The board is responsible for the oversight and approval (or ratification) of any transaction, relationship or arrangement in which the Company is a participant and that involves board members, Company executive officers, beneficial owners of more than 5% of the Ordinary Shares, their immediate family members, any individual (other than tenants and employees) who shares that person’s home and companies they control or in which they have a substantial beneficial ownership interest. We refer to these as related person transactions and to the persons or entities involved as related persons.
The board has adopted a written policy that sets out procedures for the reporting, review and approval (or ratification) of related person transactions. The policy operates in conjunction with other aspects of the Company’s compliance program, such as its code of conduct and business ethics policy, which requires directors and employees to report any circumstances that may create or appear to create a conflict between the interests of the related person and those of the Company, regardless of the amount involved. The Company’s directors and executive officers must also periodically confirm information about related person transactions, and management reviews its books and records and makes other inquiries as appropriate to confirm the existence, scope and terms of related person transactions.
Under the board’s policy, the audit committee evaluates related person transactions for purposes of recommending to the disinterested members of the board that the transactions are fair, reasonable and within Company policies and practices and should be approved or ratified. Related person transactions entered into, but not approved or ratified, are subject to termination if so directed by the audit committee or the board, as applicable.
The audit committee considers the appropriateness of any related person transaction in light of all relevant factors and the controls implemented to protect the interests of the Company and its shareholders, including:
the terms of the transaction and whether they were made on an arm’s-length basis and in the ordinary course of the Company’s business;
the direct or indirect nature of the related person’s interest in the transaction;
other facts and circumstances that bear on the materiality of the related person transaction under applicable law and listing standards.
Related person transactions involving directors are also subject to board approval or ratification when so required under applicable law and subject to disclosure pursuant to the Company’s Articles of Association.
RELATED PERSON TRANSACTIONS
At January 1, 2016,December 29, 2017, the close of our most recent fiscal year, members of the Abu-Ghazaleh family, including Mohammad Abu-Ghazaleh, our Chairman and Chief Executive Officer, and Amir Abu-Ghazaleh, a director of the Company, and Ahmad Abu-Ghazaleh, a director nominee of the Company, owned approximately 35.9%38% of the Company's outstanding Ordinary Shares. Mr. Mohammad Abu-Ghazaleh and Mr. Amir Abu-Ghazaleh are brothers. Mr. Ahmed Abu-Ghazaleh is Mr. Mohammad Abu-Ghazaleh's son and Mr. Amir Abu-Ghazaleh's nephew. The Abu-Ghazaleh family members entered into an amended and restated Voting Agreement, pursuant to which (among other things) they granted Mohammad Abu-Ghazaleh an irrevocable proxy for as long as they hold the Ordinary Shares to vote all of the Ordinary Shares beneficially owned by them and agreed to grant additional such proxies on an annual basis until the termination of the Voting Agreement.
In April 2009, the board adopted the Company’s Aircraft Travel Policy to clarify and document the procedures and safety requirements with respect to the authorization to use private or charter aircraft in which Mohammad Abu-Ghazaleh, the Company’s Chairman and Chief Executive Officer, has an interest for business travel by the Chairman and Chief Executive OfficerMr. Abu-Ghazaleh and such other persons as he may designate, in any case in which payment of or reimbursement for the cost thereof is sought from the Company. In fiscal year 2015,2017, we incurred approximately $2.5$2.4 million of air charter expenses with respect to an aircraft that is indirectly owned by our Chairman and Chief Executive Officer.Mr. Abu-Ghazaleh. The rates charged for these services were comparable to market rates charged to unrelated companies for use of a similar aircraft.
Marissa R. Tenazas is the Company's Senior Vice President, Human Resources and an executive officer. Her husband, Jimenez Tenazas, is the Company's Vice President, Sales, Production and Product Management, Melon Program and Tomato Production Operations, North America and received a base salary of $310,000$325,686 during fiscal year 2015,2017, and receives other benefits generally available to all of our employees based in the United States. He also has stock options with respect to 4,0005,000 Ordinary Shares granted in 2013, of which none or 0 were20% vested as of February 26, 2016.on July 31, 2017. In addition, he has restricted shares with respect to 5,000 Ordinary Shares granted in 2014, of which 20% vested and were released on July 30, 2015 and2017; restricted shares with respect to 5,000 Ordinary Shares granted in 2015, of which 20% vested and were released on July 29, 2015.2017, restricted shares with respect to 5,000 Ordinary Shares granted in 2016, of which 20% vested and were released on August 3, 2017 and restricted shares with respect to 2,000 Ordinary Shares granted in 2017, of which 20% vested and were released on August 2, 2017.
EXECUTIVE OFFICERS
The following is information regarding our executive officers as of March 15, 201613, 2018.
Mohammad Abu-Ghazaleh—74,76, Chairman and Chief Executive Officer. Mr. Abu-Ghazaleh has served as the company's Chairman and Chief Executive Officer since 1996. He also serves as the Chairman of the Royal Jordanian Air Academy. From 1997 to 2010 he served as Chairman and Chief Executive Officer of IAT. Mr. Abu-Ghazaleh was President and Chief Executive Officer of United Trading Company from 1986 to 1996. Prior to that time, he was Managing Director of Metico from 1967 to 1986. Mr. Abu-Ghazaleh serves as Chairman of the board of directors of International General Insurance Co. Ltd. He also serves on the boards of directors of Bank Misr Liban and United Cable Company, Inc. From 2004 to March 2011, Mr. Abu-Ghazaleh served on the board of directors of Jordan Kuwait Bank. Mr. Abu-Ghazaleh and Mr. Amir Abu-Ghazaleh are brothers. Mr. Abu-Ghazaleh is Mr. Ahmad Abu-Ghazaleh's father.
Hani El-NaffyYoussef Zakharia—65,56, President Director and Chief Operating Officer. Mr. El-Naffy has served as the Company’s President, Director and Chief Operating Officer since 1996. Prior to that time, he served as Executive Director for United Trading Company from 1986 until 1996.
Richard Contreras—57, Senior Vice President and Chief Financial Officer. Mr. Contreras hasZakharia served as our SeniorExecutive Vice President, and Chief Financial Officer since 2008. Prior to that time, he served as Senior Vice President, Finance. From 2005 to 2007, he was Vice President, North America Finance and Administration. Mr. Contreras was Vice President, Budgeting and Forecasting from 2003 to 2005. He also served as Controller, North America from 1999 to 2003.
Bruce A. Jordan—62, Senior Vice President, General Counsel and Secretary. Mr. Jordan joined usbeginning in 1990 as our Assistant General Counsel. In 1994, he was appointed Vice President, General CounselAugust 2016 and Secretary, a position he held until 1997 when he left us to pursue other interests. In 2002, Mr. Jordan re-joined us as Vice President, General Counsel and Secretary. He was appointed Senior Vice President, General Counsel and Secretary in 2006.
Jean-Pierre Bartoli—65, Senior Vice President, Europe and Africa. Mr. Bartoli assumed his current responsibilities in 2008 when our Middle East and North African operations were realigned as a separate region. From 1997 to 2008, Mr. Bartoli served as our Senior Vice President, Europe, Africa and Middle East. He also served as our Financial Controller for the European and African region from 1990 to 1997. Mr. Bartoli held various financial positions in our European operations from 1983 to 1990. Mr. Bartoli has announced his intention to retire effective June 30, 2016.
Emanuel Lazopoulos—59, Senior Vice President, North America Sales, Marketing and Product Management. Mr. Lazopoulos has served as our Senior Vice President, North America Sales, Marketing and Product Management since 2005. Prior to that time, he served as our Vice President, Fresh-Cut Operations in North America from 2003 to 2005. Mr. Lazopoulos’s career in the fresh foods industry includes experience as Managing Director of NewStar Fresh Foods, as Vice President of DNA Plant Technology and as Vice President of Dole Fresh Vegetables.
Paul Rice—56, Senior Vice President, North America Operations. Mr. Rice has served as our Senior Vice President, North America Operations since 2005. Prior to that time, he served as Vice President, Distribution Center/Repack & Fresh-Cut Operations from 2001 to 2005. Prior to that, he held various senior management positions within Fresh Del Monte from 1988 to 2001. Prior to joining the Company, Mr. Rice held various sales and procurement positions for Dole Food Company & Topco.
José Antonio Yock—62, Senior Vice President, Colombia, Ecuador, Central America and Brazil, (CECAB). Mr. Yock has served as our Senior Vice President, Central America since 1994. Prior to that time, he was our Vice President Finance for the Latin American region from 1992 to 1994. Mr. Yock joined us in 1982 and has served in various financial management positions.
