Mondelez International, Inc. DEF 14A 2016
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Mondelēz International, Inc.
(Name of Registrant as Specified In Its Charter)
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March 28, 2016
Dear Fellow Shareholders:
We launched Mondelēz International three-and-a-half years ago as a focused global snacking company.
Since that time, Im proud that weve delivered industry-leading total shareholder returns that are well above the S&P 500 and our consumer staples peers, despite the highly volatile macroeconomic environment.
Our hard-working colleagues have delivered these results by focusing on what we can control and transforming our business to address the challenges head on.
Were building the worlds best snacking company one capable of winning long-term by delivering sustainable growth on both the top and bottom lines. Thats what sets us apart from our competitors!
As we prepare for our Annual Meeting of Shareholders, allow me to share a few thoughts on where weve been and where were going, while highlighting a few of our recent successes.
Focusing on What We Can Control
While we remain optimistic in the long-term outlook, its no secret that the global economy has become more challenging and volatile since we launched the company in 2012. Growth in snacks categories and consumer demand in key emerging markets have slowed. At the same time, weve experienced significant increases in input costs and strong currency headwinds.
To address these issues, we took significant steps over the past couple of years to adjust to the environment and take control of what we can by transforming the business in the following ways:
Delivering Strong Margin Expansion and Solid Earnings Growth
In 2015, we delivered another year of very strong results. Our aggressive cost-savings programs drove significant margin expansion, enabling us to increase our marketing investments, which accelerated organic revenue growth and improved our share performance as the year progressed.
Accelerating Action with Our 2020 Global Sustainability Goals
We believe that the growth of our business is inextricably linked to the well-being of the people who make and enjoy our products and the communities in which we live and work. Our Call For Well-being therefore focuses where we can make the greatest impact, in the areas of sustainability, mindful snacking, community partnerships and safety.
Last year, we continued to progress our well-being agenda. Working with leading organizations, were accelerating actions to address climate change through our new sustainability goals, which focus on reducing key end-to-end environmental impacts, from the field through distribution.
By 2020 (versus our 2013 baseline), we will have:
As the worlds largest buyer of cocoa, were committed to a sustainable cocoa supply chain. Ultimately, our goal is to sustainably source all of our cocoa, and were on track to get there.
Building on Our Momentum
In closing, Im proud of our progress made since the launch of our company and especially pleased with our strong 2015 results. Our success is a tribute to our world-class people, who have the passion, leadership, capabilities and experience to grow our business around the world.
While we expect global economic conditions, especially in emerging markets, to remain difficult in 2016, well build on our 2015 momentum by focusing on what we can control to again accelerate revenue growth and expand margins. By executing our strategies, were well-positioned to continue delivering strong returns to our shareholders now and over the long-term.
On behalf of all of our Mondelēz International employees, I thank you for your continued support of our company.
This letter to shareholders contains a number of forward-looking statements. Words, and variations of words, such as will, expect, intend, believe, positioned, target, outlook and similar expressions are intended to identify our forward-looking statements, including, but not limited to, statements about: our future performance, including our future revenue growth, earnings per share, margins and cash flow; growth in emerging markets; macroeconomic conditions; our supply chain transformation; overheads; shareholder returns; our well-being portfolio and goals; revenues from e-commerce; and our 2020 global sustainability goals. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause our actual results to differ materially from those indicated in our forward-looking statements. Such factors include, but are not limited to, risks from operating globally including in emerging markets; changes in currency exchange rates, controls and restrictions; continued volatility of commodity and other input costs; weakness in economic conditions; weakness in consumer spending; pricing actions; unanticipated disruptions to our business; competition; our global workforce; the restructuring program and our other transformation initiatives not yielding the anticipated benefits; changes in the assumptions on which the restructuring program is based; and tax law changes. Please also 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. Mondelēz International disclaims and does 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.
MONDELĒZ INTERNATIONAL, INC.
Three Parkway North
Deerfield, Illinois 60015
NOTICE OF 2016 ANNUAL MEETING OF SHAREHOLDERS
200 Barclay Boulevard
Lincolnshire, Illinois 60069
March 28, 2016
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 2016
Mondelēz International, Inc.s Proxy Statement and Annual Report on Form 10-K for the year ended
December 31, 2015 are available at http://materials.proxyvote.com/609207.
In this Proxy Statement Summary and throughout the Proxy Statement, we, us, our, the Company, and Mondelēz International, refer to Mondelēz International, Inc.
This summary highlights select information contained elsewhere in this Proxy Statement. You should read the entire Proxy Statement carefully before voting and consider all information in the Proxy Statement. For more complete information regarding the Companys 2015 performance, please see our Annual Report on Form 10-K for the year ended December 31, 2015 (the 2015 Form 10-K).
2016 Annual Meeting of Shareholders (the Annual Meeting)
Advance Voting Methods (Page 87 of this Proxy Statement)
Even if you plan to register for and attend the Annual Meeting in person, please vote in advance of the meeting using one of the following voting methods (see page 87 of this Proxy Statement for additional details). Be sure to have your proxy card or voting instruction form (VIF) in hand and follow the instructions. You can vote in advance of the meeting in one of three ways:
Voting Instructions to Proxies
At the Annual Meeting, the persons named as proxies on each shareholders proxy card will vote the shares represented by the proxy card FOR or AGAINST or ABSTAIN from voting on each proposal, as indicated in the shareholders voting instructions. If no indication is made on the properly executed proxy card, proxies will vote FOR each of the director nominees listed in proposal 1, FOR proposals 2 and 3, AGAINST proposals 4, 5 and 6 and in their discretion upon such other business as properly comes before the meeting.
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Voting at the Annual Meeting (Page 87 of this Proxy Statement)
All shareholders of record as of March 9, 2016 may vote in person at the meeting. Generally, beneficial owners may vote in person at the meeting if they have a legal proxy, as described in the response to Question 14 on page 87 of this Proxy Statement.
Attending the Annual Meeting Important Note About Advance Registration Process and Admission Requirements (Page 89 of this Proxy Statement)
If you plan to attend the meeting in person, see the answer to Question 23 on page 89 of this Proxy Statement for important details on advance registration and admission requirements.
Frequently Asked Questions (Page 84 of this Proxy Statement)
We provide answers to many frequently asked questions about the meeting and voting, including how to vote shares held in brokerage accounts and employee benefit plans, in the FAQ section beginning on page 84 of this Proxy Statement.
Items of Business
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ITEM 1. Election of Directors Nominees (Page 7 of this Proxy Statement)
Board Composition, Diversity, Tenure and Refreshment
Our 13 director nominees have significant relevant operating and leadership experience, global and diverse perspectives and financial expertise. Their varied experiences, backgrounds and personal characteristics, as summarized below, provide the Board of Directors (the Board) with a diversity of viewpoints and enable it to represent effectively our shareholders:
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As of March 9, 2016, directors ranged in age from 54 to 74. The tenure of our independent directors ranged from approximately 2 months to 9 years, with an average tenure of approximately 4 years.
Shareholders can find more information regarding our process for nominating directors and our director nominees beginning on page 7 of this Proxy Statement.
Corporate Governance Highlights (Pages 17 and 37 of this Proxy Statement)
We believe that a strong and balanced corporate governance framework is essential to our long-term success because it promotes the long-term interests of shareholders, accountability and trust in the Company. We highlight here key aspects of our corporate governance framework. Shareholders can find additional detail under Corporate Governance beginning on page 17 of this Proxy Statement and under Our Executive Compensation Design Principles and Governance Practices on page 37 of this Proxy Statement.
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ITEM 2. Advisory Vote to Approve Executive Compensation (Page 72 of this Proxy Statement)
Our Human Resources and Compensation Committee has four primary goals for our executive compensation program:
We design our executive compensation program to achieve these goals by:
Our Executives 2015 Compensation Reflected Their and Our Performance
You can find detailed information about our compensation programs and decisions in our Compensation Discussion and Analysis beginning on page 34 of this Proxy Statement.
