Monsanto Company DEF 14A 2009
Documents found in this filing:
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the
Filed by the Registrant
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the
1) Title of each class of
securities to which transaction applies:
December 7, 2009
You are cordially invited to attend our annual meeting of shareowners on January 26, 2010. We will hold the meeting at 2:00 p.m. Central Standard Time in K Building at our Creve Coeur Campus, 800 North Lindbergh Boulevard, St. Louis County, Missouri. A map with directions to our Creve Coeur Campus can be found near the end of the proxy statement on page D-1.
In connection with the meeting, we have prepared a notice of the meeting, a proxy statement, and our 2009 annual report to shareowners, which provides detailed information relating to our activities and operating performance. On December 7, 2009, we mailed to our shareowners a Notice containing instructions on how to access these materials online. We believe electronic delivery will expedite the receipt of materials, while significantly lowering costs and reducing the environmental impact of our annual meeting by reducing printing and mailing of full sets of materials.
If you receive a Notice by mail, you will not receive a printed copy of the materials, unless you specifically request one. However, the Notice contains instructions on how to receive a paper copy of the materials. If you have received paper copies of these materials, a proxy card will also be enclosed.
Whether or not you plan to attend the annual meeting of shareowners, we encourage you to vote your shares.
You may vote:
If you plan to attend the annual meeting in person, you must provide proof of share ownership, such as an account statement, and a form of personal identification in order to be admitted to the meeting.
We will make available an alphabetical list of shareowners entitled to vote at the meeting, for examination by any shareowner during our ordinary business hours, at our Shareowner Services Department, located in E Building at the Creve Coeur Campus, from January 12, 2010 until the meeting.
On behalf of the entire board, we look forward to seeing you at the meeting.
Chairman of the Board of Directors,
President and Chief Executive Officer
The annual meeting of shareowners of Monsanto Company will be held in K Building at our Creve Coeur Campus, 800 North Lindbergh Boulevard, St. Louis County, Missouri, on Tuesday, January 26, 2010, at 2:00 p.m. Central Standard Time for the following purposes:
By Order of the Board of Directors,
DAVID F. SNIVELY
St. Louis, Missouri
December 7, 2009
Q. When and where is the annual meeting?
We will hold the annual meeting of shareowners on Tuesday, January 26, 2010, at 2:00 p.m. Central Standard Time in K Building at our Creve Coeur Campus, 800 North Lindbergh Boulevard, St. Louis, Missouri 63167. A map with directions to the meeting can be found near the back of the proxy statement on page D-1.
Q. Who is entitled to vote at the meeting?
You are entitled to vote at the meeting if you owned shares as of the close of business on November 27, 2009, the record date for the meeting.
Q. What am I being asked to vote on at the meeting?
We are asking our shareowners to elect the directors named in the proxy statement; to ratify the appointment of our independent registered public accounting firm; and to approve the performance goals under the Monsanto Company 2005 Long-Term Incentive Plan.
Q. What level of shareowner vote is needed to elect directors?
Each share of our common stock is entitled to one vote with respect to each matter on which it is entitled to vote. Because this director election is not a contested election, each director will be elected by the vote of the majority of the votes cast when a quorum is present. A majority of the votes cast means that the number of votes cast for a director exceeds the number of votes cast against that director. Votes cast excludes abstentions and any broker non-votes. There is no cumulative voting with respect to the election of directors.
Q. What level of shareowner vote is needed to approve the proposals?
Each share of our common stock is entitled to one vote with respect to each matter on which it is entitled to vote. A majority of the shares present at the meeting in person or by proxy is required to ratify the appointment of our independent registered public accounting firm and to approve the performance goals under the Monsanto Company 2005 Long-Term Incentive Plan.
Q. Can I vote by telephone or over the Internet?
Most shareowners have a choice of voting in one of four ways:
Please read the instructions on the Notice, proxy card or the information sent by your broker or bank.
Q. What do I do if my shares are held in street name at a bank or brokerage firm?
If your shares are held in street name by a bank or brokerage firm as your nominee, your bank or broker will send you a separate package describing the procedure for voting your shares. You should follow the instructions provided by your bank or brokerage firm.
Q. What happens if I vote but forget to indicate how I want my shares voted on one of the proposals?
If you sign, date and return your proxy and do not mark how you want to vote, your proxy will be counted as a vote FOR all of the nominees for directors, FOR the ratification of our independent registered public accounting firm, and FOR the approval of the performance goals under the Monsanto Company 2005 Long-Term Incentive Plan.
Q. What happens if I do not instruct my broker how to vote or if I vote to abstain on the proposals?
Under our bylaws, if you vote to abstain, your vote will have no effect on the election of directors and will have the same effect as a vote against the other proposals. If you do not instruct your broker how to vote, your broker will vote your shares for you at his or her discretion on the ratification of the appointment of our independent registered public accounting firm and the approval of the performance goals under the Monsanto Company 2005 Long-Term Incentive Plan, but will not vote your shares on the election of our directors. Broker non-votes have no effect on the election of directors and have the same effect as votes cast against a particular proposal.
Q. Can I change my voting instructions before the meeting?
Except as discussed below with respect to voting instructions for shares held in our Savings and Investment Plan, you can revoke your proxy at any time before it is exercised by timely delivery of a properly executed, later-dated proxy (including an Internet or telephone vote), by delivering a written revocation of your proxy to the Secretary of Monsanto, or by voting at the meeting. The method by which you vote by a proxy will in no way limit your right to vote at the meeting if you decide to attend in person. If your shares are held in the name of a bank or brokerage firm, you must obtain a proxy, executed in your favor, from the bank or broker, to be able to vote at the meeting.
Voting instructions with respect to shares held in our Savings and Investment Plan cannot be revoked or changed after 5:00 p.m. Eastern Standard Time on January 21, 2010.
Q. What do I need to do if I plan to attend the meeting in person?
If you plan to attend the annual meeting in person, you must provide proof of your ownership of our common stock and a form of personal identification for admission to the meeting. If you own your shares in street name, such as in the name of a bank or broker, and you also wish to be able to vote at the meeting, you must obtain a proxy, executed in your favor, from the bank or broker.
Q. Why havent I received a printed copy of the proxy or annual report?
This year we again have elected to take advantage of the SECs rule that allows us to furnish proxy materials to you online. We believe electronic delivery will expedite shareowners receipt of materials, while significantly lowering costs and reducing the environmental impact of our annual meeting by reducing printing and mailing of full sets of materials. On December 7, 2009, we mailed to our shareowners a Notice containing instructions on how to access our proxy statement and annual report online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials, unless you specifically request one. However, the Notice contains instructions on how to receive a paper copy of the materials.
Q. Is the proxy statement available on the Internet?
Yes. As described in the prior question, most shareowners will receive the proxy statement online. If you received a paper copy, you can also view these documents on the Internet by accessing our website at http://www.monsanto.com and clicking on the Corporate Responsibility tab, then clicking on the Corporate Governance tab, and then clicking on the SEC Filings tab. Information on our website does not constitute part of this proxy statement. You can elect to receive future proxy statements and annual reports over the Internet instead of receiving paper copies by mail by following the instructions set forth on your proxy card.
Q. Where can I get paper copies of the proxy materials?
The Notice you received describes how to receive paper copies of the proxy materials. If you received paper copies of the materials, but would like additional copies, please feel free to call (800) 638-7999.
Q. How can I get assistance in voting my shares?
To get help in voting your shares, please contact Morrow & Co., LLC at (800) 607-0088.
Our board of directors is soliciting proxies from our shareowners in connection with our annual meeting of shareowners to be held on Tuesday, January 26, 2010 and at any and all adjournments thereof. The meeting will be held at 2:00 p.m. Central Standard Time in K Building at our Creve Coeur Campus, 800 N. Lindbergh Boulevard, St. Louis County, Missouri.
If you plan to attend the annual meeting in person, you must present proof of your ownership of our common stock, such as a bank or brokerage account statement, and a form of personal identification to be admitted to the meeting. If you own your shares in street name, such as in the name of a bank or broker, and you also wish to be able to vote at the meeting, you must obtain a proxy, executed in your favor, from the bank or broker.
On December 7, 2009, we mailed to our shareowners of record a Notice containing instructions on how to access this proxy statement and our annual report online, and we began mailing these proxy materials to shareowners who requested paper copies.
Unless otherwise noted, the information in this proxy statement covers our last fiscal year, which ran from September 1, 2008 through August 31, 2009 and which we refer to as our as our 2009 fiscal year or fiscal 2009, and in some cases the immediately preceding fiscal year, which ran from September 1, 2007 through August 31, 2008 and which we refer to as our 2008 fiscal year or fiscal 2008.
The term Former Monsanto in this proxy statement refers to a corporation that was then known as Monsanto Company that operated, among other businesses, an agricultural products division. Former Monsanto is now known as Pharmacia Corporation and is a wholly owned subsidiary of Pfizer, Inc. Former Monsanto transferred its agricultural products division to us in September 2000.
You are entitled to vote (in person or by proxy) at the annual meeting if you were a shareowner of record at the close of business on November 27, 2009. On November 27, 2009, 545,311,480 shares of our common stock were outstanding and entitled to vote and no shares of our preferred stock were outstanding. There is no cumulative voting with respect to the election of directors. Shareowners of record are entitled to one vote per share on all matters.
Most shareowners have a choice of voting their shares by:
The telephone and Internet voting facilities for the shareowners of record, other than those held in our Savings and Investment Plan, will close at 11:59 p.m. Eastern Standard Time on January 25, 2010. The Internet and telephone voting procedures are designed to authenticate shareowners by use of a control number and to allow you to confirm that your instructions have been properly recorded. If you hold your shares in street name through a bank or broker, your bank or broker will send you a separate package describing the procedures and options for voting your shares.
Except with respect to voting instructions for shares held in our Savings and Investment Plan (see below), you can revoke your proxy at any time before it is exercised by timely delivery of a properly executed, later-dated proxy (including an Internet or telephone vote), by delivering a written revocation of your proxy to our Secretary or by voting at the meeting. The method by which you vote will in no way limit your right to vote at the meeting if you decide to attend in person. If your shares are held in the name of a bank or brokerage firm, you must obtain a proxy, executed in your favor, from the bank or broker to be able to vote at the meeting.
Your properly completed proxy/voting instruction card will appoint Hugh Grant and David F. Snively as proxy holders or your representatives, or The Northern Trust Company (Northern) as trustee of our Savings and Investment Plan, as the case may be, to vote your shares in the manner directed therein by you. Mr. Grant is our chairman of the board, president and chief executive officer. Mr. Snively is our senior vice president, secretary and general counsel. Your proxy permits you to direct the proxy holders or to instruct Northern, as the case may be, to:
All of your shares entitled to vote and represented by properly completed proxy or voting instruction received prior to the meeting and not revoked will be voted at the meeting in accordance with your instructions. If you do not indicate how your shares are to be voted on a matter, the shares represented by your properly completed proxy or voting instruction will be voted FOR the nominees for director, FOR the ratification of the appointment of Deloitte & Touche LLP and FOR the approval of the performance goals under the Monsanto Company 2005 Long-Term Incentive Plan.
As far as we know, the only matters to be brought before the annual meeting are those referred to in this proxy statement. If any additional matters are presented at the annual meeting, the persons named as proxies may vote your shares in their discretion.
If you participate in a Monsanto stock fund under our Savings and Investment Plan and had shares of our common stock credited to your account on the record date of November 27, 2009, you will receive an electronic notice unless you opted to receive paper copies of the proxy materials, as described in the notice sent to participants in November. The electronic notice will contain voting instructions with respect to all shares registered in the same name, whether inside or outside of the plan. If your accounts inside and outside of the plan are not registered in the same name, you will receive a separate electronic notice with respect to the shares credited to your Savings and Investment Plan account.
Shares of common stock in our Savings and Investment Plan will be voted by Northern as trustee of the plan. Plan participants in a Monsanto stock fund should indicate their voting instructions to Northern for each action to be taken under proxy using the toll-free telephone number, by indicating their instructions over the Internet or by submitting an executed proxy card.
Voting instructions regarding plan shares must be received by 5:00 p.m. Eastern Standard Time on January 21, 2010, and all telephone and Internet voting facilities with respect to plan shares will close at that time. You can revoke your voting instructions with respect to shares held in our Savings and Investment Plan at any time prior to 5:00 p.m. Eastern Standard Time on January 21, 2010 by timely delivery of a properly executed, later-dated voting instruction card (or an Internet or telephone vote), or by delivering a written revocation of your voting instructions to Northern.
