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Mondelez International, Inc. DEF 14A 2013
Definitive Proxy Statement
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

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Check the appropriate box:

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¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to § 240.14a-12

Mondelēz International, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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x No fee required.
¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

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¨ Fee paid previously with preliminary materials.
¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(4) Date Filed:

 

 


Table of Contents
LOGO      

Irene B. Rosenfeld

Chairman and

Chief Executive Officer

Three Parkway North

Deerfield, IL 60015

April 3, 2013

Dear Fellow Shareholders:

I’m pleased to invite you to our 2013 Annual Meeting of Shareholders to be held at 9 a.m. CDT on Tuesday, May 21, 2013, at the North Shore Center for the Performing Arts in Skokie, Illinois. The center will open to shareholders at 8 a.m. If you wish to attend the meeting, we ask you to register in advance. The Proxy Statement contains registration instructions.

We have prepared the following materials for the meeting:

 

   

Notice of Annual Meeting of Shareholders;

 

   

Proxy Statement describing the proposals to be voted on at the Annual Meeting; and

 

   

Highlights of our 2012 financial and business performance.

Once again, we’re mailing to our shareholders a Notice of Internet Availability of Proxy Materials with instructions on how to access these materials and vote online. We believe electronic delivery expedites the receipt of materials, lowers costs and reduces the environmental impact of our Annual Meeting. If you receive a Notice of Internet Availability of Proxy Materials by mail, you won’t receive paper copies of these materials unless you specifically request them by following the instructions on the Notice.

Your vote is important, so we encourage you to vote promptly. The Notice contains instructions on how to vote via the Internet or by calling a toll-free number. If you receive paper copies of the proxy materials, you may also vote by signing, dating and mailing your proxy card or voting instruction form. You may also vote in person at the Annual Meeting.

Highlights of Our 2012 Financial and Business Performance

2012 was a transformational year for our company. During the first nine months, we intensely prepared for the spin-off of our North American grocery business. The separation of Kraft Foods Inc. into two world-class companies was a massive undertaking, culminating in a significant increase in shareholder value and the successful launch of both Mondelēz International and Kraft Foods Group on October 1.

What’s more, we executed all of this while delivering solid business results. The quality of our revenue and earnings growth in 2012 provides strong momentum as we enter 2013.

 

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Multiple Competitive Advantages

I’m truly excited about our future as we continue our journey as a more focused company. We now have all the ingredients in place for sustainable, profitable growth:

 

•      We have an advantaged geographic footprint with a significant presence in developing markets. With more than 40 percent of our sales from Latin America, Asia Pacific, Eastern Europe, the Middle East and Africa, we’re well-positioned to take advantage of GDP growth per capita in these markets. In developed markets, we also hold advantaged positions, with nearly 40 percent of revenue coming from Europe and about 20 percent from North America.

   LOGO

 

 

We’re focused on large, fast-growing snacks categories.

 

LOGO

  

Nearly three-quarters of our $35 billion in net revenue comes from snacks, and we’re a leader in each of our core categories. We’re No. 1 in Biscuits, Chocolate, Candy and Powdered Beverages, and a strong No. 2 in Gum and Coffee.2

 

In addition, growth in these categories remains robust. Globally, the Biscuits and Chocolate categories have each grown 6 percent annually since 2009. Gum and Candy grew 5 percent, while Coffee and Powdered Beverages were up 10 percent and 7 percent, respectively.2

  

 

 

 

(1)

In December 2012, we announced a reorganization of our management and reporting structure following the spin-off of Kraft Foods Group. Beginning in 2013, our operations, management and operating segments will reflect: Asia Pacific; Eastern Europe, Middle East & Africa (“EEMEA”); Europe; Latin America and North America. Accordingly, we will begin reporting on our new segment structure during the first quarter of 2013, including all historical periods we present. For purposes of this presentation the above pie chart reflects this structure based on our 2012 Net Revenues.

(2) 

Source: Euromonitor.

 

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We have an unrivaled portfolio of beloved Power Brands and proven global innovation platforms.

Our portfolio features nine billion-dollar brands, including icons such as Cadbury, Cadbury Dairy Milk and Milka chocolate, Jacobs coffee, LU, Nabisco and Oreo biscuits, Tang powdered beverages and Trident gum. Our pantry includes another 52 brands that each generate annual revenues of more than $100 million.

 

We’re also building a robust pipeline of innovation platforms – including belVita and Barni biscuits, Bubbly and bite-sized chocolate as well as Tassimo and Millicano on-demand coffee – that can be expanded quickly across multiple markets to drive growth.

   LOGO

 

 

 

We’re building a sales execution powerhouse, leveraging strategic customer partnerships, advantaged routes to market and superior execution at the point of sale, to deliver snacking solutions anywhere, at any time.

We’re expanding distribution in traditional trade channels, particularly in markets like Brazil, India and China. And in modern grocery stores, we’re increasing penetration in immediate consumption channels and in the Hot Zone at the front of the stores.

In many places around the globe, we have tremendous opportunities to enter “white space” markets by leveraging our strong presence in one category to enter another. For example, in 2011, we introduced Oreo into India building on our strong chocolate infrastructure. Just last August, we introduced Stride gum in China, building on our substantial infrastructure in biscuits.

 

 

Bringing it all together, we have world-class leadership, talent and capabilities to execute our strategies.

Fueling the Virtuous Cycle to Drive Top-Tier Growth

Our strong track record of delivering results over the past few years has been driven by a virtuous growth cycle. This cycle is the framework we use to manage our company to ensure sustainable growth on both the top and bottom lines.

 

The virtuous cycle begins with a sharp focus on our Power Brands and the core categories that will drive top-tier growth in each region. In 2012, our Power Brands, which represent almost 60 percent of total revenue, continued to drive our top line. These brands were up 8 percent last year. That’s nearly twice the growth rate of the total company.   LOGO

 

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At the same time, we expand gross margin through a combination of pricing to recover input costs, strong productivity and improving product mix. Last year, we increased our gross margin by 70 basis points and our adjusted gross margin3 by 50 basis points.

We’re also successfully leveraging overhead costs. Overheads as a percent of revenue declined 60 basis points in 2012, despite significant investments in sales. As a result, operating margins are also expanding. Our Adjusted Operating Income Margin4 was up 70 basis points last year and 110 basis points since 2010.

By keeping a firm grasp on overheads, together with higher gross margins, we generate the fuel needed to sustain our growth. We increased our spending on advertising and consumer support by 9 percent last year to 9.4 percent of revenue.

In addition, we delivered these strong results while successfully integrating Cadbury. We generated about $800 million of cost synergies through the end of 2012. This is above our original target of $750 million. The Cadbury acquisition is also delivering on its growth promise. To date, we’ve generated about $700 million in incremental revenue. All in all, we remain on track to reach our target of $1 billion in revenue synergies by the end of 2013, with roughly two-thirds coming from developing markets.

Generating Strong Cash Flow, Returning Cash to Shareholders, Improving ROIC

We expect to generate about $4 billion of free cash flow5 over the next two years. This will fund the cash impact of our 2012-2014 Restructuring Program as well as provide cash to pay dividends; leaving approximately $1 billion available for deployment over the next two years.

This is how we plan to use this cash:

 

 

Our first priority will be to reinvest in the business to drive top-tier growth. To support this growth, we plan to increase capital investments to approximately 5 percent of net revenues in 2013 and 2014, focusing on expanding capacity in developing markets.

 

 

Second, we’ll explore opportunities for tack-on acquisitions. In particular, we’ll look for opportunities in developing markets where we can gain additional scale in our categories or distribution capabilities.

 

 

Third, we’ll look to return capital to shareholders in the form of dividends and/or share buybacks. The current annual dividend of $0.52 per share will increase over time at a lower rate than EPS growth, but with a dividend payout ratio that would not fall below 30 percent. In March 2013, our board authorized a three-year share repurchase program to offset dilution from stock options.

 

 

Fourth, we’ll use our cash to pay down debt to maintain financial flexibility.

Finally, we’re committed to a steady improvement in return on invested capital, targeting an increase of 30 to 50 basis points per year. Double-digit earnings growth and tight management of working capital and capital expenditures will drive the improvement.

 

(3)  Please see discussion of non-GAAP financial measures on Exhibit A.
(4)  Reported Operating Income Margin was 7.9% in FY 2010; 9.8% in 2011; and 10.4% in FY 2012. Please see discussion of non-GAAP financial measures on Exhibit A.
(5)  Free Cash Flow: cash flow from operations less capital expenditures adding back cash payments (net of tax benefits) associated with 2012-2014 Restructuring Program expenditures

 

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Protecting the Well-Being of Our Planet

From investing in sustainable agriculture to eliminating waste and promoting healthy lifestyles, we continue to evolve the way we do business to reduce our environmental impact and enhance our contributions to society, while delivering outstanding financial performance.

 

Since October 2012, we’ve committed $600 million over 10 years through our Cocoa Life and Coffee Made Happy initiatives to build sustainable supplies and thriving communities to benefit millions of people in the developing world.

   LOGO

LOGO

   Coffee Made Happy is designed to help the next generation of farmers – inspiring, training and building capacity to improve their livelihoods and attract new generations back to the small-scale farming sector. Through this initiative, we’ll invest a minimum of $200 million to empower one million farming entrepreneurs in Vietnam, Peru and other important coffee markets by 2020.

Cocoa Life is our largest, most comprehensive cocoa sustainability effort to date. As the world’s largest chocolate company, we’ll invest $400 million over the next 10 years to improve the livelihoods and living conditions of more 200,000 cocoa farmers and about one million people in cocoa-farming communities.

We also remain committed to building community partnerships that empower people with the healthy habits to achieve holistic well-being. Over the last 25 years, we’ve contributed more than $1 billion in cash and food to charitable organizations around the world. And, through our Mondelēz International Foundation, we’re completing our $180 million pledge to ramp up physical activity for children and their families, while securing more fresh foods through local agriculture and better nutrition education.

To make the biggest impact possible, we work with leading non-governmental organizations, such as INMED Partnerships for Children in Brazil, Charities Aid Federation in Russia and Klasse 2000 in Germany, as well as Helen Keller International and Save the Children in Southeast Asia.

 

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Bullish about the Future

In sum, we’re well-positioned for sustainable, profitable growth. We have an advantaged geographic footprint; an enviable portfolio of iconic brands; strong innovation platforms; a virtuous cycle in every geography; a long runway of future growth opportunities; and strong cash flow.

As a result, I’m bullish on the future and the ability of our 110,000 employees around the world to deliver top-tier financial results.

Thank you for your continuing support.

Best regards,

LOGO

LOGO

Forward-Looking Statements

This letter to shareholders contains a number of forward-looking statements. Words, and variations of words, such as “expect,” “goals,” “plans,” “continue,” “may,” “will,” and similar expressions are intended to identify our forward-looking statements, including but not limited to, sustainable and profitable growth; our ability to take advantage of growth opportunities; our products’ future revenues; our pipeline of innovation platforms; our routes to market; our ability to execute our strategies; Cadbury revenue synergies; future cash flows and uses of cash; improvement in return on invested capital; plans for protecting the well-being of our planet; and our being bullish on the future. These forward-looking statements involve risks and uncertainties, many of which are beyond our control, and important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, continued volatility of commodity and other input costs, pricing actions, increased competition, our ability to differentiate our products from retailer brands, increased costs of sales, regulatory or legal restrictions, actions or delays, a shift in our product mix to lower margin offerings, private label, risks from operating globally, continued consumer weakness, weakness in economic conditions, our labor force and tax law changes. For additional information on these and other factors that could affect our forward-looking statements, see our risk factors, as they may be amended from time to time, set forth in our filings with the SEC, including our most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this letter to shareholders, except as required by applicable law or regulation.

 

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MONDELĒZ INTERNATIONAL, INC.

Three Parkway North

Deerfield, Illinois 60015

 

 

NOTICE OF 2013 ANNUAL MEETING OF SHAREHOLDERS

 

 

 

TIME AND DATE:

9:00 a.m. CDT on Tuesday, May 21, 2013.

 

PLACE:

North Shore Center for the Performing Arts in Skokie

9501 Skokie Boulevard

Skokie, Illinois 60077

 

ITEMS OF BUSINESS:

(1)

To elect the 11 directors named in the Proxy Statement;

 

  (2) To hold an advisory vote to approve executive compensation;

 

  (3) To ratify the selection of PricewaterhouseCoopers LLP as our independent auditors for the fiscal year ending December 31, 2013;

 

  (4) To vote on two shareholder proposals if properly presented at the meeting; and

 

  (5) To transact any other business properly presented at the meeting.

 

WHO MAY VOTE:

Shareholders of record at the close of business on March 15, 2013.

 

DATE OF DISTRIBUTION:

We mailed our Notice of Internet Availability of Proxy Materials on or about April 3, 2013. For shareholders who previously elected to receive a paper copy of the proxy materials, we mailed the Proxy Statement, our Annual Report on Form 10-K for the year ended December 31, 2012 and the proxy card on or about April 3, 2013.

 

LOGO

Carol J. Ward

Vice President and Corporate Secretary

April 3, 2013

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 21, 2013

 

Mondelēz International, Inc.’s Proxy Statement and Annual Report on Form 10-K

are available at http://materials.proxyvote.com/609207.

 


Table of Contents

TABLE OF CONTENTS

 

     Page  

PROXY STATEMENT SUMMARY

     1   

Significant Company Events During 2012

     3   

ITEM 1. ELECTION OF DIRECTORS

     4   

Process for Nominating Directors

     4   

Director Nominees

     6   

CORPORATE GOVERNANCE

     16   

Corporate Governance Materials Available on Our Website

     16   

Governance Guidelines and Codes of Conduct

     16   

Key Corporate Governance Practices

     17   

Board Leadership Structure

     17   

Director Independence

     19   

Oversight of Risk Management

     19   

Review of Transactions with Related Persons

     20   

Section 16(a) Beneficial Ownership Reporting Compliance

     21   

Communications with the Board

     22   

BOARD COMMITTEES AND MEMBERSHIP

     23   

Committee Membership January 1 through May 23, 2012

     23   

Committee Membership May 23 through October 1, 2012

     24   

Current Committee Membership

     24   

Meeting Attendance

     25   

Audit Committee

     25   

Audit Committee Report for the Year Ended December 31, 2012

     26   

Pre-Approval Policies

     27   

Independent Auditors’ Fees

     28   

Governance, Membership and Public Affairs Committee

     28   

Human Resources and Compensation Committee

     29   

Human Resources and Compensation Committee Interlocks and Insider Participation

     29   

Responsibilities

     30   

The Compensation Committee’s Use of an Independent Compensation Consultant

     30   

Limited Role of Executive Officers in the Determination of Executive Compensation

     31   

Analysis of Risk in the Compensation Architecture

     31   

Human Resources and Compensation Committee Report for the Year Ended December 31, 2012

     33   

COMPENSATION OF NON-EMPLOYEE DIRECTORS

     34   

COMPENSATION DISCUSSION AND ANALYSIS

     37   

Executive Summary

     37   

Our Compensation Program Design

     45   

Elements of Executive Compensation

     53   

Compensation Paid to Named Executive Officers in 2012

     67   

Policy on Recoupment of Executive Incentive Compensation in the Event of Certain Restatements

     72   

Anti-Hedging Policy and Trading Restrictions

     73   

Anti-Pledging Policy

     73   

Policy with Respect to Qualifying Compensation for Tax Deductibility

     73   

EXECUTIVE COMPENSATION TABLES

     75   

2012 Summary Compensation Table

     75   

2012 Grants of Plan-Based Awards

     78   

 

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     Page  

2012 Outstanding Equity Awards at Fiscal Year-End

     80   

2012 Stock Vested

     83   

2012 Pension Benefits

     84   

Retirement Benefit Plan Descriptions

     85   

2012 Non-Qualified Deferred Compensation Benefits

     88   

Potential Payments upon Termination or Change in Control

     89   

OWNERSHIP OF EQUITY SECURITIES

     94   

ITEM 2. ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     96   

ITEM 3. RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS

     98   

SHAREHOLDER PROPOSALS

     98   

ITEM 4. Shareholder Proposal: Report on Extended Producer Responsibility

     99   

ITEM 5. Shareholder Proposal: Sustainability Report on Gender Equality in the Company’s Supply Chain

     101   

OTHER MATTERS THAT MAY BE PRESENTED AT THE ANNUAL MEETING

     103   

FREQUENTLY ASKED QUESTIONS ABOUT THE ANNUAL MEETING AND VOTING

     103   

2014 ANNUAL MEETING OF SHAREHOLDERS

     111   

Shareholder Nominations and Proposals for the 2014 Annual Meeting

     111   

EXHIBIT A: MONDELĒZ INTERNATIONAL, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP INFORMATION

     A-1   

MAPS AND DIRECTIONS TO THE ANNUAL MEETING

     Back Cover   

 

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PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

 

 

ANNUAL MEETING OF SHAREHOLDERS

 

Time and Date

   9:00 a.m. CDT on Tuesday, May 21, 2013

Place

  

North Shore Center for the Performing Arts in Skokie

9501 Skokie Boulevard

Skokie, Illinois 60077

Record Date

   March 15, 2013

Voting

   Each share is entitled to one vote on each matter to be voted upon at the Annual Meeting.

Admission

   You must register in advance in order to attend the Annual Meeting. Please follow the advance registration instructions described in Question 24 on pages 109-110 of this Proxy Statement.

 

 

VOTING ITEMS

 

Item

      

Board
Recommendation

  

Page
Reference

Item 1 –  

Election of Directors

   FOR ALL NOMINEES   

4

Item 2 –  

Advisory Vote to Approve Executive Compensation

   FOR   

96

Item 3 –  

Ratification of PricewaterhouseCoopers LLP as Auditors for 2013

   FOR   

98

Item 4 –  

Shareholder Proposal: Report on Extended Producer Responsibility

   AGAINST   

99

Item 5 –   Shareholder Proposal: Sustainability Report on Gender Equality in the Company’s Supply Chain    AGAINST   

101

Transact any other business that properly comes before the meeting.      

 

 

DIRECTOR NOMINEES

 

Name

 

Age

 

Director
Since

  Description  

Independent

  Board Committees
         

Audit*

 

HRCC*

 

GMPAC*

Stephen F. Bollenbach

  70   Oct. 2012   Former Co-Chairman and
CEO, Hilton Hotels

Corporation

  Yes     X   X

Lewis W.K. Booth

  64   Oct. 2012   Former Executive Vice
President and Chief
Financial Officer, Ford
Motor Company
  Yes   X    

Lois D. Juliber

  64   2007   Former Vice Chairman
and COO, Colgate-
Palmolive Company
  Yes     Chair   X

Mark D. Ketchum

  63   2007   Former President and
CEO, Newell Rubbermaid
Inc.
 

Yes

(Lead
Director)

    X   Chair

Jorge S. Mesquita

  51   May 2012   Group President – New
Business Creation and
Innovation and Pet Care,
The Procter & Gamble
Company
  Yes   X    

Fredric G. Reynolds

  62   2007   Former Executive Vice
President and CFO, CBS
Corporation
  Yes   Chair    

 

 

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Name

 

Age

 

Director
Since

  Description  

Independent

  Board Committees
         

Audit*

 

HRCC*

 

GMPAC*

Irene B. Rosenfeld

  59   2006   Chairman and CEO,
Mondelēz
International, Inc.
  No      

Patrick T. Siewert

  57   Oct. 2012   Managing Director,

The Carlyle Group, L.P.

  Yes   X    

Ruth J. Simmons

  67   Oct. 2012   President Emerita,
Brown University
  Yes     X   X

Ratan N. Tata

  75  

New

Nominee

  Chairman of the Tata
Trusts
  Yes      

Jean-François M. L.

van Boxmeer

  51   2010   Chairman and CEO,
Heineken N.V.
  Yes     X   X

 

* Audit – Audit Committee; HRCC – Human Resources and Compensation Committee; GMPAC – Governance, Membership and Public Affairs Committee

 

 

EXECUTIVE COMPENSATION

We believe that our executive compensation program is strongly aligned with delivering sustainable top-tier performance and reflects competitive practices for executive compensation. The program is designed to: attract, retain and motivate talented executive officers and develop world-class business leaders; support business strategies that promote superior long-term shareholder returns; align pay and performance by making a significant portion of our Named Executive Officers’ and other executive officers’ compensation dependent on achieving financial and other critical strategic and individual goals; and align our executive officers’ and shareholders’ interests through stock ownership guidelines, equity-based incentive awards and other long-term incentive awards that link executive compensation to sustained and superior Total Shareholder Return.

The objectives described above are encouraged by basing a significant portion of total compensation for our Chief Executive Officer and our other Named Executive Officers on achieving and sustaining exceptional short-term and long-term performance results. Each Named Executive Officer’s compensation mix reflects a significant bias toward long-term incentives, and each long-term incentive vehicle is equity-based, and therefore directly tied to the Company’s share price and shareholder returns. Further, approximately half of annual long-term incentive opportunities granted to each Named Executive Officer is granted in the form of performance shares that can be earned, if at all, based upon the satisfaction of performance goals.

Our “Named Executive Officers” are those individuals who served as our Chief Executive Officer and Chief Financial Officer during 2012 and our three other most highly compensated officers. In addition, two of our former executives who moved to Kraft Foods Group, Inc. after the Kraft Foods Group Spin-Off are considered our Named Executive Officers for 2012. Please read “Compensation Discussion and Analysis” beginning on page 34 and “Executive Compensation Tables” beginning on page 75 for additional details about our executive compensation programs, including information about our Named Executive Officers’ fiscal year 2012 compensation.

 

 

AUDITORS

As a matter of good governance, we are asking our shareholders to ratify the Audit Committee’s selection of PricewaterhouseCoopers as our independent auditors for 2013. We provide information on fees billed by PwC in 2012 and 2011 on page 28 of this Proxy Statement.

 

 

SHAREHOLDER PROPOSALS

In accordance with SEC rules, we include in this Proxy Statement two shareholder proposals (Items 4 and 5). The Board recommends that you vote AGAINST each of these proposals for the reasons we set forth following each proposal.

 

 

FREQUENTLY ASKED QUESTIONS

We provide answers to many frequently asked questions about the annual meeting and voting, including how to vote shares held in employee benefit plans, in the Q&A section beginning on page 103 of this Proxy Statement.

