UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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SYSCO CORPORATION
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Sysco Corporation |
2016 Proxy Statement |
Table of Contents |
INVITATION FROM OUR LEADERSHIP
Dear Fellow Stockholder,
It is our pleasure to invite you to join us, our Board of Directors, senior leadership and other associates at Sysco Corporation’s 20142016 Annual Meeting of Stockholders, to be held on Wednesday, November 19, 2014,16, 2016, at 10:00 a.m. at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024.
Please vote right away
Our stockholder meeting is an opportunity for our senior management and Board of Directors to present Sysco’s performance and strategy, and to respond to your questions. By participating in our stockholder meeting, you play an active role in the future of your company. Please vote right away over the internet, by telephone or by signing and mailing the attached proxy card.
Enhanced stockholder communications
We are committed to ensuring that our proxy statement and associated materials are clear and easy to read. Our 20142016 proxy statement displays our ongoing commitment to clearly explain the matters to be addressed at our Annual Meeting of Stockholders. We encourage you to begin your review of this year’s document with our proxy summary, which provides highlights of the detailed information included elsewhere in the proxy statement.
If you wish to receive future E-Proxy Notices electronically, which helps to reduce Sysco’s printing costs and aligns with our sustainability principles, please visithttp://enroll.icsdelivery.com/syy for additional information.
Board and Leadershipleadership & oversight
We continuously strive for the most effective Board and Leadership Structure to promote Sysco’s vision to be our customer’s most valued and trusted business partner and to represent the long-term interests of Sysco’s stockholders. We have active participation by all Directors, including eight independent directors.members of our Board of Directors. We believe that the structure of our Board, relyingas well as the deep, relevant expertise that our directors collectively provide, cultivate strong oversight and guidance as we execute on leadership from both independent and non-independent directors, positions Sysco to benefit from the respective strengths of our CEO and our independent Non-Executive Chairman of the Board. Immediately preceding our 2013 Annual Meeting of Stockholders in Houston on November 15, 2013, our Board named Jackie M. Ward as its Non-Executive Chairman, succeeding Manny Fernandez. Ms. Ward, a Sysco director since September 2001, was previously the Board’s lead director, chaired the Corporate Governance and Nominating Committee, and served on the Compensation Committee and the Executive Committee.long-term strategy. You will find detailed information about the qualifications of all of our Directors beginning on page 22.24 and information about our Board refreshment and tenure policy on page 15.
Thank you for your interest
We trust that enhanced communication about our annual stockholder meeting will reinforce our dialogue with stockholders, and encourage you to cast your vote right away. Thank you for your continued trust and confidence in Sysco.
Bill DeLaney, President and Chief Executive Officer
Jackie Ward, Non-Executive Chairman of the Board
SYSCO CORPORATION-20142016 Proxy Statement 4
1390 Enclave Parkway
Houston, Texas 77077-2099
Notice of Annual Meeting |
November 19, 201416, 2016
10:00 a.m.
The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024
The Annual Meeting of Stockholders of Sysco Corporation, a Delaware corporation, will be held on Wednesday, November 19, 201416, 2016 at 10:00 a.m. at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024, for the following purposes:
1. | To elect as directors the | ||
2. | |||
To hold an advisory vote to approve the compensation paid to Sysco’s named executive officers, as disclosed in this proxy statement; | |||
To ratify the appointment of Ernst & Young LLP as Sysco’s independent registered public accounting firm for fiscal | |||
4. | To consider a stockholder proposal, if properly presented at the meeting, regarding a policy limiting accelerated vesting of equity awards upon a change in control; and | ||
5. | To transact any other business as may properly be brought before the meeting or any adjournment thereof. |
Only stockholders of record at the close of business on September 22, 2014,19, 2016, will be entitled to receive notice of and to vote at the Annual Meeting. For instructions on voting, please refer to the notice you received in the mail or, if you requested a hard copy of the proxy statement, on your enclosed proxy card. You may inspect a list of stockholders of record at the company’s headquarters during regular business hours during the 10-day period before the Annual Meeting. You may also inspect this list at the Annual Meeting.
October 8, 20145, 2016
Houston, Texas
By Order of the Board of Directors
Russell T. Libby
Executive Vice President, – Corporate AffairsAdministration
and Chief Legal Officer & Corporate Secretary
SYSCO CORPORATION-20142016 Proxy Statement 5
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references (“XX”) are supplied to help you find further information in this proxy statement.
20142016 Annual Meeting of Stockholders
• | Date and Time: Wednesday, November |
• | Location: The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024 |
• | Record Date: September |
Voting Matters and Board Recommendations
Our Board Vote Recommendation | ||
Election of | FOR each Director Nominee | |
Advisory Vote on Executive Compensation (page | FOR | |
Ratification of Independent Registered Public Accounting Firm (page 81) | FOR | |
Stockholder Proposal (Page 82) | AGAINST |
Business Highlights
(For more detail please see our Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”). Our discussion below of our results includes certain non-GAAP financial measures that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measuremeasures will be denoted as an adjusted measuremeasures and except for measures provided pursuant to benefit plan formulas, will exclude expensesthe impact from our executive retirement plan restructuring withdrawals from multiemployer pension plans,charges, consisting of (1) severance charges, (2) facility closing costs, (3) professional fees incurred related to our three-year strategic plan and (4) expenses associated with the revised business technology strategy announced in fiscal 2016. It will also exclude acquisition-related expense resulting from (1) merger and integration planning, litigation costs associatedand termination costs in connection with our pendingthe merger that had been proposed with US Foods, merger, changeInc. and (2) transaction costs in estimateconnection with the acquisition of the parent holding company for self-insurance costs, charges from a liability for a settlement, facility closure charges, amortization of US Foodsthe Brakes Group, as well as the financing costs and an acquisition related charge specific to fiscal 2013.these acquisitions. More information on the rationale for the use of these measures can be found in our Form 10-K on pages 29-33 and reconciliations to GAAP numbers can be found in Annex I - Non-GAAP Reconciliations.)
The general foodservice industry remained under pressuremarket environment since the beginning of fiscal 2016 has been uneven, with a combination of both favorable and unfavorable trends reflected in the relevant data. As compared to a few years ago, consumer confidence and unemployment data points were favorable through fiscal 2014. While the economy continues to slowly recover, the magnitude of recovery is modest2016 and the outlook for certain fundamental driversbeginning of fiscal 2017, while consumer spending on meals away from home has trended slightly downward towards the end of the economy is mixed. This creates a challenging business environment for usfiscal year (following gains throughout most of fiscal 2016). Spending at restaurants was generally improved, but customer traffic levels were generally unchanged during fiscal 2016 and our customers; however,are beginning to decline, together with an overall moderation in spend. Amid these conditions, throughout fiscal 2016 we continue to implement transformational change on a broad scale, which is enhancing the products and services we provideprovided our customers with excellent service, growing our business with locally managed customers, improving our gross margins and helping us to operate more efficiently. Our sales and gross profits grew modestly, andmanaging expenses. These are all important steps towards achieving our expense management performance was favorable overall, despite cost pressures in our delivery operations. Our improvements largely resulted from our Business Transformation Project initiatives, which helped drive our North American Broadline cost per case lower than in fiscal 2013.three-year plan financial objectives.
Financial highlightsComparison of results from fiscal 2014 include the following:2016 to fiscal 2015:
• | Sales |
• | Operating income |
• | Adjusted operating income increased 12.1%, or $217 million, to $2 billion; on a comparable 52-week basis, adjusted operating income increased 9.6%; |
• | Net earnings |
• | |
• | |
• | |
* See Annex I - “Non-GAAP Reconciliations” for an explanation of these non-GAAP financial measures.
Governance Highlights (page 15)
BOARD REFRESHMENT
In 2016, our Board named Jackie M. Ward as its Non-Executive Chairman ofadopted a Board refreshment plan, under which the Board succeeding Manny Fernandez. Ms. Ward, a Sysco director since September 2001, was previously the Board’s lead director, chaired the Corporate Governance and Nominating Committee, and served on the Compensation Committee and the Executive Committee. We have active participation by all Directors, including eight independent directors. We believe that the structure of our Board, relying on leadership from both independent and non-independent directors, positions Sysco to benefit from the respective strengths of our CEO and Non-Executive Chairman.
• | |
• | elected to the Board three new independent directors –Mr. Daniel J. Brutto, Mr. Bradley M. Halverson and Mr. Edward D. Shirley; and |
• | determined to elect one additional independent director in each of 2017 and 2018, subject to the availability of qualified director candidates. |
In accordance with the director tenure policy, we expect two incumbent non-employee directors to retire from the Board in each of 2017 and 2018. In addition, Mr. Joseph A. Hafner has decided not to stand for re-election at the Annual Meeting.
SYSCO CORPORATION - 2016 Proxy Statement6
• | Stockholder Engagement – In 2015, we initiated a more formal engagement process with our stockholders regarding matters of corporate governance. During 2016, we expanded this process, inviting many of our top institutional stockholders to meet with Ms. Ward, our Chairman of the Board, and Mr. Glasscock, the Chair of our Corporate Governance and Nominating Committee. |
• | Proxy Access – In August 2016, our Board adopted amendments to the Company’s bylaws to establish “proxy access” rights permitting holders who have beneficially owned 3% or more of Sysco’s outstanding common stock continuously for at least three years (as of the time of submission of the nomination) the right to nominate a number of director nominees equal to the greater of 2 or 20% (rounded down) of the total number of directors constituting our Board, subject to applicable limitations and procedural requirements. |
• | Stockholder Right to Call Special Meeting – In November 2015, our Board adopted the right for holders of at least 25% of Sysco’s outstanding common stock to call a special meeting, subject to applicable limitations and procedural requirements. |
• | Board Leadership Structure – Jackie M. Ward is our independent Chairman of the Board. Ms. Ward, a Sysco director since September 2001, was previously the Board’s lead director and chaired the Corporate Governance and Nominating Committee. We have active participation by all directors, including our independent directors. We believe that the structure of our Board, relying on leadership from both independent and non-independent directors, positions Sysco to benefit from the respective strengths of our CEO and Chairman of the Board. |
• | Director Independence– Our Corporate Governance Guidelines require that at least a majority of our directors meet the criteria for independence that the New York Stock Exchange has established for continued listing, as well as the additional criteria set forth in the Guidelines. Additionally, we require that all members of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee be independent and that all members of the Audit Committee and Compensation Committee satisfy the additional requirements of the New York Stock Exchange and applicable rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). |
• | Declassified Board – Each of Sysco’s current directors, other than Mr. Hafner, who is not standing for re-election, has been nominated by the Board for election as director to serve a one-year term or until his or her successor is elected and qualified. |
SYSCO CORPORATION-2014 Proxy Statement6Important Dates for 2017 Annual Meeting of Stockholders (page 84)
• | If you would like to present a proposal under Rule 14a-8 of the Exchange Act at our 2017 Annual Meeting of Stockholders, send the proposal in time for us to receive it no later than June 7, 2017. If the date of our 2017 Annual Meeting is subsequently changed by more than 30 days from the date of this year’s Annual Meeting, we will inform you of the change and the date by which we must receive proposals. |
If you want to |
Current Members of Our Board of Directors and Board Nominees (page 15)26)
Name | Age | Director since | Experience | Committee Memberships(1) | Other Public Company Boards | ||||||||||
Daniel J. Brutto | September 2016 | Former President, UPS International and Senior Vice President, United Parcel Service, Inc. | Yes | • Illinois Tool Works Inc. | |||||||||||
John M. Cassaday | November 2004 | Former President, | Yes | Compensation* CG&N Executive | • | Manulife Financial Corporation • Sleep Country Canada Holdings Inc. | • Spin Master Ltd. | ||||||||
Judith B. Craven, M.D. | July 1996 | Yes | Compensation CG&N Sustainability* | • | Luby’s, Inc. •Sun America Funds, Inc. •VALIC | ||||||||||
William J. DeLaney | January 2009 | CEO of Sysco | No | Executive Finance | • | Express Scripts, Inc. | |||||||||
Joshua D. Frank | 37 | August 2015 | Partner of Trian Fund Management L.P. | Yes | Compensation Finance | ||||||||||
Larry C. Glasscock | September 2010 | Former Chairman of the Board of Directors, CEO and President of WellPoint, Inc. | Yes | Compensation CG&N* Executive Sustainability | • | Simon Property Group, Inc. •Zimmer Biomet Holdings, Inc. | |||||||||
Jonathan Golden | February 1984 | Partner of Arnall Golden Gregory LLP | No | Finance Sustainability | |||||||||||
Joseph A. Hafner, Jr.(2) | November 2003 | Former Chairman, CEO and President of Riviana Foods, Inc. | Yes | Audit Executive Finance* Sustainability | |||||||||||
Bradley M. Halverson | 56 | September 2016 | Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar Inc. | Yes |
SYSCO CORPORATION - 2016 Proxy Statement7
Name | Age | Director since | Experience | Independent | Committee Memberships(1) | Other Public Company Boards | |||||||||
Hans-Joachim Koerber | January 2008 | Yes | Audit Finance | • | Air Berlin PLC | • Eurocash SA | |||||||||
Nancy S. Newcomb | February 2006 | Yes | Audit Finance | ||||||||||||
Nelson Peltz | 74 | August 2015 | Chief Executive Officer and a Founding Partner of Trian Fund Management L.P. | Yes | CG&N | • Mondeléz International, Inc. • The Madison Square Garden Company • The Wendy’s Company | |||||||||
Edward D. Shirley | 59 | September 2016 | Former President and Chief Executive Officer of Bacardi Limited | Yes | • Elizabeth Arden, Inc. • New York Life Insurance Company | ||||||||||
Richard G. Tilghman | November 2002 | Former Vice Chairman and Director of SunTrust Banks | Yes | Audit* Executive Finance | |||||||||||
Jackie M. Ward | September 2001 | Former Chairman, President and CEO of Computer Generation Incorporated | Yes | Compensation CG&N Executive* | • | Sanmina-SCI Corporation |
(1) | Full committee names are as follows: |
Audit – Audit Committee | |
Compensation – Compensation Committee | |
CG&N – Corporate Governance and Nominating Committee | |
Executive – Executive Committee | |
Finance – Finance Committee | |
Sustainability – Corporate Sustainability Committee | |
* | Denotes committee chairperson |
(3) | |
Ms. Ward serves as the |
Executive Compensation
Philosophy and Principles (page 35)44)
We believe our long-term success depends on our ability to attract, retain and motivateincentivize highly talented individuals who are committed to driving Sysco’s vision and strategy. One of the key objectives of our executive compensation program is to link executives’ pay to their performance and their advancement of Sysco’s overall performance and business strategies. Other objectives include aligning the executives’ interests with those of stockholders and encouraging high-performing executives to remain with Sysco over the course of their careers. We use the following key principles as the cornerstone of Sysco’s executive compensation philosophy to attract, develop and retain business leaders to drive financial and strategic growth and build long-term stockholder value:
• | Pay for Performance:Provide base salaries that reflect each |
• | Competitiveness and Retention:Provide a competitive pay opportunity that attracts and retains the highest quality professionals; |
• | Accountability for Short- and Long-Term Performance:Strike an appropriate balance between furthering both the short-term |
• | Alignment with Stockholders’ Interests:Link the interests of our executive officers with those of our stockholders through |
SYSCO CORPORATION-20142016 Proxy Statement 78
Pay Mix (page 41)42)
The information in the charts below should be read in connection with the explanatory information contained on page 41,42, and is qualified in its entirety by reference to such explanatory information.
SYSCO CORPORATION-20142016 Proxy Statement 8
2014 Executive Total Compensation Mix (page 56)
Set forth below is the 2014 compensation for each Named Executive Officer (“NEO”) who was an officer of the Company at the end of fiscal 2014, as determined under the Securities and Exchange Commission (“SEC”) rules. See the notes accompanying the Summary Compensation Table on page 56 for more information.
Change in | |||||||||||||||||||||||||
Pension Value and | |||||||||||||||||||||||||
Non-Equity | Nonqualified Deferred | ||||||||||||||||||||||||
Name and | Stock | Option | Incentive Plan | Compensation | All Other | ||||||||||||||||||||
Principal Position | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||
William J. DeLaney | |||||||||||||||||||||||||
President and Chief Executive Officer | $ | 1,194,583 | $ | 0 | $ | 1,819,225 | $ | 2,858,081 | $ | 657,919 | $ | 1,132,628 | $ | 152,958 | $ | 7,815,394 | |||||||||
Robert C. Kreidler | |||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 712,500 | 429,000 | 633,097 | 994,626 | 261,667 | 78,752 | 141,670 | 3,251,312 | |||||||||||||||||
Michael W. Green | |||||||||||||||||||||||||
Executive Vice President and President of Foodservice Operations | 712,500 | 143,000 | 587,878 | 923,579 | 324,539 | 1,128,887 | 91,099 | 3,911,482 | |||||||||||||||||
Thomas L. Bené | |||||||||||||||||||||||||
Executive Vice President and Chief Commercial Officer | 616,667 | 375,000 | 513,890 | 807,323 | 228,730 | 353 | 77,433 | 2,619,396 | |||||||||||||||||
Wayne R. Shurts | |||||||||||||||||||||||||
Executive Vice President and Chief Technology Officer | 585,000 | 267,400 | 482,636 | 758,240 | 221,510 | 30,740 | 54,973 | 2,400,499 |
Important Dates for 2015 Annual Meeting of Stockholders (page 82)
SYSCO CORPORATION-2014 Proxy Statement9
Sysco Corporation
1390 Enclave Parkway
Houston, Texas 77077-2099
October 8, 20145, 2016
We are providing you with a Notice of Internet Availability of Proxy Materials and access to these proxy materials, which include this 20142016 Proxy Statement, the proxy card for the 20142016 Annual Meeting of Stockholders (the “Annual Meeting”) and our Annual Report on Form 10-K for fiscal 2014,2016, because our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. Unless the context otherwise requires, the terms “we,” “our,” “us,” the “Company” or “Sysco,” as used in this proxy statement, refer to Sysco Corporation. Our Annual Meeting will be held on Wednesday, November 19, 2014,16, 2016, at 10:00 a.m. at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024.
At the close of business on September 22, 2014,19, 2016, there were 587,249,628551,217,611 shares of Sysco Corporation common stock (“Common Stock”) outstanding and entitled to vote at the Annual Meeting. All of our current directors and executive officers (18(24 persons) beneficially owned, directly or indirectly, an aggregate of 3,737,28448,570,829 shares, which was less than 1%approximately 8.81% of our outstanding common stockCommon Stock as of September 22, 2014.19, 2016.
Only owners of record of shares of Sysco’s common stockCommon Stock as of the close of business on the record date, September 22, 2014,19, 2016, are entitled to notice of, and to vote at the Annual Meeting or at any adjournments or postponements of the Annual Meeting. Each owner of record is entitled to one vote for each share owned on the record date on each matter presented at the Annual Meeting.
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
1. | What is a proxy statement and what is a proxy? |
A proxy statement is a document that Securities and Exchange Commission (the “SEC”) regulations require us to give you when we ask you to sign a proxy designating individuals to vote on your behalf. A proxy is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. We have designated three of our officers as proxies for the 20142016 Annual Meeting of Stockholders. These three officers are William J. DeLaney, Chris KreidlerJoel T. Grade and Russell T. Libby.
2. | Why did I receive a one-page notice (the “E-Proxy Notice”) in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? |
In accordance with rules and regulations adopted by the SEC, instead of mailing a printed copy of our proxy materials, including our annual report to stockholders, to each stockholder of record, we now generally furnish proxy materials, including our annual report to stockholders, to our stockholders on the Internet. Unless you have previously signed up to receive your materials in paper, you will receive a document entitledNotice of Internet Availability of Proxy Materials (which we also refer to as the E-Proxy Notice) and will not receive a printed copy of the proxy materials or the annual report to stockholders (unless you specifically request them). Instead, the E-Proxy Notice will instruct you as to how you may use the Internet to access and review all of the important information contained in the proxy materials, including our annual report to stockholders.