ITEM 3. Ratification of the Selection of PricewaterhouseCoopers LLP as Independent Registered Public
Accountants for Fiscal Year 2016 (Page 73 of this Proxy Statement)
As a matter of good governance, we are asking our shareholders to ratify the Audit Committees selection of PricewaterhouseCoopers LLP as our independent registered public accountants for the year ending December 31, 2016. We provide information on PricewaterhouseCoopers LLPs fees in 2015 and 2014 on page 27 of this Proxy Statement.
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ITEMS 4, 5 and 6. Shareholder Proposals (Page 75 of this Proxy Statement)
In accordance with U.S. Securities and Exchange Commission (SEC) rules, this Proxy Statement includes three shareholder proposals.
Other than Items 1 through 6 described in this Proxy Statement, we do not expect any matters to be presented for action at the Annual Meeting. The Chairman of the Annual Meeting may refuse to allow presentation of an improperly submitted proposal or a nomination for the Board at the Annual Meeting. We described the requirements for shareholders to properly submit proposals and nominations at the Annual Meeting in our 2015 Proxy Statement. Those requirements are similar to those described under 2017 Annual Meeting of Shareholders in this Proxy Statement.
If any other matters properly come before the Annual Meeting, your proxy authorizes the designated proxies to vote on such matters in accordance with their best judgment.
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Process for Nominating Directors
The Governance, Membership and Public Affairs Committee of our Board (the Governance Committee) is responsible for identifying, evaluating and recommending to the Board director nominees for election at the Annual Meeting (and any adjournments or postponements of the meeting). The Governance Committee invites director nominee suggestions from the directors, shareholders, management and others. In addition, the Governance Committee from time to time retains third-party executive search firms to assist in identifying and evaluating potential director nominees based on the Boards recruitment objectives.
The Board believes all directors should possess certain personal characteristics, including integrity, sound business judgment and vision. The Board believes these characteristics are necessary to establish a competent, ethical and well-functioning Board that best represents the interests of our shareholders. 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 individuals general understanding of the varied disciplines relevant to the success of a large, publicly traded company in todays global business environment, understanding of our global businesses and markets, professional expertise and educational background, and other factors that promote diversity of views, knowledge and experience, including, among others, gender, race and national origin. The Governance Committee also considers an individuals ability to devote sufficient time and effort to fulfill his or her responsibilities to the Company, given the individuals other commitments. In addition, the Governance Committee 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. The Governance Committee also evaluates each individual in the context of the Board as a whole, with the objective of recruiting and recommending a slate of director nominees who can best perpetuate the Companys success and represent our shareholders interests through the exercise of sound judgment and informed decision-making.
In addition, under our Guidelines, the Governance 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, the Governance Committee and Board may do so in extraordinary circumstances if nomination or re-nomination is in the shareholders best interests because the candidate is uniquely qualified to contribute to a specific dimension of the Boards work and the Companys growth in the subsequent year. If the Governance Committee determines that the individuals nomination or re-nomination for election is in the shareholders best interests, the Governance Committee may recommend, and the Board may approve, that directors nomination or re-nomination for up to three annual terms following the directors 75th birthday.
A management director must resign from the Board upon ceasing to be a Company officer.
Individual Experience, Qualifications, Attributes and Skills
The Governance Committee works with the Board to determine the appropriate mix of characteristics, professional experience and areas of expertise that will result in 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 all shareholders interests.
Under the leadership of the Lead Director and Chairman of the Governance Committee, the Governance Committee annually conducts evaluations of the Board and the Boards committees. It also coordinates the directors self-assessments which the Governance Committee uses to assess the experience, qualifications, attributes, skills, diversity and contributions of each director and of the Board as a whole. Every year, the director nominees complete questionnaires to update and confirm their background, qualifications, skills and potential conflicts of interest.
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Based upon the Governance Committees discussions with the Board, the Governance Committee has identified the following key competencies and relevant professional experience and areas of expertise that are particularly desirable for our directors to possess in order to meet the Boards current and future needs and obligations:
The Governance Committee reviews individual professional expertise and educational background in addition to general qualifications and evaluates each individual in the context of the Board as a whole.
Tenure and Refreshment
The Boards composition provides continuity as well as new experiences and fresh perspectives relevant to the Boards work.
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Board Composition and Diversity
As noted above, the Guidelines provide that the Governance Committee will consider factors including, among others, gender, race and national origin that promote diversity of views, knowledge and experience when evaluating the suitability of individuals for nomination. While the Board does not have a formal written policy regarding what specific factors would create such diversity, the Governance Committee recognizes and strives to promote 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. Among them are: industry knowledge; substantial global business and other international experience and backgrounds given our global, multicultural business; significant operating experience; leadership and people development experience; accounting and financial expertise; product development and marketing experience; and public company board and corporate governance experience. As part of its periodic assessment of the Boards composition, the Governance Committee assesses the effectiveness of the Boards diversity.
Our director nominees varied and relevant experiences, global and diverse perspectives, backgrounds and personal characteristics provide the Board with a diversity of viewpoints and enable it to represent effectively our shareholders:
Size of Board
Our Board currently has 13 directors. The Governance Committee recommended and the Board nominated each of the 13 incumbent directors listed below under Director Nominees for Election at the 2016 Annual Meeting for election at the 2016 Annual Meeting. Each director nominee consented to his or her nomination for election to the Board and to serving on the Board, if elected.
Shareholders elect all directors annually. Of the 13 directors standing for election, shareholders elected 12 to one-year terms at the 2015 Annual Meeting of Shareholders. Christiana Shi was recommended to the Governance Committee as a potential director by the Governance Committees consultant, Heidrick & Struggles, in connection with the Governance Committees search for a director with significant e-commerce and global business experience. On December 8, 2015, the Board appointed Ms. Shi, effective January 4, 2016.
The terms of all directors elected at the 2016 Annual Meeting will end at the 2017 Annual Meeting of Shareholders or when a directors successor has been duly elected and qualified.
Shareholder Recommendations of Candidates for Election to the Board
The Governance Committee welcomes shareholder recommendations of candidates for election to the Board. To recommend a particular candidate for consideration, the shareholder should submit the required information to our Corporate Secretary, which information includes the name of the recommended candidate along with the same information required for a shareholder to nominate a candidate for election to the Board at an Annual Meeting and in the same manner as set forth in the advance notice provisions of the Companys By-Laws. When evaluating a candidate recommended by a shareholder(s), the Governance Committee uses the same criteria set forth in the Guidelines, as described above in this section, as it uses to evaluate a candidate the Governance Committee
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identifies. It then makes a recommendation to the Board regarding the candidates appointment or nomination for election to the Board at an upcoming annual meeting. After the Boards consideration of the Committees recommendation, our Corporate Secretary notifies that shareholder of the Boards decision whether to appoint or nominate the candidate.
In addition, our By-Laws permit our shareholders to nominate a candidate for election directly at an Annual Meeting or for inclusion in our proxy materials, subject to certain terms and conditions. For details, see 2017 Annual Meeting of Shareholders Shareholder Nominations and Proposals for the 2017 Annual Meeting on page 90 of this Proxy Statement.
Individual Nominees Experience, Qualifications, Attributes and Skills
The Board believes that each director nominee for election at the Annual Meeting is highly qualified. The director nominees biographies describe the specific experience, qualifications, including education and background, attributes and skills that the Governance Committee relied upon when determining to recommend the individual director nominees for election and led the Board to nominate him or her for election. A particular director nominee may possess skills, knowledge or experience in addition to those described below. As their biographies indicate, all the director nominees possess significant leadership and professional experience, knowledge, including industry knowledge, and skills that qualify them for service on our Board. Each director nominee other than Ms. Rosenfeld satisfies independence requirements under the NASDAQ listing standards and the Boards categorical standards of director independence. All 13 director nominees satisfy the criteria stated in our Guidelines and possess the personal characteristics essential for the proper and effective functioning of the Board, including public board and corporate governance experience.
