke your proxy and change your
vote at any time before the final vote at the Annual Meeting by voting again via
the Internet or by telephone, by completing, signing, dating and returning a new
proxy card or voting instruction form with a later date, or by attending the
Annual Meeting and voting in person. Only your latest dated proxy we receive at
or prior to the Annual Meeting will be counted. However, your attendance at the
Annual Meeting will not automatically revoke your proxy unless you vote again at
the Annual Meeting and specifically request that your prior proxy be revoked by
delivering to PepsiCos Corporate Secretary at 700 Anderson Hill Road, Purchase,
New York 10577 a written notice of revocation prior to the Annual
Meeting.
Who will serve as the inspectors
of election?
Representatives from Broadridge Investor
Communication Solutions, Inc. will serve as the inspectors of
election.
Where can I find the voting
results of the Annual Meeting?
We expect to announce preliminary voting
results at the Annual Meeting. We will also disclose voting results on a Form
8-K filed with the SEC within the time period prescribed by SEC
rules.
How are proxies solicited and what
is the cost?
We are providing these proxy materials in
connection with the solicitation by our Board of Directors of proxies to be
voted at our Annual Meeting. We bear all expenses incurred in connection with
the solicitations of proxies. We have engaged Innisfree M&A Incorporated to
solicit proxies for an estimated fee of $18,500, plus expenses.
76 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
INFORMATION ABOUT THE
ANNUAL MEETING
In addition to the solicitation of proxies
by mail and electronically, PepsiCo intends to ask brokers and bank nominees to
solicit proxies from their principals and will pay the brokers and bank nominees
their expenses for the solicitation. Our directors, officers and employees also
may solicit proxies by mail, telephone, electronic or facsimile transmission or
in person. They will not receive any additional compensation for these
activities.
Attending the Annual
Meeting
How can I attend the Annual
Meeting in Person?
Attendance at the Annual Meeting is
limited to shareholders as of the close of business on the record date, March 1,
2017. Each shareholder may appoint only one representative to attend the Annual
Meeting on his, her or its behalf. Admission to the Annual Meeting will be on a
first-come, first-served basis and will require an admission ticket. Each
shareholder will be asked to present valid government-issued picture
identification such as a drivers license or passport. The use of cell phones,
PDAs, tablets, pagers, recording and photographic equipment and/or computers is
not permitted in the meeting rooms at the Annual Meeting. The North Carolina
History Center at Tryon Palace is accessible to disabled persons. Upon advance
request, we will provide wireless headsets for hearing amplification.
How do I receive an admission
ticket?
If you received your proxy materials by
mail, your admission ticket will be your Notice of Internet Availability, proxy
card (shareholders of record only) or voting instruction form (beneficial owners
only). If you received your proxy materials by email, you will be given an
opportunity to print an admission ticket after you vote online.
We encourage shareholders to pre-register
in advance of the Annual Meeting by visiting www.proxyvote.com. You will need your
16-digit control number to access www.proxyvote.com, which you can find
in the Notice of Internet Availability, proxy card or voting instruction form.
You may also pre-register by contacting PepsiCos Manager of Shareholder
Relations at (914) 253-3055 or investor@pepsico.com. If you are a
beneficial owner of shares, you must show proof of ownership, such as a recent
bank or brokerage account statement reflecting your ownership of Common Stock or
Convertible Preferred Stock as of March 1, 2017, in addition to valid
government-issued picture identification. On May 3, 2017, registration will
begin at 8:30 a.m. Eastern Daylight Time.
Can I listen to the Annual Meeting
on the Internet?
Yes, our Annual Meeting will be webcast
live on May 3, 2017 at 9:00 a.m. Eastern Daylight Time. You are invited to visit
www.pepsico.com under InvestorsEvents and
Presentations to listen to the live webcast
of the Annual Meeting.
2017 Proxy Materials
Why am I receiving these proxy
materials?
Our Board of Directors has made these
materials available to you on the Internet or has delivered printed versions of
these materials to you by mail in connection with the Board of Directors
solicitation of proxies for use at our Annual Meeting of Shareholders. As a
shareholder, you are invited to attend the Annual Meeting and are requested to
vote on the items of business described in this Proxy Statement.
What is included in these
materials?