All voting instructions from plan participants will be kept confidential. If a participant does not timely submit voting instructions, the shares allocated to such participant, together with unallocated shares, will be voted in accordance with the pro rata vote of the participants who did provide instructions.
No business can be conducted at the annual meeting unless a majority of all outstanding shares entitled to vote are either present in person or represented by proxy at the meeting.
Because this director election is not a contested election, each director will be elected by the vote of the majority of the votes cast. A contested election means an election in which the number of candidates exceeds the number of directors to be elected. A majority of the votes cast means that the number of votes cast for a director exceeds the number of votes cast against that director. Votes cast excludes abstentions and any broker non-votes. There is no cumulative voting with respect to the election of directors.
Under Delaware law, if a director is not elected at the annual meeting, the director will continue to serve on the Board as a holdover director. As required by our bylaws, each director-nominee has submitted an irrevocable contingent resignation that becomes effective if he or she is not elected by a majority of the votes cast by shareowners and our board of directors accepts the resignation. If a director-nominee is not elected by a majority of the votes cast, our nominating and corporate governance committee will consider the directors resignation and recommend to our board of directors whether to accept or reject the resignation. Our board of directors will decide whether to accept or reject the resignation and publicly disclose its decision and the rationale behind the decision as soon as practicable after the election results are certified.
The affirmative vote of a majority of the shares present at the meeting in person or by proxy is required to ratify the appointment of our independent registered public accounting firm. For this purpose, abstentions and votes withheld by brokers in the absence of instructions from street-name holders (broker non-votes) have the same effect as votes cast against the proposal.
The affirmative vote of a majority of the shares present at the meeting in person or by proxy is required to approve the performance goals under the Monsanto Company 2005 Long-Term Incentive Plan. For this purpose, abstentions and votes withheld by brokers in the absence of instructions from street name holders (broker non-votes), if any, have the same effect as votes cast against the proposal.
Monsanto Company is committed to the values of effective corporate governance and high ethical standards. Our board believes that these values are conducive to long-term performance and reevaluates our policies on an ongoing basis to ensure they sufficiently meet the companys needs. Most recently, in 2007, the board amended our bylaws to adopt majority voting in uncontested elections of directors and adopted our Related Person Transactions Policy. In 2008, the board revised the companys advance notice bylaw to clarify its applicability and widen its scope in light of recent case law and the reported use by certain shareowners at other companies of derivative instruments that affect voting rights and adopted a statement on Board Leadership Roles, which is posted on our website. In 2009, the board expanded its statement on Board Leadership Roles and amended our bylaws to adopt the terminology of Lead Director for our lead independent director.
Our corporate website includes key information about our corporate governance and ethics policies and includes copies of our certificate of incorporation, bylaws, board charter and corporate governance guidelines, board committee charters, code of business conduct, code of ethics for our chief executive officer and senior financial officers, statement on board leadership roles, Monsanto Pledge, and human rights policy. Each of these documents can be found at http://www.monsanto.com under the Corporate Responsibility tab. Note that information on our website does not constitute part of this proxy statement. Hard copies of these documents may be obtained without charge by any shareowner upon request by contacting the Office of the General Counsel, Monsanto Company, 800 North Lindbergh Boulevard, St. Louis, Missouri 63167.
We have described below certain key corporate governance and ethics policies which we believe enable us to manage our business in accordance with the highest standards of business practices and in the best interest of our shareowners.
Our board of directors has adopted clear corporate governance policies to assist the board and its committees in the exercise of their responsibilities, several of which are described below. Each of the board committees has a written charter that sets forth the purposes, goals and responsibilities of the committee as well as qualification for committee membership, procedures for committee membership, appointment and removal, committee structure and operations and committee reporting to the full board. The board and committee charters provide our shareowners a transparent view of how our board functions. The charters are found on our website at http://www.monsanto.com by clicking on the Corporate Responsibility tab, then clicking on the Corporate Governance tab and then clicking on the Charter and Guidelines and Board Committees tabs.
The Monsanto Pledge is our commitment to how we do business. It is a declaration that compels us to listen more, to consider our actions and their impact broadly, and to lead responsibly. It helps us to convert our values into actions, and to make clear who we are and what we champion. Our Pledge and our Pledge Report are available on our website at http://www.monsanto.com by clicking on the Corporate Responsibility tab, then clicking on the Our Pledge tab.
At Monsanto, we are committed to building relationships based on integrity. Integrity, in alignment with our Pledge, helps us earn and retain the trust of people with whom we do business. Our board has adopted a Code of Business Conduct that applies to our directors, officers and employees. In addition, the Code of Business Conduct applies to all persons representing our company such as consultants, agents, sales representatives, distributors, and independent contractors, who agree in writing to follow all applicable portions of the code. Our Code of Business Conduct is available on our website at http://www.monsanto.com by clicking on the Corporate Responsibility tab, then clicking on the Business Conduct tab.
The Code of Business Conduct is designed to provide guidance on and articulate our commitment to several key matters such as safety and health, protecting the environment, fair dealing, proper stewardship of our products, use of company resources, and accurate communication about our finances and products. It also addresses the many legal and ethical facets of integrity in business dealings with customers, suppliers, investors, the public, governments that regulate us and the communities where we do business. Our Code of Business Conduct has been translated into more than 20 languages and is distributed to our employees, who affirm the code on an annual basis.
We have established a Global Business Conduct Office with working groups and facilitators in all parts of the world. We have a guidance line and website operated by an independent service provider that is available worldwide for the receipt of complaints regarding accounting, internal controls and auditing matters, and have in place procedures for the anonymous submission of employee concerns regarding questionable accounting or auditing matters. We have in place the following methods under which an employee may submit a complaint or question: private post office box; internal toll-free telephone number; and special e-mail mailbox dedicated to business conduct matters.
Our Human Rights Policy was adopted by the board in April 2006. The policy is an important expression of our values as described in the Monsanto Pledge. The policy is one of the ways we hold ourselves accountable and demonstrate our commitment to human rights as we conduct our business globally. Monsanto will work to identify and do business with partners who aspire in the conduct of their businesses to ethical standards that are consistent with this policy. Our human rights policy is available on our website at http://www.monsanto.com by clicking on the Corporate Responsibility tab, then clicking on the Human Rights tab.
We have adopted a code of ethics that applies to our chief executive officer and the senior leadership of our finance department, including our chief financial officer and our controller. As a public company, it is critical that our filings with the SEC be accurate and timely. Our Code of Ethics for Chief Executives and Senior Financial Officers is available on our website at http://www.monsanto.com by clicking on the Corporate Responsibility
tab, then clicking on the Corporate Governance tab, then clicking on the Code of Ethics tab. Our internal audit function maintains important oversight over the key areas of our business and financial processes and controls, and reports regularly to our audit and finance committee.
Under our bylaws, the number of directors on our board shall not be less than five nor more than 20 and is fixed, and may be increased or decreased from time to time, by resolution of our board of directors. Currently, the board has fixed the number of directors at eleven members. Our board of directors is divided into three classes, with terms expiring at successive annual meetings. In the case of an appointment of a director or if there is a change in the number of directors, the number of directors in each class will be apportioned as nearly equally as possible.
The board is responsible for nominating members to the board and for filling vacancies on the board that may occur between annual meetings of shareowners, in each case based upon the recommendation of the nominating and corporate governance committee. The committee seeks input from other board members and senior management to identify and evaluate nominees for director. The committee may hire a search firm or other consultant, and has hired a search firm to assist in identifying and evaluating potential candidates for our board. The committee will consider nominees recommended by shareowners for election to the board provided the names of such nominees, accompanied by relevant biographical information, and relevant information about the shareowner submitting the nominee, are provided in writing to our secretary in accordance with the requirements of our bylaws described below under Other Matters Shareowner Proposals on page 80. Our newest board member, Dr. Chicoine, was recommended by one of our executive officers.
When evaluating potential director candidates, our nominating and corporate governance committee takes into consideration the Desirable Characteristics of Directors in our board charter (see Appendix B). The committee also considers whether potential director candidates will likely satisfy the independence standards for the board, the audit and finance committee, the people and compensation committee and the nominating and corporate governance committee, as set forth in the board charter (see Appendix A).
Upon joining the board, directors are provided with an initial orientation about the company, including its business operations, strategy and governance. New directors without previous experience as a director of a public company are expected to enroll in a director education program on the principles of corporate governance and director professionalism offered by a nationally-recognized sponsoring organization, or to participate in a comparable director education program offered at another board on which the director serves. The director may satisfy this requirement if he or she participated in a comparable program within two years prior to being elected to our board.
Our directors are expected to remain abreast of developments in corporate governance and critical issues relating to the operation of public company boards. Management provides notice of and access to continuing educational programs and coordinates in-boardroom continuing education presentations led by outside experts. The board also conducts periodic visits to company facilities as part of its regularly scheduled board meetings.
Our bylaws establish the role of an independent lead director who is elected by the independent directors. Mr. Stevens currently serves as the lead director. As lead director, Mr. Stevens:
While serving as lead director, Mr. Stevens has overseen the development and implementation of governance practices that support high levels of performance by members of the board. His leadership fosters a board culture of open discussion and deliberation, with a thoughtful evaluation of risk, to support sound decision-making. He encourages communication among the directors, and between management and the board, to facilitate productive working relationships. Working with our chairman and other members of the board, Mr. Stevens also ensures there is an appropriate balance and focus among key board responsibilities such as strategy development; review of operations; risk oversight; and management succession planning.
Further information about board leadership roles, including a comparison of the duties of our chairman and lead director, is available at http://www.monsanto.com by clicking on the Corporate Responsibility tab, then clicking on the Corporate Governance tab, then clicking on the Board Leadership Roles tab.
Shareowners and other interested persons may contact Mr. Stevens directly by mail at the Office of the Lead Director, Monsanto Company, 800 North Lindbergh Boulevard, Mail Stop A3NA, St. Louis, Missouri 63167.
The board conducts annual self-evaluations to determine whether it and its committees are functioning effectively. As part of the board self-evaluation process, each director also conducts a director self-evaluation. The nominating and corporate governance committee receives comments from all directors and reports annually to the board with an assessment of the boards performance. The assessments are discussed with the full board each year.
Each committee, other than the executive committee, reviews and reassesses the adequacy of its charter annually and recommends any proposed changes. Each committee also annually reviews its own performance and reports the results to the board. The nominating and corporate governance committee oversees and reports annually to the board its assessment of each committees performance evaluation process.
Our board of directors has adopted a policy that provides a process for shareowners to send communications to the board. Shareowners may contact our board through our website at http://www.monsanto.com or they may send correspondence to 800 North Lindbergh Boulevard, Mail Stop A3NA, St. Louis, Missouri 63167, c/o David F. Snively, our secretary and general counsel.
Our board charter requires that no more than two board members may be non-independent under the independence criteria set by the NYSE. Under the NYSE listing standards, for a director to be considered independent, the board must affirmatively determine that the director has no direct or indirect material relationship with Monsanto. The board has established categorical independence standards for determining director independence which conform to the NYSEs independence criteria. The categorical standards are found in Appendix A.
In determining director independence, the board considered the categorical independence standards and relevant facts and circumstances, including any direct or indirect transactions, relationships and arrangements between a director and Monsanto. Our board considered the following, each of which is within the NYSEs and our categorical independence standards. Our board determined that the directors did not have a material interest in the transactions and that they would not impair each such directors independent judgment.
Based upon these considerations, the board has determined that the following directors are independent: Frank V. AtLee III, John W. Bachmann, David L. Chicoine, Janice L. Fields, Arthur H. Harper, Gwendolyn S. King, C. Steven McMillan, William U. Parfet, George H. Poste, and Robert J. Stevens. Accordingly, ten of our eleven directors are independent, and each of the following committees is composed solely of independent directors:
The board has adopted a written policy regarding the review, approval or ratification of transactions involving certain persons that SEC regulations require to be disclosed in proxy statements, which are commonly referred to as related person transactions. A related person is defined under the applicable SEC regulation and includes our directors, executive officers, 5% or more beneficial owners of our common stock, and each of their immediate family members. Under the written policy, our nominating and corporate governance committee is responsible for reviewing, approving or ratifying any related party transactions. It will approve a transaction only if it determines that the transaction is in, or not inconsistent with, the best interests of the company and its shareowners.