Their biographies also include information about current and past (covering the last five years) directorships at companies publicly listed in the U.S. and registered investment companies. The director nominees may also serve on the boards of various private companies, companies listed outside of the U.S. and charitable, educational and cultural institutions, not all of which are included in their biographies.
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 director 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 13 DIRECTOR NOMINEES.
The following information regarding each director nominee is as of March 9, 2016.
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We believe that a strong corporate governance framework is essential to our long-term success. This section describes our governance policies, key governance practices and Board leadership structure and oversight functions.
The Board adopted Guidelines articulating our governance philosophy, practices and policies in a range of areas, including: the Boards role and responsibilities; Board composition and structure; responsibilities of the committees of the Board; CEO and Board performance evaluations; and succession planning. At least annually, the Governance Committee reviews the Guidelines and recommends any changes to the Board. The Guidelines are available on our website at www.mondelezinternational.com/investors/corporate-governance.
Key Corporate Governance Practices
At least annually, we review our corporate governance practices to support the Boards independent leadership, accountability and oversight. Key aspects of our corporate governance framework include:
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Additionally, equity grants awarded in or after May 2010 to directors are made in the form of deferred stock units. Distribution of actual shares occurs six months after the director ends his or her service as a director.
Board Leadership Structure
Our By-Laws provide the Board flexibility in determining its leadership structure. The Board may appoint and designate the duties of a Lead Director and permit one person to hold the offices of both CEO and Chairman. Within that framework, the Board annually re-evaluates its leadership structure to determine the most appropriate leadership structure at that time. In considering which leadership structure will allow it to most effectively carry out its responsibilities and best represent shareholders interests, the Board takes into account various factors. Among them are our specific business needs, our operating and financial performance, industry conditions, economic and regulatory environments, results of Board and committee annual self-assessments, advantages and disadvantages of alternative leadership structures based on circumstances at that time and our corporate governance practices. In keeping with this principle, the Board may determine that the CEO also serve as Chairman, but if it does so, it also appoints an independent Lead Director with robust responsibilities.
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Current Leadership Structure
Currently, our Guidelines provide that:
The Board believes that this leadership structure provides an effective balance of strong leadership and independent oversight and best meets our current circumstances and anticipated needs.
Independent Director Leadership and Oversight
The Board believes that robust independent Board leadership and oversight are very important. Therefore, it established the substantive position of independent Lead Director for times when one individual serves as both Chairman and CEO. Our independent directors annually select our Lead Director for a one-year term. The Board created the Lead Director position to provide independent leadership of the Boards affairs on behalf of our shareholders, increase the Boards effectiveness, promote open communication amongst the independent directors and serve as the principal liaison between the Chairman and the other independent directors.
Lead Director Role and Responsibilities
Under our Guidelines, the Lead Director, in consultation with the other independent directors, has the following duties and responsibilities:
Mark D. Ketchum is our current Lead Director. The independent directors first appointed him to that role in 2009 and have re-appointed him annually. The independent directors believe that he is an effective Lead Director due to his independence, leadership, global operating experience as former President and CEO of Newell Rubbermaid Inc. and a variety of roles during his 33 year career at The Procter & Gamble Company, and corporate governance experience, including his prior service as a director of Newell Rubbermaid Inc. and Hillenbrand Industries.
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Chairman and CEO Role and Responsibilities
Ms. Rosenfeld has served as our CEO and as a director since June 2006. In conjunction with our 2007 spin-off from Altria Group, Inc., 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 in which we operate, her leadership experience and her ability and dedication to working closely with the Lead Director and our other independent directors. Based on our current circumstances and anticipated needs, the Board continues to believe that having Ms. Rosenfeld serve as both CEO and Chairman serves our shareholders interests and contributes to the Boards efficiency and effectiveness. The Board believes that she is generally in the best position to inform our independent directors about our global operations and critical business matters and ensure alignment of our business and strategic plans. Further, the Board believes that combining these roles also fosters expedient communication between Ms. Rosenfeld and the Board.
Our Guidelines require that at least 80% of our directors meet the NASDAQ listing standards independence requirements and provide that the Chairman and CEO generally should be the only member of management to serve as a director. In order to determine that a director is 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 directors immediate family has any current or past employment or affiliation with Mondelēz International or our independent registered public accountants. These standards are generally consistent with the NASDAQ listing standards independence requirements. Annex A to the Guidelines lists these categorical standards. It is available on our website at www.mondelezinternational.com/investors/corporate-governance.
The Board determined that, under our categorical standards and NASDAQs listing standards, the following directors are independent: Stephen F. Bollenbach, Lewis W.K. Booth, Lois D. Juliber, Mark D. Ketchum, Jorge S. Mesquita, Joseph Neubauer, Nelson Peltz, Fredric G. Reynolds, Christiana S. Shi, Patrick T. Siewert, Ruth J. Simmons and Jean-François M. L. van Boxmeer. In addition, Ratan N. Tata was independent during the portion of fiscal 2015 he served on the Board. Irene B. Rosenfeld is not independent because she is a Mondelēz International employee.
Oversight of Risk Management
Our business faces various risks, including strategic, financial, operational and compliance risks.
Our ERM process is ongoing and implemented at all levels of our operations and across business units to identify, assess, monitor, manage and mitigate risk. Our ERM process facilitates open communication between management and the Board so that the Board and committees understand key risks to our business and performance, our risk management process and how it is functioning, the participants in the process and the information gathered through the process. The Audit Committee annually reviews the functioning of our ERM process as well as the results of our annual ERM risk assessment.
Annually, the Audit Committee reviews and approves managements recommendation for allocating to the full Board or retaining for itself responsibility for reviewing and assessing key risk exposures and managements response to
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those exposures. Management provides reports to the Board and the appropriate committee in advance of meetings regarding key risks and the actions management has taken to monitor, control and mitigate these risks. Management also attends Board and committee meetings to discuss these reports and provide any updates. The committees report key risk discussions to the Board following their meetings. Board members may also further discuss the risk management process directly with members of management.
During 2015, the Board and committees reviewed and assessed risks related to our business and operations as follows (the Board annually reviews and sometimes reallocates responsibilities amongst committees. Accordingly, the allocation of responsibilities shown in this table may change during 2016):
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, including strategic and operational risks. More generally, the Board is responsible for oversight of strategy, broad corporate policy and overall performance of the Company through engaged oversight of management.
The Board believes our current leadership structure enhances its oversight of risk management because our CEO, who is ultimately responsible for our risk management process, is in the best position as Chairman to discuss with the Board these key risks and managements responses to them.
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Code of Business Conduct and Ethics for Non-Employee Directors
We have adopted a Code of Business Conduct and Ethics for Non-Employee Directors. 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 Code of Business Conduct and Ethics for Non-Employee Directors. Shareholders and others can access our Director Ethics Code on our website at www.mondelezinternational.com/investors/corporate-governance.
Code of Conduct for Employees
We have adopted a Code of Conduct for Employees that applies to all of our employees. It includes policies that cover ethical and legal practices for nearly every aspect of our business. The Code of Conduct for Employees reflects our values and contains important rules our employees must follow when conducting business. The Code of Conduct is part of our global compliance and integrity program. The program provides training throughout 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 for Employees on our website at www.mondelezinternational.com/about-us/compliance-and-integrity.
We will disclose in the Corporate Governance section of our website any amendments to our Code of Business Conduct and Ethics for Non-Employee Directors or Code of Conduct for Employees and any waiver granted to an executive officer or director under these codes.