The E-Proxy Notice also instructs you as to how you may submit your proxy on the Internet. Instructions for requesting printed proxy materials are included in the E-Proxy Notice. E-Proxy Notices are distributed by mail, unless you previously signed up to receive your proxy materials electronically, in which case it will be emailed to you. Set forth below is a summary of delivery methods.
• | Stockholders who previously signed up to Receive Proxy Materials Electronically: If you previously signed up to receive proxy materials electronically, we will send the E-Proxy Notice to you via e-mail, to the last e-mail address you have supplied to us. We will e-mail electronic E-Proxy Notices on or aboutOctober |
SYSCO CORPORATION-20142016 Proxy Statement10
• | Stockholders who previously signed up to Receive Future Proxy Materials in Printed Format by Mail: If you previously submitted a valid election to receive all proxy materials in printed format, then we will send you a full set of printed proxy materials, including our annual report to stockholders. We will begin mailing these materials on or aboutOctober |
• | All other Stockholders:If you have not submitted any elections, we will send you a printed E-Proxy Notice by mail. We will begin mailing E-Proxy Notices on or aboutOctober |
Receiving Future Proxy Materials Electronically and Receiving the E-Proxy Notice by e-mail: If you previously elected to receive your proxy materials in printed format, but would like to receive an E-Proxy Notice only and use the Internet to access proxy materials, please visithttp://enroll.icsdelivery.com/syyfor additional information. This would significantly reduce our printing and postage costs and eliminate bulky paper documents from your personal files. To receive your E-Proxy Notice by e-mail, please visithttp://enroll.icsdelivery.com/syyfor additional information.
3. | What is the difference between holding shares as a stockholder of record and as a beneficial stockholder? |
These terms describe the manner in which your shares are held. If your shares are registered directly in your name with the Company’s registrar and transfer agent, American Stock Transfer and Trust Company, you are considered a “stockholder of record” with respect to those shares. If your shares are held inthrough a brokerage account, bank, trust or other nominee as custodian on your behalf, you are considered the “beneficial owner” or “street name holder” of those shares. See questions 5, 6 and 9 below for important information for beneficial owners.
4. | How do I vote? |
You may vote your shares as follows:
• | In person at the Annual Meeting.All stockholders of record may vote in person at the meeting. Beneficial owners may vote in person at the meeting if they have a legal proxy, as described in the response to question |
• | By telephone or Internet |
• | By Written Proxy.All stockholders of record can vote by written proxy card. If you received a printed copy of these proxy materials by mail, you may vote by signing, dating and mailing the enclosed proxy |
5. | How do I attend the meeting in person? What do I need to bring? |
You need to bring documentation showing that you owned Common Stock on the record date, September 22, 2014.19, 2016.You also will need to bring a photo ID to gain admissionadmission.. Please note that cameras, sound or video recording equipment cellular telephones, smartphones or other similar equipment, electronic devices, large bags, briefcases or packages may not be allowed in the meeting room. If you are a beneficial owner, bring the notice or voting instruction form you received from your bank, brokerage firm or other nominee for admission to the meeting. You also may bring your brokerage statement reflecting your ownership of Common Stock as of September 22, 201419, 2016 with you to the meeting.Please note that you will not be able to vote your shares at the meeting without a legal proxy, as described in the response to question 6 below..
6. | How can I vote at the meeting if I am a beneficial owner? |
You will need to ask your broker, bank or other intermediary to furnish you with a legal proxy. You will need to bring the legal proxy with you to the meeting and hand it in with a signed ballot that will be provided to you at the meeting. You will not be able to vote your shares at the meeting without a legal proxy. If you do not receive the legal proxy in time, you can follow the procedures described in the response to question 5 above to gain admission to the meeting. However, you will not be able to vote your shares at the meeting. Accordingly, we encourage you to vote your shares in advance, even if you intend to attend the meeting. Please note that, if you request a legal proxy, any previously executed proxy will be revoked and your vote will not be counted unless you appear at the meeting and vote in person or legally appoint another proxy to vote on your behalf.
SYSCO CORPORATION-20142016 Proxy Statement11
7. | What are my voting choices for each of the proposals to be voted on at the |
Proposal | Voting Choices and Board Recommendation | |
Item 1: Election of Fourteen Director Nominees | •vote in favor of all | |
•vote against all nominees; | ||
•vote for or against specific nominees; | ||
•abstain from voting with respect to all nominees; or | ||
•abstain from voting with respect to specific nominees. | ||
The Board recommends a voteFOReach of the nominees. | ||
Item 2: Advisory Proposal to Approve Executive Compensation | • | |
•vote against the advisory proposal; or | ||
•abstain from voting on the advisory proposal. | ||
The Board recommends a voteFORthe advisory proposal to approve executive compensation. | ||
Item Ratification of the Appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm | •vote in favor of the ratification; | |
•vote against the ratification; or | ||
•abstain from voting on the ratification. | ||
The Board recommends a voteFORthe ratification. | ||
Item 4: Stockholder proposal, if properly presented at the meeting, regarding a policy limiting accelerated vesting of equity awards upon a change in control | • vote in favor of the stockholder proposal; | |
• vote against the stockholder proposal; or | ||
• abstain from voting on the stockholder proposal. | ||
The Board recommends a voteAGAINST the stockholder proposal. | ||
If you vote by proxy, the individuals named on the proxy card (your proxies) will vote your shares in the manner you indicate. Directors will be elected by a majority of the votes cast, either for or against, by the holders of the shares of Common Stock voting in person or by proxy at the meeting. In order to be approved, each other proposal will require approval by a majority of the votes cast, either for or against, by the holders of the shares of Common Stock voting in person or by proxy at the meeting. As an advisory vote, the proposal to approve executive compensation is not binding upon the Company. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders and will consider the outcome of the vote when making future compensation decisions.
8. | What if I am a stockholder of record and do not specify a choice for a matter when returning a proxy? |
Stockholders should specify their choices for each matter on the proxy card. If no specific instructions are given, proxies that are signed and returned will be voted:
• | FOR the election of the |
• | FOR |
• | FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for fiscal |
• | AGAINST the stockholder proposal regarding a policy limiting accelerated vesting of equity upon a change in control. |
Proxies will be voted in the discretion of the proxy holders on any other matter that may properly come before the Annual Meeting.
9. | What if I am a beneficial owner and do not give voting instructions to my broker? |
As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered for vote.
Non-Discretionary ItemsItems.. The election of Directors, the proposal to approve the adoption of the Sysco Corporation 2015 Employee Stock Purchase Plan, and the advisory proposal to approve executive compensation and the stockholder proposal are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners.
Discretionary Items. The ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm is a discretionary item. Generally, brokers, banks and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal in their discretion.
SYSCO CORPORATION-20142016 Proxy Statement12
10. | What can I do if I want to revoke or change my vote? |
You may revoke or change your proxy at any time prior to the completion of voting at the Annual Meeting by:
• | delivering written notice of revocation to Sysco’s Corporate Secretary in time for him to receive it before the Annual Meeting; |
• | voting again by telephone, Internet or mail (provided that such new vote is received in a timely manner pursuant to the instructions above); or |
• | voting in person at the Annual Meeting. |
The last vote that we receive from you will be the vote that is counted.
11. | Is there a quorum requirement? |
A quorum is necessary to hold a valid meeting. A quorum will exist if the holders of at least 35% of all the shares entitled to vote at the meeting are present in person or by proxy. All shares voted by proxy are counted as present for purposes of establishing a quorum, including those that abstain or as to which the proxies contain broker non-votes as to one or more items.
12. | What votes are necessary for action to be taken? |
Sysco’s Bylaws and Corporate Governance Guidelines include a majority vote standard for uncontested director elections. Since the number of nominees timely nominated for the Annual Meeting does not exceed the number of directors to be elected, each director to be elected shall be elected if the number of votes cast “for” election of the director exceeds those cast “against.” Any incumbent director who is not re-elected will be required to tender his or her resignation promptly following certification of the stockholders’ vote. The Corporate Governance and Nominating Committee will consider the tendered resignation and recommend to the Board of Directors whether to accept or reject the resignation offer, or whether other action should be taken. The Board of Directors will act on the recommendation within 120 days following certification of the stockholders’ vote and will promptly make a public disclosure of its decision regarding whether to accept the director’s resignation offer.
Pursuant to Sysco’s Bylaws, the affirmative vote of a majority of the votes cast, either for or against, is required for the approval of:
• | the non-binding, advisory proposal to approve the compensation paid to Sysco’s named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K; |
• | the ratification of the appointment of the independent registered public accounting |
• | the stockholder proposal. |
The vote on compensation paid to Sysco’s named executive officers is being provided pursuant to Section 14A of the Exchange Act. In light of the stockholder recommendation at Sysco’s 2011 Annual Meeting of Stockholders regarding the frequency of the stockholder advisory votes on executive compensation, it is the current intention of the Sysco Board of Directors to conduct an annual stockholder advisory vote on executive compensation until the next required vote on the frequency of stockholder advisory votes on executive compensation that will occur at our 2017 Annual Meeting of Stockholders.
Broker non-votes and abstentions will be disregarded with respect to the election of directors and each of the other proposals.
13. | Who will count votes? |
We will appoint one or more Inspectors of Election who will determine the number of shares outstanding, the voting power of each, the number of shares represented at the Annual Meeting, the existence of a quorum and whether or not the proxies and ballots are valid and effective.
The Inspectors of Election will determine, and retain for a reasonable period, a record of the disposition of any challenges and questions arising in connection with the right to vote, and will count all votes and ballots cast for and against and any abstentions or broker non-votes with respect to all proposals and will determine the results of each vote.
14. | How are abstentions and broker non-votes counted? |
Abstentions and broker non-votes are included in determining whether a quorum is present. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting authority and has not received voting instructions from the beneficial owner. Broker non-votes and abstentions will be disregarded with respect to the election of directors and each of the other proposals.
SYSCO CORPORATION-20142016 Proxy Statement13
15. | How are proxies solicited and what are the costs of proxy solicitation? |
We will pay all of the cost of solicitation of proxies including preparing, printing and mailing this proxy statement and the E-Proxy Notice. Solicitation may be made personally or by mail, telephone or electronic data transfer by officers, directors and employees of the Company (who will not receive any additional compensation for any solicitation of proxies).
We will also authorize banks, brokerage houses and other custodians, nominees and fiduciaries to forward copies of proxy materials and will reimburse them for their costs in sending the materials. We have retained Georgeson Shareholder Communications to help us solicit proxies from these entities and certain other stockholders, in writing or by telephone, at an estimated fee of $12,000 plus reimbursement for their out-of-pocket expenses.
16. | Will any other matters be presented at the Annual Meeting? |
We do not know of any matter that will be presented at the Annual Meeting other than the election of directors and the other proposals discussed in this proxy statement. However, if any other matter is properly presented at the Annual Meeting, your proxies will act on such matter in their best judgment.
17. | Where can I access the Annual Report? |
We will furnish additional copies of our annual report to stockholders, which includes our Annual Report on Form 10-K, without exhibits, for the year ended June 28, 2014,July 2, 2016, as filed with the Securities and Exchange Commission (the “Annual Report on Form“Form 10-K”), for no charge, upon your written request if you are a record or beneficial owner of Sysco Corporation common stock whose proxy we are soliciting in connection with the Annual Meeting.
Please address requests for a copy of the Annual Report on Form 10-K to the Investor Relations Department, Sysco Corporation, 1390 Enclave Parkway, Houston, Texas 77077-2099. The Annual Report on Form 10-K is also available on our website under “Investors— Annual Reports & Financial Information”and SEC Filings” atwww.sysco.com.
18. | What is Householding and where can I get additional copies of proxy materials? |
If your shares are held in the name of your broker or agent, and you share the same last name and address with another Sysco stockholder, you and the other stockholders at your address may receive only one copy of the E-Proxy Notice and any other proxy materials we choose to mail, unless contrary instructions are provided from any stockholder at that address. This is referred to as “householding.” If you prefer to receive multiple copies of the E-Proxy Notice and any other proxy materials that we mail, at the same address, additional copies will be provided to you promptly upon written or oral request, and if you are receiving multiple copies of the E-Proxy Notice and other proxy materials, you may request that you receive only one copy. Please address requests for a copy of the E-Proxy Notice and other proxy materials to the Investor RelationsBroadridge, Householding Department, Sysco Corporation, 1390 Enclave Parkway, Houston, Texas 77077-2099,51 Mercedes Way, Edgewood, New York, 11717, or call the Investor Relations DepartmentBroadridge at 281-584-1308. The Annual Report on Form 10-K is also available on our website under “Investors—Reports & Financial Information” atwww.sysco.com.
If your shares are not registered in your own name, you can request additional copies of the E-Proxy Notice and any other proxy materials we mail or you can request householding by notifying your broker or agent in whose name your shares are registered.(866) 540-7095.
19. | Will the Company announce the voting results? |
We will announce the preliminary voting results at the Annual Meeting of Stockholders.Meeting. The Company will report the final results on our website and in a Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting.
20. | Does the Company have a policy about Directors’ attendance at the Annual Meeting of Stockholders? |
It is the Board’s policy that Directors attend the Annual Meeting, of Stockholders, to the extent practicable. In fiscal 2014, allAll Directors who were in office at that time attended the Annual Meetingannual meeting of stockholders held in November 2013.2015.
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We believe that good corporate governance is critical to achieving business success. The CompanyBoard has adopted certain documents, referred to herein as our Governance Documents, to provide a general framework for the Company and reflect our commitment to sound governance practices, including:
• | Sysco’s |
• | the Corporate Governance |
• | the |
• | the Code of |
• | the Code of Conduct for non-employee directors. |
These Governance Documents outline the functions of the Board, each of the Board’s committees, director responsibilities, and various processes and procedures designed to ensure effective and responsive governance. These guidelines also outline qualities and characteristics we consider when determining whether a member or candidate is qualified to serve on the Board, including diversity, skills, experience, time available and the number of other boards the member sits on, in the context of the needs of the Board and Sysco.
The Corporate Governance Guidelines comply with the listing standards of the NYSE and include guidelines for determining director independence and qualifications. OurThese guidelines define qualities and characteristics utilized in evaluating if an existing Board member or candidate meets the qualifications for service as a Sysco Board member. Additionally, diversity, skills, experience and time available for service (including consideration of other board service) are all important considerations. The Corporate Governance and Nominating Committee regularly reviews the Governance Documents and makes changesrecommends revisions to the Board from time to time to reflect developments in the law and corporate governance practices.
Copies of the Governance Documents can be accessed from the corporate governance section of the Company’s website at “Investors— Corporate Governance” atwww.sysco.com. These documents will also be provided without charge to any stockholder upon written request to the Corporate Secretary at Sysco Corporation, 1390 Enclave Parkway, Houston, Texas 77077.
Our Board recognizes the importance of Board refreshment and Board succession planning to ensure that the directors possess a composite set of skills, experience and qualifications necessary for the Board to successfully establish and oversee management’s execution of the Company’s strategic priorities (see “Director Qualifications” below for a discussion of the key qualifications considered by the Corporate Governance and Nominating Committee in evaluating candidates). In order to promote thoughtful Board refreshment, during 2016 our Board adopted a director tenure policy and elected three new independent, non-employee directors to the Board, as discussed below. Director Tenure Policy. In July 2016, our Board, upon the recommendation of our Corporate Governance and Nominating Committee, approved an amendment to the Company’s Corporate Governance Guidelines to provide that, effective November 17, 2016, no individual who, as of the date of the election to which any nomination relates, will have served as a non-employee director for 15 years will be eligible to be nominated for election or re-election to the Board. This tenure limitation is subject to a two-year transition period that expires immediately following our 2018 annual meeting of stockholders, during which only those two non-employee directors with the longest tenure will be ineligible for re-election in connection with any particular election of directors. In that case, the ineligibility of any other impacted non-employee directors will be deferred until the next annual meeting of stockholders. This transition period is intended to ensure an orderly transition as our longest-tenured directors retire from the Board. Director Recruitment.During 2016, in connection with our Board refreshment efforts, our Board engaged the services of a search firm to assist with identifying and recruiting appropriate director candidates. Several director candidates were referred by our then current directors and identified by our search firm, and our Board evaluated the skills, experience and qualifications of each candidate in the context of the Board’s composition and the Company’s strategic priorities. Following consideration of these candidates, and upon the unanimous recommendation of our Corporate Governance and Nominating Committee, in September 2016 our Board expanded the size of the Board from 12 to 15 directors and elected three new independent, non-employee directors to fill the resulting vacancies: Mr. Daniel J. Brutto, Mr. Bradley M. Halverson and Mr. Edward D. Shirley. In accordance with the director tenure policy, we expect two incumbent non-employee directors to retire from the Board in each of 2017 and 2018. In addition, Mr. Joseph A. Hafner has decided not to stand for re-election at the Annual Meeting. As our longest-tenured directors retire from the Board, we will continue our director recruitment efforts to help ensure that the size of the Board may be maintained at an appropriate level. Accordingly, over the next two years, the Board has determined to elect one additional independent director in each of 2017 and 2018, assuming that it is able to identify a sufficient number of qualified candidates interested in serving as a director. |
SYSCO CORPORATION - 2016 Proxy Statement15
Communicating with stakeholders, whether customers, employees or stockholders, has always been an important part of how Sysco does business. In 2015, in furtherance of these efforts, we began a more formal engagement process with our stockholders regarding matters of corporate governance. This engagement process is incremental to our customary participation at industry and investment community conferences, investor road shows, and analyst meetings.
At the direction of our Corporate Governance and Nominating Committee, senior leaders and subject matter experts from the company met with representatives at many of our top institutional stockholders to discuss Sysco’s governance practices, executive compensation, compliance programs, and other environmental, social, and governance related matters. Management reported regularly to the Board and the Corporate Governance and Nominating Committee concerning these meetings, including feedback on the concerns and issues raised by our stockholders.
In fiscal 2016, this engagement program was expanded to include Ms. Ward and Mr. Glasscock, who have each participated in meetings with many of our top institutional stockholders to discuss the same governance and compensation matters described above. We look forward to gaining further insight from our stockholders during future engagements.
In recognition of developments in corporate governance practices and the feedback received through our engagement with stockholders, our Board has implemented the following enhancements to stockholder rights, as recommended by our Corporate Governance and Nominating Committee:
Proxy Access – In August 2016, our Board adopted amendments to the Company’s bylaws to establish “proxy access” rights, beginning with our 2017 annual meeting, permitting stockholders who have beneficially owned 3% or more of Sysco’s outstanding common stock continuously for at least three years (as of the time of submission of the nomination) the right to nominate a number of director nominees equal to the greater of 2 or 20% (rounded down) of the total number of directors constituting our Board, subject to applicable limitations and procedural requirements.
Right of Stockholders to Call a Special Meeting – In November 2015, our Board adopted amendments to the Company’s bylaws to establish the right for holders of at least 25% of Sysco’s outstanding common stock who comply with certain procedural requirements to call a special meeting of stockholders.
The Governance Documents provide the Board with the flexibility to select the appropriate leadership structure for the Company.
BOARD LEADERSHIP
BOARD LEADERSHIP | |
• | |
• | Active participation by all |
• | |
We believe that the structure of our Board positions Sysco to benefit from the respective strengths of our CEO and Chairman of the Board. |
We believe that the structure of our Board, relying on leadership from both independent and non-independent directors, positions Sysco to benefit from the respective strengths of our CEO and Non-Executive Chairman.
