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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material under §240.14a-12 |
PepsiCo, Inc.
(Names of Registrant as Specified in its Charter)
(Names of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Notice of 2014 Annual Meeting of Shareholders and Proxy Statement
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| Dear Fellow PepsiCo Shareholders:
I am pleased to invite you to attend our 2014 Annual Meeting of Shareholders on Wednesday, May 7, 2014 at 9:00 a.m. Eastern Daylight Time at the North Carolina History Center at Tryon Palace, 529 South Front Street, New Bern, North Carolina 28562. We are delighted to be returning for the third consecutive year to New Bern, the “birthplace” of Pepsi, for our Annual Meeting. |
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| 2013 was a successful year for PepsiCo.
In 2013, we met or exceeded the financial goals announced to shareholders. We also successfully executed our broader strategic agenda by investing in initiatives to generate long-term value including: increasing investment in our iconic global brands, strengthening our position in key developing and emerging markets, and ramping up our innovation program. Our relentless focus on managing costs enabled us to meet our productivity savings target for 2013, and we recently announced plans to sustain approximately $1 billion in productivity savings per year through 2019. We delivered these results while returning $6.4 billion to shareholders through dividends and share repurchases, and we expect to increase these returns to approximately $8.7 billion in 2014. |
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| Our enduring commitment to strong corporate governance is essential to our success.
At PepsiCo, we believe that strong corporate governance is the foundation for financial integrity, investor confidence and superior performance. Our Board members, executives and associates have consistently demonstrated an enduring commitment to strong corporate governance practices. These include an active and independent Presiding Director, in-depth Board and management succession planning, a rigorous and integrated approach to risk management and a robust Global Code of Conduct. We are proud to have been honored by Corporate Secretary Magazine for maintaining the Best Corporate Governance, Ethics and Compliance Program (Large Cap) for the year 2013, and to have been recognized by Ethisphere as one of the World’s Most Ethical Companies for the 8th consecutive year. |
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We continue to be guided by Performance with Purpose.
At PepsiCo, we believe acting ethically and responsibly is not only the right thing to do, but the right thing for our business. If history has taught us one thing, it’s that we have to think in terms of both quarters and generations. We remain steadfastly dedicated to building a profitable and sustainable 21st century corporation – one that is a good investment for our shareholders, a good environment for our employees, a good citizen in our communities and a good steward of our planet’s resources. That’s Performance with Purpose: our goal to deliver sustained value by providing a wide range of foods and beverages from treats to healthy eats; finding innovative ways to minimize our impact on the environment and lower our costs through energy and water conservation and reduced use of packaging material; providing a safe and inclusive workplace for our employees globally; and respecting and investing in the local communities in which we operate. Performance with Purpose is important now more than ever. | |
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We recognize that pay-for-performance is a high priority for our shareholders.
Our Board believes that rewards for our senior leaders should be commensurate with the results they achieve for our shareholders. Our Compensation Committee is committed to maintaining responsible compensation practices that encourage our executives to act like owners, including a long-term incentive program governed by both operating and stock performance metrics, meaningful stock ownership requirements and prohibitions on hedging and pledging PepsiCo securities. |
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We value diversity of thought, experience and background in our Boardroom and in our business, through our people.
For more than half a century, PepsiCo has been a leader in diversity and inclusion. In the 1940s, we were the first company to grant a franchise to persons of color. In the 1950s, we were the first major company to have a woman on our Board. And in 1962, we became the first major U.S. corporation to appoint an African-American Vice President. As a company with products in over 200 countries and territories around the world, we recognize that building on this legacy of leadership is critical to our continued success. Our directors provide a broad array of opinions and perspectives that are representative of our global business. Over 50% of our Board is comprised of women and ethnically diverse individuals. |
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| Your input is one of our most valuable assets.
The input that we receive from our shareholders and other stakeholders is a cornerstone of our governance practices. I had the privilege of meeting with a number of you this year to discuss a wide variety of business and governance topics. Through ongoing dialogue with you, 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. |
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| Your vote is important.
Last but far from least, your vote is very important to us. With that in mind, this year we’ve added new links and graphics to make our Proxy Statement easier to navigate and more user-friendly. We hope these changes enhance your ability to find the information you need to make your voting decisions. 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.
Thank you for the confidence you place in us through your investment. We look forward to continuing our conversation in the years to come.
Cordially,
Indra K. Nooyi
Chairman of the Board of Directors and Chief Executive Officer
March 21, 2014 |
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NOTICE OF 2014 ANNUAL MEETING OF SHAREHOLDERS
| Date and Time |
Wednesday, May 7, 2014 at 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 of Business |
• | Elect as directors the 13 nominees named in the attached Proxy Statement. |
| • | Ratify the appointment of KPMG LLP as our independent registered public accountants for fiscal year 2014. |
| • | Provide advisory approval of our executive compensation. |
| • | Approve the material terms of the performance goals of the PepsiCo, Inc. Executive Incentive Compensation Plan. |
| • | 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 February 28, 2014 will be entitled to notice of, and to vote at, the Annual Meeting. |
| Live Webcast |
The Annual Meeting will be webcast live on our website at www.pepsico.com under “Investors”—“Events and Presentations” |
beginning at 9:00 a.m. Eastern Daylight Time on May 7, 2014.
| 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. |
| March 21, 2014 |
By Order of the Board of Directors, | |||
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| LARRY D. THOMPSON Corporate Secretary | ||||
Important Notice Regarding the Availability of
Proxy Materials for the Annual Meeting of Shareholders
To Be Held on May 7, 2014
The Notice of Annual Meeting, Proxy Statement and the Annual Report for
the fiscal year ended December 28, 2013 are available at www.pepsico.com/proxy14.
This Proxy Statement 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. “Forward-looking statements” are generally identified through the inclusion of words such as “believe,” “expect,” “goals” and “target” and inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such statements, including changes in demand for PepsiCo’s products, changes in the legal and regulatory environment, and the other factors discussed in the risk factors section of PepsiCo’s most recent annual report on Form 10-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.
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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 2013 Annual Report before you vote.
2014 ANNUAL MEETING OF SHAREHOLDERS
CORPORATE GOVERNANCE
Our Corporate Governance Policies Reflect Best Practices
SHAREHOLDER ENGAGEMENT
We believe that building positive relationships with our shareholders is critical to PepsiCo’s long-term success. We value the views of our shareholders and other stakeholders, and we solicit input throughout the year on topics such as portfolio strategy, capital allocation, corporate governance, transparent public disclosure, executive compensation, sustainability and corporate social responsibility. Please see page 24 of this Proxy Statement for examples of our recent engagement activities.
VOTING MATTERS AND BOARD RECOMMENDATIONS
| Voting Matters |
Board’s Recommendation | Page | ||
| Management Proposals: | ||||
| FOR all Director Nominees | 7 | |||
| 2. Ratification of Appointment of KPMG LLP as Independent Registered Public Accountants for 2014 |
FOR | 63 | ||
| FOR | 63 | |||
| FOR | 64 | |||
| Shareholder Proposals | AGAINST each Shareholder Proposal | 68 |
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PROXY STATEMENT SUMMARY (CONTINUED)
EXECUTIVE COMPENSATION PROGRAMS
Our Executive Compensation Programs are Designed to Attract and Retain Global Talent and Align the Interests of Our Executives and Our Shareholders
Our compensation philosophy is to provide market-competitive programs, with pay directly linked to the achievement of short- and long-term business results.
PepsiCo’s Compensation Committee has a practice of reviewing the program components, targets and payouts on an annual basis, to ensure the strength of our pay for performance alignment. Our performance is evaluated against short-term goals that support PepsiCo’s long-term business strategy and long-term goals that measure the creation of sustainable long-term shareholder value.
Our programs are designed to incentivize responsible achievement of multiple operating goals over one- and three-year periods, with targets and metrics selected because they are directly linked to our strategic goals. Additionally, our long-term incentives measure the creation of shareholder value, rewarding the delivery of both absolute stock price growth and relative total shareholder return.
| Strong Compensation Governance Features | Long-Term Commitment to PepsiCo Share Retention |
In 2013, PepsiCo again received strong support for its Executive Compensation Programs with approximately 92% of votes cast approving our advisory resolution in May 2013. As in prior years, the Compensation Committee considered input from our shareholders and other stakeholders as part of its annual review of PepsiCo’s Executive Compensation Programs.
Please see the Compensation Discussion and Analysis section beginning on page 29 of this Proxy Statement for a detailed description of our executive compensation programs.
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PROXY STATEMENT SUMMARY (CONTINUED)
DIRECTOR NOMINEES
Our Board of Directors has nominated 13 directors for election at the Annual Meeting. Please see “Election of Directors (Proxy Item No. 1)” beginning on page 7 of this Proxy Statement for additional information about each nominee.
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Committee
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Name
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Director Since
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Age*
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Primary Occupation
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Independent
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AC
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CC
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NCGC
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Shona L. Brown
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2009 | 48 | Senior Advisor, Google Inc.
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Ö | Ö | |||||||||
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George W. Buckley |
2012 | 67 | Retired Chairman, President and Chief Executive Officer of 3M Company; Chairman of Smiths Group plc
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Ö | FE | |||||||||
| Ian M. Cook (PD) |
2008 | 61 | Chairman, President and Chief Executive Officer, Colgate-Palmolive Company
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Ö
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FE | |||||||||
| Dina Dublon |
2005 | 60 | Former Executive Vice President and Chief Financial Officer, JPMorgan Chase & Co.
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Ö | C, FE | |||||||||
| Rona A. Fairhead |
2014 | 52 | Former Chairman and Chief Executive Officer of the Financial Times Group, a division of Pearson plc
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Ö | FE | |||||||||
| Ray L. Hunt |
1996 | 70 | Chairman, President and Chief Executive Officer, Hunt Consolidated, Inc.
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Ö | Ö | C | ||||||||
| Alberto Ibargüen |
2005 | 70 | President and Chief Executive Officer, John S. and James L. Knight Foundation
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Ö | Ö | Ö | ||||||||
| Indra K. Nooyi |
2001 | 58 | Chairman and Chief Executive Officer, PepsiCo
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| Sharon Percy Rockefeller |
1986 | 69 | President and Chief Executive Officer, WETA Public Stations
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Ö | Ö | Ö | ||||||||
| James J. Schiro |
2003 | 68 | Former Chief Executive Officer, Zurich Financial Services
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Ö | Ö | Ö | ||||||||
| Lloyd G. Trotter |
2008 | 68 | Managing Partner, GenNx360 Capital Partners
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Ö | C | Ö | ||||||||
| Daniel Vasella, MD |
2002 | 60 | Former Chairman and Chief Executive Officer, Novartis AG
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Ö | Ö | Ö | ||||||||
| Alberto Weisser |
2011 | 58 | Former Chairman and Chief Executive Officer, Bunge Limited
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Ö | FE | |||||||||
| * | Ages are as of March 21, 2014 |
| AC = Audit Committee CC = Compensation Committee NCGC = Nominating and Corporate Governance Committee |
C = Committee Chair FE = Financial Expert PD = Presiding Director |
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PROXY STATEMENT
2014 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of proxies by PepsiCo, Inc. (“PepsiCo” or the “Company”) on behalf of the Board of Directors for the 2014 Annual Meeting of Shareholders. PepsiCo is making this Proxy Statement and the form of proxy first available on or about March 21, 2014.
The 2014 Annual Meeting of Shareholders will be held on Wednesday, May 7, 2014 at 9:00 a.m. Eastern Daylight Time at the North Carolina History Center at Tryon Palace, 529 South Front Street, New Bern, North Carolina 28562.
At the 2014 Annual Meeting, shareholders will vote on the following matters, as well as any other business properly brought before the meeting:
| • | Elect as directors the 13 nominees named in this Proxy Statement. The Board recommends a vote FOR each of the nominees. |
| • | Ratify the appointment of KPMG LLP (“KPMG”) as our independent registered public accountants for fiscal year 2014. The Board recommends a vote FOR this proposal. |
| • | Provide advisory approval of our executive compensation. The Board recommends a vote FOR this proposal. |
| • | Approve the material terms of the performance goals of the PepsiCo, Inc. Executive Incentive Compensation Plan (the “EICP”). The Board recommends a vote FOR this proposal. |
| • | Act upon two shareholder proposals, if properly presented. The Board recommends a vote AGAINST each of these proposals. |
Shareholders of record of PepsiCo Common Stock and Convertible Preferred Stock at the close of business on February 28, 2014, the record date, or their duly authorized proxy holders, are entitled to vote on each matter submitted to a vote at the 2014 Annual Meeting and at any adjournment or postponement of the Annual Meeting.
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VOTING PROCEDURES AND ANNUAL MEETING ATTENDANCE (CONTINUED)
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Our Board of Directors has nominated 13 directors for election at the 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 2013 Annual Meeting except Rona A. Fairhead, who was elected to the Board effective March 2014. Mrs. Fairhead was first brought to the attention of the Nominating and Corporate Governance Committee by our independent search firm.
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 and qualifications that include the following:
Directors’ Skills and Qualifications
Additionally, directors are expected to possess personal traits such as candor, integrity and professionalism and must be able to commit significant time to the Company’s oversight.
Following each nominee’s biography below, we have highlighted certain notable skills and qualifications that contributed to his or her selection as a member of our Board of Directors. We have also included a chart immediately after the biographies to highlight the skills and qualifications of the Board as a whole.
We have no reason to believe that any of the nominees for director will be unable to serve if elected. However, if any of these nominees becomes unavailable, the persons named in the proxy intend to vote for any alternate designated by the current Board, or the Board may reduce the size of Board. Proxies cannot be voted for a greater number of persons than the nominees named.
Our Board of Directors recommends that shareholders vote “FOR” the election of each of the following directors:
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ELECTION OF DIRECTORS (PROXY ITEM NO. 1) (CONTINUED)
Skills and Qualifications of Our Board of Directors
The table below includes the skills and qualifications of each director that led our Board of Directors to conclude that the director is qualified to serve on our Board.
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Stock Ownership of Officers and Directors
The following table shows, as of March 13, 2014: (1) the number of shares of our Common Stock and Convertible Preferred Stock beneficially owned by each director (including each nominee), by each of the executive officers identified in the 2013 Summary Compensation Table on page 45 of this Proxy Statement (the “NEOs”) and by all directors and all executive officers as a group; and (2) the number of phantom units of our Common Stock held in the Company’s income deferral programs by each director (including each nominee), by each NEO and by all directors and all executive officers as a group. Each phantom unit is intended to be the economic equivalent of one share of our Common Stock. The information in this table is based solely on statements in filings with the SEC or other reliable information.
As of March 13, 2014, the directors and executive officers as a group own less than 1% of our outstanding Common Stock and less than 1% of our outstanding Convertible Preferred Stock.
| Name of Individual or Group | Number of Shares of PepsiCo Common Stock
Beneficially Owned(1) |
Number of Shares of PepsiCo Convertible Preferred
Stock Beneficially Owned |
Number of Phantom Units of PepsiCo Common Stock Held
in PepsiCo’s Deferral Programs(2) |
Total | ||||||||||||
| Zein Abdalla |
289,453 | 0 | 0 | 289,453 | ||||||||||||
| Shona L. Brown |
1,000 | 0 | 18,380 | 19,380 | ||||||||||||
| George W. Buckley |
1,000 | 0 | 5,242 | 6,242 | ||||||||||||
| Ian M. Cook |
3,569 | 0 | 16,521 | 20,090 | ||||||||||||
| Brian Cornell |
18,746 | (3) | 0 | 0 | 18,746 | |||||||||||
| Dina Dublon |
10,413 | 0 | 17,569 | 27,982 | ||||||||||||
| Rona A. Fairhead |
700 | (4) | 0 | 1,070 | 1,770 | |||||||||||
| Ray L. Hunt(5) |
520,902 | 0 | 46,226 | 567,128 | ||||||||||||
| Alberto Ibargüen |
12,326 | 0 | 18,616 | 30,942 | ||||||||||||
| Hugh F. Johnston |
305,325 | 0 | 27,625 | 332,950 | ||||||||||||
| Mehmood Khan |
237,324 | 0 | 0 | 237,324 | ||||||||||||
| Indra K. Nooyi |
2,743,912 | 0 | 48,316 | 2,792,228 | ||||||||||||
| Sharon Percy Rockefeller |
57,212 | 0 | 16,999 | 74,211 | ||||||||||||
| James J. Schiro |
22,312 | 0 | 35,502 | 57,814 | ||||||||||||
| Lloyd G. Trotter |
1,000 | 0 | 27,017 | 28,017 | ||||||||||||
| Daniel Vasella |
18,824 | 0 | 29,082 | 47,906 | ||||||||||||
| Alberto Weisser |
1,000 | 0 | 7,400 | 8,400 | ||||||||||||
| All directors and executive officers as a group (24 persons) |
5,447,416 | 0 | 329,447 | 5,776,863 | ||||||||||||
| (1) | The shares shown include the following shares that directors and executive officers have the right to acquire within 60 days after March 13, 2014 through the exercise of vested stock options: Zein Abdalla, 210,474 shares; Dina Dublon, 7,958 shares; Alberto Ibargüen, 6,588 shares; Hugh F. Johnston, 255,514 shares; Mehmood Khan, 214,647 shares; Indra K. Nooyi, 2,410,490 shares; Sharon Percy Rockefeller, 6,588 shares; James J. Schiro, 6,588 shares; Daniel Vasella, 6,588 shares; and all directors and executive officers as a group, 4,089,032 shares. 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. |
| (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 include Restricted Stock Units (“RSUs”) that Brian Cornell has the right to acquire within 60 days after March 13, 2014 which will convert into 12,531 shares of PepsiCo Common Stock. |
| (4) | Reflects the 1,000 initial share grant issued to Rona A. Fairhead upon her election to the Board on March 13, 2014, less the required 30% withholding tax. |
| (5) | The shares shown for Mr. Hunt include (i) 288,986 shares held in a corporation over which Mr. Hunt has sole voting and investment power and (ii) 231,916 shares held in a trust over which Mr. Hunt has sole voting power and no investment power. |
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OWNERSHIP OF PEPSICO COMMON STOCK (CONTINUED)
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 Beneficially Owned as of December 31, 2013 |
Percent of Class Outstanding as of December 31, 2013 | ||
| The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 |
86,879,466 | 5.66% |
| (1) | On a Schedule 13G/A filed with the SEC on February 11, 2014, The Vanguard Group reported that, as of December 31, 2013, it had sole voting power for 2,513,830 shares of our Common Stock, sole dispositive power for 84,529,959 shares of our Common Stock, and shared dispositive power over 2,349,507 shares of our Common Stock. |
Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors and executive officers to file reports of ownership and changes in ownership of our Common Stock and Convertible Preferred Stock. We received written representations from each such person 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 forms and written representations, in 2013 all required forms were filed on time with the SEC.