 

 

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Significant Company Events During 2012

2012 was another transformational year for us. We began the year as Kraft Foods Inc., a company primarily comprised of two distinct businesses – a market leading North American grocery business and a faster-growing global snack foods business. To allow each business to focus on its specific strengths and objectives, on October 1, 2012, we spun-off Kraft Foods Group, Inc. (“Kraft Foods Group”), our North American grocery business, to our shareholders (the “Spin-Off”). As a result of the Spin-Off, Kraft Foods Group became an independent, publicly-traded company. In connection with the Spin-Off, we also changed our name from Kraft Foods Inc. to Mondelēz International, Inc. (“Mondelēz International” or the “Company”). The Spin-Off has allowed us to focus on our significant opportunities for growth as consumer demand for snacks increases around the world.

Over the past several years, we have transformed our Company, catalyzed by our acquisitions of the LU biscuits business on November 30, 2007 and the Cadbury business on February 2, 2010, and culminating with the Spin-Off, from a modestly growing grocery and snacks business into a faster-growing global snacks powerhouse. Over the last three years, we have been a top-tier performer in our industry as evidenced by our significant returns to shareholders. Our portfolio is comprised of fast-growing categories with a footprint across most major developed and developing markets. We have leading share positions globally in the Biscuits, Chocolate, Candy and Powdered Beverages categories, and number two share positions in the Gum and Coffee categories. With 74% of our revenue in 2012 generated in the fast-growing snacks categories, we are well positioned to deliver top-tier growth into the future.

Further, prior to the Spin-Off, on June 26, 2012, the Company transferred its stock exchange listing from the New York Stock Exchange to the NASDAQ Global Select Market (“NASDAQ”). The Company’s stock now trades on NASDAQ under the symbol “MDLZ,” and Kraft Foods Group trades under the symbol “KRFT.”

Like the Company, the Board of Directors underwent significant changes during 2012 in connection with the Spin-Off:

 

   

Myra M. Hart, Peter B. Henry, Terry J. Lundgren, Mackey J. McDonald and John C. Pope served as directors until they resigned as directors of the Company, effective immediately before the Spin-Off, to become directors of Kraft Foods Group;

 

   

Lois D. Juliber, Mark D. Ketchum, Jorge S. Mesquita, Fredric G. Reynolds and Jean-François M.L. van Boxmeer continued as directors of the Company, and Irene B. Rosenfeld continued as Chief Executive Officer and Chairman of the Board of the Company;

 

   

Stephen F. Bollenbach, Lewis W.K. Booth and Ruth J. Simmons were appointed to the Company’s Board of Directors, effective immediately following the Spin-Off; and Patrick T. Siewert was appointed to the Company’s Board of Directors, effective October 23, 2012.

The Board currently consists of 10 members, all of whom have been nominated for election for a term of one year expiring at the 2014 Annual Meeting of Shareholders.

 

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ITEM 1. ELECTION OF DIRECTORS

Process for Nominating Directors

The Governance, Membership and Public Affairs Committee of our Board of Directors (the “Governance Committee”) is responsible for identifying, evaluating and recommending to the Board nominees for election at the 2013 Annual Meeting of Shareholders (and any adjournments or postponements of the meeting) (the “Annual Meeting”). The Governance Committee relies on nominee suggestions from the directors, shareholders, management and others. From time to time, the Governance Committee retains executive search and board advisory firms to assist in identifying and evaluating potential nominees. The Governance Committee retained Heidrick & Struggles to assist in the Committee’s recruitment of individuals to replace two directors who did not stand for re-election at the 2012 Annual Meeting of Shareholders (Ajaypal S. Banga and Richard A. Lerner) and the five individuals (Myra M. Hart, Peter B. Henry, Terry J. Lundgren, Mackey J. McDonald and John C. Pope) elected at the 2012 Annual Meeting of Shareholders whom the Board asked to serve on the board of Kraft Foods Group in connection with the Spin-Off. The Committee’s recruitment efforts focused on identifying individuals for the new Mondelēz International Board of Directors. These recruitment efforts resulted in the Board’s appointment of Stephen F. Bollenbach, Lewis W.K. Booth, Patrick T. Siewert and Ruth J. Simmons as new directors of Mondelēz International at or soon after the Spin-Off. These directors were all identified by Heidrick & Struggles and recommended to the Board as director nominees by the Governance Committee. Ratan N. Tata was recommended to the Board as a director nominee by the Chairman and Chief Executive Officer.

General Qualifications

The Board believes all directors should possess certain personal characteristics, including integrity, sound business judgment and vision, to serve on our Board. We believe these characteristics are necessary to establish a competent, ethical and well-functioning Board that best represents the interests of our business, shareholders, employees, business partners and consumers. Under our Corporate Governance Guidelines (the “Guidelines”), when evaluating the suitability of individuals for nomination, the Governance Committee takes into account many factors. These include the individual’s general understanding of the varied disciplines relevant to the success of a large, publicly traded company in a global business environment, understanding of our global businesses and markets, professional expertise and education. The Governance Committee also considers an individual’s ability to devote sufficient time and effort to fulfill his or her Mondelēz International responsibilities, taking into account the individual’s other commitments. In addition, the Board considers whether an individual meets various independence requirements, including whether his or her service on boards and committees of other organizations is consistent with our conflicts of interest policy.

In addition, under the Guidelines, the Committee generally will not recommend and the Board will not nominate an individual or re-nominate for election an independent director after he or she reaches age 75. However, from time-to-time, the Board may do so in extraordinary circumstances if the Board believes that nomination or renomination is in the shareholders’ best interests because the candidate is uniquely qualified to contribute to the Board’s work and Corporation’s growth in the subsequent year. If the Committee determines that the individual’s nomination or director’s re-nomination is in the shareholders’ best interests, the Committee may recommend, and the Board may approve, the nomination or re-nomination for up to three annual terms following his or her 75th birthday.

In considering whether to nominate Mr. Tata, age 75, for election by the Company’s shareholders, both the Committee and Board reviewed Mr. Tata’s unique experience and expertise in leading a successful global enterprise; in Indian, Asian, and emerging markets business and cultural affairs; support for the development and promotion of innovative business practices; and insights into the continuing evolution of consumer products. They both determined that Mr. Tata would uniquely contribute to the Board’s work and the Corporation’s growth during the coming year.

An employee director must resign from the Board upon ceasing to be a Company officer.

 

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Diversity

The Guidelines provide that the Governance Committee will consider factors that promote diversity of views and experience when evaluating the suitability of individuals for nomination. While the Board has no formal written policy regarding what specific factors would create a diversity of views and experience, the Governance Committee recognizes the significant benefit diversity provides to the Board and Mondelēz International, as varying viewpoints contribute to a more informed and effective decision-making process. The Governance Committee seeks broad experience in relevant industries, professions and areas of expertise important to our operations, including global business, manufacturing, marketing, science, finance and accounting, academia, law and government. The Governance Committee also recognizes the importance of having directors with significant international experiences and backgrounds given our global, multicultural business.

As shown below, our director nominees have varied experiences, backgrounds and personal characteristics, which provide the Board with a diversity of viewpoints and enable it to effectively represent our business, shareholders, employees, business partners and consumers:

 

   

6 director nominees are current or former presidents or chief executive officers of large, complex enterprises;

 

   

9 director nominees currently hold or held key positions at major consumer products companies, including food and beverage companies;

 

   

3 director nominees have significant financial and accounting backgrounds;

 

   

1 director nominee is a professor at, and former president of, a leading university;

 

   

3 director nominees are women, including the Chairman;

 

   

7 director nominees are living and working or have lived and worked outside the United States;

 

   

the director nominees range in age from 51 – 75.

Individual Skills and Experience

The Governance Committee works with the Board to determine the appropriate mix of backgrounds and experiences that would establish and maintain a Board that is strong in its collective knowledge, allowing the Board to fulfill its responsibilities and best perpetuate our long-term success and represent our shareholders’ interests. Then, when evaluating potential director nominees, the Governance Committee considers each individual’s professional expertise and educational background in addition to the general qualifications. The Governance Committee evaluates each individual in the context of the Board as a whole. To help the Governance Committee determine whether director nominees qualify to serve on our Board and would contribute to the Board’s current and future needs, director nominees complete questionnaires regarding their backgrounds, qualifications, skills and potential conflicts of interest. Additionally, the Governance Committee annually conducts evaluations of the Board and the Board’s committees, and coordinates individual directors’ self-assessments, that assess the experience, skills, qualifications, diversity and contributions of each individual and of the group as a whole.

The Governance Committee regularly communicates with the Board to identify characteristics, professional experience and areas of expertise that are particularly desirable for our directors to possess to help meet specific Board needs, including:

 

   

industry knowledge, which is vital in understanding and reviewing our strategy, including the acquisition of businesses that offer complementary products or services;

 

   

significant operating experience as current or former executives of large for-profit or other large organizations, which gives directors specific insight into, and expertise that will foster active participation in, the development and implementation of our operating plan and business strategy;

 

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leadership experience, as directors who have served in significant leadership positions possess strong abilities to motivate and manage others and to identify and develop leadership qualities in others;

 

   

substantial global business experience, which is particularly important given our global presence;

 

   

accounting and financial expertise, which enables directors to analyze our financial statements, capital structure and complex financial transactions and oversee our accounting and financial reporting processes;

 

   

product development and marketing experience in complementary industries, which contributes to our identification and development of new food and beverage products and implementation of marketing strategies that will improve our performance;

 

   

public company board and corporate governance experience at large publicly traded companies, which provides directors with a solid understanding of their extensive and complex oversight responsibilities and furthers our goals of greater transparency, accountability for management and the Board and protection of shareholder interests; and

 

   

academic and research experience, which brings to the Board strong critical thinking and verbal communications skills as well as a greater diversity of views and backgrounds.

Director Nominees

The Board believes that all the director nominees for election at the Annual Meeting are highly qualified. Each director nominee’s specific skills, knowledge and experience that the Governance Committee relied upon when determining whether to nominate the individual for election are described below in the nominee’s biography. (A particular nominee may possess other skills, knowledge or experience even though they are not indicated.) As their biographies indicate, the nominees have significant leadership, professional experience, knowledge and skills that qualify them for service on our Board. They represent diverse views, experiences and backgrounds. Each nominee other than the Chairman satisfies independence requirements under the NASDAQ Stock Market Listing Standards and the Board’s categorical standards of director independence. All director nominees satisfy the criteria set forth in our Guidelines and possess the personal characteristics that are essential for the proper and effective functioning of the Board.

All Board members are subject to annual election. Our Board currently has ten directors, all of whom are standing for election at the 2013 Annual Meeting. Shareholders elected six of the directors to one-year terms at the 2012 Annual Meeting. The Board appointed the other four directors – Messrs. Bollenbach, Booth, and Siewert and Dr. Simmons – in October 2012 in connection with the Spin-Off.

The Governance Committee recommended, and the Board nominated, each of the 11 director nominees listed below for election at the Annual Meeting. The terms of all directors elected at the 2013 Annual Meeting will end at the 2014 Annual Meeting or until the director’s successor has been duly elected and qualified. Each nominee has consented to his or her nomination for election to the Board.

The chart below presents information regarding each director nominee as of April 1, 2013, including information about each nominee’s professional experience, educational background and qualifications that led the Board to nominate him or her for election. It also includes information about all public company directorships each nominee currently holds and held during the past five years. In addition to the public company directorships listed below, the nominees also serve on the boards of various charitable, educational and cultural institutions.

The persons named as proxies on each shareholder’s proxy card will vote the shares represented by the proxy card FOR or AGAINST the director nominees or ABSTAIN from voting, as indicated in the shareholder’s voting instructions. If a director nominee should become unavailable to serve as a director, the persons named as proxies intend to vote the shares for a replacement nominee designated by the Board. In lieu of naming a substitute, the Board may reduce the number of directors on our Board.

 

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The Board recommends shareholders vote FOR the election of each of these nominees.

 

   

LOGO

 

Stephen F. Bollenbach

 

Former Co-Chairman and CEO, Hilton Hotels Corporation

 

Director since October 2012

 

Current Committees:

•     Governance, Membership and Public Affairs

•     Human Resources and Compensation Committee

 

Age: 70

  

Professional Experience:

Mr. Bollenbach served as Co-Chairman and Chief Executive Officer of Hilton Hotels Corporation, a global hospitality provider, from May 2004 until his retirement in October 2007, and as President and Chief Executive Officer from February 1996 to May 2004. Prior to that, he was Senior Executive Vice President and Chief Financial Officer of The Walt Disney Company, an international family entertainment and media enterprise, from September 1995 to February 1996. Mr. Bollenbach spent the previous 30 years in various financial leadership positions, including Chief Financial Officer, in the hospitality, real estate and financial services industries.

 

Education:

Mr. Bollenbach received a Bachelor of Science in Finance from the University of Southern California and a Master of Business Administration from California State University, Long Beach.

 

Public Company Boards:

Mr. Bollenbach is a director of KB Home, Macy’s Inc. and Time Warner Inc.

 

Director Qualifications:

•     Leadership, Product Development and Marketing, Operating and Global Business experience – former Co-Chairman, Chief Executive Officer and President of a global hospitality corporation.

•     Accounting and Financial expertise – many years of experience in financial leadership positions, including ten years as Chief Financial Officer, including in the family entertainment, media, hospitality, real estate and financial services industries.

•     Public Company Board and Corporate Governance experience – current director of three other public companies.

 

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LOGO

 

Lewis W.K. Booth

 

Former Executive Vice President and Chief Financial Officer of the Ford Motor Company

 

Director since October 2012

 

Current Committees:

 

•  Audit

 

Age: 64

  

Professional Experience:

Mr. Booth served as Executive Vice President and Chief Financial Officer of the Ford Motor Company, a global automobile manufacturer, from November 2008 until his retirement in April 2012. He was Executive Vice President, Ford of Europe, Volvo Car Corporation and Ford Export Operations and Global Growth Initiatives, and Executive Vice President of Ford’s Premier Automotive Group, from October 2005 to October 2008. Prior to that, Mr. Booth held various executive leadership positions with Ford including as Chairman and Chief Executive Officer of Ford of Europe, President of Mazda Motor Corporation and President of Ford Asia Pacific and Africa Operations. He was employed continuously by the Ford Motor Company, in positions of increasing responsibility, since 1978.

 

Mr. Booth is a qualified chartered management accountant.

 

Mr. Booth was appointed Commander of the Order of the British Empire in the Queen’s Birthday Honours list in June 2012, for his services to the automotive and manufacturing industries.

 

Education:

Mr. Booth received a Bachelor of Science in Mechanical Engineering from the University of Liverpool.

 

Public Company Boards:

Mr. Booth is a director of Gentherm Incorporated and Rolls-Royce Holdings plc.

 

Director Qualifications:

•  Leadership, Product Development and Marketing, Operating and Global Business experience – many years of experience in executive leadership positions for major divisions of a global automobile manufacturer.

•  Accounting and Financial expertise – former chief financial officer of a global automobile manufacturer.

•  Public Company Board and Corporate Governance experience – current director of two other global public companies.

 

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LOGO

 

Lois D. Juliber

 

Former Vice Chairman and
Chief Operating Officer,
Colgate-Palmolive Company

 

Director since November 2007

 

Current Committees:

 

•     Chair, Human Resources and Compensation

•     Governance, Membership and Public Affairs

 

Age: 64

  

Professional Experience:

Ms. Juliber served as a Vice Chairman of the Colgate-Palmolive Company, a global consumer products company, from July 2004 until her retirement in April 2005. She served as Colgate-Palmolive’s Chief Operating Officer from March 2000 to July 2004, Executive Vice President – North America and Europe from 1997 until March 2000 and President of Colgate North America from 1994 to 1997. Prior to joining Colgate-Palmolive, Ms. Juliber spent 15 years at Mondelēz International’s predecessor, General Foods Corporation, in a variety of key marketing and general management positions.

 

Education:

Ms. Juliber received a Bachelor of Arts from Wellesley College and a Master of Business Administration from Harvard University.

 

Public Company Boards:

Ms. Juliber is a director of E.I. du Pont De Nemours and Company. She was formerly a director of Goldman Sachs Group, Inc.

 

Director Qualifications:

•  Leadership and Operating experience – former Vice Chairman and Chief Operating Officer of a global consumer products company.

•  Industry Knowledge, Product Development and Marketing, and Global Business experience – 32 years working in the global consumer products industry.

•  Public Company Board and Corporate Governance experience – current and former director of other global public companies.

LOGO

 

Mark D. Ketchum

 

Former President and Chief Executive Officer, Newell Rubbermaid Inc.

 

Director since April 2007

 

Lead Director since January 2009

 

Current Committees:

 

•  Human Resources and Compensation

•  Chair, Governance, Membership and Public Affairs

 

Age: 63

  

Professional Experience:

Mr. Ketchum served as President and Chief Executive Officer of Newell Rubbermaid Inc., a global marketer of consumer and commercial products, from October 2005 to June 2011 and was a member of its board of directors from November 2004 to May 2012. From 1999 to 2004, Mr. Ketchum was President, Global Baby and Family Care of The Procter & Gamble Company, a global marketer of consumer products. Mr. Ketchum joined The Procter & Gamble Company in 1971, where he served in a variety of roles, including Vice President and General Manager – Tissue/Towel from 1990 to 1996 and President–North American Paper Sector from 1996 to 1999.

 

Education:

Mr. Ketchum received a Bachelor of Science in Industrial Engineering and Operations Research from Cornell University.

 

Public Company Boards:

Mr. Ketchum was formerly a director of Newell Rubbermaid Inc.

 

Director Qualifications:

•     Leadership and Operating experience – former President and Chief Executive Officer of a global products company and former President of a division of a global consumer products company.

•     Industry Knowledge, Product Development and Marketing and Global Business experience – held key roles at a global consumer products companies for four decades.

•     Public Company Board and Corporate Governance
experience – former director of another global public company.

 

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LOGO

 

Jorge S. Mesquita

 

Group President – New Business Creation and Innovation and Pet Care, The Procter & Gamble Company

 

Director since May 2012

 

Current Committees:

 

• Audit

 

Age: 51

  

Professional Experience:

Mr. Mesquita has served as Group President – New Business Creation and Innovation and Pet Care of The Procter & Gamble Company, a global marketer of consumer products, since March 14, 2012 and served as Group President — Special Assignment from January 1, 2012 until March 13, 2012. Prior to that, he served as Group President, Global Fabric Care from 2007 to 2011 and as President, Global Home Care from 2001 to 2007, also serving as President of Commercial Products and President of P&G Professional from 2006 to 2007. Mr. Mesquita has been employed continuously by The Procter & Gamble Company, in various marketing and leadership capacities, since 1984.

 

Education:

Mr. Mesquita received a Bachelor of Science in Chemical Engineering from the Florida Institute of Technology.

 

Director Qualifications:

• Leadership and Global Business experience – current Group President of a major division of a global marketer of consumer products.

• Industry Knowledge and Marketing experience – former President of major divisions of a global consumer products company.

LOGO

 

Fredric G. Reynolds

 

Former Executive Vice President and Chief Financial Officer, CBS Corporation

 

Director since December 2007

 

Current Committees:

 

• Chair, Audit

 

Age: 62

  

Professional Experience:

Mr. Reynolds served as Executive Vice President and Chief Financial Officer of CBS Corporation, a mass media company, from January 2006 until his retirement in August 2009. From 2001 until 2006, Mr. Reynolds served as President and Chief Executive Officer of Viacom Television Stations Group and Executive Vice President and Chief Financial Officer of the businesses that comprised Viacom Inc. He also served as Executive Vice President and Chief Financial Officer of CBS Corporation and its predecessor, Westinghouse Electric Corporation, from 1994 to 2000. Prior to that, Mr. Reynolds served in various capacities with PepsiCo, Inc., a food and beverage company, for twelve years, including Chief Financial Officer or Financial Officer at Pizza Hut, Pepsi Cola International, Kentucky Fried Chicken Worldwide and Frito-Lay.

 

Education:

Mr. Reynolds received a Bachelor of Business Administration in Finance from the University of Miami and is a certified public accountant.

 

Public Company Boards:

Mr. Reynolds is a director of AOL, Inc.

 

Director Qualifications:

• Leadership, Operating and Global Business experience – former President, Chief Executive Officer, Executive Vice President and Chief Financial Officer of global media companies and divisions of a global food and beverage company.

• Industry Knowledge – twelve years in various positions, including key roles, at a global food and beverage company.

• Accounting and Financial expertise – former Chief Financial Officer of a mass media company and divisions of a global food and beverage company, and Certified Public Accountant.

• Public Company Board and Corporate Governance
experience – current director of another global public company.

 

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LOGO

 

Irene B. Rosenfeld

 

Chairman and Chief Executive Officer, Mondelēz International, Inc.

 

Director since June 2006

 

Age: 59

  

Professional Experience:

Ms. Rosenfeld is our Chairman and Chief Executive. She was appointed Chief Executive Officer and Director in June 2006 and became Chairman of the Board in March 2007. Prior to that, she served as Chairman and Chief Executive Officer of Frito-Lay, a division of PepsiCo, Inc., a food and beverage company, from September 2004 to June 2006. Previous to that, Ms. Rosenfeld was employed continuously by Mondelēz International and its predecessor companies, in various capacities from 1981 until 2003, including President of Kraft Foods North America and President of Operations, Technology, Information Systems and Kraft Foods Canada, Mexico and Puerto Rico.

 

Education:

Ms. Rosenfeld received a Bachelor of Arts in Psychology, a Master of Science in Business Administration and a Doctor of Philosophy in Marketing and Statistics from Cornell University.

 

Director Qualifications:

• Leadership and Operating experience – current Chairman and Chief Executive Officer of Mondelēz International and former Chairman and Chief Executive Officer of a major business unit of another global food and beverage company.

• Industry Knowledge, Product Development and Marketing and Global Business experience – long-time service in various positions, including key roles, at Mondelēz International and its predecessor companies and another global food and beverage company.

• Public Company Board and Corporate Governance
experience – former director of another public company.

 

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LOGO

 

Patrick T. Siewert

 

Managing Director, The Carlyle Group

Director since October 2012

 

Current Committees:

 

•   Audit

 

Age: 57

  

Professional Experience:

Mr. Siewert has served as a Managing Director for the The Carlyle Group, a global alternative asset management firm, since April 2007. Since 2008, he has also served as Chairman of Eastern Broadcasting Company, one of Greater China’s largest television broadcast and media companies. Prior to that, he was a senior executive with The Coca-Cola Company from August 2001 to March 2007 in various positions including Group President and Chief Operating Officer, Asia and a member of the Global Executive Committee. Prior to that, he was with Eastman Kodak Company from 1974 to 2001, serving in a variety of executive and managerial and director roles, including Chief Operating Officer, Consumer Imaging and Senior Vice President and President of the Kodak Professional Division.