As of its last Schedule 13G filing, FMR Corp. was the beneficial owner of more than 5% of our common stock. An affiliate of FMR Corp., Fidelity Investments Institutional Services Company, Inc. (Fidelity), provides services in connection with the maintenance, operation and administration of various employee benefit plans sponsored by us and certain of our subsidiaries, including certain pension plans, 401(k) plans and health and welfare benefit plans. In exchange for its services, Fidelity received fees totaling approximately $9 million in fiscal 2009. In addition, Fidelity Management Trust Company, an affiliate of FMR Corp., was the investment manager for certain mutual funds in the 401(k) plan of one of our subsidiaries, until that plan merged into our Savings and Investment Plan in December 2008. Fidelity Management Trust Company was compensated for its investment management services by the mutual funds through customary investment management fees paid by the plans participants investing in the funds. The expense ratios paid by plan participants for each of the mutual funds for all but one fund were at or below the average expense ratio of mutual funds pursuing similar investment strategies. During fiscal year 2009, we engaged a consulting firm with expertise in the area of employee benefit plan service providers to help us perform an analysis of our services agreement with Fidelity to determine whether to renew the agreement. Following this review, our nominating and corporate governance committee determined that it was in the best interests of our shareowners to amend and extend the term of the agreement with Fidelity.
In June 2008, the board elected Kerry Preete as an executive officer of the company. William Sherk, Mr. Preetes brother-in-law, is currently the sales lead for our seeds and traits business in Western Canada, and prior to September 1, 2009, was the chemicals national sales lead for our Canadian chemistry business. He has worked in our Canadian business since 1999. Mr. Sherks compensation has been established in accordance with our ordinary employment and compensation practices applicable to employees with equivalent qualifications, experience and responsibilities and he is eligible to participate in our employee benefit programs on the same basis as other eligible employees. Mr. Preete would ordinarily have been involved in approving any special pay actions and awards for Mr. Sherks position under our annual incentive plan while Mr. Sherk was employed in our chemicals business. However, a procedure was put in place under which Mr. Begemann, our Executive Vice President, Seeds and Traits, has been involved in such actions and awards rather than Mr. Preete. During fiscal year 2009, Mr. Sherk received annual base pay in the amount of $104,274. He also received an annual incentive award with respect to the fiscal year 2009 performance period in the amount of $21,389. These amounts are based on an August 31, 2009 exchange rate. In October 2009, Mr. Sherk was granted 470 stock options under our 2005 Long-Term Incentive Plan as the long-term incentive component of his compensation.
No member of our people and compensation committee is or has been an officer or employee of our company or any of our subsidiaries. In addition, no member of our people and compensation committee has had any related person transactions that require disclosure under the SECs proxy rules and regulations.
The ages, principal occupations, directorships held and any other information with respect to our nominees and directors, and the classes into which they have been divided, are shown below as of December 1, 2009 except as otherwise noted.
The board has nominated four directors to be elected at the 2010 annual meeting to serve for a three-year term ending with the annual meeting to be held in 2013, until a successor is elected and has qualified, or until his or her earlier death, resignation or removal. Each nominee is currently a director of our company and has agreed to serve if elected.
During fiscal 2009, our board of directors met six times. All incumbent directors attended 75% or more of the aggregate meetings of the board and of the board committees on which they served during the period in which they held office during fiscal 2009. The following table shows the attendance of each director at committee meetings.
Our board charter formally encourages directors to attend the annual meeting of shareowners. Last year all but one of the directors then in office attended the meeting.
Our board of directors has the following six committees: (1) executive; (2) audit and finance; (3) nominating and corporate governance; (4) people and compensation; (5) public policy and corporate responsibility; and (6) science and technology. The written charter for each committee is available on our website at http://www.monsanto.com.
The following chart shows the membership and chairpersons of our board committees and committee meeting attendance.
1 Dr. Chicoine became a director in April 2009 and attended all meetings of each committee while a member.
Members: Messrs. Grant (Chair), Parfet and Stevens
Our executive committee has the powers of our board of directors in directing the management of our business and affairs in the intervals between meetings of our board of directors (except for certain matters specifically retained by our board of directors or which are reserved for our entire board of directors by statute, our certificate of incorporation or our bylaws). Actions of the executive committee are reported at the next regular meeting of our board of directors. The executive committee met one time during the 2009 fiscal year and took one action by written consent.
Members: Messrs. Parfet (Chair), AtLee, Bachmann, McMillan and Stevens
The audit and finance committee assists our board of directors in fulfilling its responsibility to oversee:
As noted in the Report of the Audit and Finance Committee at page 72, our board of directors believes that all members of the audit and finance committee meet the independence and experience requirements of the listing standards of the NYSE. In addition, our board of directors has determined that each of the members of the audit and finance committee is an audit committee financial expert for purposes of the rules of the SEC. The audit and finance committee met ten times during the 2009 fiscal year and did not take any actions by written consent.
For additional information regarding the audit and finance committee, please see Ratification of Independent Registered Public Accounting Firm (Proxy Item No. 2) at page 73 and Report of the Audit and Finance Committee at page 72.
Members: Messrs. Stevens (Chair) and McMillan, Ms. King and Ms. Fields
Our nominating and corporate governance committee provides oversight of the corporate governance affairs of our board and company. Our nominating and corporate governance committee also identifies and recommends individuals to our board of directors for nomination as members of the board and its committees, and leads our board of directors in its annual review of the boards performance.
Pursuant to its charter, all members of the nominating and corporate governance committee must meet the independence requirements contained in the listing standards of the NYSE. We believe all members of the nominating and corporate governance committee meet the current listing standards of the NYSE pertaining to independence. The nominating and corporate governance committee met five times during the 2009 fiscal year and did not take any actions by written consent.
Members: Messrs. McMillan (Chair), Bachmann and Parfet, and Ms. King
Our people and compensation committee is responsible for:
Pursuant to its charter, our people and compensation committee must be comprised of at least three members of our board of directors who, in the opinion of our board of directors, meet the independence requirements of the New York Stock Exchange (the NYSE), are non-employee directors pursuant to Rule 16b-3 of the Securities and Exchange Commission (the SEC) and are outside directors for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code). Our board of directors has determined that all members of the people and compensation committee meet these requirements. The people and compensation committee met eight times and did not take any actions by written consent during the 2009 fiscal year.
Our people and compensation committee has delegated certain authority, responsibilities and duties to a committee of senior officers. We refer to this committee as our internal people committee. Our internal people committee has authority and responsibility to:
Members: Ms. King (Chair), Ms. Fields, Mr. Harper, Dr. Poste, and, since June 2009, Dr. Chicoine
Our public policy and corporate responsibility committee reviews and monitors our performance as it affects communities, customers, other key stakeholders and the environment. This committee also reviews issues affecting company products in the marketplace, including issues of agricultural biotechnology, and identifies and investigates significant emerging issues. It also receives periodic reports on the companys business conduct program, progress related to the companys Human Rights Policy, and the companys charitable and political contributions. The public policy and corporate responsibility committee met five times during the 2009 fiscal year and did not take any actions by written consent.
Members: Dr. Poste (Chair), Messrs. AtLee and Harper, Ms. Fields, and, since June 2009, Dr. Chicoine
Our science and technology committee reviews and monitors our science and technology initiatives in areas such as technological programs, research, agricultural biotechnology and information technology. Our science and technology committee also identifies and investigates significant emerging science and technology issues. The science and technology committee met five times during the 2009 fiscal year and did not take any actions by written consent.
The objectives for our non-employee director compensation program are to attract highly-qualified individuals to serve on our board of directors and align our directors interests with the interests of our shareowners. Our people and compensation committee reviews the program at least annually to ensure that it continues to meet the objectives. Our non-employee directors are paid for their services to us pursuant to our Non-Employee Director Equity Incentive Compensation Plan (the Directors Plan).
To determine whether our director compensation program is competitive, our people and compensation committee considers general market information on program design, in addition to compensation data from the same comparator group of companies as it uses for determining compensation for members of our executive team, as described on pages 24-25. Our directors compensation is targeted to the median range of compensation for directors of companies in our comparator group, considering our revenue size relative to that of our comparator group. At the request of the people and compensation committee, management engages Towers Perrin to provide the market trend and comparator group information. Based on this information and data, management recommends any program changes it considers appropriate to the people and compensation committee. That committee considers the recommendation, supporting data and information, in addition to information and input from its independent executive compensation consultant, Frederic W. Cook & Co., Inc. The people and compensation committee then recommends any change it considers appropriate to our full board of directors for its review and approval, and includes the relevant information and data for our board to use in its considerations.
In June 2008, the people and compensation committee reviewed the design of our director compensation program and the Directors Plan. The committee determined that the plan design was in line with market trends and determined not to recommend any changes to our board of directors. However, after reviewing data from our comparator group, the committee determined that the amount of our directors annual base retainer was below the median range of the group, considering our relative revenue at that time. The committee considered and recommended to our board of directors that it amend the Directors Plan, effective for fiscal 2009, to increase the annual base retainer from $165,000 to $195,000. The recommended increase would position our program within our comparator groups median range of director pay, considering our relative revenue. No adjustment was recommended for the annual retainers for committee memberships or chairs since those retainer amounts continued to be in line with similar types of director retainers in our comparator group. The board of directors approved the recommended increase in the annual base retainer, effective September 1, 2008. Effective December 1, 2007, the Directors Plan also provided that a non-employee director would receive, upon his or her commencement of service as a member of our board of directors, a grant of restricted stock equal to the annual base retainer, divided by the closing price of a share of our common stock on the commencement date.
Our directors aggregate annual retainer for fiscal 2009 was based on the following:
Half of the aggregate retainer for each director is payable in deferred common stock. The remainder is payable, at the election of each director, in the form of deferred common stock, restricted common stock, current cash and/or deferred cash. The Directors Plan does not provide for meeting fees. Mr. Grant is our sole employee director and does not receive compensation for his services as a director.
In June 2009, the people and compensation committee again considered the design of our director compensation program and determined that it continued to be in line with market trends, so that no changes were necessary. After reviewing data from our comparator group, the committee determined that the amount of our directors annual base retainer was still within the median range of the group, considering our relative revenue at the time, and accordingly, did not recommended any changes to the annual base retainer. Likewise, no adjustment was recommended for the annual retainers for committee memberships or chairs since those retainer amounts continued to be in line with similar types of director retainers in our comparator group.
In addition to the compensation described above, our non-employee directors are reimbursed for expenses incurred in connection with their attendance at board, committee and shareowners meetings, including cost of travel, lodging, food and related expenses. Non-employee directors are also reimbursed for reasonable expenses associated with other business activities related to their service on our board of directors, such as participation in director education programs and are insured under our travel accident policy while traveling on company business. Non-employee directors may use corporate aircraft, when available, for transportation to and from meetings and functions related to service as a director.
Directors may participate in a matching gift program under which we will match donations made to eligible educational, arts or cultural institutions. Gifts will be matched in any calendar year up to a maximum of $5,000. While our directors participate on the same basis as our employees, SEC rules require that the amount of a directors participation in a charitable matching program be disclosed.
The following presents compensation to our non-employee directors for their services in fiscal 2009.
The shareowners are being asked to elect Mr. AtLee, Dr. Chicoine, Mr. Harper and Ms. King to terms ending with the annual meeting to be held in 2013, until a successor is elected and qualified or until his or her earlier death, resignation or removal. The board nominated Mr. AtLee, Dr. Chicoine, Mr. Harper and Ms. King for election at the 2010 meeting of shareowners upon the recommendation of the nominating and corporate governance committee. Each nominee is currently a director of our company. For more information regarding the nominees for director, see Information Regarding Board of Directors and Committees beginning on page 10.
The board does not contemplate that any of the nominees will be unable to stand for election, but should any nominee become unable to serve or for good cause will not serve, all proxies (except proxies marked to the contrary) will be voted for the election of a substitute nominee nominated by the board.
Our Compensation Discussion and Analysis, or CD&A, is organized into the following sections:
In our CD&A, the term
Following record performance in our 2007 and 2008 fiscal years, we again achieved growth in our business in fiscal 2009, driven by our seeds and genomics segment and cost reduction efforts, which was partially offset by reduced sales by our agricultural productivity segment compared to the prior year. Our sales for that segment declined due to share loss resulting from reduced prices by our competitors and increasing competitive supply for our Roundup® and other glyphosate-based herbicides. The reduced sales by this segment prevented us from meeting our companys threshold-performance goals for increases in sales and free cash flow (cash flow) in our annual incentive plan but we were able to meet our target-performance goal for earnings per share (EPS), as described further below.