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CORPORATE GOVERNANCE AT PEPSICO (CONTINUED)
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COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three standing Committees: Audit, Compensation and Nominating and Corporate Governance. The table below indicates the members of each Board committee:
| * | Victor J. Dzau served as a member of the Nominating and Corporate Governance Committee and the Compensation Committee until May 2013 and served as a member of the Audit Committee from May 2013 until his resignation from the Board in March 2014. |
| ** | Rona A. Fairhead became a member of the Audit Committee effective March 2014. |
| *** | Effective May 2013, Alberto Ibargüen became a member of the Nominating and Corporate Governance Committee and the Compensation Committee and ceased serving as a member of the Audit Committee. |
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PepsiCo’s Audit Committee reports to and acts on behalf of the Board of Directors by providing oversight of the Company’s independent registered public accountants and the Company’s financial management and financial reporting procedures. The Audit Committee satisfies the independence, financial experience and other qualification requirements of the New York Stock Exchange and applicable securities laws. The Audit Committee assists the Board’s oversight of the quality and integrity of PepsiCo’s financial statements and its related internal controls over financial reporting, PepsiCo’s compliance with legal and regulatory requirements and the performance of PepsiCo’s internal audit function and its independent registered public accountants. The Audit Committee operates under a written charter, adopted by the Board of Directors, which describes these and other responsibilities and is available on the Company’s website at www.pepsico.com under “Who We Are”—“Corporate Governance.” The Audit Committee’s charter is reviewed annually and updated, as appropriate, to address changes in regulatory requirements, authoritative guidance, evolving oversight practices and investor feedback. During 2013, the Audit Committee fulfilled its duties and responsibilities as outlined in its charter, including each of the matters below, and received periodic updates on PepsiCo’s financial performance and strategic initiatives, as well as other matters germane to its responsibilities.
Management has primary responsibility for preparing PepsiCo’s financial statements and establishing effective internal controls over financial reporting. KPMG is responsible for auditing those financial statements and expressing an opinion on the conformity of PepsiCo’s audited financial statements with generally accepted accounting principles and on the effectiveness of PepsiCo’s internal controls over financial reporting based on criteria established in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission.
In this context, the Audit Committee has met with management and KPMG to review and discuss the Company’s audited financial statements. The Audit Committee discussed with management and KPMG the critical accounting policies applied by PepsiCo in the preparation of its financial statements. The Audit Committee discussed with KPMG the matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board, and had the opportunity to ask KPMG questions relating to such matters. The discussions included the quality, and not just the acceptability, of the accounting principles utilized, the reasonableness of significant accounting judgments, and the clarity of disclosures in the financial statements.
The Audit Committee met nine times during 2013. At each of its meetings, the Audit Committee met with PepsiCo’s Chief Financial Officer, Controller and other senior members of PepsiCo’s financial management. The Audit Committee reviewed and assessed the guidelines and policies governing PepsiCo’s risk management and oversight processes and assisted the Board’s oversight of financial, compliance and employee safety risks facing PepsiCo. The Audit Committee reviewed with KPMG and PepsiCo’s internal auditors the overall scope and plans for their respective audits for 2013. The Audit Committee also received regular updates from PepsiCo’s internal auditors on internal controls and business risks and from PepsiCo’s Chief Compliance & Ethics Officer on compliance and ethics issues. In addition, the Audit Committee received an update on PepsiCo’s Law Department’s compliance with Part 205 of Section 307 of the Sarbanes-Oxley Act of 2002 regarding standards of professional conduct for attorneys. The Audit Committee meets with the internal auditors and KPMG, with and without management present, to discuss their evaluations of PepsiCo’s internal controls and the overall quality of the Company’s financial reporting. The Audit Committee also meets independently with PepsiCo’s General Counsel, and PepsiCo’s Chief Compliance & Ethics Officer, with and without other members of management present, to discuss PepsiCo’s compliance with laws and regulations. The Audit Committee also receives periodic updates on PepsiCo’s financial performance.
The Audit Committee considers the independence, qualifications and performance of KPMG. Such consideration includes reviewing the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accountants’ communications with the Audit Committee concerning independence provided by KPMG, and discussing with KPMG their independence. The Audit Committee periodically reviews and evaluates the performance of KPMG’s lead audit partner, oversees the required rotation of KPMG’s lead audit partner
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AUDIT COMMITTEE REPORT (CONTINUED)
responsible for PepsiCo’s audit and, through the Audit Committee’s Chairperson as representative of the Audit Committee, reviews and considers the selection of the lead audit partner. In addition, in order to help ensure auditor independence, the Audit Committee periodically considers whether there should be a rotation of the independent registered public accountants.
In 2013, the Audit Committee also considered several factors in deciding whether to re-engage its independent registered public accountant including the length of time KPMG has served as PepsiCo’s independent registered public accountant, the breadth and complexity of PepsiCo’s business and its global footprint and the resulting demands placed on its auditing firm in terms of expertise in PepsiCo’s business, the quantity and quality of KPMG’s staff and KPMG’s global reach.
The Audit Committee is also responsible for the approval of audit fees, and the Committee reviewed and pre-approved all fees paid to KPMG. These fees are described in the next section of this Proxy Statement. The Audit Committee also considered whether KPMG’s provision of non-audit services to PepsiCo was compatible with the independence of the independent registered public accountants. The Audit Committee has adopted a formal policy for Pre-Approval of Audit, Audit-Related and Non-Audit Services, which is briefly described in the next section of this Proxy Statement. The Audit Committee concluded that the independent registered public accountants are independent from PepsiCo and its management.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 28, 2013, for filing with the SEC. The Audit Committee has also retained KPMG as the Company’s independent registered public accountants for the fiscal year 2014. The Audit Committee and the Board believe that the continued retention of KPMG to serve as the Company’s independent registered public accountants is in the best interests of the Company and its shareholders and have recommended that shareholders ratify the appointment of KPMG as the Company’s independent registered public accountants for the fiscal year 2014.
THE AUDIT COMMITTEE
| DINA DUBLON, CHAIR SHONA L. BROWN GEORGE W. BUCKLEY |
IAN M. COOK ALBERTO WEISSER |
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, or the Exchange Act except to the extent we specifically incorporate such report by reference.
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The following table presents fees billed for professional audit services rendered by KPMG, the Company’s independent registered public accountants, for the audit of the Company’s annual consolidated financial statements for 2012 and 2013, and fees billed for other services rendered by KPMG.
| 2012 | 2013 | |||||||
| Audit fees(1) |
$ | 24,104,000 | $ | 24,093,000 | ||||
|
|
|
|
|
|||||
| Audit-related fees(2) |
$ | 1,954,000 | $ | 2,018,000 | ||||
|
|
|
|
|
|||||
| Tax fees(3) |
$ | 442,000 | $ | 708,000 | ||||
|
|
|
|
|
|||||
| All other fees(4) |
$ | 151,000 | $ | 68,000 | ||||
|
|
|
|
|
|||||
| (1) | Audit fees for 2012 and 2013 consisted of fees for the audits of the Company’s annual consolidated financial statements, the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q, and services related to statutory filings or engagements. |
| (2) | Audit-related fees for 2012 and 2013 consisted primarily of the 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 2012 and 2013 consisted primarily of international tax compliance services. |
| (4) | All other fees consisted of fees for assessments of technology risk, contract compliance, and business process outsourcing alternatives for 2012 and services/assistance with an operational process assessment for 2013. |
We understand the need for the independent registered public accountants to maintain their objectivity and independence, both in appearance and in fact, in their audit of PepsiCo’s 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 accountants for the audit of PepsiCo’s consolidated financial statements and other audit-related, tax and other non-audit work. The policy provides that on an annual basis the independent registered public accountants’ Global Lead Audit Partner will review with the Audit Committee the services the independent registered public accountants expect 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 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 the Audit Committee’s pre-approval of audit, audit-related, tax or other non-audit services that the independent registered public accountants have been pre-approved to perform, have been asked to provide or may be expected to provide during the balance of the year.
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COMPENSATION DISCUSSION AND ANALYSIS
Our Compensation Philosophy. PepsiCo’s executive compensation programs are designed to align the interests of PepsiCo’s executive officers with those of our shareholders. Our compensation philosophy is to provide market-competitive programs that enable PepsiCo to attract and retain world-class talent, with pay directly linked to the achievement of short- and long-term performance goals that foster the creation of sustainable long-term shareholder value. Our Compensation Committee sets financial targets for executive officer incentive pay at or above the external financial goals communicated to shareholders because we believe executive officers should only receive target payouts if PepsiCo meets our financial goals to shareholders.
Engagement with Our Shareholders. PepsiCo has a longstanding practice of engaging with shareholders on executive compensation matters. During 2013, PepsiCo’s senior management conducted a substantial number of meetings with shareholders to discuss our executive compensation programs and governance. Our Compensation Committee incorporates the feedback we receive from our shareholders into its annual review of program components, targets and payouts to maintain awareness of emerging practices and ensure the continued strength of our pay-for-performance alignment.
Elements of Our Program. The table below summarizes the elements of total direct compensation opportunities for our CEO and other NEOs:
| ELEMENTS OF TOTAL DIRECT COMPENSATION | ||||||||
| Component | CEO Pay Mix | Metrics | Performance Period | |||||
|
Long-Term Incentive Awards |
72% |
PepsiCo Performance Stock Units (PEPunits) (60%) |
Based on absolute stock price performance and total shareholder return (TSR) relative to the S&P 500 |
Three years | ||||
|
Long-Term Cash (“LTC”) Awards (40%) |
Based on key business operating metrics, including earnings per share (EPS) and return on invested capital (ROIC) measures |
Three years | ||||||
|
Annual Cash Incentives |
19% |
Combination of business unit operating performance, including revenue, cash flow, profit and share of retail sales, and individual performance objectives |
One year | |||||
|
Base Salary |
9% |
Fixed pay reflecting internal role and competitiveness |
||||||
|
At PepsiCo, over 90% of CEO total direct compensation is performance-based to ensure that pay is directly linked to the creation of sustainable long-term shareholder value. | ||||||||
Strong Governance Features. Our Compensation Committee has incorporated the following strong governance features into our program:
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EXECUTIVE COMPENSATION (CONTINUED)
At our 2013 Annual Meeting, shareholders showed strong support for our executive
compensation program, with approximately 92% of the votes cast approving our advisory resolution.
Taking into account the strong support demonstrated by our shareholders, the Compensation Committee determined to maintain our existing executive compensation program.
The Compensation Discussion and Analysis describes the compensation of the following NEOs:
| Name | Title | |
| Indra K. Nooyi |
Chairman and Chief Executive Officer, PepsiCo | |
| Hugh F. Johnston |
Executive Vice President and Chief Financial Officer, PepsiCo | |
| Brian C. Cornell |
CEO, PepsiCo Americas Foods (“PAF”) | |
| Zein Abdalla |
President, PepsiCo | |
| Mehmood Khan |
Executive Vice President, PepsiCo and Chief Scientific Officer, Global Research and Development |
2013 Company Performance
In 2013, PepsiCo met or exceeded the financial goals announced to shareholders despite continued challenging and volatile macroeconomic conditions around the globe. We successfully executed against our broader strategic agenda and continued to invest in long-term value creation, while returning $6.4 billion to shareholders through share repurchases and dividends last year. We believe that our strong focus on brand building and innovation, our extensive portfolio of diversified products spanning a broad global footprint, and our aggressive focus on productivity provided the foundation to deliver strong and well-balanced operating performance in 2013.
| Company Performance Measures(1) | Financial Goals |
Actual Results |
||||||
| Organic Revenue Growth |
Mid-single digits | Mid-single digits | ||||||
| Core Constant Currency Earnings Per Share (EPS) Growth |
7.0% | 8.9% | ||||||
| Free Cash Flow Excluding Certain Items |
>$7.0 billion | $8.2 billion | ||||||
| Core Net Return On Invested Capital (ROIC) |
+50 bps | +110 bps | ||||||
| (1) | Organic revenue, core constant currency earnings per share, free cash flow excluding certain items and core net return on invested capital are non-GAAP financial measures that exclude certain items. Please refer to Exhibit A to this Proxy Statement for a reconciliation of these measures relative to reported GAAP financial results, and to PepsiCo’s 2013 Form 10-K for a more detailed description of the items excluded from these measures. To ensure that performance is evaluated in a manner consistent with how management evaluates our operational results and trends the Compensation Committee applies business performance metrics that are measured on an organic or core constant currency basis to both long-term and annual incentive awards. Constant currency financial measures assume constant foreign currency exchange rates for comparing year-over-year results to provide that executives are incentivized to grow non-U.S. operations with respect to the applicable local currency, and do not receive windfall incentive payouts as a result of currency fluctuations. |
Additional 2013 performance highlights include:
| • | Delivering more than $900 million of productivity savings during 2013, remaining on track to achieve our previously announced three-year, $3 billion productivity goal for 2012-2014; |
| • | Returning $6.4 billion to shareholders through share repurchases and dividends; and |
| • | Achieving total shareholder return (“TSR”) of 25% for 2013. |
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EXECUTIVE COMPENSATION (CONTINUED)
Impact of Company Performance on 2013 NEO Pay
2013 Chairman and CEO Pay Decisions
Under Ms. Nooyi’s leadership, PepsiCo delivered strong 2013 performance while continuing to remain focused on long-term value creation for its shareholders. Ms. Nooyi made substantial progress on the initiatives we undertook in 2012 to position PepsiCo for future success. These initiatives included increasing our investment in our largest global brands; stepping up our innovation program, including the successful launch of six new products that are expected to achieve over $100 million each in annual retail sales in their first year; expanding our research and development capability, including opening a new state-of-the-art food and beverage innovation center in Shanghai, China; and continuing our multi-year productivity program that resulted in over $900 million in savings in 2013.
In recognition of these accomplishments, the Board approved a 2013 annual incentive award for Ms. Nooyi of $4.0 million and a long-term incentive (“LTI”) award with a grant date value of $13.0 million. The actual LTI value realized will depend upon achievement of critical operating objectives and absolute and relative stock performance targets established by the Compensation Committee.
2013 Chairman and CEO Total Direct Compensation1
| Performance Year | Base Salary (MM) |
Annual Incentive Award (MM) |
PEPunit Value (MM)2 |
LTC Award Value (MM)3 |
Total Direct Compensation | |||||
| 2013 |
$1.6 | $4.0 | $7.8 | $5.2 | $18.6 |
| 1 | Information reflected in this table differs from, and is not a substitute for, the information presented in the 2013 Summary Compensation Table on page 45 of this Proxy Statement. |
| 2 | PEPunit award values are approved by the Board for a specific performance year, with awards granted in the following year. PEPunit award values presented above are expressed in U.S. dollars prior to the application of accounting guidance on share-based payments, and accordingly differ from the value reported in the 2013 Summary Compensation Table under SEC disclosure rules. |
| 3 | LTC Award values are approved by the Board for a specific performance year, with awards granted in the following year. |
After a comprehensive review and consideration of feedback from shareholders, PepsiCo introduced in 2012 a new 100% performance-based Long-Term Incentive program that included two distinct components, PepsiCo Equity Performance Units (“PEPunits”) and Long-Term Cash Awards (“LTC Awards”). PEPunits, which represent 60% of the annual LTI award, and the LTC award, which represents 40% of the annual LTI award, are designed to reward achievement of key operating metrics and market-based performance as measured through both absolute stock price and relative TSR performance over a three-year performance period. This program replaced PepsiCo’s former long-term incentive program that consisted of a combination of 50% Stock Options and 50% Performance Stock Units (“PSUs”).
Overview of PepsiCo Long-Term Incentive Awards – Performance Period and Vesting Schedule
| Award Year | Vehicles | Performance Period | Vesting Date | |||
| 2011 |
PSUs/Stock Options | 2011 – 2012 | March 2014 | |||
| 2012 |
PEPunits/LTC Award | 2012 – 2014 | March 2015 | |||
| 2013 |
PEPunits/LTC Award | 2013 – 2015 | March 2016 |
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EXECUTIVE COMPENSATION (CONTINUED)
The 2011 PSUs vested and were paid out in March 2014 based on 2011-2012 two-year average performance of two equally weighted financial metrics:
| • | two-year average core constant currency EPS growth; and |
| • | two-year average core constant currency International Net Revenue growth1 as a multiple of two-year average core constant currency North America Net Revenue growth2 (with a minimum floor of 2% North America Net Revenue growth). |
PepsiCo’s actual two-year (2011-2012) average core constant currency EPS growth of 0.2% was lower than the target range of 7% to 9% growth set by the Compensation Committee. PepsiCo’s actual two-year (2011-2012) average core constant currency International Net Revenue growth as a multiple of North America core constant currency Net Revenue growth of 4.0x exceeded the target 2.0-2.5x growth set by the Compensation Committee. As a result, 62.5% of the target 2011 PSUs were earned by executive officers based on 2011 and 2012 performance. The 2011 PSUs were subject to an additional year of service-based vesting. The table below reflects the 2011 PSUs delivered to executive officers in March 2014:
| Name(1) | 2011 PSUs Granted |
2011 PSUs Vested and Paid Out in 2014 | ||
| Indra K. Nooyi |
98,039 | 61,274 | ||
| Hugh F. Johnston |
17,569 | 10,981 | ||
| Zein Abdalla |
18,824 | 11,765 | ||
| Mehmood Khan |
17,647 | 11,029 |
| (1) | Mr. Cornell did not receive a 2011 PSU award because he was not a PepsiCo employee at the time of grant. |
In addition, in February 2014, the Compensation Committee certified the level of performance achieved with respect to the three-year performance goals applicable to 50% of the 78,431 retention PSUs granted to each of Mr. Abdalla and Dr. Khan in March 2011. Because the performance goals, which related to specified business units, were not met, each executive will forfeit 39,215 PSUs. Performance goals with respect to the remaining 50% of each award will be certified by the Compensation Committee after conclusion of the applicable 2011-2015 five-year performance period.
Annual Incentive Awards
Consistent with our pay-for-performance philosophy, all of our NEOs are awarded annual incentives that reflect the achievement of annual business objectives against pre-approved targets. The business objectives reflect a combination of key financial drivers as well as strategic objectives based on an executive’s role and accountabilities aligned with Performance with Purpose, our strategy for driving sustainable growth over the long term while continuing to deliver strong and consistent annual financial results. Annual incentive award payments for our NEOs were above target based on the strong 2013 business and individual performance described on pages 36-38.
| 1 | Reflects core constant currency Net Revenue growth for all countries other than Canada and the United States, adjusted for merger and acquisition activities. |
| 2 | Reflects core constant currency Net Revenue growth for Canada and the United States, adjusted for merger and acquisition activities. |
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EXECUTIVE COMPENSATION (CONTINUED)
NEO PAY MIX
To align pay levels for NEOs with the Company’s performance, our pay mix places the greatest emphasis on performance-based incentives. Over 90% of our Chairman and CEO’s target total compensation, and approximately 80%–85% of the average target total compensation of our other NEOs, is performance-based:
COMPONENTS OF OUR EXECUTIVE COMPENSATION AND BENEFITS PROGRAMS
The primary components of our executive compensation and benefits programs are summarized in the following table:
| Type | Component | Objective | ||||||
| Performance-Based Compensation | Long-Term Incentive Awards |
- Align executive officers’ rewards with returns delivered to PepsiCo’s shareholders - Incent achievement of stock performance objectives (absolute stock price and relative TSR) through PEPunit awards and critical operating performance objectives (EPS and ROIC) through LTC Awards over a three-year period |
||||||
| Annual Cash Incentive Awards |
- 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 development of a diverse and talented workforce |
|||||||
| Base Salary |
- Provide market-competitive fixed pay reflective of an executive’s role, responsibilities and individual performance |
|||||||
| Fixed Compensation | Retirement Programs |
- Provide retirement benefits at market-competitive levels consistent with programs for our broad-based employee population |
||||||
| Benefits and Perquisites |
- Provide market-competitive benefits |
|||||||
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EXECUTIVE COMPENSATION (CONTINUED)
1. Long-Term Incentive Awards. The annual LTI award is weighted more heavily than any other component of total compensation for NEOs. Target LTI award levels vary by position and are determined based on competitive benchmarking. Target award levels are expressed in dollars (rather than as a percentage of base salary). In 2013, the actual size of awards granted could range from 0% to 125% of target and were determined for each executive officer based on prior year business performance, individual performance and potential for future contributions to PepsiCo, as determined by the Compensation Committee. The Compensation Committee directly approves individual awards to executive officers.