Related Persons Policy and Procedures
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, the amount involved exceeds $120,000 and any related person had, has or will have a 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 Governance Committee determines that a transaction qualifies as a related person transaction, then the Governance Committee reviews, and approves, disapproves or ratifies the related person transaction. The Governance 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 Governance 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 Governance Committee any transaction so approved or ratified. The Governance Committee, in the course of its review and approval or ratification of a related person transaction under this policy, considers, among other things:
Any member of the Governance Committee who is a related person with respect to a transaction under review may not participate in the deliberations or decisions regarding the transaction.
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Review of Transactions
On February 10, 2016, BlackRock, Inc. (BlackRock), an investment management corporation, filed a Schedule 13G/A with the SEC reporting that it was a greater than 5% shareholder as of December 31, 2015. During 2015, BlackRock acted as an investment manager with respect to certain investment options under our U.S. retirement savings plans and Canadian, Irish and U.K. pension plans. BlackRock was selected as an investment manager for the retirement savings and pension plans by each plans designated authority for plan investments. BlackRocks selection was based on the determination of each plans designated authority that the selection met applicable standards and that the fees were reasonable and appropriate. BlackRocks fees, approximately $1.59 million during 2015, were paid from the plan assets of the specific plans for which it performed services. The plans expect to pay similar fees to BlackRock during 2016 for similar services. (Fees, based on plan asset value, are paid quarterly on a lagging basis.)
Consistent with our shareholder engagement philosophy, throughout 2015, our Lead Director, senior management, Investor Relations and the Corporate Secretary met with and sought feedback from many shareholders representing a significant portion of our outstanding shares on a wide range of topics including, among others, portfolio strategy, capital allocation, corporate governance including proxy access, sustainability and corporate social responsibilities. These meetings were candid and constructive. We will continue to engage with and consider our shareholders perspectives, and doing so benefits Mondelēz International and its registered, beneficial, retail and institutional investors. Our Lead Director is available for consultation and direct communication with major shareholders.
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/Investors/corporate-governance#contacts. Our Corporate Secretary:
The Governance Committee considers and makes recommendations to the Board regarding the Boards committee structure and membership. Our Board designates the committee members and chairs following consideration of the Governance Committees recommendations. The Board has adopted a written charter for each standing committee. The charters define each committees roles and responsibilities. Charters for each committee are available on our website at www.mondelezinternational.com/investors/corporate-governance. Independent directors comprise 100% of the Audit, Compensation, Finance and Governance Committees. All committee chairs are independent. Each committee meets regularly in executive session without management. Committee Chairs approve agendas and materials for their committee meetings. In addition, committees may retain outside legal, financial and other advisors, at the Companys expense.
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The Board has four standing committees: Audit, Finance, Governance, Membership and Public Affairs and Human Resources and Compensation. The committee structure and membership is as follows:
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 eight meetings during 2015 and acted twice by unanimous written consent.
The Board established the Audit Committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (the Exchange Act). The Board has determined that all of the Audit Committee members 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 are financially literate in accordance with the New York Stock Exchange listing standards. The Board has determined that Stephen F. Bollenbach 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 2015 from us other than compensation for service as a director.
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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, compensation, retention and oversight of our independent registered public accountants, including review of their qualifications, independence and performance.
Among other duties, the Audit Committee also oversees:
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: email@example.com.
Audit Committee Report for the Year Ended December 31, 2015
Management has primary responsibility for Mondelēz Internationals 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 Internationals accounting and financial reporting processes and audits of its financial statements. In addition, in 2015 we assisted the Board in its oversight of:
Our duties include overseeing Mondelēz Internationals management, the internal audit department and the independent registered public accountants in their performance of the following functions, for which they are responsible:
Internal Audit Department
Independent Registered Public Accountants
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Periodically, we meet, both independently and collectively, with management, the internal auditor and the independent registered public accountants to, among other things:
Prior to Mondelēz Internationals filing of its Annual Report on Form 10-K for the year ended December 31, 2015 with the SEC, we also:
Based upon the review 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 Internationals Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the U. S. Securities and Exchange Commission on February 19, 2016.
Fredric G. Reynolds, Chair
Stephen F. Bollenbach
Jorge S. Mesquita
Patrick T. Siewert
Our Audit Committees policy is to pre-approve all audit and non-audit services provided by the independent registered public accountants. 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 registered public accountants will perform. Management reports to the Audit Committee on the actual fees charged by the independent registered public accountants for each category of service.
During the year, circumstances may arise when it becomes necessary to engage the independent registered public accountants for additional services not contemplated in the original pre-approval authority. In those instances, the committee approves the services before we engage the independent registered public accountants. In case approval is needed before a scheduled committee meeting, the committee has delegated pre-approval authority to its chair. The chair must report on such pre-approval decisions at the committees next regular meeting.
The Audit Committee pre-approved all 2015 audit and non-audit services provided by the independent registered public accountants.
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Independent Registered Public Accountants Fees
Aggregate fees for professional services rendered by our independent registered public accountants, PricewaterhouseCoopers LLP, for 2015 and 2014 were:
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).
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.
All Other Fees include professional services in connection with seminars, compliance reviews and data protection compliance reviews.
All fees above include out-of-pocket expenses.
The Board has determined that all of the Finance Committee members are independent within the meaning of the NASDAQ listing standards. The Finance Committees charter sets out its responsibilities, which include reviewing and making recommendations to the Board on significant financial matters, including:
The Finance Committee also reviews and discusses with management:
Governance, Membership and Public Affairs Committee
The Board has determined that all of the Governance Committee members are independent within the meaning of the NASDAQ listing standards. The Governance Committees charter sets out its responsibilities. Among its responsibilities are:
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Human Resources and Compensation Committee Independence, Interlocks and Insider Participation
The Board has determined that all of the Compensation Committee members are independent within the meaning of the NASDAQ listing standards, including the heightened independence criteria for compensation committee members. None of the Compensation Committees members is or was:
The Compensation Committees charter sets out its responsibilities. Among its responsibilities are to:
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The Compensation Committee has the authority to delegate any of its responsibilities to the committees Chair, another Compensation Committee member or a subcommittee of Compensation Committee members, unless prohibited by law, regulation or any NASDAQ listing standard.
The Compensation Committees Use of an Independent Compensation Consultant
The Compensation Committee retains an independent compensation consultant to assist it in evaluating executive compensation programs and advise it regarding the amount and form of executive and director compensation. It uses a consultant to provide additional assurance that our executive and director compensation programs are reasonable, competitive and consistent with our objectives. It directly engages the consultant under an engagement letter that the Compensation Committee reviews at least annually.
Since September 2009, the Compensation Committee has retained Compensation Advisory Partners, LLC (CAP) as its independent compensation consultant, and the Compensation Committee annually reviews CAPs engagement. During 2015, CAP provided the Compensation Committee advice and services, including:
For the year ended December 31, 2015, CAP provided no services to Mondelēz International other than consulting services to the Compensation Committee regarding executive and non-employee director compensation.
The Compensation Committee regularly reviews the current engagements and the objectivity and independence of the advice that CAP provides to the Compensation Committee on executive and non-employee director compensation. The Compensation Committee considered the six specific independence factors adopted by the SEC and NASDAQ and determined that CAP is independent and that CAPs work did not raise any conflicts of interest.
