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HSY » Topics » Have any additional changes been made to the CPG or financial peer groups during 2008 which impact the Committees decision-making? Why were these changes made?

This excerpt taken from the HSY DEF 14A filed Mar 16, 2009.

Have any additional changes been made to the CPG or financial peer groups during 2008 which impact the Committee’s decision-making? Why were these changes made?

As discussed in the description of the Committee appearing on pages 15 through 17, the Committee retained Mercer to serve as its compensation consultant beginning in March 2008. The transition to Mercer triggered the need for the Committee to review the CPG peer group because proprietary Towers Perrin surveys had been the primary source of competitive pay data for the

 

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CPG peer group. The Committee asked Mercer to provide a recommended approach for the development of the CPG and financial peer groups and benchmarking data the Committee would use in setting 2009 compensation levels and relative performance metrics for the 2009-2011 PSU performance cycle.

Mercer reviewed the existing CPG peer group and the financial peer group and made the following recommendations:

 

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Use consumer products companies that are part of Mercer’s database as the basis for the primary peer group (the CPG peer group) reference for benchmarking senior executives. Mercer’s database includes 41 consumer products companies, 24 of which were in the CPG peer group approved by the Committee at the start of 2008.

 

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Continue use of a financial peer group as a primary reference for financial performance benchmarking and as a secondary reference for assessing competitive pay levels for the most senior executives. In order to increase the effectiveness of the financial peer group as a secondary reference for senior executive pay levels, the financial peer group should be reconstituted by adding CPG companies with revenue similar in amount to the Company’s and removing those companies being acquired (Anheuser-Busch and Wm. Wrigley Jr.), companies of substantially larger size than the Company (Coca-Cola, PepsiCo and Procter & Gamble) and companies that do not produce or manufacture food or beverage products (Colgate-Palmolive and Clorox).

The Committee considered Mercer’s recommendations and determined that changes to both peer groups were appropriate. The Committee approved the CPG peer group and financial peer group set forth below to be used in connection with compensation decisions made for 2009. The Committee believes the revised peer groups contain organizations that have comparable business characteristics to the Company in that the peer groups focus on food and beverage companies which are the Company’s key talent and business competitors. In addition, the revised financial peer group is more comparable to the Company’s scale in revenues (median revenues of $9.0 billion as compared to the prior financial peer group median revenues of $13.7 billion). This provides a greater opportunity to use this more refined peer group to assess the competitiveness of compensation levels of the executive officers in addition to benchmarking financial performance comparisons and as a secondary pay reference. The Committee determined that it would retain Kraft Foods Inc. in the financial peer group even though it is significantly larger than the Company because of its position as a leader in the food industry and an important reference for the Company as a labor market competitor.

Companies included in the 2009 CPG peer group are as follows:

 

Anheuser-Busch   Farmland Foods   Reynolds American
Arby’s Restaurant Group   H.J. Heinz   Rich Products
Bob Evans Farms   International Dairy Queen   S.C. Johnson & Son
Burger King Holdings   Interstate Bakeries   Sara Lee
California Pizza Kitchen   Jack in the Box   Schwan’s
Chiquita Brands International   Kellogg   Smithfield Foods
Coca-Cola   Kimberly-Clark   Tyson Foods
Colgate-Palmolive   Land O’Lakes   Unilever United States
ConAgra Foods   Mars North America   Welch’s
Darden Restaurants   McDonald’s   Wells’ Dairy
Del Monte Foods   Nestlé USA   Wendy’s International
Dunkin’ Brands   Pernod Ricard USA   Wm. Wrigley Jr.
Energizer   Ralcorp Holdings   Yum! Brands
Estée Lauder Companies   Reckitt Benckiser  

 

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Companies included in the 2009 financial peer group are as follows:

 

Cadbury plc   General Mills   Kraft Foods
Campbell Soup   H.J. Heinz   McCormick
Dean Foods   Hormel Foods   Molson Coors Brewing
Del Monte Foods   J.M. Smucker   Sara Lee
Dr Pepper Snapple Group   Kellogg  
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