These proxy materials include:
● |
this Proxy Statement for the Annual Meeting;
and |
● |
our Annual Report for the fiscal year
ended December 31, 2016. |
If you received printed versions of these
materials by mail, these materials also include the proxy card or voting
instruction form for the Annual Meeting.
Why did I receive a Notice of
Internet Availability in the mail instead of printed proxy
materials?
In accordance with SEC rules, instead of
mailing a printed copy of our proxy materials to all of our shareholders, we
have elected to furnish such materials to selected shareholders by providing
access to these documents over the Internet. Accordingly, on or about March 17,
2017, we sent a Notice of Internet Availability to most of our
shareholders.
|
PEPSICO 2017 PROXY
STATEMENT | 77 |
Table of Contents
INFORMATION ABOUT THE
ANNUAL MEETING
These shareholders have the ability to
access the proxy materials on a website referred to in the Notice of Internet
Availability or request to receive a printed set of the proxy materials by
calling the toll-free number found on the Notice of Internet Availability. We
encourage you to take advantage of the availability of the proxy materials on
the Internet in order to help save natural resources and reduce the cost to
print and distribute the proxy materials.
How can I get electronic access to
the proxy materials?
The Notice of Internet Availability
provides you with instructions regarding how to:
● |
view our proxy materials for the Annual Meeting on the
Internet; |
● |
vote your shares after you have viewed our proxy
materials; |
● |
request a printed copy of the proxy
materials; and |
● |
instruct
us to send our future proxy materials to you electronically by
email. |
PepsiCo will plant a tree
for every shareholder that signs up for electronic delivery. Choosing to
receive your future proxy materials by email will lower our costs of
delivery and will help reduce the environmental impact of our Annual
Meeting. In 2016, approximately 13,185 trees were planted on behalf of
Company shareholders. |
Copies of the proxy materials are
available for viewing at www.pepsico.com/proxy17.
You may have received proxy materials by
email. Even if you received a printed copy of our proxy materials, you may
choose to receive future proxy materials by email. If you do so, you will
receive an email next year with instructions containing a link to view those
proxy materials and a link to the proxy voting site. Your election to receive
proxy materials by email will remain in effect until you terminate it or for so
long as the email address provided by you is valid.
What is
householding?
If you are a beneficial owner, your bank
or broker may deliver a single Proxy Statement and Annual Report, along with
individual proxy cards, or individual Notices of Internet Availability to any
household at which two or more shareholders reside unless contrary instructions
have been received from you. This procedure, referred to as householding,
reduces the volume of duplicate materials shareholders receive and reduces
mailing expenses. Shareholders may revoke their consent to future householding
mailings or enroll in householding by contacting Broadridge at 1-800-542-1061,
or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood,
New York 11717. Alternatively, if you wish to receive a separate set of proxy
materials for this years Annual Meeting, we will deliver them promptly upon
request to PepsiCos Manager of Shareholder Relations at PepsiCo, Inc., 700
Anderson Hill Road, Purchase, New York 10577 or (914) 253-3055 or
investor@pepsico.com.
Where can I find the Annual
Report?
The 2016 Annual Report to Shareholders,
including financial statements, was delivered or made available with this Proxy
Statement.
A copy of PepsiCos Annual Report on
Form 10-K for the fiscal year ended December 31, 2016 (including the financial
statements, schedules and a list of exhibits) will be sent without charge upon
the request of any shareholder to PepsiCos Manager of Shareholder Relations at
PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York 10577 or
investor@pepsico.com. You also may obtain our Annual Report on Form 10-K over the
Internet on the SECs website at www.sec.gov, or on our website at
www.pepsico.com under Investors
SEC Filings.
Other Matters
The Board of Directors knows of no other
matters to be brought before the Annual Meeting. If any other business should
properly come before the Annual Meeting or any postponement or adjournment
thereof, the persons named in the proxy will vote on such matters according to
their best judgment.
2018 Shareholder Proposals
and Director Nominations
Shareholder Proposals for
Inclusion in the Proxy Statement for the 2018 Annual Meeting
PepsiCo welcomes comments or suggestions
from its shareholders. If a shareholder wishes to have a proposal formally
considered at the 2018 Annual Meeting of Shareholders and included in the
Companys Proxy Statement for that meeting, we must receive the proposal in
writing on or before the close of business on November 17, 2017 and the proposal
must otherwise comply with Rule 14a-8 under the Exchange Act.