1(a). PEPunit Awards: Alignment with Shareholder Returns. PEPunits strengthen alignment to long-term shareholder value creation by providing our NEOs with an opportunity to earn shares of PepsiCo Common Stock with a value that adjusts upon changes in PepsiCo’s absolute stock price growth as well as PepsiCo’s TSR relative to the S&P 500 over a three-year period. The illustration below depicts how the number of shares earned at the end of the performance period is determined:
The Absolute Stock Price Adjustment, which can range from 0% to 150%, is calculated as the stock price at the end of the performance period divided by the stock price at the beginning of the performance period using a 90-day average. In addition to absolute stock price growth, the final number of shares that are earned at the end of the performance period is subject to a Relative TSR Adjustment, which can range from -25 percentage points to +25 percentage points. Additional shares can be earned with relative TSR performance above the median of the S&P 500, with earned shares reduced by relative TSR below the median.
In 2013, further enhancements were made to the PEPunit design which incorporated feedback received during PepsiCo’s shareholder engagement meetings.
| • | Require positive TSR or delivery of above-median TSR performance relative to the S&P 500 in order to pay out any shares. In other words, PepsiCo TSR of zero that is at or below median performance relative to the S&P 500 will result in a zero payout.3 For the 2013 PEPunits, the Relative TSR adjustment is additive rather than multiplicative as referenced in the illustration above. A maximum payout of 175% of target can only be earned for relative TSR performance that is greater than or equal to 75th percentile of the S&P 500. |
| • | Incorporate a stock price performance hurdle of 5% growth compounded annually (or approximately a 16% premium added to the ending stock price for the three-year performance period) in order to achieve target payout assuming median TSR performance relative to the S&P 500. |
| 3 | Assumes an annual dividend yield of approximately 3%. |
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EXECUTIVE COMPENSATION (CONTINUED)
The following example illustrates PEPunit payouts at various levels of performance based on median TSR performance relative to the S&P 500:
1(b). LTC Award: Focus on Operating Performance. We believe that the LTC Award complements PEPunits by incentivizing our executive officers to focus on critical operating performance objectives not included in the annual performance incentive. The LTC Award is denominated and paid in cash, subject to the level of performance achieved with respect to two equally weighted financial metrics: core net ROIC and core constant currency EPS. Beginning with the 2013 award, the LTC Award payout can range from 0 – 175% of the target award opportunity.
Core net ROIC was chosen as a performance metric because it aligns with our commitment to shareholders to improve both capital spending and working capital management, ensuring that we continue to improve the efficiency of our asset base. Core constant currency EPS was selected as the second operating metric because it represents a key metric followed by shareholders and incorporates key elements of financial success, including top-line growth in revenue, expense control and the effectiveness of investments made in the business over time and bottom-line profitability.
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EXECUTIVE COMPENSATION (CONTINUED)
1(c). Performance-Based Retention Awards. The Compensation Committee selectively grants retention equity awards to talented leaders who are critical to PepsiCo’s business continuity and growth. These awards are generally granted in the form of PSUs, but may consist of stock options or restricted stock units (“RSUs”) with vesting periods designed to facilitate retention through key business and/or career milestones. The awards have no value to the executive unless the executive remains employed with PepsiCo for the relevant vesting period and minimum performance criteria are met. The awards are cancelled if the executive terminates employment or retires prior to the end of the vesting period or if the underlying performance goals are not attained.
The Board of Directors granted retention PSU awards to the following NEOs on July 19, 2013:
| Name | Retention PSUs Granted |
Vesting Date | ||||||
| Brian Cornell |
69,364 | July 2018 | ||||||
| Hugh F. Johnston |
57,803 | July 2018 | ||||||
| Zein Abdalla |
57,803 | July 2018 | ||||||
| Mehmood Khan |
34,682 | July 2016 | ||||||
These awards are earned based on PepsiCo’s TSR relative to the S&P 500 over a 3-year performance period from August 1, 2013 through July 31, 2016, and the payout can range from 0 – 125% of target.
| • | To receive a target payout, PepsiCo’s TSR for the 3-year performance period must be at the median relative to the S&P 500. |
| • | To receive maximum payout capped at 125% of target, PepsiCo’s TSR must be at or above the 75th percentile relative to the S&P 500. |
| • | The awards will not pay out if PepsiCo’s TSR is below the 25th percentile relative to the S&P 500. |
| • | To ensure that PSU payouts are aligned with shareholder returns, the downside leverage for below-target performance is twice as steep as the upside leverage for above-target performance. Specific payout values are interpolated on a one-for-one basis between median and 75th percentile performance and on a two-for-one basis between 25th percentile and median performance. |
In addition, the awards for Messrs. Johnston, Cornell and Abdalla require further continued service through July 19, 2018. Notwithstanding the achievement of any performance target established by the Committee, the Committee has the discretion to reduce the number of PSUs paid.
2. Annual Cash Incentive Awards. 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.
Each executive officer’s target annual incentive opportunity (expressed as a percentage of base salary) is based on job responsibility, alignment with internally comparable positions and peer company market data. If financial performance with respect to a specific measure is above or below target, the actual payout will be above or below the target annual incentive opportunity for that measure.
When determining the actual annual incentive award payable to each executive officer, the Compensation Committee considers both business and individual performance. Weighting of performance metrics for NEOs other than the Chairman and CEO are illustrated below:
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EXECUTIVE COMPENSATION (CONTINUED)
Business Performance Metrics: Our annual incentive plan applies business performance metrics that executives directly influence to ensure a link between annual performance and actual incentive payments. The business performance measures used in the annual incentive program relate to Company-wide performance or business unit performance depending on the NEO’s position and scope of responsibility. The 2013 business performance metrics used by the Compensation Committee for each NEO are listed in the table below:
| Name | Weighting | Business Performance Metrics | ||
| Indra K. Nooyi |
100% PepsiCo | Organic Revenue(1), EPS(2), Cash Flow(3) and Core Net ROIC(4) | ||
| Hugh F. Johnston |
100% PepsiCo | Organic Revenue, Net Income, Cash Flow and Share of Retail Sales(5) | ||
| Brian Cornell |
100% PAF | Organic Revenue, NOPBT(6), Cash Flow and Share of Retail Sales | ||
| Zein Abdalla(7) |
50% PepsiCo Europe/50% PepsiCo | Organic Revenue, NOPBT, Cash Flow and Share of Retail Sales | ||
| Mehmood Khan |
100% PepsiCo | Organic Revenue, Net Income, Cash Flow and Share of Retail Sales |
| (1) | “Organic Revenue” represents Organic Revenue growth, as calculated in accordance with the reconciliation included in Exhibit A to this Proxy Statement. |
| (2) | Measured on a core constant currency basis, as calculated in accordance with the reconciliation included in Exhibit A to this Proxy Statement. |
| (3) | “Cash Flow” represents Free Cash Flow adjusted for the items reflected in the reconciliation included in Exhibit A to this Proxy Statement. |
| (4) | “Core Net ROIC” represents Net Income attributable to PepsiCo plus after-tax net interest expense, divided by the average of invested capital less cash, cash equivalents and short-term investments, adjusted, in each case, for the non-core items reflected in the Net Income Attributable to PepsiCo reconciliation included in Exhibit A to this Proxy Statement, for the five quarters ended December 28, 2013. |
| (5) | “Share of Retail Sales” represents food and beverage share of retail sales in certain categories and markets in which PepsiCo operates. |
| (6) | “NOPBT” represents net operating profit before taxes, excluding net interest expense and corporate unallocated expenses. |
| (7) | Prior to becoming President, Mr. Abdalla previously held the position of CEO, PepsiCo Europe until September 2012. When an executive officer assumes a new leadership position, the annual incentive award for the next year is determined based 50% on the performance for the prior business unit and 50% on performance related to his new position. |
Business Results: In determining annual incentive awards for 2013, 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 or above the financial goals PepsiCo communicated to shareholders to ensure the performance targets are challenging and our executive officers are motivated to deliver on our financial goals.
| Compensation Performance Measures | Financial Goals |
Performance Targets |
Actual Results |
|||||||||
| Organic Revenue Growth |
Mid-single digits | 5.1% | 4.0% | |||||||||
| Core Constant Currency Net Income Growth |
* | 6.5% | 7.9% | |||||||||
| Core Constant Currency EPS Growth |
7.0% | 7.0% | 8.9% | |||||||||
| Free Cash Flow Excluding Certain Items |
>$7.0 billion | $7.9 billion | $8.2 billion | |||||||||
| Core Net ROIC |
+50 bps | +50 bps | +110 bps | |||||||||
| * | PepsiCo does not publicly announce net income goals. |
PepsiCo’s Share of Retail Sales targets for each business unit and business unit Cash Flow and NOPBT performance targets, which were intended to be challenging, are not disclosed because such disclosure would result in competitive harm to PepsiCo. Consistent with external disclosures, business unit targets were set at levels necessary to deliver long-term high-single-digit core constant currency EPS growth.
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Overall Results: The following table summarizes the actual annual incentive awards paid to the NEOs in March 2014 based on 2013 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 ($000) |
Actual Annual Incentive as a % of Target Incentive |
||||||||||
| Indra K. Nooyi |
200 | % | 0 – 6,400 | 4,000 | 125 | % | ||||||||
| Hugh F. Johnston |
140 | % | 0 – 2,218 | 1,422 | 127 | % | ||||||||
| Brian Cornell |
150 | % | 0 – 2,673 | 1,728 | 128 | % | ||||||||
| Zein Abdalla |
150 | % | 0 – 2,673 | 1,424 | 106 | % | ||||||||
| Mehmood Khan |
130 | % | 0 – 1,802 | 1,174 | 129 | % | ||||||||
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PepsiCo 2013 Compensation Peer Group | ||
| 3M Company
Abbott Laboratories
Anheuser-Busch InBev SA/NV
Apple, Inc.
The Coca-Cola Company
Colgate-Palmolive Company
General Electric Company
General Mills, Inc.
Groupe Danone
Hewlett-Packard Company
International Business Machines Corp.
Johnson & Johnson |
Kellogg Company
Kraft Foods Group, Inc.
McDonald’s Corporation
Mondelēz International, Inc.
Nestlé S.A.
Nike, Inc.
The Procter & Gamble Company
Unilever PLC
United Parcel Service, Inc.
Wal-Mart Stores, Inc.
The Walt Disney Company | |
| PepsiCo currently is at the 64th and 57th percentile of the peer group based on revenue for the four fiscal quarters ended on or prior to December 31, 2013 and 2013 year-end market capitalization, respectively. | ||
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2013 SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of the NEOs for the fiscal year ended December 28, 2013. The NEOs are the Company’s Chairman and Chief Executive Officer, Chief Financial Officer and certain other executive officers who were most highly compensated in fiscal year 2013 by reference to their total compensation in the table below (excluding amounts disclosed in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column).
| Name and Principal Position (a) |
Year (b) |
Salary ($) (2) (c) |
Bonus ($) (3) (d) |
Stock Awards ($) (4) (e) |
Option Awards ($) (f) |
Non-Equity Incentive Plan Compensation ($) (5) (g) |
Change in Pension Value and Non- Qualified Deferred Compensation Earnings ($) (6) (h) |
All Other Compensation ($) (7) (i) |
Total ($) (j) |
|||||||||||||||||||||||||||
| Indra K. Nooyi |
2013 | 1,600,000 | — | 7,458,225 | — | 4,000,000 | 1,089,072 | 133,580 | 14,280,877 | |||||||||||||||||||||||||||
| Chairman and Chief |
2012 | 1,600,000 | — | 7,527,736 | — | 3,300,000 | 1,631,919 | 149,379 | 14,209,034 | |||||||||||||||||||||||||||
| Executive Officer, PepsiCo |
2011 | 1,584,615 | — | 6,249,986 | 3,231,373 | 2,500,000 | 3,029,699 | 520,416 | 17,116,089 | |||||||||||||||||||||||||||
| Hugh F. Johnston |
2013 | 800,000 | — | 7,088,257 | — | 1,422,400 | 461,272 | 25,350 | 9,797,279 | |||||||||||||||||||||||||||
| EVP and Chief Financial |
2012 | 792,308 | — | 1,836,793 | — | 1,241,210 | 782,746 | 27,596 | 4,680,653 | |||||||||||||||||||||||||||
| Officer, PepsiCo |
2011 | 752,885 | — | 1,120,023 | 579,066 | 857,270 | 1,007,072 | 34,660 | 4,350,976 | |||||||||||||||||||||||||||
| Brian Cornell(1) |
2013 | 900,000 | — | 8,036,102 | — | 1,728,000 | — | 308,408 | 10,972,510 | |||||||||||||||||||||||||||
| Chief Executive Officer, |
2012 | 726,923 | 2,500,000 | 7,197,361 | — | 1,040,310 | 128,748 | 355,645 | 11,948,987 | |||||||||||||||||||||||||||
| PepsiCo Americas Foods |
||||||||||||||||||||||||||||||||||||
| Zein Abdalla |
2013 | 900,000 | — | 6,837,689 | — | 1,424,300 | 803,372 | 994,820 | 10,960,181 | |||||||||||||||||||||||||||
| President, PepsiCo |
2012 | 824,462 | — | 1,444,121 | — | 1,226,740 | 1,449,801 | 873,575 | 5,818,699 | |||||||||||||||||||||||||||
| 2011 | 768,846 | — | 6,200,006 | 620,422 | 785,090 | 975,324 | 846,724 | 10,196,412 | ||||||||||||||||||||||||||||
| Mehmood Khan |
2013 | 700,000 | — | 4,235,098 | — | 1,173,900 | 482,177 | 529,656 | 7,120,831 | |||||||||||||||||||||||||||
| EVP, PepsiCo and Chief |
2012 | 700,000 | — | 1,084,026 | — | 1,026,680 | 435,475 | 126,521 | 3,372,702 | |||||||||||||||||||||||||||
| Scientific Officer, Global R&D |
2011 | 705,769 | — | 6,124,972 | 581,645 | 862,750 | 407,290 | 37,046 | 8,719,472 | |||||||||||||||||||||||||||
| (1) | Mr. Cornell was not an NEO for 2011, and as a result only his 2012 and 2013 compensation information is included. |
| (2) | The salary amounts reflect the actual base salary payments made to the NEOs. |
| (3) | “Bonus” refers to non-performance-based annual cash incentive payments. |
| (4) | The amounts reported for stock awards represent the aggregate grant date fair value of awards calculated in accordance with the accounting guidance on share-based payments. |
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| The amounts reported in this column assume target-level performance for the annual PEPunit awards and retention PSU awards. If PepsiCo were to exceed its performance targets, grant recipients may earn up to 175% of the target number of PEPunits granted and 125% of the target number or PSUs granted, respectively. The following tables reflect the grant date fair value of the PEPunit awards and retention PSU awards at below threshold performance, target and maximum earn-out levels: |
| Value of 2013 PEPunit Awards ($) |
||||||||||||
| Name | Below Threshold |
At Target Level |
At Maximum 175% Level |
|||||||||
| Indra K. Nooyi |
0 | 7,458,225 | 13,051,877 | |||||||||
| Hugh F. Johnston |
0 | 2,088,298 | 3,654,504 | |||||||||
| Brian Cornell |
0 | 2,036,116 | 3,563,151 | |||||||||
| Zein Abdalla |
0 | 1,837,729 | 3,216,026 | |||||||||
| Mehmood Khan |
0 | 1,235,105 | 2,161,434 | |||||||||
| Value of 2013 Retention PSU Awards ($) |
||||||||||||
| Name | Below Threshold |
At Target Level |
At Maximum 125% Level |
|||||||||
| Hugh F. Johnston |
0 | 4,999,960 | 6,249,885 | |||||||||
| Brian Cornell |
0 | 5,999,986 | 7,499,983 | |||||||||
| Zein Abdalla |
0 | 4,999,960 | 6,249,885 | |||||||||
| Mehmood Khan |
0 | 2,999,993 | 3,749,948 | |||||||||
| For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the PEPunits and PSUs, please see Note 6 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the applicable fiscal year. |
| (5) | As described in the Annual Cash Incentive Awards section of the Compensation Discussion and Analysis on pages 36-38 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. |
| (6) | The amounts reported reflect the aggregate change in the actuarial present value of each NEO’s 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 2013, and the effect of a change in the discount rate from 4.2% on December 29, 2012 to 5.0% on December 28, 2013 used to determine the present value. For Mr. Cornell, the change in his frozen pension value earned prior to his rehire with the Company is a negative amount ($29,878) due to a combination of factors, primarily the impact of the change in discount rate. During 2013, 2012 and 2011, PepsiCo did not pay above-market or preferential rates on any non-qualified deferred compensation. |
| (7) | The following table provides the details for the amounts reported for 2013 for each NEO: |
| Name | Personal Use of Company Aircraft (A) ($) |
Personal Use of Ground Transportation (A) ($) |
Car Allowance (B) ($) |
Company Contributions to Defined Contribution Plans (C) ($) |
Global Mobility (D) ($) |
Tax Reimbursement (E) ($) |
Total All Other Compensation (F) ($) |
|||||||||||||||||||
| Indra K. Nooyi |
102,772 | 30,463 | — | — | — | — | 133,580 | |||||||||||||||||||
| Hugh F. Johnston |
— | — | 25,350 | — | — | — | 25,350 | |||||||||||||||||||
| Brian Cornell |
74,808 | — | 27,450 | 174,628 | 11,976 | 16,607 | 308,408 | |||||||||||||||||||
| Zein Abdalla |
13,437 | — | 24,932 | — | 641,986 | 314,465 | 994,820 | |||||||||||||||||||
| Mehmood Khan |
— | — | 25,350 | — | 278,277 | 207,879 | 529,656 | |||||||||||||||||||
| (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 and crew expenses) or ground transportation (such as fuel and the driver’s compensation). The NEOs are fully responsible for all personal income taxes associated with any personal use of Company aircraft and ground transportation. |
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| As an internationally recognized business leader and public figure, the Compensation Committee requires Ms. Nooyi to use Company aircraft and ground transportation for all personal travel. This requirement serves to enhance her security and personal safety, and to increase her time available for business purposes. The Committee reaffirmed this security requirement following a detailed independent security study updated in 2013. The Committee will continue to assess Ms. Nooyi’s use of Company-provided transportation to ensure that it remains appropriate. |
| Beginning in 2009, 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 other executive officers must be approved by the Chairman and CEO on a case-by-case basis. |
| (B) | Amounts reported for Mr. Abdalla’s car allowance reflects a portion paid in Swiss Francs and converted into U.S. dollars based on an average daily exchange rate of 1.00 CHF = 1.079 USD for 2013. |
| (C) | Amounts reported for Mr. Cornell reflect ARC and Company matching contributions under the PepsiCo Savings Plan, and contributions under the ARC-E, a nonqualified, non-elective defined contribution deferred compensation plan that provides benefits to employees whose participation in the ARC portion of the PepsiCo Savings Plan is limited because of Internal Revenue Code limitations on qualified compensation and benefits. Mr. Cornell is eligible for these benefits because he was rehired by the Company after January 1, 2011 and is accordingly not eligible to accrue any additional benefits under any defined benefit pension plan maintained by the Company. |
| (D) | The amounts reported include the following: |
| • | For Mr. Cornell, relocation benefits related to PepsiCo requiring Mr. Cornell to move to New York from Arkansas at the time of hire, including home purchase assistance under the Company’s salaried employee relocation program. |
| • | For Mr. Abdalla, relocation benefits related to PepsiCo requiring Mr. Abdalla to move from Geneva, Switzerland to New York, including assistance with temporary living, moving of household goods ($57,910) and travel under the Company’s salaried employee relocation program. |
| • | For Mr. Abdalla, reported amounts also include the following transition benefits, which were approved by the Compensation Committee in connection with his immediate relocation to the United States upon his appointment as President, PepsiCo, in September 2012: (i) continuation of housing, cost-of-living and educational benefits provided to his family as part of his Geneva, Switzerland-based international assignment until his family relocated to the United States in July 2013 ($222,800); (ii) reimbursement of Mr. Abdalla’s periodic home leave flights to Geneva prior to his family’s relocation ($89,610); (iii) reimbursement of immigration fees; and (iv) transition payment to assist with expenses related to his move to the United States ($200,000). A portion of Mr. Abdalla’s Global Mobility Program benefits were paid in Swiss Francs and converted into U.S. dollars based on an average daily exchange rate of 1.00 CHF = 1.079 USD for 2013. |
| • | For Dr. Khan, relocation benefits related to PepsiCo requiring Dr. Khan to move from Illinois to New York, including assistance with moving of household goods and home sale assistance under the Company’s salaried employee relocation program. |
| (E) | For Messrs. Cornell and Abdalla and Dr. Khan, the amount reported reflects reimbursement of all federal, state and local tax obligations directly related to relocation assistance, and taxes incurred in connection with such assistance. Related to Mr. Abdalla’s prior international assignment in Geneva, Switzerland, the amount reported also reflects tax equalization designed to cover taxes on his compensation in excess of the taxes he would have incurred in the United States, so as to minimize any financial detriment or gain from the international assignment. Mr. Abdalla’s tax reimbursements are paid in Swiss Francs and converted into U.S. dollars based on an average daily exchange rate of 1.00 CHF = 1.079 USD for 2013. |
| (F) | The total also includes the cost of an annual physical exam for Ms. Nooyi, Mr. Cornell and Dr. Khan. |
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EXECUTIVE COMPENSATION (CONTINUED)
2013 GRANTS OF PLAN-BASED AWARDS
The following table summarizes grants of PEPunits, PSUs, LTC Awards and target annual cash incentive opportunities provided to NEOs in 2013. PEPunit and LTC Awards granted in 2013 recognized 2012 performance. The material terms of PepsiCo’s annual and long-term incentive programs are described in the Compensation Discussion and Analysis beginning on page 29 of this Proxy Statement.
