Bunge DEF 14A 2007
Documents found in this filing:
Proxy Statement Pursuant to
Section 14(a) of
You are cordially invited to attend our Annual General Meeting of Shareholders, which will be held on Friday, May 25, 2007 at 10:00 a.m., Eastern time, at the Sofitel Hotel, 45 West 44th Street, in New York City.
The proxy statement contains important information about the Annual General Meeting, the proposals we will consider and how you can vote your shares.
Your vote is very important to us. We encourage you to promptly complete, sign, date and return the enclosed proxy card, which contains instructions on how you would like your shares to be voted. You may also appoint your proxy by telephone or the Internet by following the instructions included with the proxy card. Please submit your proxy regardless of whether you will attend the Annual General Meeting. This will help us ensure that your vote is represented at the Annual General Meeting.
On behalf of the Board of Directors and the management of Bunge, I extend our appreciation for your investment in Bunge. We look forward to seeing you at the Annual General Meeting.
Bunge Limiteds 2007 Annual General Meeting of Shareholders will be held on May 25, 2007 at 10:00 a.m., Eastern time, at the Sofitel Hotel, 45 West 44th Street, in New York City. At the Annual General Meeting, we will discuss and you will vote on the following proposals:
· Proposal 1the election to our Board of Directors of four Class I Directors to serve for a three-year term and the election of one Class II Director to serve for a two-year term;
· Proposal 2the appointment of Deloitte & Touche LLP as our independent auditors for the fiscal year ending December 31, 2007 and the authorization of the audit committee of the Board of Directors to determine the independent auditors fees; and
· Proposal 3the approval of our 2007 Non-Employee Directors Equity Incentive Plan.
Shareholders will also consider and act on such other matters as may properly come before the meeting or any adjournments or postponements thereof.
These matters are more fully described in the enclosed proxy statement. We will also present at the Annual General Meeting the consolidated financial statements and independent auditors report for the fiscal year ended December 31, 2006, copies of which can be found in our 2006 Annual Report that accompanies this Notice.
March 30, 2007 is the record date for determining which shareholders are entitled to notice of, and to vote at, the Annual General Meeting and at any subsequent adjournments or postponements. The share register will not be closed between the record date and the date of the Annual General Meeting.
Please promptly complete, sign, date and return the enclosed proxy card in the accompanying pre-addressed envelope. You may also appoint your proxy by telephone or the Internet by following the instructions included with your proxy card. We must receive your proxy no later than 11:59 p.m., Eastern time, on May 24, 2007.
You will be required to bring certain documents with you to be admitted to the Annual General Meeting. Please read carefully the sections in the proxy statement on attending and voting at the Annual General Meeting to ensure that you comply with these requirements.
By order of the Board of Directors.
Bunge shareholders should complete and return the proxy card as soon as possible. To be valid, the proxy card must be completed in accordance with the instructions on it and received by us no later than 11:59 p.m., Eastern Time, on May 24, 2007. If you appoint your proxy by telephone or the Internet, we must also receive your appointment no later than 11:59 p.m., Eastern Time, on May 24, 2007. If you participate in the Bunge share funds of the Bunge Retirement Savings Plan, the Bunge Savings Plan and the Bunge Savings PlanSupplement A, you must also submit your voting instructions by this deadline in order to allow the plan trustees time to receive your voting instructions and vote on behalf of the plans. If your common shares are held in street name, you should return your proxy card or voting instruction card in accordance with the instructions on that card or as provided by the bank, brokerage firm or other nominee who holds Bunge common shares on your behalf.
We will bear the cost of the solicitation of proxies, including the preparation, printing and mailing of this proxy statement and the proxy card. We will furnish copies of these proxy materials to banks, brokers, fiduciaries and custodians holding shares in their names on behalf of beneficial owners so that they may forward these proxy materials to our beneficial owners.
We have retained Innisfree M&A Incorporated to assist us in the distribution of the proxy materials and to act as proxy solicitor for the Annual General Meeting for a fee of $12,500 plus reasonable out-of-pocket expenses. In addition, we may supplement the original solicitation of proxies by mail with solicitation by telephone, telegram and other means by our directors, officers and/or employees. We will not pay any additional compensation to these individuals for any such services.
Our Board consists of twelve directors and is divided into three classes that are, as nearly as possible, of equal size. Each class of directors is elected for a three year term of office, and the terms are staggered so that the term of only one class of directors expires at each annual general meeting. Bunges bye-laws provide that no more than two directors may be employed by Bunge or its subsidiaries.
The Board is composed of a substantial majority of independent directors. In accordance with the listing standards of the New York Stock Exchange (NYSE), to be considered independent, a director must have no material relationship with Bunge either directly or as a partner, shareholder or officer of an organization that has a relationship with Bunge. The Board annually reviews commercial and other relationships between directors or members of their immediate families and Bunge, including those reported under Certain Relationships and Related Party Transactions, in order to make a determination regarding the independence of each director. To assist it in making these determinations, the Board has adopted categorical standards of director independence which are set forth in Annex A to our Corporate Governance Guidelines, which are included as Appendix A to this proxy statement and are also available through the About BungeInvestor InformationCorporate Governance section of our website, www.bunge.com.
In making its independence determinations, the Board considered that in the ordinary course of business, purchase and sale transactions may occur between Bunge and other companies with which some of our directors or their immediate family members are affiliated. In each case, these transactions were conducted on arms length terms at market prices and, in each case, except as described below, the amount of these transactions in each of the last three years did not exceed the thresholds set forth in the categorical standards. In addition, the Board considered and determined that the transactions with Mutual Investment Limited and its subsidiaries described in this proxy statement under Certain Relationships and Related Party Transactions do not impair the independence of the directors of Bunge who are current or former directors of Mutual Investment Limited as such transactions have been on arms length terms and are not otherwise material to us or our directors personally.
As a result of this review, the Board has determined that each director other than Mr. Weisser and Mr. Caraballo is independent. Mr. Weisser is not considered an independent director by virtue of his position as an executive officer of Bunge. Mr. Caraballo is not considered an independent director as ordinary course agricultural commodity sales to, and fertilizer purchases from, Bunge made by a company owned and controlled by Mr. Caraballos sister exceeded the thresholds set forth in the categorical standards for 2006. See Certain Relationships and Related Party Transactions for more information.