78 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
INFORMATION ABOUT THE ANNUAL MEETING
Director Nominations for Inclusion in the Proxy Statement for the 2018 Annual Meeting
The Board has implemented a proxy access provision in our By-Laws, which allows a shareholder or group of up to 20 shareholders owning in aggregate three percent or more of our outstanding Common
Stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up
to 20% of the number of directors in office or two nominees, whichever is greater, provided the shareholder(s) and nominee(s)
satisfy the requirements in the By-Laws. If a shareholder or group of shareholders wishes to nominate one or more director
candidates to be included in the Company’s Proxy Statement for the 2018 Annual Meeting of Shareholders pursuant to
these proxy access provisions in Section 2.9 of our By-Laws, we must receive proper written notice of any such nomination no
earlier than the close of business on October 18, 2017 and no later than the close of business on November 17, 2017, and the
nomination must otherwise comply with our By-Laws. If, however, the 2018 Annual Meeting is not within 30 days before or 60
days after the anniversary of this year’s Annual Meeting, we must receive such notice no earlier than the close of
business on the 150th day prior to such meeting and no later than the close of business on the later of the 120th day prior
to such meeting or the 10th day following the public announcement of the meeting date.
Other Proposals or Director Nominations for Presentation at the 2018 Annual Meeting
Under our By-Laws, if a shareholder wishes to present other business or nominate a
director candidate at the 2018 Annual Meeting of Shareholders, we must receive proper written notice of any such business or
nomination no earlier than the close of business on January 3, 2018 and no later than the close of business on February 2,
2018. If, however, the 2018 Annual Meeting is not within 30 days before or 60 days after the anniversary of this year’s
Annual Meeting, we must receive such notice no earlier than the close of business on the 120th day prior to such meeting and
not later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the public
announcement of the meeting date. Any such notice must include the information specified in the By-Laws. If a shareholder
does not meet these deadlines, or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as
proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the Annual
Meeting.
All notices of proposals or nominations, as applicable, must be addressed to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577.
|
PEPSICO 2017 PROXY
STATEMENT | 79 |
Table of Contents
Exhibit AReconciliation of GAAP and |
Non-GAAP Information |
($ in millions, except per share
amounts; unaudited)
Organic revenue, core constant currency
EPS (with 2016 growth excluding the impact of the Venezuela deconsolidation),
free cash flow excluding certain items, core net ROIC, core constant currency
net income (refers to core constant currency net income attributable to PepsiCo,
with 2016 growth excluding the impact of the Venezuela deconsolidation), and
core constant currency operating profit are non-GAAP financial measures. In
addition to using these measures as compensation performance measures, we use
these non-GAAP financial measures internally to make operating and strategic
decisions, including the preparation of our annual operating plan and evaluation
of our overall business performance. We believe presenting non-GAAP financial
measures provides additional information to facilitate comparison of our
historical operating results and trends in our underlying operating results, and
provides additional transparency on how we evaluate our business. We also
believe presenting these measures allows investors to view our performance using
the same measures that we use in evaluating our financial and business
performance and trends.
We consider quantitative and qualitative
factors in assessing whether to adjust for the impact of items that may be
significant or that could affect an understanding of our ongoing financial and
business performance or trends.
See pages 57-61 and 73-75 of PepsiCos
Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for a
detailed description of items excluded from these non-GAAP financial measures.
Additionally, free cash flow excluding certain items is a measure management
uses to monitor cash flow performance. Since net capital spending is essential
to our product innovation initiatives and maintaining our operational
capabilities, we believe that it is a recurring and necessary use of cash. As
such, we believe investors should also consider net capital spending when
evaluating our cash from operating activities. We also consider certain other
items (included in the Net Cash Provided by Operating Activities Reconciliation
table below) in evaluating free cash flow that we believe investors should
consider in evaluating our free cash flow results. Non-GAAP information should
be considered as supplemental in nature and is not meant to be considered in
isolation or as a substitute for the related financial information prepared in
accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not
be the same as or comparable to similar non-GAAP measures presented by other
companies.