| Grant Date (1) (b) |
Grant Type |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All
Other Stock Awards: Number of Shares of Stock or Units (#) (i) |
Grant Date Fair Value of Stock and Option Awards (7) ($) (j) |
|||||||||||||||||||||||||||||||||
| Name (a) |
Threshold ($) (c) |
Target ($) (d) |
Maximum ($) (e) |
Threshold (#) (f) |
Target (#) (g) |
Maximum (#) (h) |
||||||||||||||||||||||||||||||||
| Indra K. Nooyi |
Annual Bonus (2) | 0 | 3,200,000 | 6,400,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Long-Term Cash (3) | 0 | 5,000,000 | 8,750,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Annual PEPunits (4) | — | — | — | 0 | 108,911 | 190,594 | — | 7,458,225 | |||||||||||||||||||||||||||||
| Hugh F. Johnston |
Annual Bonus (2) | 0 | 1,120,000 | 2,217,600 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Long-Term Cash (3) | 0 | 1,400,000 | 2,450,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Annual PEPunits (4) | — | — | — | 0 | 30,495 | 53,366 | — | 2,088,298 | |||||||||||||||||||||||||||||
| 7/19/2013 | Retention PSUs (5) | — | — | — | 0 | 57,803 | 72,253 | — | 4,999,960 | |||||||||||||||||||||||||||||
| Brian Cornell |
Annual Bonus (2) | 0 | 1,350,000 | 2,673,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Long-Term Cash (3) | 0 | 1,365,000 | 2,388,750 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Annual PEPunits (4) | — | — | — | 0 | 29,733 | 52,032 | — | 2,036,116 | |||||||||||||||||||||||||||||
| 7/19/2013 | Retention PSUs (5) | — | — | — | 0 | 69,364 | 86,705 | — | 5,999,986 | |||||||||||||||||||||||||||||
| Zein Abdalla |
Annual Bonus (2) | 0 | 1,350,000 | 2,673,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Long-Term Cash (3) | 0 | 1,232,000 | 2,156,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Annual PEPunits (4) | — | — | — | 0 | 26,836 | 46,963 | — | 1,837,729 | |||||||||||||||||||||||||||||
| 7/19/2013 | Retention PSUs (5) | — | — | — | 0 | 57,803 | 72,253 | — | 4,999,960 | |||||||||||||||||||||||||||||
| Mehmood Khan |
Annual Bonus (2) | 0 | 910,000 | 1,801,800 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Long-Term Cash (3) | 0 | 828,000 | 1,449,000 | — | — | — | — | — | |||||||||||||||||||||||||||||
| 3/1/2013 | Annual PEPunits (4) | — | — | — | 0 | 18,036 | 31,563 | — | 1,235,105 | |||||||||||||||||||||||||||||
| 7/19/2013 | Retention PSUs (6) | — | — | — | 0 | 34,682 | 43,352 | — | 2,999,993 | |||||||||||||||||||||||||||||
| (1) | Consistent with prior years, 2013 PEPunit and LTC Awards were approved by the Compensation Committee at its regularly-scheduled meeting in February. The approval date for the awards was February 7, 2013 and the grant date was March 1, 2013. |
| (2) | The amounts reported reflect the potential range of 2013 annual cash incentive awards under the shareholder-approved EICP, as described in the Compensation Discussion and Analysis beginning on page 29 of this Proxy Statement. |
| (3) | The amounts reported reflect the potential range of 2013 LTC Award payouts under the shareholder-approved PepsiCo, Inc. 2007 Long-Term Incentive Plan, as described in the Compensation Discussion and Analysis beginning on page 29 of this Proxy Statement. The actual cash award earned is determined based on the level of achievement attained with respect to the pre-established performance targets over the three-year performance period and will be paid out on the third anniversary of the grant date. |
| (4) | The actual number of shares of PepsiCo Common Stock that are earned for the annual 2013 PEPunits award is determined based on the level of achievement attained with respect to absolute stock price performance and relative TSR 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 PEPunits earned will be reduced below the target number. The amounts reported in the “target” column reflect the number of PEPunits 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 PEPunits that will be paid out if the performance targets are exceeded. |
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| The PEPunits 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. Ms. Nooyi and Mr. Abdalla are currently eligible for pro-rata vesting. Notwithstanding the level of performance achieved, the Compensation Committee retains the discretion to reduce the number of shares issued in settlement of the 2013 PEPunit awards. |
| For additional information regarding these awards, please see the PEPunit Awards section of the Compensation Discussion and Analysis on pages 34-35 of this Proxy Statement. |
| (5) | The amount reported reflects a retention PSU award. The award is scheduled to vest on the fifth anniversary of the grant date, subject to PepsiCo’s TSR performance relative to the S&P 500 consistent with the pre-established payout scale determined for a three-year period, and subject to continued employment through the vesting date. |
| (6) | The amount reported reflects a retention PSU award. The award is scheduled to vest on the third anniversary of the grant date, subject to PepsiCo’s TSR performance relative to the S&P 500 consistent with the pre-established payout scale determined for a three-year period, and subject to continued employment through the vesting date. |
| (7) | The amounts reported represent the aggregate grant date fair value of all PEPunits and PSUs granted to NEOs in 2013 calculated in accordance with the accounting guidance on share-based payments, assuming target performance is achieved. For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the PEPunits and RSUs reported, please see Note 6 to the Company’s consolidated financial statements in the Company’s Annual Report in Form 10-K for the fiscal year ended December 28, 2013. |
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EXECUTIVE COMPENSATION (CONTINUED)
2013 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table lists all outstanding stock options and PEPunit, PSU, and RSU awards as of December 28, 2013 for the NEOs. The material terms and conditions of the equity awards reported in this table are described in the Long-Term Equity Incentive Compensation section of the Compensation Discussion and Analysis beginning on page 29 of this Proxy Statement. No stock options, PEPunits, PSUs or RSUs granted to an NEO have been transferred to any other person, trust or entity.
| Option Awards (1) | Stock Awards (1)(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name (a) |
Number of Securities Underlying Unexercised Options (#) Exercisable (b) |
Number of Securities Underlying Unexercised Options (#) Unexercisable (c) |
Option Exercise Price($) (d) |
Option Grant Date |
Option Vesting Date |
Option Expiration Date (e) |
Number of Shares of Units of Stock that Have Not Vested (#) (f) |
Grant Date |
Vesting Date |
Market Value of Shares or Units of Stock that Have Not Vested ($) (g) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (3) (#) (h) |
Grant Date |
Vesting Date |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) (i) |
||||||||||||||||||||||||||||||||||||||||
| Indra K. Nooyi |
392,157 | 63.75 | 03/01/11 | 03/01/14 | 02/28/21 | 108,911 | 03/01/13 | 03/01/16 | 9,008,029 | |||||||||||||||||||||||||||||||||||||||||||||
| 360,902 | 66.50 | 04/12/10 | 04/12/13 | 04/11/20 | 116,691 | 04/02/12 | 04/02/15 | 9,651,513 | ||||||||||||||||||||||||||||||||||||||||||||||
| 452,830 | 53.00 | 02/06/09 | 02/01/12 | 01/31/19 | 98,039 | 03/01/11 | 03/01/14 | 8,108,806 | ||||||||||||||||||||||||||||||||||||||||||||||
| 374,899 | 68.75 | 02/01/08 | 02/01/11 | 01/31/18 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 304,220 | 65.00 | 02/02/07 | 02/01/10 | 01/31/17 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 375,000 | 45.51 | 07/26/01 | 07/26/11 | 07/25/16 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 72,705 | 57.50 | 02/03/06 | 02/01/09 | 01/31/16 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 77,777 | 53.75 | 02/01/05 | 02/01/08 | 01/31/15 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Hugh F. Johnston |
70,275 | 63.75 | 03/01/11 | 03/01/14 | 02/28/21 | 57,803 | (4) | 07/19/13 | 07/19/18 | 4,780,886 | ||||||||||||||||||||||||||||||||||||||||||||
| 43,856 | 66.50 | 04/12/10 | 04/12/13 | 04/11/20 | 30,495 | 03/01/13 | 03/01/16 | 2,522,241 | ||||||||||||||||||||||||||||||||||||||||||||||
| 46,561 | 53.00 | 02/06/09 | 02/01/12 | 01/31/19 | 28,473 | 04/02/12 | 04/02/15 | 2,355,002 | ||||||||||||||||||||||||||||||||||||||||||||||
| 49,052 | 68.75 | 02/01/08 | 02/01/11 | 01/31/18 | 17,569 | 03/01/11 | 03/01/14 | 1,453,132 | ||||||||||||||||||||||||||||||||||||||||||||||
| 45,025 | 65.00 | 02/02/07 | 02/01/10 | 01/31/17 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 360 | 57.50 | 02/03/06 | 02/01/09 | 01/31/16 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 385 | 53.75 | 02/01/05 | 02/01/08 | 01/31/15 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Brian Cornell |
25,063 | (5) | 04/02/12 | 04/02/15 | 2,120,580 | 69,364 | (4) | 07/19/13 | 07/19/18 | 5,737,096 | ||||||||||||||||||||||||||||||||||||||||||||
| 29,733 | 03/01/13 | 03/01/16 | 2,459,216 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 46,677 | (6) | 04/02/12 | 04/02/15 | 3,860,655 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 26,139 | 04/02/12 | 04/02/15 | 2,161,957 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Zein Abdalla |
75,294 | 63.75 | 03/01/11 | 03/01/14 | 02/28/21 | 57,803 | (4) | 07/19/13 | 07/19/18 | 4,780,886 | ||||||||||||||||||||||||||||||||||||||||||||
| 54,737 | 66.50 | 04/12/10 | 04/12/13 | 04/11/20 | 26,836 | 03/01/13 | 03/01/16 | 2,219,606 | ||||||||||||||||||||||||||||||||||||||||||||||
| 59,259 | 53.00 | 02/06/09 | 02/01/12 | 01/31/19 | 22,386 | 04/02/12 | 04/02/15 | 1,851,546 | ||||||||||||||||||||||||||||||||||||||||||||||
| 19,411 | 68.75 | 02/01/08 | 02/01/11 | 01/31/18 | 78,431 | (7) | 03/01/11 | 03/01/16 | 6,487,028 | |||||||||||||||||||||||||||||||||||||||||||||
| 531 | 65.00 | 02/02/07 | 02/01/10 | 01/31/17 | 18,824 | 03/01/11 | 03/01/14 | 1,556,933 | ||||||||||||||||||||||||||||||||||||||||||||||
| 600 | 57.50 | 02/03/06 | 02/01/09 | 01/31/16 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 642 | 53.75 | 02/01/05 | 02/01/08 | 01/31/15 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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EXECUTIVE COMPENSATION (CONTINUED)
| Option Awards (1) | Stock Awards (1)(2) | |||||||||||||||||||||||||||||||||||||||||||||
| Name (a) |
Number of Securities Underlying Unexercised Options (#) Exercisable (b) |
Number of Securities Underlying Unexercised Options (#) Unexercisable (c) |
Option Exercise Price($) (d) |
Option Grant Date |
Option Vesting Date |
Option Expiration Date (e) |
Number of Shares of Units of Stock that Have Not Vested (#) (f) |
Grant Date |
Vesting Date |
Market Value of Shares or Stock that Have Not Vested ($) (g) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (3) (#) (h) |
Grant Date |
Vesting Date |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) (i) |
||||||||||||||||||||||||||||||||
| Mehmood Khan |
70,588 | 63.75 | 03/01/11 | 03/01/14 | 02/28/21 | 34,682 | (8) | 07/19/13 | 07/19/16 | 2,868,548 | ||||||||||||||||||||||||||||||||||||
| 50,526 | 66.50 | 04/12/10 | 04/12/13 | 04/11/20 | 18,036 | 03/01/13 | 03/01/16 | 1,491,758 | ||||||||||||||||||||||||||||||||||||||
| 63,396 | 53.00 | 02/06/09 | 02/01/12 | 01/31/19 | 16,804 | 04/02/12 | 04/02/15 | 1,389,859 | ||||||||||||||||||||||||||||||||||||||
| 30,137 | 68.75 | 02/01/08 | 02/01/11 | 01/31/18 | 78,431 | (9) | 03/01/11 | 03/01/14 | 6,487,028 | |||||||||||||||||||||||||||||||||||||
| 17,647 | 03/01/11 | 03/01/14 | 1,459,583 | |||||||||||||||||||||||||||||||||||||||||||
| (1) | With the exception of the awards discussed in footnotes (4), (5), (6), and (7) below, each of the unvested stock option, 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, in the case of PEPunits and PSUs, achievement of applicable performance targets. Each of the awards that are not retention 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. |
| (2) | The market value of unvested PEPunits, PSUs and RSUs reflected in columns (g) and (i) have been valued by multiplying the number of unvested PEPunits, PSUs and RSUs reflected in columns (f) and (h) by $82.71, PepsiCo’s closing stock price on December 27, 2013, the last trading day of the 2013 fiscal year. |
| (3) | The reported awards reflect grants of PEPunits and PSUs that will vest and be earned based on the achievement of financial performance targets during a two-year performance period for the 2011 PSU award, and a three-year performance period for the 2012 and 2013 PEPunit awards, and require the NEO to continue to provide service to PepsiCo through the end of a three-year vesting period. Awards vest on a pro-rata basis upon retirement between ages 55 and 61, inclusive, with at least 10 years of service, and vest in full upon retirement at age 62 or older with at least 10 years of service, subject, in each case, to achievement of applicable performance targets. Ms. Nooyi and Mr. Abdalla are currently eligible for pro-rata vesting. For the 2013, 2012 and 2011 awards, the number displayed in column (h) reflects 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 awards reflect retention PSU awards granted to Messrs. Johnston, Cornell and Abdalla. These awards are scheduled to vest on July 19, 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. Messrs. Johnston, Cornell and Abdalla may receive 0% to 125% of the PSUs granted depending on the performance level achieved. |
| (5) | The reported award reflects Mr. Cornell’s 2012 new hire RSU award which vests in three equal installments. 33% of the award vested on April 2, 2013, 33% will vest on April 2, 2014 and 34% will vest on April 2, 2015, subject to his continued employment through each vesting date. |
| (6) | The reported award reflects Mr. Cornell’s 2012 new hire PEPunit award which vests in two equal installments on each of the second and third anniversaries of the grant date, subject to the achievement of pre-established performance targets over a three-year period. |
| (7) | The reported award reflects Mr. Abdalla’s retention PSU award which vests on March 1, 2016 contingent upon the achievement of pre-established performance targets over three and five-year performance periods, and subject to continued employment through the vesting date. In February 2014, the Compensation Committee certified that the performance goals applicable to the three-year performance period were not met, and Mr. Abdalla will accordingly forfeit 39,215 PSUs. Mr. Abdalla may receive up to 100% of the remaining 39,216 PSUs granted depending on the performance level achieved with respect to performance goals applicable to the five-year performance period. |
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| (8) | The reported award reflects Dr. Khan’s retention PSU award. This award is scheduled to vest on July 19, 2016, subject to the achievement of pre-established performance targets over a three-year performance period, and subject to continued employment through the vesting date. Dr. Khan may receive 0% to 125% of the PSUs granted depending on the performance level achieved. |
| (9) | The reported award reflects Dr. Khan’s retention PSU award. This award vests 50% on March 1, 2014 and 50% on March 1, 2016 contingent upon the achievement of pre-established performance targets over three-year and five-year performance periods, respectively and subject to continued employment through the applicable vesting dates. In February 2014, the Compensation Committee certified that the performance goals applicable to the three-year performance period were not met, and Dr. Khan will accordingly forfeit 39,215 PSUs. Dr. Khan may receive up to 100% of the remaining 39,216 PSUs granted depending on the performance level achieved with respect to performance goals applicable to the five-year performance period. |
2013 OPTION EXERCISES AND STOCK VESTED
| Option Awards (1) | Stock Awards (2) | |||||||||||||||||
| Name (a) |
Number of Shares Acquired on Exercise (#) (b) |
Value Realized on Exercise (3) ($) (c) |
Number of Shares Acquired on Vesting (#) (d) |
Value Realized on Vesting (3) ($) (e) |
||||||||||||||
| Indra K. Nooyi |
88,444 | 2,517,990 | 94,195 | 7,477,906 | ||||||||||||||
| Hugh F. Johnston |
55,464 | 1,582,643 | 11,446 | 908,669 | ||||||||||||||
| Brian Cornell |
0 | 0 | 12,531 | 997,154 | ||||||||||||||
| Zein Abdalla |
0 | 0 | 14,286 | 1,134,130 | ||||||||||||||
| Mehmood Khan |
0 | 0 | 13,187 | 1,046,883 | ||||||||||||||
| (1) | All stock option exercises during 2013 were executed in a manner consistent with PepsiCo’s Exercise and Hold Policy, which is described in the Governance Features of our Executive Compensation Programs section of the Compensation Discussion and Analysis beginning on page 43 of this Proxy Statement. |
| (2) | The following table lists details of the PSU and RSU awards that vested in 2013 for the NEOs. The last column includes dividend equivalent amounts earned as a result of the PSUs and RSUs that vested in 2013 and were paid out in cash, and are not included in the table above. The PSUs vested on April 12, 2013 based upon the level of achievement attained with respect to the pre-established core constant currency EPS growth and international constant currency Net Revenue growth as a multiple of North America Net Revenue growth targets for the two-year performance period. |
| Name | Type | Grant Date |
Payout Date |
Number of Shares Granted (#) |
Shares Acquired on Vesting (#) |
Realized on Vesting ($) |
Dividend Equivalents Paid ($) |
|||||||||||||||||||
| Indra K. Nooyi |
PSU | 4/12/2010 | 4/12/2013 | 90,226 | 94,195 | 7,477,906 | 577,415 | |||||||||||||||||||
| Hugh F. Johnston |
PSU | 4/12/2010 | 4/12/2013 | 10,964 | 11,446 | 908,669 | 70,164 | |||||||||||||||||||
| Brian Cornell |
RSU(A) | 4/2/2012 | 4/2/2013 | 12,531 | 12,531 | 997,154 | 26,942 | |||||||||||||||||||
| Zein Abdalla |
PSU | 4/12/2010 | 4/12/2013 | 13,684 | 14,286 | 1,134,130 | 87,573 | |||||||||||||||||||
| Mehmood Khan |
PSU | 4/12/2010 | 4/12/2013 | 12,632 | 13,187 | 1,046,883 | 80,836 | |||||||||||||||||||
| (A) | The amount reported reflects a new hire RSU award which vests in three equal installments on each of the first, second and third anniversary of the grant date. |
| (3) | The value realized on exercise of stock options is equal to the amount per share at which the NEO sold shares acquired on exercise (all of which occurred on the date of exercise) minus the exercise price of the stock options times the number of shares acquired on exercise of the options. The value realized on vesting of stock awards is equal to the average of the high and low market prices of PepsiCo Common Stock on the date of vesting times the number of shares acquired upon vesting. The number of shares and value realized on vesting includes shares that were withheld at the time of vesting to satisfy tax withholding requirements. |
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EXECUTIVE COMPENSATION (CONTINUED)
The present value of the accumulated retirement benefits reported in column (d) of the following 2013 Pension Benefits Table represents the accumulated benefit obligation for benefits earned to date, based on age, service and earnings through the plan’s measurement date of December 28, 2013.