 

Education:

Mr. Siewert received a Bachelor of Science from Elmhurst College and a Master of Science in Service Management from the Rochester Institute of Technology.

 

Public Company Boards:

Mr. Siewert is a director of Avery Dennison Corporation.

 

Director Qualifications:

•   Leadership, Operating and Global Business experience – former president of a major division of a global beverage company and a consumer products company.

•   Industry Knowledge – six years in a key role at a global beverage company.

•   Public Company Board and Corporate Governance
experience – current director of another global public company.

 

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LOGO

 

Ruth J. Simmons

 

President Emerita, Brown University

 

Director since October 2012

 

Current Committees:

 

•   Human Resources and Compensation

•   Governance, Membership and Public Affairs

 

Age: 67

  

Professional Experience:

Dr. Simmons is Professor of Comparative Literature and Africana Studies and President Emerita of Brown University, having served as President from 2001 to 2012. She has been Professor of Comparative Literature and Africana Studies at Brown since 2001. Prior to that, Dr. Simmons served as President, Smith College from 1995 to 2001 and Vice Provost of Princeton University from 1991 to 1995. She served in various administrative positions at colleges and universities since 1977, including the University of Southern California from 1979 to 1983, Princeton University from 1983 to 1989 (and again from 1991 to 1995) and Spelman College from 1989 to 1991.

 

Education:

Dr. Simmons received a Bachelor of Arts in French from Dillard University and a Master of Arts and Doctor of Philosophy in Romance Languages and Literatures from Harvard University.

 

Public Company Boards:

Dr. Simmons is a director of Chrysler Group LLC and Texas Instruments Incorporated and was formerly a director of The Goldman Sachs Group, Inc.

 

Director Qualifications:

•   Leadership and Operating experience – former President of a major college and leading university with over 15 years of experience.

•   Academic and Research experience – professor of literature and former administrator with over 36 years of experience.

•   Public Company Board and Corporate Governance experience – former and current director of other global public companies.

 

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LOGO

 

Ratan N. Tata

 

Former Chairman of Tata Sons Limited

 

Age: 75

 

Professional Experience:

Mr. Tata is Chairman of the Tata Trusts, among the largest private sector philanthropic trusts in India.

 

Mr. Tata served as Chairman of Tata Sons Limited, the holding company of the Tata Group, one of India’s largest business conglomerates, from 1991 until December 28, 2012. Mr. Tata was also Chairman of the major Tata Group companies, including Tata Motors, Tata Steel, Tata Consultancy Services, Tata Global Beverages and several other Tata companies, until December 28, 2012. Mr. Tata joined the Tata Group in December 1962.

 

Education:

Mr. Tata received a Bachelor of Architecture from Cornell University and completed the Advanced Management Program at Harvard Business School.

 

Public Company Boards:

Mr. Tata is a director of Alcoa Inc. and was formerly a director of Bombay Dyeing and Manufacturing Company Ltd. and Fiat S.p.A.

 

Director Qualifications:

•    Leadership and Operating experience – former Chairman of the holding company for one of India’s largest business conglomerates, with revenues in excess of $100 billion USD; former Chairman of major operating companies in various industries, including automotive, consulting, steel and beverages.

•    Global Business experience – former Chairman of the holding company for one of India’s largest business conglomerates and former Chairman of multiple companies with international operations; serves on the United Kingdom Prime Minister’s Business Counsel for Britain; member of international advisory boards of Mitsubishi Corp., JPMorgan Chase, Rolls-Royce, Temasek Holdings and Monetary Authority of Singapore.

•    Industry Knowledge and Marketing experience – former Chairman of an international beverage company.

•    Public Company Board and Corporate Governance experience – current director of global public company; member of international advisory boards of Mitsubishi Corp., JPMorgan Chase, Rolls-Royce, Temasek Holdings and Monetary Authority of Singapore.

 

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LOGO

 

Jean-François M. L. van Boxmeer

 

Chairman of the Executive

Board and Chief Executive Officer of Heineken N.V.

 

Director since January 2010

 

Committees:

 

• Human Resources and Compensation

• Governance, Membership and Public Affairs

 

Age: 51

 

Professional Experience:

Mr. van Boxmeer has been Chairman of the Executive Board and Chief Executive Officer of Heineken N.V., a brewing company, since 2005 and a member of its Executive Board since 2001. He has been employed continuously by Heineken, in various capacities, since 1984, including General Manager of Heineken Italia from 2000 to 2001.

 

Education:

Mr. van Boxmeer received a Master in Economics at les Faculté universitaires Notre Dame de la Paix S.J.

 

Director Qualifications:

•   Leadership and Operating experience – Chairman and Chief Executive Officer of a global brewing company.

•   Industry Knowledge, Product Development and Marketing and Global Business experience – over two decades in various positions, including key roles, at a global brewing company.

 

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CORPORATE GOVERNANCE

We believe that a strong corporate governance framework is essential to the long-term success of our Company. This section describes our governance policies, key governance practices, Board leadership structure and oversight functions.

The Board reviewed our various corporate governance documents and practices in connection with the Company’s decision to delist its Class A Common Stock from the New York Stock Exchange and list the Class A Common Stock with NASDAQ beginning on June 26, 2012 and also in preparation for the Spin-Off to provide that they are consistent with Mondelēz International’s future governance needs and objectives.

Corporate Governance Materials Available on Our Website

We include the following documents in the Corporate Governance section of our website at www.mondelezinternational.com/investor/corporate-governance/index.aspx.

 

   

our Articles of Incorporation,

 

   

our By-Laws,

 

   

our Corporate Governance Guidelines,

 

   

our Board committee charters, and

 

   

the Directors Ethics Code.

The information on our website is not, and will not be deemed to be, a part of this Proxy Statement or incorporated into any of our other filings with the U.S. Securities and Exchange Commission (“SEC”).

Governance Guidelines and Codes of Conduct

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines (the “Guidelines”) that articulate our governance philosophy, practices and policies in a range of areas, including: the Board’s role and responsibilities; composition and structure of the Board; establishment and responsibilities of the committees of the Board; CEO and Board performance evaluations; and succession planning. At least annually, the Board’s Governance Committee reviews the Guidelines and recommends any changes to the Board. Shareholders and others can access the Guidelines on our website as described above. Please read “Key Corporate Governance Practices” beginning on page 17.

Code of Business Conduct and Ethics for Non-Employee Directors and Code of Conduct for Employees

We have adopted a Code of Business Conduct and Ethics for Non-Employee Directors (the “Directors Ethics Code”). It fosters a culture of honesty and integrity, focuses on areas of ethical risk, guides non-employee directors in recognizing and handling ethical issues and provides mechanisms to report unethical conduct. Annually, each non-employee director must acknowledge in writing that he or she has received, reviewed and understands the Directors Ethics Code.

We also have a Code of Conduct that applies to all of our employees. It includes a set of employee policies that cover ethical and legal practices for nearly every aspect of our business. The Code of Conduct reflects our values, the foremost being trust, and contains important rules our employees must follow when conducting business to promote compliance and integrity. The Code of Conduct is part of our global compliance and integrity program that provides support and training throughout

 

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our Company and encourages reporting of wrongdoing by offering anonymous reporting options and a non-retaliation policy. Shareholders and others can access our Code of Conduct on our website at www.mondelezinternational.com/DeliciousWorld/compliance-integrity/index.aspx.

We will disclose in the Corporate Governance section of our website any amendments to our Directors Ethics Code or Code of Conduct and any waiver granted to an executive officer or director under these codes.

Key Corporate Governance Practices

We design our corporate governance practices to enhance the Board’s independent leadership, accountability and oversight:

 

   

Leadership Structure. As described further below under “Board Leadership Structure,” our Guidelines currently provide that the Chief Executive Officer (“CEO”) currently serves as Chairman of the Board and an independent director serves as Lead Director.

 

   

Limitation on Management Directors. The Guidelines provide that the Board believes the Chairman and Chief Executive Officer generally should be the only member of management to serve as a director.

 

   

Independent Committees. The Board determined that all Board committees should consist entirely of independent directors.

 

   

Executive Sessions. At each Board meeting, our independent directors meet without the Chief Executive Officer or any other members of management present to discuss issues important to Mondelēz International, including matters concerning management. These sessions are chaired by the Lead Director.

 

   

Special Meetings of the Board. Our By-Laws empower the Lead Director, in addition to the Chairman, to call special meetings of the Board.

 

   

Annual Chairman and CEO Evaluation. The Human Resources and Compensation Committee annually evaluates the Chief Executive Officer’s performance. Additionally, the Governance Committee annually considers the Chief Executive Officer’s performance and suitability as Chairman when determining whether to nominate him or her for re-election.

 

   

Special Meetings of Shareholders. Our By-Laws allow shareholders of record of at least twenty percent (20%) of the voting power of the outstanding stock to call a special meeting of shareholders.

 

   

Majority Voting in Uncontested Director Elections. Our By-Laws provide that, in uncontested elections, director nominees must be elected by a majority of the votes cast.

 

   

Annual Election of Directors. Our By-Laws provide that our shareholders elect all directors annually.

 

   

Stock Holding Requirements. Our Guidelines provide that directors are expected to hold Mondelēz International common stock in an amount equal to five times the annual Board retainer within five years of joining the Board. As of March 1, 2013 all directors who have served for five years have satisfied or exceeded this holding requirement. Directors must hold equity grants awarded in May 2010 or thereafter until six months after the director concludes service on the Board.

Board Leadership Structure

Our current Board leadership structure consists of:

 

   

a combined Chairman and Chief Executive Officer;

 

   

an independent Lead Director;

 

   

all independent directors except the Chairman and CEO;

 

   

independent Board committees; and

 

   

governance practices that promote independent leadership and oversight.

 

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Combined Chairman and CEO

Our By-Laws provide the Board flexibility in determining its leadership structure, permitting one person to hold the offices of chief executive officer and chairman, and providing that the Board may appoint, and designate the duties of, a lead director. The Board periodically evaluates our leadership structure to determine whether the current structure is in our best interests based on circumstances existing at the time. When determining the leadership structure that will allow the Board to effectively carry out its responsibilities and best represent our shareholders’ interests, the Board considers various factors, including our specific business needs, our operating and financial performance, industry conditions, the economic and regulatory environment, Board and committee annual self-evaluations, advantages and disadvantages of alternative leadership structures and our corporate governance practices.

The Guidelines currently provide that the Chief Executive Officer serves as Chairman of the Board and an independent director serves as Lead Director. The Board believes that this leadership structure best meets our current and anticipated needs, as it has provided an effective balance of strong leadership and independent oversight during the last several years. Ms. Rosenfeld has served as our Chief Executive Officer and a director since June 2006. In 2007, the Board concluded that Ms. Rosenfeld should also serve as Chairman because of her extensive knowledge of the Company, the food industry and the competitive environment, her leadership experience and her dedication to working closely with the Lead Director and our other directors.

Having one individual serve as both Chief Executive Officer and Chairman benefits Mondelēz International and our shareholders by contributing to the Board’s efficiency and effectiveness. The Board believes that the Chief Executive Officer is generally in the best position to inform our independent directors about our global operations and issues important to Mondelēz International. Combining these roles also allows timely communication between management and the Board on critical business matters given the complexity and geographic reach of our business and ensures alignment of our business and strategic plans. At the same time, as described below under “Independent Director Leadership and Oversight,” we believe that our governance practices ensure that skilled and experienced independent directors provide independent leadership.

Independent Director Leadership and Oversight

Because the Board believes that independent Board leadership is important, it established the role of Lead Director for times when one individual serves as Chairman and Chief Executive Officer. The Lead Director is an independent director who serves as the principal liaison between the Chairman and the other independent directors and has similar responsibilities to those of the Chairman. The Board created the Lead Director position to increase the Board’s effectiveness and promote open communication among independent directors. The Lead Director works with the Chairman and other members of the Board to provide independent leadership of the Board’s affairs on behalf of our shareholders.

Under the Guidelines, the Lead Director, in consultation with the other independent directors, is responsible for:

 

   

advising the Chairman as to an appropriate schedule of Board meetings;

 

   

reviewing and providing the Chairman with input regarding the agendas and materials for the Board meetings;

 

   

presiding at all Board meetings at which the Chairman is not present, including executive sessions of the non-employee directors, and, as appropriate, apprising the Chairman of the issues considered;

 

   

being available for consultation and direct communication with our shareholders;

 

   

serving as an unofficial member of all Board committees of which he or she is not a member; and

 

   

performing such other duties as the Board may from time-to-time delegate.

 

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Our current Lead Director is Mark D. Ketchum, whom the Board appointed to that position in 2009. The Board believes that Mr. Ketchum is an effective Lead Director due to his independence, leadership and operating experience from formerly serving as President and Chief Executive Officer of a global consumer products company and his corporate governance experience acquired while serving on public company boards.

Director Independence

The Guidelines require that at least 75% of the directors on our Board meet the NASDAQ listing standards’ independence requirements and provide that the Chairman and Chief Executive Officer generally should be the only member of management to serve as a director. For a director to be considered independent, the Board must affirmatively determine, after reviewing all relevant information, that a director has no relationship with Mondelēz International or any of its subsidiaries that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. To assist in this determination, the Board adopted categorical standards of director independence, including whether a director or a member of the director’s immediate family has any current or past employment or affiliation with Mondelēz International or our independent auditors. These categorical standards are listed as Annex A to the Guidelines, which are available on our website at www.mondelezinternational.com/investor/corporate-governance/index.aspx.

The Board determined that, under our categorical standards and NASDAQ’s listing standards, the following director nominees are independent: Stephen F. Bollenbach, Lewis W.K. Booth, Lois D. Juliber, Mark D. Ketchum, Jorge S. Mesquita, Fredric G. Reynolds, Patrick T. Siewert, Ruth J. Simmons, Ratan N. Tata, and Jean-François M.L. van Boxmeer. In addition, the Board previously determined that Myra M. Hart, Peter B. Henry, Terry J. Lundgren, Mackey J. McDonald and John C. Pope (who served on the Board until October 1, 2012) and Ajaypal S. Banga and Richard A. Lerner (who served on the Board until May 23, 2012) were independent directors. Irene B. Rosenfeld is not independent because she is an employee of Mondelēz International.

In making its determination that Mr. Tata is independent, the Board considered transactions that occurred since the beginning of 2010 between Mondelēz International and Tata Consultancy Services (“TCS”), a Tata Group company, relating to information technology services. Mr. Tata formerly served as Chairman of Tata Sons Limited (the holding company of the Tata Group), TCS and several other Tata Group companies and currently serves as Chairman of the Tata Trusts. The Board considered the fact that, as of December 28, 2012, Mr. Tata ceased serving as Chairman of TCS, as well as Tata Sons Limited and other Tata Group companies, and that the transactions between Mondelēz International and TCS constituted less than 0.3% of TCS’s annual revenues in each of the past three years. The Board further considered the fact that the Tata Trusts are a majority shareholder of Tata Sons Limited, but the Tata Trusts have no authority to exercise, and do not exercise, operational control of Tata Sons Limited or the Tata Group companies. Mr.  Tata owns less than 1% of the outstanding shares of Tata Sons Limited.

Oversight of Risk Management

Our business faces various risks, including strategic, financial, legal, regulatory, operational, accounting and reputational risks. Management is responsible for the day-to-day assessment, management and mitigation of risk. Identifying, managing and mitigating our exposure to these risks and effectively overseeing this process are critical to our operational decision-making and annual planning processes. Our Board has ultimate responsibility for risk oversight, but it has delegated primary responsibility for overseeing risk assessment and management to the Audit Committee. Pursuant to its charter, the Audit Committee reviews and discusses risk assessment and risk management guidelines, policies and processes utilized in our Enterprise Risk Management (“ERM”) approach. Our ERM approach is an ongoing process effected at all levels of our operations and across business units to identify, assess, monitor, manage and mitigate risk. Our ERM approach facilitates open communication between management and the Board to ensure that the Board and committees

 

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understand our risk management process, how it is functioning, the participants in the process, key risks to our business and performance and the information gathered through the approach. The Audit Committee annually reviews our ERM process, as well as the results of our annual ERM risk assessment, to assure the process continues to function effectively.

Annually, the Audit Committee reviews and approves management’s recommendation for allocating responsibility for reviewing and assessing key risk exposures and management’s response to those exposures to the full Board or retaining those responsibilities. Management provides reports to the Board and Audit Committee, in advance of meetings, regarding these key risks and the actions management has taken to monitor, control and mitigate these risks. Management also attends Board and Audit Committee meetings to discuss these reports and provide any updates. The Audit Committee reports key risk discussions to the Board following its meetings. Board members may also further discuss the risk management process directly with members of management.

In addition to our ERM approach, throughout the year, the Board and each committee review and assess risks related to our business and operations as follows:

 

Board

 

Audit

 

Governance,

Membership and

Public Affairs

  

Human Resources

and Compensation(1)

Strategy (including health and wellness)

 

Operations

 

Food safety (including supply chain and food defense)

 

Competition (including private label and customer concentration)

 

Capital structure

 

Financial strategies and transactions (including economic trends)

 

Labor Relations (including Human Capital)

 

Financial statements

 

Financial reporting process

 

Accounting matters

 

Legal, compliance and regulatory matters

 

Business

Continuity/Operations

 

Sovereign Risk

 

Financial risk management (including foreign exchange, commodities and interest rate exposure, income and other taxes)

 

Health, Safety and Environmental

 

Governance programs

 

Board organization, membership and structure

 

Related person transactions

 

Social accountability

 

Public policy

 

Mondelēz International’s public image and reputation

  

Compensation policies and

practices for all employees (including executives)

 

Succession planning

 

Human resources policies and practices

 

(1) For a discussion about risk oversight relating to our compensation programs, see “Human Resources and Compensation Committee – Analysis of Risk in the Compensation Architecture.”

The Board frequently discusses our strategic plans, issues and opportunities in light of circumstances in the food and beverage industry and the economic environment. Additionally, the Board devotes several days each year to a highly focused review of our strategic plans, which includes discussion of strategic and operational risks.

The Board believes our current leadership structure enhances its oversight of risk management because our Chief Executive Officer, who is ultimately responsible for our risk management process, is in the best position to discuss with the Board these key risks and management’s response to them by also serving as Chairman.

Review of Transactions with Related Persons

The Board has adopted a written policy regarding the review, approval or ratification of “related person transactions.” A related person transaction is one in which Mondelēz International is a participant, in which the amount involved exceeds $120,000 and in which any “related person” had, has or will have a

 

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direct or indirect material interest. In general, “related persons” are the following persons and their immediate family members: our directors, executive officers and shareholders beneficially owning more than 5% of our outstanding common stock. In accordance with this policy, the Governance Committee reviews transactions that might qualify as related person transactions. If the Committee determines that a transaction qualifies as a related person transaction, then the Committee reviews, and approves, disapproves or ratifies the related person transaction. The Committee approves or ratifies only those related person transactions that are fair and reasonable to Mondelēz International and in our and our shareholders’ best interests. The chair of the Committee reviews and approves or ratifies potential related person transactions when it is not practicable or desirable to delay review of a transaction until a committee meeting. The chair reports to the Committee any transaction so approved or ratified. The Committee, in the course of its review and approval or ratification of a related person transaction under this policy, considers, among other things:

 

   

the commercial reasonableness of the transaction;

 

   

the materiality of the related person’s direct or indirect interest in the transaction;

 

   

whether the transaction may involve an actual, or the appearance of a, conflict of interest;

 

   

the impact of the transaction on the related person’s independence (as defined in the Guidelines and the NASDAQ listing standards); and

 

   

whether the transaction would violate any provision of our Directors Ethics Code or Code of Conduct or the Code of Conduct for Compliance and Integrity.

Any member of the Committee who is a related person with respect to a transaction under review may not participate in the deliberations or decisions regarding the transaction.

On January 30, 2013, BlackRock, Inc. (“BlackRock”), an investment management corporation, filed a Schedule 13G with the SEC notifying the Company that it became a greater than 5% shareholder as of December 31, 2012. During 2012, BlackRock acted as an investment manager with respect to certain investment options under 401(k) plans for our U.S. employees sponsored by our U.S. operating company, Mondelēz International Global LLC. BlackRock was selected as an investment manager for the 401(k) plans by the plans’ named fiduciary for investment, the Benefits Investment Committee (“BIC”). Participants in the 401(k) plans pay BlackRock’s investment management fees if they invest in investment options managed by BlackRock. During 2012, BlackRock received approximately $330,000 in connection with its investment management fees. The BIC’s selection of BlackRock for the investment management services it provides the plans’ was based on its fiduciary determination that BlackRock’s expertise met applicable fiduciary standards and that its fees were reasonable and appropriate. The Governance Committee reviewed our relationship with BlackRock and ratified these transactions.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires our executive officers, directors and persons who beneficially own more than 10% of our common stock to report to the SEC their ownership of our common stock and changes in that ownership. As a practical matter, our Office of the Corporate Secretary assists our directors and executive officers by monitoring their transactions and completing and filing Section 16(a) reports on their behalf.

We reviewed copies of reports filed pursuant to Section 16(a) of the Exchange Act and written representations from reporting persons that all reportable transactions were reported. Based solely on that review, we believe that during the fiscal year ended December 31, 2012, all required filings were timely made in accordance with the requirements of the Exchange Act, except as follows:

 

   

In May 2012, due to an administrative error, we filed a Form 3 on behalf of Mr. Mesquita underreporting his holdings of Mondelēz International stock by 6,500 shares. Upon discovering the error, we filed an amended Form 3 reporting these shares.

 

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In October 2012, due to an administrative error in connection with the Spin-Off, we filed a Form 3 on behalf of Tracey Belcourt, our Vice President, Strategy, underreporting her shares of Mondelēz International stock by 7,911 shares. Upon discovering the error, we filed an amended Form 3 reporting these shares.

Communications with the Board

Information for shareholders and other parties interested in communicating with the Lead Director, the Board or our independent directors, individually or as a group, is available on our website at www.mondelezinternational.com/Investor/corporate-governance/contact_bod.aspx. Our Corporate Secretary forwards communications relating to matters within the Board’s purview to the independent directors; communications relating to matters within a Board committee’s area of responsibility to the chair of the appropriate committee; and communications relating to ordinary business matters, such as suggestions, inquiries and consumer complaints, to the appropriate Mondelēz International executive or employee. Our Corporate Secretary does not forward solicitations, junk mail and obviously frivolous or inappropriate communications, but makes them available to any independent director who requests them.