We expect our fiscal 2010 performance to directly reflect the competitive dynamic surrounding our glyphosate business. We have reduced prices for our glyphosate products in fiscal 2010 and expect prices to remain lower than in fiscal 2008 and 2009, as we work to rebuild a competitive position in our chemistry business. We expect these actions to lead to reduced EPS and cash flow in fiscal 2010, compared to fiscal 2009, but we continue to focus on growing our seeds and traits business and our commitment to double our companys gross profit by fiscal 2012, from our fiscal 2007 base. We believe the successful launch of next generation products by our seeds and genomics segment will be essential to meeting our growth commitment for 2012.
The business considerations and strategic objectives described above have influenced the Committees decisions on compensation earned by our executive team members for fiscal 2009, as well as the design of our fiscal 2010 executive compensation program in terms of magnitude and structure:
Our board delegates to the Committee responsibility for establishing compensation policies and programs for all of our employees. The core principles underlying the Committees approach to compensation are to:
The Committee regularly reviews our executive compensation strategies, policies and programs to assure that the program continues to meet its overall objectives.
Role of Management
Our board established an internal people committee of senior officers appointed by our CEO, Mr. Grant, to establish and oversee broad-based compensation and benefits strategies, plans and programs. The current members are: Messrs. Grant and Casale, Dr. Fraley, our executive vice president of human resources, Steven C. Mizell (our EVP-HR) and one other executive team member, Janet M. Holloway. Our EVP-HR is the chairperson of our internal people committee. The Committee periodically seeks input from our internal people committee on executive compensation strategy and design. Neither the internal people committee nor any of its members determines any component of compensation for any executive team member; these responsibilities reside only with the Committee.
The Committee considers input from our CEO, CFO and EVP-HR when developing and setting metrics and financial goals for our annual incentive plan and Financial Goal RSUs. Also, the Committee considers input from our CEO, with the assistance of our EVP-HR (for officers other than himself), regarding recommendations for base salary, annual incentive plan opportunities and awards and long-term incentive award values for our officers. The Committee gives significant weight to our CEOs judgment when they assess each proxy officers performance and determining appropriate compensation levels. As described below, the CEOs recommendations to the Committee take into account market data from our comparator group provided through managements outside executive compensation consultant, as well as input from the Committees independent consultant. When determining our CEOs compensation, the Committee considers compensation data from our comparator group, input from our EVP-HR and input from the Committees independent consultant.
The Committee reports to our full board the specifics of each decision for our CEO and the general decisions for our other officers.
Role of Compensation Consultants
Since 2002, the Committee has engaged an outside independent executive compensation consultant, Frederic W. Cook & Co., Inc., to advise and counsel the Committee. The consultant provides no services to our company other than those provided directly to or on behalf of the Committee.
At the Committees direction, management provides all Committee materials to the independent consultant and discusses all materials and recommendations with the independent consultant in advance of each Committee meeting or communication. The independent consultant considers the information and reports to the Committee chairperson, specifically identifying any issues or concerns. The chairperson discusses the independent consultants input with the Committee at its meeting and the Committee considers the input as part of its decision-making processes. The independent consultant has attended at least two meetings annually, with one meeting focused on executive compensation trends and the other on the design of our executive compensation program. Beginning in fiscal 2010, the independent consultant will participate in all Committee meetings.
Management retains and works with Towers Perrin to provide various calculations, comparator group data and general market data used by the Committee in its decision-making processes. The Committee periodically requests our EVP-HR and his staff to seek Towers Perrins input or recommendation with respect to a specific practice, program or arrangement being considered by the Committee. To assist the Committee in its decision-making processes, management may also independently seek Towers Perrins input on various matters to provide information to the Committee. Towers Perrin provides consulting, actuarial and other compensation and employee benefits-related services to our company.
Tally Sheets, Wealth Accumulation and Risk Assessment
At the Committees direction, management prepared a presentation of total compensation, a tally sheet, for each executive team member for the Committee to use when determining our 2009 fiscal year executive compensation program. The tally sheets summarized each officers total compensation, including:
The tally sheets were used to demonstrate each officers total compensation, as well as the impact of company performance on compensation. The Committee used the information as a basis for considering changes to our officers fiscal 2009 compensation, but made no adjustment as a result of the analyses based on its assessment that the program continued to meet the Committees core compensation principles described above.
Wealth Accumulation Analysis
At the Committees direction, our EVP-HR and his staff, with guidance from the Committees independent consultant, prepared a wealth accumulation analysis for each of Messrs. Grant, Casale, Begemann, Crews and Dr. Fraley. The Committee used this analysis to consider total earnings and potential earnings under our past, present and anticipated compensation and benefit plans while determining our executive compensation programs. The wealth accumulation analysis for each officer summarized total earnings over the previous five fiscal years and projected anticipated earnings for the next five fiscal years, assuming that current components of our executive compensation program continue at then-current levels.
In using the wealth accumulation analyses and tally sheets, the Committee specifically considered the following when establishing our officers fiscal 2009 compensation:
After considering the above items, the Committee determined that our fiscal 2009 executive compensation program continued to meet its objectives and made no changes to the program design or any individual pay element for any of our proxy officers as a result of the analyses.
Also at the Committees direction, our EVP-HR and his staff conducted a risk assessment of our compensation programs, including our executive compensation programs. The Committee and its consultant reviewed and discussed the findings of the assessment and concluded that our compensation programs are designed with the appropriate balance of risk and reward in relation to our Companys overall business strategy and do not incent executives to take unnecessary or excessive risks. In its discussions, the Committee considered the attributes of our programs, including:
The Committee specifically considered compensation risk implications during its deliberations on the design of our fiscal 2010 executive compensation program. Additionally, in October 2009, our board of directors expanded the companys policy on the recoupment of performance-based compensation as discussed in the Recoupment Policy section below.
Comparator Group For Determining Executive Compensation
Our comparator group consists of companies having one or more of the following characteristics:
The Committee considers these characteristics essential to the success of our business.
The following companies constitute our comparator group for fiscal 2009 officer compensation:
The Committee updates the comparator group members to account for mergers, acquisitions or business-related changes.
The Committee reviews the composition of our comparator group annually; it compares our size and performance to the comparator group with respect to key publicly available financial metrics (such as revenue, market capitalization, EPS growth and total shareholder return) to confirm its belief that positioning our officers compensation at the median range of our comparator group for target-level performance reflects appropriate pay for performance in relation to the companys size and difficulty of performance objectives. Our revenues approximate the median and our market capitalization approximates the 75th percentile of the comparator group companies.
The Committees philosophy is to target each component of our officers annual pay to the median range for comparable positions in our comparative group (which it considers generally to be 90%-110% of the median) and seeks to drive company financial performance that is in the upper quartile of our comparator group. The Committee may use its discretion to adjust a component of pay above or below the median range to align the officers position with the corresponding position in the Towers Perrin data or to acknowledge the experience and value he or she brings to the role, sustained high-level performance, demonstrated success in meeting key financial and other business objectives, and the amount of the officers pay relative to the pay of his or her peers within our company. The differences in compensation levels among our officers are primarily attributable to the differences in the median range of compensation for similar positions in our comparator group data and the Committees assessment of each positions internal value.____________________
How the Committee Used Our Comparator Group Data to Determine 2009 Fiscal Year Executive Compensation
The Committee used data from our comparator group as a reference for determining:
For 2009 fiscal year compensation the Committee continued to target our officers base salary, target annual incentive award opportunities and long-term incentive opportunity values to the median range of compensation for comparable positions in our comparator group. However, due to the growth in our revenue and earnings since our current comparator group was established in 2006, the total compensation and certain pay components for some of our officers had been in the lower end of the median range. Therefore, the Committee increased specific pay components, including base salary and annual and long-term incentive opportunities, for those officers to better align with the targeted competitive level and to reflect the expanded scope of responsibilities associated with our companys growth.
In collecting the comparator group data for the Committee, management provided the Committee data at the 25th, 50th and 75th percentiles for each position and for each pay component. The data had been adjusted, generally using regression analysis, to account for differences in revenue scope for each position relative to comparator company positions. For example, data for our CEO and CFO positions was adjusted based on total corporate revenues, and data for our business area executive vice president was adjusted based on the revenues of the associated business area. Where information for one of our positions was not available within our comparator group data and was available from the broader Towers Perrin database, we used the general industry data and adjusted for revenue size. Information for base salary and annual incentive award opportunities were also adjusted upwards, generally by 4% per annum, to bring the data forward to the midpoint of the following year to account for the timing of the data collection. Based on market trends, no timing adjustment was made to data for long-term incentive opportunity values.
As in past years, the Committee considered the design of our executive compensation program over the course of several meetings. In October, the Committee determines our CEOs and other officers overall compensation for the then-current fiscal year and the individual components and amounts of pay. When making these compensation decisions, the Committee considered our comparator group data, tally sheets and wealth accumulation and other analyses described above.
Our officers fiscal 2009 compensation consisted principally of the following components, in addition to the retirement, health and welfare plans and programs in which all of our full-time U.S. employees participate:
2009 Fiscal Year Pay Components and Compensation Determinations For Our Proxy Officers
The Summary Compensation Table at page 42 sets forth the base salary earned by each proxy officer for our 2009 fiscal year. The following information summarizes their annualized base salaries for the calendar years falling within our 2009 fiscal year.
Setting Base Salary for Our CEO. In October 2008, the Committee reviewed Mr. Grants base salary to consider any changes effective for the 2009 calendar year. The Committee reviewed data for the CEO position relative to our comparator group and determined that Mr. Grants salary was within the median range. Given Mr. Grants continued very high level of performance and the Committees philosophy of paying our officers within the median range of our comparator group, the Committee determined to provide Mr. Grant a salary increase commensurate with the general market trend of 3.5% to 4.0%.
Setting Base Salary for Our Other Proxy Officers. Also in October 2008, the Committee reviewed relevant base pay data for the proxy officer positions in our comparator group. In the cases of Messrs. Casale and Leidy, the market data was adjusted upward for their additional responsibilities. In the case of Dr. Fraley, the Committee looked at a subgroup of technology-based companies from our comparator group that better represent his role within our organization, technologys impact on our business and the market in which our company competes for scientific talent.3 The Committee determined 2009 calendar year salaries as follows: Messrs. Crews, Begemann and Leidy, and Dr. Fraley above-market increases to bring their salaries within the median range; Mr. Casale market increase to remain within the median range.
Annual Incentive Plan (AIP)
Design. The design of our 2009 AIP, including its metrics, was
the same as for our previous years plans. As more fully described on page 28
the actual amount of money available for awards the award pool is based on
overall plan funding. Each year, the Committee determines funding of the award
pool based on its assessment of overall company performance during the fiscal
year, measured against pre-established financial
goals for net sales, EPS and free cash flow4 (cash flow). The Committee determined that the metrics and relative weightings focus the organization on desired performance for the following reasons:
The metrics for determining performance against goals are derived from our financial statements which follow generally accepted accounting principles. However, the Committee, in its discretion, may consider certain items or events as extraordinary when determining the companys performance against EPS and cash flow goals, as discussed in the Annual Incentive Plan description beginning on page 48, and make what it deems to be appropriate adjustments.
The award pool is allocated to each participant based on:
Although actual performance measured against pre-established goals is the key component in determining both company and individual performance, the Committee may use judgment when determining whether company or a proxy officers individual goals have been attained.
Additionally, under our shareowner-approved Code Section 162(m) Annual Incentive Program for Covered Executives, which we refer to as our Code 162(m) Program, our proxy officers other than our CFO are eligible for an annual incentive plan award only if the Committee certifies that the net income performance goal it established under such program has been attained. Each year, the Committee establishes our companys net income performance goal either before or within the first 90 days of the beginning of each fiscal year performance period, and considers and certifies our company performance against the net income goal at its October meeting following the close of the fiscal year performance period. Also under the terms of the program, the maximum award amount a proxy officer may receive is three quarters of one percent (.75%) of corporate net income for the applicable performance year. For these purposes, the Committee considers company net income for the fiscal year performance period as defined in the Code Section 162(m) Program. As permitted by such program, the Committee uses its discretion to reduce this maximum award amount to the amount of the award the Committee determines for the proxy officer under the terms of our AIP for the fiscal year.