Immediately preceding our 2013 Annual Meeting of Stockholders, our Board named Jackie M. Ward as its Non-Executive Chairman of the Board, succeeding Manny Fernandez.Board. Ms. Ward, a Sysco director since September 2001, previously served as the Board’s lead director and chaired the Corporate Governance and Nominating Committee, and she has served continuously on the Compensation Committee, the Corporate Governance and Nominating and the Executive Committee.Committee for nearly twelve years. The Board elected Ms. Ward as its Non-Executive Chairman in order to provide experienced, independent leadership for the Directors and to foster the Board’s oversight of management and the Company.
At times when our chairman is not independent or when otherwise appropriate, we utilize an independent Lead Director in order to ensure that the Board continues to maintain an independent thought process that ultimately benefits stockholders. The Lead Director, among other things, reviews meeting schedules and agendas with the chairman of the Board and serves as the primary liaison between the independent directors and the chairman of the Board.
The independent directors meet in executive session at least once a year, without the other directors present, and the Non-Executive Chairman of the Board presides at such meetings. The non-management directors meet regularly without the CEO or any other member of management present and in fiscal 20142016 met fourfive times. Ms. Ward, first as Lead Director and, subsequently, as Non-Executive Chairman of the Board, presided over the sessions of the non-management and independent directors in fiscal 2014.2016.
SYSCO CORPORATION - 2016 Proxy Statement 16
Communicating with the Board
Interested parties may communicate with the Non-Executive Chairman of the Board, the non-management directors or independent directors as a group and the individual members of the Board by confidential web submission or by mail. All such correspondence will be delivered to the parties to whom they are addressed. The Board requests that items unrelated to the duties and responsibilities of the Board not be submitted, such as product inquiries and complaints, job inquiries, business solicitations and junk mail. You may access the form to communicate by confidential web submission in the corporate governance section of Sysco’s website under “Investors — Corporate Governance— Contact the Board” atwww.sysco.com. You can contact any of our Directors by mail in care of the Office of the Corporate Secretary, Sysco Corporation, 1390 Enclave Parkway, Houston, Texas 77077.
SYSCO CORPORATION-2014 Proxy Statement 15
During fiscal 2014,2016, the Board held 1214 meetings, including four regular meetings and eightten special meetings, and committees of the Board held a total of 3034 meetings. Overall attendance at such meetings was approximately 98%. Each director attended 75% or more of the aggregate of all meetings of the Board and the committees on which he or she served during fiscal 2014.2016. The Board has an Audit Committee, a Compensation Committee, a Corporate Governance and Nominating Committee, a Corporate Sustainability Committee, a Finance Committee, and an Executive Committee. Current copies of the written charters for the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, the Finance Committee and the Corporate Sustainability Committee are published on our website under “Investors — Corporate Governance” at www.sysco.com.www.sysco.com. The current membership and primary responsibilities of the committees are summarized in the following table.
Committee Name | Primary Responsibilities | Fiscal Meetings | ||
Audit(1) Mr. Tilghman (Chair) Mr. Hafner Dr. Koerber Ms. Newcomb | • Oversees and reports to the Board with respect to various auditing and accounting matters, including the selection of the independent public accountants, the scope of audit procedures, the nature of all audit and non-audit services to be performed by the independent public accountants, the fees to be paid to the independent public accountants, and the performance of the independent public accountants • Oversees and reports to the Board with respect to Sysco’s accounting practices and policies • Responsible for discussing the Company’s policies with respect to risk assessment and risk management, including discussion of enterprise-wide guidelines and policies to govern the process by which risk assessment and management is undertaken • Oversees and reports to the Board with respect to compliance with legal and regulatory requirements, corporate accounting, reporting practices and the integrity of the financial statements of the Company | 9 | ||
Compensation(2)(3) Mr. Cassaday (Chair) Dr. Craven Mr. Frank Mr. Glasscock Ms. Ward | • Establishes compensation policies that effectively attract, retain and • • Responsible for the appointment, compensation and oversight of the work of each of the committee’s compensation consultants, counsel or other advisers • Oversees the administration of Sysco’s qualified and nonqualified benefit plans, incentive compensation plans, equity-based plans and Sysco’s group benefit medical plan • Appropriately delegates and oversees compensation and granting authority, except for decisions that impact the compensation of Sysco’s CEO and executive officers • Oversees administrative committees or individuals delegated oversight of employee and executive benefit plans • Amends, establishes or terminates any benefit plan that is maintained primarily for the benefit of Sysco’s senior officers • Resolves claims under any benefit plan with respect to any senior officer | 8 | ||
Corporate Governance and Nominating(2) Mr. Glasscock (Chair) Mr. Cassaday Dr. Craven Mr. Peltz Ms. Ward | • Proposes directors, committee members and officers to the Board for election or reelection • Oversees the evaluation of management, including the CEO • Reviews the performance of the members of the Board and its committees • Recommends to the Board the annual compensation of non-employee directors • Reviews related party transactions • Reviews and makes recommendations regarding the organization and effectiveness of the Board and its committees, the establishment of corporate governance principles, the conduct of meetings, succession planning and Sysco’s Governing Documents • Reviews and makes recommendations regarding changes to Sysco’s Codes of Conduct, periodically reviews overall compliance with the Codes and approves any waivers to the Codes given to Sysco’s executive officers and directors • Monitors compliance with and approves waivers to Sysco’s Policy on Trading in Company | 9 | ||
Corporate Sustainability Dr. Craven (Chair) Mr. Glasscock Mr. Golden Mr. Hafner | • Reviews and acts in an advisory capacity to the Board and management with respect to policies and strategies that affect Sysco’s role as a socially responsible organization as well as Sysco’s long-term sustainability • Reviews, evaluates, and provides input on the development and implementation of Sysco’s Sustainability Strategy, which focuses on • Reviews philanthropic giving, agriculture programs, and warehouse and transportation initiatives designed to improve the environmental impact of the company
| 3 |
SYSCO CORPORATION - 2016 Proxy Statement17
Committee Name & Current Members | Primary Responsibilities | Fiscal 2016 Meetings | ||
Finance Mr. Hafner (Chair) Mr. DeLaney Mr. Frank Mr. Golden Dr. Koerber Ms. Newcomb Mr. Tilghman | • • Reviews policies regarding capital structure, dividends and liquidity • Reviews and recommends the sale or issuance of equity and debt securities • Reviews acquisitions and financing alternatives • Reviews and approves certain capital expenditures • Reviews and recommends insurance risk management strategies as proposed by • Approves and monitors high-level investment and funding objectives and investment performance and funding of Sysco’s tax-qualified retirement plans and non-qualified retirement and deferred compensation plans • Reviews and oversees Sysco’s information technology and security matters • Assists the Audit Committee in reviewing and overseeing Sysco’s environmental, health and safety matters and related regulatory compliance |
SYSCO CORPORATION - 2014 Proxy Statement 16
Executive Ms. Ward (Chair) | 0 | |||
(1) | Each member of the Audit Committee has been determined by the Board to be independent, as defined in the NYSE’s listing standards, Section 10A of the Exchange Act and the Company’s Corporate Governance Guidelines. Each member of the Audit Committee is financially literate and the Board has determined that Messrs. Hafner and Tilghman and Ms. Newcomb each meet the definition of an audit committee financial expert as promulgated by the Securities and Exchange Commission. No Audit Committee member serves on the audit committees of more than two other companies. |
(2) | Each member of the Compensation Committee and the Corporate Governance and Nominating Committee has been determined by the Board to be independent, as defined in the NYSE’s listing standards and the Company’s Corporate Governance Guidelines. |
(3) | Except for decisions that impact the compensation of Sysco’s CEO, the Compensation Committee is generally authorized to delegate any decisions it deems appropriate to a subcommittee. In such a case, the subcommittee must promptly make a report of any action that it takes to the full Compensation Committee. In addition, the Compensation Committee may delegate to any one or more members of the Board its full equity grant authority with respect to any equity-based grants other than grants made to officers that are subject to reporting obligations under Section 16 of the Exchange Act; and the Compensation Committee has delegated such authority to Mr. DeLaney with respect to certain non-executive employees, subject to specified limitations. In carrying out its duties, the Compensation Committee may also delegate its oversight of Sysco’s employee and executive benefit plans to any administrative committees of the respective plans or to such officers or employees of Sysco as the Compensation Committee deems appropriate, except that it may not delegate its powers to amend, establish or terminate any benefit plan that is maintained primarily for the benefit of Sysco’s senior officers, resolve claims under a benefit plan with respect to any senior officer, or modify the compensation of any senior officer as provided under any nonqualified or executive incentive compensation plan. For a detailed description of the Compensation Committee’s processes and procedures for consideration and determination of executive compensation, including the role of executive officers and compensation consultants in recommending the amount and form of executive compensation, see “— Compensation Consultants,” and “Compensation Discussion and Analysis.” |
Director IndependenceAnnual Board Self-Evaluation
The Board conducts an annual self-evaluation to determine whether the Board and its committees are functioning effectively. As part of the evaluation process, each director completes a Board self-evaluation questionnaire developed by the Corporate Governance and Nominating Committee. The questionnaire responses are compiled and reviewed by outside legal counsel, which provides a summary of the responses, without attribution to any individual director, to the Chairman of the Board and the Chairman of the Corporate Governance and Nominating Committee. The outside legal counsel also conducts interviews with each director individually. The results of the questionnaires and the interview process are subsequently discussed by the Corporate Governance and Nominating Committee and are then presented to the full Board for review and discussion.
In addition, each Board committee conducts a similar self-evaluation of its performance focused on the Committee’s key responsibilities. Feedback from the committees’ self-evaluations is reviewed by the applicable committee and also presented to the full Board for review and discussion.
In fiscal 2016, following consultation with leading third party experts on public company board governance and director evaluations, the Corporate Governance and Nominating Committee approved the following enhancements to the Board’s annual self-evaluation process:
• | An individual director self-evaluation process, implemented for fiscal 2016, under which each director completes an individual self-evaluation questionnaire that is submitted to the outside legal counsel and discussed with the director during the interview referenced above; and |
• | “360 degree” individual director performance reviews, which will be conducted every 3 years, beginning no earlier than calendar year 2017, and will involve soliciting feedback on each director’s individual performance from a variety of sources, including management and the other members of the Board. |
SYSCO CORPORATION - 2016 Proxy Statement18
Our Corporate Governance Guidelines require that at least a majority of our directors meet the criteria for independence that the New York Stock Exchange has established for continued listing, as well as the additional criteria set forth in the Guidelines. Additionally, we require that all members of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee be independent, that all members of the Audit Committee satisfy the additional requirements of the New York Stock Exchange and applicable rules promulgated under the Exchange Act, and that all members of the Compensation Committee satisfy the additional requirements of the New York Stock Exchange.
Under New York Stock Exchange listing standards, to consider a director to be independent, we must determine that he or she has no material relationship with Sysco other than as a director. The standards specify the criteria by which we must determine whether directors are independent, and contain guidelines for directors and their immediate family members with respect to employment or affiliation with Sysco or its independent public accountants.
In addition to the NYSE’s standards for independence, our Corporate Governance Guidelines contain categorical standards that provide that the following relationships will not impair a director’s independence:
• | if a Sysco director is an executive officer of another company that does business with Sysco and the annual sales to, or purchases from, Sysco are less than two percent of the annual revenues of the company for which he or she serves as an executive officer; |
• | if a Sysco director is an executive officer of another company which is indebted to Sysco, or to which Sysco is indebted, and the total amount of either company’s indebtedness to the other is less than two percent of the total consolidated assets of the company for which he or she serves as an executive officer, so long as payments made or received by Sysco as a result of such indebtedness do not exceed the two percent thresholds provided above with respect to sales and purchases; and |
• | if a Sysco director serves as an officer, director or trustee of a tax-exempt charitable organization, and Sysco’s discretionary charitable contributions to the organization are less than two percent of that organization’s total annual charitable receipts; Sysco’s automatic matching of employee charitable contributions will not be included in the amount of Sysco’s contributions for this purpose. |
The Board of Directors has reviewed all relevant relationships of the directors with Sysco. The relationships reviewed included those described under “Certain Relationships and Related Transactions,” and several relationships that did not automatically make the individual non-independent under the NYSE standards or our Corporate Governance Guidelines, either because of the type of affiliation between the director and the other entity or because the amounts involved did not meet the applicable thresholds.
These additional relationships include the following (for purposes of this section, “Sysco”, “we,” “us” and “our” include our operating companies):
• | Mr. Cassaday serves as a director of Irving Oil Limited, |
• | |
• | Mr. |
• | Mr. Hafner serves on the boards or committees of several non-profit organizations to which Sysco makes donations; in addition, Mr. Hafner serves |
SYSCO CORPORATION- 2014 Proxy Statement 17
Mr. Peltz is Chief Executive Officer and a Founding Partner of Trian Fund Management, L.P., which owns approximately 8% of Sysco’s outstanding common stock; he is also the non-executive Chairman of The Wendy’s Company, which is one of our customers, a director of Mondeléz International, Inc., a customer of and supplier to | |
• | Mr. Tilghman is |
• |
After reviewing such information, the Board of Directors has determined that each of Mr. Brutto, Mr. Cassaday, Dr. Craven, Mr. Frank, Mr. Glasscock, Mr. Hafner, Mr. Halverson, Dr. Koerber, Ms. Newcomb, Mr. Peltz, Mr. Shirley, Mr. Tilghman and Ms. Ward has no material relationship with Sysco and is independent under the NYSE standards and the categorical standards set forth in the Corporate Governance Guidelines and described above.
The Board also determined that Mr. DeLaney, and Mr. Fernandez, each of whomwho served as an executive officer of the Company during fiscal 2014, are2016, is not independent pursuant to the NYSE independence standards due to such service, and that Mr. Golden is not independent due to his relationship to Arnall Golden Gregory LLP. See “Transactions with Related Persons” below for further discussion.
The Board has also determined that each member of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee is independent. Our Corporate Governance Guidelines also provide that no independent director who is a member of the Audit, Compensation or Corporate Governance and Nominating Committees may receive any compensation from Sysco other than in his or her capacity as a non-employee director or committee member. The Board has determined that no non-employee director received any compensation from Sysco at any time since the beginning of fiscal 2014,2016, other than in his or her capacity as a non-employee director, committee member, committee chairman lead director or Non-Executive Chairman of the Board.
SYSCO CORPORATION - 2016 Proxy Statement19
Certain Relationships and Related Person Transactions
Related Person Transactions Policies and Procedures
The Board has adopted written policies and procedures for review and approval or ratification of transactions with related persons. We subject the following related persons to these policies: directors, director nominees, executive officers, beneficial owners of more than five percent of our stock and any immediate family members of these persons.
We follow the policies and procedures below for any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which Sysco was or is to be a participant, the amount involved exceeds $100,000, and in which any related person had or will have a direct or indirect material interest. These policies specifically apply without limitation to purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness, and employment by Sysco of a related person. The Board of Directors has determined that the following do not create a material direct or indirect interest on behalf of the related person, and are, therefore, not related person transactions to which these policies and procedures apply:
• | Interests arising only from the related person’s position as a director of another corporation or organization that is a party to the transaction; or |
• | Interests arising only from the direct or indirect ownership by the related person and all other related persons in the aggregate of less than a 10% equity interest, other than a general partnership interest, in another entity which is a party to the transaction; or |
• | Interests arising from both the position and ownership level described in the two bullet points above; or |
• | Interests arising solely from the ownership of a class of Sysco’s equity securities if all holders of that class of equity securities receive the same benefit on a pro rata basis, such as dividends; or |
• | A transaction that involves compensation to an executive officer if the compensation has been approved by the Compensation Committee, the Board of Directors or a group of independent directors of Sysco performing a similar function; or |
• | A transaction that involves compensation to a director for services as a director of Sysco if such compensation will be reported pursuant to Item 402(k) of Regulation S-K. |
Any of our employees, officers or directors who have knowledge of a proposed related person transaction must report the transaction to our Chief Legal Officer.chief legal officer. Whenever practicable, before the transaction goes effective or becomes consummated, the Corporate Governance and Nominating Committee of the Board of Directors will review and approve the proposed transaction in accordance with the terms of this policy. If the Chief Legal Officerchief legal officer determines that it is not practicable to obtain advance approval of the transaction under the circumstances, the Committee will review and, in its discretion may ratify, the transaction at its next meeting. In addition, the Board of Directors has delegated to the Chair of the Committee the authority to pre-approve or ratify, as applicable, any related person transaction in which the aggregate amount involved is expected to be less than $500,000.
In addition, if a related person transaction is ongoing in nature and the Committee has previously approved it, or the transaction otherwise already exists, the Committee will review the transaction during its first meeting of each fiscal year to:
• | ensure that such transaction has been conducted in accordance with the previous approval granted by the Committee, if any; |
• | ensure that Sysco makes all required disclosures regarding the transaction; and |
• | determine if Sysco should continue, modify or terminate the transaction. |
We will consider a related person transaction approved or ratified if the transaction is authorized by the Corporate Governance and Nominating Committee or the Chair, as applicable, in accordance with the standards described below, after full disclosure of the related person’s interests in the transaction. As appropriate for the circumstances, the Committee will review and consider such of the following as it deems necessary or appropriate: | |
• | the related person’s interest in the transaction; |
• | the approximate dollar value of the amount involved in the transaction; |
• | the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss; |
• | whether the transaction was undertaken in Sysco’s ordinary course of business; |
• | whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to Sysco than terms that could have been reached with an unrelated third party; |
• | the purpose of, and the potential benefits to Sysco of, the transaction; and |
• | any other information regarding the transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. |
SYSCO CORPORATION- 2014 Proxy Statement 18
The Committee will review such additional information about the transaction as it in its sole discretion shall deem relevant. The Committee may approve or ratify the transaction only if the Committee determines that, based on its review, the transaction is in, or is not inconsistent with, the best interests of Sysco. The Committee may, in its sole discretion, impose such conditions as it deems appropriate on Sysco or the related person when approving a transaction. If the Committee or the Chair, as applicable, does not ratify a related person transaction, we will either rescind or modify the transaction, as the Committee or the Chair, as applicable, directs, as soon as practicable following the failure to ratify the transaction. The Chair will report to the Committee at its next regularly scheduled meeting any action that he or she has taken under the authority delegated pursuant to this policy. If any director has an interest in a related person transaction, he or she is not allowed to participate in any discussion or approval of the transaction, except that the director is required to provide all material information concerning the transaction to the Committee.
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Transactions with Related Persons
Mr. Golden, one of our directors, is the sole stockholder of Jonathan Golden, P.C., a partner in the law firm of Arnall Golden Gregory LLP, Atlanta, Georgia, which provided legal services to Sysco during fiscal 20142016 and continues to do so in fiscal 2015.2017. During fiscal 2014,2016, Sysco incurred approximately $2.2$1.2 million in legal fees and disbursements related to these services. We believe the amounts were fair and reasonable in view of the level and extent of services rendered. Due to this relationship, Mr. Golden is not considered to be an independent director under the NYSE standards or the categorical standards set forth in Sysco’s Corporate Governance Guidelines.
Michael W. Green’s brother-in-law works for, and handles the account for, Red Gold, Inc., a company which supplies tomato products to Sysco. Sysco paid Red Gold approximately $62.7 million during fiscal 2014. Mr. Green’s sister and brother-in-law own Sunrise Café, one of Sysco’s customers. Sysco and its affiliates sold approximately $158,000 in product to Sunrise Café during fiscal 2014. Mr. Green serves as our Executive Vice President and President of Foodservice Operations.