| Name (a) |
Plan Name (b) |
Number of Years Credited Service (#) (c) |
Value of Accumulated Benefit ($) (1) (d) |
Payments During Last Fiscal Year ($) (e) |
||||||||||
| Indra K. Nooyi |
PepsiCo Salaried Employees Retirement Plan | 19.8 | 822,510 | 0 | ||||||||||
| PepsiCo Pension Equalization Plan | 14,839,195 | 0 | ||||||||||||
| Hugh F. Johnston |
PepsiCo Salaried Employees Retirement Plan | 23.8 | 631,672 | 0 | ||||||||||
| PepsiCo Pension Equalization Plan | 3,690,717 | 0 | ||||||||||||
| Brian Cornell(2) |
PepsiCo Salaried Employees Retirement Plan | 20.4 | 473,226 | 0 | ||||||||||
| PepsiCo Pension Equalization Plan | 1,221,295 | 0 | ||||||||||||
| Zein Abdalla(3) |
PepsiCo Salaried Employees Retirement Plan | 1.3 | 23,269 | 0 | ||||||||||
| PepsiCo International Retirement Plan | 16.8 | 2,279,840 | 0 | |||||||||||
| PepsiCo Pension Equalization Plan | 2,613,708 | 0 | ||||||||||||
| Mehmood Khan |
PepsiCo Salaried Employees Retirement Plan | 6.0 | 324,224 | 0 | ||||||||||
| PepsiCo Pension Equalization Plan | 1,605,240 | 0 | ||||||||||||
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| (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 5.0%; and |
| • | Benefits will be converted to lump sums based on interest rates that grade up to 6% at retirement. |
| (2) | Mr. Cornell is currently participating in the ARC, and his pension values are based on his grandfathered benefits accrued during his previous employment with PepsiCo. |
| (3) | Effective September 2012, Mr. Abdalla ceased participation in the PIRP and commenced participation in the Salaried Plan and the PEP. Accordingly, Mr. Abdalla no longer accrues benefits under the PIRP. |
2013 NON-QUALIFIED DEFERRED COMPENSATION
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EXECUTIVE COMPENSATION (CONTINUED)
Participants select phantom investment options from those available under the ARC-E, which are a subset of the funds available under the PepsiCo Savings Plan, and amounts credited to participants’ accounts are subject to investment gains and losses. A participant’s vested account balance is paid in a single lump sum as soon as practicable following the last day of the month in which the participant separates from service, provided that specified employees under Section 409A may not receive a distribution for at least six months following separation from service.
| Name (a) |
Executive Contributions in Last Fiscal Year ($) (b) |
Registrant Contributions in Last Fiscal Year ($) (1) (c) |
Aggregate Earnings in Last Fiscal Year ($) (2) (d) |
Aggregate Withdrawals/ Distributions ($) (e) |
Aggregate Balance at Last Fiscal Year End ($) (3) (f) |
|||||||||||||||
| Indra K. Nooyi |
0 | 0 | 1,003,316 | 0 | 10,478,842 | |||||||||||||||
| Hugh F. Johnston |
0 | 1,177,837 | 350,792 | 52,914 | 2,449,668 | |||||||||||||||
| Brian Cornell |
0 | 151,678 | 14,424 | 0 | 206,612 | |||||||||||||||
| Zein Abdalla |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| Mehmood Khan |
0 | 0 | 0 | 0 | 0 | |||||||||||||||
| (1) | The amount reported for Mr. Cornell represents notional Company contributions to the ARC-E account and is reported as compensation in the “All Other Compensation” column of the 2013 Summary Compensation Table. Mr. Cornell is not eligible to accrue any additional benefits under any defined benefit pension plan maintained by the Company. During 2013, these contributions were invested in the Blkrck LifePath 2025 fund which earned an annual rate of return of 12.29%. |
| (2) | PepsiCo does not provide above-market or preferential rates and as a result, the earnings on non-qualified deferred compensation are not included in the 2013 Summary Compensation Table. |
| (3) | Except for the contributions reported in column (c) for Mr. Cornell, none of the amounts reported in this column are reflected in the 2013 Summary Compensation Table. Deferral balances of NEOs under the Executive Income Deferral Program were invested in the following phantom funds and earned the following rates of return in 2013: (i) PepsiCo Common Stk: 24.42%, (ii) Defined AFR Fund: 3.42% and (iii) Blkrck LRG Eqty Indx: 32.24%. |
POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
Termination of Employment/Retirement
None of our active NEOs have any arrangement that provides for severance payments or benefits.
In the event an NEO retires, terminates or resigns from PepsiCo for any reason as of the fiscal year end, he or she would be entitled to:
| • | the pension benefit disclosed in column (d) of the 2013 Pension Benefits table on page 54 of this Proxy Statement; and |
| • | the non-qualified deferred compensation balance disclosed in column (f) of the 2013 Non-Qualified Deferred Compensation table, above. |
Our NEOs’ unvested annual long-term incentive 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 retention awards, no accelerated vesting occurs upon retirement. In the event of death or long-term disability, pre-2012 retention awards vest on a pro rata basis and any retention awards granted in 2012 and later fully vest. Even after vesting, PEPunit, PSU and LTC Awards remain subject to achievement of pre-established performance targets.
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EXECUTIVE COMPENSATION (CONTINUED)
The following table sets forth, for each NEO, the value of the unvested stock option and PEPunit, PSU, RSU and LTC Awards and accrued dividend equivalents on PSUs and RSUs that would vest and would be forfeited if the NEO’s employment terminated on December 28, 2013, the last day of the 2013 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 |
27.6 | 17.2 | 17.2 | 0.0 | ||||||||||||||
| Hugh F. Johnston |
0.0 | 15.2 | 15.2 | 0.0 | ||||||||||||||
| Brian Cornell |
0.0 | 19.0 | 19.0 | 0.0 | ||||||||||||||
| Zein Abdalla |
5.5 | 15.7 | 12.7 | 3.0 | ||||||||||||||
| Mehmood Khan |
0.0 | 17.2 | 14.2 | 3.0 | ||||||||||||||
| (1) | The stock options, PEPunits, PSUs, and RSUs were valued at a price of $82.71, PepsiCo’s closing stock price on December 27, 2013, the last trading day of the 2013 fiscal year. Amounts do not include the value of vested stock options that have already been earned or unvested stock options, PEPunits, PSUs and RSUs that an executive may have earned due to fulfilling the retirement eligibility criteria. Currently, Ms. Nooyi and Mr. Abdalla are eligible for pro-rata vesting. For a list of earned vested stock options, see the 2013 Outstanding Equity Awards at Fiscal Year-End table beginning on page 50 of this Proxy Statement. |
Change in Control
PepsiCo has a long history of maintaining a “double trigger” vesting policy. This means that unvested stock option and PEPunit, PSU, RSU and LTC Awards only vest if the participant is terminated without cause or resigns for good reason within two years following a change in control of PepsiCo or if the acquirer fails to assume or replace the outstanding awards.
For each NEO, the following table illustrates:
| • | the value of stock option, PEPunit, PSU, RSU, LTC Awards and accrued dividend equivalents on PSUs and RSUs that would vest upon a change in control of PepsiCo without termination of employment reflecting target level of payout; and |
| • | the incremental value of the stock options, PEPunits, PSUs, RSUs, LTC Awards and accrued dividend equivalents on PSUs and RSUs that would vest upon an NEO’s termination without cause or resignation for good reason at the time of the change in control plus the excess of the Black-Scholes value above the intrinsic value of vested options awarded prior to 2007 that would become payable at that time. |
| Change in Control ($ in millions) |
||||||||
| Name | Total Benefit: Change in Control Only |
Total Benefit: Qualifying Termination upon Change in Control(1) |
||||||
| Indra K. Nooyi |
0.0 | 17.2 | ||||||
| Hugh F. Johnston |
0.0 | 15.2 | ||||||
| Brian Cornell |
0.0 | 19.0 | ||||||
| Zein Abdalla |
0.0 | 15.7 | ||||||
| Mehmood Khan |
0.0 | 17.2 | ||||||
| (1) | The amounts reported in this column assume that both the change in control and termination occurred on December 28, 2013, the last day of the 2013 fiscal year. The stock options, PEPunits, PSUs and RSUs were valued based on PepsiCo’s $82.71 closing stock price on December 27, 2013. Amounts do not include vested options that have already been earned due to continued service other than the excess of the Black-Scholes value above the intrinsic value on vested options granted prior to 2007. For a list of earned vested stock options, please see the 2013 Outstanding Equity Awards at Fiscal Year-End table beginning on page 50 of this Proxy Statement. |
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The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2013.
THE COMPENSATION COMMITTEE
| LLOYD G. TROTTER, CHAIRMAN RAY L. HUNT ALBERTO IBARGÜEN |
SHARON PERCY ROCKEFELLER JAMES J. SCHIRO DANIEL VASELLA |
The information contained in the above report will not be deemed to be “soliciting material” or “filed” with the SEC, nor will this information be incorporated into any future filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent we specifically incorporate such report by reference.
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2013 DIRECTOR COMPENSATION (CONTINUED)
2013 NON-EMPLOYEE DIRECTOR COMPENSATION
The following table summarizes the compensation of the non-employee directors for the fiscal year ended December 28, 2013.
| Name (a) |
Fees Earned or Paid in Cash ($)(1) (b) |
Stock Awards ($)(2) (c) |
Option Awards ($)(3) (d) |
All Other Compensation ($)(4) (e) |
Total($) (f) |
|||||||||||||||
| Shona L. Brown |
50,000 | 150,000 | 0 | 0 | 200,000 | |||||||||||||||
| George W. Buckley |
50,000 | 150,000 | 0 | 0 | 200,000 | |||||||||||||||
| Ian M. Cook (5) |
79,167 | 150,000 | 0 | 0 | 219,167 | |||||||||||||||
| Dina Dublon |
70,000 | 150,000 | 0 | 0 | 220,000 | |||||||||||||||
| Victor J. Dzau |
50,000 | 150,000 | 0 | 11,211 | 211,211 | |||||||||||||||
| Ray L. Hunt |
65,000 | 150,000 | 0 | 0 | 215,000 | |||||||||||||||
| Alberto Ibargüen |
50,000 | 150,000 | 0 | 0 | 200,000 | |||||||||||||||
| Sharon P. Rockefeller |
50,000 | 150,000 | 0 | 0 | 200,000 | |||||||||||||||
| James J. Schiro |
50,000 | 150,000 | 0 | 0 | 200,000 | |||||||||||||||
| Lloyd G. Trotter |
70,000 | 150,000 | 0 | 0 | 220,000 | |||||||||||||||
| Daniel Vasella |
50,000 | 150,000 | 0 | 16,025 | 216,025 | |||||||||||||||
| Alberto Weisser |
50,000 | 150,000 | 0 | 0 | 200,000 | |||||||||||||||
| (1) | The retainer fee reflects the first payment made in arrears in December 2013 for service during the period June 1, 2013 through November 30, 2013. The following directors elected to defer their 2013-2014 cash compensation into PepsiCo’s director deferral program: Dr. Dzau, Dr. Vasella, Mr. Schiro and Dr. Buckley each deferred his $50,000 retainer into 597 phantom stock units; Mr. Hunt deferred his $65,000 retainer into 776 phantom stock units; Mr. Trotter deferred his $70,000 retainer into 836 phantom stock units. The number of phantom units of PepsiCo Common Stock each director deferred on December 2, 2013 was determined by dividing their deferred cash compensation by the closing price of PepsiCo Common Stock on the grant date, which was $83.70. |
| (2) | The amounts reported for stock awards represent the full grant date fair value of the phantom stock units granted in 2013 calculated in accordance with the accounting guidance on share-based payments. |
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| (3) | Prior to 2007, the directors’ annual equity award included stock options and RSUs. Beginning in 2007, the directors’ annual equity award consisted solely of phantom stock units. The number of vested and unvested stock options held by each non-employee director at fiscal year-end 2013 is shown below: |
| Name | Number of Vested Options |
Number of Unvested Options |
||||||
| Shona L. Brown |
0 | 0 | ||||||
| George W. Buckley |
0 | 0 | ||||||
| Ian M. Cook |
0 | 0 | ||||||
| Dina Dublon |
7,958 | 0 | ||||||
| Victor J. Dzau |
6,588 | 0 | ||||||
| Ray L. Hunt |
0 | 0 | ||||||
| Alberto Ibargüen |
6,588 | 0 | ||||||
| Sharon P. Rockefeller |
12,618 | 0 | ||||||
| James J. Schiro |
12,618 | 0 | ||||||
| Lloyd G. Trotter |
0 | 0 | ||||||
| Daniel Vasella |
6,588 | 0 | ||||||
| Alberto Weisser |
0 | 0 | ||||||
| (4) | The amounts reported in this column include PepsiCo Foundation matching gift contributions. PepsiCo Foundation matching gift contributions are available to all full-time PepsiCo employees, PepsiCo retirees, PepsiCo non-employee directors and spouses of eligible individuals. 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, or $20,000 if an eligible individual provides significant and continuous ongoing volunteer services to a tax-exempt organization in addition to his or her financial contribution. In addition, infrequently, spouses of Directors are invited to attend a Board meeting and may incur travel expenses that are reimbursed by the Company. These amounts are included in the All Other Compensation column. If spouse travel occurs on Company aircraft, income is imputed to the Director for income tax purposes and the Director is not provided a tax reimbursement. |
| (5) | The retainer fee includes a pro-rata amount of $4,167 to reflect Mr. Cook’s appointment as Presiding Director, effective May 2013. |
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The following table provides information as of December 28, 2013 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 by security holders (1) |
59,069,774 | (2) | $ | 62.79 | (5) | 110,251,842 | (3) | |||||
| Equity compensation plans not approved by security holders |
— | — | — | |||||||||
| Total (4) |
59,069,774 | $ | 62.79 | (5) | 110,251,842 | |||||||
| (1) | Includes the 2007 Long-Term Incentive Plan (the “2007 Plan”), the 2003 Long-Term Incentive Plan (the “2003 Plan”) and the 1994 Long-Term Incentive Plan. |
| (2) | This amount includes 674,758 PEPunits and 11,928,968 PSUs and RSUs that, if and when vested, will be settled in shares of PepsiCo Common Stock. This amount also includes 279,556 phantom units under the PepsiCo Director Deferral Program that will be settled in shares of Common Stock pursuant to the 2007 Plan at the end of the applicable deferral period. The amounts reported in the table assume target level performance for PEPunits and PSUs. If maximum earn-out levels are assumed for 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 28, 2013 is 59,939,205. |
| (3) | The shareholder-approved 2007 Plan is the only equity compensation plan under which PepsiCo currently issues equity awards. As of May 2, 2007, the 2007 Plan superseded the Company’s prior plan, the shareholder-approved 2003 Plan, and no further awards were made under the 2003 Plan. The 2007 Plan permits the award of stock options, stock appreciation rights, restricted and unrestricted shares, restricted stock units and performance shares and units. The 2007 Plan authorizes a number of shares for issuance equal to 195,000,000 plus the number of shares underlying awards under the Company’s prior equity compensation plans that are cancelled or expire after May 2, 2007 without delivery of shares. Under the 2007 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. |
| (4) | The table does not include information for equity compensation plans assumed by PepsiCo in connection with PepsiCo’s merger with The Quaker Oats Company (“Quaker”) in 2001 and acquisitions of The Pepsi Bottling Group, Inc. (“PBG”) and PepsiAmericas Inc. (“PAS”) in 2010. |
| • | As of December 28, 2013, 12,536 shares of PepsiCo Common Stock, which are related to awards issued under the Quaker plans prior to the merger, have been deferred and will be issued in the future. No additional options or other awards may be granted under the Quaker plans. |
| • | As of December 28, 2013, 3,195,207 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 $44.66 and an additional 10,008 shares of PepsiCo Common Stock related to RSU awards issued under the PBG plans prior to the acquisition of PBG. No additional stock options or other awards may be granted under the PBG plans. |
| • | As of December 28, 2013, 80,132 shares of PepsiCo Common Stock were issuable upon the exercise of outstanding options granted under the PAS plans prior to the acquisition of PAS at a weighted average exercise price of $39.45. No additional stock options or other awards may be granted under the PAS plans. |
| (5) | Weighted average exercise price of outstanding options only. |
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The Audit Committee has appointed KPMG LLP as PepsiCo’s independent registered public accountants for fiscal year 2014. KPMG has served as PepsiCo’s independent registered public accountants since 1990. While we are not required to seek shareholder ratification of the selection of KPMG as our independent registered public accountants, we are doing so as a matter of good corporate governance. If the shareholders do not ratify the selection, the Audit Committee will take the vote into consideration when determining whether or not to retain KPMG.
Representatives of KPMG are expected to be present and available to answer appropriate questions at the 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 PepsiCo’s independent registered public accountants for fiscal year 2014.
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 29 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 29 of this Proxy Statement. As described in the Compensation Discussion and Analysis, we believe that PepsiCo’s 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 PepsiCo’s performance and by providing a competitive level of compensation needed to recruit, retain and motivate talented executives critical to PepsiCo’s long-term success.
We are asking our shareholders to vote FOR, in a non-binding vote, the following resolution:
“Resolved, the shareholders of PepsiCo approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the 2013 Summary Compensation Table, the other compensation tables and the related notes and narratives on pages 29-57 of this Proxy Statement for the 2014 Annual Meeting of Shareholders.”
The Board has adopted a policy of providing annual advisory votes on the compensation of our Named Executive Officers. The next advisory vote to approve our executive compensation will occur at the 2015 Annual Meeting of Shareholders, unless the Board of Directors modifies its policy on the frequency of holding such advisory votes.
Our Board of Directors recommends that shareholders vote “FOR” the compensation of our Named Executive Officers.
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APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS OF THE PEPSICO, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN
(PROXY ITEM NO. 4)
We are asking shareholders to approve the material terms of the performance goals of the PepsiCo, Inc. Executive Incentive Compensation Plan (the “EICP”), as amended and restated. The Compensation Committee and Board of Directors previously approved the amended and restated EICP in February 2014, subject to shareholder approval.