The Board normally has five regularly scheduled meetings per year and committee meetings are normally held in conjunction with Board meetings. Our Board met six times in 2006. All directors attended at least 75% of the combined Board and committee meetings on which they served during the last fiscal year.
Our bye-laws give our Board the authority to delegate its powers to committees appointed by the Board. All of our committees are composed solely of directors. Our committees are required to conduct meetings and take action in accordance with the directions of the Board, the provisions of our bye-laws and the terms of their respective committee charters. We have four standing committees: the audit committee, the compensation committee, the finance and risk policy committee and the corporate governance and nominations committee. Copies of all our committee charters are available on our website,
www.bunge.com, and in print from us without charge upon request. Please note that the information contained in or connected to our website is not intended to be part of this proxy statement.
Audit Committee. Our audit committee assists the Board in fulfilling its responsibility for oversight of (i) the quality and integrity of our financial statements and related disclosure; (ii) our compliance with legal and regulatory requirements; (iii) the independent auditors qualifications, independence and performance; and (iv) the performance of our internal audit and control functions. Please see the Audit Committee Report included in this proxy statement for information about our 2006 fiscal year audit. The audit committee met 12 times in 2006. The members of our audit committee are Messrs. Bachrach, Boilini, Coppinger, de La Tour dAuvergne Lauraguais (chairman) and Engels. Each of the members of the audit committee is independent under the Sarbanes-Oxley Act of 2002 and the listing standards of the NYSE. Our Board has determined that each of Mr. de La Tour dAuvergne Lauraguais, Mr. Bachrach, Mr. Boilini and Mr. Engels qualifies as an audit committee financial expert. In accordance with our audit committee charter, no committee member may simultaneously serve on the audit committees of more than two other public companies without the prior approval of the Board.
Compensation Committee. Our compensation committee reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluates the performance of the Chief Executive Officer in light of these goals and objectives and sets the compensation level based on this evaluation. The compensation committee also reviews the evaluations of the direct reports to the Chief Executive Officer and approves and oversees the total compensation packages for the direct reports to the Chief Executive Officer, which packages include annual base salaries, performance-based cash bonuses and long-term equity-based compensation. In addition, the compensation committee reviews other benefits and perquisites offered to our executive officers. The compensation committee also oversees our equity incentive plans, which include our Equity Incentive Plan and our Non-Employee Directors Equity Incentive Plan. The compensation committee has the discretion to interpret the terms of our equity incentive plans, to amend rules and procedures relating to these plans and to take all other actions necessary to administer these plans in our best interests. The compensation committee also makes recommendations to the Board on director compensation, and periodically reviews our management succession program for senior executive positions. The compensation committee has the power to delegate its authority and duties designated in its charter to subcommittees or individual members of the compensation committee as it deems appropriate, unless prohibited by law, regulation or any NYSE listing standard. The compensation committee met three times in 2006. The members of our compensation committee are Messrs. Bachrach, Bulkin (chairman), Coppinger, Hatfield and Lupo. Each of the members of the compensation committee is independent under the listing standards of the NYSE.
Corporate Governance and Nominations Committee. Our corporate governance and nominations committee is responsible for monitoring significant developments in the law and practice of corporate governance and the duties and responsibilities of directors of public companies, leading the Board in its annual performance evaluation, developing, recommending and administering our corporate governance guidelines and code of ethics, assisting our Board by actively identifying individuals qualified to become members of our Board and making recommendations to the Board regarding the director nominees for election at the next annual general meeting of shareholders. See also Nomination of Directors. The corporate governance and nominations committee met four times in 2006. The members of our corporate governance and nominations committee are Messrs. Born, Coppinger, Engels, Hatfield (chairman) and Pillard. Each of the members of the corporate governance and nominations committee is independent under the listing standards of the NYSE.
Finance and Risk Policy Committee. Our finance and risk policy committee is responsible for supervising the quality and integrity of our financial and risk management practices. The finance and risk policy committee reviews and updates our risk management policies and risk limits on a periodic basis and advises our Board on financial and risk management practices. The finance and risk policy committee met
ten times in 2006. The members of our finance and risk policy committee are Messrs. Boilini, Born, de La Tour dAuvergne Lauraguais, Engels (chairman), Lupo and Pillard.
Our Board has adopted corporate governance guidelines that set forth our corporate governance objectives and policies and, subject to our bye-laws, govern the functioning of the Board. Our corporate governance guidelines are included as Appendix A to this proxy statement and are also available on our website, www.bunge.com, and in print from us without charge upon request.
We also have a code of ethics that sets forth our commitment to ethical business practices. Our code of ethics applies to our directors, officers and employees worldwide, including our Chief Executive Officer and senior financial officers. Our code of ethics is available on our website and in print from us without charge upon request. We intend to post amendments to and waivers (to the extent applicable to certain officers and our directors) of our code of ethics on our website.
Our corporate governance guidelines provide that the non-management directors shall meet without management directors at regularly scheduled executive sessions and at such other times as they deem appropriate. Our Board has adopted a policy that the non-management directors will meet without management present at each regularly scheduled Board meeting. In accordance with our corporate governance guidelines, the non-management directors shall, from time to time, designate a director from among their number to preside at these executive sessions of the non-management directors. In 2006, Mr. Born presided, and continues to preside, over these sessions. The presiding director, among other things, establishes an agenda with the assistance of the other non-management directors and facilitates communications among other non-management directors at each executive session.
To facilitate the ability of shareholders to communicate with our Board and to facilitate the ability of interested persons to communicate with non-management directors, the Board has established an electronic mailing address and a physical mailing address to which such communications may be sent. Additional information on the electronic mailing address and the physical mailing address is available on our website through the About BungeInvestor InformationCorporate Governance section.
Communications sent to the electronic mailing or physical mailing addresses are initially directed to our legal department, where they are screened to eliminate communications that are merely solicitations for products and services, items of a personal nature not relevant to us or our shareholders and other matters that are improper or irrelevant to the functioning of the Board and Bunge. All other communications are forwarded to the relevant director, if addressed to an individual director or a committee chairman or to the members of the corporate governance and nominations committee if no particular addressee is specified.
In addition, it is the policy of our Board that our directors attend each annual general meeting of shareholders. All of our then serving, continuing directors were in attendance at our 2006 Annual General Meeting.