Marissa R. Tenazas—61, Senior Vice President, Human Resources. Ms. Tenazas served as Vice President-Human Resources from 1999 through December 2011. From 1996 to 1999, she served as Senior Director-Human Resources. From 1989 to 1996, she worked for Suma Fruit International (USA), Inc. Prior to that, Ms. Tenazas worked in the Philippines in various human resource management and consulting positions with some of the major conglomerates and consulting firms in that country.
Sergio Mancilla—56, Vice President, South America. Mr. Mancilla has served as our Vice President, South America since March 2012. From 2006 until March 2012, he served as Director, Shipping Operations for South America when he relocated back to his home country after serving as Senior Vice President, Shipping Operations from 1997 until 2006, which position was based in Coral Gables, Florida. From 1990 until 1996, Mr. Mancilla served as Manager of Maritima Altisol Ltda and before that time he worked as Deck Officer for several Chilean Shipping companies from 1981 until 1990.
Joseph Cole—66, Vice President, Asia Pacific. Mr. Cole joined us in 2008 and served as Vice President Tomato & Vegetables for our North American region. In February 2011, Mr. Cole was appointed Vice President, Asia Pacific. Prior to joining us, Mr. Cole’s career in the fresh produce industry included various senior management positions for The Oppenheimer Group, Chiquita Brands, The Tengelman Group in Germany and Dole Fresh Vegetables.
Youssef Zakharia—54, Vice President, Europe and Africa. Mr. Zakharia has served as our Vice President, Europe and Africa sincefrom January 2016 to August 2016. From 2006 through December 2015, he served as Vice President for our Middle East and North Africa, (MENA) region. Prior to that time, he served as our Vice President, Human Resources for Europe, Africa and Middle East region from 2005 to 2006. From 2000 to 2005, Mr. Zakharia was the Director of Operations for the Europe, Africa and Middle East region. Before joining the Company, Mr. Zakharia served as the Director of Sales Europe, Africa and Middle East for A.W. Chesterton from 1996 to 2000, and as Director of Operations for Nevada Power Company from 1990 to 1996.
MohammadRichard Contreras—59, Senior Vice President and Chief Financial Officer. Mr. Contreras has served as our Senior Vice President and Chief Financial Officer since 2008. Prior to that time, he served as Senior Vice President, Finance. From 2005 to 2007, he was Vice President, North America Finance and Administration. Mr. Contreras was Vice President, Budgeting and Forecasting from 2003 to 2005. He also served as Controller, North America from 1999 to 2003.
Bruce A. Jordan—64, Senior Vice President, General Counsel and Secretary. Mr. Jordan joined us in 1990 as our Assistant General Counsel. In 1994, he was appointed Vice President, General Counsel and Secretary, a position he held until 1997 when he left us to pursue other interests. In 2002, Mr. Jordan re-joined us as Vice President, General Counsel and Secretary. He was appointed Senior Vice President, General Counsel and Secretary in 2006.
Marissa R. Tenazas—63, Senior Vice President, Human Resources. Ms. Tenazas served as Vice President-Human Resources from 1999 through 2011. From 1996 to 1999, she served as Senior Director-Human Resources. From 1989 to 1996, she worked for Suma Fruit International (USA), Inc. Prior to that, Ms. Tenazas worked in the Philippines in various human resource management and consulting positions with some of the major conglomerates and consulting firms in that country.
Helmuth A. Lutty—59, Senior Vice President, Shipping Operations. Mr. Lutty has served as our Senior Vice President, Shipping Operations since January 2018. Prior to that time, he served as our Vice President, Shipping Operations from 2006 to December 2017. Mr. Lutty additionally held positions of increasing responsibility from when he joined us in 1997 through 2006. Mr. Lutty also previously held various purchasing, engineering, and production positions for Ravenscroft Shipping, Southern ShipManagement (Chile) LTDA, and Almac Supermarket S.A.
Jorge Pelaez—55, Vice President, Colombia, Ecuador, Central America and Brazil, (CECAB). Mr. Pelaez has served as our Vice President, CECAB, since April 2017. From February 2015 to March 2017, Mr. Pelaez served as the General Manager in the Company’s Costa Rica Banana Division. From 2012 to January 2015, he served as Senior Operations Director in our Costa Rica Banana Division, and as our Operations Manager in our Costa Rica Banana Division from 2010 to 2011. Mr. Pelaez served as the General Manager in our Cameroon Banana Division from 2004 to 2009. Prior to that time, he served as our Operations Manager, Brazil from 1994 to 2003. Mr. Pelaez held various senior positions in our banana operations from 1984 to 1994.
Emanuel Lazopoulos—61, Senior Vice President, North America Sales, Marketing and Product Management. Mr. Lazopoulos has served as our Senior Vice President, North America Sales, Marketing and Product Management since 2005. Prior to that time, he served as our Vice President, Fresh-Cut Operations in North America from 2003 to 2005. Mr. Lazopoulos’s career in the fresh foods industry includes experience as Managing Director of NewStar Fresh Foods, as Vice President of DNA Plant Technology and as Vice President of Dole Fresh Vegetables.
Paul Rice—58, Senior Vice President, North America Operations. Mr. Rice has served as our Senior Vice President, North America Operations since 2005. Prior to that time, he served as Vice President, Distribution Center/Repack & Fresh-Cut Operations from 2001 to 2005. Prior to that, he held various senior management positions within Fresh Del Monte from 1988 to 2001. Prior to joining the Company, Mr. Rice held various sales and procurement positions for Dole Food Company & Topco.
Hector Rivera—57, Vice President, Asia Pacific. Mr. Rivera has served as our Vice President, Asia Pacific since July 2016. From 2011 until July 2016, he served as General Manager, Philippines. From 2010 to 2011, Mr. Rivera worked with Indochina Gateway Capital in Southeast Asia as a Business Consultant to develop new produce developmental areas. From 2007 to 2009, he worked as the Country Manager with Sumifru (Philippines) Corporation. Prior to that time, he worked in various senior level positions for Dole Food Company for 21 years.
Sergio Mancilla—58, Vice President, South America. Mr. Mancilla has served as our Vice President, South America since March 2012. From 2006 until 2012, he served as Director, Shipping Operations for South America when he relocated back to his home country after serving as Senior Vice President, Shipping Operations from 1997 until 2006, which position was based in Coral Gables, Florida. From 1990 until 1996, Mr. Mancilla served as Manager of Maritima Altisol Ltda and before that time he worked as Deck Officer for several Chilean Shipping companies from 1981 until 1990.
Mohammed Abbas—40,42, Vice President, Middle East and North Africa, (MENA). Mr. Abbas has served as our Vice President, Middle East and North Africa since January 2016. From April 2015 through December 2015, he served as Vice President of Fresh Produce, for our Middle East and North Africa, (MENA) region. Mr. Abbas has served as the General Manager of Del Monte Saudi Arabia since 2009.from 2009 to March 2015. Prior to that time, he served as our General Manager of Del Monte Foods UAE since the inception of the first unit in the MENA Region in 2006 until 2009. Before joining the Company, Mr. Abbas served as the Director of Fresh Produce Sales in the Middle East and North Africa from 1998 to 2005 for Abu Ghazaleh International based in Dubai, UAE.
Gianpaolo Renino—50, Vice President, Europe and Africa. Mr. Renino has served as our Vice President, Europe and Africa since August 2016. From January 2014 until August 2016, he served as Senior Director-Italy. Prior to that time, he served as our Director, Southern Europe- Prepared Food. From 2005 to 2010, Mr. Renino served as our Senior Manager, Middle East and North Africa (MENA) and Europe region. From 2004 to 2005, he served as Business Development Manager, Middle East and Eastern Europe. Before joining the Company, Mr. Renino held management positions for Cirio Alimentare from 1999 to 2004, and Rosanova SPA from 1995 to 1999.
EXECUTIVE COMPENSATION
Compensation Committee
The compensation committee is comprised of four directors: Michael J. Berthelot (Chairman), Salvatore H. Alfiero, Madeleine Champion and John H. Dalton. None of the compensation committee members has a business relationship with the Company or its subsidiaries. Each member of the compensation committee is an “outside director” as defined in Section 162(m) of the Internal Revenue Code, a “non-employee director” as defined in Rule 16b-3 of the Exchange Act and “independent,” as that term is defined by NYSE Rule 303A.02.