Establishing AIP Financial
Goals. At its August and October
2008 meetings, the Committee considered target-level performance goals for each
AIP metric and the anticipated cost of the plan at target-level funding. The
Committee set target-level goals equal to our 2009 fiscal year budget, which was
approved in August 2008 by our board after a review and discussion of the
capital and operating budgets for fiscal 2009. The Committee determined that the
target goals represented above median level of difficulty and considerable
4 Free cash flow represents the total of cash flows from operating activities and investing activities.
our actual 2008 fiscal year results. The Committee set outstanding levels of performance for each metric at proportionately higher levels relative to target-level performance than for our 2008 fiscal year AIP, thus making achievement of the outstanding level for funding of the plans incentive pool relatively more difficult to attain and requiring us to achieve double-digit growth to achieve target-level performance and further significant growth for us to achieve the outstanding level of performance. The Committee set the threshold EPS and cash flow performance goals at the actual fiscal 2008 actual results, thus providing no payout if fiscal 2009 results were not higher than fiscal 2008 actual results. The Committee set the net sales goal in line with the EPS goal. Each of the target-level goals is set out in the table below.
Determining AIP Funding. At its October 2009 meeting, the Committee reviewed our 2009 fiscal year financial results and considered our companys performance against the plans performance goals and other performance factors to determine funding of the 2009 AIP award pool. Our CEO and EVP-HR, based upon financial information provided by our CFO, provided the Committee an assessment of our financial results measured against the plans goals. Based on financial result achievement of our 2009 AIP goals and adjustment for certain extraordinary items, they recommended a 61% funding factor for the Committee to consider in determining the funding of the annual award pool for all participating employees, including our proxy officers, with an additional 1% to be allocated among non-officer employees to recognize especially high performers in this difficult year. The Committee determined to fund the incentive award pool as recommended.
The Committee also reviewed our companys 2009 fiscal year financial results against the net income performance goal it had established for our 2009 fiscal year performance period for purposes of our Code Section 162(m) Program and compliance with Code Section 162(m). The Committee determined that the goal had been met, that each of our proxy officers would be eligible for the awards as determined under our 2009 AIP, and that the awards are fully deductible by our company. In considering each proxy officers actual annual incentive award, the Committee also determined that the award to each proxy officer was substantially lower than the maximum award amount that may be received by a proxy officer covered by our Code Section 162(m) Program.
Summary of 2009 AIP Goals and Actual Results. The following chart shows our 2008 fiscal year financial results applying that plans metrics for the net sales, EPS and cash flow goals; the 2009 AIP target-level performance for our 2009 fiscal year, and the actual levels of performance our company achieved for fiscal 2009, applying the 2009 AIP metrics.
2009 AIP Target Opportunity and Award for our CEO. At its October 2008 meeting, the Committee met in executive session and set Mr. Grants individual performance goals for our 2009 fiscal year, which were derived from our annual and long-term plan and included financial, strategic and operational items. Mr. Grants goals also served as the organizational goals for the other officers. Under the terms of the plan, meeting, exceeding or falling short of an identified individual performance goal is considered one factor among many in evaluating performance. The Committee has discretion to consider actual performance and other factors it considers relevant when evaluating our CEOs performance. For our 2009 fiscal year, the Committee increased Mr. Grants target annual incentive award opportunity from 120% to 125% of base salary to better align with our comparator group.
At its October 2009 meeting, the Committee met in executive session to discuss Mr. Grants performance and determine his fiscal 2009 annual incentive award, in addition to his total compensation arrangement. The Committee evaluated Mr. Grants performance against our 2009 fiscal year corporate goals and objectives and determined that his performance was consistent with the companys performance in relation to the 2009 AIP goals. The Committee determined to provide Mr. Grant 61% of his target annual incentive award opportunity, which was reflective of their funding determination of the 2009 AIP award pool.
2009 AIP Target Opportunities and Awards for Our Other Proxy Officers. In October 2008, the Committee, with input from our CEO and the EVP-HR, determined the 2009 AIP incentive opportunity for each proxy officer. The Committee increased the target annual incentive opportunities for Messrs. Crews, Casale and Begemann and Dr. Fraley from 70% to 80% of base salary and for Mr. Leidy from 60% to 70% of base salary.
During its October 2009 meeting, the Committee discussed and determined our other proxy officers awards under our 2009 AIP. Our CEO discussed with the Committee the individual performance considerations impacting his award recommendations. The Committee also reviewed the performance of each officers respective organization in relation to the goals set for each. The proxy officers generally received awards in line with the overall funding level of our officers of 61% of target-level funding, as adjusted for individual, team and business segment performance.
Summary of 2009 AIP Awards for Our Proxy Officers. The actual 2009 AIP awards to our proxy officers were as follows:
Long-Term Incentive Awards
How the Committee Determined Equity Grant Sizes. To determine the size of our equity-based awards, the Committee first determined the total number of shares that would be made available for equity-based award grants for all management employees for the fiscal year. The Committee made this determination by:
To determine the value of each officers long-term incentive awards, the Committee considered the median range for comparable roles within our comparator group, with consideration given to the strategic value of each officers role. The Committee did not consider an officers outstanding equity awards or stock ownership levels when determining the long-term incentive award value since it considers outstanding equity awards to represent compensation for past services.
Each officers long-term incentive award value was then converted into specific equity grants as follows:
Our CEOs and other Proxy Officers Long-Term Incentive Award Values. For our 2009 fiscal year, the Committee increased Mr. Grants long-term incentive award value from $6,935,000 to $7,500,000 in order to position the value within the median range of our comparator group and reflect the impact of our companys growth. The Committee also increased each of Mr. Crews and Mr. Begemanns target long-term incentive award value to position their target values within the median range of our comparator group, given our companys growth. Mr. Grants long-term incentive award value is greater than that of our other proxy officers to reflect his greater job scope and responsibilities.
Summary of Our Proxy Officers 2009 Fiscal Year Long-Term Incentive Award Values. The 2009 fiscal year long-term incentive award values for each proxy officer fiscal years are as follows:
Options and Financial Goal RSUs granted to our proxy officers on October 20, 2008 are included in the Grants of Plan-Based Awards table. The terms and conditions of the grants are more fully described in the narrative to that table.
Financial Goal RSU Design, Financial Goals and Vesting
Plan Design and Metrics. The Committee regularly reviews the design of the Financial Goal RSU component of our executive compensation program, including their metrics, to assure that the grants continue to meet the Committees objectives. The design of the Financial Goal RSUs is described on pages 45 and 49-50 in the narrative preceding and following our Grants of Plan-Based Awards table.
When considering the design of Financial Goal RSUs for the fiscal 2008 and fiscal 2009 grants, the Committee determined that EPS, cash flow and return on capital metrics, equally weighted, are the most appropriate metrics for the Financial Goal RSUs for the following reasons:
Although Financial Goal RSUs have been granted to executive team members each year since our fiscal year ending August 31, 2004, each grant incorporates performance goals to be achieved over a different two-year period and requires continued service for a period of up to three years. Thus, the Financial Goal RSUs focus on sustained achievement. Each year, in establishing the goals for each performance metric, the Committee determines the levels of performance that will represent target performance based upon our prior year results, annual budget and long-range business plan at the time the Financial Goal RSUs are granted. The Committee also considers and establishes threshold and outstanding performance levels for each goal.
Grant of 2009 Fiscal Year Financial Goal RSUs. The Financial Goal RSUs granted to our CEO and other executive team members in October 2008 for the 2009 fiscal year grant incorporate cumulative goals for the fiscal year 2009 and 2010 performance period and have the same design, types of metrics and weighting of goals detailed above. In October 2008, the Committee established target-level goals for each performance metric, which were in line with our budget for our 2009 fiscal year and the 2010 long-range business plan. Further, goals for our 2010 fiscal year reflect significant growth over our 2009 fiscal year goals. The Committee established threshold and outstanding funding levels at 90% and 110%, respectively, of the target-level performance goals. At the time the goals were established, the Committee anticipated that given the growth required to achieve target-level performance, attainment of the goals would be difficult to achieve. Attainment of each of the goals at each performance level requires significant, double-digit growth from the corresponding cumulative goals for the 2008 fiscal year Financial Goal RSU grant.
Earn-Out of 2008 Fiscal Year Financial Goal RSU Grant. Financial Goal RSUs granted in October 2007 for our 2008 fiscal year grant incorporated cumulative performance goals for our 2008 and 2009 fiscal years. In October 2007, the Committee established target-level goals for each performance metric based upon our prior year results, annual budget and long-range business plan at the time. The Committee established threshold and outstanding performance level goals at 90% and 110%, respectively, of the target-level performance goals. At the time the goals were established, the Committee anticipated that given the growth required for our company to achieve target-level performance with respect to each metric, the goals would be difficult to attain. In October 2009, the Committee determined that actual performance as compared to the goals was at 200%. Given the companys exceptional operational performance in fiscal 2008 and the companys above-target performance in fiscal 2009 relative to the goals established at the beginning of the two-year performance period, it achieved the required significant, double-digit growth from the corresponding cumulative goals for the fiscal 2008 grant at each performance level. These awards will vest August 31, 2010, based on the officers continued service through that date. In addition, as discussed under Financial Goal Performance RSUs beginning on page 49, the Committee also determined that the goal established for Code Section 162(m) that the company must have positive Net Income (as defined) for the September 1, 2007 through August 31, 2009 performance period had been satisfied.
The following chart shows EPS, cash flow and average ROC goals at threshold, target-level and outstanding performance, and the actual, outstanding-level performance our company achieved during the 2008 and 2009 fiscal years performance period with respect to each goal:
Vesting of 2007 Fiscal Year Financial Goal RSUs. In our 2009 fiscal year, Financial Goal RSUs that were earned in fiscal 2008 based on performance during our 2007 and 2008 fiscal years vested and were distributed in shares of Monsanto stock. The value our officers realized from this Financial Goal RSU grant exceeded the Committees projections of target median levels for the same pay components within our comparator group. This was due to our exceptional operating performance during our 2007 and 2008 fiscal years and was in line with the Committees pay for performance philosophy and compensation program objectives.
When determining the design of our fiscal 2010 executive compensation program, the Committee considered the companys fiscal 2009 performance and the challenges it expects to face in fiscal 2010, as further described in the Introduction section above. Our officers compensation will again consist of the following components, in addition to the retirement, health and welfare plans and programs in which all of our full-time U.S. employees participate: base pay, annual incentive plan award opportunities and long-term incentive awards (stock option and Financial Goal RSU grants). The Committee determined that our officers receive no general base pay increase, a 25% reduction in annual incentive award target opportunities and a 25% reduction in annual long-term incentive values as described in further detail below.
2010 Fiscal Year Pay Components
For calendar year 2010, the Committee considered the median range of our comparator group for base pay and determined that given market conditions and company performance expectations for fiscal 2010, no base pay increases be provided to any officer other than Mr. Casale to recognize his new responsibilities as CFO. The Committee determined to increase Mr. Casales annual base pay from $550,000 to $590,000 effective January 11, 2010 to better align his base pay with the comparator group.
2010 Fiscal Year Annual Incentive Plan
For our 2010 fiscal year Annual Incentive Plan, or 2010 AIP, the Committee maintained the EPS, cash flow and sales performance goal metrics and weightings, but revised the performance standards and corresponding award opportunities to reflect our fiscal 2010 annual budget, which was set at levels below fiscal 2009 actual performance.
Consistent with historic practice, the 2010 AIP target-level performance objectives for EPS, cash flow and sales goals correspond to the companys fiscal 2010 annual budget. However, given the competitive variables in the agricultural chemistry sector that can affect our performance in fiscal 2010, and in consideration of our plans for strategic transformation of its seeds and traits business over the next three years, the Committee widened the performance range around the plans target performance level corresponding to the threshold and outstanding performance levels. For example, achievement of the outstanding performance level under the 2010 AIP requires EPS to be 29% above our fiscal 2010 annual budget in contrast to the 2009 AIP outstanding performance level EPS goal that was set at 12% above our fiscal 2009 annual budget.
In conjunction with the above changes and after careful deliberation around pay for performance, risk and retention, the Committee determined to reduce our officers annual incentive award target opportunities by 25% from their fiscal 2009 target opportunities (set out in the Summary of 2009 AIP Awards for Our Proxy Officers section of this CD&A). In the Committees view, this reflects lower absolute performance expectations for fiscal 2010, notwithstanding that achievement of target performance levels is consistent with a median level of difficulty. Consequently, officers actual award payments at target-level performance will equal 75% of the target award opportunity, rather than 100%, and actual award payments for outstanding performance will be 150% of the target award opportunity, rather than 200%.
2010 Fiscal Year Long-Term Incentive Compensation
For 2010 fiscal year compensation, the Committee determined to provide officers their annual long-term incentive award values in the form of traditional awards of stock options and Financial Goal RSUs, weighted consistently with prior years (75% in the form of stock options and 25% in the form of Financial Goal RSUs) in reduced amounts as described below.