As provided in its charter, the corporate governance and nominations committee will identify and recommend to the Board nominees for election to the Board and will consider nominees submitted by shareholders. The corporate governance and nominations committee, in its commitment to our corporate
governance guidelines, strives to nominate director candidates who exhibit high standards of ethics, integrity, commitment and accountability and who are committed to promoting the long-term interests of our shareholders. In addition, all nominations attempt to ensure that the Board shall encompass a range of talent, skill and relevant expertise sufficient to provide sound guidance with respect to our operations and interests. The committee strives to recommend candidates that complement the current members of the Board and other proposed nominees so as to further the objective of having a Board that reflects a diversity of background and experience with the necessary skills to effectively perform the functions of the Board and its committees. In that regard, from time to time, the corporate governance and nominations committee may identify certain skills or attributes (e.g., extensive global business leadership experience) as being particularly desirable to help meet specific board needs that have arisen. When the corporate governance and nominations committee reviews a potential new candidate, it looks specifically at the candidates qualifications in light of the needs of the Board at that time given the then-current mix of director attributes.
Under the corporate governance guidelines, directors must inform the Chairman of the Board and the Chairman of the corporate governance and nominations committee in advance of accepting an invitation to serve on another public company board. In addition, no director may sit on the board, or beneficially own more than 1% of the outstanding equity securities, of any of our competitors in our principal lines of business. While the Board has not established any term limits to an individuals membership on the Board, no director having attained the age of 70 will be nominated by the Board for re-election or re-appointment to the Board. Directors eligible for re-election abstain from Board discussions regarding their nomination and from voting on such nomination.
Shareholders who wish to propose a director nominee must give written notice to our Secretary at our registered address at 2 Church Street, Hamilton HM 11, Bermuda, not later than 120 days before the first anniversary of the date on which Bunges proxy statement was distributed to shareholders in connection with the prior years annual general meeting. If no annual general meeting was held in the prior year or if the date of the annual general meeting has been changed by more than 30 days from the date contemplated in the prior years proxy statement, the notice must be given before the later of (i) 150 days prior to the contemplated date of the annual general meeting and (ii) the date which is ten days after the date of the first public announcement or other notification of the actual date of the annual general meeting. Where directors are to be elected at a special general meeting, such notice must be given before the later of (i) 120 days before the date of the special general meeting and (ii) the date which is ten days after the date of the first public announcement or other notification of the date of the special general meeting. In each case, the notice must include, as to each person the shareholder proposes to recommend for election or re-election as director, all information relating to that person required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, which includes such persons written consent to being named in the proxy statement as a nominee and to serving as a director if elected, and evidence satisfactory to Bunge that such nominee has no interests that would limit such nominees ability to fulfill their duties of office. Bunge may require any proposed nominee to furnish such other information as reasonably may be required by Bunge to determine the eligibility of such proposed nominee to serve as a director. A shareholder may propose a director nominee to be considered by our shareholders at the annual general meeting provided that the notice provisions in our bye-laws as set forth above are met, even if such director nominee is not nominated by the corporate governance and nominations committee. A shareholder may also recommend director candidates for consideration by the corporate governance and nominations committee at any time. Any such recommendations should include the nominees name and qualifications for Board membership.
In connection with the director nominations process, the corporate governance and nominations committee may identify candidates through recommendations provided by members of the Board, management or shareholders, and may also engage a search firm to assist in identifying or evaluating
qualified candidates. The committee will review and evaluate candidates taking into account available information concerning the candidate, the qualifications for Board membership described above and other factors that it deems relevant. In conducting its review and evaluation, the committee may solicit the views of other members of the Board, senior management and third parties, conduct interviews of proposed candidates and may also request that candidates meet with other members of the Board. The committee will evaluate candidates recommended by shareholders in the same manner as candidates recommended by other persons. The corporate governance and nominations committee has retained a professional search firm to assist it in identifying and evaluating candidates for director. Messrs. Lupo and Pillard, who joined the Board on July 19, 2006 and January 1, 2007, respectively, were initially identified as potential director candidates by the search firm retained by the corporate governance and nominations committee. The corporate governance and nominations committee has not received any nominations for director from shareholders for the 2007 Annual General Meeting of Shareholders.
Upon the recommendation of the corporate governance and nominations committee, each of Messrs. Born, Caraballo, de La Tour dAuvergne Lauraguais, Engels and Lupo has been nominated by the Board for election at the 2007 Annual General Meeting. Messrs. Born, Caraballo, de La Tour dAuvergne Lauraguais and Engels are currently Class I directors, and their terms expire on the day of the 2007 Annual General Meeting. Messrs. Bachrach, Boilini, Bulkin and Hatfield are Class III directors, and their terms expire in 2008. Messrs. Coppinger, Lupo, Pillard and Weisser are Class II directors, and their terms expire in 2009. In order to create a better balance of skills, experience and tenure among the classes of directors on the Board, the corporate goverance and nominations committee has recommended the nomination of Messrs. Born, de La Tour dAuvergne Lauraguais, Engels and Lupo for election as Class I directors and Mr. Caraballo for election as a Class II director. The Class I directors elected at this Annual General Meeting will serve a term that expires at our 2010 annual general meeting. The Class II director elected at this Annual General Meeting will serve a term that expires at our 2009 annual general meeting. Election of each director requires the affirmative vote of a majority of the votes cast by the holders of common shares represented at the Annual General Meeting in person or by proxy.
The following paragraphs set forth information about the nominees and our directors. The nominees for election at the Annual General Meeting are listed first. All of the nominees are current directors of Bunge and we are not aware of any reason why any of the nominees will not be able to serve if elected.
Our Board recommends that you vote FOR the election of each of Messrs. Born, de La Tour dAuvergne Lauraguais, Engels and Lupo to our Board as Class I Directors for a term ending at our 2010 annual general meeting and the election of Mr. Caraballo to our Board as a Class II director for a term ending at our 2009 annual general meeting.
Our compensation program for non-employee directors is designed to enable us to attract, retain and motivate highly qualified directors to serve on our Board. It is also intended to further align the interests of our directors with those of our shareholders. Annual compensation for our non-employee directors in 2006 was comprised of a mix of cash and equity-based compensation. The compensation committee periodically receives reports on the status of Board compensation for non-employee directors from its independent compensation consultant and is responsible for recommending to the Board changes in director compensation.