Ms. Twila Day is the wife of William Day, our Executive Vice President, Merchandising. Ms. Day previously served as Sysco’s Vice President and Chief Information Officer from December 2005 until January 2010, when she was promoted to Senior Vice President and Chief Information Officer, and served in this position until her departure from Sysco effective June 29, 2013. In July 2013, Ms. Day received a lump sum separation payment of $1,155,000. In August 2013, Ms. Day received a payment of $144,698 with respect to a 2011 CPU grant and a MIP bonus of $153,384. Following her departure from Sysco, Ms. Day accepted a position as a managing director of the consulting firm Alvarez & Marsal, which has provided consulting services to Sysco since 2004. Sysco and its affiliates purchased approximately $3.6$1.7 million in consulting services from this firm in fiscal 2014,2016, although Ms. Day did not personally provide any services to Sysco, nor did she receive any compensation as a result of these services.
The Corporate Governance and Nominating Committee has approved alleach of the above transactions in accordance with the disclosed policies and procedures.
One of the primary oversight functions of the Board is to ensure that Sysco has an appropriate risk management process in place that is commensurate with both the short and long-term goals of the Company. In order to effectively fulfill this oversight role, the Board relies on various individuals and committees within management and among our Board members. See “Board of Directors Matters—Election of Directors at 20142016 Annual Meeting (Item I)1) —Director Qualifications” and “Board of Directors Matters—Board Composition” below for a description of individual director qualifications, including risk management experience.
Management is responsible for identifying, managing and mitigating risks, and reports directly to the Audit Committee and the Board on a regular basis with respect to risk management. As discussed above under “Board Meetings and Committees of the Board,” the Audit Committee reviews Sysco’s process by which management assesses and manages the Company’s exposure to risk. The Audit Committee also makes recommendations to the Board of Directors with respect to the process by which members of the Board and relevant committees will be made aware of the Company’s significant risks, including recommendations regarding what committee of the Board would be most appropriate to take responsibility for oversight of management with respect to the most material risks faced by the Company. On an annual basis management reviews with the Board the key enterprise risks identified in the process, such as strategic, operational, financial, compliance and reputation risks, as well as management’s process for addressing and mitigating the potential effects of such risks. Through this process Sysco has developed an enhanced enterprise risk management proceduresprocess that includeincludes frequent discussion and prioritization of key risk issues by the executive management team, enhanceda deep dive approach to fully understand the risks, creation of a risk management plan in support of lowering the risk’s exposure to the level of management’s preferred tolerance, and tracking and monitoring of risk information and identificationmanagement’s execution of particular risks for which management intends to develop or enhance Sysco’s managementthe plan, all within a governance and mitigation plans.reporting cadence.
The Board’s committees help oversee the risk management process within the respective areas of the committees’ delegated oversight authority. The Audit Committee is primarily responsible for hiring and evaluating our independent auditor, review of our internal controls, oversight of our internal audit function, oversight of customer credit risk, reviewing contingent liabilities that may be material to the Company and various regulatory and compliance oversight functions. The Compensation Committee is responsible for ensuring that our executive compensation policies and practices do not incentivize excessive or inappropriate risk-taking by employees. The Corporate Governance and Nominating Committee monitors risk by ensuring that proper corporate governance standards are maintained, that the Board is comprised of qualified Directors, and that qualified individuals are chosen as senior officers. The Finance Committee oversees risks involving capital structure of the enterprise, including borrowing, liquidity, allocation of capital, major capital transactions and expenditures, funding of benefit plans, credit/counterparty risk investment risk and cyber-securityinvestment risk. The Non-Executive Chairman of the Board coordinates the flow of information regarding risk oversight from each respective committee to the independent Directors and participates in the review of the agenda for each Board and Committee meeting. As the areas of oversight among committees sometimes overlap, committees may hold joint meetings when appropriate and address certain risk oversight issues at the full Board level. The Board considers risk in evaluating the Company’s strategy, including specific strategic and emerging risks, and annually reviews and approves corporate goals and capital budgets. The Board also monitors any specific risks for which it has chosen to retain oversight rather than delegating oversight to one of its committees, such as risks related to our Business Transformation Project (including the associated informationcyber-security, technology risks)platform development and our proposed merger with USF Holding Corp.succession planning.
SYSCO CORPORATION - 20142016 Proxy Statement 1921
We require all of our officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, to comply with our Code of Conduct applicable to Sysco employees to help ensure that we conduct our business in accordance with the highest standards of moral and ethical behavior. This Code of Conduct addresses the following, among other topics:
• | professional conduct, including customer relationships, equal opportunity, payment of gratuities and receipt of payments or |
• | competition and fair |
• | compliance with the Foreign Corrupt Practices |
• | political |
• | |
• | conflicts of |
• | legal compliance, including compliance with laws addressing insider |
• | financial |
• | intellectual |
• | confidential information. |
Our Code, which is reviewed annually by our Corporate Governance and Nominating Committee, requires strict adherence to all laws and regulations applicable to our business and requires employees to report any violations or suspected violations of the Code. In August 2010, we also adopted a separate Code of Conduct applicable to non-employee directors that is similar in scope to the employee Code but is tailored to the issues and concerns facing Sysco directors. We have published the Codes of Conduct for employees and non-employee directors on our website under “Investors— Corporate Governance” atwww.sysco.com. We intend to disclose any future amendments to or waivers of our Code applicable to our principaldirectors or executive officer, principal financial officer, principal accounting officer and controller, as well as any employees performing similar functions,officers on our website atwww.sysco.com under the heading “Investors— Corporate Governance.”
Reporting a Concern or Violation
Our Code of Conduct explains that there are multiple channels for an employee to report a concern, including to his or her manager, a human resource professional, orour legal counsel, to ouror internal audit department, or to the Sysco Associate Hotline, which is monitored by Global Compliance. Our Global Compliance Hotline is available 24 hours a day, seven days a week, to receive calls or web submissions from anyone wishing to report a concern or complaint, anonymous or otherwise. Our HotLine contact information can be found on our website atwww.sysco.comunder the heading “Investors—Corporate Governance—Contact the Board.”
Any report to any one of our multiple channels for reporting concerns that raiseraises a concern or allegation of impropriety relating to our accounting, internal controls or other financial or audit matters is immediately forwarded to the Office of the Chief Legal Officer, whichour Executive Vice President, Administration and Corporate Secretary, who is then responsible for reporting such matters, unfiltered, to the Chair of our Audit Committee. All such matters are investigated and responded to in accordance with the procedures established by the Audit Committee to ensure compliance with the Sarbanes-Oxley Act of 2002.
Since September 2009,In May 2014, the Compensation Committee has retained Compensation Advisory PartnersExequity LLP (“CAP”Exequity”) as its executive compensation consultant. Retained by and reporting directly to the Compensation Committee, CAP has providedExequity provides the Committee with assistance in evaluating Sysco’s executive compensation programs and policies, and, where appropriate, has assisted with the redesign and enhancement of elements of the programs. The scope of CAP’sExequity’s assignments inwith regard to fiscal 20142016 executive compensation included:
• | Review of long-term incentive program design and assistance with determination of awards; |
• | Provision of external perspective on executive compensation, including preparation of annual comparative executive compensation studies and development of key trends reports regarding executive compensation, evolving best practices and relevant regulatory changes; |
• | Review of the total compensation program, including competitive peer group comparisons and analysis, and analysis of executive benchmark positions and competitive levels in relation to broader market survey data, and assessment of annual NEO pay and performance relationship versus the peer group; |
• | Provision of consulting with regard to |
• | Periodic compensation consulting at the request of the Compensation Committee and management. |
CAPExequity has also advisesadvised the Corporate Governance and Nominating Committee with respect to non-employee director compensation. At the Corporate Governance and Nominating Committee’s request, CAPExequity has provided data regarding the amounts and type of compensation paid to non-employee directors at the companies in Sysco’s peer group, and has also identified trends in director compensation. All decisions regarding non-employee director compensation are recommended by the Corporate Governance and Nominating Committee and approved by the Board of Directors. In addition to providing background information and written materials, CAPExequity representatives attendattended meetings at which the Committee Chairmen believe that their expertise would be beneficial to the Committees’ discussions. Neither CAPExequity nor any of its affiliates provided any additional services to Sysco and its affiliates in fiscal 20142016, or any such services in fiscal 20152017 through the date of the proxy statement. Sysco does not expect CAPExequity to provide any such services to Sysco duringin the remainder of fiscal 2015.future. The Compensation Committee has determined CAPExequity to be independent from the Company and that no conflicts of interest exist related to CAP’sExequity’s services provided to the Compensation Committee. See “Compensation Discussion and Analysis–How Executive Pay is Established—Committee Oversight.”
For a discussion of the role of the CEO and other executive officers in determining or recommending NEO compensation, see “Compensation Discussion and Analysis – How Executive Pay is Established – Role of CEO and/or Other Executive Officers in Determining NEO Compensation.”
SYSCO CORPORATION - 20142016 Proxy Statement 2022
Since September 2010, the Senior Vice President, Human Resources and his Human Resources department (“HR”) have retained the services of Towers Watson to provide assistance to HR and Sysco management in making recommendations to the Compensation Committee and the Board with respect to certain aspects of executive compensation. Towers Watson has provided advice directly to Sysco’s management team and has consulted directly with management and provided, among other things, reports based on their proprietary data and information regarding market benchmarks. While Towers Watson did not provide the Committee with any direct advice regarding any of the NEOs, the Compensation Committee’s decisions are indirectly impacted by input from Towers Watson that is presented by management, and such information is used by the Committee in its dialogue with CAP representatives.
We believe that our directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of Sysco’s stockholders. They must also have an inquisitive and objective perspective, practical wisdom and mature judgment. We endeavor to have a Board representing a range of backgrounds and experiences in areas that are relevant to the Company’s activities so that the Board, as a whole, possesses the combination of skills, professional experience, and diversity of backgrounds necessary to oversee Sysco’s business. In particular, we place a high level of importance on knowledge and experience specific to and relevant in our industry, with eight directors with direct food industry experience.
Election of Directors at 20142016 Annual Meeting (Item 1)
Election Process
The company’s Bylawsbylaws provide for majority voting in uncontested director elections. Majority voting means that directors are elected by a majority of the votes cast—that is, the number of shares voted “for” a director must exceed the number of shares voted “against” that director. Any incumbent director who is not re-elected in an election in which majority voting applies shall tender his or her resignation promptly following certification of the stockholders’ vote. The Corporate Governance and Nominating Committee shall consider the tendered resignation and recommend to the Board whether to accept or reject the resignation offer, or whether other action should be taken. The director who tenders his or her resignation shall not participate in the recommendation of the committee or the decision of the Board with respect to his or her resignation. The Board shall act on the recommendation within 120 days following certification of the stockholders’ vote and shall promptly disclose its decision regarding whether to accept the director’s resignation offer. In contested elections, where there are more nominees than seats on the Board as of the record date of the meeting at which the election will take place, directors are elected by a plurality vote. This means that the nominees who receive the most votes of all the votes cast for directors will be elected.
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Nomination Process
The Corporate Governance and Nominating Committee is responsible for identifying and evaluating candidates for election to Sysco’s Board of Directors.
Director Candidates Identified by the Board and Management. In consideringidentifying candidates for election to the Board, the Committee will determine which of the incumbent directors whose terms expirehas an interest in being nominated for re-election at the upcoming Annual Meeting and who wish to continue their service on the Board.next meeting of stockholders. The Committee will also identify and evaluate new candidates for election to the Board for the purpose of filling vacancies. The Committee will solicit recommendations for nominees from persons that the Committee believes are likely to be familiar with qualified candidates. These persons may includecandidates, including current members of the Board and Sysco’s management and stockholders who beneficially own individually or as a group at least five percent of Sysco’s outstanding shares for at least one year and who have expressed an interest in recommending director candidates. In evaluating candidates, the Committee will consider the absence or presence of material relationships with Sysco that might impact independence, as well as the diversity, age, skills, experience, time available and the number of other boards the candidate sits on in the context of the needs of the Board and Sysco, and such other criteria as the Committee shall determine to be relevant at the time.management. The Committee may also determine to engage a professional search firm to assist in identifying qualified candidates. WhereWhen such a search firm is engaged, the Committee shall set its fees and scope of engagement.
During 2016, in connection with the Board refreshment efforts described above, the Board engaged the services of a search firm to assist with identifying and recruiting appropriate director candidates. Following consideration of director candidates referred by our then-current directors and identified by our search firm, upon the recommendation of our Corporate Governance and Nominating Committee, in September 2016 our Board unanimously expanded the size of the Board from 12 to 15 directors and elected three new independent, non-employee directors: Mr. Daniel J. Brutto, Mr. Bradley M. Halverson and Mr. Edward D. Shirley. The size of the Board will be reduced from 15 to 14 directors, effective at the time of the Annual Meeting, in connection with the expiration of Mr. Hafner’s term. As our longest-tenured directors retire from the Board pursuant to the director tenure policy, we will continue our director recruitment efforts to help ensure that the size of the Board may be maintained at an appropriate level. Accordingly, over the next two years, the Board has determined to elect one additional independent director in each of 2017 and 2018, assuming that it is able to identify a sufficient number of qualified candidates interested in serving as a director.
Director Candidates Recommended by Stockholders.The Committee will also consider candidates recommended by stockholders. The Committee will evaluate such recommendations using the same criteria that it uses to evaluate other director candidates. Stockholders can recommend candidates for consideration by the Committee by writing to the Corporate Secretary, 1390 Enclave Parkway, Houston, Texas 77077, and including the following information:
• | the name and address of the stockholder; |
• | the name and address of the person to be nominated; |
• | a representation that the stockholder is a holder of the Sysco stock entitled to vote at the meeting to which the director recommendation relates; |
• | a statement in support of the stockholder’s recommendation, including a description of the candidate’s qualifications; |
• | information regarding the candidate as would be required to be included in a proxy statement filed in accordance with the rules of the Securities and Exchange Commission; and |
• | the candidate’s written, signed consent to serve if elected. |
The Committee typically recommends director candidates to the Board in early July of each year. The Committee will consider, in advance of Sysco’s next Annual Meetingannual meeting of stockholders, those director candidate recommendations that the Committee receives by May 1st. With respect1, 2017.
In addition, if we receive by June 7, 2017, a recommendation of a director candidate from one or more stockholders who have beneficially owned at least five percent of our outstanding common stock for at least one year as of the date the stockholder makes the recommendation, then we will disclose in our next proxy materials relating to the election of directors the identity of the candidate, the identity of the nominating stockholder(s) and whether the Committee determined to nominate such candidate for election to the Board. However, we will not provide this disclosure without first obtaining written consent of such disclosure from both the nominating stockholder and the candidate it is planning to recommend. The Committee will maintain appropriate records regarding its process of identifying and evaluating candidates for election to the Board. The Committee has not received any recommendations for director nominees for election at the 2016 annual stockholders meeting from any Sysco stockholders beneficially owning more than five percent of Sysco’s outstanding common stock.
Proxy Access Director Candidates. For director elections following the Annual Meeting, our proxy access bylaw provisions will permit an eligible stockholder (or a group of up to 20 eligible stockholders), who have continuously owned for a period of three years at least 3% of the aggregate of our outstanding common stock, to nominate a number of
SYSCO CORPORATION - 2016 Proxy Statement23
director nominees equal to 20% (rounded down) of the total number of directors constituting our Board (provided that, if the total number of directors is less than 10, an eligible stockholder or group may nominate up to 2 persons), which nominees will be included in our proxy statement for the relevant annual stockholders meeting if the nominating stockholder(s) and the respective nominee(s) comply with all applicable eligibility, procedural and disclosure requirements set forth in our bylaws.
Evaluation of Director Candidates.In evaluating all incumbent and new director candidates that the Committee believesdetermines merit consideration, the Committee will:
• | cause to be assembled information concerning the background and qualifications of the candidate, including information required to be disclosed in a proxy statement under the rules of the SEC or any other regulatory agency or exchange or trading system on which Sysco’s securities are listed, and any relationship between the candidate and the person or persons recommending the candidate; |
• | determine if the candidate |
• | |
• | consider the absence or presence of material relationships with Sysco that might impact independence; |
• | consider the contribution that the candidate can be expected to make to the overall functioning of the Board; |
• | consider the candidate’s capacity to be an effective director in light of the time required by the candidate’s primary occupation and service on other boards; |
• | consider the extent to which the membership of the candidate on the Board will promote diversity among the directors; and |
• | consider, with respect to an incumbent director, whether the director satisfactorily performed his or her duties as a director during the preceding term, including attendance and participation at Board and Committee meetings, and other contributions as a director. |
In its discretion, the Committee may designate one or more of its members, or the entire Committee, to interview any proposed candidate. Based on all available information and relevant considerations, the Committee will recommend to the full Board for nomination those candidates who, in the viewjudgment of the Committee, are most suitedappropriate for membership on the Board.Board based on each candidate’s characteristics, skills and qualifications.
The Committee has not received any recommendations for director nominees for election at the 2014 annual stockholders meeting from any Sysco security holder or group of security holders beneficially owning more than five percent of Sysco’s outstanding common stock.Diversity
IfAs a matter of practice, the Board looks for diversity in nominees such that the individuals can enhance perspective and experience through diversity in race, gender, ethnicity, cultural background, age, geographic origin, education, and professional and life experiences. Because we receive by June 10, 2015, a recommendation of a director candidate from one or more stockholders who have beneficially owned at least five percentvalue gender and racial diversity among our Board members, three of our outstanding common stock for at leastcurrent Board members are women, including one year asAfrican American and the Chairman of the dateBoard, and two of our current Board members are from outside the stockholder makes the recommendation, then we will disclose in our next proxy materials relating to the election of directors the identity of the candidate, the identity of the nominating stockholder(s) and whether the Committee determined to nominate such candidate for election to the Board. However, we will not provide this disclosure without first obtaining written consent of such disclosure from both the nominating stockholder and the candidate it is planning to identify. The Committee will maintain appropriate records regarding its process of identifying and evaluating candidates for election to the Board.United States.
Director Qualifications and Board Succession
The Board andOur Corporate Governance Guidelines provide that the Corporate Governance and Nominating Committee consideris responsible for reviewing with the qualification ofBoard, on an annual basis, the requisite characteristics, skills and qualifications that directors and director candidates should possess individually and in the broader context of the Board’s overall composition and the company’s currentCompany’s business and future needs. Below we identifystructure. This review includes consideration of diversity, skills, experience, time available and describe somethe number of other boards for which the key experience, qualificationsindividual serves as a director, and skills that our Corporate Governancesuch other criteria as the Committee shall determine to be relevant at the time. The Committee is responsible for developing a succession plan for the Board and Nominating Committee believes individuals serving as directors of Sysco should collectively bringmaking recommendations to the Board in addition toregarding director succession.