For fiscal 2010 Financial Goal RSUs, the Committee maintained the EPS, cash flow and return on capital performance metrics and weightings, but revised the performance standards and corresponding award opportunities to reflect the companys fiscal 2010 annual budget, which was set at levels below our fiscal 2009 actual performance, as well as the longer-range plan. The design changes made to the Financial Goal RSUs were generally consistent with those made to the 2010 AIP described above. Stock options and Financial Goal RSUs granted to our officers on October 26, 2009 and the terms and conditions of grant are described in footnotes 2 and 4 to the Grants of Plan-Based Awards table on page 47.
Similar to its reasons for changes made to officers target award opportunities under the 2010 AIP, the Committee determined to reduce our officers long-term incentive award values by 25% to reflect lower absolute performance expectations for fiscal 2010. For Mr. Grant, Mr. Begemann and Dr. Fraley, the Committee applied the reduction to the officers fiscal 2009 long-term incentive award values (set out in the Summary of Our Proxy Officers 2009 Fiscal Year Long-Term Incentive Award Values section of this CD&A). For Mr. Casale, the Committee determined to first increase the unreduced amount of his fiscal year long term award value from $1,500,000 to $1,700,000 to recognize his new responsibilities as CFO and to better align the value with the comparator group, and then apply the 25% reduction factor.
The Committee believes that in the current economic environment, it is crucial to focus our officers on leading the company to accomplish certain strategic priorities: doubling our gross profit by fiscal 2012 (from our fiscal 2007 base) and creating long-term shareowner value during a potentially transformative period for our corn and soy platforms. To support this objective, in October 2009, the Committee granted our officers performance-based restricted stock units with strategic goal metrics, or Strategic Goal RSUs, in addition to their traditional fiscal year equity grants (stock options and Financial Goal RSUs). The number of Strategic Goal RSUs granted to our proxy officers on October 26, 2009, and the terms and conditions of grant, are described in footnote 2 to the Grants of Plan-Based Awards on page 47.
The Committee discussed the design of the Strategic Goal RSU program over the course of several meetings, with particular attention on essential performance measures, the cost of the program and the appropriate balance of risk and reward in relation to our overall business strategy. The Strategic Goal RSUs are premised on performance criteria relating to cumulative gross profit for SmartStax corn and Roundup Ready 2 Yield soybeans for the fiscal years 2010, 2011 and 2012 performance period, and the commercialization of drought-tolerant corn by the end of fiscal 2012. The Committee also included a four-year service period as an additional retention tool for ensuring continuity of leadership during this critical performance period.
The Committee determined that the value of each officers Strategic Goal RSU grant would be the same as his or her fiscal 2010 long-term incentive award value (described in the 2010 Fiscal Year Long-Term Incentive Compensation section immediately above). The value represents the amount of the fiscal 2010 long-term incentive award value reduction (i.e. 25% of the full value) for each of the three years of the Strategic Goal RSU performance period. The Committee believes that the value of the strategic goal incentive balances the recognition of officers reduced earnings potential for fiscal 2010 award opportunities and the challenging accomplishments necessary to successfully launch the next generation of products in our seeds and genomics segment over the next several years. The Committee also believes that the grant value is appropriate for retention purposes in light of the four-year service period.
Grants of Restricted Stock or Restricted Stock Units as a Retention Tool
Occasionally, the Committee grants restricted stock or restricted stock units to encourage executives to remain with our company. No such awards were made during our 2009 fiscal year.
Change-of-Control Employment Agreements
Our company has entered into employment agreements with our officers and certain other management employees that become effective upon a change of control of our company. A detailed description of these agreements is set forth in the narrative introducing our Potential Impact on Compensation Upon Termination or Change of Control tables beginning on page 62. The Committee believes that the agreements serve the interests of our company and its shareowners by ensuring that if a hostile or friendly change of control is ever under consideration, our executives will be able to advise our board about the potential transaction in the best interests of shareowners, without being unduly influenced by personal considerations, such as fear of the economic consequences of losing their jobs as a result of a change of control. At least annually, the Committee reviews the potential cost and the terms and provisions of the agreements, in addition to those executives eligible for the agreements. In October 2008, at the recommendation of the Committee, the board adopted technical amendments to the Agreements to comply with Code Section 409A.
Retirement and Welfare Benefits
The company provides our executive team members with the same employee benefits as all our U.S. regular employees under our broad-based plans. These benefits include tax-qualified and non-qualified pension and savings plans, health benefits, life insurance, and other welfare benefits. Base salary and regular annual incentive awards, but not long-term compensation or the value of perquisites, are treated as eligible pay under the terms of our U.S. pension and savings plans. In the U.S., the company sponsors tax-qualified pension and savings plans, as well as non-qualified parity pension and savings plans providing benefits to all employees whose benefits under the tax-qualified plans are limited by the Code. The company does not provide executive team members with any special retirement or welfare plan benefits that are not provided to other employees, other than increased coverage under our travel accident insurance plan and the executive medical plan, which we consider to be perquisites and which are discussed in more detail in the narrative introducing our All Other Compensation Table described on pages 43-44. The Committee adopted the executive medical plan to encourage our executive team members to maintain or improve their health and productivity. Mr. Grant is eligible for a disability benefit under the terms of our Third Country National (TCN) Retirement Plan, which from January 1, 1983 to October 31, 2002 was our regular, non-qualified pension plan designed to protect retirement benefits for employees who were transferred from their home to another country at the organizations request. The provisions of the disability benefit are described in footnote 5 to our Potential Impact on Compensation Upon Termination or Change of Control Table on page 69.
In order to further align managements interests with the interests of shareowners and support good governance practices, our board has adopted a recoupment policy applicable to annual incentive awards, Financial Goal RSUs and other performance-based compensation to our officers. As revised in October 2009, the policy generally provides that in the event our company is required to prepare an accounting restatement due to our companys material noncompliance with any financial reporting requirement under the securities laws as a result of misconduct or an error (as determined by the members of our board who are considered independent for purposes of the listing standards of the NYSE), our company may, in the exercise of its discretion (as determined by such board members) take action to recoup the amount by which such award exceeded the payment that would have been made based on the restated financial results. Our companys right of recoupment expires unless demand is made within three years following payment of the award, and does not apply to stock options, restricted stock or other securities that do not have performance-vesting criteria. A copy of our current policy is filed as Exhibit 10.27 to our annual report on Form 10-K for the fiscal year ended August 31, 2009.
Executive and Director Stock Ownership Requirements
The Committee believes that an important aspect of our total rewards program is significant stock ownership by senior executives, which aligns their interests with those of shareowners. Accordingly, the company has stock ownership requirements for our executives who are a party to a change of control agreement with us and for our non-employee directors. The stock ownership requirements for our executives are calculated as a fixed number of shares using the ownership requirement multiple as shown below and the executives calendar year annual base salary as of a certain date, and the stock price as of a fixed date. The ownership requirement remains at that share level until the Committee determines that a re-calibration is appropriate for all executives subject to the policy, based on each executives then-current base salary and stock price.
The stock ownership requirements for all of our executives subject to the policy were last re-calibrated as of June 27, 2006, based on each executives then-current calendar year base salary and stock price.
The stock ownership requirements for our proxy officers as of October 31, 2009 were as follows:
The stock ownership requirements for our executive team members is three times their base pay as of June 27, 2006 or the date they became subject to the requirements, and for the 24 other covered executives, one times annual base pay as of June 27, 2006, or the date they became subject to the requirements. The stock ownership requirement for each of our non-employee directors is 10,000 shares.
The following shares count toward meeting the policys ownership requirements:
The following shares do not count towards meeting the policys ownership requirements:
Until an executive or director has met his or her stock ownership requirement, he or she must retain 25% of the pre-tax number of shares received upon an exercise of a stock option, vesting of restricted stock or settlement of Financial Goal RSUs or other equity-based award granted under our long-term incentive plans.
The Committee reviews progress toward meeting the ownership requirements at least annually. As of the date of this proxy statement, each of our proxy officers and all but two of our directors (who are of short tenure) has met his or her stock ownership requirements.
The company provides our executive team members with certain perquisites, the most significant of which is access to the companys aircraft for personal flights. The majority of the personal flights results from our board of directors requirement that our CEO travel on the companys aircraft for security reasons. Personal use of the companys aircraft by other officers will occasionally be allowed for extraordinary personal situations that arise but must be approved in advance by our CEO. When considering Mr. Grants total compensation, the Committee eliminated the companys payment of his annual club membership dues (for business and personal use) and associated tax gross-up beginning with fiscal 2010. The Committees decision was premised on its philosophy of providing a limited number of officer perquisites and a consideration of executive compensation trends. Further discussion of the perquisites provided to our proxy officers is included in the narrative introducing our All Other Compensation Table on pages 43-44. Perquisite values are not considered for purposes of determining any annual incentive award, retirement benefit or any other benefit payment.
Equity Grant Practices
The company makes equity grants under our shareowner-approved 2000 long-term incentive plan or 2005 long-term incentive plan. Since our 2008 fiscal year, the grant date is the date the Committee or its delegate approves the grants. The grant price is the fair market value of a share of our common stock on the grant date. Since October 2006, the fair market value is the closing price on the grant date. Stock options are granted with an exercise price equal to the fair market value of a share of our common stock on the grant date.
The Committee and its independent consultant review its grant date practices for stock options, restricted stock unit and other equity awards to assure that our grant practices are aligned with what they believe constitute best practice guidelines.
Timing of Regular Equity Grants
The Committee approves the individual components of our annual executive compensation program, including stock option and restricted stock unit grants, at its regularly-scheduled October meeting. The Committee approves the grants with a grant date the same as the approval date. In addition to annual equity grants, stock option grants are made to management employees who are hired or promoted during the period between annual grants, representing a pro-rata portion of the number of shares (or increased number of shares) warranted by their new positions. Under the rules the Committee has established for these grants, grants are made on the 15th day of each month at the fair market value on that date. Any equity grant to one of our new or existing officers is approved by the full Committee with a grant date on the approval date.
Derivative Trading Policy
Our company prohibits derivative transactions in our company stock. Specifically, officers and their families may not, at any time:
Deductibility of Compensation
Our company intends to comply with the requirements of Code Section 162(m), to the extent practical, with respect to options and annual and long-term incentive programs in order to avoid losing the deduction for compensation in excess of $1 million paid to our CEO and three other highest-paid executive officers other than the CFO. Compensation plans have generally been performance-based so that payments under those plans and arrangements are tax deductible. The plans or performance measures have been approved by our companys shareowners. However, the Committee may elect to provide compensation outside those requirements when necessary to achieve its compensation objectives. In fiscal year 2009, $387,419 of compensation to our officers was not deductible under the provisions of Section 162(m).
The people and compensation committee of our board of directors has reviewed and discussed with management the preceding Compensation Discussion and Analysis. Based on that review and discussion, the people and compensation committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
PEOPLE AND COMPENSATION
The narrative, table and footnotes below describe the total compensation paid to each of our proxy officers. The components of the total compensation reported in the Summary Compensation Table are described below. For information on the role of each component within the total compensation package, see the description under Compensation Discussion and Analysis beginning on page 19.
This column represents the base salary earned during the fiscal years indicated by each of our proxy officers.
This column represents the aggregate amount of compensation cost recognized in the respective fiscal year under FAS 123R for restricted stock, restricted stock units and performance-RSUs granted to each of the proxy officers in the current and prior fiscal years.
With respect to performance-RSUs, FAS 123R requires the company to evaluate the likelihood of the achievement of the different possible levels of performance in terms of the goals specified in the awards each quarter and incur expense based on the most probable outcome. Based on our evaluation at the end of our 2007 and 2008 fiscal years, we incurred expense at 200% of the number of financial goal performance RSUs initially awarded for our 2005, 2006, 2007 and 2008 fiscal years, and based on our evaluation at the end of fiscal 2009, we incurred expense at 88% of the number of performance-RSUs initially awarded for fiscal 2009. Performance will be evaluated at each reporting period, and changes in expected performance could cause this expense to be reversed in future periods. Amounts reported in this column do not factor in an estimate of forfeitures related to service-based vesting conditions. Pursuant to the requirements of FAS 123R, restricted stock, restricted stock
units and performance-RSUs are generally expensed ratably over the vesting period of the grant. However, performance-RSUs granted for fiscal years 2007 and 2008 are expensed ratably over the two-year performance period with respect to individuals who will reach age 50 during the two-year performance period, including Messrs. Grant, Crews and Leidy and Dr. Fraley, and performance-RSUs granted for fiscal year 2009 are expensed ratably over the two-year performance period with respect to individuals who will reach age 55 during the two-year performance period, and who have completed at least five years of service, including Dr. Fraley, rather than ratably over the corresponding three-year service period. Additional information regarding the awards is set forth in the Grants of Plan-Based Awards Table on page 46 and the Outstanding Equity Awards at Fiscal Year-End Table on page 51.