 

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BOARD COMMITTEES AND MEMBERSHIP

The Governance Committee considers and makes recommendations to the Board regarding the Board’s committee structure and membership. Our Board then designates the committee members and chairs based on the Governance Committee’s recommendations.

The Board has adopted a written charter for each committee. The charters define each committee’s roles and responsibilities. All current standing committee charters are available on our website at www.mondelezinternational.com/Investor/corporate-governance/index.aspx.

As mentioned above, the Board of Directors underwent significant changes during 2012 in connection with the Spin-Off. In the following tables, we lay out committee structure and membership during the course of 2012 and indicate the number of times each committee met.

Through October 1, 2012, the Board had four standing committees: Audit, Finance, Human Resources and Compensation, and Governance. From January 1 through the 2012 Annual Meeting, the committee structure and membership was:

Committee Membership

January 1 through May 23, 2012

 

Name

  

Audit

   Finance    Human
Resources
and
Compensation
   Governance,
Membership and
Public Affairs

Ajaypal S. Banga(1)

        X    Chair      —  

Myra M. Hart

   X      —        —      Chair

Peter B. Henry

     —        —        —      X

Lois D. Juliber

     —        —      Vice Chair    X

Mark D. Ketchum

   X      —        —      X

Richard A. Lerner, M.D.(1)

     —        —        —      X

Mackey J. McDonald

   X    X      —        —  

John C. Pope

   X    Chair      —        —  

Fredric G. Reynolds

   Chair    X      —        —  

Jean-François M.L. van Boxmeer

     —        —      X    X

Total Number of Meetings January 1 through May 22, 2012(2)

   9    6    4    3

 

  (1)

Mr. Banga and Dr. Lerner did not stand for re-election at the Company’s 2012 Annual Meeting of Shareholders. Their service on these committees ended at that time.

 

  (2)

The Audit and Finance Committees held one joint meeting in May 2012; it is included in the Audit Committee meeting total.

 

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From the 2012 Annual Meeting through the Spin-Off, the committee structure and membership was:

Committee Membership

May 23 through October 1, 2012

 

Name

  

Audit

   Finance    Human
Resources
and
Compensation
  Governance,
Membership and
Public Affairs

Myra M. Hart

   X      —        —     Chair

Peter B. Henry

     —        —        —     X

Lois D. Juliber

     —        —      Chair   X

Mark D. Ketchum

   X      —        —     X

Terry J. Lundgren(1)

     —        —      X     —  

Mackey J. McDonald

   X    X      —       —  

Jorge S. Mesquita(1)

   X      —        —       —  

John C. Pope

   X    Chair      —       —  

Fredric G. Reynolds

   Chair    X      —       —  

Jean-François M.L. van Boxmeer

     —        —      X   X

Total Number of Meetings May 23 through October 1, 2012

   2    3    2 (2)   1

 

  (1)

Shareholders elected Messrs. Lundgren and Mesquita to the Board on May 23, 2012 after which the Board appointed them to committees.

 

  (2)

The Human Resources and Compensation Committee acted twice by Written Consent between May 23 and October 1, 2012.

In anticipation of the Spin-Off, the Governance Committee and Board reviewed the committee structure. The Board decided to eliminate the Finance Committee effective with the Spin-Off and reallocate the Finance Committee’s responsibilities. The Finance Committee met a total of nine times from January 1 to October 1, 2012.

Current Committee Membership(1)

 

Name

  

Audit

   Human
Resources
and
Compensation
  Governance,
Membership and
Public Affairs

Stephen F. Bollenbach(2)

     —      X   X

Lewis W.K. Booth(3)

   X      —       —  

Lois D. Juliber

     —      Chair   X

Mark D. Ketchum

     —      X   Chair

Jorge S. Mesquita

   X      —       —  

Fredric G. Reynolds

   Chair      —       —  

Patrick T. Siewert(4)

   X      —       —  

Ruth J. Simmons

     —      X   X

Jean-François M.L. van Boxmeer

     —      X   X

 

 

  

 

 

  

 

 

 

 

 

Total Number of Meetings October 2 through December 31, 2012

   4    3   2

Total Number of Meetings During 2012

   15    9(5)   6

 

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  (1)

The Board periodically reviews and rotates committee memberships. Accordingly, the membership shown in this table may change during 2013.

 

  (2)

Mr. Bollenbach was a member of the Audit Committee from October 2 through December 31, 2012 and became a member of the Human Resources and Compensation Committee on January 1, 2013.

 

  (3)

Mr. Booth became a member of the Audit Committee on October 2, 2012.

 

  (4)

Mr. Siewert became a member of the Audit Committee on January 1, 2013.

 

  (5)

The Human Resources and Compensation Committee acted twice by written consent during 2012.

Meeting Attendance

We expect directors to attend all Board meetings, the Annual Meeting and all meetings of the committees on which they serve. We understand, however, that occasionally a director may be unable to attend a meeting. The Board held 11 meetings in 2012. All directors who served for some or all of 2012 attended at least 75% of the aggregate number of meetings of the Board and all committees on which they served (held during the period that they served). All nine then-incumbent directors attended the 2012 Annual Meeting.

Audit Committee

The Board established the Audit Committee in accordance with Section 3(a)(58)(A) of the Exchange Act. The Board determined that all members of the Audit Committee are independent within the meaning of the NASDAQ listing standards and Rule 10A-3 of the Exchange Act. The Board also determined that all Audit Committee members are able to read and understand financial statements in accordance with NASDAQ listing standards and that Lewis W.K. Booth and Fredric G. Reynolds are audit committee financial experts” within the meaning of SEC regulations and have financial sophistication in accordance with NASDAQ listing standards. No Audit Committee member received any payments in 2012 from us other than compensation for service as a director.

Under its charter, the Audit Committee is responsible for overseeing our accounting and financial reporting processes and audits of our financial statements. The Audit Committee is directly responsible for the appointment and oversight of our independent auditors, including review of their qualifications, independence and performance.

Among other duties, the Audit Committee also oversees:

 

   

the integrity of our financial statements, our accounting and financial reporting processes, our systems of internal control over financial reporting and safeguarding our assets;

 

   

our compliance with legal and regulatory requirements;

 

   

the performance of our internal auditors and internal audit functions; and

 

   

our guidelines and policies with respect to risk assessment and risk management.

The Audit Committee has established procedures for the receipt, retention and treatment, on a confidential basis, of any complaints we receive. We encourage employees and third-party individuals and organizations to report concerns about our accounting controls, auditing matters or anything else that appears to involve financial or other wrongdoing. To report such matters, please e-mail us at: mdlz-financialintegrity@mdlz.com.

 

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Audit Committee Report for the Year Ended December 31, 2012

Management has primary responsibility for Mondelēz International’s financial statements and the reporting process, including the systems of internal control over financial reporting. Our role as the Audit Committee of the Mondelēz International Board of Directors is to oversee Mondelēz International’s accounting and financial reporting processes, and audits of its financial statements. In addition, we assist the Board in its oversight of:

 

   

The integrity of Mondelēz International’s financial statements and Mondelēz International’s accounting and financial reporting processes and systems of internal control over financial reporting and safeguarding Company assets;

 

   

Mondelēz International’s compliance with legal and regulatory requirements;

 

   

Mondelēz International’s independent auditors’ qualifications, independence and performance;

 

   

The performance of Mondelēz International’s internal auditor and the internal audit function; and

 

   

Mondelēz International’s risk assessment and risk management guidelines and policies.

Our duties include overseeing Mondelēz International’s management, the internal audit department and the independent auditors in their performance of the following functions, for which they are responsible:

Management

 

   

Preparing Mondelēz International’s consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”);

 

   

Assessing and establishing effective financial reporting systems and internal controls and procedures; and

 

   

Reporting on the effectiveness of Mondelēz International’s internal control over financial reporting.

Internal Audit Department

 

   

Independently assessing management’s system of internal controls and procedures; and

 

 

   

Reporting on the effectiveness of that system.

 

Independent Auditors

 

   

Auditing Mondelēz International’s financial statements;

 

 

   

Issuing an opinion about whether the financial statements conform with U.S. GAAP; and

 

 

   

Annually auditing the effectiveness of Mondelēz International’s internal control over financial reporting.

 

Periodically, we meet, both independently and collectively, with management, the internal auditor and the independent auditors, among other things, to:

 

   

Discuss the quality of Mondelēz International’s accounting and financial reporting processes and the adequacy and effectiveness of its internal controls and procedures;

 

 

   

Review significant audit findings prepared by each of the independent auditors and internal audit department, together with management’s responses; and

 

 

   

Review the overall scope and plans for the 2013 audits by the internal audit department and the independent auditors.

 

 

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Prior to Mondelēz International’s filing of its Annual Report on Form 10-K for the year ended December 31, 2012, with the SEC, we also:

 

   

Reviewed and discussed the audited financial statements with management and the independent auditors;

 

 

   

Discussed with the independent auditors the items the independent auditors are required to communicate to the Audit Committee in accordance with applicable requirements of the Public Company Accounting Oversight Board;

 

 

   

Received from the independent auditors the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with us concerning independence; and

 

 

   

Discussed with the independent auditors their independence from Mondelēz International, including reviewing non-audit services and fees to assure compliance with (i) regulations prohibiting the independent auditors from performing specified services that could impair their independence, and (ii) Mondelēz International’s and the Audit Committee’s policies.

 

Based upon the reports and discussions described in this report and without other independent verification, and subject to the limitations of our role and responsibilities outlined in this report and in our written charter, we recommended to the Board, and the Board approved, that the audited consolidated financial statements be included in Mondelēz International’s Annual Report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on February 25, 2013.

Audit Committee:

Fredric G. Reynolds, Chair

Lewis W.K. Booth

Jorge S. Mesquita

Patrick T. Siewert

 

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 by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Mondelēz International specifically incorporates it by reference in such filing.

Pre-Approval Policies

Our Audit Committee’s policy, which it reviews annually, is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other permissible non-audit services. The pre-approval authority details the particular service or category of service that the independent auditors will perform. The Audit Committe’s policy also requires management to report at committee meetings throughout the year on the actual fees charged by the independent auditors for each category of service.

During the year, circumstances may arise when it may become necessary to engage the independent auditors for additional services not contemplated in the original pre-approval authority. In those instances, the committee approves the services before we engage the independent auditors. If pre-approval is needed before a scheduled committee meeting, the committee delegated pre-approval authority to its chair. The chair must report on such pre-approval decisions at the committee’s next regular meeting.

During 2012, the Audit Committee pre-approved all audit and non-audit services provided by the independent auditors.

 

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Independent Auditors’ Fees

Aggregate fees billed for professional services rendered by our independent auditors, PricewaterhouseCoopers LLP, for 2012 and 2011 were:

 

     2012      2011  

Audit Fees

   $ 18,142,000       $ 20,827,000   

Audit-Related Fees

     617,000         478,000   

Tax Fees

     5,680,000         12,373,000   

All Other Fees

     77,000         9,000   
  

 

 

    

 

 

 

Total

   $ 24,516,000       $ 33,687,000   
  

 

 

    

 

 

 

 

   

“Audit Fees” include (a) the integrated audit of our consolidated financial statements, including statutory audits of the financial statements of our affiliates, and our internal control over financial reporting and (b) the reviews of our unaudited condensed consolidated interim financial statements (quarterly financial statements). In 2012, audit fees include work related to the Spin-Off.

 

   

“Audit-Related Fees” include professional services in connection with employee benefit plan audits, due diligence related to acquisitions and divestitures and procedures related to various other audit and special reports.

 

   

“Tax Fees” include professional services in connection with tax compliance and advice. The 2012 tax fees include work related to the Spin-Off.

 

   

“All Other Fees” include professional services in connection with benchmarking studies, seminars and web-site security reviews.

 

   

All fees above include out-of-pocket expenses.

Governance, Membership and Public Affairs Committee

The Board determined that all of the Governance Committee members are independent within the meaning of the NASDAQ listing standards.

The Governance Committee’s responsibilities include:

 

   

reviewing the qualifications of candidates for Board membership consistent with criteria approved by the Board;

 

   

considering the performance and suitability of incumbent directors in determining whether to nominate them for re-election;

 

   

recommending to the Board a director retirement age;

 

   

making recommendations to the Board as to directors’ independence and related party transactions;

 

   

making recommendations to the Board concerning the function, composition and structure of the Board and its committees;

 

   

recommending to the Board a slate of nominees for election or re-election to the Board at each annual meeting of shareholders;

 

   

recommending to the Board candidates to be appointed to the Board as necessary to fill vacancies and newly created directorships;

 

   

evaluating any compensation committee interlocks among the Board members and executive officers;

 

 

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recommending to the Board the frequency and content of Board meetings;

 

   

recommending to the Board the membership of each Board committee, as well as candidates to fill vacancies on any committee;

 

   

monitoring directors’ compliance with our stock ownership guidelines;

 

   

reviewing and evaluating opportunities for Board members to engage in continuing education;

 

   

advising and making recommendations to the Board on corporate governance matters, including reviewing and recommending to the Board revisions to the Guidelines;

 

   

developing and recommending to the Board and overseeing an annual self-evaluation process for the Board and its committees;

 

   

administering and reviewing the Directors Ethics Code;

 

   

overseeing Mondelēz International’s policies and programs related to corporate citizenship, social responsibility, and public policy issues significant to Mondelēz International such as sustainability and environmental responsibility; food labeling, marketing and packaging; and philanthropic and political activities and contributions; and

 

   

monitoring issues, trends, internal and external factors and relationships that may affect the public image and reputation of Mondelēz International and the food and beverage industry.

The Governance Committee will consider any candidate whom a shareholder properly presents for election to the Board in accordance with the procedures set forth in the By-Laws. The Governance Committee uses the same criteria set forth in the Guidelines to evaluate a candidate suggested by a shareholder as the Governance Committee uses to evaluate a candidate it identifies, as described above under “Item 1. Election of Directors – Process for Nominating Directors,” and makes a recommendation to the Board regarding the candidate’s appointment or nomination for election to the Board. After the Board’s consideration of the candidate suggested by a shareholder, our Corporate Secretary will notify that shareholder whether the Board decided to appoint or nominate the candidate.

For a description of how shareholders may nominate a candidate for election to the Board at an annual meeting of shareholders and have that nomination included in the proxy statement for that meeting, see “2014 Annual Meeting of Shareholders” in this Proxy Statement.

During 2011, the Governance Committee formed a subcommittee of the Governance Committee to assist in addressing director recruitment matters related to the Spin-Off. The directors who served on this subcommittee were: Myra M. Hart, Peter B. Henry and Lois D. Juliber. This subcommittee held one meeting in 2012.

Human Resources and Compensation Committee

Human Resources and Compensation Committee Interlocks and Insider Participation

The Board has determined that all of the directors who served on the Human Resources and Compensation Committee (“Compensation Committee”) during 2012 are independent within the meaning of the NASDAQ listing standards. None of the Compensation Committee’s members:

 

   

is or was an officer or employee of Mondelēz International;

 

   

is or was a participant in a “related person” transaction since the beginning of 2012 (for a description of our policy on related person transactions, see “Corporate Governance – Review of Transactions with Related Persons” in this Proxy Statement); or

 

   

is an executive officer of another entity at which one of our executive officers serves on the board of directors.

 

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Responsibilities

The Compensation Committee’s responsibilities are set forth in its charter. The Compensation Committee’s responsibilities include, among other duties:

 

   

establishing our executive compensation philosophy;

 

   

determining the group of companies used to benchmark executive and director compensation;

 

   

assessing the appropriateness and competitiveness of our executive compensation programs;

 

   

reviewing and approving the Chief Executive Officer’s goals and objectives, evaluating her performance against these goals and objectives and, based upon its evaluation, determining both the elements and amounts of the Chief Executive Officer’s compensation;

 

   

reviewing and approving the compensation of the Chief Executive Officer’s direct reports and other officers subject to Section 16(a) of the Exchange Act;

 

   

determining annual incentive compensation, equity awards and other long-term incentive awards granted under our equity and long-term incentive plans to eligible participants;

 

   

determining our policies governing option and other stock grants;

 

   

making recommendations to the Board with respect to incentive plans requiring shareholder approval; and approving eligibility for and design of executive compensation programs implemented under shareholder-approved plans;

 

   

reviewing our compensation policies and practices for employees, including non-executive and executive officers, as they relate to our risk management practices and risk-taking incentives;

 

   

overseeing the management development and succession planning process (including succession planning for emergencies) for the Chief Executive Officer and her direct reports and, as appropriate, evaluating potential candidates;

 

   

reviewing periodically our key human resource policies and practices related to organizational engagement and effectiveness, talent sourcing strategies and employee development programs;

 

   

monitoring our policies, objectives and programs related to diversity and reviewing periodically our diversity performance against appropriate measures;

 

   

monitoring executive officers’ compliance with our stock ownership guidelines;

 

   

assessing the appropriateness of, and advising the Board regarding, the compensation of non-employee directors for service on the Board and its committees; and

 

   

reviewing and discussing with management the Compensation Discussion and Analysis and preparing and approving the Compensation Committee’s report to shareholders included in our annual Proxy Statement.

The Compensation Committee’s Use of an Independent Compensation Consultant

The Compensation Committee has retained Compensation Advisory Partners, LLC ("Compensation Advisory Partners") since September, 2009 as its independent compensation consultant to assist the Compensation Committee in evaluating executive compensation programs and to advise the Compensation Committee regarding the amount and form of executive and director compensation. The use of a consultant provides additional assurance that our executive and director compensation programs are reasonable, competitive and consistent with our objectives. The consultant is engaged directly by the Compensation Committee, regularly participates in Compensation Committee meetings, including executive sessions of the Compensation Committee that exclude management, and advises the Compensation Committee with respect to compensation trends and best practices, plan design and the reasonableness of compensation grants.

 

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During 2012, Compensation Advisory Partners provided the Compensation Committee advice and services, including:

 

   

participating in Compensation Committee meetings;

 

   

providing competitive peer group compensation data for executive positions and evaluating how the compensation we pay our Named Executive Officers’ (as described under “Compensation Discussion and Analysis”) relates both to the Company’s performance and to how our peers compensate their comparable executives;

 

   

analyzing “best practices” and providing advice about design of our annual and long-term incentive plans, including selecting performance metrics;

 

   

advising on the composition of our Compensation Survey Group and our Performance Peer Group (as described in the “Compensation Discussion and Analysis”) for benchmarking pay and performance;

 

   

advising on compensation matters related to the Spin-Off; and

 

   

updating the Compensation Committee on executive compensation trends, issues and regulatory developments.

For the year ended December 31, 2012, Compensation Advisory Partners provided no services to Mondelēz International other than executive and director compensation consulting services to the Compensation Committee. The Compensation Committee determined that Compensation Advisory Partners is independent and that of Compensation Advisory Partners’ work did not raise any conflicts of interest.

At least annually, the Compensation Committee reviews the types of advice and services provided by Compensation Advisory Partners and the fees charged for those services. Compensation Advisory Partners reports directly to the Compensation Committee on all executive and director compensation matters; regularly meets separately with the Compensation Committee outside the presence of management; and speaks separately with the Compensation Committee chair and other members between meetings as necessary or desired.

Limited Role of Executive Officers in the Determination of Executive Compensation

Each year, the Chief Executive Officer presents her compensation recommendations for each of the other Named Executive Officers (as described under “Compensation Discussion and Analysis”), her remaining direct reports and other executive officers. The Compensation Committee reviews and discusses these recommendations with the Chief Executive Officer and has full discretion over all recommended compensation actions. The Chief Executive Officer does not make recommendations or participate in deliberations regarding her compensation. Executive officers do not play a role in determining or recommending the amount or form of director compensation.

Analysis of Risk in the Compensation Architecture

Each year, including 2012, the Compensation Committee evaluates whether our compensation designs, policies and practices operate to discourage our executive officers and employees from taking unnecessary or excessive risks. As described below under “Compensation Discussion and Analysis,” our compensation is designed to incentivize executives and employees to achieve the Company’s financial and strategic goals as well as individual performance goals that promote long-term shareholder returns. The compensation design discourages excessive risk-taking by executives and employees to obtain short-term benefits that may be harmful to the Company and our shareholders in the long term. The Compensation Committee uses various strategies to mitigate risk, including:

 

   

Balancing Corporate and Business Unit Performance Measure Weighting. Corporate and business unit performance measures are weighted in certain incentive plans to encourage

 

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participants to focus on overall corporate performance as well as business unit performance. This balanced approach discourages actions that may improve business unit performance but harm our overall corporate health.

 

   

Short-Term/Long-Term Incentive Mix. The balanced mix between short-term and long-term incentives discourages executives from focusing on short-term performance to the detriment of long-term performance. Our executive compensation is heavily weighted toward long-term incentive compensation to encourage sustainable shareholder value and ensure accountability for long-term results.

 

   

Award Caps. Our compensation plans provide for a limit on annual incentive awards to discourage short-term actions that may harm our long-term interests.

 

   

Multiple Performance Measures. In general, our incentive plans use multiple performance measures to discourage participants from focusing on achievement of one performance measure at the expense of another. Our incentive plans generally also include individual performance criteria to ensure that goals do not favor achievement without regard for risks taken.

 

   

Committee Discretion. In general, the Compensation Committee has discretion to reduce incentive awards based on unforeseen or unintended consequences.

 

   

Long-Term Incentive Mix. The Compensation Committee uses a number of long-term equity based incentives to motivate executives to achieve long-term financial goals and top-tier performance results. Multi-year vesting features and multi-year performance cycles of long-term incentive compensation promote sustainable shareholder value creation and long-term growth as well as encourage retention.

 

   

Stock Ownership Guidelines and Holding Requirements. The Compensation Committee imposes meaningful stock ownership guidelines on our top executives that are comparable to, or more stringent than, our Compensation Survey Group’s (as defined under “Compensation Discussion and Analysis” below) median and stock holding requirements to align our executives’ interests with our shareholders’ interests and ultimately focus our executives on attaining sustainable long-term shareholder returns.

 

   

Clawback and Anti-Hedging Policies. Our clawback policy allows the Company to recapture incentive compensation paid in the event of certain restatements of our financial statements, which discourages inappropriate risk-taking behavior. Our anti-hedging policies further align our executives’ interests with those of our shareholders.