Limited Role of Executive Officers in the Determination of Executive Compensation and Non-Employee Director Compensation
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How the Compensation Committee Manages Compensation-Related Risk
As it does each year, in 2015, the Compensation Committee evaluated whether our compensation designs, policies and practices operate to discourage our executive officers and other employees from taking unnecessary or excessive risks. As described in the Compensation Discussion and Analysis, we design our compensation to incentivize executives and other employees to achieve the Companys financial and strategic goals as well as individual performance goals that promote long-term shareholder returns. Our compensation design discourages our executives and other employees from taking excessive risks for short-term benefits that may harm the Company and our shareholders in the long-term. The Compensation Committee uses various strategies to mitigate risk, including:
In addition, our Audit Committee oversees our ethics and compliance programs that educate executives and other employees on appropriate behavior and the consequences of inappropriate actions. These programs not only drive compliance and integrity but also encourage employees with knowledge of bad behavior to report concerns by providing multiple reporting avenues while protecting reporting employees against retaliation.
CAP also reviewed the Compensation Committees risk analysis, including the underlying procedures, and confirmed the Compensation Committees conclusion below.
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 the Company.
Any director who also is an 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 recruit and retain highly qualified non-employee directors who will best represent our shareholders interests. To ensure the compensation we offer is sufficient to meet our objective, our Compensation Committee periodically reviews non-employee director compensation. During 2015, the Compensation Committee used data
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provided by CAP to benchmark our non-employee director compensation against our Compensation Survey Group and compensation paid to non-employee directors of other Fortune 100 companies in order to assess the appropriateness of the form and amount of non-employee director compensation. Based upon that information, the Compensation Committee recommended and the Board approved changes to the non-employee compensation in 2015. Effective July 1, 2015:
Additionally, effective on May 20, 2015, the date of the 2015 Annual Meeting of Shareholders, the annual equity grant value increased from $145,000 to $160,000.
Summary of 2015 Compensation Elements
Cash Compensation Board, Lead Director and Committee Chair Retainers
We pay our non-employee directors their cash retainers quarterly. Pursuant to the Mondelēz International, Inc. 2001 Compensation Plan for Non-Employee Directors, they can defer 25%, 50%, 75% or 100% of their cash retainers into notional unfunded accounts that mirror certain of the investment options under the Mondelēz Global LLC Thrift 401(k) Plan. If the Board appoints a non-employee director during the year (i.e., other than at the annual meeting of shareholders), we pay that director a prorated retainer based on the number of days remaining in the calendar year.
Equity Compensation Annual Equity Grant
Annual equity grants are made following the annual meeting of shareholders.
If the Board appoints a non-employee director during the year (i.e., other than at the annual meeting of shareholders), the director receives a prorated equity grant upon appointment. We calculate the value of the prorated grant using this ratio: the number of months until the next annual meeting of shareholders over a denominator of twelve months.
Non-employee director annual equity grants are made in the form of vested deferred stock units. Distribution of actual shares occurs six months after the director ends his or her service as a director. When the Company pays a dividend on the Companys common shares, we accrue the value of the dividends that the Company would have paid on the deferred stock units. Six months after the director ends his or her service as a director, we issue shares to the director equal to the accumulated accrued value.
Stock Ownership Guidelines
To align further our non-employee directors interests with our shareholders interests, we expect our non-employee directors to hold shares of our Common Stock in an amount equal to five times the annual Board retainer (i.e., $550,000) within five years of becoming a director. If a non-employee director does not meet the stock ownership guidelines within that timeframe, the Lead Director will consider the non-employee directors particular situation and may take action, as he deems appropriate. As of March 9, 2016, each director who has served for at least five years met or exceeded this requirement.
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Company Match for Director Charitable Contributions
Non-employee directors are eligible to participate in a Mondelēz International Foundation (the Foundation) Matching Gift program. Each year, the Foundation will generally match up to $15,000 in contributions by a non-employee director to a 501(c)(3) non-profit organization(s).
2015 Non-Employee Director Compensation Table
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Non-Employee Director Equity Awards Table
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In the Overview section of this Compensation Discussion and Analysis (CD&A), we highlight:
In the remainder of this CD&A, we describe:
How Our Financial Performance Impacted Our NEOs 2015 Annual Incentive Award and Performance Share Unit Awards Subject to the 2013-2015 Performance Cycle
2015 Annual Cash Incentive Program Awards
Our financial performance in 2015 was strong. Specifically, we delivered:
Because we satisfied our market share performance target, this measure did not impact our corporate rating.
Overall, we achieved an above target performance rating of 175% under the 2015 Annual Cash Incentive Program.
See Description of Individual Executive Compensation Program Elements Financial Measure Definitions for definitions of these performance measures and Description of Individual Executive Compensation Program Elements Annual Cash Incentive Program for more information about our Annual Cash Incentive Program, including our performance targets under the program.
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Performance Share Unit Awards Subject to 2013-2015 Performance Cycle
During the 2013-2015 performance cycle, we delivered:
Overall, we achieved an above target performance rating of 150% for our performance share unit awards subject to the 2013-2015 performance cycle.
See Description of Individual Executive Compensation Program Elements Financial Measure Definitions for definitions of these performance measures and Description of Individual Executive Compensation Program Elements Equity Program for more information about our performance share units, including the performance targets.
Our 2015 Shareholder Say on Pay Vote Showed Strong Support for Our Executive Compensation Program
More than 96% of the votes cast in our 2015 shareholder advisory Say on Pay voted for our executive compensation program. As evidenced by this strong support, we believe our shareholders generally support our overall compensation principles, programs and practices. Therefore, we made no changes to our executive compensation program directly in response to the 2015 shareholder advisory Say on Pay vote.
Our 2015 Executive Compensation Program Changes to Refine the Alignment with Our Strategies and Objectives
Our Compensation Committee regularly assesses our executive compensation program in light of our strategy, market practices and shareholder input. In 2015, we made changes to our executive compensation program to refine the alignment with our strategies and objectives. We summarize the changes below.
2015 Annual Cash Incentive Program Changes
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2015 Equity Program Change
Historically, we allocated the total target annual equity grant value in the form of 50% performance share units, 25% non-qualified stock options, and 25% restricted stock/deferred stock units. We no longer grant time-based restricted stock or deferred stock units as part of our annual equity program to our executives, including the NEOs.
To further link pay to performance for our executives and align with our shareholders interests, beginning with grants made under our 2015 annual equity program, we allocate 75% of the total target annual equity grant value to performance share units and 25% to non-qualified stock options as illustrated here:
Our 2015 NEOs
Our 2015 NEOs are:
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Our Executive Compensation Design Principles and Governance Practices
Our executive compensation design principles and compensation governance practices reflect best practices to protect and promote our shareholders interests.
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How We Design our Executive Compensation Program
In overseeing our executive compensation program, our Compensation Committee focuses on the following primary program goals:
We design our executive compensation program to achieve these goals by:
Using a Mix of Fixed and Variable Compensation. We heavily weight the mix toward variable compensation to attract, retain and motivate top-performing executives, as well as to appropriately align compensation levels with achieving relevant financial and strategic goals.
Using a Mix of Equity and Cash Incentives. We heavily weight the mix toward equity that vests over multiple years to focus executives on achieving long-term TSR that exceeds our peers median and to align the mix with the interests of our shareholders.
Compensating Based on Individual Performance. We consider an executives individual performance in making compensation decisions.
Requiring Our Executives to be Significant Shareholders. We require our executives to:
Benchmarking our Compensation and Performance Against Relevant Comparators. We use two separate groups of companies to benchmark our executives compensation and assess our relative performance:
With CAPs input, the Compensation Committee reviews the composition of these comparator groups to ensure the composition of each remains appropriate. See Composition and Purpose of our Compensation Survey Group and Composition and Purpose of our Performance Peer Group below for additional information.
Paying Competitively. Each year, we compare our compensation programs with those of our Compensation Survey Group. We assess whether our executive compensation and target compensation levels are consistent with market practice. In addition, we compare our financial and TSR performance against our Performance Peer Group. The Performance Peer Group comparison allows us to link long-term incentive compensation to the delivery of superior financial results relative to industry peers.