The EICP is being submitted to you for approval with the intention of preserving the ability of the Compensation Committee to grant cash incentive awards to executive officers that may be deductible in accordance with Section 162(m) of the Internal Revenue Code. Section 162(m) limits to $1 million per year the deductibility of compensation to the Chief Executive Officer and the next three most highly compensated executive officers other than the Chief Financial Officer. This limit does not apply to compensation defined in Section 162(m) as “qualified performance-based compensation.” In order for awards under the EICP to constitute “qualified performance-based compensation,” among other conditions, shareholders must approve the EICP every five years.
IMPORTANT FACTS ABOUT THIS PROPOSAL
| • | This proposal does not seek shares of PepsiCo Common Stock, as no shares can be issued under the EICP pursuant to awards granted thereunder. Any such shares must be issued pursuant to the shareholder-approved 2007 Long-Term Incentive Plan. |
| • | Assuming that any bonuses paid under the EICP are treated as qualified performance-based compensation under Section 162(m), approval of this proposal by the Company’s shareholders will not result in any cost to the Company in excess of the cost of any such bonuses. |
The material terms of the EICP, formerly called the 2009 Executive Incentive Plan (the “2009 EICP”), were last approved by shareholders in 2009, and the material terms of the performance goals of the EICP are now being resubmitted for shareholder approval at this Annual Meeting with the intention of satisfying this Section 162(m) requirement; however, there can be no guarantee that the awards granted under the EICP will be treated as qualified performance-based compensation under Section 162(m). If shareholders do not re-approve the material terms of the EICP, it will be cancelled. If the EICP is cancelled, the Company may grant bonuses under a new plan and any bonuses awarded to our Chief Executive Officer and the next three most highly compensated executive officers other than the Chief Financial Officer will not be fully deductible for tax purposes pursuant to Section 162(m) to the extent total compensation exceeds $1 million.
For purposes of Section 162(m), the material terms of the performance goals that must be approved include: (i) the employees eligible to receive compensation under the EICP, (ii) a description of the business criteria on which the performance goal is based and (iii) either the maximum amount of compensation that can be paid to a covered employee under the performance goal or the formula used to calculate the amount of compensation that could be paid if the performance goal is satisfied. The material terms of the EICP are discussed in the pages that follow.
The EICP provides performance-related incentive compensation opportunities to our executive officers and other participating employees. Awards under the EICP are designed to provide annual incentives that drive Company-wide and business unit performance. The EICP rewards outstanding performance by those individuals whose decisions and actions affect the sustainable growth and profitability of the Company. The performance criteria set forth in the EICP are intended to align the interests of participating employees with the interests of shareholders.
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APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS OF THE PEPSICO, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN (PROXY ITEM NO. 4) (CONTINUED)
SUMMARY OF THE EXECUTIVE INCENTIVE COMPENSATION PLAN
We have summarized below the principal features of the EICP. This summary is qualified in its entirety by reference to the complete text of the EICP set forth in Exhibit B to this Proxy Statement.
Administration. The EICP is administered by the Compensation Committee, which is composed entirely of independent directors who meet the criteria of “outside director” under Section 162(m) of the Internal Revenue Code and “non-employee director” under Section 16 of the Exchange Act. The Compensation Committee selects the participants, determines the time when awards will be granted, sets the performance goals, performance measures, target awards and other terms and conditions of awards, certifies the degree to which the performance goals for earning awards have been met, and determines whether an award should be reduced or eliminated.
Eligibility and Participation. For each performance period, the Compensation Committee selects the executives who are eligible for participation in the EICP. The performance period is one fiscal year unless otherwise established by the Compensation Committee. The EICP provides that all executive officers and other executives of PepsiCo who are selected by the Compensation Committee shall participate in the EICP. For 2014, a total of 14 executives, including our 12 executive officers, will participate in the EICP. The Compensation Committee selects eligible participants no later than 90 days after the beginning of the year (or, if shorter, before 25 percent of the performance period has elapsed).
Performance Goals. The amount of awards payable to participants under the EICP is based on the degree of achievement of objective performance goals that the Compensation Committee establishes within 90 days after commencement of the performance period (or, if shorter, before 25 percent of the performance period has elapsed). Under the EICP, the performance goals may be based upon one or more of the following performance measures:
|
Ÿ stock price
Ÿ market share
Ÿ sales revenue
Ÿ cash flow
Ÿ sales volume
Ÿ earnings per share
Ÿ return on equity
Ÿ return on assets
Ÿ return on sales
Ÿ return on invested capital
Ÿ economic value added
Ÿ net earnings |
Ÿ total shareholder return
Ÿ gross margin
Ÿ costs
Ÿ productivity
Ÿ brand contribution
Ÿ product quality
Ÿ portfolio transformation
Ÿ productivity improvement
Ÿ corporate value measures (such as compliance, safety, environmental or personnel matters)
Ÿ measures related to corporate initiatives (such as acquisitions, dispositions or customer satisfaction) |
Performance goals may be based upon the performance of PepsiCo as a whole, an individual participant, or a subsidiary, division, department, region, function or business unit of the Company. Performance goals may be absolute or may be relative to a peer group or index. Performance goals need not be the same for all participants and different performance measures may be given different weights. For purposes of exercising negative discretion in reducing the amount of any award, the Compensation Committee may
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APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS OF THE PEPSICO, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN (PROXY ITEM NO. 4) (CONTINUED)
establish other subjective or objective performance goals, including individual performance goals, for awards to the extent permissible for awards to still be qualified performance-based compensation under Section 162(m).
The Compensation Committee may adjust the performance goals, or the manner in which performance will be measured against the performance goals, based on qualifying criteria selected by the Compensation Committee to the extent permissible for awards to still be qualified performance-based compensation under Section 162(m). Such criteria may include acquisition-related charges; litigation, claim judgments, settlements or tax settlements; the effect of changes in tax law, changes in accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; gains or losses from discontinued operations; consolidated operating results attributable to acquisitions; and any extraordinary non-recurring items as described in Generally Accepted Accounting Principles and/or in management’s discussion and analysis of financial condition and results of operations appearing in the annual report to shareholders for the applicable year.
Determination of Awards. Following the conclusion of the performance period, the Compensation Committee will review actual performance and certify in writing the degree to which the performance goals applicable to the awards have been met. Notwithstanding attainment of performance goals, the Compensation Committee has the discretion to reduce, but not increase, some or all of an award that would otherwise be paid.
Payment of Awards. Awards are payable in cash as soon as practicable following the conclusion of the performance period and the Compensation Committee’s determination of the award amounts. The Compensation Committee may permit or require the deferral of award amounts and may also subject the payout of awards to vesting conditions. In addition, the terms of the EICP provide the Compensation Committee the discretion to pay awards in stock, restricted stock, stock options or other equity-based awards under the shareholder-approved 2007 Long-Term Incentive Plan or successor plan.
Award Maximum. No participant may receive an aggregate award of more than $9 million under the EICP in any year. This limitation is unchanged from the 2009 EICP.
Amendment and Termination. The Compensation Committee may amend or terminate the EICP so long as such action does not adversely affect any rights or obligations with respect to awards already outstanding under the EICP. Shareholder approval is required for any amendment that (i) increases the maximum amount per year which can be paid to any one participant under the EICP, (ii) changes the performance measures on which the performance goals may be based, or (iii) modifies the class of persons eligible for participation in the EICP. The EICP will continue in effect until terminated by the Compensation Committee.
U.S. Federal Income Tax Consequences. Under the Internal Revenue Code, a grant of an award under the EICP would have no federal income tax consequences. The payment of the award is taxable to a participant as ordinary income in the year of receipt. PepsiCo will generally be entitled to a corresponding U.S. federal income tax deduction for the amounts constituting ordinary income to the participant as long as the EICP and the award satisfy the requirements of Section 162(m) of the Internal Revenue Code. It is intended that awards payable under the EICP to participants covered by Section 162(m) will be qualified performance-based compensation; however, there can be no guarantee that the awards granted under the EICP will be treated as qualified performance-based compensation under Section 162(m).
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APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS OF THE PEPSICO, INC. EXECUTIVE INCENTIVE COMPENSATION PLAN (PROXY ITEM NO. 4) (CONTINUED)
PLAN BENEFITS
Awards under the EICP are determined based on actual future performance. Therefore, future actual awards cannot now be determined. Set forth below is a table that shows annual incentive awards that were earned under the 2009 EICP based on 2013 performance. Please see the Compensation Discussion and Analysis and 2013 Summary Compensation Table for additional detail.
| Name | Value ($) | |||
| Indra K. Nooyi |
4,000,000 | |||
| Hugh F. Johnston |
1,422,400 | |||
| Zein Abdalla |
1,424,300 | |||
| Brian Cornell |
1,728,000 | |||
| Mehmood Khan |
1,173,900 | |||
| All Executive Officers as a Group (1) |
16,238,100 | |||
| All Non-Executive Directors as a Group |
0 | |||
| All Non-Executive Officer Employees as a Group |
2,324,600 | |||
| (1) | Consists of 12 executive officers, including the five Named Executive Officers listed in the table. |
APPROVAL
For purposes of Section 162(m), the material terms of a performance goal are approved by shareholders if, in a separate vote, a majority of the votes cast on the issue are cast in favor of approval.
Our Board of Directors recommends that shareholders vote “FOR” the approval of the material terms of the performance goals of the PepsiCo, Inc. Executive Incentive Compensation Plan.
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Shareholders have submitted the following resolutions for the reasons stated. The shareholder proposals will be voted on at our 2014 Annual Meeting only if properly presented by or 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 these inaccuracies. However, our Board of Directors has recommended a vote against each of these proposals for the reasons set forth following each proposal.
POLICY REGARDING POLITICAL CONTRIBUTIONS
(PROXY ITEM NO. 5)
James W. Mackie, 122 Pennsylvania Avenue, Bryn Mawr, Pennsylvania 19010, who owns 3,500 shares of PepsiCo Common Stock, has submitted the following proposal for the reasons stated.
“Resolved: The Corporation shall have a policy pertaining to making political contributions (to individual candidates; organizations supporting candidates, directly or indirectly; leadership groups; or political action committees) only if such a policy is approved by at least at least 75% of its shares outstanding. No funds, or in kind support, shall be provided by the corporation to any of the entities listed above unless the contribution complies with the corporate policy.
There are five reasons for passage of this resolution:
| 1. | The ability of large corporations to provide large amounts of funding for political candidates gives the corporation the ability to manage legislation that will provide them with legislated or regulatory benefits that place their smaller competitors at a disadvantage in the market place. |
| 2. | Endowment funds, insurance companies, mutual funds and pension funds currently hold the majority of all publicly traded shares and these shares are held for the benefit of many small investors. To have the large corporations utilize corporate funds to further the political goals of the executives is irresponsible fiduciary behavior that may be against the wishes of the individuals for whom they hold the shares. |
| 3. | We have recently seen the result of undue influence that has reduced the oversight of regulatory agencies and created problems for stock holders and consumers in the areas of finance, food, health care and petroleum. The political influence exerted by large corporations had a direct impact on these actions. Unless large corporations are prevented from making political contributions to elected officials, or their political parties, these practices will continue. |
| 4. | Legislative and regulatory bodies should be guided by all constituents, not just those who pay for their re-election or provide significant perks to individuals in those bodies. Large corporate political contributions can corrupt honest efforts to provide reasonable laws and regulations. |
| 5. | The increasing use by advocacy groups of 501(c)(4) non-profit corporations to escape disclosure of political contributions would allow publicly held corporations to make unlimited political contributions, but to do so without even informing their own shareholders.” |
Recommendation of the Board of Directors:
The Board of Directors recommends that shareholders vote against this resolution for the following reasons:
| • | At PepsiCo, we believe that participation in the political process is critical to our Company’s success. Because PepsiCo is one of the world’s leading food and beverage companies, public policy affects our ability to operate and to maintain a successful business and to continue to provide shareholder value. For this reason, we believe that active participation in the public policy process, including political expenditures and participation in lobbying activities on topics of relevance to our business and operations, is essential and appropriate for our Company. |
| • | PepsiCo has already adopted a Political Contributions Policy. Transparency and accountability are embedded into PepsiCo’s public policy, political spending and lobbying actions. PepsiCo has adopted a Political Contributions Policy, which is available on our website at www.pepsico.com |
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| under “Who We Are”—“Corporate Governance”—“Policies.” We have also developed various processes designed to further promote corporate accountability, including a requirement that all contributions reflect PepsiCo’s business or strategic interests and not those of its individual officers or directors. The following criteria are considered in connection with all contributions: |
| ¡ | The candidate’s or entity’s commitment to improving the business climate; |
| ¡ | The candidate’s commitment to the long-term public policy goals of PepsiCo; |
| ¡ | The location of PepsiCo facilities or employees within the candidate’s district or state; and |
| ¡ | The candidate’s position on key committees where legislation of importance to PepsiCo is considered or the candidate’s demonstrated leadership—or potential for leadership—within the U.S. Congress or a state legislature. |
A summary of PepsiCo’s processes and procedures relating to political contributions and expenditures is available on our website at www.pepsico.com under “Who We Are”—“Corporate Governance”—“Policies”—“Political Activities, Political Contributions & Issue Advocacy: Policies & Guidelines.”
| • | Our public policy priorities and political expenditures are focused on business issues that are critical to our Company and our stakeholders. We seek to support candidates, organizations and legislation that will advance PepsiCo’s business interests. All political contributions are distributed in a non-partisan manner to U.S. candidates, political parties, other political committees and ballot measure committees. PepsiCo’s Public Policy/Government Affairs team works with senior management to develop annual and long-term public policy priorities. The PepsiCo Board of Directors oversees both PepsiCo’s public policy priorities and political contributions. |
| • | PepsiCo publicly discloses substantial information relating to its lobbying expenditures and political contributions. Over the past several years, we have significantly enhanced our website disclosure of political spending and lobbying activities given the importance of this issue. |
| ¡ | Disclosure of lobbying expenditures – PepsiCo discloses all lobbying activities at the federal, state and local level as required by law. A link to PepsiCo’s quarterly federal lobbying reports and the total annual amount of PepsiCo’s federal lobbying-related expenditures can be found on our website at www.pepsico.com under “Who We Are”—”Corporate Governance”—“Policies”—“Political Activities, Political Contributions & Issue Advocacy: Policies & Guidelines.” Moreover, our website includes information about: |
| ú | the rationale for PepsiCo’s lobbying activities; |
| ú | a description of our top lobbying priorities; and |
| ú | the processes we follow to promote transparency and accountability. |
| ¡ | Disclosure of political contributions – PepsiCo’s website provides ample and relevant information about PepsiCo’s political contributions, including: |
| ú | the amounts of PepsiCo’s annual corporate political contributions in the United States; |
| ú | the amounts of contributions made from PepsiCo’s employee political action committee, the “Concerned Citizens Fund”; and |
| ú | the precise criteria used to analyze and approve political contributions, which require that all contributions are reviewed by PepsiCo’s law department for compliance with laws, and that all political contributions using corporate funds be approved by PepsiCo’s Corporate Vice President Public Policy and Government Affairs. |
The proposal seeks to impose on PepsiCo restrictions on our ability to make political expenditures in support of public policy issues that are critical to the success of our business. Our public policy activities, both contributions and lobbying, are aligned with our corporate values. The Board believes that it is in the best interest of our Company and shareholders to continue to participate in the public policy process in a transparent manner.
Our Board of Directors recommends that shareholders vote “AGAINST” this proposal.
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SHAREHOLDER PROPOSALS (PROXY ITEM NOS. 5 AND 6) (CONTINUED)
POLICY REGARDING EXECUTIVE RETENTION OF STOCK
(PROXY ITEM NO. 6)
John Chevedden, on behalf of Kenneth Steiner, 14 Stoner Avenue, 2M, Great Neck, New York 11021, who owns at least 500 shares of PepsiCo Common Stock, has submitted the following proposal for the reasons stated.
“Proposal 6 – Executives to Retain Significant Stock
Resolved: Shareholders urge that our executive pay committee adopt a policy requiring senior executives to retain a significant percentage of shares acquired through equity pay programs until reaching normal retirement age and to report to shareholders regarding the policy before our Company’s next annual meeting. For the purpose of this policy, normal retirement age would be an age of at least 60 and determined by our executive pay committee. Shareholders recommend that the committee adopt a share retention percentage requirement of 50% of net after-tax shares.
This single unified policy shall prohibit hedging transactions for shares subject to this policy which are not sales but reduce the risk of loss to the executive. Otherwise our directors would be able to avoid the impact of this proposal. This policy shall supplement any other share ownership requirements that have been established for senior executives, and should be implemented so as not to violate our Company’s existing contractual obligations or the terms of any pay or benefit plan currently in effect.
Requiring senior executives to hold a significant portion of stock obtained through executive pay plans would focus our executives on our company’s long-term success. A Conference Board Task Force report stated that hold-to-retirement requirements give executives “an ever-growing incentive to focus on long-term stock price performance.”
This proposal should also be more favorably evaluated due to our Company’s clearly improvable environmental, social and corporate governance performance as reported in 2013:
In regard to our board Alberto Ibargüen and Ray Hunt were negatively flagged by GMI, an independent investment research firm, due to their involvement with these respective boards when they filed bankruptcy: AMR Corporation and Halliburton. Our Lead Director Ian Cook was a CEO at another company. Sharon Percy Rockefeller had a whooping 27-years of tenure. Not one independent director had expertise in risk management. GMI said shareholders are free, by North Carolina law, to remove directors with or without cause.
In regard to executive pay there was $20 million for Indra Nooyi and shareholders faced a potential 13% dilution. Pepsi could give long-term incentive pay to our CEO for below-median performance. Our CEO’s annual incentive pay would not rise or fall in line with annual performance. Pepsi did not link environmental or social performance to its incentive pay policies.
Pepsi had limited implementation of OSHAS 18001 as its occupational health and safety management system. The world’s 10 biggest food and beverage makers, including Nestle, Coca-Cola, Danone and PepsiCo, scored poorly in social and environmental practices including the way they treat women, a study by international human rights group Oxfam said.