 

   

Ethics and Compliance Programs. The Audit Committee oversees our ethics and compliance programs that educate executives and employees on appropriate behavior and the consequences of inappropriate actions. These programs use innovative and effective approaches to promote compliance and integrity and encourage employees and others to report concerns by providing multiple reporting avenues with a no retaliation policy.

 

   

Governance Practices. We have implemented good pay and governance practices that are critical to driving sustained shareholder value, including targeting pay at the median of our Compensation Survey Group, using quantitative results to determine incentive awards (with a qualitative overlay where appropriate), engaging an independent compensation consultant, communicating with our shareholders to understand their views and concerns and conducting annual risk assessments.

The Compensation Committee also analyzed our overall enterprise risks and whether our compensation programs could impact individual behavior so as to exacerbate these enterprise risks. The Compensation Committee collaborated with the Audit Committee in this analysis.

In addition to the Compensation Committee’s evaluation, Compensation Advisory Partners also reviewed our executive and broad-based incentive plans and noted similar terms in our incentive plans that mitigate risk.

 

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In light of these analyses, the Compensation Committee believes that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on Mondelēz International.

 

Human Resources and Compensation Committee Report for the Year Ended December 31, 2012

The Compensation Committee oversees our compensation programs on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. In reliance on that review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in our Proxy Statement to be filed with the SEC in connection with our Annual Meeting and incorporated by reference in our Annual Report on Form 10-K for the year ended December 31, 2012, which was filed with the SEC on February 25, 2013.

Human Resources and Compensation Committee:

Lois D. Juliber, Chair

Stephen F. Bollenbach

Mark D. Ketchum

Ruth J. Simmons

Jean-François M.L. van Boxmeer

 

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COMPENSATION OF NON-EMPLOYEE DIRECTORS

Any director who is a full-time employee of Mondelēz International receives no compensation for service as a director. Currently, Irene B. Rosenfeld is the only director who is an employee of the Company.

We strive to attract and retain highly qualified non-employee directors who will best represent our shareholders’ interests. In order to ensure that the compensation offered is sufficient to meet this objective, our Compensation Committee annually reviews non-employee director compensation. As in prior years, during 2012 the Compensation Committee used data provided by its independent compensation consultant to benchmark our non-employee director compensation against our Compensation Survey Group (discussed below in the “Compensation Discussion & Analysis”) and compensation paid to non-employee directors of Fortune 100 companies to consider the appropriateness of the form and amount of non-employee director compensation and to make recommendations to the Board concerning such compensation. Based on the benchmarking, the Compensation Committee determined that current total compensation levels are below median. The Compensation Committee indicated that it would reconsider compensation for non-employee directors in 2013.

Summary of Compensation Elements

The table below summarizes the compensation elements in effect during 2012 for our non-employee directors.

 

Compensation Elements

      

Annual Board Retainer

   $ 110,000   

Annual Committee Chair Retainer

   $ 10,000   

Annual Lead Director Retainer

   $ 30,000   

Annual Stock Grant Value(1)

   $ 125,000   

 

  (1) In 2012, non-employee directors, with the exception of Messrs. Pope and van Boxmeer, were awarded deferred share units (“DSUs”). Although the DSUs vested as of the award date, shares of Company stock are not distributed until six months following the date the non-employee director ceases to serve on our Board. When dividends are paid on our common stock, we accrue the value of the dividend paid and issue shares equal to the accrued value six months after the director’s departure. Messrs. Pope and van Boxmeer were awarded unrestricted shares; however, the shares are subject to an equity holding restriction which ends six months after they cease serving on our Board.

Cash Compensation

We pay our non-employee directors their cash retainers quarterly. Non-employee directors can defer 25%, 50%, 75% or 100% of their cash retainers into notional unfunded accounts that mirror the investment options under the Mondelēz Global LLC Thrift 401(k) Plan pursuant to the Mondelēz International, Inc. 2001 Compensation Plan for Non-Employee Directors. A non-employee director appointed by the Board during the year receives a prorated retainer based on the number of days remaining in the calendar year following the appointment.

Equity Compensation

In addition, annually at the Board meeting immediately following our annual meeting of shareholders, the Board grants our non-employee directors stock in the Company. A non-employee director appointed by the Board during the year receives a stock grant upon joining the Board in a prorated amount based on the following ratio: the number of months until the next annual meeting of shareholders over a denominator of twelve months. At the non-employee director’s election, he or she may receive the annual stock award in the form of (i) unrestricted shares of our common stock,

 

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subject to a holding period ending six months after the director no longer serves on our Board or (ii) vested DSUs where distribution of shares is deferred until six months after the director no longer serves on our Board. For those non-employee directors who receive DSUs, when dividends are paid, we accrue the value of the dividend paid and issue shares equal to the accrued value six months after the director’s departure.

Equity Holding Requirement

To align the interests of our shareholders and our non-employee directors further, we require that they hold shares of our common stock in an amount equal to five times the annual Board retainer (equivalent to $550,000) within five years of becoming a director. If a non-employee director does not meet the stock ownership requirement within the timeline, the Lead Director will consider the director’s particular situation and may take any further action as he deems appropriate. As of March 1, 2013, each director who has served for at least five years has met or exceeded this requirement.

Company Matching Charitable Donations at the Direction of a Director

Non-employee directors may also participate in the Mondelēz International Foundation Matching Gift Program on the same terms as our U.S. employees. Under the program, the Mondelēz International Foundation matches up to $15,000 of donations per director, per year, of contributions to 501(c)(3) non-profit organizations.

2012 Non-Employee Director Compensation Table

 

Name

   Fees
Earned(1)
($)
     Stock
Awards(2)
($)
     All Other
Compensation(3)
($)
    Total
($)
 

Juliber, Lois

     116,071         125,009         12,500        253,580   

Ketchum, Mark

     142,500         125,009         15,000        282,509   

Mesquita, Jorge

     66,786         125,009                  —        191,795   

Reynolds, Fredric

     120,000         125,009         15,000        260,009   

van Boxmeer, Jean-François

     110,000         125,009                  —        235,009   

Banga, Ajaypal(4)

     47,473                  —         25,000 (5)      72,473   

Lerner, Richard(4)

     43,516                  —         15,000        58,516   

New to Mondelēz International, Inc. Board Effective at Spin-Off or Later:(6)

          

Bollenbach, Stephen

     27,500         83,358                  —        110,858   

Booth, Lewis

     27,500         83,358                  —        110,858   

Siewert, Patrick

     20,924         83,349                  —        104,273   

Simmons, Ruth

     27,500         83,358                  —        110,858   

Board Member Until Spin-Off (then became Board Member for Kraft Foods Group, Inc.:(7)

          

Hart, Myra

     90,000         125,009                  —        215,009   

Henry, Peter

     82,500         125,009         3,500        211,009   

Lundgren, Terry

     39,286         125,009                  —        164,295   

McDonald, Mackey

     82,500         125,009                  —        207,509   

Pope, John

     90,000         125,009         1,100        216,109   

 

  (1) Includes all retainer fees paid in cash or deferred pursuant to the 2001 Compensation Plan for Non-Employee Directors. Non-employee directors do not receive meeting fees.

 

  (2) The amounts shown in this column represent the full grant date fair value of stock awards granted in 2012 as computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. The 2012 Non-Employee Director Stock Awards Table below provides further detail on the non-employee director grants made in 2012 and the number of stock awards and stock options outstanding as of December 31, 2012.

 

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  (3) Represents Foundation contributions made as part of the Foundation Matching Gift Program.

 

  (4) Messrs. Banga’s and Lerner’s terms of service on the Board ended on May 23, 2012.

 

  (5) Includes an additional amount of Foundation contributions made under the Foundation Matching Gift Program above the general $15,000 limit. In October 2011, we offered a two-for-one match promotion under which the Foundation contributed amounts over the general annual limit to non-profit organizations on the director’s behalf and Mr. Banga received this special promotion on a gift that was paid out in Q1 2012. This promotion was available to all our U.S. employees and directors on the same terms.

 

  (6) Messrs. Bollenbach and Booth and Ms. Simmons received their grants on October 2, 2012, and Mr. Siewert received his grant on October 23, 2012; therefore their DSU grants were prorated based on eight months to the next annual shareholders meeting and reflect the FMV on their respective grant dates.

 

  (7) Ms. Hart and Messrs. Henry, Lundgren, McDonald and Pope resigned from the Board effective as of October 1, 2012 in order to serve on the board of Kraft Foods Group in connection with the Spin-Off.

Non-Employee Director Stock Awards Table

 

    Stock Awards

Name

  Number of Stock
Awards
Granted in 2012
    Grant Date Fair
Value Grant(1)
($)
   

Outstanding
Stock Awards
as of
December 31,
2012

Juliber, Lois

    3,239        125,009      21,955

Ketchum, Mark

    3,239        125,009      26,165

Mesquita, Jorge

    3,239        125,009      3,297

Reynolds, Fredric

    3,239        125,009      21,955

van Boxmeer, Jean-François

    3,239        125,009      8,254

Banga, Ajaypal(2)

              

Lerner, Richard(2)

              31,679

New to Mondelēz International, Inc.
Board Effective at Spin-Off or Later:(3)

   

   

Bollenbach, Stephen

    2,984        83,358      2,984

Booth, Lewis

    2,984        83,358      2,984

Siewert, Patrick

    3,117        83,349      3,117

Simmons, Ruth

    2,984        83,358      2,984

Board Member Until Spin-Off (then became Board Member for Kraft Foods Group, Inc.):

     

Hart, Myra

    3,239        125,009      11,431

Henry, Peter

    3,239        125,009      6,984

Lundgren, Terry

    3,239        125,009      3,263

McDonald, Mackey

    3,239        125,009      11,431

Pope, John

    3,239        125,009      8,168

 

  (1) The amounts shown in this column represent the full grant date fair value of the stock awards granted in 2012 as computed in accordance with FASB ASC Topic 718.
  (2) Messrs. Banga and Lerner completed their terms on May 23, 2012 prior to the 2012 annual shareholders meeting.
  (3) Messrs. Bollenbach and Booth and Ms. Simmons received their grants on October 2, 2012, and Mr. Siewert received his grant on October 23, 2012; therefore their DSU grants were prorated based on eight months to the next annual shareholders meeting and reflect the FMV on their respective grant dates.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”):

 

   

Highlights our 2012 performance, our overall performance during 2010-2012 and our transformation into a global snacks powerhouse;

 

   

Summarizes the executive compensation philosophy of our Human Resources and Compensation Committee (referred to in this CD&A as the “Compensation Committee” or “Committee”);

 

   

Describes how the Committee designs our executive compensation programs; and

 

   

Shows the correlation between the Committee’s compensation-related decisions and how well the Company and each executive performed over the period based on standards established by the Committee.

 

Executive Summary

This Executive Summary:

 

   

Highlights our 2012 performance, our overall performance during 2010-2012 and our transformation into a global snacks powerhouse;

 

   

Identifies the key actions the Compensation Committee took to align our Named Executive Officers’ (referred to in our CD&A as our Named Executive Officers or “NEOs”) and shareholders’ interests; and

 

   

Summarizes the Committee’s compensation governance practices for 2012 to demonstrate how the Committee takes shareholder interests into account in compensating our executives.

During 2012, We Continued to Transform the Company

2012 was another transformational year for us. We began the year as Kraft Foods Inc., a company primarily comprised of two distinct businesses–a market leading North American grocery business and a faster-growing global snack foods business. To allow each business to focus on its specific strengths and objectives, on October 1, 2012, we spun-off Kraft Foods Group, our North American grocery business, to our shareholders. As a result of the Spin-Off, Kraft Foods Group became an independent, publicly-traded company. In connection with the Spin-Off, we also changed our name from Kraft Foods Inc. to Mondelēz International, Inc. The Spin-Off has allowed us to focus on our significant opportunities for growth as consumer demand for snacks increases around the world.

Over the past several years we have transformed our Company, catalyzed by our acquisitions of the LU biscuits business on November 30, 2007 and the Cadbury business on February 2, 2010, and culminating with the Spin-Off, from a modestly growing grocery and snacks business into a faster-growing global snacks powerhouse. Over the last three years, we have been a top-tier performer in our industry as evidenced by our significant returns to shareholders. Our portfolio is comprised of fast-growing categories with a footprint across most major developed and developing markets. We have leading share positions globally in the Biscuits, Chocolate, Candy and Powdered Beverages categories, and number two share positions in the Gum and Coffee categories. With 74% of our revenue in 2012 generated in the fast-growing snacks categories, we are well positioned to deliver top-tier growth into the future.

 

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These charts illustrate how Snacks increased from 37% of our portfolio in 2009 to 74% of our portfolio post Spin-Off.

 

LOGO

 

  (1) Includes revenue from Kraft Foods Group, including the Frozen Pizza business divested in 2010.

 

  (2) Excludes net revenue from Kraft Foods Group.

These charts illustrate how our sources of revenue have changed since 2009. Developing Markets and Europe now comprise approximately 80% of our revenue compared to only 42% in 2009.

 

LOGO   LOGO

 

  (1) Includes revenue from Kraft Foods Group, including the Frozen Pizza business divested in 2010.

 

  (2) Excludes net revenue from Kraft Foods Group. Reflects 2012 Operating Segments.

 

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We Delivered Strong Results During the Last Three Years of our Transformation

Our three-year performance from 2010-2012 reflected high-single digit Operating Earnings Per Share (“Operating EPS”) growth and mid-single digit Organic Net Revenue growth. Although we anticipated better Organic Net Revenue growth in 2012, we believe that our underlying fundamental performance has us well-positioned to deliver strong growth in the future. We established Kraft Foods Group as an independent public company and completed the Spin-Off, which included successfully separating our respective businesses and adequately capitalizing both companies without significant disruption to our business. The Spin-Off will provide us with increased focus on our ongoing operations. While we significantly out-performed our Performance Peer Group in shareholder return for the three-year period 2010-2012, our 2012 shareholder return was closer to the median performance of our Performance Peer Group. See “Our Compensation Program Design – Composition and Purpose of the Performance Peer Group” below for additional information regarding our Performance Peer Group.

The chart below provides a one-year and annualized three-year review of our Total Shareholder Return (“TSR”)(1).

 

LOGO

 

  (1) TSR reflects share price performance including dividends paid for the period of 12/31/2009 to 12/31/2012.

 

  (2) Mondelēz International stock prices prior to the Spin-Off reflects adjusted stock prices provided by Bloomberg using a constant adjustment factor based on a three-to-one Spin-Off share distribution ratio and Mondelēz International and Kraft Foods Group stock prices on October 1, 2012.

 

  (3) Based on Pre Spin-Off Performance Peer Group (excluding Sara Lee due to their change in structure). International companies performance based on US-traded ticker symbols.

2012 Compensation Decisions and Highlights

2012 Performance Impact on Annual Cash Incentive Program Payouts

In early 2013, the Committee reviewed our performance compared to our 2012 Annual Cash Incentive Program (“Program”) objectives. Overall, despite solid growth versus prior year, we were below our Organic Revenue Growth and Defined Operating Income targets. We did, however, deliver strong Defined Free Cash Flow results. The results that drove Program payouts for our NEOs for 2012 were:

 

   

Organic Revenue Growth—3.9%

 

   

Defined Operating Income—$7.2 billion

 

   

Defined Free Cash Flow—$3.5 billion

 

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Based on these results, our overall Program rating for 2012 was 91% of target. See “– Elements of Executive Compensation – Annual Cash Incentive Program – 2012 Business Unit Ratings” below for more information about our results relative to targets.

2010 – 2012 Performance and Impact on Long-Term Incentive Plan (“LTIP”) Award

Overall, we delivered performance above target during the 2010-2012 performance cycle for the LTIP. In 2010, the Committee set the performance cycle at three years; however, at the December 2011 Committee meeting, the period was shortened to 33 months (January 1, 2010 – September 30, 2012) to coincide with the Spin-Off. Over the performance cycle we achieved strong Operating EPS Growth, Organic Net Revenue Growth and relative TSR. During this period, our relative TSR was above the 90th percentile of our Pre Spin-Off Performance Peer Group – significantly surpassing the Performance Peer Group’s median.

The results that drove LTIP awards for our eligible NEOs for the LTIP’s 2010-2012 performance cycle were as follows:

 

   

Organic Net Revenue Growth – 4.7%

 

   

Operating EPS Growth – 9.1%

 

   

Annualized Relative TSR – Above Performance Peer Group 90th percentile (The Company’s annualized Total Shareholder Return was 20.1% compared to a 9.1% median for our Pre Spin-Off Performance Peer Group).

Based on these results, our overall LTIP rating for the 2010 – 2012 performance cycle was top tier. See “– Elements of Executive Compensation – Long-Term Incentives – LTIP – Performance Shares (2010 – 2012 Performance Cycle)” below for more information about our results relative to targets.

Special Chief Executive Officer Equity Grant Rewards and Incents CEO

On December 19, 2012, the Compensation Committee granted Ms. Rosenfeld a special equity grant valued at approximately $10,000,000. The Committee intended the grant to reward and incent Ms. Rosenfeld as follows:

 

   

Delivering top-tier performance during her tenure as CEO since 2006;

 

   

Identifying and executing numerous transformational initiatives benefitting shareholders – including the 2012 Spin-Off of Kraft Foods Group to shareholders;

 

   

Positioning the Company to deliver sustainable top-tier shareholder returns into the future; and

 

   

Continuing to lead the Company in the future.

With the advice of its independent consultant, the Committee structured the grant (in size and terms) to ensure that Ms. Rosenfeld continues as the Company’s CEO well into the future while further incenting her to continue delivering top-tier returns in the coming years. The award reflects the Board’s confidence in Ms. Rosenfeld’s ability to successfully lead the Company following the Spin-Off and ensure that a long-term management development and senior leadership succession plan is in place.

 

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The grant consists of: 1) restricted stock (20% of grant) and 2) performance-contingent restricted stock units (80% of grant). Ms. Rosenfeld will not earn any of the performance-contingent restricted stock units unless certain share price hurdles are met as detailed in the following chart:

 

% of Award Vesting

   % Stock Price
Appreciation
from FMV on
Grant Date
   Required Closing
Price for Minimum
of 10 Consecutive
Trading Days
    

25%

   20%    $31.12   

37.5%

   30%    $33.72   

37.5%

   40%    $36.31   

If the share price hurdles are not satisfied prior to the earlier of: 1) the six-year anniversary of the grant date or 2) one-year following Ms. Rosenfeld’s retirement as CEO, Ms. Rosenfeld will forfeit the outstanding unvested performance-contingent restricted stock units at that time. See “– Elements of Executive Compensation – Long-Term Incentives – Special CEO Equity Grant” below for more information about the provisions of this grant.

Special Equity Grants to Select Executives Recognize Successful Execution of Spin-Off

On November 13, 2012, the Compensation Committee granted select senior executives, including Mr. Brearton and Ms. West, restricted stock to reward them for their significant contributions toward the successful execution of the Spin-Off. See “– Elements of Executive Compensation – Long-Term Incentives – Special Equity Grant to Select Executives to Recognize Successful Execution of Spin-Off “ below for more information about these grants.

Aligning Pay with Performance

The Company’s executive compensation philosophy is designed to promote superior long-term shareholder returns. This objective is encouraged by basing a significant portion of total compensation for our CEO and the other NEOs on achieving and sustaining exceptional short-term and long-term performance results. The Committee not only structures each NEO’s compensation mix with a significant bias toward long-term incentives, but also designs each long-term incentive vehicle to be equity-based, and therefore directly tied to the Company’s share price and shareholder returns. Further, approximately half of annual long-term incentive opportunities granted to each NEO is granted in the form of performance shares; half of the performance share grants are based on TSR in comparison to our Performance Peer Group, 25% is based on Organic Net Revenue Growth performance and 25% is based on Operating EPS Growth. The Committee also grants non-qualified stock options, which will only result in remuneration if the Company’s stock price appreciates above the grant price at a time when the options are exercised. See “– Elements of Executive Compensation – Long-Term Incentives” for more information about our long-term incentive programs.

 

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The chart below illustrates the alignment between CEO pay and Indexed TSR over the past 5 years.

 

LOGO

How the Committee Considered the Shareholder Advisory Vote on our 2011 Executive Compensation Program

At the 2012 Annual Meeting of Shareholders, we held our second shareholder advisory vote on NEO compensation. Our shareholders expressed strong support for our fiscal year 2011 executive compensation program — with 96.3% of votes cast voting to approve the compensation.

The Committee considered these voting results when designing the 2012 NEO compensation packages. The Committee concluded that the current compensation programs are effectively aligning pay and performance and are promoting long-term shareholder value and did not make any specific program changes as a result of the voting results. Consequently, apart from issuing one time equity grants to our CEO, CFO and one other NEO in connection with their leadership in successfully transforming the company and executing the Spin-Off, the Committee approved only modest design changes to our ongoing compensation programs during 2012. In fulfilling its role, the Committee will continue to consider the results of future shareholder advisory votes as well as shareholder views about our core compensation principles, objectives and program design.

 

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We Employ Sound Compensation Design Principles and Corporate Governance Practices

We believe that our executive compensation design principles and governance practices provide focus, a foundation for success, and clear alignment with shareholder interests. The chart below describes key principles and practices.

 

Compensation Design Principles and Governance Practices

The Committee intends its compensation design principles to protect and promote our shareholders’ interests. In general, our compensation-related governance practices are comparable to, or are more stringent than, our peers’ practices.

Design Principles

 

  þ Link pay to performance. We reward our NEOs based upon the value of their contributions.  

 

  þ Put pay-at-risk based on performance. Over 85% of our CEO’s pay is at-risk consistent with peer companies in our Compensation Survey Group. Over 70% of our other NEOs’ pay is at-risk.  

 

  þ Target pay at the median of our peer group. We compensate fairly and competitively, but not excessively.  

 

  þ Do not incent short term results to the detriment of long term goals.  

 

  þ Do not incent excessively risky business strategies.  

 

  Governance Practices  

 

  þ Require significant equity ownership. Our stock ownership guidelines are comparable to, or more stringent than, our Compensation Survey Group’s median.  

 

  þ Require executives to retain equity compensation. To buttress our stock ownership guidelines, we require our NEOs to hold for one year all net shares awarded and all net shares acquired upon the exercise of stock options. (Net shares are the number of shares delivered after applicable costs, employment and income taxes have been withheld based on the value of the gross shares awarded or stock options exercised.)  

 

  þ Provide for “clawbacks”. Our clawback policy allows us to recoup incentive compensation in the event of certain financial restatements.  