The following table sets forth the compensation for non-employee directors who served on our Board during the fiscal year ended December 31, 2006.
(1) Represents compensation earned in 2006.
(2) Each of the directors, except Mr. Lupo and Mr. Braun Saint, received an annual grant of 5,500 stock options on May 26, 2006. In accordance with Statement of Financial Accounting Standards No. 123R Share Based Payments (SFAS 123R) (without any reduction for risk of forfeiture), all calculations are based on applying the assumptions used in Bunges financial statements. See Note 22 to the audited financial statements in our annual report on Form 10-K for the year ended December 31, 2006 (the Form 10-K) regarding assumptions underlying valuation of equity awards.
(3) Mr. Lupo was appointed to the Board effective as of July 19, 2006 and received a grant of 13,000 stock options on such date.
(4) Mr. Braun Saint did not stand for reelection in 2006 and therefore did not receive an annual grant of stock options.
Directors Fees. Non-employee directors received the following fees in 2006: (i) an annual retainer fee of $60,000; (ii) a fee of $10,000 for service as committee chair on any committee, except for the Chair of the audit committee, who received $20,000 per year for his services due to the added workload and responsibilities of this committee; and/or (iii) a fee of $5,000 for service as a member on any committee,
except for the members of the audit committee, who each received $10,000 per year for their services due to the added workload and responsibilities of this committee. Although directors do not receive an annual Board or committee meeting attendance fee, if the Board and/or a committee meets in excess of five times in a given year, each director receives a fee of $1,000 per day for attendance at each such additional meeting of the Board and $1,000 per day for attendance at each such additional committee meeting. In addition, directors receive $250 for each Board or committee meeting held by teleconference, if the number of Board or committee meetings has exceeded five for the relevant year. Bunge also reimburses non-employee directors for reasonable expenses incurred by them in attending Board meetings, committee meetings and our annual shareholder meetings. Bunge provides Mr. de La Tour dAuvergne Lauraguais with office accommodations, communications services and secretarial services to facilitate his fulfillment of his role as chairman of the audit committee.
On February 27, 2007, the Board, upon recommendation of the compensation committee, modified the cash compensation program for non-employee directors serving on the Board effective as of January 1, 2007 as follows:
· The annual cash retainer received by each non-employee director will be increased from $60,000 to $75,000. Directors who serve on committees of the Board, other than the audit committee, will no longer receive committee membership fees. Directors who serve on the audit committee will continue to receive a membership fee of $10,000 per year.
· Committee chair fees will remain $20,000 per year for the audit committee chair and $10,000 per year for each other committee chair.
· If the Board or a committee meets in excess of 10 times per year, each non-employee director or committee member will receive a fee for attendance at each such additional meeting. Such fees will be fixed at $1,000 per meeting attended. For 2006, meeting fees were earned if the Board or a committee met more than five times per year.
Non-Employee Directors Equity Incentive Plan. The Non-Employee Directors Equity Incentive Plan, adopted in 2001, provides that each new non-employee director will be granted stock options to purchase 7,500 Bunge common shares at the time of their initial appointment or election to the Board. In addition, each year on the date of our annual general meeting of shareholders or at an earlier time specified by the Board, each continuing non-employee director will be granted stock options to purchase 5,500 common shares. Bunge grants only non-qualified stock options under the Non-Employee Directors Equity Incentive Plan. The exercise price per share is equal to the fair market value of a common share on the option grant date, as provided in the plan, and in 2006 was based on the average of the highest and lowest sale prices of a common share on the date of grant. Options become vested and exercisable on the January 1st after the date of grant, provided that the director has continued to serve on the Board until such date. Outstanding options remain exercisable for a period of ten years after their grant date. The Non-Employee Directors Equity Incentive Plan provides that up to 0.5% of our issued and outstanding common shares may be issued under the plan. As of December 31, 2006, we had granted stock options to purchase an aggregate of 504,500 common shares to our non-employee directors as a group under the Non-Employee Directors Equity Incentive Plan.
Non-Employee Directors Deferred Compensation Plan. Our Deferred Compensation Plan for Non-Employee Directors (the Non-Employee Directors Deferred Compensation Plan), a non-tax qualified deferred compensation plan, is designed to provide non-employee directors with an opportunity to elect to defer receipt of all or a portion of their annual cash fees. Participants may elect to defer receipt of their cash fees for at least 36 months and will receive a distribution of their respective accounts immediately following the end of their elected deferral period. Messrs. Bachrach and Braun Saint were the only non-employee directors who deferred any amounts in 2006.
Amounts deferred are credited in the form of hypothetical share units that are approximately equal to the fair market value of a Bunge common share on the date that fees are otherwise paid. Participants deferral accounts will be credited with hypothetical share units and dividend equivalents, in the form of additional share units, in the event Bunge pays dividends to holders of its common shares. Distributions are made in the form of Bunge common shares or cash, as elected by the participant. Upon a change of control of Bunge, a participant will receive an immediate lump sum distribution of his or her account in cash or Bunge common shares, as determined by the compensation committee.
The number of shares underlying hypothetical share units held by our non-employee directors are shown in the beneficial ownership table on page 45 of this proxy statement.
Non-Employee Director Share Ownership Guidelines. To further align the personal interest of the Board with the interests of our shareholders, the Board has established share ownership guidelines for the minimum amount of common shares that are required to be held by our non-employee directors. These guidelines are required to be met within five years of May 2005 or, if later, from when the non-employee director is initially appointed or elected to the Board. For non-employee directors, the guideline is four times the annual retainer fee paid by Bunge to its non-employee directors. Shares deemed to be owned for purposes of the share ownership guidelines include shares underlying hypothetical share units held under the Non-Employee Directors Deferred Compensation Plan and 50% of the difference between the exercise price and the fair market value of our common shares for vested, in-the-money stock options. Unvested stock options do not count toward satisfaction of the guidelines. Furthermore, our non-employee directors are required to hold 100% of the net shares acquired through Bunges equity incentive plans until the guidelines are met.