Net Revenue Growth
Reconciliation
|
|
Year
Ended |
|
|
12/31/2016 |
Reported Net Revenue Growth |
|
(0.4 |
)% |
Impact of Acquisitions and
Divestitures |
|
|
|
Impact of Foreign Exchange
Translation |
|
3.3 |
|
Impact of Venezuela
Deconsolidation(a) |
|
1.8 |
|
Impact of 53rd Reporting Week |
|
(1.1 |
) |
Organic Revenue Growth |
|
3.7 |
% |
(a) |
Represents the impact of the
exclusion of the 2015 results of our Venezuelan businesses, which were
deconsolidated effective as of the end of the third quarter of
2015. |
Note - Certain amounts above may not
sum due to rounding.
A-1 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of
Contents
EXHIBIT
ARECONCILIATION OF GAAP AND NON-GAAP INFORMATION
Diluted EPS Growth Reconciliation
|
|
Year Ended |
|
Growth |
|
|
12/31/2016 |
|
12/26/2015 |
|
12/27/2014 |
|
12/28/2013 |
|
2016 |
|
2015 |
|
2014 |
Reported Diluted EPS |
|
$ |
4.36 |
|
|
$ |
3.67 |
|
|
$ |
4.27 |
|
$ |
4.32 |
|
|
19 |
% |
|
(14 |
)% |
|
(1 |
)% |
Commodity Mark-to-Market Net Impact |
|
|
(0.08 |
) |
|
|
|
|
|
|
0.03 |
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
Restructuring and Impairment Charges |
|
|
0.09 |
|
|
|
0.12 |
|
|
|
0.21 |
|
|
0.08 |
|
|
|
|
|
|
|
|
|
|
Charges Related to the Transaction with
Tingyi |
|
|
0.26 |
|
|
|
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge Related to Debt Redemption |
|
|
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension-Related Settlement
Charges/(Benefits) |
|
|
0.11 |
|
|
|
(0.03 |
) |
|
|
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Venezuela Impairment Charges |
|
|
|
|
|
|
0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Benefits |
|
|
|
|
|
|
(0.15 |
) |
|
|
|
|
|
(0.13 |
) |
|
|
|
|
|
|
|
|
|
Venezuela Remeasurement Charges |
|
|
|
|
|
|
|
|
|
|
0.07 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
Merger and Integration Charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
Core
Diluted EPS |
|
$ |
4.85 |
|
|
$ |
4.57 |
|
|
$ |
4.63 |
|
$ |
4.37 |
|
|
6 |
|
|
(1 |
) |
|
6 |
|
Impact of Foreign Exchange
Translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
11 |
|
|
3 |
|
Core
Constant Currency Diluted EPS Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
10 |
|
|
9 |
|
Impact of Excluding Venezuela from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.5 |
|
|
n/a |
|
|
n/a |
|
2015
Base(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
Constant Currency Diluted EPS Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding
the Impact of Venezuela from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
% |
|
10 |
% |
|
9 |
% |
2015
Base |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Year Growth Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
% |
n/a - Adjustment was not applicable for
purposes of calculating this target.
(a)
|
Represents the impact
of the exclusion of the 2015 results of our Venezuelan businesses, which
were deconsolidated effective as of the end of the third quarter of
2015. |
Net Cash Provided by Operating Activities
Reconciliation
|
|
Year
Ended |
|
|
12/31/2016 |
Net
Cash Provided by Operating Activities |
|
$ |
10,404 |
|
Capital Spending |
|
|
(3,040 |
) |
Sales of Property, Plant and
Equipment |
|
|
99 |
|
Free
Cash Flow |
|
|
7,463 |
|
Payments Related to Restructuring
Charges |
|
|
125 |
|
Discretionary Pension Contributions |
|
|
459 |
|
Net
Cash Received Related to Interest Rate Swaps |
|
|
(5 |
) |
Net
Cash Tax Benefit Related to Discretionary Pension Contributions |
|
|
(151 |
) |
Net
Cash Tax Benefit Related to Restructuring Charges |
|
|
(22 |
) |
Net
Cash Tax Benefit Related to Debt Redemption Charge |
|
|
(83 |
) |
Free
Cash Flow Excluding Above Items |
|
$ |
7,786 |
|
Note - Certain amounts above may not
sum due to rounding.