Key Characteristics of All Nominees. Each director nominee should demonstrate and possess all of the key characteristics described above, and that are important in light of our business and structure. The priorities and emphasisfollowing characteristics:
• | Integrity and Accountability: Directors must have demonstrated high ethical standards and integrity in their personal and professional dealings, and must be willing to act on – and remain accountable for – their boardroom decisions. |
• | Intelligence, Wisdom and Judgment: Directors must be able to provide wise, thoughtful counsel on a broad range of issues and possess high intelligence, practical wisdom and mature judgment. |
• | Financial Literacy: Directors must be financially literate and capable of understanding a balance sheet, an income statement and a cash flow statement, and capable of using financial ratios and other indices to evaluate a company’s financial performance. |
• | Teamwork: Directors must possess a willingness to challenge management and other directors while working collaboratively as part of a team in an environment that encourages open, candid discussion. |
• | Diversity: A director’s membership on the Board must promote diversity among the directors, including diversity of experience, views, gender, race, ethnicity and age. |
• | High Performance Standards: Directors must have achieved prominence in their respective business, governmental, or professional activities, including a history of achievements reflecting high standards of performance. |
• | Representing Stockholder Interests: Directors must have demonstrated their willingness and ability to effectively, consistently and appropriately represent the best interests of the Company’s stockholders. |
• | Commitment: Directors must have the ability and willingness, in light of their principal occupation and other board service, to commit the time and energy necessary to be fully prepared for, and to participate in, meetings and consultations on Company matters. |
• | Conflicts: Directors must not have an interest in any agreement, arrangement or understanding with any person or entity that might limit or interfere with their ability to comply with their fiduciary duties to the Company and its stockholders. |
• | Company Policies: Directors must recognize and affirm their obligation to comply with the Company’s Code of Conduct, Corporate Governance Guidelines and other policies and guidelines of the Company applicable to them. |
Director Qualifications. In fiscal 2015, the Corporate Governance and Nominating Committee and ofenhanced the Board with regard to these factors may change from time to time to take into account changes in our business and other trends, as well asCompany’s process for identifying the portfolio of skills, characteristics and experiencequalifications required for the Board to establish and oversee management’s execution of current the Company’s strategic priorities. The Committee, together with the Board as a whole
SYSCO CORPORATION - 2016 Proxy Statement24
and prospectivewith the assistance of an independent law firm, utilized feedback from senior management and the individual directors to identify the following director qualifications, which the Board members.determined are the most significant for the Board to possess, collectively, in light of the Company’s strategic priorities. These director qualifications were reviewed and affirmed by the Committee in fiscal 2016.
• |
SYSCO CORPORATION - 2014 Proxy Statement 22
strategy, risk management and | |
• | |
• | Business Operations— Directors |
• | |
• | Risk |
• | Public Company Board |
• | |
• | Communications/Investor Relations — Directors experienced with investor and/or public relations functions of a public company are capable of guiding management in its engagement with media, investors, the financial community and other constituencies, and can provide advice and insights in connection with the development of consistent messaging concerning important matters, especially Sysco’s financial performance and strategic priorities. |
• | HR/Talent Management/Large Workforce — Directors with human resources experience can offer guidance on Sysco’s talent management strategy, particularly in connection with recruiting, assessing, incentivizing and rewarding corporate executives and other senior leadership. |
• | International/Global — Although Sysco’s primary focus is on growing and optimizing the core foodservice distribution business in North America, we continue to pursue opportunities to grow our global capabilities in, and source products directly from, international markets, such as the acquisition of the Brakes Group. We benefit from the experience and insight of directors with a global business perspective as we identify the best strategic manner in which to continue to expand our operations outside of North America. As Sysco’s reach becomes increasingly global, directors with international business experience can assist us in navigating the business, political, and regulatory environments in countries in which Sysco does, or seeks to do, business. |
• | Foodservice Industry Experience — Experience serving as an executive, director or in another leadership position with a company in the foodservice industry enables a director to oversee more effectively our operations and to provide advice and guidance on issues impacting our business. In addition, as the foodservice market continues to mature, directors with industry experience can provide valuable insights as we focus on ways in which Sysco can grow organically by identifying and developing new markets. |
• | Technology/e-Commerce — We use technology in substantially all aspects of our business operations, and we expect to continue employing technology in furtherance of our strategic priorities. Directors with experience in technology and e-commerce are well suited to oversee management’s selection and implementation of key technological solutions and its approach to privacy issues and cyber security risks. |
In selecting the director nominees, the Corporate Governance and Nominating Committee and the Board reviewed each of the incumbent directors in light of these qualifications and the Company’s strategic priorities, and it concluded that each of the nominees contributed significantly to the Board’s collective portfolio of requisite skills, characteristics and qualifications and to the Board’s overall composition. The Committee and the Board also applied these qualifications in connection with its consideration of the director candidates elected to the Board in September 2016, and expects to continue to utilize these qualification criteria in connection with its ongoing Board refreshment efforts to identify additional candidates for future Board service.
The priorities and emphasis of the Corporate Governance and Nominating Committee and of the Board with regard to these qualifications will change from time to time as the Company’s strategic priorities and the composition of the Board evolve. Included in the individual biographies below is a discussion of the most significant aspects of each director’s background that strengthen the Board’s collective qualifications, skills and experience and that the Corporate Governance and Nominating Committee and the Board considered in reaching their conclusion that he or she should continue to serve as a director of Sysco.
SYSCO CORPORATION - 2016 Proxy Statement25
Nominees for Election as Directors at the 20142016 Annual Meeting
Ten directors are to be elected at the meeting. The Board of Directors currently consists of ten members. The Board of Directors was previously divided into three classes, and prior to 2012, the directors of only one of the three classes were elected at each annual meeting, for a three-year term. However, at the 2011 annual meeting of stockholders, the stockholders approved an amendment to the Bylaws to provide for the staggered de-classification of the Board, beginning in 2012.
This year, all ten directors are nominated for election at the annual meeting, for a term of one year only.
The Board of Directors has nominated the following tenfourteen persons for election as directors to serve for one-year terms or until their successors are elected and qualified:
• | Daniel J. Brutto |
• | John M. Cassaday |
• | Judith B. Craven, M.D. |
• | William J. DeLaney |
• | Joshua D. Frank |
• | Larry C. Glasscock |
• | Jonathan Golden |
• | |
• | Hans-Joachim Koerber |
• | Nancy S. Newcomb |
• | Nelson Peltz |
• | Edward D. Shirley |
• | Richard G. Tilghman |
• | Jackie M. Ward |
Mr. Joseph A. Hafner is not standing for re-election, and his term will expire at the Annual Meeting. Each of the nominees is currently serving as a director of Sysco. Each of the nominees has consented to serve if elected. Although management does not contemplate the possibility, in the event any nominee is not a candidate or is unable to serve as a director at the time of the election, the proxies will vote for any nominee who is designated by the present Board of Directors to fill the vacancy.
SYSCO CORPORATION- 2014 Proxy Statement 23
The Board believes that the combination of the various qualifications, skills and experiences of the nominees for election as Directors at the 20142016 Annual Meeting wouldwill contribute to an effective and well-functioning Board. Set forth below is biographical information for each of the nominees for election as a director at the 20142016 Annual Meeting. Unless otherwise noted, the persons named below have been engaged in the principal occupations shown for the past five years or longer. In addition to the information described below, many of our directors serve as trustees, directors or officers of various non-profit, educational, charitable and philanthropic organizations.
The Board of Directors unanimously recommends a vote FOR each of the nominees listed above.
Nominees for Election as Directors at the Annual Meeting:
Daniel J. Brutto
Age: 60
Director Since: September 2016
Primary Occupation: Mr. Brutto served as President of UPS International and Senior Vice President of United Parcel Service, Inc. (“UPS”) from January 2008 until his retirement in June 2013.
Other Boards: Mr. Brutto has served as a director of Illinois Tool Works Inc. since February 2012.
Key Director Qualifications:Mr. Brutto earned a Bachelor of Business Administration in Accounting degree from Loyola University in 1978, followed by a Master of Business Administration degree from Keller Graduate School of Management in 1982. Mr. Brutto served as President of UPS International and Senior Vice President of UPS, a global package delivery, supply chain management and freight forwarding company, from January 2008 until his retirement in June 2013. Previously, he served as President, Global Freight Forwarding, for UPS from 2006 to 2007, and corporate controller from 2004 to 2006. Mr. Brutto’s more than 38-year career at UPS, during which he served in various capacities with increasing levels of responsibility, provided him with extensive experience in the following areas: executive leadership/management, strategy development, business operations, finance, information systems, mergers & acquisitions, marketing and international/global. He also has public company board experience, having served as a director of Illinois Tool Works Inc. since February 2012. Additionally, Mr. Brutto is currently Vice Chairman of Radial, a privately held global fulfillment, customer care and technology company, and he has served on the board of UNICEF since 2009. In the past, he has served on the board of the US-China Business Council, the Guangdong Economic Council, and the Turkey Economic Advisory Council. He was also a delegate to the World Economic Forum, Davos, Switzerland, from 2009 to 2013.
John M. Cassaday
Age: 61
63
Director Since: November 2004
Committees: Compensation Committee (Chair), Corporate Governance and Nominating Committee
Primary Occupation: Since September 1999, Mr. Cassaday has served as President and Chief Executive Officer as well as a director, of Corus Entertainment Inc., a media and entertainment company based from September 1999 until his retirement in Canada.
March 2015.
Other Boards: Mr. Cassaday is a director of Manulife Financial Corporation, a director of Corus EntertainmentSleep Country Canada Holdings Inc., and Spin Master Ltd. and a director of one privately held companycompany: Irving Oil Limited.
Key Director Qualifications: Mr. Cassaday earned a Bachelor of Arts degree from the University of Western Ontario and a Master of Business Administration Degree with honors from the University of Toronto’s Rotman School of Management. Prior to his current positionmore than 15 years of service as the founding President and CEOChief Executive Officer of Corus Entertainment Inc., a Canadian leader in radio and specialtycable television, Mr. Cassaday served as President and CEO of CTV Television Network Ltd. Mr. Cassaday’s career prior to broadcasting included executive positions in a number of leading packaged goods companies, including RJR-Macdonald, Inc., General Foods Corporation and Campbell Soup Company, where he gained food processing and food safety experience while advancing through positions in sales, marketing, and strategic planning in Canada, the United States, and the United Kingdom. His career at Campbell’s culminated in service as President of Campbell Soup Company’s operations in Canada and then the United Kingdom. Mr. Cassaday gained additional foodservice experience through his service as a director of Loblaw Companies Limited, Canada’s largest food distributor,retailer, and of J.M. Schnieder, a meat processing company. This background has provided Mr. Cassaday with extensive experience and knowledge in the areas of leadership, corporate strategy
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and development, the foodservice industry, distribution and supply chains, marketing, international operations, accounting, finance and financial reporting. In addition, Mr. Cassaday’s service on the Board of Directors of Manulife Financial Corporation has provided a greater understanding of risk management and global compensation considerations. Mr. Cassaday has received many business, industry and charitable honors, including designation as the most distinguished alumni of the University of Toronto’s Rotman School of Management in 1998, receipt of the Gold Medal from the Association of Canadian Advertisers in 2004 (which recognizes individuals who have made an outstanding contribution to the advancement of marketing communications in Canada) and, induction in the Marketing Hall of Legends of Canada in 2006.2006 and induction into the Canadian Broadcast and Music Hall of Fame in 2015. In 2013, Mr. Cassaday was inducted into the Order of Canada, Canada’s highest civilian honor.
Judith B. Craven, M.D.
Age: 69
70
Director Since: July 1996
Committees: Corporate Sustainability Committee (Chair), Compensation Committee, Corporate Governance and Nominating Committee
Primary Occupation: Dr. Craven served as President of the United Way of the Texas Gulf Coast from 1992 until her retirement in September 1998.
Other Boards: Director of Luby’s, Inc., Sun America Funds and VALIC. In the last five years, Dr. Craven served as a director of Belo Corporation.
Key Director Qualifications: Dr. Craven earned a B.S. degree in Biology and English from Bowling Green State University, then completed premedical requirements at Texas Southern University before earning a Doctor of Medicine from Baylor College of Medicine and a Master of Public Health from the University of Texas School of Public Health. She also completed the Harvard University Program for Senior Managers in Government at the John F. Kennedy School of Government. Dr. Craven provides a unique viewpoint on Sysco’s Board as a medical doctor and distinguished public health expert. She gained a distinctive understanding of the foodservice industry after serving as Director of Public Health for the City of Houston from 1980 through 1983, which included responsibility for the regulation of all foodservice establishments in the City of Houston, including an emphasis on food safety and food handling. Following this appointment, Dr. Craven served as Dean of the University of Texas School of Allied Health Sciences from 1983 to 1992. She also serves on the Board of Directors of Luby’s, Inc., which operates almost 100 restaurants and provides food services to select hospital and other medical institutions in Texas. Dr. Craven’s education and service in these various positions has provided her with extensive experience and knowledge in the areas of executive leadership and management, strategy development and the foodservice industry. Dr. Craven also has experience and knowledge in, and has demonstrated a strong commitment to, diversity and social responsibility, having led many initiatives to help increase and incorporate diversity in schools, the workplace and the community. Dr. Craven served as Vice President for Multicultural Affairs for the University of Texas Health Science Center at Houston from 1987 to 1992, and served as Chair of the Committee on Diversity for the University of Texas Board of Regents for six years. Under Dr. Craven’s leadership as president for six years, The United Way of The Texas Gulf Coast won the first National Award for diversity from the United Way of America. She has also served as a member of the Board of Directors of Compaq Corporation and the Houston Branch of the Federal Reserve Bank of Dallas. Dr. Craven has received numerous awards and honors, including the NAACP VIP Award for Community Service, Houston’s Thirty Most Influential Black Women Award and induction into the Texas Women’s Hall of Fame in 1989.
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William J. DeLaney
Age: 58
60
Director Since: January 2009
Committees: Finance Committee
Primary Occupation: Mr. DeLaney began servinghas served as Sysco’s Chief Executive Officer insince March 2009. He assumed the additional title of President in March 2010. Mr. DeLaney began his Sysco career in 1987 as Assistant Treasurer at the company’s corporate headquarters. He was promoted to Treasurer in 1991, and in 1993 he was named a Vice President of the company, continuing in those responsibilities until 1994. Mr. DeLaney joined Sysco Food Services of Syracuse in 1996 as chief financial officer, progressed to senior vice president in 1998 and executive vice president in 2002. In 2004, Mr. DeLaney was appointed president and chief executive officer of Sysco Food Services of Charlotte. He held that position until December 2006, when he was named Sysco’s Senior Vice President of Financial Reporting. Effective July 1, 2007, Mr. DeLaney was promoted to the role of Executive Vice President and Chief Financial Officer and continued to serve in such position following his promotion to CEO until October 2009.
Other Boards: Mr. DeLaney is a director of Express Scripts, Inc. and serves on the Compensation Committee and the Audit Committee of the Express Scripts, Inc. Board of Directors.
Key Director Qualifications: Mr. DeLaney earned a Bachelor of Business Administration degree from the University of Notre Dame, and a Master of Business Administration degree from the Wharton Graduate Division of the University of Pennsylvania. Mr. DeLaney has worked in various capacities at Sysco and its subsidiaries for more than 2025 years. Through various accounting, finance, operations and management positions within Sysco and its operating companies, Mr. DeLaney has gained valuable insight into the foodservice industry, as well as Sysco’s competitive advantages and how to further build upon them. Throughout his career, Mr. DeLaney has developed experience and knowledge in the areas of leadership and management development, corporate strategy and development, finance and accounting and distribution and supply chain management. Further, the Corporate Governance and Nominating Committee and the Board believe that it is appropriate and beneficial to Sysco to have its Chief Executive Officer serve as management’s voice on the Board.
Joshua D. Frank
Age: 37
Director Since: August 2015
Committees: Compensation Committee, Finance Committee
Primary Occupation: Mr. Frank is a Partner at Trian Fund Management, L.P. and has been a member of the Trian investment team since Trian’s formation in 2005.
Key Director Qualifications: Mr. Frank has played a leading role in many of Trian’s investments in the consumer sector, including investments in Mondelēz International, Inc., H.J. Heinz Company and PepsiCo, Inc., as well as numerous investments across other industries. As a senior member of the Trian investment team, he sources new investment ideas, leads due diligence on potential investments and focuses on portfolio construction and corporate governance matters. Mr. Frank was previously an Associate, Corporate Development, of Triarc Companies, Inc. (now known as The Wendy’s Company) (“Triarc”). Prior to joining Triarc in 2003, Mr. Frank worked at Credit Suisse First Boston from 2001 to 2003, where he spent time in both the mergers & acquisitions and healthcare investment banking groups. Throughout his career, Mr. Frank has developed experience and knowledge in the areas of corporate strategy development, finance, accounting, corporate governance, mergers and acquisitions, foodservice and the broader consumer sector. Mr. Frank graduated cum laude from Yale University with a B.A. in Economics.
SYSCO CORPORATION - 2016 Proxy Statement27
Larry C. Glasscock
Age: 66
68
Director Since: September 2010
Committees: Corporate Governance and Nominating Committee (Chair), Compensation Committee, Corporate Sustainability Committee
Primary Occupation: In March 2010, Mr. Glasscock retired from his position as Chairman of the Board of Directors of WellPoint, Inc., one of the largest health benefits companies in the United States, (now Anthem, Inc.) after serving in the role since November 2005. He also served as WellPoint’s President and CEO from November 2004 until July 2007. Mr. Glasscock previously served as Chairman, President and CEO of Anthem, Inc., a health benefits company, from 2001 to 2004, assuming additional responsibilities as Chairman from 2003 to 2004.
Other Boards: Mr. Glasscock has served as a director of Simon Property Group, Inc., a real estate investment trust, since March 2010;2010, where he is currently the lead independent director, and as a director of Zimmer Biomet Holdings, Inc., a global leader in the design, development, manufacture and marketing of orthopedic reconstructive implants, dental implants, spinal implants, trauma products and related surgical devices, since August 2001.2001, where he is currently the non-executive chairman of the board. In the last five years, Mr. Glasscock served as a director of WellPoint, Inc. and Sprint Nextel Corporation.
Key Director Qualifications: Mr. Glasscock attended Cleveland State University, where he received a bachelor’s degree in business administration. He later studied at the School of International Banking, participated in the American Bankers Association Conference of Executive Officers, and completed the Commercial Bank Management Program at Columbia University. Mr. Glasscock has developed significant leadership and corporate strategy expertise through over 30 years of business experience, including former service as President and CEO of WellPoint, Inc. (2004 –2007), Chairman, President and CEO of Anthem, Inc. (2001 – 2004), assuming additional responsibilities as Chairman from 2003 to 2004, as well as his service as COO of CareFirst, Inc., President and CEO of Group Hospitalization and Medical Services, Inc., President and COO of First American Bank, N.A., and President and CEO of Essex Holdings, Inc. During his tenure at WellPoint, Inc., he played a major role in transforming the company from a regional health insurer into a national healthcare leader and championed company efforts to improve quality and customer service. Throughout his career, Mr. Glasscock has developed expertise in the successful completion and integration of mergers, utilization of technology to improve productivity and customer service, and team building and human capital development. Mr. Glasscock’s expertise in the utilization of technology to improve productivity will be valuable to Sysco as we continue to implement and build upontechnological solutions in connection with our Business Transformation Project.strategic priorities. His knowledge and experience in team building and human capital development are also extremely valuable to Sysco, as management development was oneand succession planning remain top priorities of our CEO’s key non-financial goalsexecutive management and the Board during fiscal 2012 and 2013.2017. Mr. Glasscock also has considerable financial experience, as he has supervised the chief financial officers of major corporations. Earlier in his career he served as a bank officer lending to major corporations and supervised assessments of companies’ creditworthiness. Mr. Glasscock also has significant experience as a public company director and as a member of various committees related to important board functions, including audit, finance, governance and compensation.
Jonathan Golden
Age: 77
79
Director Since: February 1984
Committees: Corporate Sustainability Committee, Finance Committee
Primary Occupation: Mr. Golden is a partner of Arnall Golden Gregory LLP, counsel to Sysco.LLP.
Key Director Qualifications: Mr. Golden is a graduate of Princeton University and Harvard Law School. He also has served as an adjunct professor at Emory Law School in Atlanta for nine years. Mr. Golden, who is not considered an independent director, has developed an extensive knowledge of Sysco’s business through his service as a director of the companyCompany since 1984 and through Arnall Golden Gregory LLP, a firm that has served as legal advisor to the companyCompany on numerous transactions. Mr. Golden has served as Chairman of that firm for approximately eleven years. He personally has a long history of representing participants in the food industry, including manufacturers, distributors and food industry trade associations. Mr. Golden has gained further experience regarding the distribution and supply chain of foodservice companies as a member of the Board of Directors of a major privately-held food manufacturer that is a leader in the frozen food industry and sells to foodservice customers, particularly in-store bakeries and retail marketplaces. In addition to his legal and regulatory experience and focus on corporate responsibility, Mr. Golden has developed a knowledge of other public company Board practices through his past service on the Boards of The Profit Recovery Group International, Inc., Intermedics, Inc., Automatic Service Company and Butler Shoe Corp.