The compensation committee acts on behalf of the board to review, adopt, and oversee the Company’s compensation strategy, policies, plans, and programs, including:
establishment of key executives’ performance objectives relevant to the compensation of the Company’s executive officers and evaluation of performance in light of these stated objectives;
review and approval of compensation and other terms of employment or service, including severance and change-in-control arrangements for the Company’s Chief Executive Officer and the other executive officers;
advising the board regarding changes to board or committee compensation programs and perquisites;
administration of the Company’s equity compensation plans, deferred compensation plans and other similar plans and programs; and
evaluation of the risks inherent in the Company’s incentive compensation programs.
The compensation committee oversees the compensation of all executive officers. The compensation committee participated in the preparation of the disclosure appearing under the heading “Compensation Discussion and Analysis” below and the related report of the compensation committee. The compensation committee has adopted a written charter that outlines its specific authority, duties and responsibilities. The charter is periodically reviewed and revised by the compensation committee and the board and is available to shareholders on the Company’s Web site at www.freshdelmonte.com under the “Investor Relations” tab.
Compensation Committee Processes and Procedures
Typically, the compensation committee meets at least once quarterly and with greater frequency if necessary. The compensation committee may also take action by written consent. During fiscal year 2015,2017, the compensation committee held four regular meetings. The agenda for each meeting is usually developed by the chairman of the compensation committee in consultation with the Company’s Senior Vice President of Human Resources and the Company’s Senior Vice President, General Counsel and Secretary. The compensation committee meets regularly in executive session and invites independent directors who do not serve on the compensation committee to attend these executive sessions, as well as its regular compensation committee meetings. From time to time, various members of management and other employees, as well as outside advisors or consultants, may be invited by the compensation committee to make presentations, provide financial or other background information or advice or otherwise participate in compensation committee meetings. No executive officer may participate in or be present during any deliberations or determinations of the compensation committee regarding their compensation. The charter of the compensation committee grants the compensation committee full access to all books, records, facilities and personnel of the Company, as well as authority to obtain, at the expense of the Company, advice and assistance from internal and external legal, accounting or other advisors and consultants and other external resources that the compensation committee considers necessary or appropriate in the performance of its duties. In particular, the compensation committee has the sole authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms.
Since July 1, 2013, the compensation committee has engaged Willis Towers Watson as its independent executive compensation consultant.
Over the course of their engagement, Willis Towers Watson has assisted the Company in:
reviewing the Company’s current compensation program compared to its peer group and other relevant compensation surveys to ensure market competitiveness;
evaluating the effectiveness of the Company’s compensation strategy and practices in supporting and reinforcing the Company’s long-term strategic goals; and
refining the Company’s compensation strategy and developing and implementing an executive compensation program to execute that strategy.
As part of its engagement, the compensation committee has directed Willis Towers Watson to develop a comparative peer group of companies similar in size and complexity to the Company and conduct an annual review of competitive market data (including base salary, annual incentive targets and long-term incentive targets) for the Chief Executive Officer and other executive officers. Willis Towers Watson then analyzed the competitive performance of the Company relative to the peer group. Willis Towers Watson has also previously conducted individual interviews with members of senior management and the compensation committee to learn more about the Company’s business operations and strategy, key performance metrics and strategic goals, as
well as the labor markets in which the Company competes. In addition, Willis Towers Watson reviews and comments on broader aspects of the Company’s executive compensation programs, including program philosophy, design and implementation, as requested by the committee. Willis Towers Watson attends all committee meetings at the request of the committee and presents relevant data and analysis to the committee for its consideration. Willis Towers Watson does not have any relationship or arrangement with the Company other than their engagement as consultant to the compensation committee.
Consultant Independence and Conflict of Interest. During 2015,2017, the compensation committee once again engaged Willis Towers Watson as its independent compensation consultant. Willis Towers Watson is engaged by and reports to the compensation committee, and does not perform any work for and does not otherwise receive any fees from the Company. In accordance with the requirements of Item 407(e)(3)(iv) of Regulation S-K, the committee has determined that Willis Towers Watson is an independent adviser to the compensation committee and no actual or potential conflicts of interest exist between the Company and Willis Towers Watson.
The compensation committee applied the following six independence factors to determine whether a conflict of interest exists:
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Factors to Consider | Result |
Provision of other services to the company by the firm that employs the compensation consultant | Willis Towers Watson provided no other services to Fresh Del Monte Produce Inc. during the calendar year ending December 31, 2015.2017. Fresh Del Monte Produce, Inc. purchased one compensation survey for $3,980 from Willis Towers Watson. |
Amount of fees (as a percentage of total revenue) paid or payable by the company to the firm that employs the compensation consultant | Willis Towers Watson's total fee received from Fresh Del Monte Produce, Inc. is less than 1%Watson disclosed on its most recent 10-K Annual Report filed on March 1, 2017 that no single client represented a significant concentration of Towers Watson's total annual revenuetheir consolidated revenues for itsany of the most recent three fiscal years. |
Policies and procedures of the firm that employs the compensation consultant designed to prevent conflicts of interest | Willis Towers Watson maintains policies and internal protocols to ensure its advice is fully objective and independent. |
Any business or personal relationship of the compensation consultant with a member of the committee | Willis Towers Watson is not aware of any business or personal relationship between the compensation adviser and the Compensation Committee.compensation committee. |
Any stock of the company owned by the compensation consultant | No regular member of the Willis Towers Watson executive compensation team serving Fresh Del Monte Produce, Inc. owns any stock, other than investment funds or other funds that are managed without the member's input. |
Any business or personal arrangement of the compensation consultant or the firm employing the compensation consultant with an executive officer of the company | Willis Towers Watson is not aware of any business or personal relationship between an executive officer of Fresh Del Monte Produce, Inc. and a regular member of the Willis Towers Watson executive compensation team. |
Final Determination | No conflict of interest exists |
The compensation committee makes notable adjustments to annual compensation, determines bonus awards for executive officers of the Company, and establishes new performance objectives, at one or more meetings held during the first quarter of the year. Annual equity awards for the Chief Executive Officer have historically been determined at a meeting held in the first quarter of the year, and equity awards for other executive officers and employees are determined at a meeting held in the third quarter of the year. Beginning 2018, the equity awards for other executives and employees will be determined at the same time as the awards for the Chief Executive Officer are determined, which is at a meeting held in the first quarter of the year. In addition, the committee retains discretion to grant additional equity awards to executive officers at other times during the year if it deems such grants to be appropriate or warranted. The compensation committee considers matters related to individual compensation, as well as high-level strategic issues, such as the effectiveness of the Company’s compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year. Generally, the compensation committee’s process comprises two related elements: (1) the determination of compensation levels of current executive officers and (2) the establishment of their performance objectives for the short- and long-term. For all executives and directors, as part of its deliberations, the compensation committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable in various hypothetical scenarios, Company share performance data, analysis of historical executive compensation levels and current Company-wide compensation levels, and the recommendations of Willis Towers Watson, including analysis of executive and director compensation paid at other peer companies identified by the consultant. The specific determinations of the compensation committee with respect to executive compensation for fiscal year 20152017 are described in greater detail below.
Compensation Committee Interlocks and Insider Participation
During fiscal year 2015,2017, none of the persons who served on the compensation committee is, or has been, an employee or officer of the Company or had any relationship requiring disclosure under Item 404 of Regulation S-K under the Securities Act of 1933, as amended. In addition, none of the Company’s executive officers serves, or has served during the last completed fiscal year, as a member of the board or compensation committee of any other entity that has or has had one or more of its executive officers serving as a member of the board.
Compensation Committee Report
The compensation committee has reviewed and discussed with management the disclosure appearing under the heading “Compensation Discussion and Analysis” below. Based on this review and discussion, the compensation committee has recommended to the board that the disclosure appearing under the heading “Compensation Discussion and Analysis” be included in this proxy statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2016.December 29, 2017.
Michael J. Berthelot, Chairman
Salvatore H. Alfiero
Madeleine L. Champion
John H. Dalton
Compensation Discussion and Analysis
Our Compensation Discussion and Analysis describes the key features of the Company's executive compensation program and the compensation committee's approach in deciding the 2017 compensation for our named executive officers. For 2017, our named executive officers are:
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Named Executive Officers |
Mohammad Abu-Ghazaleh | Chief Executive Officer |
Richard Contreras | Chief Financial Officer |
Youssef Zakharia | President and Chief Operating Officer |
Emanuel Lazopoulos | Senior Vice President, North America Sales, Marketing & Product Management |
Paul Rice | Senior Vice President, North American Operations |
Executive Compensation Philosophy
Compensation for Fresh Del Monte’s "named executive officers" (the "NEOs" as identified in the Summary Compensation Table below) is intended to be largely performance-based in order to align the NEOs’ interests with those of the shareholders. In establishing the Company’s compensation program for the NEOs, the compensation committee has four principal objectives:
ensuring that the Company is able to attract and retain executives through the use of industry-competitive base salary compensation;
providing a total compensation package that is competitive in the industry and that is tied to, and varies based upon, individual and corporate performance;
incentivizing NEOs to make prudent business decisions and maximize shareholder value without exposing the Company to material levels of risk by providing a significant portion of total compensation opportunities in the form of equity compensation awards; and
establishing and maintaining internal pay equity among employees.