|
PEPSICO 2017 PROXY
STATEMENT | A-2 |
Table of
Contents
EXHIBIT
ARECONCILIATION OF GAAP AND NON-GAAP INFORMATION
ROIC
|
Year Ended |
|
12/31/2016 |
|
12/26/2015 |
|
12/28/2013 |
Net
Income Attributable to PepsiCo |
$ |
6,329 |
|
|
$ |
5,452 |
|
|
$ |
6,740 |
|
Interest Expense |
|
1,342 |
|
|
|
970 |
|
|
|
911 |
|
Tax
on Interest Expense |
|
(483 |
) |
|
|
(349 |
) |
|
|
(328 |
) |
|
$ |
7,188 |
|
|
$ |
6,073 |
|
|
$ |
7,323 |
|
|
Average Debt Obligations |
$ |
35,308 |
|
|
$ |
31,169 |
|
|
$ |
29,291 |
|
Average Common Shareholders Equity |
|
11,943 |
|
|
|
15,147 |
|
|
|
22,900 |
|
Average Invested Capital |
$ |
47,251 |
|
|
$ |
46,316 |
|
|
$ |
52,191 |
|
ROIC |
|
15.2 |
% |
|
|
13.1 |
% |
|
|
14.0 |
% |
ROIC Growth Reconciliation
|
|
Year
Ended |
|
|
12/31/2016 |
ROIC
Growth |
|
210 |
bps |
Impact of: |
|
|
|
Average Cash, Cash Equivalents and Short-Term Investments |
|
188 |
|
Interest Income |
|
(10 |
) |
Tax on Interest Income |
|
4 |
|
Commodity Mark-to-Market Net Impact |
|
(19 |
) |
Restructuring and Impairment Charges |
|
(10 |
) |
Charges Related to the Transaction with Tingyi |
|
50 |
|
Pension-Related Settlement Charge/(Benefits) |
|
42 |
|
Venezuela Impairment Charges |
|
(316 |
) |
Tax Benefits |
|
49 |
|
Core
Net ROIC |
|
190 |
bps |
Note - Certain amounts above may not
sum due to rounding.
A-3 | PEPSICO 2017 PROXY STATEMENT
|
|
Table of
Contents
EXHIBIT
ARECONCILIATION OF GAAP AND NON-GAAP INFORMATION
3-Year ROIC Growth Reconciliation
|
|
Year Ended |
|
|
|
|
|
12/31/2016 |
|
12/28/2013 |
|
Growth |
ROIC |
|
15.2 |
% |
|
14.0 |
% |
|
117 |
bps |
Impact
of: |
|
|
|
|
|
|
|
|
|
Average Cash, Cash Equivalents and Short-Term Investments |
|
6.0 |
|
|
2.5 |
|
|
345 |
|
Interest Income |
|
(0.2 |
) |
|
(0.2 |
) |
|
(4 |
) |
Tax on Interest Income |
|
0.1 |
|
|
0.1 |
|
|
1 |
|
Commodity Mark-to-Market Net Impact |
|
(0.2 |
) |
|
0.1 |
|
|
(29 |
) |
Restructuring and Impairment Charges |
|
0.1 |
|
|
0.1 |
|
|
2 |
|
Charges Related to the Transaction with Tingyi |
|
0.6 |
|
|
|
|
|
69 |
|
Pension-Related Settlement Charge/(Benefits) |
|
0.3 |
|
|
|
|
|
33 |
|
Venezuela Impairment Charges |
|
(0.5 |
) |
|
|
|
|
(45 |
) |
Tax Benefits |
|
0.1 |
|
|
(0.3 |
) |
|
40 |
|
Venezuela Remeasurement Charge |
|
|
|
|
0.2 |
|
|
(21 |
) |
Merger and Integration Charges |
|
|
|
|
|
|
|
3 |
|
Core
Net ROIC |
|
21.5 |
% |
|
16.4 |
% |
|
511 |
bps |
Net Income Attributable to PepsiCo Reconciliation
|
|
Year Ended |
|
|
|
|
|
12/31/2016 |
|
12/26/2015 |
|
Growth |
Reported Net Income Attributable to
PepsiCo |
|
$ |
6,329 |
|
|
$ |
5,452 |
|
|
16.1 |
% |
Commodity Mark-to-Market Net Impact |
|
|
(111 |
) |
|
|
(8 |
) |
|
|
|
Restructuring and Impairment Charges |
|
|
131 |
|
|
|
184 |