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Joseph A. Hafner, Jr.Bradley M. Halverson
Age: 69
56
Director Since: November 2003
Committees: Finance Committee (Chair), Audit Committee, Corporate Sustainability Committee
September 2016
Primary Occupation: Mr. Hafner retired as Chairman of Riviana Foods, Inc. in 2006, a position he had held since March 2005. HeHalverson has served as the Group President, Financial Products and Corporate Services and Chief ExecutiveFinancial Officer of Riviana from 1984 until March 2004.Caterpillar Inc. (“Caterpillar”) since January 2013.
Key Director Qualifications: Mr. HafnerHalverson attended Dartmouth College,the University of Illinois, where he graduated cum laude, then earnedreceived a masterBachelor of business administrationScience degree with high distinction from Dartmouth’s Amos Tuck Schoolin Accounting in 1982 and an Executive Master of Business Administration. After graduation, Mr. Hafner served for two yearsAdministration degree in the Latin American Internship Program of Cornell University1996. He is a Certified Public Accountant and the Ford Foundation in Lima, Peru, followed by two years with the Arthur Andersen & Co. accounting firm in Houston. In 1972, Mr. Hafner began his career with Riviana Foods, Inc. in Guatemala City as Controller of Riviana’s Central American Division. For over 30 years, Mr. Hafner worked in positions of increasing authority for Riviana, a company that processed, marketed and distributed rice products in the U.S. and Europe, as well as other food products in Central America and Europe. Mr. Hafner continued his international exposure through the oversight of Riviana’s rice operations in South Africa and Australia. His career culminated in his service as President and CEO of Riviana for over 20 years, providing him with experience in the areas of leadership, corporate strategy and development, the foodservice industry, distribution and supply chains, finance and accounting and international operations. In addition, Mr. Hafner has developed finance and accounting expertise during his career at Arthur Andersen and Riviana and is a member of the American Institute of Certified Public Accountants. Mr. Halverson currently serves as Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar, the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel - electric locomotives. He is responsible for Caterpillar’s Finance Services Division, Human Services Division, Global Information Services Division, Financial Products Division, Global Supply Network Division, as well as Corporate Auditing. He joined Caterpillar in 1988, serving in budgeting, forecasting and financial analysis roles of increasing responsibility. In 1993, Mr. Halverson moved to Geneva, Switzerland, to become a strategy and planning consultant with Caterpillar Overseas, S.A. He went on to become controller in Europe, responsible for Caterpillar’s financial reporting in Europe, Africa and the Middle East, returning to the U.S. in 1996 to manage general accounting and financial systems. From 1998 until 2012, Mr. Halverson served in various leadership roles at Caterpillar, including Corporate Controller (2007-2010) and Vice President, Financial Services Division (2010-2012). During the course of his nearly 30 year career with Caterpillar, together with his prior service with PricewaterhouseCoopers LLP, Mr. Halverson has developed deep expertise in accounting, financial reporting and corporate finance, and has leadership experience in the areas of executive leadership and management, corporate strategy development, mergers and acquisitions, risk management, information technology systems oversight
SYSCO CORPORATION - 2016 Proxy Statement28
and international business. Mr. Halverson is a member of the Executive Committee of the U. S. Chamber of Commerce Board and also serves on the OSF St. Francis Medical Center Community Advisory Board and is Immediate Past Chairman of the Easter Seals Central Illinois Board of Directors and Treasurer of the Easter Seals Foundation of Central Illinois Board of Trustees.
Hans-Joachim Koerber
Age: 68
70
Director Since: January 2008
Committees: Audit Committee, Finance Committee
Primary Occupation: Dr. Koerber served as the chairman and chief executive officer of METRO Group Germany’s largest retailer, from 1999 until his retirement in October 2007.
Other Boards: Dr. Koerber is chairman of the board of directors of Air Berlin PLC and a director of Eurocash SA, as well as a director of several private European companies, including Klüh Service management GmbH, WEPA Industrieholding SE and DAW SE, and Eurocash SA.SE.
Key Director Qualifications: Dr. Koerber earned a degree as a Master Brewer in Brewing Technology and a Ph.D. in Business Management from the Technical University of Berlin. Dr. Koerber began his career in the beverage industry, including management positions in which he was responsible for finance and accounting, information technology, purchasing and personnel. He first became involved with the company that would eventually become METRO when he joined the predecessor company’s cash-and-carry, self-service wholesale company in charge of finance and accounting, controlling, logistics and information technology. His responsibilities continued to expand to include international cash-and-carry activities in six countries. When METRO AG was formed in 1996, Dr. Koerber became part of the METRO management board. His responsibilities included corporate development, corporate communications and investor relations and he became chairman and chief executive officer in 1999. Dr. Koerber introduced a new management style, streamlined the company to focus on four of the original 16 business divisions in order to remain competitive and achieve profitability, adopted international accounting standards and rapidly developed METRO’s international presence, including hands-on experience in expanding METRO into Eastern Europe and Asia, including China and India. These efforts helped make METRO Germany’s largest retailer, operating wholesale cash & carry stores, supermarkets, hypermarkets, department stores and consumer electronics shops throughout the world. Throughout his career, Dr. Koerber developed experience and qualifications in the areas of leadership, corporate strategy and development, the foodservice industry, distribution and supply chains, marketing and risk management. Dr. Koerber’s insights on running and expanding a foodservice business with international operations have been, and will continue to be, particularly helpful to Sysco. Dr. Koerber’s career at METRO AG, combined with his 10 years of service on the Board of Skandinaviska Enskilda Banken AB (the parent company of the SEB Group, a North European banking concern catering to corporations, institutions, and private individuals) and the Board of Directors of several other international companies, has provided him with financial expertise, particularly with regard to international financial accounting standards. His service on the Board of Air Berlin PLC (Germany’s second largest airline) has deepened his experience in marketing.
Nancy S. Newcomb
Age: 69
71
Director Since: February 2006
Committees: Audit Committee, Finance Committee
Primary Occupation: Ms. Newcomb served as Senior Corporate Officer, Risk Management, of Citigroup from May 1998 until her retirement in 2004. She served as a customer group executive of Citicorp (the predecessor corporation of Citigroup) from December 1995 to April 1998, and as a division executive, Latin America from September 1993 to December 1995. From January 1988 to August 1993 she was the principal financial officer, responsible for liquidity, funding and capital management.
Other Boards: In the last five years, Ms. Newcomb isserved as a director of The DIRECTV Group, Inc., and during the last five years, was a director of Moody’s Corporation.
Key Director Qualifications: Ms. Newcomb is a graduate of Connecticut College and received a Master’s Degree in Economics from Boston University. She also graduated from Harvard Business School’s Program for Management Development. Ms. Newcomb served as Senior Corporate Officer, Risk Management, of Citigroup (May 1998 – April 2004), Customer Group Executive of Citicorp (the predecessor corporation of Citigroup) (December 1995 – April 1998), Division Executive, Latin America of Citicorp (September 1993 – December 1995) and Principal Financial Officer, Citicorp (January 1988 – August 1993), responsible for liquidity, funding and capital management. Ms. Newcomb’s 35-year career with Citigroup, a major international financial services company, and its predecessors Citicorp and Citibank, provided her with experience in the areas of leadership, corporate strategy and development, finance, risk management and international operations. Ms. Newcomb developed extensive risk management experience throughout her career, including holding the position of Citigroup’s Senior Corporate Officer of Risk Management for the last six years of her career. In the area of Finance and International Operations, Ms. Newcomb served as Citigroup’s Principal Financial Officer, responsible for liquidity, funding and capital management. She has had extensive international experience as head of worldwide treasury operations in over 100 countries, and co-head of Citigroup’s global, multinational customer business.
Nelson Peltz
Age: 74
Director Since: August 2015
Committees: Corporate Governance and Nominating Committee
Primary Occupation: Mr. Peltz has served as the Chief Executive Officer and a Founding Partner of Trian Fund Management, L.P. since its formation in 2005. From April 1993 through June 2007, Mr. Peltz served as Chairman and Chief Executive Officer of Triarc Companies, Inc. (now known as The Wendy’s Company).
Other Boards: Mr. Peltz has served as a director of Mondelēz International, Inc. since January 2014 and as a director and non-executive Chairman of The Wendy’s Company since June 2007. He has also served as a director of The Madison Square Garden Company since it was separated from MSG Networks Inc. (formerly, The Madison Square Garden Company) in September 2015, and prior to that, as a director of MSG Networks Inc. since December 2014. Mr. Peltz previously served as a director of Legg Mason, Inc. from October 2009 to December 2014. He also served as a director of Ingersoll-Rand plc from August 2012 to June 2014 and H.J. Heinz Company from September 2006 to June 2013. In addition, he served as a director of Trian Acquisition I Corp. from October 2007 until May 2013.
Key Director Qualifications: Mr. Peltz has more than 40 years of business and investment experience and over 20 years of service as the Chairman and Chief Executive Officer of public companies. Mr. Peltz has developed extensive experience working with management teams and boards of directors, and in acquiring, investing in and building companies and implementing operational improvements at the companies with which he has been involved. As a
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result, he has strong operating experience and strategic planning skills and has strong relationships with institutional investors, investment banking and capital markets advisors and others that can be drawn upon for the Company’s benefit. Mr. Peltz has also gained extensive experience in the foodservice industry through his service on the boards of directors of H.J. Heinz Company, Mondelēz International, Inc. and The Wendy’s Company.
Edward D. Shirley
Age: 59
Director Since: September 2016
Primary Occupation: Mr. Shirley served as President and Chief Executive Officer of Bacardi Limited from March 2012 until his retirement in April 2014.
Other Boards: Mr. Shirley has served as a director of Elizabeth Arden, Inc. since December 2015 and as a director of New York Life Insurance Company since November 2015. In the last five years, Mr. Shirley served as a director of Time Warner Cable Inc.
Key Director Qualifications: Mr. Shirley attended the University of Massachusetts, where he received a Bachelor of Business Administration, Accounting degree in 1978. Mr. Shirley served as the President and Chief Executive Officer of Bacardi Limited, a global beverage and spirits company, from March 2012 to April 2014. Prior to that, he served as Vice Chairman of Global Beauty and Grooming, a business unit of The Procter & Gamble Company (“Procter & Gamble”), a consumer goods company, from July 2008 through June 2011, and as Vice Chair on Special Assignment from July 2011 through December 2011. Prior to that, he served as Group President, North America of Procter & Gamble from April 2006 and held several senior executive positions during his 27 years with The Gillette Company, a consumer goods company that was acquired by Procter & Gamble in 2005. Mr. Shirley has substantial experience in the areas of executive leadership, strategy development, marketing/brand development and business operations developed in his various senior executive positions with large consumer products companies, including during more than 30 years as a senior executive at global personal care companies like Procter & Gamble and The Gillette Company. He also has public company board experience, having served as a member of the Elizabeth Arden, Inc. board of directors since December 2015, including as Chair of its Compensation Committee, and as a member of the board of directors of Time Warner Cable Inc. from 2009 to 2016.
Richard G. Tilghman
Age: 74
76
Director Since: November 2002
Committees: Audit Committee (Chair), Finance Committee
Primary Occupation: Mr. Tilghman served as Vice Chairman and Director of SunTrust Banks from 1999 until his retirement in 2000. He served as Chairman and Chief Executive Officer of Crestar Financial Corporation, a bank holding company, from 1986 until 1999.
Key Director Qualifications: After graduating from the University of Virginia with a B.A. in Foreign Affairs and serving in the U.S. Army as a lieutenant, Mr. Tilghman enjoyed a 34-year banking career, including service as Vice Chairman and Director of Suntrust Banks, as well as the former Chairman and CEO of Crestar Financial Corporation, a bank holding company for fifteen years. His career provided him with experience and expertise in the areas of leadership, corporate strategy and development, finance, banking, accounting and risk management. Mr. Tilghman’s experience overseeing a business and technology transformation for a series of banks acquired through acquisitions is very important to Sysco as we undertake to streamline our operations using a common technology platform. Mr. Tilghman also gained high tech and regional marketing experience that has been valuable to Sysco as we have redefined oversight of our operating companies by marketing region and focus on the use of e-Commerce technologies to service Sysco customers more efficiently. Mr. Tilghman’s experience also includes approximately 20 years of service on the Board of Directors of Chesapeake Corporation, which was then a leading supplier of cartons, labels, leaflets, and specialty plastic packaging, with manufacturing facilities in Asia, Europe and the U.S. at that time.
Jackie M. Ward
Age: 76
78
Director Since: September 2001 (Non-Executive Chairman(Chairman of the Board since November 2013)
Committees: Compensation Committee, Corporate Governance and Nominating Committee
Primary Occupation: Ms. Ward is the former Chairman, President and Chief Executive Officer of Computer Generation Incorporated (CGI), a company she founded in 1968 that was acquired in December 2000 by Crescent Capital and later Intec Telecom Systems PLC, a technology company based in the United Kingdom.
Other Boards: Director of Sanmina-SCI Corporation. In the last five years, Ms. Ward also served as a director of Bank of America Corporation, Equifax Inc., Flowers Foods, Inc. and WellPoint, Inc.
Key Director Qualifications: Ms. Ward attended Georgia State College for Women and the University of Georgia Extension Center, where she majored in psychology and mathematics. She later attended the London School of Business and was awarded a Doctor of Laws from Mercer University. Early in her career, Ms. Ward held programming, engineering, marketing and management positions with UNIVAC (a division of Sperry Corporation), General Electric Company and J.P. Stevens Company. Ms. Ward then founded, was elected chairman, president and chief executive officer, and had over 30 years of experience with Computer Generation Incorporated (CGI), a provider of software/hardware solutions to the telecommunications and general industry with operations in the U.S., England and much of Europe, Australia, South Africa, Mexico and Latin America. Ms. Ward’s lengthy career has provided her with extensive leadership, information technology, retail/mass marketing, corporate strategy and development, finance, banking, and international experience. In addition, significant projects undertaken by CGI for governmental and private entities provided unique experience for Ms. Ward in developing and implementing
SYSCO CORPORATION - 2016 Proxy Statement30
supply chain inventory control systems, fraud detection systems and software/hardware to handle generalized and specific accounting functions. Ms. Ward has gained knowledge of the foodservice industry through her membership on the Board of Directors of Flowers Foods, Inc., one of the largest producers and marketers of bakery products in the U.S., as well as developing systems for related food clients, such as Edwards Baking Company and Eastern Food Services. She also has significant public company board experience as a current or former member of numerous Boards of Directors where she served in various leadership positions, including lead director, presiding director, chairman of the board and the chairman of various committees. With respect to Flowers Foods, Ms. Ward served as the Lead Director, Chair of the Nominating and Corporate Governance Committee and a member of the Compensation and Executive Committees. With respect to WellPoint, Ms. Ward served as Chairman of the Board, Chair of the Corporate Governance Committee and Executive Committee, and a member of the Compensation Committee. She also serves as the Chair of the Nominating and Governance Committee of Sanmina-SCI Corporation. Ms. Ward furthered her expertise in the areas of finance and risk management as Chairman of the Asset Quality Committee of Bank of America’s Board of Directors for 15 years and her expertise in the areas of accounting and internal audit as a member of the Board of PRG-Schultz International, Inc., now known as PRGX Global, Inc., which provides recovery audit services to organizations with high volumes of payment transactions, including retail and wholesale businesses, manufacturers, health care, and government agencies. In addition, Ms. Ward was named a member of the “NACD Directorship 100” in 2015, an annual honor sponsored by the National Association of Corporate Directors to recognize directors who exhibit exemplary leadership in the boardroom and promote the highest standards of corporate governance.
Current Director Not Standing for Re-election:
Joseph A. Hafner, Jr.
Age: 71
Director Since: November 2003
Committees: Finance Committee (Chair), Audit Committee, Corporate Sustainability Committee
Primary Occupation: Mr. Hafner retired as Chairman of Riviana Foods, Inc. in 2006, a position he had held since March 2005. He served as President and Chief Executive Officer of Riviana from 1984 until March 2004.
Key Director Qualifications: Mr. Hafner attended Dartmouth College, where he graduated cum laude, then earned a master of business administration degree with high distinction from Dartmouth’s Amos Tuck School of Business Administration. After graduation, Mr. Hafner served for two years in the Latin American Internship Program of Cornell University and the Ford Foundation in Lima, Peru, followed by two years with the Arthur Andersen & Co. accounting firm in Houston. In 1972, Mr. Hafner began his career with Riviana Foods, Inc. in Guatemala City as Controller of Riviana’s Central American Division. For over 30 years, Mr. Hafner worked in positions of increasing authority for Riviana, a company that processed, marketed and distributed rice products in the U.S. and Europe, as well as other food products in Central America and Europe. Mr. Hafner continued his international exposure through the oversight of Riviana’s rice operations in South Africa and Australia. His career culminated in his service as President and CEO of Riviana for over 20 years, providing him with experience in the areas of leadership, corporate strategy and development, the foodservice industry, distribution and supply chains, finance and accounting and international operations. In addition, Mr. Hafner has developed finance and accounting expertise during his career at Arthur Andersen and Riviana and is a member of the American Institute of Certified Public Accountants.
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Overview of Non-Employee Director Compensation
The Company uses a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board, as described below. Members of the Board who are employees of the Company are not compensated for services on the Board or any of its Committees. We currently pay each non-employee director a base retainer of $100,000 per year. Non-employee directors who serve as committee chairpersons receive annual additional amounts as follows:
• | Audit Committee Chair— $25,000 |
• | Compensation Committee Chair— $20,000 |
• | Corporate Governance and Nominating Committee Chair— $20,000 |
• | Finance Committee Chair— $20,000 |
• | Corporate Sustainability Committee Chair— $15,000 |
In November 2013, the Board elected Ms. Ward as its Non-Executive Chairman.We pay these annual retainers quarterly. In addition to the compensation received by all non-employee directors, Ms. Ward receives an additional annual retainer of $475,000 for her service as Non-Executive Chairman of the Board, which is paid quarterly in the form of “elected shares” that are deferred as described below under “—Deferral of Shares.” See footnote 1 to the “Fiscal 20142016 Director Compensation” table below for a detailed discussion of the elected shares deferred by Ms. Ward.
Each November, the Board grants approximately $160,000 in time vesting equity incentives to each of the non-employee directors in the form of restricted stock awards. For fiscal 2014,2016, the Board granted approximately $160,000 in restricted stock awards that vest in full on the first anniversary of the grant date. See “2009 Non-Employee Directors Stock Plan—Restricted Stock and Restricted Stock Units” below for a description of the plan under which these awards may currentlyare expected to be granted anduntil the plan’s expiration in November 2016, the “Fiscal 20142016 Non-Employee Director Compensation” table below for detailed compensation information for fiscal 20142016 for each of our non-employee directors and “Stock Ownership—Stock Ownership Guidelines” below for a description of the stock ownership requirements applicable to our non-employee directors. Future grants of restricted stock awards to the non-employee directors may be made pursuant to the 2013 Long-Term Incentive Plan.
Reimbursement of Expenses
All non-employee directors are entitled to receive reimbursements of expenses for all services as a director, including committee participation or special assignments. We pay the annual retainers quarterly. Directors are invited to have their spouses accompany them to dinners and other functions held in connection with one or two board meetings each year, and the company pays, either directly or through reimbursement, all expenses associated with their travel to and attendance at these business-related functions. Reimbursement for non-employee director travel may include reimbursement of a portion of the cost of travel on private aircraft.