Returning to the core topic of this proposal from the context of our clearly improvable corporate performance, please vote to protect shareholder value:
Executives to Retain Significant Stock – Proposal 6”
Recommendation of the Board of Directors:
While the Board agrees with the proponent that executive officers should own a significant amount of company stock to align their interests with those of shareholders, the Board believes that this proposal is unnecessary because PepsiCo already has in place policies that address this issue. Also, PepsiCo’s executive compensation programs and governance policies are already designed and managed to
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SHAREHOLDER PROPOSALS (PROXY ITEM NOS. 5 AND 6) (CONTINUED)
achieve the objectives articulated in this proposal. As set forth below, and explained in greater detail in the Compensation Discussion and Analysis beginning on page 29 of this Proxy Statement, PepsiCo uses long-term incentive awards to align pay with Company performance; PepsiCo’s executive officers are subject to rigorous stock ownership, stock retention and clawback policies that extend beyond employment with PepsiCo; and all employees of PepsiCo are prohibited from engaging in hedging and pledging transactions in Company stock. Accordingly, the Board of Directors recommends that shareholders vote against this proposal for the following reasons:
| • | PepsiCo’s executive officers are already subject to strong stock ownership requirements. As set forth on page 43, PepsiCo’s Chief Executive Officer is required to hold PepsiCo stock having a value equal to eight times her annual salary and our other executive officers are required to hold PepsiCo stock having a value equal to either four or two times their annual salary, depending on their position. For example, as of March 13, 2014, PepsiCo’s CEO held 381,738 shares and share equivalents of PepsiCo Common Stock, equal in value to 19.5 times her annual salary, an amount that significantly exceeds her ownership requirement. Executive officers have five years from the date of appointment to their position to achieve the applicable ownership requirement. All of our executive officers have met or are on track to meet their ownership requirement within the five-year period. |
| • | PepsiCo’s share retention policies already require executive officers to hold a significant portion of shares acquired through our long-term incentive program. Executive officers who have not yet achieved their stock ownership requirement are subject to strict share retention policies. These policies limit 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 officer’s in-the-money vested stock options. Any proceeds in excess of this 20% limit must be held in PepsiCo shares. These policies also require that executive officers hold at least 50% of the shares, net of tax withholding, received upon payout of any PEPunits, PepsiCo’s performance share awards described on page 31. |
| • | PepsiCo’s executive officers are already subject to post-employment stock-holding requirements and a strong clawback policy. As explained on page 43, executive officers who terminate or retire from PepsiCo cannot fully sell the shares covered by the stock ownership policy until one year after leaving PepsiCo. Executive officers are also subject to a strong clawback policy, which also continues to apply following termination or retirement. |
| • | PepsiCo’s insider trading policy already prohibits executive officers from engaging in any transactions to hedge against declines in the value of PepsiCo’s stock. Unlike the proponent’s proposal, which would only prohibit hedging transactions with respect to shares covered by the proposed ownership requirement, PepsiCo’s insider trading policy prohibits hedging with respect to any and all shares held by an executive officer. In addition, PepsiCo executive officers may not hold Company securities in a margin account or pledge company securities as collateral for a loan. |
| • | PepsiCo’s executive compensation programs already achieve the proposal’s underlying goal of focusing our executive officers on PepsiCo’s long-term success. As more fully explained on page 34, in order to motivate senior executives to deliver sustained long-term performance and to promote an ownership culture, the annual long-term incentive award is weighted more heavily than any other component of total direct compensation for our executive officers. The long-term incentive program rewards business performance, measured through critical internal operating metrics, and market-based performance, measured through absolute share price as well as total shareholder return relative to the S&P 500 over an extended three-year performance period. |
We believe that our current executive compensation program, comprised of a significant portion of long-term incentive awards and complemented by rigorous stock ownership, clawback and hedging and pledging policies, is consistent with market practices. Therefore, we do not believe that the policy requested by the proposal is in the best interests of the Company or its shareholders.
Our Board of Directors recommends that shareholders vote “AGAINST” this proposal.
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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.
PepsiCo welcomes comments or suggestions from its shareholders. If a shareholder wants to have a proposal formally considered at the 2015 Annual Meeting, and included in the Proxy Statement for that meeting, we must receive the proposal in writing on or before the close of business on November 21, 2014 and the proposal must otherwise comply with Rule 14a-8 under the Exchange Act. Proposals must be addressed to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577.
Under our By-Laws, if a shareholder wishes to present other business at the 2015 Annual Meeting of Shareholders, or nominate a director candidate, we must receive proper written notice of any such business or nominations no earlier than January 7, 2015 and no later than February 6, 2015. If the 2015 Annual Meeting is not within thirty days before or sixty days after the anniversary date of this year’s Annual Meeting, we must receive notice no earlier than the 120th day prior to such annual 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 notice must include the information specified in the By-Laws and must be addressed to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577. 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.
The 2013 Annual Report to Shareholders, including financial statements, was delivered or made available with this Proxy Statement or was previously delivered to shareholders. If you have not received the Annual Report, please contact PepsiCo’s Manager of Shareholder Relations at PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York 10577 or (914) 253-3055 or investor@pepsico.com. The Annual Report can also be found on our website at www.pepsico.com under “Investors”—“Annual Reports and Proxy Information.”
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 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 year’s Annual Meeting, we will deliver them promptly upon request to PepsiCo’s Manager of Shareholder Relations at PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York 10577 or (914) 253-3055 or investor@pepsico.com.
A copy of PepsiCo’s Annual Report on Form 10-K for the fiscal year ended December 28, 2013 (including the financial statements, schedules and a list of exhibits) will be sent to any shareholder without charge by contacting the Company at the address or phone number listed above. You also may obtain our Annual Report on Form 10-K over the Internet on the SEC’s website at www.sec.gov, or on our website at www.pepsico.com under “Investors”—“SEC Filings.”
Your vote is very important. Please vote your shares promptly through any of the means described on the proxy card, the voting instruction form or the Notice of Annual Meeting.
By Order of the Board of Directors,
LARRY D. THOMPSON
Corporate Secretary
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Table of Contents
Reconciliation of GAAP and Non-GAAP Information
($ in millions, except per share amounts, unaudited)
Organic revenue, core results and core constant currency results are non-GAAP financial measures as they exclude certain items noted below. However, we believe investors should consider these measures as they are more indicative of our ongoing performance and with how management evaluates our operational results and trends. Additionally, free cash flow excluding certain items is the primary measure management uses to monitor cash flow performance. Free cash flow is not a measure defined by GAAP. 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. See pages 48-50 of PepsiCo’s 2013 Form 10-K for a detailed description of certain items excluded from the below non-GAAP financial measures.
Net Revenue Growth Reconciliation
| Year Ended | ||
| 12/28/13 | ||
| Reported Net Revenue Growth |
1.4% | |
| Impact of Acquisitions and Divestitures |
1.0 | |
| Impact of Foreign Exchange Translation |
1.6 | |
|
| ||
| Organic Revenue Growth |
4.0% | |
|
|
Net Income Attributable to PepsiCo Reconciliation
| Year Ended | ||||||||||
| 12/28/13 | 12/29/12 | Growth | ||||||||
| Reported Net Income Attributable to PepsiCo |
$ | 6,740 | $ | 6,178 | 9.1% | |||||
| Commodity Mark-to-Market Net Impact |
44 | (41 | ) | |||||||
| Merger and Integration Charges |
8 | 12 | ||||||||
| Restructuring and Impairment Charges |
129 | 215 | ||||||||
| Venezuela Currency Devaluation |
111 | — | ||||||||
| Tax Benefits |
(209 | ) | (217 | ) | ||||||
| Restructuring and Other Charges Related to the Transaction with Tingyi |
— | 176 | ||||||||
| Pension Lump Sum Settlement Charge |
— | 131 | ||||||||
|
|
|
|
|
|||||||
| Core Net Income Attributable to PepsiCo |
$ | 6,823 | $ | 6,454 | 5.7% | |||||
|
|
|
|||||||||
| Impact of Foreign Exchange Translation |
140 | 2.2 | ||||||||
|
|
|
| ||||||||
| Core Constant Currency Net Income Attributable to PepsiCo Growth |
$ | 6,963 | 7.9% | |||||||
|
|
|
| ||||||||
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EXHIBIT A (CONTINUED)
Diluted EPS Reconciliation
| Year Ended | ||||||||||||
| 12/28/13 | 12/29/12 | Growth | ||||||||||
| Reported Diluted EPS |
$ | 4.32 | $ | 3.92 | 10.2% | |||||||
| Commodity Mark-to-Market Net Impact |
0.03 | (0.03 | ) | |||||||||
| Merger and Integration Charges |
0.01 | 0.01 | ||||||||||
| Restructuring and Impairment Charges |
0.08 | 0.14 | ||||||||||
| Venezuela Currency Devaluation |
0.07 | — | ||||||||||
| Tax Benefits |
(0.13 | ) | (0.14 | ) | ||||||||
| Restructuring and Other Charges Related to the Transaction with Tingyi |
— | 0.11 | ||||||||||
| Pension Lump Sum Settlement Charge |
— | 0.08 | ||||||||||
|
|
|
|
|
|||||||||
| Core Diluted EPS |
$ | 4.37 | * | $ | 4.10 | * | 6.7% | |||||
|
|
|
|
|
|||||||||
| Impact of Foreign Exchange Translation |
2.2 | |||||||||||
|
|
|
|||||||||||
| Core Constant Currency Diluted EPS Growth |
8.9% | |||||||||||
|
|
|
|||||||||||
Net Cash Provided by Operating Activities Reconciliation
| Year Ended | ||||
| 12/28/13 | ||||
| Net Cash Provided by Operating Activities |
$ | 9,688 | ||
| Capital Spending |
(2,795 | ) | ||
| Sales of Property, Plant and Equipment |
109 | |||
|
|
|
|||
| Free Cash Flow |
7,002 | |||
| Discretionary Pension and Retiree Medical Contributions (after-tax) |
20 | |||
| Merger and Integration Payments (after-tax) |
21 | |||
| Payments Related to Restructuring Charges (after-tax) |
105 | |||
| Net Payments Related to Income Tax Settlements |
984 | |||
| Net Capital Investments Related to Merger and Integration |
(4 | ) | ||
| Net Capital Investments Related to Restructuring Plan |
8 | |||
| Payments for Restructuring and Other Charges Related to the Transaction with Tingyi (after-tax) |
26 | |||
|
|
|
|||
| Free Cash Flow Excluding Above Items |
$ | 8,162 | ||
|
|
|
|||
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PepsiCo 2014 Proxy Statement |
Table of Contents
EXHIBIT A (CONTINUED)
Return on Invested Capital (ROIC) Growth Reconciliation
| Year Ended | ||||||||
| 12/28/13 | ||||||||
| Reported ROIC Growth |
37 | bps | ||||||
| Impact of: |
||||||||
| Cash, Cash Equivalents and Short-Term Investments |
104 | |||||||
| Commodity Mark-to-Market Net Impact |
15 | |||||||
| Merger and Integration Charges |
10 | |||||||
| Restructuring and Impairment Charges |
(21 | ) | ||||||
| Venezuela Currency Devaluation |
21 | |||||||
| Tax Benefits |
9 | |||||||
| Restructuring and Other Charges Related to the Transaction with Tingyi |
(37 | ) | ||||||
| Pension Lump Sum Settlement Charge |
(29 | ) | ||||||
|
|
|
|||||||
| Core Net ROIC Growth |
110 | * | bps | |||||
|
|
|
|||||||
Note—The impact of all other reconciling items to reported ROIC rounds to zero.
| * | Does not sum due to rounding. |
|
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A-3 |
Table of Contents
PEPSICO, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
(as amended and restated effective February 7, 2014)
| 1. | Purpose. |
The principal purposes of this PepsiCo, Inc. Executive Incentive Compensation Plan, which was formerly referred to as the PepsiCo, Inc. 2009 Executive Incentive Compensation Plan, are to assist the Company in attracting, motivating and retaining participating eligible executives who have significant responsibility for the growth and long-term success of the Company by providing incentive awards that ensure a strong pay-for-performance linkage for such executives, and to permit the incentive awards to qualify as performance-based compensation under Section 162(m).
| 2. | Definitions. |
(a) “Award” means an amount calculated and awarded to a Participant pursuant to the Plan.
(b) “Board of Directors” means the Board of Directors of PepsiCo.
(c) “Code” means the Internal Revenue Code of 1986, as amended from time to time.
(d) “Committee” has the meaning set forth in Section 3(a).
(e) “Company” means PepsiCo and its subsidiaries and divisions.
(f) “Disability” means a disability for which a Participant is considered to be “disabled” under the PepsiCo Disability Plan (as amended and restated from time to time).
(g) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
(h) “Eligible Executive” means an employee of the Company who is considered an executive officer of PepsiCo within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and executives of the Company who are selected by the Committee as key executives for participation in the Plan.
(i) “Fiscal Year” means a fiscal year of the Company.
(j) “Key Employee” has the meaning ascribed to it from time to time in the PepsiCo Executive Income Deferral Program.
(k) “Misconduct” means (i) violating the Company’s Code of Conduct, Insider Trading Policy or any other written policies of the Company, (ii) unlawfully trading in the securities of PepsiCo or of any other company based on information gained as a result of his or her employment with the Company, or (iii) engaging in any activity which constitutes gross misconduct or (iv) engaging in any action which constitutes gross negligence or misconduct and that causes or contributes to the need for an accounting adjustment to PepsiCo’s financial results.
(l) “Participant” means an Eligible Executive participating in the Plan for a Performance Period as provided in Section 4(b).
(m) “PepsiCo” means PepsiCo, Inc., a North Carolina corporation and its successors and assigns.
(n) “Performance Goals” has the meaning set forth in Section 5(b).
(o) “Performance Measures” has the meaning set forth in Section 5(c).
(p) “Performance Period” means a Fiscal Year or other period of time (which may be longer or shorter than a Fiscal Year) set by the Committee during which the achievement of the Performance Goals is to be measured.
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EXHIBIT B (CONTINUED)
(q) “Plan” means this PepsiCo, Inc. Executive Incentive Compensation Plan, as amended and restated herein, and as it may be amended from time to time.
(r) “Section 162(m)” means Section 162(m) of the Code and the applicable regulations and other guidance of general applicability that are issued thereunder.
(s) “Section 162(m) Exemption” means the exemption from the limitation on deductibility imposed by Section 162(m) as set forth in Section 162(m)(4)(C) of the Code and the regulations and other guidance of general applicability that are issued thereunder.
(t) “Section 409A” means Section 409A of the Code and the applicable regulations and other guidance of general applicability that are issued thereunder.
(u) “Separation from Service” means separation from service as defined in Section 409A; provided that for purposes of determining whether a Separation from Service has occurred, the Plan has determined, based upon legitimate business criteria, to use the twenty percent (20%) test described in Treas. Reg. §1.409A-1(h)(3). In the event a Participant also provides services other than as an employee for the Company and its affiliates, as determined under the prior sentence, such other services shall not be taken into account in determining when a Separation from Service occurs to the extent permitted under Treas. Reg. § 1.409A-1(h)(5).
| 3. | Administration of the Plan. |
(a) Committee. The Plan shall be administered by the Compensation Committee of the Board of Directors (the “Committee”). The Committee shall be appointed by the Board of Directors and shall consist of not less than two members of the Board who meet the definition of “outside director” under the provisions of Section 162(m) and the definition of “non-employee director” under the provisions of the Exchange Act or the regulations or rules thereunder, and each of whom is “independent” as set forth in the applicable rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange.
(b) Administration. The Committee shall have all the powers vested in it by the terms of this Plan, such powers to include the authority (within the limitations described herein) to select the persons to be granted awards under the Plan, to determine the time when Awards will be granted, to determine whether objectives and conditions for earning Awards have been met, to determine whether Awards will be paid at the end of the Performance Period or deferred, consistent with Section 409A, and to determine whether an Award or payment of an Award should be reduced or eliminated. The Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable. The Committee’s interpretations of the Plan, and all actions taken and determinations made by the Committee pursuant to the powers vested in it hereunder, shall be conclusive and binding for all purposes and on all parties, including the Company, its shareholders, its employees and any person receiving an Award under the Plan, as well as their respective successors in interest. The provisions of the Plan are intended to ensure that all Awards granted hereunder qualify for the Section 162(m) Exemption, and this Plan is intended to be interpreted and operated consistent with this intention. There is no obligation of uniformity of treatment of Participants under the Plan. No member of the Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award.
(c) Guidelines. The Committee may adopt from time to time written policies or rules as it deems necessary or desirable for the Committee’s implementation and administration of the Plan.
(d) Delegation of Administrative Authority. The Committee may delegate its responsibilities for administering the Plan to employees of the Company as it deems necessary or appropriate for the proper administration of the Plan.
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Table of Contents
EXHIBIT B (CONTINUED)
| 4. | Eligibility and Participation. |
(a) Eligibility. All Eligible Executives are eligible to participate in the Plan for any Performance Period.
(b) Participation. For each Performance Period, the Committee, in its discretion, shall select the Eligible Executives who shall participate in this Plan. The Committee will select the Participants no later than 90 days after the beginning of the Performance Period (or, if shorter, before 25% of the Performance Period has elapsed) in accordance with Section 162(m).
| 5. | Awards. |
(a) Establishment of Basis for Awards. In connection with the grant of each Award, the Committee shall (i) establish the Performance Goal(s) and the Performance Period applicable to such Award, (ii) establish the formula for determining the amounts payable based on achievement of the applicable Performance Goal(s), (iii) determine the consequences for the Award of the Participant’s termination of employment for various reasons or the Participant’s demotion or promotion during the Performance Period and (iv) establish such other terms and conditions for the Award as the Committee deems appropriate. The foregoing shall be accomplished within 90 days of the beginning of the Performance Period (or, if shorter, before 25% of the Performance Period has elapsed).
(b) Performance Goals. The “Performance Goals” means the objective performance goals established by the Committee for each Performance Period. The Performance Goals may be based upon the performance of the Company as a whole, a Participant, or a subsidiary, division, department, region, function or business unit of the Company, using one or more of the Performance Measures selected by the Committee. The Performance Goals may be absolute or may be relative to a peer group or index. Separate Performance Goals may be established by the Committee for the Company or subsidiary or division thereof or an individual thereof, and different Performance Measures may be given different weights. To the extent permissible for Awards to qualify for the Section 162(m) Exemption, the Committee may establish other subjective or objective goals, including individual Performance Goals, which it deems appropriate, for purposes of applying negative discretion in determining the Award amount.
(c) Performance Measures. The “Performance Measures” are one or more of the following criteria on which Performance Goals may be based: stock price, market share, sales revenue, cash flow, sales volume, earnings per share, return on equity, return on assets, return on sales, return on invested capital, economic value added, net earnings, total shareholder return, gross margin, costs, productivity, brand contribution, product quality, portfolio transformation, productivity improvement, corporate value measures (such as compliance, safety, environmental and personnel matters), or goals related to corporate initiatives, such as acquisitions, dispositions or customer satisfaction.
(d) Adjustments. The Committee may appropriately adjust the Performance Goals or the manner in which performance will be measured against the Performance Goals based upon the occurrence of a qualifying criteria selected by the Committee in its discretion that occurs during the Performance Period to the extent permissible for Awards to qualify for the Section 162(m) Exemption. Such criteria may include: acquisition-related charges; litigation, claim judgments, settlements or tax settlements; the effects of changes in tax law, changes in accounting principles or other such laws or provisions affecting reported results; accruals for reorganization and restructuring programs; gains or losses from discontinued operations; consolidated operating results attributable to acquisitions; and any extraordinary non-recurring items as described in Generally Accepted Accounting Principles and/or in management’s discussion and analysis of financial condition and results of operations appearing in the annual report to shareholders for the applicable year.
(e) Certification of Awards. After the end of the Performance Period and prior to payment of any Award, the Committee shall certify in writing the degree to which the Performance Goals applicable to each Participant for the Performance Period were achieved or exceeded. Subject to Section 5(f), the Award for each Participant shall be determined by applying the applicable formula for the Performance Period based upon the level of achievement of the Performance Goals certified by the Committee.
| B-3 |
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EXHIBIT B (CONTINUED)
(f) Committee Discretion. Notwithstanding anything to the contrary in the Plan, the Committee may, in its sole discretion, reduce or eliminate, but not increase, any Award payable to any Participant for any reason, including without limitation to reflect individual or business performance and/or unanticipated or subjective factors.
(g) Maximum Awards. No Participant may receive an aggregate Award of more than $9 million under the Plan in any Performance Period (or in the case of a Performance Period other than a Fiscal Year, an amount that bears the same ratio to $9 million as the length of the Performance Period bears to a Fiscal Year).
(h) Timing of Payment. Awards will be payable by the Company to Participants as soon as administratively practicable following the determination and written certification of the Committee for the Performance Period pursuant to Section 5(e) above. In the case of any Participant subject to U.S. federal income tax, the Company shall distribute amounts payable to Participants in the calendar year following the year in which the Performance Period ends and no later than March 15th of that year.