Compensation Philosophy and Objectives
The compensation committee of our Board (the Committee) is responsible for designing, reviewing and overseeing the administration of Bunges executive compensation program (the Program). Pursuant to its charter, the Committee approved the 2006 compensation for the Chief Executive Officer (the CEO) and the other executive officers named in the Summary Compensation Table set forth on page 28 of this proxy statement (the Named Executive Officers). Information about the Committee and its members can be found on page 7 of this proxy statement.
The Program is designed to achieve the following objectives:
· support Bunges business goals by fostering profitable growth and increasing shareholder value;
· align the interests of executive officers and shareholders;
· attract, retain and motivate high caliber executive officers; and
· pay for performance by linking a significant amount of executive compensation to the overall individual contribution to Bunges growth and to the achievement of pre-established performance goals.
The Program is designed around key performance drivers for Bunge in order to motivate our executives (including the Named Executive Officers) to continually improve Bunges financial performance and increase shareholder value both over the short and long-term. The Program emphasizes company-wide compensation programs over individually negotiated compensation arrangements. Other than Messrs. Kfouri and Weisser, none of the Named Executive Officers have employment agreements.
As described below, the Program provides executives with a mix of cash and equity-based compensation opportunities. The Program also provides executives with a level of benefits that is intended to be competitive with those companies that Bunge competes with for executive talent.
The Program consists of the following main elements of compensation:
· base salary;
· annual cash incentive;
· long-term equity-based incentives; and
· retirement and welfare benefits.
The Program strives to provide a mix of base salary, annual cash incentive awards and long-term equity-based incentive award values that is aligned with the Programs compensation principles and competitive with compensation provided by a peer group of selected publicly-traded companies. This group includes Bunges direct competitors in its industries and other U.S. based and international companies that have comparable annual revenues to Bunge or which otherwise reflect the breadth of its activities (the Peer Group). The Committee, in consultation with its independent compensation consultant, establishes and periodically reviews the composition of the Peer Group based on available market data. For 2006, the following companies comprised the Peer Group: Air Products & Chemicals Inc., Alcoa Inc., Archer Daniels Midland Company, Coca-Cola Enterprises Inc., ConAgra Foods Inc., Dean Foods Company, FedEx Corp., Georgia-Pacific Corp., International Paper Company, Meadwestvaco Corp., Monsanto Company, The Mosaic Company, Pepsi Bottling Group Inc., PotashCorp, Smithfield Foods Inc., Tyson Foods, Inc., United Parcel Service, Inc., and Weyerhaeuser Co. As Georgia-Pacific Corp. is no longer a publicly-traded company, it has been removed from the Peer Group for 2007.
In addition, the Committee supplements Peer Group data with data derived from several external compensation surveys. The survey data further enables the Committee to compare the competitiveness of the compensation of the Named Executive Officers based on their individual responsibilities and scope against comparable positions in (1) a broader market group of companies of comparable annual revenues to the company and (2) companies in related industries or which otherwise reflect the breadth of the companys activities. The Peer Group and the external survey data are referred to collectively as the Comparator Groups.
Under the Program, the Committee generally sets the base salary and the target levels for annual cash incentive awards and long-term equity-based incentive award values (referred to as target total compensation) for the Named Executive Officers at approximately the median of the Comparator Groups, with the potential for actual compensation earned to be at, above or below the median depending on individual and company performance for the year.
In addition to reviewing data from the Comparator Groups, the Committee also considers the following factors in setting target total compensation levels for the Named Executive Officers: (i) the individual responsibilities and achievements of the Named Executive Officers and their potential contributions towards Bunges performance, (ii) recommendations from the independent compensation consultant, Semler Brossy Consulting Group, LLC, (iii) recommendations from senior management, as described below and (iv) whether the components of a Named Executive Officers compensation align with the Programs overall objectives as described above. As such, the Program retains the flexibility to set target total compensation above the median of the Comparator Groups in the Committees discretion in order to recognize competitive factors such as unusual experience, unique skill sets and ongoing or potential contributions by our executives.
A significant portion of the Named Executive Officers target total compensation under the Program is meant to be at-risk, performance-based compensation. For 2006, base salary represented 23% of the target total compensation established for the Named Executive Officers, while at-risk, performance-based compensation represented 77% of target total compensation for the Named Executive Officers, with 20% from annual cash incentive awards and 57% from long-term equity-based incentive awards. The following chart illustrates this mix of target total compensation.
For 2006, based on consideration of the objectives underlying the Program, compensation levels in the Comparator Groups and Bunges financial performance and individual executive performance, the Committee determined that target total compensation awarded to the Named Executive Officers was consistent with the objectives of the Program and that such compensation was reasonable and appropriate.
The CEO establishes the strategic direction of the Program in consultation with the Committee, evaluates the performance of the Named Executive Officers (excluding his own performance) and makes recommendations regarding their compensation in consultation with the Chief Personnel Officer. The CEO and the Chief Personnel Officer also participate in developing and recommending the individual performance goals for our Named Executive Officers for approval by the Committee. No other executive officers participate in the executive compensation process.
Elements of Named Executive Officer Compensation
The following discusses the main elements of compensation under the Program and the actions taken by the Committee for 2006 with respect to the compensation awarded to the Named Executive Officers.
A portion of annual cash compensation is paid as base salary to provide executives with a level of security and stability. Base salaries for the Named Executive Officers are reviewed on an annual basis, as well as in connection with a promotion or other change in responsibilities. The Committee reviews and approves the annual base salaries for the Named Executive Officers based on an evaluation of the individuals experience, skill level, scope of responsibilities, level of pay compared to comparable executives in the Comparator Groups, recommendations from the independent compensation consultant and, for each Named Executive Officer other than the CEO, recommendations from the CEO in consultation with the Chief Personnel Officer.
The Committee generally sets the base salary at approximately the median level for comparable executives in the Comparator Groups. For 2006, the base salaries for the Named Executive Officers were not increased, with the exception of Mr. Gwathmey. Mr. Gwathmeys base salary was increased by approximately 14% in order to bring his base salary up to the median level for comparable executives in the Peer Group and to recognize Mr. Gwathmeys substantial responsibilities in connection with his global oversight of our agribusiness segment. The base salary of each Named Executive Officer is set forth in the Salary column of the Summary Compensation Table on page 28 of this proxy statement.