This column represents the aggregate amount of compensation cost recognized in the respective fiscal year under FAS 123R for option awards granted to each of our proxy officers in the current and prior fiscal years. However, amounts reported in this column do not factor in an estimate of forfeitures related to service-based vesting conditions. The assumptions used in determining the fair value of the awards are set forth in Notes 16, 18 and 20 to our financial statements contained in our Annual Reports on Form 10-K for the fiscal years ended August 31, 2007, 2008, and 2009, respectively. Options granted in fiscal years 2007 and 2008 are expensed at an accelerated rate with respect to individuals age 48 or older, including each of our proxy officers, and options granted In fiscal year 2009 are expensed at an accelerated rate with respect to individuals age 53 or older with at least five years of service, rather than ratably over the vesting period. Additional information regarding the awards is set forth in the Grants of Plan-Based Awards Table on page 46 and the Outstanding Equity Awards at Fiscal Year-End Table on page 51.
This column represents cash awards earned by our proxy officers during the respective fiscal year under the applicable annual incentive plan, which were paid in November of the subsequent fiscal year. Our annual incentive plans are discussed in further detail on pages 48-49 and under Compensation Discussion and Analysis beginning on page 19.
This column represents the aggregate actuarial increase in the present value of benefits under all of our pension plans during the respective fiscal years for each of our proxy officers. The amounts were determined by using interest rate and mortality rate assumptions consistent with those used in our financial statements, as is set forth in the Pension Benefits Table beginning on page 56. This column also includes interest earned under our Deferred Payment Plan to the extent that it exceeds 120% of the applicable federal long-term rate. The Deferred Payment Plan is discussed in further detail under Non-Qualified Deferred Compensation Table beginning on page 57.
This column represents all other compensation for each proxy officer for the respective fiscal years not reported in the previous columns, such as company matching contributions to our savings and deferred compensation plans, gross-ups and the aggregate incremental costs of providing certain perquisites and benefits, as discussed below under All Other Compensation beginning on page 43.
The following table provides additional information on the amounts reported in the All Other Compensation column of the Summary Compensation Table for fiscal 2009.
The company makes matching contributions for compensation contributed by participants under our Savings and Investment Plan, which we refer to as our SIP, and our SIP Parity Plan. The SIP is a tax-qualified defined contribution plan and our SIP Parity Plan is a non-qualified defined contribution plan under the Code. For the January 1, 2008-December 31, 2008 plan year, the company also made a special allocation with respect to eligible employees under the SIP based on a uniform percentage of the employees eligible pay for the year. The companys matching contributions and special allocation under the plans for each of our proxy officers for fiscal 2009 are set forth in the respective columns below. Information regarding the company matching contribution levels and special allocation are described under SIP Parity Plan on page 57.
The company did not provide any tax gross-ups for the proxy officers in fiscal 2009, other than for club dues for Mr. Grant who used the clubs primarily for business-related purposes. Effective with our 2010 fiscal year, the company no longer reimburses Mr. Grant for club dues and, therefore, no longer provides tax gross-ups for his club dues.
The perquisites we provide to our proxy officers include:
Perquisites are not included in determining an employees retirement or severance benefits.
The following table provides additional information about plan-based awards granted to our proxy officers during fiscal 2009. Our proxy officers generally received three types of plan-based awards:
Our annual incentive plan is designed to reward financial and operational performance that drives shareowner value. Awards under the annual incentive plan are paid in cash. For details of this plan, see the description beginning on page 48.
These options were granted on October 20, 2008 under our 2005 Long-Term Incentive Plan. One-third of the options will vest on each of November 15, 2009 and November 15, 2010, and the remainder will vest on November 15, 2011, or earlier under certain circumstances, such as death, disability, retirement or a change of control, as described below. The term of these options may not exceed 10 years and may be shorter as a result of certain events, such as death or termination of service.
Financial goal performance-RSUs were granted on October 20, 2008 under our 2005 Long-Term Incentive Plan. These awards represent the right to receive a specified number of shares of our common stock if and to the extent the performance-RSUs vest. Vesting of financial goal performance-RSUs is generally subject to (i) our attainment of specified performance criteria relating to cumulative EPS, cash flow and return on capital goals during the designated performance period (September 1, 2008 through August 31, 2010), and (ii) the proxy officers continued employment during the designated service period (September 1, 2008 through August 31, 2011). However, vesting is accelerated under certain circumstances, such as death, disability, retirement or a change of control. We describe the terms of these financial goal performance-RSUs in more detail beginning on page 49.
For grants made for fiscal years prior to 2008, during the restricted period, the executive receives cash payments equal to the cash dividends that would have been paid had he or she been the record owner of shares equal to the number of financial goal performance RSUs initially granted. Beginning with fiscal 2008 grants, dividends will be accrued during the designated service period and will be paid upon vesting based on the number of units that vest.
Annual Incentive Plan
Our 2009 annual incentive plan covered all of our proxy officers and other regular employees, except those who participate in a sales or manufacturing annual incentive plan or a specific business annual incentive plan. The performance period covered fiscal 2009. The plan focused the organization on achieving financial goals as shown below, all of which affect shareowner value. The following describes our 2009 fiscal year annual incentive plan:
The metrics for determining our companys performance against the EPS and cash flow goals of our 2009 fiscal year annual incentive plan and financial goal performance RSUs described below, are derived from our financial statements, which follow generally accepted accounting principles. However, the people and compensation committee may exercise discretion and make adjustments, as follows:
For information regarding the annual incentive and performance-RSU awards to our proxy officers for fiscal 2009, please see Annual Incentive Plan beginning on page 27 and Financial Goal RSU Design, Financial Goals and Vesting beginning on page 32.
Long-Term Incentive Awards
In fiscal 2009, we granted long-term incentive awards to our proxy officers and other members of our executive team based on each executives long-term incentive opportunity and provided 75% as stock options and 25% as financial goal performance RSUs.
For all management employees other than our proxy officers and executive team members (approximately 2,500 people), all long-term compensation was delivered in the form of stock options upon the same terms and conditions as used for proxy officers.
We generally award stock options with ten year terms that vest ratably over three years, except in certain circumstances. In the event of a change of control, as defined on page 59, all options become fully vested. In the event of termination of employment for any reason before the first anniversary of the grant date, unvested options are forfeited. In the event of death, disability, involuntary termination without cause or retirement, options held more than one year become fully vested. Beginning with stock options granted for fiscal year 2009, we amended the Long-Term Incentive Plans to change the definition of retirement from age 50 to age 55, with five years of service. Retirement remains defined as age 50 for stock options granted prior to fiscal year 2009. The terms and conditions of the stock options provide for single-trigger vesting so that upon a change of control, employees are provided certainty as to their equity-based compensation and afforded the same flexibility as shareowners in determining whether to continue to be tied to the companys success following the change in control.
Financial Goal Performance RSUs
The terms and conditions of financial goal performance RSUs granted to our proxy officers and other executive team members as a portion of the long-term incentive component of their annual compensation provide as follows:
The following chart shows performance-RSU grants vesting on or after August 31, 2009:
Financial Goal Performance-RSU Grant Vesting Table
Restricted Stock and Restricted Stock Units
We grant restricted stock and restricted stock unit awards from time to time with specified vesting periods, although we did not make any such grants in fiscal 2009. Generally, the shares or units are forfeited in the event of termination of employment prior to vesting. However, in the event of death, disability or involuntary termination without cause, the shares or units vest on a pro rata basis. In the event of a change of control, as defined on page 59, all shares or units become fully vested. Participants are entitled to receive dividends and to vote shares of restricted stock.
The table below provides information regarding each proxy officers outstanding equity awards as of August 31, 2009. The equity awards in this table consist of stock options, restricted stock units and financial goal performance RSUs.
The following table provides information about the value realized by the proxy officers on exercise of stock options and vesting of stock awards during the 2009 fiscal year.
We maintain the following defined benefit retirement plans for the benefit of our eligible U.S. employees: (1) the company Pension Plan, which is a tax-qualified defined benefit plan under the Code; and (2) the Parity Pension Plan, which is a non-qualified defined benefit plan under the Code. The disclosure that follows reflects the status of our defined benefit pension plans as of the end of the 2009 fiscal year.
Prior to January 1, 1997, Former Monsanto sponsored a traditional defined benefit pension plan. Effective January 1, 1997, Former Monsanto converted this plan to a form of pension plan known as a cash balance plan. Former Monsanto similarly converted certain non-qualified pension plans that were intended to offset certain federal tax limitations as to the benefits participants could receive under the Former Monsanto defined benefit plan. The cash balance plan provides benefits that are a function of two notional accounts maintained on behalf of plan participants, a prior plan account and a cash balance account. Cash balance plan participants who were employed before and after the 1997 conversion date have both a prior plan account and a cash balance account. Participants who were not employed by Former Monsanto, Pharmacia or us prior to January 1, 1997 have only a cash balance account.
The opening balance of the prior plan account was (at a minimum) the actuarial equivalent lump sum value of the executives old defined benefit plan monthly retirement benefit accrued prior to January 1, 1997. The formula used to calculate the opening balance for employment with Former Monsanto was the greater of 1.4% (1.2% for employees hired by Former Monsanto on or after April 1, 1986) of the average final compensation multiplied by years of service, without reduction for Social Security or other offset amounts, or 1.5% of average final compensation multiplied by years of service, less a 50% Social Security offset. Average final compensation for purposes of determining the opening balance was the greater of: (1) average compensation received during the 36 months of employment prior to 1997; or (2) average compensation received during the highest three of the five calendar years of employment prior to 1997.
In calculating the opening prior plan account balances, Former Monsanto assumed that all participants were eligible for a full, unreduced pension at age 55, rather than at age 65, the plans normal retirement age. For participants who had not yet reached age 55 at the time of conversion, the pension payable at age 55 was discounted to an actuarially equivalent lump sum as of the date of conversion using an 8.5% interest rate for each year that a participants age was less than 55. Beginning January 1, 1997, interest credits are added to the prior plan account monthly, at an annual rate of 8.5% until the participant reaches age 55 or benefits begin if earlier, in order to restore the discount taken at conversion. Pay credits are also added to the prior plan accounts monthly, at an annual rate of 4%, until the participant retires or terminates employment, to reflect future increases in compensation that would have increased prior plan benefits.
We credit the cash balance account for all plan participants service beginning January 1, 1997. The cash balance account grows by the addition of various compensation-based and interest-based credits posted over the course of participants employment. We credit annual contributions to the cash balance account in amounts depending upon a participants age as follows: 3% before age 30, 4% for ages 30 to 39, 5% for ages 40 to 44, 6% for ages 45 to 49 and 7% for age 50 and over. Participants also receive contribution credits equal to 3% of eligible compensation in excess of the social security wage base. Participants who were covered under the prior traditional defined benefit plan on December 31, 1996 also received transition credits while employed based on the number of years of benefit service earned as of that date (up to a maximum of ten years). The applicable percentages and age ranges were 2% before age 30, 3% for ages 30 to 39, 4% for ages 40 to 44, 5% for ages 45 to 49, and 6% for age 50 and over. In addition, each participants cash balance account accrues monthly interest credits, based on the average interest rate for 30-year Treasury Bonds for October of the prior calendar year, with a minimum rate of 5% and a maximum rate of 10%.
A pension plan participant may elect to receive his or her vested plan benefit on the first day of any month coinciding with or following the date upon which the participants employment with our company and affiliated companies is terminated or the participant becomes disabled (but no later than the April 1 following the calendar year in which the participant attains age 70.5). Pension plan benefits are normally paid in either a single life annuity for unmarried participants or a 50% joint and survivor annuity for married participants, with additional optional forms of benefit available, including a lump sum distribution. All available forms of distribution are actuarially equivalent to the single life annuity.
We maintain the Parity Pension Plan for certain of our U.S. management-level employees, including the proxy officers. The Parity Pension Plan provides pension benefits to participants in our tax-qualified defined benefit pension plan who cannot be provided full benefits because of the following limitations imposed by federal law and regulations: (1) the limitation on annual compensation that can be used to compute benefits under our tax-qualified defined benefit plan, which was $245,000 in 2009 and is indexed for inflation thereafter; and (2) the limitation on the amount of benefits that can be paid as a single life annuity each year, which was generally $195,000 in 2009 and is indexed for inflation thereafter. The amount of a participants Parity Pension Plan benefit is the excess of the amount of benefit that he or she would have received under our tax-qualified defined benefit pension but for either or both of the limitations over the amount payable in the Pension Plan.