Composition and Purpose of our Compensation Survey Group
In constructing our Compensation Survey Group, our Compensation Committee considers global companies with the following attributes:
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The Compensation Committee also considers companies outside the consumer products industry based on the following criteria:
Based on these characteristics and input from CAP and management, our Compensation Committee selected the following companies for our 2015 Compensation Survey Group, which is unchanged from 2014. The median annual revenue of these companies at the time of our 2015 benchmarking was $33.6 billion, which was comparable to our revenue size at that time.
In determining appropriate compensation levels for our executives, our Compensation Committee reviews compensation levels for comparable roles at companies in our Compensation Survey Group. Aon Hewitt (Aon) provides the underlying compensation data. At the request of the Compensation Committee, CAP reviews and evaluates Aons data.
Our Compensation Committees compensation strategy is to benchmark total direct compensation (at target levels), including base salary and annual and long-term incentives, at or near the median of our Compensation Survey Group. Company and individual performance will determine whether actual compensation received is above or below the Compensation Survey Group median.
To further validate our compensation levels, using data provided by CAP, our Compensation Committee retrospectively evaluates how well we aligned pay-for-performance compared with our Compensation Survey Group.
Composition and Purpose of our Performance Peer Group
Companies primarily focused on the production and marketing of food and non-alcoholic beverages comprise our 2015 Performance Peer Group listed below. It is unchanged from 2014. We directly compete with these companies, so comparing our performance relative to the groups performance provides a valuable measure of performance. Specifically, we compare our annualized TSR with the median annualized TSR of our Performance Peer Group to assess our results on the TSR performance measure for our performance share units. This group is less relevant when we compare compensation levels for certain executive positions because differences in size and complexity reduce comparability.
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Our Performance Peer Group consists of 11 companies, 9 of which are also in our Compensation Survey Group. They slightly differ because companies in our Performance Peer Group are primarily in the food and non-alcoholic beverage industry. We include companies in our Performance Peer Group regardless of revenue size or market capitalization.
Overall Target Compensation Mix
These charts compare the 2015 total target compensation mix for our CEO and, on average, our other NEOs with the average of the companies in our Compensation Survey Group. The charts show that our target compensation mix aligns well with that of our Compensation Survey Group.
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Overview of 2015 Executive Compensation Program Elements
This table identifies and describes the specific elements of our 2015 executive compensation program for our NEOs, including each elements program objectives. A more detailed discussion of these elements, including definitions of the financial measures used in our Annual Cash Incentive Program and performance share units grants, follows this table. We discuss individual compensation decisions for each NEO under Compensation Paid to our Named Executive Officers in 2015.
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Base salary is the principal fixed element of executive compensation. In setting base salaries for our NEOs, our Compensation Committee generally targets base salary at or near the median of our Compensation Survey Group based on the executives comparable role. Our Compensation Committee also considers a number of other factors when setting base salaries for our NEOs, including Company and individual performance, level of responsibility, experience and potential to assume roles with greater responsibility. The Compensation Committee reviews our NEOs salaries annually (or more often if there is a notable change in an executive officers role and responsibilities during the course of the year) and considers whether any increases are warranted. If so, salary increases are generally effective April 1 for all executive officers.
Annual Cash Incentive Program
We design our Annual Cash Incentive Program to motivate our NEOs and to reward them for delivering results above the threshold performance of our annual financial and strategic goals. The Compensation Committee sets the formula and each NEOs target and maximum annual incentive opportunity at the beginning of the year. The Compensation Committee bases actual awards made to an NEO on our annual financial results and the NEOs individual performance.
Annual Cash Incentive Program Award Formula
As described above, we modified our Annual Cash Incentive Program in 2015 to establish financial and individual performance as stand-alone, separate metrics. The Compensation Committee used the formula below to determine awards made to NEOs under the 2015 Annual Cash Incentive Program. See Compensation Paid to our Named Executive Officers in 2015 for additional detail on the actual awards made to each NEO.
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This chart describes the Annual Cash Incentive Program elements, except for base salary (discussed above).
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2015 Corporate Rating
To determine NEO awards, our Compensation Committee evaluated our 2015 results against our 2015 performance goals:
The Compensation Committee retains discretionary authority to adjust the final corporate rating (up or down) by as much as 25 pp to recognize more subjective, less quantifiable factors such as how well we performed based on compliance, diversity and the quality of our results. The Compensation Committee did not exercise its authority to adjust the 2015 rating.
We design our equity grants to align our executive officers and shareholders interests. For our 2015 equity program, to further link pay to performance for our executives and align with our shareholders, the Compensation Committee changed the mix to 75% performance share units and 25% NQSOs as discussed earlier under Overview Our 2015 Executive Compensation Program Changes to Refine the Alignment with Our Strategies and Objectives 2015 Equity Program Change.
The Compensation Committee bases equity grant value ranges for performance share units and NQSOs on an analysis of competitive market practice, with the midpoint of the equity grant value ranges, inclusive of the value of the target performance share units, approximately equal to the median total long-term incentives of our Compensation Survey Group. The Compensation Committee may make an equity grant to an NEO above or below the midpoint based on its qualitative review of the NEOs individual performance. Generally, the equity grant value is between 50% and 150% of the midpoint. All annual equity grants made to our NEOs in 2015 fell within that range.
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The table below shows the NEO equity grant value ranges, inclusive of both performance share units and NQSOs, for the 2015 annual equity grant on February 18, 2015.
We present the actual equity grants in the 2015 Grants of Plan-Based Awards table under Executive Compensation Tables in this Proxy Statement. Our annual grant date is pre-determined based on the scheduled date of the Compensation Committee meeting following the release of our annual financial results, and the exercise price for all NQSO grants equals the closing trading price on the grant date.
Performance Share Units
The Compensation Committee grants performance share units to motivate executives to achieve our long-term financial goals and deliver top-tier shareholder returns. The Compensation Committee sets performance targets for a three-year performance cycle. The grants made in 2015 are for the three-year performance cycle ending December 31, 2017. The 2015-2017 and 2013-2015 performance cycles are discussed in greater detail below. At the end of the three-year performance cycle, the Compensation Committee will only award shares if results meet or exceed the performance thresholds set at the beginning of the cycle. The number of shares awarded to an executive depends on the achievement of key financial measures and annualized TSR relative to the median of our Performance Peer Group. Share awards occur in the first quarter following the end of the performance cycle, provided the Compensation Committee certifies performance at or above threshold levels.
To address unforeseen or unintended consequences, the Compensation Committee retains discretion to adjust the final business performance rating for a performance cycle (up or down) by as much as 25 pp, allowing the Compensation Committee to factor in a subjective review of quality of financial results, portfolio management, innovation and talent development. The Compensation Committee did not exercise its authority to adjust the final business performance rating for the 2013-2015 performance cycle. The Compensation Committee does not consider an NEOs individual contributions as the basis for an award; awards related to performance share units are based solely on how the Company performed against performance targets.
For grants made beginning in 2013, dividend equivalents accrue during the performance period and are paid out in cash in the first quarter following the award payout date based on the actual share award.
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The Compensation Committee uses the following formula to determine actual awards for participants, including our NEOs. Each element of this formula is discussed below.
2015-2017 Performance Cycle
For performance share units with a 2015-2017 performance cycle, the target objective set for Annualized Relative TSR is the median of the Performance Peer Group. We set our financial performance targets for Organic Net Revenue Growth and Adjusted ROIC Increase taking into consideration our long-term strategy. We do not publicly disclose specific financial performance targets on a prospective basis. Revealing these specific targets prospectively would provide competitors and other third parties with insights into our confidential planning process and strategies, thereby potentially harming us competitively. The financial performance targets are designed to be challenging, and there is a risk that no awards will be made or awards will be made at less than 100% of the target level.