Specifically, this includes reimbursement for non-commercial air travel in connection with Sysco business, subject to specified maximums, provided that amounts related to the purchase price of an aircraft or fractional interest in an aircraft are not reimbursable and any portion of the reimbursement that relates to insurance, maintenance and other non-incremental costs is limited to a maximum annual amount. Non-employee directors also receive discounts on products carried by the companyCompany and its subsidiaries comparable to the discounts offered to all company employees.
Directors Deferred Compensation Plan
Non-employee directors may defer all or a portion of their annual retainer, including additional fees paid to committee chairpersons and the Non-Executive Chairman of the Board’s and/or Lead Directors’Director’s annual retainer, under the Directors Deferred Compensation Plan. Non-employee directors may choose from a variety of investment options, including Moody’s Average Corporate Bond Yield plus 1%, with respect to amounts deferred prior to fiscal 2009. This investment option was reduced to Moody’s Average Corporate Bond Yield, without the addition of 1%, for amounts deferred after fiscal 2008. We credit such deferred amounts with investment gains or losses until the non-employee director’s retirement from the Board or until the occurrence of certain other events.
As of September 22, 2014,19, 2016, the non-employee directors held shares of restricted stock that were issued under the 2009 Non-Employee Directors Stock Plan. They also held elected and match shares (as described below) issued under the 2009 Non-Employee Directors Stock Plan. Below is a description of the 2009 Non-Employee Directors Stock Plan.
SYSCO CORPORATION - 20142016 Proxy Statement 2832
2009 Non-Employee Directors Stock Plan
Election to Receive a Portion of the Annual Retainer in Common Stock
Under the 2009 Non-Employee Directors Stock Plan, instead of receiving his or her full annual retainer fee in cash, a non-employee director may elect to receive up to 100% of his or her annual retainer fee, including any additional retainer fee paid to the Non-Executive Chairman of the Board and/or Lead Director for his or her service in such capacity and any fees paid to a committee chairman for his or her service in such capacity, in 10% increments, in common stock. If a director makes this election, on the date we make each quarterly payment of the director’s annual retainer fee we will credit the director’s stock account with:
• | The number of shares of Sysco common stock that the director could have purchased on that date with the portion of his or her cash retainer that he or she has chosen to receive in stock, assuming a purchase price equal to the last closing price of the common stock on the |
• | With respect to up to half of his or her annual retainer fee, excluding any additional retainer fee paid for chairing the Board or one of its committees and/or serving as Lead Director, |
The elected shares and match shares vest as soon as we credit the director’s account with them, but we do not issue them until the end of the calendar year. The director may not transfer the match shares, however, until one year after we issue them, or, if deferred, the date that we otherwise would have issued them, provided that certain events will cause this transfer restriction to lapse.
The one year transfer restriction on match shares will lapse if:
• | the director dies; | ||
• | the director leaves the Board: | ||
– | due to disability; | ||
– | after having served out his or her full term; or | ||
– | after reaching age 71; or | ||
• | a change in control, as defined in the plan, occurs. |
Restricted Stock and Restricted Stock Units
The plan provides that the Board may grant shares of restricted stock and restricted stock units in the amounts and on such terms as it determines, but specifies that no grant may vest earlier than one year following the grant date. A restricted stock unit is an award denominated in units whose value is derived from common stock, and which is subject to similar restrictions and possibility of forfeiture, as is the restricted stock. In November 2013,2015, we issued restricted stock awards to non-employee directors under this plan. We have not yet issued any restricted stock units to non-employee directors under this plan.
Generally, if a director ceases to serve as a director of Sysco, he or she will forfeit all the unvested restricted stock and restricted stock units that he or she holds. However, if the director leaves the board after serving out his or her term, or for any reason after reaching age 71, his or her restricted stock and restricted stock units will remain in effect and continue to vest as if the director had remained a director of Sysco. All unvested restricted stock and restricted stock units will automatically vest upon the director’s death.
Deferral of Shares
A non-employee director may elect to defer receipt of all or any portion of any shares of common stock issued under the plan, whether such shares are to be issued as a grant of restricted stock, elected shares or match shares, or upon the vesting of a restricted stock unit grant. Generally, the receipt of stock may be deferred until the earliest to occur of the death of the non-employee director, the date on which the non-employee director ceases to be a director of the company,Company, or a change of control of Sysco. All such deferral elections shall be made in accordance with the terms and conditions set forth in Sysco’s 2009 Board of Directors Stock Deferral Plan.
Change in Control
Grant agreements underUnder the 2009 Non-Employee Directors Stock Plan and the applicable grant agreements, any unvested awards of restricted stock or restricted stock units will determine vesting provisionsvest immediately upon the occurrence of a specified change in control.
SYSCO CORPORATION-20142016 Proxy Statement 2933
Fiscal 20142016 Director Compensation
The following table provides compensation information for fiscal year 20142016 for each of our directors who served for any part of the fiscal year, other than Messrs.
Mr. DeLaney, and Fernandez, whose compensation is disclosed in the Summary Compensation Table on page 56:59:
Fees Earned or | Stock | Non-Qualified Deferred | Other | ||||||||||||||||||||||||||
Paid in Cash | Awards | Compensation Earnings | Compensation | Total | |||||||||||||||||||||||||
Name | Fees Earned or Paid in Cash($)(1) | Stock Awards($)(2)(3)(4) | Non-Qualified Deferred Compensation Earnings($)(5) | Other Compensation(6) | Total($) | ($)(1) | ($)(2)(3)(4) | ($)(5) | ($)(6) | ($) | |||||||||||||||||||
Cassaday | $ | 120,000 | $ | 185,019 | $ | — | $ | — | $ | 305,019 | $ | 120,000 | $ | 185,006 | $ | — | $ | — | $ | 305,006 | |||||||||
Craven | 115,000 | 185,019 | 2,613 | — | 302,632 | 115,000 | 185,006 | 3,298 | — | 303,304 | |||||||||||||||||||
Frank | 100,000 | 185,006 | — | — | 285,006 | ||||||||||||||||||||||||
Glasscock | 120,000 | 185,019 | — | — | 305,019 | 120,000 | 185,006 | — | — | 305,006 | |||||||||||||||||||
Golden | 100,000 | 185,019 | 31,321 | — | 316,340 | 100,000 | 185,006 | 37,747 | — | 322,753 | |||||||||||||||||||
Hafner | 120,000 | 185,019 | — | — | 305,019 | 120,000 | 185,006 | — | — | 305,006 | |||||||||||||||||||
Koerber | 100,000 | 185,019 | — | — | 285,019 | 100,000 | 185,006 | — | 12,142 | 297,148 | |||||||||||||||||||
Newcomb | 100,000 | 185,019 | — | — | 285,019 | 100,000 | 185,006 | — | — | 285,006 | |||||||||||||||||||
Peltz | 100,000 | 185,006 | — | — | 285,006 | ||||||||||||||||||||||||
Tilghman | 125,000 | 185,019 | — | — | 310,019 | 125,000 | 185,006 | — | — | 310,006 | |||||||||||||||||||
Ward | 433,750 | 185,019 | 7,080 | — | 625,849 | 575,000 | 185,006 | 8,789 | — | 768,795 |
(1) | Includes retainer fees, including any retainer fees for which the non-employee director has elected to receive shares of Sysco common stock in lieu of cash and fees for the fourth quarter of fiscal |
(2) | For fiscal |
(3) | The aggregate number of options and unvested stock awards held by each director |
Aggregate Unvested Stock Awards | Aggregate Options Outstanding | ||||||
Outstanding as of | as of July 2, 2016 | ||||||
Cassaday | 3,942 | — | |||||
Craven | 3,942 | — | |||||
Frank | 3,942 | — | |||||
Glasscock | 3,942 | — | |||||
Golden | 3,942 | — | |||||
Hafner | 3,942 | — | |||||
Koerber | 3,942 | — | |||||
Newcomb | 3,942 | — | |||||
Peltz | 3,942 | — | |||||
Tilghman | 3,942 | — | |||||
Ward | 3,942 | — |
The unvested stock awards for each non-employee director listed in the table immediately above relate to restricted stock awards granted in November | |
(4) | None of the directors shown in the table received option grants during fiscal |
(5) | We do not provide a pension plan for the non-employee directors. For each non-employee director, the amounts shown in this column represent above-market earnings on amounts deferred under the Non-Employee Director Deferred Compensation Plan. Directors who do not have any amounts in this column were not eligible to participate in such plan, did not participate in such plan or did not have any above-market earnings. |
(6) | The amount shown with respect to Dr. Koerber reflects the amount paid for spousal travel in connection with business events. The total value of all perquisites and personal benefits received by each of the other non-employee directors, |
Messrs.Mr. DeLaney and Fernandez did not receive any compensation in or for his fiscal 20142016 for Board service, other than the compensation for services as an employee that is disclosed elsewhere in this proxy statement. See “Executive Compensation – Summary Compensation Table” for details regarding compensation received by Messrs.Mr. DeLaney and Fernandez for fiscal 2014.2016.
SYSCO CORPORATION - 20142016 Proxy Statement 3034
The Corporate Governance Guidelines provide that after five years of service as a non-employee director, such individuals are expected to continuously own a minimum of 16,500 shares of Sysco common stock. All of the current non-employee directors with at least five years of service beneficially held the requisite number of shares as of September 22, 2014. Stock ownership guidelines applicable to executive officers are described under “Stock Ownership— Stock Ownership Guidelines.”
The following persons currently serve as executive officers of Sysco. Each person listed below, other than Mr. Bené, Mr. Kreidler,Charlton, Mr. Moskowitz and Mr. Shurts, has served as an officer of Sysco and/or its subsidiaries for at least the past five years.
Name | Title | Age |
Thomas L. Bené* | President and Chief Operating Officer | 54 |
Greg D. Bertrand | Senior Vice President, U.S. Foodservice Operations | 52 |
R. Scott Charlton | Executive Vice President, | |
William B. Day | Executive Vice President, Merchandising and SBS | |
William J. DeLaney* | ||
Joel T. | ||
Executive Vice President and Chief Financial Officer | ||
Russell T. | Executive Vice President, | |
Paul T. Moskowitz | ||
Wayne R. Shurts* | Executive Vice President and Chief Technology Officer |
* | Named Executive Officer. |
Thomas L. Benéhas served as Sysco’s President and Chief Operating Officer since January 1, 2016. Previously, he served as Executive Vice President and President, Foodservice Operations from January 2015 to December 2015, Executive Vice President and Chief Commercial Officer sincefrom September 1, 2013 to December 2014 and as Executive Vice President, Chief Merchandising Officer from May 2013 to September 2013. Prior to joining Sysco, Mr. Bené served as President of PepsiCo FoodservicesFoodservice from 2011 until 2013. Between 2008 and 2011, he held various senior roles with PepsiCo, including President, Pepsi-Cola North American Beverages; SVP, Sales and Franchise Development; President, PepsiCo Foods & Beverages, Canada; and Chief Operating Officer, South Beach Beverage Co. Mr. Bené joined PepsiCo in 1989 after working for American Hospital Supply.
Greg D. Bertrand has served as Sysco’s Senior Vice President, U.S. Foodservice Operations since July 3, 2016. Previously, he served as Senior Vice President, Foodservice Operations (West) from August 2015 to July 2016, Senior Vice President, Merger Integration Deployment from November 2014 to August 2015, and Senior Vice President, Business Process Integration from March 2014 to November 2014. Mr. Bertrand began his Sysco career in 1991 as a Marketing Associate at Sysco Chicago, where he advanced through several sales leadership positions before becoming Vice President-Sales in 1997 and Senior Vice President-Sales in 1998. He was promoted to Executive Vice President in 1999. In 2005, he was named President-Sysco Eastern Wisconsin. He became President-Sysco Chicago in 2008 and took on the added responsibilities of leading Sysco Eastern Wisconsin and Sysco Baraboo in 2009. He was promoted to Market Vice President-Midwest in 2010 and then to Senior Vice President – Foodservice Operations (West) in July 2012.
R. Scott Charlton has served as Sysco’s Executive Vice President, Supply Chain since August 30, 2015, having been promoted from Senior Vice President, Distribution Services, a position he had held since July 2013. Prior to joining Sysco, Mr. Charlton served as Executive Vice President, Operations, at C&S Wholesale from 2007 until June 2013. Between 1980 and 2007, Mr. Charlton served in a variety of manufacturing, operations and quality assurance roles at Publix Super Markets, Inc., culminating with his role as Senior Vice President, Manufacturing and Distribution, from 2005 to 2007.
William B. Dayhas served as Sysco’s Executive Vice President, Merchandising and SBS since August 2015. Previously, he served as Executive Vice President, Merchandising sincefrom July 2010. He served as2010 to August 2015 and Senior Vice President—President – Merchandising and Supply Chain from July 2009 to July 2010. He began his Sysco career in 1983 as a staff accountant at Sysco’s Memphis, Tennessee subsidiary. Between 1984 and 1987 he divided his time between Sysco’s corporate headquarters and Sysco’s Atlanta subsidiary, where he served as the Chief Financial Officer. In 1987 Mr. Day officially moved to Sysco’s corporate headquarters in Houston where he served in a variety of roles until 1999, when he was promoted to Assistant Controller. Mr. Day started Sysco’s RDC project in 2000, was named Vice President, Supply Chain Management in 2003 and was promoted to Senior Vice President, Supply Chain in July 2007.
William J. DeLaneyis described under “Board has served as Sysco’s Chief Executive Officer since March 2009. He assumed the additional title of Directors Matters.”President in March 2010 through December 31, 2015. Mr. DeLaney began his Sysco career in 1987 as Assistant Treasurer at the Company’s corporate headquarters. He was promoted to Treasurer in 1991, and in 1993 he was named a Vice President of the Company, continuing in those responsibilities until 1994. Mr. DeLaney joined Sysco Food Services of Syracuse in 1996 as chief financial officer, progressed to senior vice president in 1998 and executive vice president in 2002. In 2004, Mr. DeLaney was appointed president and chief executive officer of Sysco Food Services of Charlotte. He held that position until December 2006, when he was named Sysco’s Senior Vice President of Financial Reporting. Effective July 1, 2007, Mr. DeLaney was promoted to the role of Executive Vice President and Chief Financial Officer and continued to serve in such position following his promotion to CEO until October 2009.
Joel T. Gradewas has served as Sysco’s Executive Vice President and Chief Financial Officer since September 1, 2015, having been promoted tofrom Senior Vice President – Finance and Chief Accounting Officer, ina position he had held since February 2014, after serving as Senior Vice President, Foodservice Operations (North) since May 2012.2014. Mr. Grade began his career at Sysco as a Staff Auditor in 1996. He was promoted to Assistant Manager-Operations Review in 1999. He transferred to Sysco Austin in 2000 as Controller, was appointed Vice President-Finance and CFO of Sysco Chicago in 2002, and became Vice President-Finance and CFO of Sysco Canada in 2007. He was promoted to Vice President, Foodservice Operations of Sysco Corporate and President of Sysco Canada in 2010 and held that position until May 2012.
Michael W. Greenhas served as Executive Vice President and President, Foodservice Operations since September 1, 2013. Prior to this, Mr. Green served as Executive Vice President and Group President from October 2011 to September 2013, as Executive2012, when he was appointed Senior Vice President, Foodservice Operations with expanded responsibilities over all of Sysco’s U.S. Broadline Foodservice Operations from July 2010 to October 2011, and as Executive Vice President of Northeast and North Central U.S. Foodservice Operations from January 2008 to July 2010. Mr. Green began his Sysco career in 1991 as a member of the Management Development Program and was named Sysco Chicago’s Vice President of Marketing later that year. In 1992, he was promoted to Senior Vice President of Marketing and Merchandising, and then to Executive Vice President, of Sysco’s Chicago operating company. In 1994, Mr. Green became the President and Chief Executive Officer of Sysco Food Services of Detroit. He was promoted in 2004 to Senior Vice President of Operations for Sysco’s Midwest Region. In August 2014, Mr. Green notified the Company that he will retire from Sysco effective December 31, 2014.(North).
Robert C. Kreidlerhas served as Sysco’s Executive Vice President and Chief Financial Officer since October 2009. Prior to joining Sysco, Mr. Kreidler served as Executive Vice President and Chief Financial Officer of C&S Wholesale Grocers, a large privately-held food wholesaler, from February 2007 through March 2009. Between June 1996 and February 2007, he held various senior roles with Yum! Brands, Inc., which includes the worldwide operations of KFC, Pizza Hut and Taco Bell. His last position with Yum! Brands was Senior Vice President of Corporate Strategy and Treasurer from December 2003 to February 2007.
SYSCO CORPORATION -20142016 Proxy Statement 3135
Russell T. Libbyhas served as Sysco’s Executive Vice President, -Administration and Corporate Secretary since August 30, 2015. Previously, he served as Executive Vice President – Corporate Affairs, Chief Legal Officer and Corporate Secretary sincefrom March 2014 having been promotedto August 2015 following his promotion from Senior Vice President, General Counsel and Corporate Secretary, a position he had held since November 2011. He joined Sysco in October 2007 as Assistant Vice President, Mergers and Acquisitions and Real Estate and was promoted to Vice President and Assistant General Counsel in July 2009 and was promoted to Vice President, General Counsel and Corporate Secretary in December 2010. From 1997 through September 2007, Mr. Libby worked for the North America unit of COFRA Holding A.G., a Swiss international conglomerate, in various positions of increasing responsibility, culminating in service as President of COFRA North America and Vice President, Legal for Good Energies, Inc., an affiliated investment advisor.
Paul T. Moskowitzhas served as Sysco’s Executive Vice President, Human Resources since August 30, 2015, having been promoted from Senior Vice President, Human Resources, a position he had held since January 2011. Prior to joining Sysco, Mr. Moskowitz served as Chief Human Resources Officer of Dean Foods Company, a large dairy processing company from 2007 until 2011. Between 1996 and 2004, he held various senior roles with Yum! Brands. His last position with Yum! Brands was Chief People Officer at Pizza Hut from 2004 to 2007.
Wayne R. Shurtshas served as Sysco’s Executive Vice President and Chief Technology Officer since October 2012. Prior to joining Sysco, Mr. Shurts served as Executive Vice President of SuperValu Inc. from 2010 until 2013. Between 2006 and 2010, he held various senior roles with Cadbury. His last position with Cadbury was Chief Information Officer from 2008 to 2010. Mr. Shurts served as a member of the board of directors of Con-Way Inc., a freight transportation and logistics services company, from May 2015 until it was acquired by XPO Logistics in October 2015.
Management Development and Succession Planning
On an ongoing basis, the Board plans for succession to the position of CEO and other key management positions, and the Corporate Governance and Nominating Committee oversees this management development and succession planning process. To assist the Board, the CEO periodically provides the Board with an assessment of senior executives and their potential to succeed to the position of CEO, as well as perspective on potential candidates from outside the company.CEO. On an annual basis, the Board and its Corporate Sustainability Committee have engaged in discussions with management regarding increasing the diversity of Sysco’s executive management team. In addition, the CEO periodically provides the Board with an assessment of potential successors to other key positions.
In fiscal 2014,2016, Sysco’s effectiveness in management development and succession planning were a part of our CEO’s non-financial performance goals, which are reviewed at the end of each fiscal year by the Compensation and Corporate Governance and Nominating Committees. In addition, the Compensation Committee assessed Sysco’s performance in select non-financial areas, including the overall effectiveness of its management development and succession planning processes, in determining the magnitude of the 2014 bonus2016 annual incentive payment to our CEO. Management development and succession planning remainedremain top priorities of executive management and the Board during fiscal 2015,2017, as evidenced by the following:
• | Sysco’s Board discussed human capital and succession planning at its |
• |
SYSCO CORPORATION - 20142016 Proxy Statement 3236
Security Ownership of Officers and Directors
The following table sets forth certain information with respect to the beneficial ownership of Sysco’s common stock, as of September 22, 2014,19, 2016, by (i) each current director and director nominee, (ii) each named executive officer (as defined under “Compensation Discussion and Analysis”), and (iii) all currentdirectorscurrent directors and executive officers as a group. Unless otherwise indicated, each stockholder identified in the table has sole voting and investment power with respect to his or her shares. Fractional shares have been rounded down to the nearest whole share.