|
|
|
|
Charges Related to the Transaction with
Tingyi |
|
|
373 |
|
|
|
73 |
|
|
|
|
Charge Related to Debt Redemption |
|
|
156 |
|
|
|
|
|
|
|
|
Pension-Related Settlement
Charge/(Benefits) |
|
|
162 |
|
|
|
(42 |
) |
|
|
|
Venezuela Impairment Charges |
|
|
|
|
|
|
1,359 |
|
|
|
|
Tax
Benefit |
|
|
|
|
|
|
(230 |
) |
|
|
|
Core
Net Income Attributable to PepsiCo |
|
$ |
7,040 |
|
|
$ |
6,788 |
|
|
3.7 |
% |
Impact of Foreign Exchange
Translation |
|
|
|
|
|
|
|
|
|
3.1 |
|
Core
Constant Currency Net Income Attributable to PepsiCo Growth |
|
|
|
|
|
|
|
|
|
6.8 |
|
Impact of Excluding Venezuela from 2015
Base(a) |
|
|
|
|
|
|
|
|
|
2.4 |
|
Core
Constant Currency Net Income Attributable to PepsiCo Growth |
|
|
|
|
|
|
|
|
|
|
|
Excluding
the Impact of Venezuela from 2015 Base |
|
|
|
|
|
|
|
|
|
9.3 |
% |
(a)
|
Represents the impact
of the exclusion of the 2015 results of our Venezuelan businesses, which
were deconsolidated effective as of the end of the third quarter of
2015. |
Note - Certain amounts above may not
sum due to rounding.
|
PEPSICO 2017 PROXY
STATEMENT | A-4 |
Table of
Contents
EXHIBIT
ARECONCILIATION OF GAAP AND NON-GAAP INFORMATION
FLNA and NAB Operating Profit Growth Reconciliation
|
|
Year
Ended |
|
|
12/31/2016 |
|
|
FLNA |
|
NAB |
Reported Operating Profit Growth |
|
HSD |
% |
|
MSD |
% |
Restructuring and Impairment Charges |
|
|
|
|
|
|
Pension-Related Settlements |
|
|
|
|
LSD |
|
Core
Operating Profit Growth |
|
HSD |
|
|
HSD |
|
Impact of Foreign Exchange
Translation |
|
|
|
|
|
|
Core
Constant Currency Operating Profit Growth |
|
HSD |
% |
|
HSD |
% |
AMENA Net Revenue Growth Reconciliation
|
|
Year
Ended |
|
|
12/31/2016 |
Reported Net Revenue Growth |
|
(1 |
)% |
Impact of Acquisitions and
Divestitures |
|
|
|
Impact of Foreign Exchange
Translation |
|
5 |
|
Organic Revenue Growth |
|
5 |
% |
China and Egypt Net Revenue Growth Reconciliation
|
|
Year
Ended |
|
|
12/31/2016 |
|
|
China |
|
Egypt |
Reported Net Revenue Growth |
|
HSD |
% |
|
(LSD) |
% |
Impact of Foreign Exchange
Translation |
|
MSD |
|
|
DD |
|
Organic Revenue Growth |
|
DD |
% |
|
DD |
% |
Note - Certain amounts above may not
sum due to rounding.
A-5 | PEPSICO 2017 PROXY
STATEMENT |
|
Table of Contents
|
GLOBAL CODE OF
CONDUCT |
|
|
|
|
PepsiCo Values |
Our
Commitment To
deliver sustained growth through empowered people acting with
responsibility and building trust |
|
|
|
|
|
|
|
|
Guiding
Principles We must always strive to:
●Care for our customers, consumers and
the world we live in
●Sell only products we can be proud
of
●Speak with truth and
candor
●Balance short term and long
term
●Win with diversity and
inclusion
●Respect others and succeed
together |
|
|
|
|
Table of Contents