A significant portion of the annual cash compensation paid to the Named Executive Officers is directly related to the achievement of company and individual performance goals and contributions that deliver short-term results aligned with our long-term goals. The Committee grants Named Executive Officers the opportunity to earn annual cash incentive awards under Bunges Annual Incentive Plan (the AIP), an annual performance-based incentive plan that is available for a broad group of employees within the company.
Target annual cash incentive awards under the AIP for the Named Executive Officers are established by the Committee at the beginning of each year. These target awards are established based on an analysis of comparable executives in the Comparator Groups. The Committee generally sets target annual cash incentive awards at approximately the median level for comparable executives in the Comparator Groups. However, the actual annual cash incentive awards earned by the Named Executive Officers for any year may be above, at or below the target level based on their contribution to Bunges results and their performance with respect to pre-established, equally-weighted company and individual performance goals attained for such year as described below. For 2006, the Named Executive Officers were eligible to receive an annual cash incentive award ranging from 0 percent to 250 percent of the target annual cash incentive award established for each executive.
Company Performance Goals. Company performance goals for purposes of the AIP are weighted between return on net assets (RONA) and either net income after minority interest for centralized corporate functions or operating profit of a business unit, depending on the responsibilities of the applicable Named Executive Officer.
For 2006, the company performance objectives applicable for Messrs. Weisser, Wells, Kfouri and Burke were based on Bunges consolidated RONA and Bunges net income after minority interest. Mr. Gwathmeys award was determined based on the RONA and operating profit for Bunge Global Markets, Inc.
RONA is a measure of financial performance which indicates the relationship between profits and the net assets used in our business. As Bunge operates in a number of capital intensive businesses, RONA allows us to measure managements ability and efficiency in using our assets to generate profits that exceed our cost of capital. As a complement to RONA, net income after minority interest and operating profit measure the overall profitability of Bunges ongoing business operations. Because the Committee has determined that RONA is a principal driver of shareholder value for Bunge, the percentage variation from target is indexed by 2.5 before averaging the result with net income after minority interest or operating profit of a business unit (as applicable).
During the past three years, Bunges financial performance has met or exceeded target performance goals in two of the past years (2004 and 2005) and maximum performance goals were achieved once (2004).
Individual Performance Goals. Each Named Executive Officer is also evaluated based on the achievement of individualized performance objectives that are assigned based on the executives role within the company and his responsibility for delivering on such goals, and his overall contribution to the company during the fiscal year. The individual objectives generally relate to the achievement of specific aspects of Bunges business strategy and corporate initiatives designed to achieve long-term shareholder value. In addition, the contribution of each Named Executive Officer during the fiscal year in review is measured with respect to the following core management competencies:
· building organizational capability;
· technical competence;
· team work and collaboration;
· customer/farmer focus;
· strategic thinking;
· results orientation;
· communications; and
· personal effectiveness.
Determination of Individual AIP Awards. Following the completion of each fiscal year, the Committee reviews and approves individual AIP awards for the prior fiscal year based on the results achieved on the company and individual performance goals as described above. Company performance is approved by the Committee after audited results for the prior fiscal year are finalized. In assessing individual performance, the Committee reviews the CEOs evaluations of his direct reports and conducts its own evaluation of the CEO. The Committee retains the right to adjust a Named Executive Officers actual annual cash incentive award upward or downward if it determines that such adjustment is appropriate and consistent with the
objectives and principles of the Program, such as to reflect factors including changes in business strategies, unforeseeable challenges or other events or developments not reflected in the performance measures and goals for the year. The Committee then approves an award amount for each Named Executive Officer based on the target AIP award granted to each executive.
In February 2007, based on the process and factors described above, the Committee determined that payouts under the AIP to the Named Executive Officers for 2006 would be between 50% and 139% of their respective target incentive awards. The actual annual incentive awards paid to each Named Executive Officer for 2006, as approved by the Committee, are set forth on the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table on page 28 of this proxy statement.
Named Executive Officers are eligible to receive long-term equity-based incentive compensation awards under Bunges Equity Incentive Plan (the EIP). Pursuant to the EIP, the Committee may grant qualified and non-qualified stock options and restricted stock units, including restricted stock units that vest subject to the satisfaction of a specified service period (Time-Vested RSUs) and/or certain pre-established performance goals over a specified performance period (performance-based restricted stock units, or PBRSUs). The long-term equity-based incentive compensation element of the Program is intended to provide that Named Executive Officers have a continuing stake in the long-term success of the company. Bunge further emphasizes equity ownership by senior executives through the share ownership guidelines described later in this section.
It is the Committees practice to make annual grants of equity-based awards in the form of non-qualified stock options and PBRSUs under the EIP to employees (including the Named Executive Officers) at the beginning of each year, when compensation decisions for the fiscal year are made and after the public release of Bunges year-end audited financial results for the prior fiscal year. The Committee targets the value of the long-term incentive awards granted to Named Executive Officers to the median of awards granted to comparable executives in the Comparator Groups. The Committee also considers shareholder dilution, the percentage of outstanding stock option and restricted stock unit awards, paper gains on outstanding long-term incentive awards, the historical relationship between Bunges pay and performance against the Peer Group and accounting expense in determining the amount and type of these awards.
For 2006, the Committee determined that the value of long-term incentive awards should be divided evenly between stock options and PBRSUs based on the Committees assessment that this mix of equity awards furthers the Programs objectives of linking incentive compensation to the companys performance, creating long-term shareholder value and aligning the interests of Named Executive Officers and Bunges shareholders.
Stock Option Awards. Pursuant to the terms of the EIP, Bunge sets the exercise price of a stock option based on the average of the high and low trading price of Bunges common shares on the New York Stock Exchange on the grant date. On February 23, 2006, the Committee granted stock options to Named Executive Officers effective as of February 24, 2006 with an exercise price equal to the average of the high and low trading price of Bunges common shares on February 24, 2006. It is the Committees practice to grant equity-based incentive compensation awards (including stock options) effective as of the day immediately following the date that the Committee takes action with respect to such awards, as this is typically the date that the full Board meets.
Stock options will have value only if the trading price of Bunges common shares exceeds the exercise price of the stock option. Stock options vest in three equal installments on each of the first three anniversaries following the option grant date and remain exercisable until the tenth anniversary of the option grant date.