In order to address these objectives, the compensation committee regularly assesses compensation components that it believes will most cost effectively attract and motivate executive officers and reward them for their individual achievements and those of the Company as a whole. The compensation committee has retained a compensation consultant, Willis Towers Watson, to assist in its analysis of key elements of compensation programs. The Company does not maintain any other relationship with Willis Towers Watson other than Willis Tower Watson’s role as a consultant to the compensation committee.
The compensation committee allocates total compensation between cash and equity compensation based on benchmarking to the Company’s peer group, discussed below, while considering the balance between providing short-term incentives and long-term parallel investment with shareholders to align the interests of management with shareholders. The compensation committee evaluates the balance between equity and cash compensation among NEOs annually.
Based on its review of the above-mentioned objectives, the Company has established a compensation program that consists of the following five components:
a competitive, market-driven base salary;
an annual cash bonus and incentive award that is dependent on pre-specified individual and/or corporate performance;performance objectives and corresponding level of achievement;
a long-term incentive plan with equity and/or cash awards that is dependent on the achievement of both individual and corporate pre-specified goals;
equity awards, consisting of stock options, restricted shares, or restricted share units that vest over time; and
post-termination benefits that are triggered in limited circumstances.
Executive Summary of Compensation Programs
The Company has established a compensation program that is heavily weighted towards performance based compensation. The major components of the Company’s compensation program include the following: (1) a base salary that is targeted to be at the median of the market; (2) an annual cash-based incentive program established to incentivize the executive to execute its business plans and objectives without exposing the Company to undue levels of risk; (3) a long term cash or equity based incentive plan; and, (4) periodic equity grants which encourage the executive to take a strategic view to support the long term interests of the Company. The Company’s long and short-term incentive plans in which most of the named executive officers participate are based upon quantifiable and objective performance goals established at the beginning of each period and the achievement of which is subject to a rigorous review process. Each of the Company’s incentive compensation plans contains claw back provisions in the event that an award is granted based upon incorrect data. The Company does not offer its executives pensions or supplemental retirement plans (except for one non U.S. based NEO who participates in a defined benefit plan which is offered to other employees within his region).plans. The Company offers other benefits to its executives which are also offered to a broad group of employees, such as a 401(k) retirement plan, for its U.S. resident NEOs, health and welfare benefits and mostly statutory or policy driven severance payments except for the Chief Executive Officer ("CEO") and the President and Chief Operating Officer ("COO") who each havehas an individual Severance and Retention Agreements.Agreement. Other than certain arrangements for the CEO, and COO, the Company does not provide any executive life insurance benefits to its NEOs
other than what is provided to other salaried employees. The Company provides the use of Company cars to the CEO and COO and one other NEO residing in Central America.the COO. The Company does not provide special benefit programs for its NEOs except for one NEO residing in Central America who is provided security and participates in a retirement plan created for a broad group of executives in that region.NEOs. The Company does not pay for country club memberships or financial counseling/tax advice nor does it pay for spouses of executives to travel on chartered aircraft or commercial airline when traveling with a NEO. Further, the Company does not provide employment agreements to any of our NEOs except for the COO.
NEOs.
Evaluation of Stockholder Say on Pay Vote Results
When establishing or modifying our compensation programs and arrangements for 20152017 and our ongoing compensation philosophy and policies, the compensation committee took into account the results of the shareholder advisory vote on executive compensation, or "say on pay" vote that occurred at our annual meeting in 2015.2017. In that vote, approximately 94.3%79.7% of the votes cast approved our compensation programs and policies. The Committee believes that the strong support from our stockholders reflected by the 20152017 say on pay vote is evidence that the Company's pay-for-performance policies are working and are aligned with our stockholders' interests.
Determination of Compensation Program
The compensation committee has been delegated the authority to create a compensation program for the NEOs. In structuring the program, the compensation committee has relied on written reports provided by Willis Towers Watson with respect to competitive practices and the amounts and nature of compensation paid to executive officers in a peer group of companies. Willis Towers Watson has also provided advice to the compensation committee regarding, among other things, structuring the Company’s various compensation programs and determining the appropriate levels of salary, bonus and other awards payable to the Company’s executive officers. Based upon Willis Towers Watson’s recommendations, the Company’s cash and equity-based incentive awards are weighted significantly towards variable components to ensure that total compensation reflects the overall success or failure of the Company, and to motivate executive officers to meet appropriate performance measures, thereby maximizing total return to shareholders.
The compensation committee determines the amount and nature of compensation for all NEOs. In making this determination, the recommendation and advice of certain executives is considered. The compensation committee solicits the CEO’s recommendation regarding the COO’s compensation. Additionally, the COO provides recommendations annually to the compensation committee regarding the compensation of all NEOs, excluding himself and the CEO. The President and COO’s recommendations are based on the results of his annual performance review of each NEO, at which time each NEO’s individual goals are assessed in light of their achievement of specific strategic goals. Each NEO also provides input about his individual contributions to the Company’s success for the period being assessed. The input from each NEO is validated by other individuals in the organization who can support and confirm the NEO's achievement level of each performance objective. The compensation committee reviews each of these performance reviews as part of its compensation setting process.
The following chart illustrates the decision making process in determining the compensation of the CEO, the COO and the other NEOs.
Compensation Benchmarking and Peer Group
An important basis for structuring the Company’s compensation program and establishing target compensation levels for the Company’s NEOs is the analysis of the compensation packages offered to similarly situated executive officers of peer group companies. As part of its engagement, the compensation committee directed Willis Towers Watson to review its comparative group of companies and to perform analyses of competitive performance and compensation levels for that group. The peer group of companies were selected based on the Company's industry or related industries that are similar in size and complexity of operations, span of control and global reach, vertical integration and business risks. One other secondary consideration of this peer group is that they may be competitors in the marketplace for our products, but also they may be likely competitors for key personnel and capital investment. The comparative information provided by Willis Towers Watson was obtained from publicly filed reports of each company in the comparative peer group, as well as from nationally recognized compensation surveys. As part of their analysis, consultants from Willis Towers Watson conducted individual interviews with members of senior management and the compensation committee to learn more about the Company’s business operations and strategy, key performance metrics and strategic goals, as well as the labor markets in which the Company competes. Willis Towers Watson ultimately developed recommendations and metrics that were presented to the compensation committee for its consideration.