 

  þ Prohibit hedging or short sales. We prohibit our NEOs from hedging or entering into short sales of any equity interests in the Company.  

 

  þ Prohibit pledging of Company shares. We prohibit NEOs and other senior level executives from pledging shares as collateral for a loan.  

 

  þ Limit perquisites/tax gross-ups. We provide the types and amounts of perquisites at or below the median levels of peer companies in our Compensation Survey Group. We do not gross up income to mitigate the tax impact of the perquisites provided.  

 

  þ In the event of a change in control:  

 

  Ø Pay severance and vest equity only upon a “double trigger.” With “double trigger” vesting, we retain the power to make personnel decisions during a change in control. (“Double trigger” requires a change in control and termination of employment without cause.)  

 

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  Ø Do not provide NEOs tax gross ups. We do not provide NEOs or other executives tax gross-ups upon a change in control. Taxes are our NEOs’ responsibility. Prior to 2013, certain executives’ rights to tax gross ups on a change in control were “grandfathered”. However, effective January 1, 2013, we eliminated this right for all executives, including “grandfathered” executives.  

 

  þ Do not re-price underwater stock options. We do not re-price outstanding stock options – vested or unvested.  

 

  þ Do not pay dividends on unvested or unearned performance shares. Because performance shares do not vest unless the applicable performance conditions are satisfied, we do not pay dividend equivalents for the unvested period unless and until the performance conditions are satisfied and we deliver the shares awarded.  

 

  þ Do not enter into employment agreements with our NEOs. Executive officers do not have employment contracts and are not guaranteed salary increases or bonus amounts. However, we agreed to provide Mr. Kholsa benefits greater than those generally provided to other employees when he retired from Mondelēz International. We did so as consideration for Mr. Khosla’ s agreement to restrictive covenants. For further information, see the discussion of Mr. Khosla’s compensation under Compensation Paid to Named Executive Officers in 2012.  

 

  þ The Compensation Committee retains an independent compensation consultant. The compensation consultant does no work for the Company other than advising the Compensation Committee.  

 

  þ Perform an annual compensation risk assessment. Management presents the results of the assessment to the Compensation Committee and independent compensation consultant for review.  

 

  þ Engage shareholders. We strive to communicate in plain English, and we take into account shareholder concerns and input when reviewing our executive compensation program and practices. Over the last year, Irene Rosenfeld, our Chairman and CEO, David Brearton, our Executive Vice President and Chief Financial Officer, and members of our Investor Relations group met with nearly 500 current or prospective institutional shareholders to discuss the Company’s strategy, financial results and outlook. During these discussions, we also addressed any questions or concerns regarding annual and long-term executive compensation structures, both current and future. We also provided feedback from these discussions to the Compensation Committee. These discussions are part of the dialogue we have with the institutional investor community both within and outside the U.S.  

Our NEOs

SEC rules require us to provide information regarding the following NEOs:

 

   

Each individual who served as CEO or Chief Financial Officer (“CFO”) at any time during the fiscal year that ended December 31, 2012. Those individuals are:

 

Name

  

Title

Irene Rosenfeld

   Chairman and CEO
David Brearton    Executive Vice President and CFO

 

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The three other most highly compensated executive officers serving as executive officers of Mondelēz International at the end of fiscal 2012. Those three individuals are:

 

Name

  

Title

Timothy Cofer    Executive Vice President and President, Europe

Sanjay Khosla

   Executive Vice President and President, Developing Markets

Mary Beth West

   Executive Vice President, Chief Category and Marketing Officer

 

   

Up to two former executive officers who served as executive officers in 2012 and would have been among the three most highly compensated executive officers of Mondelēz International had they still served as executive officers at the end of 2012. Those two individuals are:

 

Name

  

Title

John Cahill

   Former Executive Chairman, Kraft Foods North America. Coincident with the Spin-Off, Mr. Cahill became Executive Chairman of the Board of Kraft Foods Group, Inc.
W. Anthony Vernon    Former Executive Vice President and President, Kraft Foods North America. Coincident with the Spin-Off, Mr. Vernon became Chief Executive Officer of Kraft Foods Group, Inc.

Our Compensation Program Design

Compensation Philosophy

The Committee regularly evaluates its compensation philosophy and makes changes it believes are appropriate. As part of the 2012 review, the Committee considered whether changes would be desirable following the Spin-Off and concluded that no changes were necessary. The Committee also determined that the strategies designed to achieve its compensation objectives continue to be appropriate for the Company after the Spin-Off.

Our executive compensation program has four primary objectives:

 

  1. attract, retain and motivate talented executive officers and develop world-class business leaders;

 

  2. support business strategies that promote superior long-term shareholder returns;

 

  3. align pay and performance by making a significant portion of our NEOs’ and other executive officers’ compensation dependent on achieving financial and other critical strategic and individual goals; and

 

  4. align our executive officers’ and shareholders’ interests through stock ownership guidelines, equity-based incentive awards and other long-term incentive awards that link executive compensation to sustained and superior TSR.

We design our executive compensation program to achieve these objectives by following these principles and practices:

 

   

Pay competitively but not excessively. Each year, the Committee compares our target and actual compensation levels and pay-mix with our Compensation Survey Group (see “Composition and Purpose of Compensation Survey Group” below for definition of the Compensation Survey Group). The Committee uses this comparison to ensure that our executive compensation and benefits package is competitive with the Compensation Survey Group but not excessive. In addition, the Committee compares our financial and TSR performance against our Performance Peer Group. The Performance Peer Group comparison

 

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allows us to link long-term incentive compensation to the delivery of superior financial results relative to industry peers. In anticipation of the Spin-Off, the Committee made changes to the Compensation Survey Group, the Performance Peer Group and comparison methodology. See “Pay Competitively, But Not Excessively” below for additional details.

 

   

Use Fixed and Variable Compensation. The Committee uses a mix of fixed and variable compensation (heavily weighted to variable compensation for our NEOs) designed to attract, retain and motivate top-performing executives, as well as appropriately align compensation levels with achieving relevant financial and strategic goals;

 

   

Use Equity and Cash Incentives. The Committee uses a mix of equity and cash incentives heavily weighted toward equity to focus executive officers on achieving long-term TSR performance that is superior to our peers;

 

   

Compensate based on Individual Performance and Potential. The Committee makes incentive awards based in part on the individual’s performance and potential for advancement within the organization; and

 

   

Require executive officers to be significant shareholders. The Committee requires our executive officers, including our NEOs, to maintain specific levels of Company stock ownership in order to align their interests with those of our shareholders. Our compensation programs facilitate high levels of stock ownership. The Committee also requires our executive officers to hold for one year net shares received through the exercise of stock options, the vesting of restricted stock and the award of Company stock upon satisfaction of performance conditions. More information about stock ownership guidelines for executive officers can be found below under “Requiring Stock Ownership.”

Pay Competitively, But Not Excessively

Peer Group Approach

Each year, the Committee compares our compensation program with those companies in our Compensation Survey Group. The Committee also uses a Performance Peer Group to analyze the linkage between pay and performance and to determine the Company’s relative TSR ranking for the LTIP. As a result of the Spin-Off, the Committee reviewed our Compensation Survey Group and our Performance Peer Group and adjusted both based on the Company’s Post Spin-Off characteristics. For 2012, the Committee used the Post Spin-Off Compensation Survey Group to evaluate our pay practices including stock ownership guidelines and perquisites. Pay levels reflected in 2012 (as reported in the tables below) are based on the Pre Spin-Off and Post Spin-Off Compensation Survey Groups depending on timing of pay level decisions. For 2013, the Committee will use the Post Spin-Off Compensation Survey and Performance Peer Groups to evaluate all elements.

Composition and Purpose of the Compensation Survey Group

The Committee annually compares our compensation program with those companies in our Compensation Survey Group to ensure that our compensation program and our target compensation levels are consistent with market practice. This allows us to attract and retain the talent we need to drive superior long-term TSR performance.

 

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Prior to the Spin-Off, we used the following Compensation Survey Group:

 

Pre Spin-Off Compensation Survey Group

3M Company    Kimberly-Clark Corporation
Abbott Laboratories    McDonald’s Corporation
Bristol-Myers Squibb Company    Merck & Co., Inc.
The Coca-Cola Company    Nestlé S.A.
Colgate-Palmolive Company    PepsiCo, Inc.
ConAgra Foods, Inc.    Pfizer Inc.
Eli Lilly and Company    The Procter & Gamble Company
General Mills, Inc.    Sara Lee Corporation
H.J. Heinz Company    Unilever N.V.
Johnson & Johnson    The Walt Disney Company
Kellogg Company   

The Committee used this peer group to analyze compensation levels for our named executive officers in 2012.

In anticipation of the Spin-Off, the Committee reviewed our Compensation Survey Group and determined it needed adjustment. In making the adjustments, the Committee sought to have the Compensation Survey Group represent our market competitors, based on the Company’s post Spin-Off characteristics. The Committee removed those companies with a primary focus similar to our North America grocery business, companies whose revenue significantly decreased following divestitures such that they were no longer good points of comparison, and pharmaceutical companies with significantly lower revenue than ours. The Committee added global, top-tier, high growth consumer products companies, global companies with manufacturing, and global consumer-facing companies.

Through this review process, the Committee developed a Post Spin-Off Compensation Survey Group. It consists of companies within the Consumer Products industry, selected based on the following attributes:

 

   

Similar revenue size

 

   

Similar market capitalization

 

   

Primarily focused on food/beverage, consumer/household products or are consumer facing companies

 

   

Recognized for their industry leadership and brand recognition

 

   

Executive positions similar in breadth, complexity and/or scope of responsibility

 

   

Competitors for executive talent

 

   

Predominately global companies

As well as companies outside the Consumer Products industry, included for the following reasons:

 

   

Revenue above $35 billion

 

   

Strong global presence

 

   

World-class marketing capabilities specifically focused on the consumer

 

   

Preferably manufacturing companies

 

   

Multiple lines of business

 

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The Committee’s independent compensation consultant, Compensation Advisory Partners, provided independent analysis and advice regarding adjustments to our Compensation Survey Group. At the conclusion of its review, the Committee approved a Post Spin-Off, 21-company Compensation Survey Group (the “Post Spin-Off Compensation Survey Group”) with median revenues of $31.1 billion. Our revenue size places us above the median of the peer companies. The approved Post Spin-Off Compensation Survey Group is:

 

Post Spin-Off Compensation Survey Group

3M Company    Kimberly-Clark Corporation
Abbott Laboratories (post-split)    McDonald’s Corporation
The Coca-Cola Company    Nestlé S.A.
Colgate-Palmolive Company    Nike, Inc.
The Dow Chemical Company    PepsiCo, Inc.
E.I. DuPont de Numours and Company    Pfizer Inc.
General Mills, Inc.    Philip Morris International
Group Danone    The Procter & Gamble Company
H.J. Heinz Company    Unilever N.V.
Johnson & Johnson    United Parcel Service, Inc.
Kellogg Company   

Competitive Positioning

Generally, in determining appropriate compensation levels for our NEOs, the Committee reviews compensation levels for similarly situated executives at companies in the Compensation Survey Group. Aon Hewitt provides that compensation data. At the request of the Committee, CAP reviews and evaluates the data that Aon Hewitt provides.

The Committee’s compensation philosophy is to target total direct compensation, including base salary and annual and long-term incentives, at or near the median of the Compensation Survey Group. Company performance and individual performance will determine whether actual pay received is above or below the Compensation Survey Group median. For 2012, the Committee, using the Pre Spin-Off Compensation Survey Group, targeted a size-adjusted median since the Company’s revenues were significantly greater than the median of our peer group. Following the Spin-Off, however, our revenues now approximate the median of the Post Spin-Off Compensation Survey Group and the Committee can therefore use the nominal median to position named executive officer compensation without size-adjusting the data. In general, the target total compensation for the Pre Spin-Off Compensation Survey Group does not differ significantly from the target total compensation for the Post Spin-Off Compensation Survey Group.

 

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Composition and Purpose of the Performance Peer Group

The Committee uses a performance peer group to analyze the linkage between pay and performance and to determine the Company’s relative TSR ranking for the LTIP (see discussion below under “Long-Term Incentives” for a description of how each outstanding performance cycle was treated upon the Spin-Off). Prior to the Spin-Off, the companies in our Performance Peer Group (the “Pre Spin-Off Performance Peer Group”) were considered to be our market competitors or had been selected primarily on the basis of industry. The Pre Spin-Off Performance Peer Group included the following companies:

 

Pre Spin-Off Performance Peer Group

Campbell Soup Company    The Hershey Company
The Coca-Cola Company    Kellogg Company
ConAgra Foods, Inc.    Nestlé S.A.
General Mills, Inc.    PepsiCo, Inc.
Groupe Danone    Sara Lee Corp.
H.J. Heinz Company    Unilever N.V.

In anticipation of the Spin-Off, the Committee reviewed our Pre Spin-Off Performance Peer Group and determined that adjustments were appropriate following the Spin-Off. The Committee removed those companies with a primary focus similar to our North America grocery business and companies whose revenue significantly decreased following divestitures such that they were no longer good points of comparison. The Committee added global, top-tier, high growth consumer products companies. The Committee then approved a new 12-company Performance Peer Group (the “Post Spin-Off Performance Peer Group”). The Committee’s independent compensation consultant, Compensation Advisory Partners, also provided independent analysis and advice regarding the Post Spin-Off Performance Peer Group. The historical P/E multiples and growth rates, on average, for the companies in the revised peer group are higher than the companies in the Pre Spin-Off Performance Peer Group and better reflecting our focus on high growth markets and categories.

There is substantial overlap (10 of the 12 companies) between the Post Spin-Off Performance Peer Group and the Post Spin-Off Compensation Survey Group. The main difference between them is that the Post Spin-Off Performance Peer Group companies are primarily food and non-alcoholic beverage companies (9 of the 12 companies in the Performance Peer Group versus 8 of the 21 companies in the Compensation Survey Group) and are included regardless of revenue size or market capitalization.

In considering performance measures for the LTIP, the Committee believes that our financial performance should be compared to a group of primarily food and non-alcoholic beverage companies as our shareholders are likely comparing our financial performance to a similar group of companies when making investment decisions. The Committee believes that this group is less relevant when comparing compensation levels for certain executive positions due to our larger size and complexity relative to several companies included in this group.

 

Post Spin-Off Performance Peer Group

Campbell Soup Company    The Hershey Company
The Coca-Cola Company    Kellogg Company
Colgate-Palmolive Company    Nestlé S.A.
General Mills, Inc.    PepsiCo, Inc.
Groupe Danone    The Procter & Gamble Company
H.J. Heinz Company    Unilever N.V.

 

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Overall Pay Mix

The chart below shows the total compensation mix, on average, for our CEO and other NEOs, based on target awards in 2012, compared with the average of the Compensation Survey Group. Our mix is well–aligned to the mix paid by companies in the Compensation Survey Group. In the case of our CEO, the incentive mix is slightly more weighted towards long-term incentives and less weighted in annual incentives compared to the Compensation Survey Group, consistent with our focus on delivering top-tier sustainable performance over the long-term.

LOGO

 

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Overview of 2012 Compensation Program

The following table summarizes the elements and program objectives of our 2012 compensation program for executive officers, including NEOs.

 

Program

  

Description

  

Program Objective

   

Annual Cash Compensation

 

Base Salary

   Ongoing cash compensation based on the executive officer’s role and responsibilities.   

•   Retention and attraction

•   Drive top-tier performance

–    Individual contribution

 

Annual Cash Incentive

Program

   Annual incentive with target award amounts for each executive officer. Actual cash awards may be higher or lower than target, based on business and individual performance.   

•   Drive top-tier performance

–    Across entire organization

–    Within business units

–    Individual contribution

 

Long-Term/Stock-Based Incentive Compensation

 
Performance Shares or LTIP   

•   Long-term incentive with target award amounts are established for each executive officer. Actual awards are linked to achievement of three-year Mondelēz International goals and can be 0% – 200% of target, based on our performance. Payout will be in Mondelēz International common stock following the end of the three-year program.

 

•   No dividends or dividend equivalents are paid or earned on unvested performance shares granted prior to 2013. For performance shares granted beginning with the 2013-2015 performance cycle, dividend equivalents will accrue during the performance period and be paid in cash only if and when shares are delivered (i.e., after performance criteria have been satisfied).

  

•   Drive top-tier performance

–    Across entire organization

–    Focus on long-term sustained success

•   Stock ownership/alignment to shareholders

•   Retention

 
Non-Qualified Stock Options    Each executive officer has a grant opportunity based upon 1) his or her role, long-term performance and 2) potential for advancement. Non-Qualified Stock Options vest one-third each year over three years.   

•   Drive top-tier performance

–    Long-term individual contribution

–    Recognize advancement potential

•   Stock ownership/alignment to shareholders

•   Realized value linked entirely to stock price appreciation

•   Retention

 

 

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Program

  

Description

  

Program Objective

   
Restricted Stock    Each executive officer has a grant opportunity based upon 1) his or her role, long-term performance and 2) potential for advancement. Restricted stock vests three years after the grant date.   

•   Drive top-tier performance

–    Long-term individual contribution

–    Recognize advancement potential

•   Stock ownership/alignment to shareholders

•   Retention

 

Executive Benefits

 

Voluntary Non-Qualified Deferred Compensation

Plan

   Program that allows U.S. executive officers to defer, on a pre-tax basis, certain defined compensation elements with flexible distribution options to meet future financial goals.   

•   Retention and attraction

•   Provide opportunity for future financial security

 
Executive Perquisites    Market-consistent program that is generally limited to a car allowance, financial counseling, and, for the CEO only, personal use of Mondelēz International’s aircraft.   

•   Retention and attraction

•   Supports personal financial planning needs

•   Security of CEO

 

Post-Termination Benefits

 
Defined Benefit Program (i.e. Pension)    Generally, provides for the continuation of a portion of total annual cash compensation (defined as base salary plus annual cash incentive award) at the conclusion of an executive officer’s career. This program is not offered to any U.S. employees hired on or after January 1, 2009 and for employees who are participating, no additional accruals will be made after 2019.   

•   Retention

•   Attraction

•   Provide financial security to long-term service executive officers in retirement

 

Defined Contribution Program

(i.e. 401(k) Savings)

   Program under which U.S. executive officers’ contributions are matched up to a limit. Account balances are typically payable at the conclusion of an executive officer’s career. The Company enhanced this program for U.S. employees hired on or after January 1, 2009 who are not eligible for the defined benefit program described above.   

•   Retention

•   Attraction

•   Provide opportunity for financial security in retirement

•   Provide U.S. executive officers an additional opportunity to meet stock ownership requirements

 

Change in

Control Plan

   Executive separation program that provides for enhanced benefits in the event of an executive officer’s termination following a defined Mondelēz International change in control.   

•   Retention

•   Focus on delivering top-tier shareholder value in periods of uncertainty

•   Supports effective transition

 

 

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Program

  

Description

  

Program Objective

Other Benefits

Other Benefits    Health, welfare and other benefits.   

•   Retention

•   Attraction

•   Promote executive health

Elements of Executive Compensation

Each element of the compensation program is described below and individual compensation decisions are discussed under “Compensation Paid to Named Executive Officers in 2012.”

Base Salary

Base salary is the principal “fixed” element of executive compensation. In setting base salary levels for NEOs, the Committee generally targets base salary to be at or near the median of the Compensation Survey Group based on the corresponding executive role. The Committee does also consider a number of other factors when reviewing and setting base salaries for NEOs including: Company performance and the NEO’s individual performance, level of responsibility, potential to assume roles with greater responsibility, and experience. The Committee reviews salaries on an annual basis and considers merit increases, which are generally effective April 1, for all executive officers. Base salaries for NEOs for 2012 were generally at or below the median of comparable roles at companies comprising the Compensation Survey Group.

Annual Cash Incentive Program

Overview

The Annual Cash Incentive Program (“Program”) is designed to motivate our employees, including our NEOs, to help us reach our annual financial and strategy goals and to reward them for their contributions toward achieving those goals. The Committee determines each NEO’s target and maximum annual incentive opportunity at the beginning of the performance year, and the amount actually awarded under the Program is based on the financial results achieved during the year and the NEO’s contribution towards achieving those results.

 

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Program Award Formula

The formula shown below was used to determine actual awards under the Program for our employees, including our NEOs for 2012 performance. Other than base salary, which is discussed above, each element of this formula is discussed below.

 

Base Salary
as of

December 31, 2012

  x  

Target Annual

Incentive

Opportunity

(% of Base Salary)

  x  

Business Unit Rating

(0% - 180%)

  x  

Individual Performance

Assessment
(0% - 180%)

  =   Actual Program Award (Maximum capped at 250% of target)

 

Award Formula
Element

  

Explanation of Key Provisions

Target Annual

Incentive

Opportunity

  

•    Target percentage of base salary reflects the NEO’s role and responsibilities.

•    Individual targets under the Program, as a percentage of base salary, for our NEOs for 2012 were as follows:

  

Mondelēz International:

 

Ms. Rosenfeld

 

Mr. Brearton

  Mr. Cofer   Mr. Khosla   Ms. West
150%   90%   80%   82.5%(1)   80%

 

  (1) 

80% effective 1/1/12 – 9/30/12 and 90% effective 10/1/12 – 12/31/12

 

  

Former Executives:

 

Mr. Cahill

 

Mr. Vernon

100%  

100%

 

2012

Business Unit Ratings

 

•    Ratings range from 0% to 180%.

 

•    The Committee approved the following financial measures to assess business performance:

 

        

Measure

    

    Weighting    

    
    

Organic Net Revenue Growth

     40%   
    

Defined Operating Income

     40%   
    

Defined Free Cash Flow

     20%   
 

•    The Committee chose these measures because of their high correlation to TSR. These measures reinforce the importance of driving both top-line and bottom-line performance while generating positive cash flow.

 

•    In establishing the performance standards under the Program for 2012, the Committee determined that a business unit rating of 100% would result in target performance having been achieved. Where actual performance exceeds target performance, the actual business unit rating would exceed 100%, and where actual performance does not achieve target performance, the actual business unit rating would be less than 100%.