Our Parity Pension Plan also provides a benefit to participants in our tax-qualified defined benefit plan who defer payment of all or a portion of an annual incentive award under our Deferred Payment Plan described on pages 57-58, since the deferred amount may not be considered compensation for purposes of calculating benefits under our tax-qualified defined benefit plan. The amount of a participants benefit is the excess of the amount of benefit that he or she would have received under our tax-qualified defined benefit pension but for the deferral of the annual incentive award over the amounts payable from the Pension Plan and this Plan reflecting the deferral. Previously these benefits were provided under our Supplemental Pension Plan, which was merged into the Parity Pension Plan on December 31, 2008.
Parity Pension Plan benefits are vested only to the extent a participants tax-qualified defined benefit pension plan benefits are vested, but are forfeited in the event of a termination for cause. Effective December 31, 2008, the provisions of the Parity Pension Plan relating to the timing of distributions were amended to comply with the final regulations under Code Section 409A, and certain payment options were eliminated from the grandfathered portion of the plan. Pre-2005 benefits (grandfathered) under the Parity Pension Plan are those benefits which were earned and vested prior to December 31, 2004. There are two payment options under the Parity Pension Plan. Benefits may be paid as:
During any waiting or deferral period, we credit participants Parity Pension Plan benefits with interest, currently based on the prior years average of the average Moodys Baa Bond Index, which was 6.48% in calendar year 2008 and 7.45% in calendar year 2009. A Parity Pension Plan participant may request an emergency benefit distribution during the waiting period, deferral period or after benefit payments have begun if he or she incurs a severe, unforeseeable financial hardship.
Post-2004 benefits under the Parity Pension Plan are those benefits which were earned and vested after December 31, 2004. There are two payment options under Parity Pension Plan. Benefits may be paid as:
The following table reports the present value of accumulated benefits payable to each of our proxy officers under our defined benefit retirement plans. For the Parity Pension Plan, the present value of the accumulated benefit has been calculated assuming, for valuation purposes only, that each of our proxy officers will remain in service until age 65, that the discount rate is 5.30%, and the benefit is payable as a lump sum. For the Pension Plan, the present value of the accumulated benefit has been calculated assuming, for valuation purposes only, that each of our proxy officers will remain in service until age 65, that the discount rate is 5.30%, and that 80% of the benefit is payable as a lump sum and the remainder as a single life annuity. The post-retirement mortality assumption for all of the retirement plans is based on the RP-2000 Healthy Annuitants table without collar or adjustments, projected to 2015 using scale AA.
We maintain two non-qualified deferred compensation plans for certain of our management-level U.S. employees: (1) the Savings and Investment Parity Plan, which we refer to as our SIP Parity Plan, and (2) our Deferred Payment Plan.
All eligible U.S. employees may contribute up to 25% of eligible pay to our SIP, which is a tax-qualified defined contribution plan. We make matching contributions to SIP equal to 60% of up to the first 7% of compensation contributed by the participant, and may make an annual discretionary matching contribution on up to 10% of their pay.
Once contributions to the SIP reach a Code limit on compensation or contributions, contribution amounts are allocated to bookkeeping accounts under the SIP Parity Plan. Employee contributions to the SIP Parity Plan are fully vested; however, company matching amounts vest 20% per year over five years. The company credits both participant contributions and its matching amounts to the SIP Parity Plan with earnings or losses matching the performance of one or more investment options available under the SIP, as determined by the participant. We currently offer 15 investment options, one of which is a book account based on our company stock which provided a return of -26% for fiscal 2009. The other 14 investment options provided returns ranging from -20.8% to 4.2% for fiscal 2009. A participant may change his or her investment choices at any time, except that reallocations involving our common stock funds must be made in compliance with our policies on trading our stock. The SIP Parity Plan provides for payment following termination of employment in a lump sum or through a deferral election payable not later than age 70.5 in a lump sum or monthly installments over a term certain. After termination of employment, we credit accounts with interest, currently based on the prior years average of the average Moodys Baa Bond Index Rate, as in effect from time to time, which was 6.48% in calendar year 2008 and 7.45% in calendar year 2009. The provisions of the SIP Parity Plan relating to the timing of elections to contribute to the plan and distributions from the plan, including distributions in the event of a financial emergency, were amended effective December 31, 2008 to comply with the final regulations under Code Section 409A.
Our Deferred Payment Plan provides certain management-level employees the opportunity to defer, until a specific date in the future or until termination of employment or beyond, the receipt of all or a portion of cash compensation they may earn under our annual incentive plan. Effective August 27, 2009, participants in the Deferred Payment Plan also are credited with amounts generally equivalent to the amounts they would have received as matching contributions with respect to the deferred amounts under our SIP or SIP Parity Plan whether or not they actually participate in those plans.
The Deferred Payment Plan permits participants to elect between or among two investments. Under the cash investment election, earnings on deferred amounts will accrue at a rate equivalent to the average yield of the Moodys Baa Bond Index for the prior calendar year. Under the stock investment election, earnings on deferred amounts will accrue at a rate that tracks the performance of our common stock (including reinvestment of dividends), with deferred amounts converted into hypothetical stock units based on the average trading price during the preceding ten trading days. Participants may transfer between funds subject to certain rules and procedures. Amounts are distributed on either a date specified by the participant at the time of the deferral election or in a lump sum or monthly installments for up to ten years following retirement. Amounts attributable to the cash investment election are paid in cash and amounts attributable to the stock election are paid in shares of our common stock unless the participant otherwise elects to receive cash. If approved by the plans administrative committee, at its discretion, a participant may receive an early distribution of benefits if he or she incurs a severe, unforeseeable financial hardship. The provisions of the Deferred Payment Plan relating to the timing of elections to defer annual incentive plan amounts under the plan and distributions from the plan were amended effective December 31, 2008 effective for deferrals contributed beginning in 2005, to comply with the final regulations under Code Section 409A.
The following table provides information for each of our proxy officers regarding aggregate individual and company contributions and aggregate earnings for fiscal 2009 and year-end account balances under our deferred compensation plans:
We have entered into change of control employment security agreements with each of the proxy officers and other executives that may require us to make payments to these individuals in the event of the termination of their employment following a change of control. In addition, many of our executive compensation, benefit and deferred compensation plans provide the proxy officers with certain rights or the right to receive payments in the event of the termination of their employment.
Under the terms of the agreements, each proxy officer is generally an employee at-will until and unless the occurrence of a change of control. Upon a change of control, we will provide certain protections for a period of time to the proxy officers, including the payment of specified termination benefits if their employment is terminated during the period. If a proxy officer incurs an involuntary termination of employment or a termination of employment for good reason after the occurrence of a change of control while his agreement is in effect, he would not be entitled to severance pay or benefits under any company severance plan or program.
A change of control generally means:
The same definition is used with respect to the equity awards included in the tables below.
Terms of Employment Following a Change of Control
Upon a change of control, the agreement establishes certain protections in the form of fixed terms of employment during a protected period for two years following the first day during the term of the agreement on which a change of control occurs. More specifically, during the protected period, we provide the proxy officer certain guarantees with respect to the officers position, job location and travel requirements. In addition, during the protected period, we guarantee the proxy officer certain minimums with respect to base salary, annual incentive plan award payments, incentive opportunities and other benefits. The guaranteed benefits are generally determined, as appropriate, in accordance with the most favorable plans, practices, policies and programs in effect during the 120-day period before the change of control or afterwards, as applicable, to peer executives at our company:
Termination Other Than for Cause or Disability; Voluntary Termination for Good Reason
If the proxy officer is terminated other than for cause or disability, or the officer terminates employment for good reason during the protected period following a change of control and executes a timely release, the proxy officer is entitled to a lump sum payment within 30 days after the termination date or, if later, within five days after the proxy officer executes a release of claims equal to the following:
All benefits accrued through the termination date under our Pension Plan and supplemental pension or retirement plans will be vested and paid in accordance with their terms. In addition, a lump sum payment will be made within 30 days after the termination date or, if later, within five days after the proxy officer executes a release of claims equal to the amount of incremental benefits that would have accrued (whether or not vested) under those plans through the end of a three-year severance period.
Each proxy officer is eligible for outplacement benefits, in accordance with our normal practice for our most senior executives and specified welfare benefits (i.e., medical, prescription drug, dental, vision, disability and life insurance), through the end of the severance period. Further, for purposes of eligibility for retiree welfare benefits, the executive will be considered to have remained employed until the end of the severance period and to have retired on the last day and, if age 50 on the termination date, will be entitled to receive retiree medical benefits at least as favorable as those available on the date of the change in control.
Good reason generally means:
In order to terminate employment for good reason, the proxy officer must first provide us with notice of the existence of an event or condition constituting good reason within 90 days after such event or condition initially occurs and allow us 30 days to cure such event or condition.
Termination for Death or Disability
If the proxy officer is terminated on account of death or disability during the protected period following a change of control, the company will pay the proxy officer (or his estate or beneficiaries):
Termination for Cause or Voluntary Termination Other Than for Good Reason
If the proxy officer is terminated for cause during the protected period following a change of control, the company must pay the proxy officer base salary and provide him his benefits through the termination date. Cause is defined as a proxy officers:
If the proxy officer voluntarily terminates, other than for good reason, during the protected period, the company must pay the proxy officer in a lump sum in cash within 30 days of the date of termination:
Tax Gross-Up Payments
If any payment to an officer would be subject to excise tax, we will pay the executive a gross-up payment (whether or not his or her employment has terminated), so that, after payment of taxes and excise taxes on the payment, the officer retains an amount of the gross-up payment equal to the applicable excise tax. However, if the payment subject to the tax does not exceed 110% of the amount that would not trigger an excise tax, the company would instead reduce the payments under the agreement to the executive accordingly (unless the excise tax would not thereby be avoided).
The following tables show potential incremental payments, benefits and equity award accelerations and forfeitures upon termination of our proxy officers or a change of control. The amounts are determined under existing agreements and plans under various termination scenarios. The amounts assume that the terminations or change of control were effective as of August 31, 2009 and use the closing price of our common stock on that date of $83.88 per share. Other material assumptions used in calculating the estimated compensation and benefits under each triggering event are noted below. All amounts are estimates of the amounts which would be paid to the proxy officers upon their termination or as a result of the change of control. Because the compensation impact upon termination or a change of control depends on several factors, the actual impact can only be determined at the time of the event. All amounts included in the table are stated in the aggregate, even if the payments will be made on a monthly basis, except in the case of amounts contained under Annual Benefit Value.
The tables do not reflect amounts attributable to vested, non-forfeited equity-based awards or accrued compensation, retirement and other benefits and deferred compensation. For information about these previously earned and accrued amounts, see the Summary Compensation Table, Outstanding Equity Awards at Fiscal Year End Table, Pension Benefits Table and Non-Qualified Deferred Compensation Table located elsewhere in this proxy statement.
Unvested stock options, restricted stock, restricted stock units and performance-RSUs vest under certain circumstances, as described in footnotes 1, 2, and 3 to the tables below, including in the event of a change of control, regardless of any termination of employment. The values of such awards are reflected in the Change of Control Without Termination column and, accordingly, are not also reflected in the Change of Control column under Termination.
Our proxy officers participate in our companys broad-based Separation Pay Plan covering our full-time U.S. employees. Under the terms of the plan, a proxy officer would receive severance benefits in the event of his involuntary termination without cause, absent a change of control. The amount of the severance benefits would be paid as a lump sum equal to the product of: (a) 15, times (b) the sum of: (i) the proxy officers monthly base salary in effect at the time of the termination, plus (ii) the average of his annual incentive plan awards paid to him under our annual incentive plan for the three prior years, divided by 12. Their severance benefit calculation follows the same formula used in determining all other U.S. employees severance pay upon an involuntary termination without cause under the Separation Pay Plan. The information in the tables below reflects estimated severance benefits in the event of the proxy officers involuntary termination without cause, absent a change of control based on the Separation Pay Plan formula.
For an explanation of numeric footnotes, see footnotes on pages 68-69.
Terrell K. Crews
For an explanation of numeric footnotes, see footnotes on pages 68-69.
Brett D. Begemann
For an explanation of numeric footnotes, see footnotes on pages 68-69.
Carl M. Casale