In October 2015,November 2017, Willis Towers Watson updated its executive compensation analysis report to the compensation committee. Willis Towers Watson utilized nationally recognized compensation surveys and analyzed competitive practices and the amounts and nature of compensation paid to executive officers of a peer group of food and beverage, agricultural products and consumer products companies of similar size based on revenue, market capitalization, and number of employees as a measure of the complexity of the enterprise. The peer group identified in the 20152017 Willis Towers Watson report changed from 20142016 for the purpose of the executive compensation analysis by the additionremoval of The J.M. SmuckerWhiteWave Foods Company, Keurig Green Mountain, Inc.,which was acquired by Danone on April 12, 2017 and Mead Johnson Nutrition Company, Darling Ingredients Inc. The WhiteWave Foods Company, Treehouse Foods, Inc., Sanderson Farms, Inc., and Pinnacle Foods, Inc., and the removal of Chiquita Brands International, Inc. Chiquitawhich was acquired by Cutrale-Safra GroupReckitt Benckiser on January 6, 2015June 15, 2017, and isas a result of these acquisitions, they are no longer a public company.companies. Also, Hormel Foods Corporation has been removed as part of the peer group due to its revenues size. In replacement of The WhiteWave and Mead Johnson, Post Holdings and Snyder's-Lance were added to the peer group. As a result, the 20152017 peer group now consists of the following companies:
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| | | | | | | | | | | | | | |
• | | The Hain Celestial Group, Inc.Brown-Forman Corporation | | • | | Campbell Soup Company | | • | | Ingredion IncorporatedDarling Ingredients, Inc. | | • | | HormelFlowers Foods, CorporationInc. |
• | | Molson Coors
Brewing Company Ingredion Incorporated | | • | | McCormick & Company, Inc. | | • | | The HersheyMolson Coors Brewing Company | | • | | FlowersPinnacle Foods, Inc. |
• | | Brown-Forman CorporationPost Holdings, Inc. | | • | | Darling Ingredients,Sanderson Farms, Inc. | | • | | Snyder's-Lance, Inc. | | • | | The Hain Celestial Group, Inc. |
• | | The Hershey Company | | • | | The J.M. Smucker Company | | • | | Keurig Green Mountain, Inc. |
• | | Mead Johnson Nutrition Company | | • | | Pinnacle Foods, Inc. | | • | | Sanderson Farms, Inc. | | • | | Treehouse Foods, Inc. |
• | | The WhiteWave Foods Company | | | | | | | | | | | | |
Based on the data presented to the compensation committee by Willis Towers Watson and the analysis described above, the compensation committee has targeted base salary, annual and long-term cash incentive compensation, and equity incentive compensation for NEOs around the 50th percentile of market consensus based on nationally recognized compensation surveys andthe peer group comparison. The Company also targets the overall proportion of total variable compensation (i.e., compensation based on performance) and fixed compensation (i.e., base or guaranteed compensation) for each NEO to be consistent with the 50th percentile of the market consensus.peer group comparison. In determining the level of compensation provided to its NEOs, the compensation committee not only considers the Company’s independent
performance, but also evaluates the Company’s comparative performance against peer group companies, taking into account sales growth, growth in earnings per share (“EPS”), and share price performance, among other factors. In addition, the compensation committee considers the Company’s geographic locations, including the greater Miami area, where there is significant competition for employees in the global agricultural and consumer products industries. The compensation committee also evaluates individual NEO experience, seniority, and performance, based on both objective and subjective measures, on an annual basis and may award merit salary increases as a result of these assessments. This approach ensures that the Company’s compensation programs will enable it to remain competitive in its markets and reward individual NEO performance.
While the compensation committee targets cash compensation and equity awards in the 50th percentile of the peer group, the compensation committee recognizes the Company’s desire to keep the best talent in its executive management team. To retain and motivate these key individuals, the compensation committee may determine that it is in the best interests of the Company to negotiate or award total compensation that may deviate from the general benchmark targets described above. Actual pay for each executive is determined based on this premise and is driven by the performance of the executive over time and the annual performance of the Company. Equity grant guidelines are then set by job level, using market survey data and current guidelines to determine the appropriate annual grant levels for the upcoming year.
The Company provides Messrs.Mr. Abu-Ghazaleh and El-Naffy with greater total compensation and benefits (including post-employment benefits) than those provided to other NEOs to reflect the increased level of responsibility and risk faced by Mr. Abu-Ghazaleh as the Company’s CEO and Mr. El-Naffy as its COO.CEO. We continue to maintain Mr. Abu-Ghazaleh’s compensation also differslevel as a direct result of the compensation committee’s review of peer group compensation data, andas it reflects the competitive nature of compensation paid to chief executive officers within the peer group. The compensation committee believes that Mr. Abu-Ghazaleh’s and Mr. El-Naffy’sAbu-Ghazaleh's competitive compensation packages arepackage is important to motivate and retain themhim as the highly valued top two executivesexecutive of the Company.
The comparisons and percentile rankings in this section are based on the most current data available to the Company, generally calculated based on an analysis performed by Willis Towers Watson in October 2015.November 2017.
Base Salary
The base salary component of the Company’s compensation program is designed to provide its NEOs with total base salary that is close to the median or 50th percentile among peer group companies. In establishing this target percentile, the compensation committee has relied on peer group data included in Willis Towers Watson’s written reports. The Company pays base salaries at the levels established by the compensation committee based upon the Company’s compensation philosophy.
The compensation committee determined that our CEO, Mr. Abu-Ghazaleh, would receive no salary increase in fiscal year 2015.2017. Although his base salary of $1,200,000 has remained unchanged since 2003, the CEO’s base salary is currently 20%13% above the market median, and the compensation committee accordingly does not believe that an increase is warranted at this time.
Our COO’s employment agreement with the Company was established in 1997 and provided for a minimumThe base salary of $800,000. Effective May 1, 2005,for Mr. Youssef Zakharia, our President and COO, effective upon his appointment on November 3, 2016 is $700,000. This base salary was adjusted to $1,000,000, which while 33%is currently 6% above the market median,median. Mr. Zakharia succeeded Mr. Hani El-Naffy, our former President and COO. Following the completion of Mr. Zakharia's first full year in his role and a performance review which exceeded expectations, the compensation committee believes is warranted by the responsibilities and duties that he performs for the Company. The compensation committee does not believe thatapproved an increase is warranted at this time.in the COO's base salary from $700,000 to $850,000.
The Company’s COO and other NEOs do not have employment agreements. Each year, base salary increases for the NEOs are determined based upon Willis Towers Watson review of market median compensation and a subjective evaluation of the performance of the NEOs as assessed by the compensation committee, the COO and the CEO, as well the NEO’s experience, commitment to corporate core values and potential for advancement. No formulaic base salary increases are provided to the NEOs.
The compensation committee, with the advice and recommendation of the COO, determines salary increases for all NEOs, other than the CEO and COO, in the first quarter of each year. During 2015,2017, base salary increases effective January 1, 20152017 were awarded to the NEOs as follows: Mr. Contreras' base salary was increased 2.00%2% from $418,000$426,360 to $426,360;$434,887; Mr. Lazopoulos’Lazopoulos' base salary was increased 2.50%2% from $430,000$450,000 to $440,750;$459,000; and Mr. Yock’sRice's base salary was increased by 2.38%2% from $473,313$446,000 to $484,570. Mr. Yock's base salary fluctuates due to currency exchange rates as he is based in Costa Rica. The salary stated here is based on the exchange rate that was used for purposes of our spring 2015 proxy statement.$$454,920. For fiscal year 2015,2017, our NEOs’NEOs' base salaries were in the following percentages of the market median base salary paid to executives in the same (or the most similar) position: Richard Contreras, Senior Vice President and Chief Financial Officer, 19%2% below market median; Emanuel Lazopoulos, Senior Vice President, North America Sales, Marketing and Product Management, 6%24% below market median; and José Antonio Yock,Paul Rice, Senior Vice President, CentralNorth America 12%Operations, 2% below market median.
On February 24, 2016,21, 2018, the compensation committee with the advice and recommendation of the COO approved base salary increases to the NEOs, other than the CEO and COO, effective January 1, 20162018 as follows: Mr. Contreras' base salary was increased by 2% from $434,887 to $443,585; Mr. Lazopoulos' base salary was increased by 2.10%2% from $440,750$459,000 to $450,000; Mr. Yock's base salary was increased by 1.55% from $484,570 to $492,075. Mr. Yock's base salary fluctuates due to currency exchange rate as he is based in Costa Rica. The salary stated here is based on the exchange rate used for purposes of this proxy statement; and Mr. Contreras did not receive a salary increase for 2016 and his base salary remains at $426,360.$468,180.
Annual Cash Incentive Awards
Annual cash bonuses for NEOs are determined under the terms of the Company’s annual incentive plans or in accordance with such officer’s respective employment contract as illustrated in the chart below. The Company’s annual cash bonus and incentive award plans are designed to reward the NEO for his contribution to the Company’s achievement of its financial goals and to reflect, at least in part, the executive’s overall job performance. The compensation committee reviews the status and forecasted amounts of the annual incentive bonus plans for the CEO and the NEOs on a quarterly basis.
The Chief Executive Officer
In 2011, the Board approved the implementation of a 2011 CEO Annual Incentive Plan ("CEO AIP"), the sole participant of which is the CEO. The CEO AIP was designed to make the CEO’s annual performance objectives more relevant to the Company’s current economic and operational environment and its current business initiatives. The CEO AIP allows the compensation committee to establish annual performance goals targeting key performance objectives that it believes are relevant to the Company’s desired business results for the coming year. These performance goals may include such objectives as before or after tax net income, earnings per share, book value per share, stock price, return on stockholder’s equity, expense management, improvement in capital structure, profitability of an identifiable business unit or product, business growth, before or after tax profit margins, budget comparisons, total return to shareholders, market share, relative performance against peers, or any similar metric. In recognition of the nature of the Company's business, the CEO AIP also provides that the committee may, in its sole discretion, make adjustments in determining actual performance against specified objectives by considering the impact of unexpected or extraordinary events or occurrences, such as restructuring charges, facility closure costs, discontinued operations, asset impairment charges, the effect of foreign currency fluctuations outside of specified parameters, cumulative effects of accounting changes, certain weather related impacts, losses on debt extinguishment, the cost and impact of governmental investigations or proceedings, including fees and penalties to the extent such investigations result in no findings of illegal behavior on the part of the Company or the CEO, items reflected on the financial statements as “Other Income or Expense”, and the impact of new accounting standards or income tax regulations, as long as such adjusted items are objectively determinable by reference to the Company’s financial statements or notes thereto or management’s discussion and analysis of financial results in its annual report.