We base cash awards under our Annual Cash Incentive Program and share awards for our performance share units in part on our Organic Net Revenue Growth. However, the Compensation Committee uses a different benchmark to measure performance for each. For the Annual Cash Incentive Program, the Compensation Committee measures Defined Organic Net Revenue Growth based on our annual operating targets. In contrast, when setting our Organic Net Revenue Growth target for the 2015-2017 performance cycle, the Compensation Committee considered our long-term strategy. The Compensation Committee believes the use of these different targets focuses our executives on critical internal drivers, both in the short- and long-term, and the different targets for each, when combined, closely correlate with shareholder value. Additionally, the majority of any cash award under our Annual Cash Incentive Program or share award for the 2015-2017 performance cycle is based on separate independent performance measures, as Defined Organic Net Revenue Growth is weighted 21% (35% of 60% weighting for financial performance) for our Annual Cash Incentive Program and Organic Net Revenue Growth is weighted 25% for our 2015-2017 performance cycle.
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2013-2015 Performance Cycle
Our Compensation Committee determined the share award for the 2013-2015 performance cycle based on a performance rating that included the Companys performance on key financial goals (Organic Net Revenue Growth and Adjusted EPS Growth) and Annualized Relative TSR goals. With regard to determining our Annualized Relative TSR performance, we used our 2015 Performance Peer Group. See How We Design Our Executive Compensation Program Paying Competitively Composition and Purpose of our Performance Peer Group above.
The following chart reflects the key financial measures, weightings and performance standards the Compensation Committee set for the 2013-2015 performance cycle. It also reflects our actual performance and the final business performance rating approved by the Compensation Committee.
Based on target awards as a percent of salary and the performance rating of 150% of target, the share award (before taxes) for each of our NEOs for the 2013-2015 performance cycle was as follows:
2015 Retention Equity Grants
As described above, a primary goal of our executive compensation program is to retain and motivate talented executive officers and develop world-class business leaders. The CEO and Compensation Committee extensively review talent retention, including retention of executives with a demonstrated track-record of performance who are key to the future success of the Company. Based on this review, on October 30, 2015, the Compensation Committee awarded retention-based equity grants to Mr. Cofer and Mr. Clouse. Each grant had a fair market value on the grant date of $5,000,051 and consisted of deferred stock units that fully vest on the third anniversary of the grant date with the same terms and conditions as the 2015 annual equity grant to employees generally. The Committee determined this amount based on a review of Mr. Cofers and Mr. Clouses compensation and the value of outstanding equity grants for comparable positions at peer companies. These one-time grants will not affect any regular compensation arrangements for Mr. Cofer or Mr. Clouse.
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Requiring Stock Ownership
To further align our NEOs and our shareholders interests, and to incent our NEOs to focus on shareholders interests, the Compensation Committee requires each executive to hold a significant amount of our Common Stock. The following chart summarizes our stock ownership and holding requirements. We believe our stock ownership requirements are comparable to, or are more stringent than, stock ownership requirements of the majority of our Compensation Survey Group. We regularly monitor compliance with these levels. As of March 1, 2016, each of our NEOs who have met the applicable time requirements satisfied or exceeded the stock ownership requirements. All NEOs adhered to the holding requirements.
Financial Measure Definitions
While we report our financial results in accordance with U.S. GAAP, we use non-GAAP financial measures in making financial, operating and planning decisions and in evaluating our performance. Therefore, we also base financial targets for our Annual Cash Incentive Program and performance share units on non-GAAP and other financial measures. The chart below describes adjustments to the related GAAP measure and our reasons for using these measures. (See our 2015 Form 10-K, for additional information on our Non-GAAP Financial Measures and definitions of terms used in the Definitions column below.)
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In 2015, our NEOs were eligible to participate in 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 officers at many of the companies in our Compensation Survey Group and is provided for recruitment purposes and to assist executives in managing their future cash flow. 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. Executives may invest deferred amounts in one or more notional investment options.
We offer our NEOs executive physicals as well as car and financial allowances. Additionally, based on the findings of an independent, third-party security study, we require Ms. Rosenfeld to use the corporate aircraft for business and personal travel. This also allows Ms. Rosenfeld to be more productive and efficient when she travels, particularly considering we do business in approximately 165 countries. NEOs are solely responsible for all taxes on all perquisites. We do not provide tax gross ups. We offer limited perquisites similar to those offered by companies in our Compensation Survey Group and do so at comparable costs. The Compensation Committee believes these limited perquisites are important for retention and recruitment.
In 2015, the Compensation Committee approved reimbursement of a $45,000 filing fee incurred by Ms. Rosenfeld in connection with a required filing under the Hart-Scott-Rodino Antitrust Improvements Act (HSR). The filing was required because the dollar value of shares held by Ms. Rosenfeld exceeded thresholds established under HSR, due to share price appreciation and vesting in equity awards. The Compensation Committee considered it appropriate to reimburse Ms. Rosenfeld because the expense resulted from the operation of our equity compensation program and Ms. Rosenfeld is required to hold significant equity under our stock ownership and holding requirements. Ms. Rosenfeld is responsible for income taxes on the reimbursement and, in line with our policy described above, we did not provide any tax gross-up.
The footnotes to the Summary Compensation Table under Executive Compensation Tables list our NEOs 2015 perquisites.
Retirement and Separation Benefits
As described below, we offer our NEOs retirement and separation benefits. We do not have employment agreements with any of our NEOs. They are all at will employees, including Ms. Rosenfeld.
Generally, our NEOs are eligible for broad-based U.S. employee benefit plans, including two tax-qualified plans the Mondelēz Global LLC Retirement Plan (Retirement Plan) and the Mondelēz Global LLC Thrift Plan (Thrift Plan). U.S. employees hired after 2008 are not eligible to participate in the Retirement Plan or the defined benefit portion of the Supplemental Plan (as defined below). In addition, accruals under the Retirement Plan and the defined benefit portion of the Supplemental Plan will cease after 2019. U.S. employees hired after 2008 who are not eligible to participate in the Retirement Plan are eligible to receive an enhanced employer contribution under the Thrift Plan and the defined contribution portion of the Supplemental Plan.
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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 that are not provided under the Retirement Plan or Thrift Plan due to an employees compensation exceeding the tax-qualified plan compensation limit under Code Section 401(a)(17), an employees election to defer compensation under either the MEDCP or the Supplemental Plan, or a Retirement Plan participants benefit exceeding the limits under Section 415 of the Code.
We provide Ms. Rosenfeld with a non-qualified, enhanced pension benefit that credits her pension service for the period of time (2004-2006) that she was not employed by the Company. We provide this enhanced pension benefit to Ms. Rosenfeld because, when she rejoined the Company, she forfeited her right to a pension benefit at her previous employer. This benefit was part of a broader incentive program to help encourage her to return to the Company and become our CEO. The 2015 Pension Benefits table and the accompanying narrative to the table under Executive Compensation Tables provide additional details about this benefit.
The Compensation Committee believes the Retirement Plan, Thrift Plan and non-qualified Supplemental Plan are integral parts of our overall executive compensation program. The Compensation Committee believes our NEOs should receive the same defined benefit accruals, be able to defer the same percentage of their compensation and receive the same corresponding notional employer contributions as all other employees, without regard to the Codes compensation limit applicable to tax-qualified plans or whether the NEO has elected to defer compensation.
Change in Control Severance Plan
We maintain a Change in Control Severance Plan (the CIC Plan) for senior executive officers. The CIC Plan is consistent with similar plans maintained by companies in our Compensation Survey Group, including eligibility and severance benefit levels. We structure separation payments to help assure that key executives, 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 is involuntarily terminated without cause or resigns for good reason within two years following a change in control (double trigger). In the event that a payment under the CIC Plan or otherwise triggers an excise tax under Code Section 4999, the payment will be the greater of the full benefit or a reduced benefit that does not trigger the excise tax as determined on an after-tax basis for each. We do not provide any tax gross ups for taxes payable on change in control benefits.