(i) Form of Payment. Awards will be paid in cash or cash equivalents. The Committee in its discretion may determine that all or a portion of an Award shall be paid in stock, restricted stock, stock options or other stock-based or stock denominated units which shall be issued pursuant to the PepsiCo, Inc. 2007 Long-Term Incentive Plan or a successor equity compensation plan in existence at the time of grant.
(j) Deferral of Payment of Awards. Notwithstanding Section 5(h), the Committee, in its discretion, may defer the payout or vesting of any Award and/or provide to Participants the opportunity to elect to defer the payment of any Award under the PepsiCo Executive Income Deferral Program or any other PepsiCo approved deferred compensation plan or arrangement. With respect to any Award (or portion thereof), including any Award under the Company’s Premium Bonus Program, that constitutes deferred compensation subject to Section 409A and is not otherwise exempt from Section 409A, such Award (or portion thereof) shall not be paid earlier than the date that is six months after the Participant’s Separation from Service if the payment is based on the Participant’s Separation from Service (other than as a result of death) and the Participant is classified as a Key Employee at the time of his or her Separation from Service.
(k) Certain Participants not Eligible. To be eligible for payment of any Award, the Participant must (i) be employed by the Company on the last day of the Performance Period unless the Committee specifies otherwise, (ii) have performed the Participant’s duties to the satisfaction of the Committee, and (iii) have not engaged in any acts that are considered by the Committee to constitute Misconduct. If the Committee determines following the date an Award is paid that the Participant, prior to the date of payment of such Award, engaged in any acts that are considered by the Committee to constitute Misconduct, the Participant shall be obligated, upon demand, to return the amount of such Award to the Company.
| 6. | Miscellaneous Provisions. |
(a) Effect on Benefit Plans. Awards shall not be considered eligible pay under other plans, benefit arrangements or fringe benefit arrangements of the Company unless otherwise provided under the terms of such other plans.
(b) Restriction on Transfer. Awards (or interests therein) or amounts payable with respect to a Participant under the Plan are not subject to transfer, assignment or alienation, whether voluntary or involuntary.
(c) Withholding Taxes. PepsiCo or any subsidiary or division thereof, as appropriate, shall have the right to deduct from all payments hereunder any federal, state, local or foreign taxes or social contributions required by law to be withheld with respect to such awards. The Participant shall be solely responsible for the satisfaction of any federal, state, local or foreign taxes on payments under the Plan.
(d) No Rights to Awards. Except as set forth herein, no Company employee or other person shall have any claim or right to be granted an award under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of PepsiCo or any of its subsidiaries, divisions or affiliates or to interfere with the ability of the Company to terminate any such
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PepsiCo 2014 Proxy Statement |
B-4 |
Table of Contents
EXHIBIT B (CONTINUED)
employee’s employment relationship at any time. At no time before the actual payment of an Award shall any Participant or other person accrue any vested interest or right whatsoever under the Plan, and the Company has no obligation to treat Participants identically under the Plan.
(e) Costs and Expenses. The cost and expenses of administering the Plan shall be borne by the Company and shall not be charged to any Award or to any Participant receiving an Award.
(f) No Funding of Plan. The Plan shall be unfunded, and the Awards shall be paid solely from the general assets of the Company. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Award under the Plan. To the extent that any person acquires a right to receive payments under the Plan, the right is no greater than the right of any other unsecured general creditor.
(g) Offset for Monies Owed. Any payments made under the Plan will be offset for any monies that are owed to the Company to the extent permitted by applicable law, including Section 409A if such payment is subject to Section 409A.
(h) Other Incentive Plans. Nothing contained in the Plan shall prohibit the Company from granting other performance awards to employees of the Company (including Participants) under such other incentive arrangements, and in such form and manner, as it deems desirable.
(i) Successors. All obligations of PepsiCo under the Plan shall be binding on any successor to PepsiCo whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise of all or substantially all of the business or assets of PepsiCo.
(j) Section 409A. To the extent that any Award under the Plan is subject to Section 409A, the terms and administration of such Bonus shall comply with the provisions of Section 409A, and, to the extent necessary to achieve compliance, shall be modified at the discretion of the Committee.
(k) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan or Award shall remain in full force and effect.
(l) Governing Law. The Plan and all rights and awards hereunder shall be construed in accordance with and governed by the laws of the State of New York.
| 7. | Effective Date, Amendments and Termination. |
(a) Effective Date. The Plan originally became effective on May 6, 2009 upon approval by PepsiCo’s shareholders. The Plan as amended and restated herein is hereby adopted and approved by the Board of Directors at the Board of Director’s duly authorized meeting on February, 7, 2014, subject to approval by PepsiCo’s shareholders at the 2014 annual meeting of PepsiCo’s shareholders scheduled to be held May 7, 2014 for Awards for the 2014 Fiscal Year and thereafter. If such shareholder approval is not obtained, the Plan shall terminate at such time and be of no further effect.
(b) Amendments. The Committee may at any time terminate or from time to time amend the Plan in whole or in part, but no such action shall adversely affect any rights or obligations with respect to any Awards theretofore made under the Plan. No such amendment or modification, however, may be effective without approval of PepsiCo’s shareholders if such approval is necessary to comply with the requirements of the Section 162(m) Exemption including (i) any change to the class of persons eligible to participate in the Plan, (ii) any change to the Performance Goals or Performance Measures or (iii) any increase to the maximum dollar amount that may be paid to a Participant for a Performance Period.
(c) Termination. The Plan shall continue in effect until terminated by the Committee.
| B-5 |
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Table of Contents
Table of Contents
q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
| A | Proposals — Where no voting instructions are given, the shares represented by this proxy will be voted “FOR” each |
+
| ||
| of the nominees listed in item No. 1, “FOR” items No. 2, 3 and 4 and “AGAINST” items No. 5 and 6. |
||||
|
The Board of Directors recommends you vote “FOR” each of the nominees listed in item No. 1 and “FOR” items No. 2, 3 and 4. |
Company Proposals
1. Election of Directors:
| For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||
| 1.1 - Shona L. Brown |
¨ | ¨ | ¨ | 1.8 - Indra K. Nooyi |
¨ | ¨ | ¨ | 2. Ratification of the appointment of KPMG LLP as the company’s independent registered public accountants for the fiscal year 2014. |
¨ | ¨ | ¨ | |||||||||||||
| 1.2 - George W. Buckley |
¨ | ¨ | ¨ | 1.9 - Sharon Percy Rockefeller |
¨ | ¨ | ¨ | 3. Advisory approval of the company’s executive compensation. |
¨ | ¨ | ¨ | |||||||||||||
| 1.3 - Ian M. Cook | ¨ | ¨ | ¨ | 1.10 - James J. Schiro |
¨ | ¨ | ¨ | 4. Approval of the material terms of the performance goals of the PepsiCo, Inc. Executive Incentive Compensation Plan. |
¨ | ¨ | ¨ | |||||||||||||
| 1.4 - Dina Dublon | ¨ | ¨ | ¨ | 1.11 - Lloyd G. Trotter |
¨ | ¨ | ¨ | |||||||||||||||||
| 1.5 - Rona A. Fairhead |
¨ | ¨ | ¨ | 1.12 - Daniel Vasella |
¨ | ¨ | ¨ |
Shareholder Proposals
|
||||||||||||||||
| 1.6 - Ray L. Hunt | ¨ | ¨ | ¨ | 1.13 - Alberto Weisser |
¨ | ¨ | ¨ | The Board of Directors recommends you vote “AGAINST” items No. 5 and 6.
|
||||||||||||||||
| 1.7 - Alberto Ibargüen |
¨ | ¨ | ¨ | For
|
Against
|
Abstain
|
||||||||||||||||||
| 5. Policy regarding approval of political contributions. |
¨ | ¨ | ¨ | |||||||||||||||||||||
| 6. Policy regarding executive retention of stock. |
¨ | ¨ | ¨ | |||||||||||||||||||||
IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
| ¢ | 1 U P X | + |
01SD3F
Table of Contents
ADMISSION TICKET
2014 Annual Meeting of Shareholders of PepsiCo, Inc.
Dear Shareholder(s):
The Annual Meeting of Shareholders of PepsiCo, Inc. will be held at the North Carolina History Center at Tryon Palace, 529 South Front Street, New Bern, North Carolina 28562, on Wednesday, May 7, 2014, at 9:00 a.m. Eastern Daylight Time.
Admission to the meeting will be on a first-come, first-served basis. This admission ticket and valid government-issued photo identification, such as a driver’s license, state identification card or passport, will be required to enter the meeting. If you are a shareholder of record and plan to attend the meeting, please bring this admission ticket to the meeting.
Directions to the PepsiCo, Inc. 2014 Annual Meeting at the North Carolina History Center
| FROM COASTAL CAROLINA REGIONAL AIRPORT (EWN):
Head east on Terminal Drive. Turn left on Airport Road. Take the second left onto US 70 West. Take exit #417A toward New Bern. Merge onto US 70 Bus. Turn left onto South Front Street. The North Carolina History Center will be immediately on your left.
FROM THE NORTHWEST (Raleigh, Goldsboro):
Take Highway 70 East to New Bern. Take the Trent Road/Pembroke exit and turn left at the light. Turn right at the third light (Broad Street), and then turn right on Hancock Street. Cross Pollock Street. Make a right onto South Front Street. The North Carolina History Center will be immediately on your left. |
FROM THE NORTH (Greenville):
Take Highway 17 South from Washington, NC. Cross the Neuse River Bridge, take the ramp straight to US 70 and cross the Freedom Memorial Bridge. Take the Trent Road/Pembroke exit and turn right at the light. Turn right at the third light (Broad Street) then turn right on Hancock Street. Cross Pollock Street. Make a right onto South Front Street. The North Carolina History Center will be immediately on your left.
FROM THE SOUTH (Wilmington, Jacksonville):
Take Highway 17 North into New Bern. Stay on the same road (also called ML King Blvd.) and pass Twin Rivers Mall. Go under Route 70 overpass (Hwy 17 becomes Business 17) - stay in middle lane. Road will veer right at Palace Motel and |
name will change to Neuse Blvd. Shortly after fire station, name will change again to Broad Street. Continue on Broad Street to Hancock Street. Turn right on Hancock Street. Cross Pollock Street. Make a right onto South Front Street. The North Carolina History Center will be immediately on your left.
FROM THE SOUTHWEST (Fayetteville):
Take I-95 North to Highway 70 East to New Bern. Take the Trent Road/Pembroke exit and turn left at the light. Turn right at the third light (Broad Street), and then turn right on Hancock Street. Cross Pollock Street. Make a right onto South Front Street. The North Carolina History Center will be immediately on your left. |
* Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at: http://www.pepsico.com/proxy14
q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Proxy — PEPSICO, INC.
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PROXY FOR ANNUAL MEETING OF SHAREHOLDERS — MAY 7, 2014
THIS PROXY IS SOLICITED ON BEHALF OF PEPSICO’S BOARD OF DIRECTORS
The undersigned hereby appoints Indra K. Nooyi, Larry D. Thompson and Cynthia Nastanski, and each of them, proxies for the undersigned, with full power of substitution, to vote all shares of Common Stock and/or Convertible Preferred Stock of PepsiCo, Inc. which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of PepsiCo, Inc. in New Bern, NC, on Wednesday, May 7, 2014 at 9:00 a.m. Eastern Daylight Time, or at any adjournment or postponement thereof, upon the matters set forth on the reverse side and described in the accompanying Proxy Statement and any other matter that may properly come before the meeting.
Please mark this proxy as indicated on the reverse side to vote on any item. Shares represented by this proxy will be voted in accordance with your specifications. If you do not provide specific instructions, shares represented by this proxy will be voted “FOR” each of the nominees listed in item No. 1, “FOR” items No. 2, 3 and 4 and “AGAINST” items No. 5 and 6.
(Continued and to be marked on the other side)
| B | Non-Voting Items |
| Change of Address — Please print your new address below. | Comments — Please print your comments below. | Meeting Attendance | ||||||||
| Mark the box to the right if you plan to attend the Annual Meeting. |
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| C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Receipt is hereby acknowledged of the PepsiCo Notice of Meeting and Proxy Statement. IMPORTANT: Please sign exactly as your name or names appear on this Proxy. Where shares are held jointly, both holders should sign. When signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. If the holder is a corporation, execute in full corporate name by authorized officer.
| Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||
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| ¢ | IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. | + |
Table of Contents
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Annual Meeting Proxy Card |
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
| A | Proposals — Where no voting instructions are given, the shares represented by this proxy will be voted “FOR” each |
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| of the nominees listed in item No. 1, “FOR” items No. 2, 3 and 4 and “AGAINST” items No. 5 and 6. |
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The Board of Directors recommends you vote “FOR” each of the nominees listed in item No. 1 and “FOR” items No. 2, 3 and 4. |
Company Proposals
1. Election of Directors:
| For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||
| 1.1 - Shona L. Brown |
¨ | ¨ | ¨ | 1.8 - Indra K. Nooyi |
¨ | ¨ | ¨ | 2. Ratification of the appointment of KPMG LLP as the company’s independent registered public accountants for the fiscal year 2014. |
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| 1.2 - George W. Buckley |
¨ | ¨ | ¨ | 1.9 - Sharon Percy Rockefeller |
¨ | ¨ | ¨ | 3. Advisory approval of the company’s executive compensation. |
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| 1.3 - Ian M. Cook | ¨ | ¨ | ¨ | 1.10 - James J. Schiro |
¨ | ¨ | ¨ | 4. Approval of the material terms of the performance goals of the PepsiCo, Inc. Executive Incentive Compensation Plan. |
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| 1.4 - Dina Dublon | ¨ | ¨ | ¨ | 1.11 - Lloyd G. Trotter |
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| 1.5 - Rona A. Fairhead |
¨ | ¨ | ¨ | 1.12 - Daniel Vasella |
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Shareholder Proposals
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| 1.6 - Ray L. Hunt | ¨ | ¨ | ¨ | 1.13 - Alberto Weisser |
¨ | ¨ | ¨ | The Board of Directors recommends you vote “AGAINST” items No. 5 and 6. | ||||||||||||||||
| 1.7 - Alberto Ibargüen |
¨ | ¨ | ¨ | For | Against | Abstain | ||||||||||||||||||
| 5. Policy regarding approval of political contributions. |
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| 6. Policy regarding executive retention of stock. |
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YOU MUST COMPLETE SECTIONS A - B ON BOTH SIDES OF THIS CARD.
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Table of Contents
* Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at: http://www.pepsico.com/proxy14
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Proxy — PEPSICO, INC.
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PROXY FOR ANNUAL MEETING OF SHAREHOLDERS — MAY 7, 2014
THIS PROXY IS SOLICITED ON BEHALF OF PEPSICO’S BOARD OF DIRECTORS
The undersigned hereby appoints Indra K. Nooyi, Larry D. Thompson and Cynthia Nastanski, and each of them, proxies for the undersigned, with full power of substitution, to vote all shares of Common Stock and/or Convertible Preferred Stock of PepsiCo, Inc. which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of PepsiCo, Inc. in New Bern, NC, on Wednesday, May 7, 2014 at 9:00 a.m. Eastern Daylight Time, or at any adjournment or postponement thereof, upon the matters set forth on the reverse side and described in the accompanying Proxy Statement and any other matter that may properly come before the meeting.
Please mark this proxy as indicated on the reverse side to vote on any item. Shares represented by this proxy will be voted in accordance with your specifications. If you do not provide specific instructions, shares represented by this proxy will be voted “FOR” each of the nominees listed in item No. 1, “FOR” items No. 2, 3 and 4 and “AGAINST” items No. 5 and 6.
(Continued and to be marked on the other side)
| B | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Receipt is hereby acknowledged of the PepsiCo Notice of Meeting and Proxy Statement. IMPORTANT: Please sign exactly as your name or names appear on this Proxy. Where shares are held jointly, both holders should sign.When signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. If the holder is a corporation, execute in full corporate name by authorized officer.
| Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. | ||||||
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| n | YOU MUST COMPLETE SECTIONS A - B ON BOTH SIDES OF THIS CARD. | + |
Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the
PepsiCo. Inc. Shareholder Meeting to be Held on May 7, 2014
Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual shareholders’ meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important!
This communication presents only an overview of the more complete proxy materials, which contain important information and are available to you on the Internet or by mail. We encourage you to access and review all of the information contained in the proxy materials before voting. The proxy statement and annual report to shareholders are available at:
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Easy Online Access — A Convenient Way to View Proxy Materials and Vote | |
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When you go online to view materials, you can also vote your shares. | ||
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Step 1: Go to www.envisionreports.com/PEP to view the materials. | ||
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Step 2: Click on Cast Your Vote or Request Materials. | ||
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Step 3: Follow the instructions on the screen to log in. | ||
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Step 4: Make your selection as instructed on each screen to select delivery preferences and vote. | ||
When you go online, you can also help the environment by consenting to receive electronic delivery of future materials.
Proxies submitted by the Internet or telephone must be received by 5:00 p.m., Eastern Daylight Time, on May 6, 2014.
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Obtaining a Copy of the Proxy Materials – If you want to receive a copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed on the reverse side on or before April 18, 2014 to facilitate timely delivery. |
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| Shareholder Meeting Notice |
The 2014 Annual Meeting of Shareholders of PepsiCo, Inc. (the “Company”) will be held at the North Carolina History Center at Tryon Palace, 529 South Front Street, New Bern, North Carolina 28562, on Wednesday, May 7, 2014, at 9:00 a.m. Eastern Daylight Time.
Proposals to be considered at the Annual Meeting:
Company Proposals
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” EACH OF THE NOMINEES LISTED IN ITEM NO. 1 AND “FOR” ITEMS NO. 2, 3 AND 4.
| 1. | Election of Shona L. Brown, George W. Buckley, Ian M. Cook, Dina Dublon, Rona A. Fairhead, Ray L. Hunt, Alberto Ibargüen, Indra K. Nooyi, Sharon Percy Rockefeller, James J. Schiro, Lloyd G. Trotter, Daniel Vasella and Alberto Weisser as Directors; |
| 2. | Ratification of the appointment of KPMG LLP as the Company’s independent registered public accountants for the fiscal year 2014; |
| 3. | Advisory approval of the Company’s executive compensation; and |
| 4. | Approval of the material terms of the performance goals of the PepsiCo, Inc. Executive Incentive Compensation Plan. |
Shareholder Proposals
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “AGAINST” ITEMS NO. 5 AND 6.
| 5. | Policy regarding approval of political contributions; and |
| 6. | Policy regarding executive retention of stock. |
PLEASE NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must vote online or request a paper copy of the proxy materials to receive a proxy card.
The Board of Directors has fixed the close of business on February 28, 2014 as the record date (the “Record Date”) for the determination of shareholders entitled to receive notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.
Shareholders of record as of the Record Date are encouraged and cordially invited to attend the Annual Meeting. Directions to attend the Annual Meeting where you may vote in person can be found below.
Directions to the PepsiCo, Inc. 2014 Annual Meeting at the North Carolina History Center
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Here’s how to order a copy of the proxy materials and select a future delivery preference:
Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or email options below.
Email copies: Current and future email delivery requests must be submitted via the Internet following the instructions below. If you request an email copy of current materials you will receive an email with a link to the materials.
PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials.
g Internet – Go to www.envisionreports.com/PEP. Click Cast Your Vote or Request Materials. Follow the instructions to log in and order a copy of the current meeting materials and submit your preference for email or paper delivery of future meeting materials.
g Telephone – Call us free of charge at 1-866-641-4276 and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings.
g Email – Send email to investorvote@computershare.com with “Proxy Materials PepsiCo, Inc.” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on the reverse, and state in the email that you want a paper copy of current meeting materials. You can also state your preference to receive a paper copy for future meetings.
To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by April 18, 2014. | |
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