The CEO AIP provides for the amount of an award to be calculated based upon the "Corporate Achievement Factor" multiplied by a Target Award equal to 100% of the CEO's annual base salary, which is then multiplied by an "Individual Performance Factor." The Corporate Achievement Factor is the weighted average of the actual achievement against the financial performance objectives established by the committee at the beginning of the year subject to a maximum achievement of 125%. The Individual Achievement Factor, determined based upon the committee’s evaluation of the CEO's performance measured against individual performance objectives may not exceed 200% and is established by the compensation committee at the beginning of the year at a fixed level. At the end of the year, the committee determines the percentage attributable to the Individual Achievement Factor to reflect the actual performance of the CEO during the period. The maximum award payable to our CEO for any one year under the CEO AIP is the lesser of (i) 250% of the CEO's annual base salary, and (ii) $3,000,000.
The CEO AIP contains claw back provisions in the event that an award is granted based upon incorrect data in the Company's financial statements that are required to be restated due to material noncompliance with applicable accounting and disclosure standards.
For 2015,2017, the committee established as equally weighted performance goals, specified levels of earnings per share, revenue, and return on equity. The committee established the Individual Performance Factor at 200% subject to negative discretion based on evaluation of the CEO's individual performance for the year. The committee also established $80 million as a minimum "threshold" level of profitability below which no award would be earned for 2015.2017. The committee further established that no award would exceed 15% of the net income level as defined in the CEO AIP as the Threshold Amount.
For fiscal year 2015,2017, the Company had total revenue of $4,057$4,086.0 million, adjusted EPS of $2.42,$2.39, and adjusted return on equity of 7.30%6.70%, representing individual criteria achievements of approximately 100%99.5%, 100%72% and 101%71% respectively, compared to the pre-established objectives. Under the terms of the CEO AIP, the committee considers non-recurring items in calculating the achievement of each of the relevant factors. In determining the Corporate Adjustment Factor, the committee adjusted the GAAP financial results to exclude the impact of a $66.1 million non-cashFor 2017, there were no non-recurring charge for impairment of goodwill associated with the 2003 acquisition of a tomato and vegetable business.items considered. It was the committee's opinion that, while the tomato and vegetable portion of the acquisition was now not anticipated to meet future expectations and the write-off was required under accounting rules, the remaining businesses acquired in that transaction had generated operating profits and cash flows that resulted in a complete return of the original investment and a substantial positive return to the Company, creating significant shareholder value as a result, and was expected to continue to do so in the future. The committee determined that this adjustment would apply to all instances where it impacted a 2015 performance metric in any plan. As a result of the committee's evaluation of the Company's financial and operating performance and the CEO's individual performance for 2015,2017, the CEO was awarded a cash incentive payment of $2,400,000$972,000 which is based on 100%81% achievement of his pre-determined financial performance goals and an Individual Achievement Factor based on his personal performance of 200%100%.
The President and Chief Operating Officer
The fiscal year 2015 bonus award for the COO was established pursuant to his 1997 employment contract, which provides for an annual cash bonus equal to 2% of the first $20 million of the consolidated net after tax profits of the Company and 1.5% of any amounts of such profits in excess of $20 million. In determining the level of Company's net after tax profits for purposes of calculating the Chief Operating Officer's bonus award for 2015, thecompensation committee considered the adjustment to 2015 financial results described above regarding the CEO AIP. As a result, based on the COO's employment contract andbelieves that the Company's consolidated net after tax profits of $128.50 million,2017 financial performance under our CEO's leadership met the COO was awarded a cash bonus of $2,028,062.
Company's expectations.
Other Named Executive Officers
The fiscal year 20152017 incentive awards for NEOs (other than our CEO and(including the President & COO) were determined under the Fresh Del Monte 2010 Annual Incentive Plan for Senior Executives (the “Senior Executive AIP”) based on an assessment of Company and individual performance.
In the first quarter of 2015,2017, each NEO participating in the Senior Executive AIP, with the review, input and approval of our CEO for our COO, and our COO for our other NEOs, and review and approval of the compensation committee, established individual performance goals that formed the basis upon which his respective incentive award value would be determined. These goals were designed to reflect each executive’s area of responsibility within the Company and, to the extent possible, were generally structured to include an objectively measurable component (i.e., numeric or other criteria capable of independent measurement or satisfaction). Each goal was then assigned a specific percentage of that executive’s overall achievement value, with all goals totaling 100%. In 2015,2017, no individual performance goal accounted for greater than 30% of any NEO’s total achievement value for NEO's individual performance portion of the annual bonus opportunity. Each NEO had between sixfive and elevennine performance criteria upon which his annual bonus was based. Some of these criteria would create a payout only if the specific goal is met, while other performance criteria would provide for partial payment to the NEO upon partial achievement of the goal. Performance factors, which must be based on strategic objectives of the Company, for participants in the Senior Executive AIP who are business unit leaders, may include profitability, business growth, market share, production volume, or production costs, to name a few. For those participants who are in functional roles, performance factors may include cost of deliverable services and cost reduction, strategic project completions, implementation of new systems or processes, or implementation of improvements in functional area. Under the Senior Executive AIP, the maximum bonus amount for each participating NEO is 50% of annual base salary. The payout for 20152017 is based on the table below:
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Basis of Performance | | % Award |
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Performance Factors as described above | | 35% of annual base salary |
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Company's EPS and Total Revenue Targets | | 15% of annual base salary |
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The target bonus percentage for NEOs, which is composed of 35% of salary at target and an additional 15% component based upon revenue and earnings per share targets, was established based upon the recommendation of Willis Towers Watson to move the NEOs’ AIP targets closer to the peer group median. Further, these additions were made to bring the other NEOs’ AIP goals in line with those established for the CEO and to better incentivize the participating executive to work for the overall success of the Company while at the same time achieving their respective individual performance goals.
As part of the Company’s annual employee performance appraisal process, our COO provided,the Company and our compensation committee took into account, an assessment of the individual performance of each participating NEO against his respective 20152017 goals. In determining the relative level of achievement of the applicable corporate and individual performance factors for each NEO's incentive award for 2015,2017, the committee used the adjusted financial results as discussed in CEO AIP section. The compensation committee concluded that the 20152017 achievement values for NEOs participating in the Senior Executive AIP were between 52%67.14% and 64%86.3% of their respective functional goals and 100%86.0% of the collective EPS and total revenue goals, resulting in awards of between 33.20%36.40% and 37.38%43.09% of the NEO’s base salary. Actual incentive awards paid to our NEOs for performance during fiscal year 20152017 in accordance with the Senior Executive AIP are set forth below in the Summary Compensation Table.Table and details are below:
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Name | Target Award1 | Company Performance | Individual Performance | Total Award |
Mohammad Abu-Ghazaleh | $1,200,000 | $972,000 | 100%2 | $972,000 |
Richard Contreras | $217,444 | $56,100 | $131,292 | $187,393 |
Youssef Zakharia | $350,000 | $90,300 | $185,500 | $275,800 |
Emanuel Lazopoulos | $229,500 | $59,211 | $113,281 | $172,492 |
Paul Rice | $227,460 | $58,685 | $106,906 | $165,591 |
________________
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(1) | Target award is 100% of base salary for CEO and 50% of base salary for other participating NEOs. For the CEO, the individual performance is up to 200% |
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(2) | For the CEO, the individual performance factor has a maximum award up to 200%. For 2017, the individual performance factor was awarded at 100% |
The Senior Executive AIP contains claw back provisions in the event that an award is granted based upon incorrect data, in the Company'sincluding financial statementsresults that, pursuant to applicable laws, rules, regulations or applicable accounting principles, are required to be restated due to material noncompliance with applicable accounting and disclosure standards.restated.