 

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Award Formula
Element

  

Explanation of Key Provisions

  

 

•   The Committee weighted the business unit ratings under the Program for Messrs. Khosla and Cofer for 2012 as follows: 30% of the business unit rating would be based on their respective business unit’s rating and 70% would be based on the weighted average Company’s Pre-Spin-Off/Post-Spin-Off rating. The Committee structured their performance standards in this manner to promote both “line-of-sight” accountability, as well as to reinforce the importance of collaboration across the enterprise. Business unit ratings for our other NEOs were aligned 100% to the weighted average the Company’s Pre-Spin-Off period and Post-Spin-Off period rating.

Individual Performance Ratings   

•   Ratings range from 0% to 180%.

 

•   Ms. Rosenfeld provided the Committee with an individual performance assessment for each of her direct reports, including our other NEOs. The Committee reviewed and discussed her recommendations, taking into account the various factors within the criteria, to determine each direct report’s individual performance rating.

 

•   Specifically, in assessing individual performance in the context of making executive compensation decisions, Ms. Rosenfeld and the Committee considered the executive officer’s contributions to our overall performance and individual performance relative to individual objectives established at the beginning of the performance cycle.

 

•   Individual ratings and range of payouts for 2012 were:

 

Individual Performance Ratings

  

Incentive Payout Range

as a Percent of Target

Outstanding

   140% – 180%

Exceeded Expectations

   115% – 135%

Achieved Expectations

   90% – 110%

Partially Met Expectations

   40% – 80%

Below Expectations

   0%

 

  

•   For its 2012 review, the Committee took into account the following factors in determining the individual performance assessments for our NEOs: contributions to the organization such as operational efficiency, leadership, quality of financial results, talent management and diversity of employees. These factors are described in greater detail below in “Compensation Paid to Named Executive Officers in 2012.”

2012 Business Unit Ratings

The 2012 Business Unit Rating for the Company under the Program was based on our performance both Pre Spin-Off and Post Spin-Off.

The following are our 2012 financial targets and actual results under the Program that the Committee considered in determining awards for our NEOs:

 

Key Financial Metrics

     Weighting     Mondelēz International  
       Threshold      Target      Maximum      2012 Actual      Performance
Rating
 
Organic Net Revenue Growth      40%        2.8%        5.3%      7.8%      3.9%      72%         

Defined Operating Income

       40     $7,067         $7,439         $7,811         $7,197         66%   

Defined Free Cash Flow

       20     $1,964         $2,310         $2,888         $3,463         180%   

Actual Rating

                     91%   

 

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The following are the targets, actual results and overall business unit ratings that the Committee considered in determining the 2012 awards for Mr. Cofer (responsible for our European operations) and Mr. Khosla (responsible for our Developing Market operations) under the Program:

 

Key Financial Metrics

   Weighting    Europe   Developing Markets
      Target    2012
Actual
  Performance
Rating
  Target    2012
Actual
  Performance
Rating

Organic Net Revenue Growth

   40%        2.6%        2.3%     94%     12.0%      7.0%       0%

Defined Segment Operating Income

   40%    $1,768    $1,748     84%   $2,466    $2,323     60%

Defined Free Cash Flow

   20%    $949    $1,078   132%     $782      $1,244   180%

Actual Business Unit Rating

             98%          60%

As discussed above, in evaluating our NEOs’ performance for 2012 to determine awards under the Program, the Committee used a performance rating methodology which considered our Pre Spin-Off and our Post Spin-Off performance targets and actual results. Because the business unit rating measures performance quantitatively against three key internal measures, the Committee retained discretionary authority to adjust the actual business rating (up or down) by as much as 25 percentage points to recognize factors which are more subjective and therefore less quantifiable—such as how well we performed based on innovation, portfolio management, talent management and the quality of our results. The Committee did not exercise its discretion to modify the business ratings in determining awards under the Program for 2012.

While we report our financial results in accordance with U.S. GAAP, our financial targets under our incentive programs, including the Program, are based on non-GAAP financial measures. The adjustments to the related GAAP measure and our reasons for using these measures are described in the chart below. (See Exhibit A on page A-1 for additional information.)

 

Measure

  

Definition/Adjustment to GAAP measure

  

Rationale

Organic Net Revenue Growth(1)   

Net revenues, excluding the impact of acquisitions, divestitures, accounting calendar changes, Integration Program costs and currency rate fluctuations (calculated based on prior year rates). Integration Program costs are defined as the costs associated with combining Mondelēz International and Cadbury businesses, and are separate from those costs associated with the acquisition

 

   Reflects the growth rates for the Company’s base business by eliminating the impact of certain disclosed one-time factors, facilitating comparisons to prior year(s)

Defined Operating Income(2)

 

  

Operating income, excluding the impact of divestitures (both operating income from divested businesses and the net gain/(loss) on divestitures), Integration Program costs, acquisition-related costs, costs incurred for the 2012-2014 Restructuring Program, Spin-Off Costs and currency rate fluctuations (calculated based on 2012 plan rates)

 

   Indicator of overall business trends and performance, based on what business leaders can control

Defined Segment

Operating Income(3)

  

Segment operating income,(4) excluding the operating income from divested businesses, Integration Program costs, acquisition-related costs, costs incurred for the 2012-2014 Restructuring Program, Spin-Off Costs and currency rate fluctuations (calculated based on 2012 plan rates)

 

   Indicator of trends and performance for business segments, based on what business units can control

 

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Measure

  

Definition/Adjustment to GAAP measure

  

Rationale

Defined Free Cash Flow   

Cash flow from operations less capital expenditures adding back voluntary pension contributions and cash payments (net of tax benefits) associated with Spin-Off Costs and 2012-2014 Restructuring Program expenditures

 

   Reflects Mondelēz International’s financial liquidity, working capital efficiency and financial health

 

 

  (1) For Mondelēz International, we measure Organic Net Revenue Growth based on our reported results for the first nine months of 2012, including the Kraft Foods Group Discontinued Operation, and our reported results for the last three months of 2012, which reflect our results of continuing operations and exclude the results of Kraft Foods Group which was divested on October 1, 2012. For North America, we measure Organic Net Revenue growth based on our reported U.S. Snacks results for the first nine months of 2012 combined with the results of our North America region (including our snacks and foodservice businesses in the U.S. and Canada) for the last three months of 2012.

 

  (2) For Mondelēz International, we measure Defined Operating Income based on our reported results for the first nine months of 2012, including the Kraft Foods Group Discontinued Operation, and our reported results for the last three months of 2012 which reflect our results of continuing operations and exclude the results of Kraft Foods Group which was divested on October 1, 2012.

 

  (3) For North America, we measure Defined Segment Operating Income based on our reported U.S. Snacks results for the first nine months of 2012 combined with the results of our North America region (including our snacks and foodservice businesses in the U.S. and Canada) for the last three months of 2012.

 

  (4) Segment operating income is a measure of Operating Income by Segment and excludes unrealized gains and losses on hedging activities (which are a component of cost of sales), certain components of our U.S. pension plan cost (which are a component of cost of sales and selling, general and administrative expenses), general corporate expenses (which are a component of selling, general and administrative expenses), net gain/(loss) on divestitures, acquisition-related costs (which are a component of selling, general and administrative expenses) and amortization of intangibles for all periods presented.

Long-Term Incentives

Long-term incentive equity grants are designed to align the interests of our executive officers with those of our shareholders. For 2012, the Committee determined that the appropriate mix of grants in our long-term incentive program for senior management, including our NEOs, was 50% performance shares, 25% non-qualified stock options and 25% restricted stock. The same mix has been used since 2008.

 

LOGO

Equity Grants – Non-Qualified Stock Options and Restricted Stock

With the objective of aligning the interests of our executives and our shareholders, historically the Committee has granted non-qualified stock options (“NQSOs”) and restricted stock on an annual basis. In 2012, the Committee intended the value delivered in restricted stock be equal to the value delivered in NQSOs. To maintain this balance, based on Black-Scholes valuation, the Committee continued to use a ratio of restricted stock to NQSOs of one to six in 2012. The Committee

 

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maintained this equity mix because it balanced the retention value of restricted stock with the performance aspect of NQSOs. To help retain valued executives, restricted stock grants do not vest until three years after the grant date. The NQSOs vest one-third each year over three years. For non-U.S. employees, the Company grants deferred stock units instead of restricted stock, which have the same three year vesting schedule as restricted stock. Dividends are paid on unvested restricted stock and dividend equivalents are paid on deferred stock units at the same time and rate as dividends are paid on Mondelēz International common stock.

The Committee bases grant ranges on an analysis of competitive market practice, with the midpoint of the equity grant ranges, inclusive of the value of the target performance shares (see “LTIP—Performance Shares” discussion below), approximately equal to the total long-term incentive median of the Compensation Survey Group. The Committee bases its decision to grant an equity award above or below the midpoint on a qualitative review of the executive officer’s individual performance and an evaluation of such executive officer’s potential to assume roles with greater responsibility. Generally, grants are between 50% and 150% of the midpoint.

The table below shows the ranges of grant opportunities for our NEOs on the February 23, 2012 grant date.

 

Name

  

Grant Value Range (1)

  

Threshold
($)

  

Midpoint
($)

  

Maximum
($)

Mondelēz International:

Ms. Rosenfeld

   2,361,000    4,722,000    7,083,000

Mr. Brearton

      550,000    1,100,000    1,650,000

Mr. Cofer

      350,000       700,000    1,050,000

Mr. Khosla

      550,000    1,100,000    1,650,000

Ms. West

      350,000       700,000    1,050,000

Former Executives:

Mr. Cahill (2)

                    —                    —                     —

Mr. Vernon (3)

                    —                    —                     —

 

  (1) The ranges above include threshold to maximum grant values for these positions. The Committee may also make a grant below the threshold.

 

  (2) As Executive Chairman, Kraft Foods North America, Mr. Cahill was not eligible for the annual equity grant made on February 23, 2012. On his hire date, January 2, 2012, Mr. Cahill received $3,375,000 in restricted stock units vesting on January 2, 2015 and $1,125,000 in non-qualified stock options vesting 33% on January 2, 2013, 33% on January 2, 2014 and 34% on January 2, 2015.

 

  (3) Mr. Vernon’s award was granted in recognition of his future role as CEO of Kraft Foods Group.

All equity grants to our NEOs in 2012 approved by the Committee were within the respective ranges presented above.

Actual equity grants made in 2012 are presented in this Proxy Statement in the 2012 Grants of Plan-Based Awards Table under “Executive Compensation Tables.”

The date for annual restricted stock and NQSO grants is pre-set on the scheduled date of the Committee meeting immediately following the release of our annual financial results. The exercise price for NQSOs is determined on the date the Committee approves the grants and is the average of the high and low trading prices on that date.

Treatment of Restricted Stock and NQSOs upon Spin-Off

In connection with the Spin-Off, executives’ outstanding NQSOs and/or restricted shares were treated the same as Company shares with respect to the issuance of equivalent interests in Kraft Foods

 

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Group equity. All terms of the outstanding NQSOs and restricted shares, including all vesting requirements, remained the same.

Restricted Stock: For every three restricted shares held, executives received one Kraft Foods Group restricted share.

NQSOs: In addition to their Company NQSOs, executives received NQSOs for Kraft Foods Group intended to maintain the intrinsic value of their NQSOs as of the Spin-Off.

Special CEO Equity Grant

On December 19, 2012, the Committee granted Ms. Rosenfeld a special equity grant valued at approximately $10,000,000. The value of the award was based on the Committee’s review of other special awards granted to other chief executive officers after major corporate transformations. Although our Company’s transformation was unique to us, the special awards granted to other Chief Executive Officers were instructive in determining the amount and design of her grant. The number of restricted shares and performance-contingent restricted stock units granted was calculated based on the intended value of the grant and the Fair Market Value (average of the high and low stock price on the date of grant) of $25.935.

The Committee intended the grant to reward Ms. Rosenfeld for:

 

   

Delivering top-tier performance during her tenure as CEO since 2006,

 

   

Identifying and executing numerous transformational initiatives benefitting shareholders – including the 2012 Spin-Off of Kraft Foods Group to shareholders,

 

   

Positioning the Company to deliver sustainable top-tier shareholder returns into the future and

 

   

Continuing to lead the Company in the future.

With the advice of its independent consultant, the Committee structured the grant (in size and terms) to ensure that Ms. Rosenfeld continues as the Company’s CEO well into the future while further incenting her to continue delivering top-tier returns in the coming years. The award reflects the Board’s confidence in Ms. Rosenfeld’s ability to successfully lead the Company following the Spin-Off and ensure that a long-term management development and senior leadership succession plan is in place.

To accomplish these objectives; the grant has two component elements:

 

   

Time-Based Restricted stock—Valued at approximately $2,000,000 (20% of grant). The stock vests after three years.

 

   

Performance-contingent restricted stock units (“RSUs”)—Valued at approximately $8,000,000 (80% of grant). Specific numbers of units vest when the Company’s closing price maintains an average at or above the following thresholds for a minimum period of ten consecutive trading days. See chart below for additional detail.

 

% of Award Vesting

   # of RSUs Vesting    % Stock Price
Appreciation from
FMV on Grant
Date
   Required Closing
Price for Minimum
of 10 Consecutive
Trading Days

25%

   77,116              20%                $31.12          

37.5%

   115,674              30%                $33.72          

37.5%

   115,674              40%                $36.31          

Each unit represents a contingent right to receive one share of the Company’s common stock. Except in case of death, disability or change in control where Ms. Rosenfeld is not retained as CEO or Company shares are not convertible into the acquiring entity’s share, Ms. Rosenfeld will not receive any award of Company common stock in connection with the performance contingent grant prior to

 

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December 19, 2015 (the three-year anniversary of the grant date). Ms. Rosenfeld will forfeit the applicable portion of the RSUs if the share price hurdle for the applicable tranche of RSUs has not been satisfied prior to the earlier of: 1) December 19, 2018 (the six-year anniversary of the grant date) or, 2) one-year following Ms. Rosenfeld’s retirement as CEO. She will also forfeit any unvested units as of the date she is removed involuntarily as CEO. Further, Ms. Rosenfeld will forfeit any rights to Company stock in connection with this grant if she voluntarily leaves her position as CEO prior to December 31, 2014, even if share price hurdles have been satisfied for any portion of the RSUs. If the share price hurdle for the third tranche of RSUs is satisfied, Ms. Rosenfeld is required to hold the net shares awarded for at least one year following her leaving the role of CEO.

Special Equity Grant to Select Executives to Recognize Successful Execution of Spin-Off

On November 13, 2012, the Committee approved special one-time equity grants to certain select executives to recognize their leadership roles in the success of the Spin-Off. Two of our NEOs received special equity grants:

 

   

David Brearton received 28,970 shares of restricted stock

 

   

Mary Beth West received 19,310 shares of restricted stock

The restrictions on the shares lapse on November 13, 2014, as long as Ms. West and Mr. Brearton continue to be active employees of the Company.

Long-Term Incentive Plan – Performance Shares

The Committee designed the LTIP to motivate executive officers to achieve long-term financial goals and top-tier shareholder returns. The Committee sets performance goals for a three year period relating to a grant. The grant made in 2012 is for the three year period ending December 31, 2014. At the end of the three year period, the Committee will only award Company shares if we meet or exceed performance thresholds set at the beginning of the cycle. The number of shares awarded to an executive officer will depend on the achievement of key internal financial measures and total shareholder return results relative to our Performance Peer Group. No individual performance factor is used in the calculation, and no dividends or dividend equivalents are paid or earned on unvested performance shares for grants made prior to 2013. For the grant made in early 2013 for the 2013-2015 performance cycle, the Committee will award dividend equivalents on shares earned for the performance cycle. Any dividend equivalents will accrue during the performance period and be paid out in cash as of the award date for the performance cycle—which generally occurs in the first quarter following the end of the performance cycle, provided shares are awarded.

The Committee uses the following formula to determine actual awards for participants, including our NEOs. Other than base salary, each element of this formula is discussed below.

 

       

Base Salary at

Beginning of

Performance Cycle

  x  

Target Incentive

Opportunity

(% of Base Salary)

(Target number of

shares established)

  x   

Business Performance

Rating

(0% – 200% of

target shares)

  =  

Actual LTIP Award

(in shares)

Treatment of Performance Share Units upon Spin-Off

In order to avoid decreasing the value of participants’ LTIP performance share units solely as the result of the Spin-Off, the number of unvested target performance share units allocated to each LTIP participant for the 2010 – 2012, 2011 – 2013 and 2012 – 2014 performance cycles was adjusted by a conversion ratio of 1.5266. This adjustment reflects that participants did not receive any interest in Kraft Foods Group with respect to their performance share units in the LTIP.

 

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2012 – 2014 LTIP Performance Cycle

 

Award Formula
Element

  

Explanation of Key Provisions

Target Incentive Opportunity   

•   Each LTIP participant was assigned a target award as a percentage of his or her base salary at the beginning of the performance cycle. Target award levels for the NEOs as of January 1, 2012 were:

   Mondelēz International:

 

Ms. Rosenfeld

 

Mr. Brearton

  Mr. Cofer   Mr. Khosla   Ms. West
325%   170%   130%   130%   130%
   Former Executives:

 

Mr. Cahill  

Mr. Vernon

0%(1)  

235%

 

  (1) 

As Executive Chairman, Kraft Foods North America, Mr. Cahill was not eligible for a LTIP performance share grant.

 

•   Target amounts were converted to performance share units at the beginning of the cycle. Actual shares awarded can range from 0% to 200% of target shares at the end of the performance cycle based on the business performance rating.

 

Business Performance Rating  

•   Rating ranges from 0% to 200%.

 

•   Performance measures are:

 

        

Measure

 

Weighting

    
    

Organic Net Revenue Growth(1)

  25%   
    

Operating EPS Growth(2)

  25%   
    

Annualized Relative Total Shareholder Return(3)

  50%   
 

While we report our financial results in accordance with U.S. GAAP, financial targets under the LTIP are based on non-GAAP financial measures. The adjustments to the related GAAP measure and our reasons for using these measures are described below.

      

Measure Definition

  

Adjustment to GAAP Measure

  

Rationale

     Organic Net Revenue Growth(1)   

Net revenues, excluding the impact of acquisitions, divestitures, accounting calendar changes, Integration Program costs and currency rate fluctuations (calculated based on prior year rates). Integration Program costs are defined as the costs associated with combining Mondelēz International and Cadbury businesses, and are separate from those costs associated with the acquisition.

 

   Reflects the growth rates for the Company’s base business by eliminating the impact of certain disclosed one-time factors, facilitating comparisons to prior year(s).

 

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Measure Definition

  

Adjustment to GAAP Measure

  

Rationale

     Operating EPS Growth(2)    Diluted EPS attributable to Mondelēz International from continuing operations, excluding the impact of Spin-Off Costs, the 2012-2014 Restructuring Program, Integration Program, acquisition-related costs, gains / losses on divestitures, pension costs related to the obligations transferred in the Spin-Off, interest expense adjustment related to the Spin-Off transaction, operating income from divested businesses and the 2010 U.S. healthcare legislation change in prior periods.    Reflects the growth rates for the Company’s base business by eliminating the impact of certain disclosed one-time factors, facilitating comparisons to prior year(s).

 

 

  (1) For Mondelēz International, we measure Organic Net Revenue Growth based on our reported results for the first nine months of 2012, including the Kraft Foods Group Discontinued Operation, and our reported results for the last three months of 2012, which reflect our results of continuing operations and exclude the results of Kraft Foods Group which was divested on October 1, 2012.

 

  (2) For Mondelēz International, we measure Operating EPS Growth based on our reported results for the first nine months of 2012, including the Kraft Foods Group Discontinued Operation, and our reported results for the last three months of 2012, which reflect our results of continuing operations and exclude the results of Kraft Foods Group which was divested on October 1, 2012

 

  (3) Annualized Relative Total Shareholder Return is a comparison relative to the Performance Peer Group during the performance cycle. Information on the Performance Peer Group is discussed below.

 

   

There is no assessment or measurement of an individual’s contributions as the basis for an award under the LTIP; except where the Committee exercises its limited discretion as described below, awards under the LTIP are based solely on how we performed using the measures described above.

 

   

For the 2012-2014 performance cycle grant, the target objective set for Annualized Relative TSR is the median of the Performance Peer Group from 2012 to 2014. The Organic Net Revenue Growth and Operating EPS Growth targets were set relative to historical results of the Performance Peer Group.

 

   

To address unforeseen or unintended consequences, the Committee retains discretion to adjust the final business performance rating (up or down) by as much as 25 percentage points, allowing the Committee to factor in a subjective review of quality of financial results, portfolio management, innovation and talent development. If the Committee exercises its discretion to make a limited adjustment, we will disclose that following the conclusion of the relevant performance cycle.

 

   

We do not publicly disclose specific long-term incentive plan targets on a prospective basis due to potential competitive harm. Revealing specific objectives prospectively would provide competitors and other third parties with insights into our confidential planning process and strategies, thereby causing competitive harm. The performance goals are designed to be challenging, and there is a risk that awards will not be made at all or will be made at less than 100% of the target amount.

 

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Both our annual cash incentive program and our long-term incentive plan based awards are in part based on our Organic Net Revenue Growth, but the Committee uses a somewhat different method to measure performance for these plans. The Committee measures Organic Net Revenue Growth performance under our annual cash incentive program based on our annual operating targets. In contrast, the Committee measures Organic Net Revenue Growth under our LTIP based on our Performance Peer Group. The Committee believes that the use of these different measures focuses our executives on critical internal drivers, both in the short- and the long-term, and that the different methods for the two incentive plans, when used together, closely correlate with shareholder value.

Treatment of 2012-2014 Performance Cycle Upon Spin-Off: Any award made for the 2012 – 2014 performance cycle will be based on a weighted average performance rating that includes the Company’s performance during the Pre Spin Period (January 1, 2012 – September 30, 2012) and its performance during the Post Sppin Period (October 1, 2012 – December 31, 2014). The Committee also determined to continue using the same measures and weightings of operational goals and relative TSR goals. However, the targets have been adjusted to reflect our Post Spin-Off attributes. With regard to determining relative TSR performance, the Pre Spin-Off Performance Peer Group was used to assess results until the Spin-Off. For the Post Spin-Off Period, relative TSR performance will be assessed against the Post Spin-Off Performance Peer Group.

2011 – 2013 LTIP Performance Cycle

Treatment of 2011-2013 Performance Cycle Upon Spin-Off: Any award made for the 2011 – 2013 performance cycle will be based on a weighted average performance rating that includes the Company’s performance during the Pre Spin Period (January 1, 2011 – September 30, 2012) and its performance during the Post Spin Period (October 1, 2012 – December 31, 2013). The Committee also determined to continue using the same measures and weightings of operational goals and relative TSR goals. However, the targets have been adjusted to reflect our Post Spin-Off attributes. With regard to determining relative TSR performance, the pre-Spin-Off Performance Peer Group was used to assess results until the Spin-Off. For the Post Spin-Off Period, relative TSR performance will be assessed against the Post Spin-Off Performance Peer Group.