Information regarding the fair value and the number of stock options awarded to the Named Executive Officers for 2006 is set forth on the Grants of Plan-Based Awards Table on page 29 of this proxy statement.
PBRSU Awards. The Committee also awarded PBRSUs to the Named Executive Officers for the fiscal year 2006-2008 performance period at its February 2006 meeting. Payouts of the PBRSUs, if any, will be subject to the Named Executive Officers continued employment with the company through the vesting date and will be based on Bunges cumulative, three-year diluted earnings-per-share results in accordance with the table below:
Results in between $12.90 and $22.58 are interpolated. In addition, dividend equivalents are paid in Bunge common shares on the date that PBRSUs are otherwise paid-out, based on the number of shares vesting subject to a maximum of the target award granted. Diluted earnings per share is used as the performance measure for the PBRSUs because many investors view it as the single most important measure of our financial performance.
Each year, following the end of a three-year PBRSU performance period and public announcement of the most recent audited fiscal year results, Bunges performance achievement is determined by the Committee based on Bunges reported financial results, subject to the Committees discretion to adjust such results for non-recurring charges and other one-time events.
Information regarding the fair value and number of PBRSUs that the Named Executive Officers may earn at the end of the 2006-2008 performance period, subject to satisfaction of the performance measures described above, is shown in the Grants of Plan-Based Awards Table on page 29 of this proxy statement.
In addition, the value and number of PBRSUs that the Named Executive Officers earned in 2006 for the 2003-2005 performance period are shown in the Stock Awards column of the Option Exercises and Stock Vested Table on page 32 of this proxy statement.
Time-Vested RSUs. The Committee awards time-vested RSUs on an infrequent basis for special purposes, such as retention and special recognition of exceptional performance. These awards generally vest upon continued employment with Bunge. Award sizes and vesting dates vary to allow flexibility in connection with the specific award. In addition, dividend equivalents are credited as additional time-vested RSUs and are paid-out in Bunge common shares on the date that time-vested RSUs otherwise vest and are settled. In 2006, no time-vested RSUs were granted to the Named Executive Officers.
Bunge provides employees with a range of retirement and welfare benefits that are designed to assist the company in attracting and retaining employees critical to the companys long-term success and to reflect the competitive practices of the companies in the Peer Group. Named Executive Officers are eligible for retirement benefits under the following plans, (i) the Bunge U.S. Pension Plan (the Pension Plan), (ii) the Bunge Excess Benefit Plan (the Excess Benefit Plan), (iii) the Bunge U.S. SERP (the SERP), (iv) the Bunge Retirement Savings Plan (the 401(k) Plan) and (v) the Bunge Excess Contribution Plan (the Excess 401(k) Plan). Mr. Weisser does not participate in the SERP. Rather, he receives a supplemental retirement benefit under the terms of his employment agreement (the Weisser SERP). The Program also provides Named Executive Officers with certain perquisites and personal benefits.
The following is a brief summary of the retirement and welfare benefits provided under the Program. The Committee, in consultation with the independent compensation consultant, periodically reviews the retirement and other benefits provided to the Named Executive Officers to ensure competitiveness with the Peer Group.
Retirement Plans. The Pension Plan, a tax qualified retirement plan, covers substantially all the companys U.S. based salaried and non-union hourly employees. Each of the Named Executive Officers participate in the Pension Plan, except for Mr. Kfouri who does not participate in any of the companys employee benefit plans. All employees whose benefits under the Pension Plan are limited by the Internal Revenue Code, including the Named Executive Officers other than Mr. Kfouri, participate in the Excess Plan. In addition, all of the Named Executive Officers (other than Messrs. Kfouri and Weisser) participate in the SERP. The Pension Plan, SERP and the Excess Benefit Plan are described following the Pension Benefits Table on page 33 of this proxy statement.
Mr. Weisser receives a non-tax qualified supplemental retirement plan benefit pursuant to the Weisser SERP. The terms of the Weisser SERP are described beginning on page 35 of this proxy statement.
The estimated annual normal retirement benefits payable to the Named Executive Officers (determined on a present value basis) are set forth in the Pension Benefits Table on page 33 of this proxy statement.
401(k) Plan and Excess 401(k) Plan. The 401(k) Plan, a tax qualified retirement plan, covers substantially all U.S. based salaried and non-union hourly employees. Each of the Named Executive Officers, other than Mr. Kfouri, participates in the 401(k) Plan. All employees whose benefits under the 401(k) Plan are limited by the Internal Revenue Code, including the Named Executive Officers other than Mr. Kfouri, participate in the Excess 401(k) Plan, which is a non-tax qualified retirement plan. The 401(k) Plan and the Excess 401(k) Plan are described following the Nonqualified Deferred Compensation Table on page 36 of this proxy statement.
Company matching contributions allocated to the Named Executive Officers under the 401(k) Plan and the Excess 401(k) Plan are shown in the All Other Compensation column of the Summary Compensation Table on page 28 of this proxy statement.
Health and Welfare Plans. Active employee benefits such as medical, dental, life insurance and disability coverage are available to U.S. employees through Bunges flexible benefits plan. Employees contribute toward the cost of the flexible benefits plan by paying a portion of the premium costs on a pre-tax basis. Long-term disability coverage can be paid on an after-tax basis at the employees option.
providing Mr. Kfouri with the housing allowance on July 1, 2006. Bunge values these benefits at the incremental cost to it.
The Committee reviews the perquisites provided to Bunges executive officers under the Program periodically. Until 2006, Bunge provided executive officers, including the Named Executive Officers, with an automobile allowance and a flexible spending account that could be used to reimburse the costs of the following perquisites selected by such officer during an applicable fiscal year:
· Financial and tax planning services;
· Estate planning services;
· Home office equipment and software;
· Club memberships;
· Airline VIP club fees;
· Subscription to magazines and periodicals;
· Continuing education programs;
· Personal legal services; and
· Executive physicals.
Prior to 2006, the value of the above perquisites provided to each Named Executive Officer was limited to approximately $45,000 for the CEO and $27,000 for the other Named Executive Officers. In 2006, the Committee revised the perquisites policy under the Program to limit the maximum aggregate value of the perquisites provided to Named Executive Officers in 2006 to $9,500 ($9,600 for 2007).