Long-Term Incentive Awards
Design Overview. The Company sponsors the Fresh Del Monte Fresh Produce Inc. Long-Term Incentive Plan (the "LTIP") for senior officers, including NEOs. Each of the NEOs other than the COO currently participates in the LTIP. The compensation committee established the LTIP, with the advice of its independent compensation consultant, to provide an incentive for executives to focus on the long-term sustainable growth of the Company by rewarding business decisions and actions over a longer term than the single year plans then in place. The compensation committee considers that the efforts of senior executives may not be adequately rewarded if decisions are made consistent with the Company’s business strategy that established a basis for significantly improved long-term performance of the Company, yet negatively affects operating results, and therefore annual cash incentive awards. Likewise, the compensation committee wishes to avoid plan designs that could incentivize executives to take actions that would result in short-term gain in order to bolster annual incentive compensation, without regard to the long-term best interests of the Company. At the time the LTIP was established, the compensation consultants also noted that the Company was the only company in the peer group not to have such a plan.
Under the LTIP, each participating NEO receives a performance-based cash award opportunity each year covering a three-year performance period. The target award is a dollar amount based on a percentage of each participating NEO's base salary as determined by the compensation committee based on its review of competitive market date. For each of the currently outstanding LTIP awards, the target award for the CEO was set at 100% of base salary and for each of the other participating NEOs at 35% of base salary. TheFor the CEO, the actual award amount can range from 0% to 150% of target based on actual performance results reviewed shortly after the end of the performance period. For the other NEOs, the actual award can range from 0% to 100% of target based on actual performance results.
Performance is measured based on a combination of financial performance results (weighted 50%) and strategic performance results (weighted 50%).
•For LTIP awards beforebeginning with the 2015-2017 performance period, financial performance is based on our cumulative total shareholder return, assuming reinvestment of dividends (TSR), versus that of our peer group over the performance period. In order to avoid significant swings in TSR caused by anomalous events that might occur at the beginning or end of the measurement period, TSR is measured using the average closing prices of the Company’s Ordinary Shares and those of the peer group during the ninety day period which precedes the first and last days of the measurement period.
•Beginning with the award for the 2015-2017 performance period, financial performance is measured based on Net Cash Provided by Operating Activities divided by Average Shareholder's Equity (NOCF), rather than the relative TSR. The committee made this change because the Company's current peer group no longer includes two of its main competitors in the
industry and the remaining peer companies are in different industries. NOCF was chosen to replace relative TSR as it is an important metric that when achieved over the three-year performance period is expected to benefit the Company's shareholders.
(NCOF). Strategic objectives represent measurable, objective goals that vary by NEO and that are set by the compensation committee at the beginning of the applicable performance period.
The compensation committee intends for the goals to be reasonably achievable at target but requiring focused effort and good performance by each NEO.
The following chart summarizes the design of the outstanding LTIP awards as of the end of the last fiscal year. See below for additional information on the payout for the 2013-20152015-2017 LTIP award. |
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Outstanding LTIP Awards |
Performance Period | Target Award | Payout Range | Financial Performance | Strategic Performance |
(% of salary) | (weighted 50%) | (weighted 50%) |
20132015 - 20152017 | - CEO: 100% | 0% to 150% | Relative TSRNOCF | CEO: twothree equally weighted |
| - Others: 35% | - 0% below threshold | | goals based on revenuerelated to overall |
| | - 50% at threshold | | topline growth, and productionsales growth |
| | - 100% at target | | expansion in defineda strategic region and |
| | - 150% max for CEO | | geographic areas.achievement in ROE. |
| | and same as target for | | Others: See below |
| | others | | |
2014 - 20162016-2018 | Same | Same | Relative TSRSame | CEO: two equally weighted |
| | | | goals related to return onproduction |
| | | | equityexpansion and sales growth in a |
| | | | specific marketin a business segment. |
| | | | Others: See below |
2015 - 20172017-2019 | Same | Same | NOCFSame | CEO: threetwo equally weighted |
| | | | goals related to overall |
| | | | topline growth, sales growth |
| | | | in a strategic region and |
| | | | sales growthachievement in a specificreturn |
| | | | product segmenton assets. |
| | | | Others: See below |
The strategic goals for the other NEOs for these awards are as follows:
2013 - 2015 award: (i) Mr. Contreras, goals related to implementation of global accounting systems and specific global cash recoveries; (ii) Mr. Yock, goals related to a major growth and operational projects in specific geographic areas; and (iii) Mr. Lazopoulos, goals related to growth in a specific commodity program, developing sales in an expansion area, improving the run rate for major commodity and growth in a specialty line of products.
2014 - 2016 award: (i) Mr. Contreras, goals related to implementation of an enterprise resource planning system, implementing efficiencies in certain key processes, achieving efficiency in working capital and completion of a transformational strategy; (ii) Mr. Yock, goals related to major growth and operational projects in specific geographic areas, and an increase in production volume for a specific business segment; and (iii) Mr. Lazopoulos, goals related to developing new category program, improvement of operating income, achieving sales growth in key business area and implementing an expansion program for a specific product line.
2015 - 2017:2017 award: (i) Mr. Contreras, goals related to financial-related specific programs and acquisition relatedstrategic project objective; (ii) Mr. Yock, goals related to an operational sourcing strategy and implementation of a strategic succession planning program in his region; and (iii) Mr. Lazopoulos, goals related to sales growth in four key business segments.segments; and (iii) Mr. Rice, goals related to production expansion, yield improvement, production automation and revenue growth. Mr. Zakharia is not eligible for the 2015-2017 LTIP award as he was not a participant when this award was established in 2015.
2016 - 2018 award: (i) Mr. Contreras, goals related to financial-related specific programs and strategic project objective; (ii) Mr. Lazopoulos, goals related to sales growth in four key business segments; and (iii) Mr. Rice, goals related to production expansion, growth and improvement of operating income. Mr. Zakharia is not eligible for the 2016-2018 LTIP award as he was not a participant when this award was established in 2016.
2017 - 2019 award: (i) Mr. Zakharia, goals related to sales growth related to acquisition and production expansion and achievement of savings related to production efficiencies; (ii) Mr. Contreras, goals related to financial-related specific programs and strategic project objectives; (iii) Mr. Lazopoulos, goals related to sales growth in various key business segments; and (iv) Mr. Rice, goals related to production expansion, growth and improvement of operating income.
For the TSR,NOCF, the basis for the payout is as follows:
| | | | Payout basis | | Payout basis |
| | (as a % of target) | | (as a % of target) |
Achievement | Achievement | CEO | Others | Achievement | CEO | Others |
Below threshold | below 40th percentile | 0% | 0% | below 80% | 0% | 0% |
Threshold | 40th percentile | 50% | 50% | 80% | 50% | 50% |
Target | 60th percentile | 100% | 100% | |
Maximum | 75th percentile | 150% | 100% | between 100% - 150% | 150% | 100% |
For CEO, payout % is based on 50% of base salary | For Others, payout % is based on 17.5% of base salary |
2013-20152015-2017 Award Results. Early in 2016,2018, the compensation committee reviewed performance and determined the payouts for the 2013-20152015-2017 LTIP awards.
The compensation committee determined that TSRNCOF performance for the period ranked at the 62.5th percentile versus the peers.is 10.80%. This performance resulted in achievement under the CEO's award at 108% and achievement for the other participating NEOs at 100%.
As to the strategic goals, the compensation committee determined that the CEO achieved 54%93% of the revenue growth goal for the period and achieved the maximum performance for79.50% of the goal related to production expansionsales growth in definedkey geographic areas. The assessment of the other participating NEOs determined levels of strategic goal achievement with payout ranging from 3.50%2.30% to 10.34%9.63%. The following chart summarizes the 2013-20152015-2017 LTIP award payouts:
| | 2013-2015 LTIP Award Payouts | |
2015-2017 LTIP Award Payouts | | 2015-2017 LTIP Award Payouts |
Name | Target Award* | TSR Portion | Strategic Portion | Total | Target Award1 | NOCF Portion | Strategic Portion | Total |
(weighted 50%) | Mohammad Abu-Ghazaleh | $1,200,000 | $650,004 | $612,000 | $1,262,004 | |
Mohammad Abu-Ghazaleh2 | | $1,200,000 | $648,000 | $504,000 | $1,152,000 |
Richard Contreras | $149,226 | $74,613 | $14,923 | $89,536 | $152,211 | $76,105 | $39,009 | $115,115 |
Jose Antonio Yock | $169,600 | $84,800 | $33,920 | $118,720 | |
Emanuel Lazopoulos | $154,262 | $77,131 | $45,574 | $122,705 | $160,650 | $80,325 | $44,202 | $124,527 |
Paul Rice | | $159,222 | $79,611 | $10,463 | $90,074 |
In order to create a properly balanced compensation program, the compensation committee utilizes both compensation that provides incentive for short-term gain, such as the annual incentive program, and compensation that provides incentive for longer-term growth, such as participation in the LTIP and the grant of equity awards. Each NEO is eligible to receive an annual equity compensation award. The Company believes, based on its performance-based approach to compensation, that equity ownership in the Company is important to tie the level of compensation to the performance of the Ordinary Shares and shareholder gains; the Company believes this is particularly important for NEOs. Because equity compensation awards vest over a period of years, they also provide a retention component and create an incentive for executives to create sustained growth.