2010 – 2012 LTIP Performance Cycle

Each of our NEOs, with the exception of John Cahill, participated in the 2010 – 2012 LTIP. In 2010, the Committee set the performance cycle at three years; however, at the December 2011 Committee meeting, the period was shortened to 33 months (January 1, 2010 – September 30, 2012) due to the Spin-Off. Following the Spin-Off, the Committee determined that the LTIP rating for the Pre Spin-Off Period was 160%, and awarded shares based on this rating. Because the performance period was set to end within three months of the Spin-Off, the Committee truncated the performance cycle so that the award would be based solely on the Company’s performance during the 33-month Pre Spin-Off Period. The Committee applied time-based vesting for the remaining period.

 

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Business Performance Rating and Awards for 2010-2012 Performance Cycle

The following chart reflects the key financial measures, weightings and performance standards that the Committee set for the 2010 – 2012 performance cycle. It also reflects our actual performance for the cycle and the resulting performance rating that the Committee approved for determining the final awards for the cycle.

 

Key Financial Measures

   Weighting    2010-2012 LTIP Results
      Threshold    Target    Maximum    Actual    Performance
Rating

Organic Net Revenue Growth(1)

   25%    3%    4%    8%    4.7%    117%

Operating EPS Growth(2)

   25%    4%    8%    13%    9.1%    122%

Annualized Relative Total Shareholder Return(3)

   50%    25th
percentile
   At
median
   90th
percentile
   93rd
percentile
   200%

Actual Business Performance Rating

                  160%

 

(1) For 2010, the Committee used Combined Organic Net Revenue Growth (which captured the impact of the Cadbury acquisition). For 2011 and 2012, the Committee used Organic Net Revenue Growth.

 

(2) For 2010, 2011 and 2012, the Committee modified the EPS Growth measure from Ongoing to Operating to align with the Company’s publicly communicated EPS targets.

 

(3) Annualized Relative TSR is based on the Company’s pre-Spin-Off Performance Peer Group. TSR is through September 30, 2012.

In evaluating our performance for the cycle, the Committee determined that we exceeded our targets for Organic Net Revenue Growth and Operating EPS Growth. Our TSR for the performance cycle significantly exceeded our target. Because the Committee determined that the performance rating for the performance cycle comported with its overall evaluation of our performance and economic conditions, the Committee did not exercise its discretion to adjust the final performance ratings.

Based on target awards as a percent of salary and the business performance rating of 160% of target, the chart below shows the share awards (before taxes) for each of our NEOs.

 

Name

   Target Award      Actual  Award
(MDLZ
Shares(1))
     Award Value  (2)
($)
 

Ms. Rosenfeld

     310% of salary         407,381         11,011,508   

Mr. Brearton

     85% of salary         37,250         1,006,868   

Mr. Cofer

     85% of salary         30,410         821,982   

Mr. Khosla

     130% of salary         83,684         2,261,979   

Ms. West

     85% of salary         34,196         924,318   

 

(1)  Represents converted number of shares as discussed under “Treatment of Performance Shares upon Spin-Off.”

(2)  Award value is based on the $27.03 closing stock price on the vest date.

As Executive Chairman, Kraft Foods North America and due to the date of his hiring, Mr. Cahill was not eligible for a LTIP performance share award.

Mr. Vernon is no longer employed by the Company following the Spin-Off, and therefore, did not receive an award under our 2010-2012 LTIP.

 

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Requiring Stock Ownership

To further align the interests of our senior management (approximately 150 executives), including our NEOs, with those of our shareholders, and to incent the executives to focus on shareholder interests, the Committee requires each executive to acquire and hold a significant amount of our common stock. The following chart summarizes our stock ownership and holding requirements. Our stock ownership requirements are comparable to, or are more stringent than, stock ownership requirements than the majority of our Compensation Survey Group, and we monitor compliance with these levels regularly.

 

Stock Ownership/Holding
Requirement

  

Explanation of Key Provisions

Ownership Requirement

  

•     Eight times salary for CEO; four times salary for other NEOs.

 

•     All Named Executive Officers who were executive officers as of March 1, 2013 satisfy these requirements.

Time to Meet Requirements

  

•     Five years from employment date or three years from promotion to executive level subject to requirements.

 

•     Given dilution in ownership levels of Mondelēz International as a result of the Spin-Off, executives will have a period of no less than three additional years from October 1, 2012, to attain the required stock ownership level in Mondelēz International.

 

•     CEO may take further action as she deems appropriate if an executive does not meet the required ownership.

Shares Included As Ownership

  

•     Mondelēz International common stock, including sole ownership, direct purchase plan shares, restricted shares and accounts over which the executive has direct or indirect ownership or control.

 

•     Excludes unexercised Mondelēz International stock options and performance-based share units.

Holding Requirements

  

•     Our NEOs are required to hold 100% of all shares acquired from stock option exercises and restricted stock and performance shares awarded, net of shares withheld for taxes or payment of exercise price, until they meet stock ownership guidelines.

 

•     Once an NEO meets stock ownership requirements, the NEO is required to hold 100% of the shares, net of shares withheld for taxes or payment of exercise price, for at least one year after the stock option exercise or restricted stock or LTIP performance share award vests.

Special Holding Requirements Following Spin-Off

For the first full year after the Spin-Off, our continuing NEOs have agreed to hold 100% of net Kraft Foods Group shares acquired through stock option exercises or the vesting of restricted stock awards.

Voluntary Non-Qualified Deferred Compensation

U.S. Deferred Compensation Plan

In 2012, certain U.S. senior management (approximately 80 employees), including our NEOs, were eligible for the Mondelēz Global LLC Executive Deferred Compensation Plan (“MEDCP”), a voluntary non-qualified deferred compensation plan. The program is similar to those provided to executive

 

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officers at many of the companies within the Compensation Survey Group and is provided for retention and recruitment purposes. The deferred compensation plan provides an opportunity for executives to defer, on a pre-tax basis, up to 50% of their salary and up to 100% of their award under the Annual Cash Incentive Program. The amounts deferred may be invested among eight notional investment options under the plan.

U.S. Supplemental Benefits Plan

We also provide an unfunded non-qualified plan, the Mondelēz Global LLC Supplemental Benefits Plan (“Supplemental Plan”), for eligible U.S. employees. The Supplemental Plan provides benefits which are not able to be provided under the tax-qualified Mondelēz Global LLC Retirement Plan (“Retirement Plan”) or Mondelēz Global LLC Thrift Plan (“Thrift Plan”) due to an employee’s compensation exceeding the tax-qualified plan compensation limit under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”), an employee’s election to defer compensation under the MEDCP or under the Supplemental Plan, or a Retirement Plan participant’s benefit exceeding the limits under Section 415 of the Code.

Perquisites

Our NEOs receive limited perquisites, including a car allowance, a financial counseling allowance and, for the CEO only, personal use of the corporate aircraft. For security and personal safety reasons, we require Ms. Rosenfeld to use the corporate aircraft for both business and personal travel. This allows Ms. Rosenfeld to be more productive and efficient when she travels. Taxes on all perquisites are the sole responsibility of the NEO. The types and total costs of perquisites we offer are similar to the types and costs offered within the Compensation Survey Group. The Committee believes that these perquisites are important for retention and recruitment purposes. Specific executive officer perquisites are listed in the footnotes to the 2012 Summary Compensation Table under “Executive Compensation Tables.”

Post-Termination Compensation

Post-termination compensation consists of both separation pay and retirement benefits. We do not have employment agreements with any of our NEOs as these individuals, including Ms. Rosenfeld, are “at will” employees.

Change in Control Plan

We have a Change in Control Plan (the “CIC Plan”) for senior executive officers. The provisions in the CIC Plan are consistent with similar plans maintained by companies in the Compensation Survey Group, including eligibility, severance benefit levels and treatment of cash and equity incentive compensation. The separation payments are structured to help assure that key personnel, including our NEOs, would be available to assist in the successful transition following a change in control and provide a competitive level of severance protection if the executive officer is involuntarily terminated without cause following a change in control. Under the CIC Plan, restricted stock and stock options only vest upon a change in control if the participant is terminated without cause or resigns for good reason within two years following the change in control or if the acquiring entity does not assume the awards (“double trigger”). In 2009, we eliminated the excise tax gross up for all executives who first become eligible to participate in the CIC Plan after December 31, 2009. In 2012, the CIC Plan was amended to eliminate excise tax gross-ups for all participants effective January 1, 2013—even those who had first become eligible to participate in the CIC Plan before January 1, 2010.

The Spin-Off did not constitute a Change in Control for purposes of any benefit plan maintained by the Company or any of our subsidiaries or affiliates.

The severance arrangements and other benefits provided under the CIC Plan (as well as the equity treatment upon certain separations in the event of a change in control) are described under “Executive Compensation Tables – Potential Payments upon Termination or Change in Control.”

 

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Non-Change in Control Severance Agreements

We do not have individual severance or employment agreements with any of our NEOs. We do maintain a broad-based severance plan in the United States that provides for certain severance payments in the event of job elimination or a workforce reduction. Similar plans are generally available in other countries where we have employees. The plans facilitate recruitment and retention, as most of the companies in the Compensation Survey Group offer similar benefits to their executives. The severance arrangements and other benefits provided for under these severance plans are described under “Executive Compensation Tables – Potential Payments upon Termination or Change in Control.”

Retirement Benefits

All of our NEOs are eligible for U.S. employee benefit plans. The sponsor of the employee benefits plans covering our NEOs is Mondelēz Global LLC, a wholly owned subsidiary of Mondelēz International, Inc. which is our operating company in the U.S. In the U.S., employees hired on or after January 1, 2009 are not eligible to participate in the Retirement Plan or the defined benefit portion of the Supplemental Plan. U.S. employees hired on or after January 1, 2009, are eligible to receive an enhanced defined contribution benefit under the Thrift Plan. Based on the significant cost volatility associated with continuing a defined benefit pension plan, the Retirement Plan was closed to new participants after December 31, 2008. In addition, accruals under the Retirement Plan for current participants will cease after 2019. We provide Ms. Rosenfeld with an enhanced pension benefit that credits her pension service for the period of time that she was not employed by us between 2004 and 2006. We provided this enhanced pension benefit to Ms. Rosenfeld because she forfeited her right to a pension benefit at her previous employer when she rejoined our employment. This benefit was part of a broader incentive program to help encourage her to return to become our CEO. Additional details of this benefit are presented in the 2012 Pension Benefits Table and the accompanying narrative to the table under “Executive Compensation Tables.”

The Committee believes that the U.S. tax-qualified Retirement Plan, Thrift Plan and the non-qualified Supplemental Plan are integral parts of our overall executive compensation program. The supplemental defined contribution program is important because it encourages executive officers, including our NEOs, to save for retirement. The Committee believes that our NEOs should be able to defer the same percentage of their compensation, and receive the corresponding notional matching contributions, as all other employees, without regard to the compensation limit established by the Code, for tax-qualified plan contributions.

Compensation Paid to Named Executive Officers in 2012

Overview

There are no material differences in compensation policies with respect to each NEO. We designed each of our NEO’s target compensation levels to be at or near the Compensation Survey Group’s size-adjusted median (or median in 2012). Actual compensation will be dependent on both business and individual performance in any given year.

Below are the specific compensation actions for each of our NEOs in 2012.

Ms. Rosenfeld

Base Salary Increase

Ms. Rosenfeld did not receive a base salary increase in 2012.

Actual Annual Cash Program Award

The Committee determined Ms. Rosenfeld’s annual cash incentive award for 2012 in accordance with the 2012 Annual Cash Incentive Program. Based on our performance relative to target (business unit rating of 91%) and Ms. Rosenfeld’s individual performance, Ms. Rosenfeld’s actual annual incentive

 

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award was 91% of her target in 2012. For 2012, the Committee considered the following factors in determining Ms. Rosenfeld’s individual performance assessment:

 

   

Delivered solid financial performance relative to peers and in aggregate slightly below targets in the Annual Cash Incentive Program. Financial performance was 91% relative to target as discussed under “– Elements of Executive Compensation – Annual Cash Incentive Program—2012 Business Unit Ratings” above.

 

   

Delivered above target performance on key strategic initiatives as evidenced by the following:

 

   

Operating Income margin improvement above peer average for second year in a row.

 

   

Improved our innovation pipeline. New product development represents 13% of revenue (increase from 12% in 2011).

 

   

Delivered Cadbury integration savings of approximately $800 million, exceeding the original $750 million target. On track to deliver $1 billion revenue synergies by the end of 2013.

 

   

Executed Spin-Off, including operational and system components, with two fully functioning, stand-alone organizations as of October 1, 2012.

 

   

Finalized two strong public company leadership teams for Mondelēz International and Kraft Foods Group.

 

   

Effectively collaborated with the Governance, Nominating and Public Affairs Committee and full Board to define the diverse skills and experience needed for the two new Boards (Kraft Foods Group, Inc. and Mondelēz International, Inc.); to identify, recruit and orient 11 outstanding new directors; to allocate the talent of our Pre Spin-Off independent directors between the two boards in a way as to provide both continuity and fresh perspectives; to develop and document committee and leadership structures appropriate to each company.

Equity Grant (Stock Options and Restricted Stock)

As part of our annual equity grant program, on February 23, 2012 the Committee granted Ms. Rosenfeld 87,000 shares of restricted stock and 521,950 non-qualified stock options (combined value on grant date of $6,611,000). This equity grant along with the 2012 – 2014 LTIP opportunity is above the size-adjusted median of our Pre Spin-Off Compensation Survey Group and above the median of our Post Spin-Off Compensation Survey Group. As discussed under “Long-Term Incentives”, on December 19, 2012 the Committee granted Ms. Rosenfeld a special equity award of 77,116 restricted stock shares and 308,464 performance-contingent restricted stock units.

2010-2012 LTIP

Applying the 160% rating for the 2010-2012 LTIP performance cycle, Ms. Rosenfeld was awarded 407,381 shares of Company common stock.

Defined Benefit Accrual

The present value of Ms. Rosenfeld’s retirement benefit increased as measured at the end of 2012. The factors leading to the increase over 2011 were/are as follows:

 

   

Decrease in applicable discount rate—$3.9 million;

 

   

Increase in final average pay calculation—$2.1 million; and

 

   

Increase due to additional service—$0.8 million.

There were no changes to the terms of the plan for Ms. Rosenfeld in 2012.

 

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Other Named Executive Officers

The chart below shows specific compensation actions for each of the other NEOs in 2012 followed by a description of these decisions:

 

     Salary
Increase
   New
Salary
($)
   2012
Annual
Cash
Incentive
Program
Award
($)
  

                    2012 Equity  Grant
                                (Shares)(1)                            

  2010-2012  LTIP(2)
(Shares)

Mr. Brearton

   7.7%    700,000    946,000    February 23, 2012 grant   37,250
            15,800 shares of restricted stock  
            94,750 non-qualified stock options  
            November 13, 2012 grant  
            28,970 shares of restricted stock  

Mr. Cofer

   33.3%    700,000    739,200    11,190 shares of deferred
stock units
  30,410
            67,110 non-qualified stock options  

Mr. Khosla

   9.3%    825,000    503,000    18,430 shares of restricted stock   83,684
            110,540 non-qualified stock options  

Ms. West

   0%    660,000    577,000   

February 23, 2012 grant

11,850 shares of restricted stock

71,060 non-qualified stock options

November 13, 2012 grant

19,310 shares of restricted stock

  34,196

 

(1) All shares, except those granted November 13, 2012, are Kraft Foods Inc. The November 13, 2012 shares are Mondelēz International.

 

(2) Consistent with plan design, the Committee made no individual adjustments in determining the share payout.

Mr. Brearton

Base Salary Increase

Mr. Brearton’s salary increase was commensurate with Company guidelines for increases, taking into account his individual performance assessment and external market positioning. His salary is below the median of our Post Spin-Off Compensation Survey Group for chief financial executives.

Actual Annual Cash Program Award

In 2012, Mr. Brearton’s individual performance rating primarily related to his delivering solid financial results and his significant leadership role in successfully executing the Spin-Off while managing ongoing operations.

Equity Grant (Non-Qualified Stock Options and Restricted Stock)

Mr. Brearton received an annual equity grant on February 23, 2012. This equity grant, along with the 2012 – 2014 LTIP target opportunity, is below the median of our Post Spin-Off Compensation Survey Group. He received an additional equity grant on November 13, 2012 for his leadership in helping to execute the Spin-Off.

 

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Mr. Cofer

Base Salary Increase

Mr. Cofer’s received both a merit salary increase in April 2012 and an increase on the date of the Spin-Off (October 1, 2012) to improve his market positioning. His salary is below the median of our Post Spin-Off Compensation Survey Group.

Actual Annual Cash Incentive Program Award

In 2012, Mr. Cofer’s individual performance rating primarily related to his leadership in delivering solid business results across the European region, including top-tier organic net revenue growth culminating in our 12th consecutive quarter of growth at the end of the year, despite tough European Union economic conditions.

Equity Grant (Non-Qualified Stock Options and Restricted Stock)

This equity grant, along with the 2012 – 2014 LTIP target opportunity, is below the median of our Post Spin-Off Compensation Survey Group.

International Assignment Payments

Mr. Cofer, as a U.S. expatriate, received payments in 2012 in conjunction with his international assignment based in Switzerland. These payments to Mr. Cofer were similar to the types of payments generally made to other employees who accept an international assignment with the Company. The payments are designed to facilitate the relocation of employees to positions in other countries by covering expenses over and above those that employees accepting assignments would have incurred had they remained in their home countries. These payments include housing expenses, cost of living adjustment, schooling and travel expenses. Similarly, the tax payments are made pursuant to our International Assignment Policy, which is designed to cover the additional taxes that an employee incurs due solely to the international assignment.

Mr. Khosla

Base Salary Increase

Mr. Khosla received both a merit salary increase in April 2012 and a promotional increase at the time he assumed the role of Executive Vice President and President, Developing Markets. His salary is above the median of our Post Spin-Off Compensation Survey Group.

Actual Annual Cash Incentive Program Award

In 2012, Mr. Khosla’s individual performance rating primarily related to Developing Markets’ slower revenue growth, which was hampered by executional issues in Brazil and Russia in the third quarter.

Equity Grant (Non-Qualified Stock Options and Restricted Stock)

This equity grant, along with the 2012 – 2014 LTIP target opportunity, is at the median of our Post Spin-Off Compensation Survey Group.

Retirement

Mr. Khosla retired from Mondelēz International effective April 1, 2013. The Company has engaged him as a consultant for the balance of 2013.

 

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On December 19, 2012, on terms approved by the Compensation Committee, we entered into an Agreement Upon Retirement and General Release (the “Agreement”) with Mr. Khosla to provide him with additional benefits following his retirement. Although we typically do not do so for similarly situated retiring employees, we provided additional benefits in consideration of Mr. Khosla’s agreement to certain restrictive covenants. Specifically, under the terms of the Agreement, Mr. Khosla receives a pro-rata 2013 Management Incentive Plan payment for the period from January 1, 2013 through March 31, 2013, based upon his individual target and the actual 2013 business unit rating. With regard to performance shares awarded under the LTIP, based upon the respective actual ratings determined by the HRCC, Mr. Khosla’s target performance shares will be adjusted to equal two-thirds of the original target shares granted for the 2011 – 2013 LTIP, and one-third of the original target shares granted for the 2012 – 2014 LTIP. Under the terms of the 2005 Mondelez International Amended and Restated Performance Incentive Plan, upon his retirement, Mr. Khosla will forfeit his unvested Mondelez International restricted stock awards, granted in 2011 and 2012. However, if Mr. Khosla complies with all of the restrictive covenants, the Company will replace the forfeited restricted stock awards with the equivalent value of deferred stock award units that vest in accordance with a specified vesting schedule. The Kraft Foods Group restricted stock awarded Mr. Khosla in 2011 and 2012 vested on March 31, 2013.

On December 19, 2012, the Company also entered into a Consulting Agreement with Mr. Khosla. Under the Consulting Agreement, Mr. Khosla will provide consulting services in the leadership development arena from April 1, 2013 to December 31, 2013. For 25 days of consulting services, we agreed to pay Mr. Khosla a monthly retainer of $13,888.89 from April 2013 to December 2013. If Mr. Khosla provides consulting services in excess of 25 days, we will pay him a daily rate of $5,000.00. We will reimburse Mr. Khosla for any reasonable expenses connected with his consulting services.

Ms. West

Base Salary Increase

Ms. West did not receive a salary increase in 2012. Her position did not have an appropriate match within the Post Spin-Off Compensation Survey Group; however, her salary is well-positioned based on her responsibilities, performance and tenure as well as other factors in comparison to her internal peers.

Actual Annual Cash Incentive Program Award

In 2012, Ms. West’s individual performance rating primarily related to her role in building stronger marketing capabilities, improving the innovation pipeline, advancing our global category model and strategies and being a key leader in forming the two new companies in connection with the Spin-Off.

Equity Grant (Non-Qualified Stock Options and Restricted Stock)

Ms. West received an annual equity grant on February 23, 2012. She received an additional equity grant on November 13, 2012 for her impact and effort in successfully executing the Spin-Off. Her position did not have an appropriate match within the Compensation Survey Group; however, her equity grants, along with the 2012-2014 LTIP target opportunity, are well-positioned based on her responsibilities, performance and tenure as well as other factors in comparison to her internal peers.

 

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Former Executives:

 

    

Salary Increase

       New Salary
($)
      

2012 Equity Grant (Shares) (2)

Mr. Cahill

     N/A(1)           750,000        

89,710 deferred stock units

179,400 non-qualified stock options

Mr. Vernon

     18.3%           900,000         27,640 shares of restricted stock 165,800 non-qualified stock options

 

(1) Due to his date of hire, Mr. Cahill was not eligible for a salary increase.

 

(2) Equity grants were based on our share price on the grant date. With the Spin-Off, Mr. Vernon received Kraft Foods Group equity interests in addition to his existing grant based on the same Spin-Off conversion ratio that applied generally to our shareholders. Mr. Cahill’s entire equity grant was converted into a Kraft Foods Group equity grant as of the Spin-Off based on the respective values of our share price and Kraft Foods Gr