The Program is designed to provide for the payment of severance benefits to our Named Executive Officers upon certain types of employment terminations. Providing severance and change of control benefits assists Bunge in attracting and retaining executive talent and reduces the personal uncertainty that executives are likely to feel when considering a corporate transaction. These arrangements also provide valuable retention incentives that focus executives on completing such transactions, thus, enhancing long-term shareholder value. The Named Executive Officers (other than Mr. Kfouri) are provided with severance benefits under individual arrangements. Mr. Kfouri is not provided with any severance benefits under his employment agreement.
The terms of the individual arrangements, and a calculation of the estimated severance benefits that would be payable to each Named Executive Officer under their respective arrangements, is set forth under the Potential Payments upon Termination of Employment or Change of Control tables beginning on page 38 of this proxy statement.
To further align the personal interest of senior management with the interests of Bunges shareholders, the Board has established the following share ownership guidelines for the minimum amount of Bunge common shares that is required to be held by senior executives, including the Named Executive Officers. The guidelines took effect in 2005 and are required to be met within five years from the effective date or, if later, from the date that the individual is hired or appointed to a covered title, as applicable. The guideline applicable to senior executives is based on a multiple of the executives base salary. For the CEO,
the guideline is five times the CEOs base salary, and for executives reporting directly to the CEO, including the Named Executive Officers, the guideline is 2.5 times the executives base salary. For a description of the share ownership guidelines applicable to our non-employee directors, see Director Compensation.
Shares deemed to be owned for purposes of the share ownership guidelines include shares underlying hypothetical share units held under the companys deferred compensation plans and 50% of the difference between the exercise price of a vested, in-the-money stock option and the fair market value of a Bunge common share. Unvested stock options and unearned PBRSUs do not count toward achievement of the guidelines. Furthermore, senior executives, including the Named Executive Officers, are required to hold 50% of the net shares acquired through the companys long-term incentive plans (such as stock options or PBRSUs) until the guidelines are met. All Named Executive Officers have either met their ownership guidelines or are making satisfactory progress towards their respective ownership guidelines as of December 31, 2006.
Section 162(m) of the U.S. Internal Revenue Code precludes a public corporation from taking a deduction for compensation in excess of $1 million for its chief executive officer or any of its four other highest paid executive officers, unless certain specific performance criteria are satisfied. Bunge has adopted the AIP and the EIP which are designed to help ensure that incentive compensation determined thereunder is considered qualified performance-based compensation within the meaning of Section 162(m) and is deductible by us. While the Program seeks to maximize the tax deductibility of compensation payable to our executive officers by having such compensation qualify as performance-based, the Committee retains the flexibility to compensate Named Executive Officers in a manner intended to promote varying corporate goals, even if certain amounts that may be payable to Named Executive Officers in excess of $1 million may not be deductible under Section 162(m).
The compensation committee has reviewed and discussed the preceding Compensation Discussion and Analysis with management. Based on such review and discussions, the compensation committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and be included in Bunge Limiteds Annual Report on Form 10-K for the year ended December 31, 2006.
The foregoing report on executive compensation for 2006 has been furnished on behalf of the Board by the undersigned members of the compensation committee.
Members of the Compensation Committee
Michael H. Bulkin, Chairman
Ernest G. Bachrach
Paul H. Hatfield
L. Patrick Lupo
The following table sets forth the compensation of our Chief Executive Officer, Chief Financial Officer, and the other three most highly compensated executive officers (the Named Executive Officers) who were serving as executive officers as of December 31, 2006. The positions shown in the table are the officers positions with Bunge or our subsidiaries as of December 31, 2006.
The following table sets forth certain information with respect to awards under our Annual Incentive Plan and Equity Incentive Plan to the Named Executive Officers for the fiscal year ended December 31, 2006.
The AIP provides annual cash incentive compensation to participating employees (including the Named Executive Officers) based upon the achievement of annual financial and individual performance goals. The compensation committee sets the applicable performance goals at the beginning of each year and determines the extent such goals have been achieved following the conclusion of the performance year. To the extent a participant qualifies for an annual incentive award, such award is generally paid within three months following the end of the applicable performance period.
For each Named Executive Officer, their performance goals for 2006 were weighted evenly between Bunge performance measures (RONA and net income after minority interest or operating profit of a business unit) and individual performance objectives assigned based on the individual executives role within Bunge and responsibility for delivering on such objectives.
The actual incentive awards paid out to each Named Executive Officer for 2006 are set forth in the Non-Equity Incentive Plan Compensation column on the Summary Compensation Table on page 28 of this proxy statement.
The EIP provides equity and equity-based awards to participating employees. Participants may receive stock options, restricted stock units, performance-based restricted stock units or such other equity-based awards as may be granted by the compensation committee. For 2006, the compensation committee granted Named Executive Officers non-qualified stock options and PBRSUs. Stock options generally vest in three equal installments over three years. Generally, PBRSUs vest following the completion of a three-year performance period depending upon the achievement of pre-established performance goals set by the compensation committee.
Stock options will have value only if the market price of a Bunge common share at the time the stock option is exercised exceeds the exercise price of such option. For 2006, stock options granted to the Named Executive Officers will vest in three equal installments on each of the first three anniversaries following the option grant date and will remain exercisable until the tenth anniversary of the option grant date.
For 2006, the compensation committee granted PBRSUs to the Named Executive Officers for the fiscal year 2006-2008 performance period. Actual payouts of the PBRSUs, if any, to the Named Executive Officers will be determined as set forth below.
These awards will vest on February 24, 2009, subject to a cumulative, three-year diluted earnings-per-share target of $16.13 and the executives continued employment with the company through the vesting date. If the cumulative diluted earnings per common share of Bunge for the performance period equals the target of $16.13, the executive will vest in 100% of the award. If the cumulative diluted earnings per share during the performance period equals or exceeds $22.58, the executive will vest in 200% of the award. If the cumulative diluted earnings per share during the performance period equals or exceeds the threshold amount of $12.90, the executive will vest in 50% of the award. Results will be interpolated. If the cumulative diluted earnings per share during the performance period is less than the threshold amount of $12.90, the executive will forfeit the entire award. Payment of this award will be made in Bunge common shares.
The following table sets forth certain information with respect to all outstanding equity awards held by the Named Executive Officers as of December 31, 2006.