Guidelines for the number of stock options, restricted share units or restricted share awards granted to each NEO are determined using a procedure approved by the compensation committee based upon the executive officer’s position and responsibilities, job level, performance, and the value of the award at the time of grant. In addition, the compensation committee may consider peer group data presented in Willis Towers Watson’s reports in making such awards. As a result, additional grants other than the annual award may be made following a significant change in job responsibility or in recognition of a significant achievement. The compensation committee generally does not consider the number of Ordinary Shares already held by NEOs when making grants, as it believes that awards should be given based on successful job performance and should
not be discounted on account of accumulated equity value. Further, the compensation committee believes that competitors, who may try to hire the Company’s NEOs would not give full credit for existing equity ownership in the Company and, to remain competitive, similarly do not take into account previous awards when approving new grants.
To promote stability and continuity of management direction, in 2003, the Company adopted the Executive Retention and Severance AgreementsAgreement for the CEO and the COO.CEO. The Company feels that the creation of these agreementsthis agreement is imperative to the retention of our CEO and our COO because they reflectit reflects customary market practices. The Company does not generally enter into written severance agreements for any of its employees unless it is mandated to do so by local statutes and has not entered into such an agreement with any other NEOs; however, the Company decided to establish severance agreements for the two most senior executivesexecutive of the Company, as retention of these two officersthe CEO is of paramount importance to the continued stability of the Company.
As further described under the heading “Potential Payments Upon Termination or Change-in-Control,” the severance agreementsagreement of our CEO and our COO provideprovides that they arethe CEO is entitled to certain cash consideration, an enhanced payment to take into effect any taxes due on the consideration, and other benefits in the event theirhis employment is terminated by the Company other than for “cause,”“cause”, if they terminate theirhe terminates his employment for “good reason,” or if they arehe is terminated in connection with a change in control, in each case such payments and benefits are conditioned upon the execution by themthe CEO of a general release of all claims. These agreementsThis agreement also provideprovides for consideration and benefits in the event of a termination of employment by reason of death or disability. Both executivesThe CEO also agreed to a two-year period following the termination of their employment during which theyhe cannot solicit the Company’s employees, distributors, vendors or customers.
payments are triggered solely by the change in control alone, thus providing the acquiring company with the flexibility to retain the executives at their discretion. The compensation committee also intends that this “double trigger” change in control policy will provide fair and equitable compensation in the event of a termination following a change in control. By providing reasonable severance in the event of a termination of employment upon a change in control, the compensation committee intends to provide each covered officerthe CEO with compensation that is sufficient to mitigate the risk of employment loss and encourage him to assist in undertaking the transaction. The amount of the severance is balanced against the Company’s need to be responsible to its shareholders, and also takes into account the potential negative impact such severance paymentspayment may have on the acquiring party in a change in control transaction. The severance agreementsagreement for both the CEO and COO containcontains a provision requiring the company to reimburse for IRS Section 280G excise tax and applicable taxes thereon that may be triggered by a change in control, although the CEO should not be subject to any such excise tax under Section 280G because he is not subject to United States income tax.
Company believes that these benefits take into account the expected length of time and difficulty the individual may experience in trying to secure new employment.
No significant pension or welfare benefits are available to NEOs other than the broad-based 401(k) plan, health and welfare benefits, and life insurance that are generally available to most of the Company’s full-time employees, or with respect to Mr. Yock, generally available to most of the Company’s regional full-time employees, except as provided below.employees.
The Company provides Mr. Abu-Ghazaleh a term life insurance policy with a premium of $43,855$42,701 providing for payment of $3 million to his designated beneficiaries upon his death. The Company provides Mr. El-Naffy with a term life insurance policy with a premium of $49,733 providing for payment of $2.5 million to his designated beneficiaries upon his death. Please see the information under the heading “Employment Agreements with NEOs” below for additional details regarding the benefits provided to Mr. El-Naffy pursuant to his employment agreement.
The compensation committee evaluates the allocation of equity awards by reference to the Company’s peer group and the performance of the individual and the Company, as discussed above. The 2014 Omnibus Plan provides that the Company must grant all equity incentive awards with an exercise price equal to the fair market value as determined by the closing sales price for the Ordinary Shares on the NYSE on the date of the grant.
The Company implemented a share ownership policy for NEOs on November 2, 2011. Under this share ownership policy, each NEO is required to own a specified multiple of his annual base salary corresponding to its value in Ordinary Shares. The CEO is required to own five times his base salary. The COO is required to own three times his base salary. For the other NEOs, they are required to own two times their base salaries. Each NEO is required to meet this share ownership guideline within five years from November 2, 2011.2011 or the date they assumed a position that required such level of ownership. For purposes of determining whether share ownership requirement has been met, the Company will use the grant price value of the share to calculate the percent of ownership as against the respective multiples of NEOs base salary requirement. As of February 21, 2018, all NEOs (except the COO) have achieved the share ownership requirement and own between 154% to 159% equivalent to their corresponding share ownership requirements. The COO is within the first five years of his position and is on track to meet the share ownership requirement.
The compensation committee annually considers the potential for the company’s incentive compensation programs to motivate employees to undertake unnecessary or excessive risk taking. The committee has reviewed management’s risk assessment of the Company’s compensation programs for its senior executives and its employees generally and has concluded that these programs do not create risks that are reasonably likely to have a material adverse effect on the Company. The committee believes that excessive risk taking is further mitigated by the use of multiple objectives which serve to limit the potential benefit of any single episode of excessive risk taking; that all incentive calculations are based upon validated financial
data; that all computations and recommendations are subject to multiple levels of review including local, regional, corporate, and board level reviews; that the status and anticipated payouts for the NEOs are reviewed by the compensation committee quarterly; and that there are caps on the amount of payments to any single individual under most of the Company's compensation plans and arrangements; and that the programs include claw back provisions in the event that an award is granted based upon incorrect data.
For U.S. income tax purposes, Section 162(m) limits the Company’s tax deduction for annual compensation in excess of $1,000,000 paid to our CEOany NEO in any calendar year. Under the U.S. tax rules in effect before 2018, there were certain exceptions to this deduction limit, including for compensation that qualified as "performance-based" under Section 162(m). However, the Tax Cuts and any of our three other most highly compensated executive officers, other than our Chief Financial Officer. However,Jobs Act eliminated the performance-based compensation that has been approved by our shareholders is excluded from the $1,000,000 limit if, among other requirements, the compensation is payable only upon the attainment of pre-established, objective performance goals and the committee of the board that establishes such goals consists only of “outside directors.” All members of the compensation committee qualify as outside directorsexception effective January 1, 2018 (except for purposes of Section 162(m)certain "grandfathered" arrangements).
The compensation committee considers the anticipated tax treatment to the Company and our executive officers when reviewing executive compensation and our compensation programs. The deductibility of some types of compensation payments can depend upon the timing of an executive’s vesting or exercise of previously granted rights or termination of employment. Interpretations of and changes in applicable tax laws and regulations, as well as other factors beyond the compensation committee’s control, also can affect the deductibility of compensation.
While the tax impact of any compensation arrangement is one factor to be considered, this impact is evaluated in light of the compensation committee’s overall compensation philosophy and objectives. The compensation committee will consider ways to preserve the deductibility of executive compensation, while retaining the discretion it deems necessary to compensate officers in a manner commensurate with performance and the competitive environment for executive talent. From time to time, the compensation committee may award compensation to our executive officers that is not fully deductible if it determines that the award is consistent with its philosophy and is in our shareholders’ best interests, such as time vested grants of restricted shares or grants of incentive stock options.interests.
The following table sets forth the amount of payments to each of our NEOs based on an assumed termination date of January 1, 2016.December 29, 2017. For Messrs.Mr. Abu-Ghazaleh, and El-Naffy, the payments and benefits are provided in the event of a termination of employment by the Company without cause, by the executive for good reason, or as a result of death or disability. For all other NEOs, the payments are provided in the event of a termination of employment by the Company without cause only.