In 2015, we decreased the CEOs severance multiple from 3 times base salary to 2.99 times base salary. We further describe 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) under Executive Compensation Tables Potential Payments upon Termination or Change in Control.
Non-Change in Control Severance Agreements
Although we generally do not have individual severance or employment agreements with any of our NEOs, we would typically provide separation benefits as consideration for entering into an agreement protecting our interests. The severance payments and other benefits provided to a typical NEO are described under Executive Compensation Tables Potential Payments upon Termination or Change in Control.
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The chart below shows specific 2015 compensation actions for each NEO. For the shares awarded under the 2013-2015 performance cycle, see Description of Individual Executive Compensation Program Elements Equity Program 2013-2015 Performance Cycle above.
Ms. Rosenfeld did not receive a base salary increase in 2015.
2015 Annual Cash Incentive Program Award
The Compensation Committee determined Ms. Rosenfelds annual cash incentive award for 2015 in accordance with the 2015 Annual Cash Incentive Program and considered the following factors in determining Ms. Rosenfelds individual performance rating:
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2015 Equity Grant (Non-Qualified Stock Options and Performance Share Units)
Ms. Rosenfelds annual equity grant reflects her individual performance and external market positioning.
Defined Benefit Pension Present Value
As disclosed in the 2015 Summary Compensation Table under Executive Compensation Tables, the present value of Ms. Rosenfelds defined benefit pension increased $1,419,064 from the prior year. The primary driver of the present value increase is the change in mortality table assumptions used for purposes of the calculation, which resulted in a present value increase of approximately $1.2 million.
Mr. Gladden did not receive a salary increase in 2015.
2015 Annual Cash Incentive Program Award
Mr. Gladdens 2015 individual performance rating primarily reflects:
2015 Equity Grant (Non-Qualified Stock Options and Performance Share Units)
Mr. Gladdens annual equity grant reflects his individual performance and external market positioning.
Mr. Clouse received a salary increase in April 2015 based on his individual performance assessment and internal and external market positioning.
2015 Annual Cash Incentive Program Award
Mr. Clouses 2015 individual performance rating primarily relates to the development and implementation of our five-year growth plan and successfully transitioning leadership of the North American business to Mr. Marques.
2015 Equity Grants (Non-Qualified Stock Options, Performance Share Units and Deferred Stock Units)
Mr. Clouses annual equity grant reflects his individual performance and external market positioning. Mr. Clouse also received a retention grant as described under Description of Individual Executive Compensation Program Elements Equity Program 2015 Retention Equity Grants.
Mr. Cofer received a salary increase in April 2015 based on his individual performance assessment and internal and external market positioning.
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2015 Annual Cash Incentive Program Award
Mr. Cofers 2015 individual performance rating primarily related to strong performance for the Asia Pacific and Eastern Europe, Middle East and Africa regions through delivery of solid financial results relative to target despite economic and political instability in certain areas. Mr. Cofer also led the successful implementation of restructuring changes across our Asia Pacific and Eastern Europe, Middle East and Africa regions.
2015 Equity Grants (Non-Qualified Stock Options and Performance Share Units and Deferred Stock Units)
Mr. Cofers annual equity grant reflects his individual performance and external market positioning. Mr. Cofer also received a retention grant as described under Description of Individual Executive Compensation Program Elements Equity Program 2015 Retention Equity Grants.
International Assignment Payments
As a U.S. expatriate, Mr. Cofer received payments in 2015 in conjunction with his international assignment based in Singapore. 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 under our International Assignment Policy. Our International Assignment Policy is designed to facilitate relocation of employees to positions in other countries by covering expenses over and above those that the employees would have incurred had they remained in their home countries. Such payments include housing expenses, cost of living adjustment, education and travel expenses. Similarly, our International Assignment Policy covers the additional taxes employees incur due solely to their international assignments.
Commencement of Employment
On March 9, 2015, Mr. Marques commenced employment as the Executive Vice President and President, North America. To offset the loss of certain long-term incentives and retirement benefits from his previous employer, incent him to join the Company, and immediately align his compensation with our key critical performance measures and the interests of shareholders, the Compensation Committee approved a one-time cash payment of $1,100,000, subject to full repayment if his employment with us terminates before March 9, 2017 (except for an involuntary termination without cause or termination due to death or disability), and a one-time equity grant of 130,900 shares of restricted stock and 654,460 NQSOs. The performance-based portion of the equity grant, approximately half of the total grant value, only rewards Mr. Marques if there is an increase in our share price (NQSOs). The shares of restricted stock ratably vest 30%, 30% and 40% annually on the anniversary of Mr. Marques date of hire and are subject to the same terms and conditions as the restricted stock grants made to other employees generally on February 18, 2015 with the exception that the shares of restricted stock vest upon an involuntary termination without cause. The NQSOs ratably vest 30%, 30% and 40% annually on the anniversary of Mr. Marques date of hire and are generally subject to the same terms as the grants made to the NEOs on February 18, 2015 with the exception that any outstanding stock options will vest with a one-year post-termination exercise period upon an involuntary termination without cause. Due to the timing of his hire, Mr. Marques received a 2015 annual equity grant of 76,140 NQSOs and 45,690 performance share units on March 9, 2015.
Target Total Direct Compensation
Mr. Marques target compensation levels are above the median of our Compensation Survey Group primarily because of his significant prior operating experience in the consumer products industry. Mr. Marques annual base salary of $875,000, his target annual incentive of 80% of his base salary and his 2015 annual equity grant generally reflect internal and external peer positioning. Mr. Marques 2015 individual performance rating reflects solid financial performance for our North American region in a challenging operating environment.
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Event of Certain Restatements
The Board or an appropriate committee of the Board may determine that, as a result of a restatement of our financial statements, an executive officer received more compensation than the executive officer would have received absent the incorrect financial statements. The Board or committee, in its discretion, may then take such actions as it deems necessary or appropriate to address the events that gave rise to the restatement and to prevent its recurrence. Such actions may include, to the extent permitted by applicable law:
Trading Restrictions and Anti-Hedging Policy
Our insider trading policy limits the timing and types of transactions in Mondelēz International securities by Section 16 officers, including our NEOs (and any member of the Section 16 officers family sharing the same household). Among other restrictions, the policy:
Our insider trading policy prohibits our directors, executive officers and certain additional executives from holding Mondelēz International securities in a margin account or pledging Mondelēz International securities as collateral for a loan.
Policy with Respect to Qualifying Compensation for Tax Deductibility
Code Section 162(m) limits our ability to deduct compensation paid to certain NEOs (the covered employees) to $1.0 million annually. Covered employees under Code Section 162(m) include our principal executive officer and our next three highest paid executive officers, other than our principal financial officer. This limitation does not apply to performance-based compensation, provided certain conditions are satisfied. The Company generally intends that the Annual Cash Incentive Program awards and awards under our equity program qualify as performance-based compensation and are thus tax-deductible under Code Section 162(m). However, the application of Section 162(m) is complex and may change with time (with a potentially retroactive effect) and thus there can be no guarantee that all of these awards will actually qualify as performance-based compensation under Section 162(m).
Additionally, the Compensation Committee retains the discretion to authorize payments that may not be tax-deductible if it believes such payments are in the best interest of shareholders. For example, the Compensation Committee decided, based on benchmarking salaries of other chief executive officers in the Compensation Survey Group, to pay Ms. Rosenfeld an annual base salary in excess of $1.0 million. Therefore, a portion of her salary was not tax-deductible in 2015. In addition, a portion of certain of the other covered employees income exceeded the $1.0 million tax deductibility limit for 2015 because of other elements of their annual compensation.
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2015 Summary Compensation Table