Shares of Common Stock Owned Directly | Shares of Common Stock Owned Indirectly | Shares of Common Stock Underlying Options(1) | Shares of Common Stock Underlying Restricted Stock Units(2) | Total Shares of Common Stock Beneficially Owned(1)(2) | Percent of Outstanding Shares(3) | Shares of Common Stock Owned Directly | Shares of Common Stock Owned Indirectly | Shares of Common Stock Underlying Options(1) | Shares of Common Stock Underlying Restricted Stock Units(2) | Total Shares of Common Stock Beneficially Owned(1)(2) | Percent of Outstanding Shares(3) | |||||||||||||
Thomas L. Bené | 6,893 | — | 34,501 | 5,103 | 46,497 | * | 31,785 | — | 133,715 | 5,102 | 170,602 | * | ||||||||||||
Daniel J. Brutto | — | — | — | — | — | * | ||||||||||||||||||
John M. Cassaday | 54,190 | (4) | — | — | — | 54,190 | * | 65,983 | (4) | — | — | — | 65,983 | * | ||||||||||
Judith B. Craven | 79,259 | (4) | — | — | — | 79,259 | * | 93,486 | (4) | — | — | — | 93,486 | * | ||||||||||
William J. DeLaney | 176,828 | — | 1,152,341 | 70,742 | 1,399,911 | * | 274,149 | — | 2,001,516 | 30,835 | 2,366,842 | * | ||||||||||||
Manuel A. Fernandez | 92,617 | (4) | — | 538,193 | — | 630,810 | * | |||||||||||||||||
Joshua D. Frank | 5,648 | — | — | — | 5,648 | * | ||||||||||||||||||
Larry C. Glasscock | 32,169 | — | — | — | 32,169 | * | 46,720 | (4) | — | — | — | 46,720 | * | |||||||||||
Jonathan Golden | 94,179 | (4) | 18,500 | (5) | — | — | 112,679 | * | 105,887 | (4) | 18,500 | (5) | — | — | 124,387 | * | ||||||||
Michael W. Green | 35,686 | — | 212,858 | 18,373 | 266,917 | * | ||||||||||||||||||
Joel T. Grade | 21,033 | 248 | (6) | 85,001 | 3,579 | 144,737 | * | |||||||||||||||||
Joseph A. Hafner, Jr. | 59,430 | (4) | — | — | — | 59,430 | * | 64,138 | (4) | — | — | — | 64,138 | * | ||||||||||
Bradley M. Halverson | — | — | — | — | — | * | ||||||||||||||||||
Hans-Joachim Koerber | 55,775 | (4) | — | — | — | 55,775 | * | 53,203 | (4) | — | — | — | 53,203 | * | ||||||||||
Robert C. Kreidler | 37,594 | 810 | (6) | 562,808 | 27,467 | 628,679 | * | — | 39,743 | (7) | — | — | 39,743 | * | ||||||||||
Russell T. Libby | 38,393 | — | 125,352 | 9,037 | 172,782 | * | ||||||||||||||||||
Nancy S. Newcomb | 45,904 | (4) | — | — | — | 45,904 | * | 57,612 | (4) | — | — | — | 57,612 | * | ||||||||||
Nelson Peltz | 5,648 | 43,960,047 | (8) | — | — | 43,965,695 | 7.98% | |||||||||||||||||
Edward D. Shirley | — | — | — | — | — | * | ||||||||||||||||||
Wayne R. Shurts | 7,645 | — | 125,839 | 15,318 | 148,802 | * | 30,689 | — | 312,458 | 4,792 | 347,939 | * | ||||||||||||
Richard G. Tilghman | 75,789 | (4) | 1,957 | (7) | — | — | 77,746 | * | 87,497 | (4) | 1,957 | (9) | — | — | 89,454 | * | ||||||||
Jackie M. Ward | 82,957 | (4) | 61 | (7) | — | — | 83,018 | * | 129,493 | (4) | 61 | (9) | — | — | 129,554 | * | ||||||||
All Directors, Director Nominees and Executive Officers as a Group (18 Persons) | 947,943(8) | 21,528 | (9) | 2,583,748 | (10) | 184,065 | (11) | 3,737,284 | (8)(9)(10)(11) | * | ||||||||||||||
All Directors, Director Nominees and Executive Officers as a Group (24 Persons) | 1,225,071 | (10) | 44,020,556 | 3,251,877 | (11) | 73,324 | (12) | 48,570,829 | (10)(11)(12) | 8.81% |
(*) | Less than 1% of outstanding shares. |
(1) | Includes shares underlying options that are presently exercisable or will become exercisable within 60 days after September |
(2) | |
Includes shares underlying restricted stock units (RSUs) that will vest and settle within 60 days after September | |
(3) | |
Applicable percentage of beneficial ownership at September | |
(4) | |
Includes shares that were elected to be received in lieu of non-employee director retainer fees during the first half of calendar | |
(5) | |
These shares are held by a family trust affiliated with Mr. Golden. | |
(6) | These shares are held in trust for the benefit of Mr. Grade’s son. |
Includes | |
(8) | 43,954,399 of these shares are owned by certain investment funds and vehicles (the “Trian Funds”) managed by Trian Fund Management, L.P. (“Trian”), an institutional investment manager. None of such shares are held directly by Mr. Peltz. An additional 5,648 of these shares are held directly by Mr. Frank, over which Trian may be deemed to have beneficial ownership (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by virtue of a director fee agreement between Trian and Mr. Frank that is further described in the |
SYSCO CORPORATION - 2016 Proxy Statement37
Schedule 13D/A filed on June 9, 2016 by Trian and certain of its affiliates. Trian Fund Management GP, LLC, of which Mr. Peltz is a member, is the general partner of Trian, and therefore is in a position to determine the investment and voting decisions made by Trian with respect to all of the shares it may be deemed to beneficially own. Accordingly, Mr. Peltz and Trian may be deemed to indirectly beneficially own the shares that the Trian Funds directly and beneficially own, and the shares that Mr. Frank directly and beneficially owns. See “-Security Ownership of Certain Beneficial Holders” below. Except as described above, Mr. Peltz disclaims beneficial ownership of such shares for all other purposes. | |
These shares are held by the spouse of the director or executive officer. | |
(10) | |
Includes an aggregate of | |
(11) | |
Includes an aggregate of | |
(12) | |
Includes an aggregate of |
SYSCO CORPORATION -2014 Proxy Statement 33
Security Ownership of Certain Beneficial Owners
The following table sets forth information concerning beneficial ownership of our common stock by persons or groups known to us to be beneficial owners of more than 5% of Sysco’s common stock outstanding as of September 22, 2014.19, 2016. The applicable percentage of beneficial ownership is based on 587,249,628551,217,611 shares outstanding as of September 22, 2014.19, 2016.
Total Shares of Common Stock Beneficially Owned | Percent of Outstanding Shares | |||||||
BlackRock and certain affiliates(1) | 30,717,832 | 5.23 | % | |||||
State Street Corporation and certain affiliates(2) | 33,187,266 | 5.65 | % | |||||
Yacktman Asset Management LP(3) | 32,096,635 | 5.47 | % |
Total Shares of Common Stock Beneficially Owned | Percent of Outstanding Shares | |||||||
Trian Fund Management, L.P. and certain affiliates(1) | 43,965,695 | 7.98 | % | |||||
BlackRock, Inc. and certain affiliates(2) | 34,420,996 | 6.24 | % | |||||
The Vanguard Group and certain affiliates(3) | 30,346,942 | 5.51 | % |
(1) | This information is based on (i) a Schedule |
(2) | |
This information is based on a Schedule | |
(3) | This information is based on a Schedule 13G/A filed on February 11, 2016 by The Vanguard Group (“Vanguard”). According to the Schedule 13G/A, Vanguard has sole power to vote, or to direct the vote of, 1,013,921 shares of common stock, sole power to dispose, or to direct the disposition of, 29,270,750 shares of common stock, shared power to vote, or to direct the vote of, 60,300 shares of common stock, and shared power to dispose, or to direct the disposition of, 1,076,192 shares of common stock. The address for Vanguard is 100 Vanguard Blvd., Malvern, PA 19355. |
To align the interests of our executivesmanagement with those of our stockholders, Sysco’s Board of Directors concluded that our executivesenior officers should have a significant financial stake in Sysco stock. To further that goal, for several years we have maintained stock ownership guidelines for our executives. In August 2013,February 2015, we amended our Corporate Governance Guidelines in order to increasebetter align with evolving best practices by tying the requirements applicableownership requirement to a multiple of the CEO and Executive Chairman positions, andofficer’s annual base salary, rather than a specified number of shares. Pursuant to provide clarity to the stock ownership guidelines. Beginningthese guidelines as amended, beginning in August 2016 or upon the end of the five-year period from the date the officer is hired, promoted or otherwise becomes subject to the guidelines, whichever is later, the executivesfollowing senior officers should own, thebased on their respective positions, a minimum number of shares by position,equal in value to the multiple of each such officer’s annual base salary as described in the following table.
Position | |||
CEO | 7x | ||
President | 4x | ||
Executive Vice Presidents | 4x | ||
Senior Vice Presidents | |||
ExecutiveOur senior officers have five years to achieve these ownership requirements. The five-year period begins the date the officer is hired, promoted or otherwise becomes subject to the guidelines. If an individual was hired after August 26, 2011, or promoted after August 26, 2011 to a position that requires the ownership of a greater amount of stock than his or her prior position, the five-year period pertaining to the new position will begin to run upon the effectivenesseffective date of the hiring or promotion; provided, further, however, that a promoted individual shall continue to comply with the above ownership requirements applicable to his or her prior position at all times subsequent to the promotion.
The shares counted towards these ownership requirements shall include Sysco shares of common stock owned directly or indirectly by the executivesenior officer, any otherincluding shares of vested restricted stock held by the executive officer that may be subject to transfer restrictions or potential clawbacks, shares owned indirectly by the officer through any Sysco employee stock purchase plan, and two-thirds of an executive officer’sthe shares underlying an officer’s unvested restricted stock units, and two-thirds of an executive officer’s unvested restricted stock, and shall not include shares held through any other form of indirect beneficial ownership or shares underlying unexercised options. Restricted stock unit incentives, coupled with shares obtained from the exercise of stock options, are anticipated to provide all senior officers with the opportunity to satisfy these requirements within the specified time frames.
These ownership requirements are set at levels that Sysco believes are reasonable given the senior officers’ respective salaries and responsibility levels. In addition, toExequity has reviewed our ownership guidelines and confirmed that they are consistent with the corresponding practices of our peer group.
SYSCO CORPORATION - 2016 Proxy Statement38
In connection with the ownership requirements described above, each executivesenior officer of the Company may need toshall retain a percentage (not to exceed 25% as described below) of the net shares acquired upon exercise of stock options and 100% of the net shares acquired pursuant to vested restricted stock and RSU grantsthe vesting of RSUs until the executive officer’s holdings of Company stock equal or exceed all futurethe applicable minimum ownership guidelines not yet applicable to the executive officer.requirement. For these purposes, “net shares” shall mean the shares remaining after disposition of shares necessary to pay the related tax liability and, if applicable, exercise price.
The Corporate Governance and Nominating Committee periodically reviews the guidelines to determine if they need to be updated due to, among other things, significant changes in the price of Sysco stock. Based on an assumed price of $37.87, which represents the average NYSE closing price of Sysco common stock during the 30-trading day period preceding the record date, the CEO ownership requirement of 225,000 shares equals a value of approximately seven times Mr. DeLaney’s current base salary. The other officer ownership requirements are set at lower levels that Sysco believes are reasonable given their salaries and responsibility levels. Restricted stock and restricted stock unit incentives, coupled with shares obtained from the exercise of stock options, are anticipated to provide all executives with the opportunity to satisfy these requirements within the specified time frames.
SYSCO CORPORATION -2014 Proxy Statement 34
The guidelinesGuidelines also provide that, after five years of service as a non-employee director, such individuals are expected to continuously own a minimum of 16,500 shares of Sysco common stock. The shares beneficially owned by Trian, as reported above under ” - Security Ownership of Certain Beneficial Owners,” are credited to Messrs. Frank and Peltz for purposes of our ownership requirements.
We provide the Board of Directors with the status of the executives’officers’ and directors’ stock ownership at all of the regularly-scheduled meetings to ensure compliance with these holding requirements. As of September 22, 2014,19, 2016, each of the named executive officers and directors metsatisfied his or her then-applicable stock ownership requirement.
Directors and executive officers may only purchase and sell Sysco common stock and exercise stock options pursuant to a 10b5-1 trading plan adopted during an approved quarterly trading window, subject to limited exceptions, including “net exercises” of stock options that do not involve an open market sale of shares and hardship exemptions. Quarterly trading windows generally open two business days after Sysco issues its quarterly earnings release and typically close around seven weeks after the opening of the window.
The adoption of a 10b5-1 trading plan or other transaction in Sysco stock by such directors and executive officers must be pre-approved by a committee that includes the Chairman of the Board, the Chair of the Corporate Governance and Nominating Committee, the Chief Executive Officer and the Company’s chief legal officer, following their review of the amount and timing of the proposed transaction and their confirmation that the individual in question does not possess any material inside information about the Company. Trades under a 10b5-1 trading plan may not commence until 30 days after adoption of the plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act and the rules issued thereunder, our executive officers and directors and any persons holding more than ten percent (10%) of our common stock are required to file with the Securities and Exchange Commission and the New York Stock Exchange reports of initial ownership of our common stock and changes in ownership of such common stock. To our knowledge, no person beneficially owns more than 10% of our common stock. Copies of the Section 16 reports filed by our directors and executive officers are required to be furnished to us. Based solely on our review of the copies of the reports furnished to us, or written representations that no reports were required, we believe that, during fiscal 2014,2016, all of our executive officers and directors complied with the Section 16(a) requirements.requirements except that, due to an administrative error on the part of the Company, a late Form 4 was filed on behalf of Mr. William DeLaney on January 21, 2016, to report an exercise of options and the sale of the underlying shares of common stock.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information regarding equity compensation plans as of June 28, 2014.July 2, 2016.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) | ||||||||
Equity compensation plans approved by security holders | 27,469,911 | $ 29.59 | 52,077,346 | (1) | 21,225,428 | $ 34.13 | 48,213,695 | (1) | ||||||
Equity compensation plans not approved by security holders | — | — | — | — | — | — | ||||||||
TOTAL | 27,469,911 | $ 29.59 | 52,077,346 | (1) | 21,225,428 | $ 34.13 | 48,213,695 | (1) |
(1) | Includes |
SYSCO CORPORATION - 2016 Proxy Statement39
COMPENSATION DISCUSSION AND ANALYSIS
In this section, we provide an overview of our philosophy and objectives of our executive compensation program and describe the material components of our executive compensation program for our fiscal 20142016 named executive officers, or “NEOs,” whose compensation is set forth in the 20142016 Summary Compensation Table and other compensation tables contained in this proxy statement:
• | William J. DeLaney, our Chief Executive Officer; |
• | |
• | Joel T. Grade, our Executive Vice President and Chief Financial Officer; |
• | |
• | Wayne R. Shurts, our Executive Vice President and Chief Technology Officer; and |
• |
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In addition, we explain how and why the Compensation Committee of our Board (the “Committee”) arrives at compensation policies and decisions involving the NEOs. For purposes of this Compensation Discussion and Analysis and the related disclosures that follow under the heading “Executive Compensation” below, the term “current NEOs” excludes Mr. Fernandez. As further discussed herein, Mr. Fernandez’s compensation was the subject of a different process than that which applied to Messrs. DeLaney, Kreidler, Bené, Green and Shurts. For more details, see “Compensation of the Former Executive Chairman” below.
Sysco is the global leader in selling, marketing and distributing food products, equipment and supplies to the foodservice industry. As such, our long-term success depends on our ability to attract, engage, motivateincentivize and retain highly talented individuals who are committed to Sysco’s vision and strategy. One of the key objectives of our executive compensation program is to link executives’ pay to their performance and their advancement of Sysco’s overall annual and long-term performance and business strategies.
Other objectives include aligning the executives’ interests with those of stockholders and encouraging high-performing executives to remain with Sysco over the course of their careers. We believe that the amount of compensation for each NEO reflects extensive management experience, high performance and exceptional service to Sysco and our stockholders. We also believe that Sysco’s compensation strategies have been effective in attracting executive talent and promoting performance and retention. We also believe that the amount of compensation for each NEO reflects his extensive management experience, high performance and exceptional service to Sysco and our stockholders.
Business Highlights
The foodservice industry remained under pressure in fiscal 2014. While the economy continues to slowly recover, the magnitude of recovery is modest and the outlook for certain fundamental drivers of the economy is mixed. This creates a challenging business environment for us and our customers; however, we continue to implement transformational change on a broad scale which is enhancing the products and services we provide our customers and helping us to operate more efficiently. Our sales and gross profits grew modestly, and our expense management performance was favorable overall despite cost pressures in our delivery operations. Our improvements largely resulted from our Business Transformation Project initiatives, which helped drive our North American Broadline cost per case lower than in fiscal 2013.
Financial highlights from fiscal 2014 include the following:
*(For more detail please see our Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”). Our discussion below of our results herein includes certain non-GAAP financial measures that we believe provide important perspective with respect to underlying business trends and results and provides meaningful supplemental information to both management and investors that is indicative of the performance of the company’s underlying operations and facilitates comparison on a year-over-year basis.trends. Other than free cash flow, any non-GAAP financial measuremeasures will be denoted as an adjusted measuremeasures and except for measures provided pursuant to benefit plan formulas will exclude expensesthe impact from executive retirement plan restructuring multiemployer pension withdrawals,charges, consisting of (1) severance charges, (2) facility closing costs, (3) professional fees incurred related to our three-year strategic plan and (4) expenses associated with the revised business technology strategy announced in fiscal 2016. They will also exclude acquisition-related expense resulting from (1) merger and integration planning, litigation costs associatedand termination costs in connection with our pending USFthe merger change in estimate for self-insurance costs, charges from a liability for a settlement, facility closure charges, amortization ofthat had been proposed with US Foods, Inc. and (2) transaction costs in connection with the acquisition of the parent holding company for the Brakes Group, as well as the financing costs and an acquisition related charge specific to fiscal 2013.these acquisitions. More information on the rationale for the use of these measures can be found in our Form 10-K on pages 29-33 and reconciliations to GAAP numbers can be found in Annex I - Non-GAAP Reconciliations.)
The general foodservice market environment since the beginning of fiscal 2016 has been uneven, with a combination of both favorable and unfavorable trends reflected in the relevant data. As compared to a few years ago, consumer confidence and unemployment data points were favorable through fiscal 2016 and the beginning of fiscal 2017, while consumer spending on meals away from home has trended slightly downward towards the end of the fiscal year (following gains throughout most of fiscal 2016). Spending at restaurants was generally improved, but customer traffic levels were generally unchanged during fiscal 2016 and are beginning to decline, together with an overall moderation in spend. Amid these conditions, throughout fiscal 2016 we provided our customers with excellent service, growing our business with locally managed customers, improving our gross margins and managing expenses. These are all important steps towards achieving our three-year plan financial objectives.
Comparison of results from fiscal 2016 to fiscal 2015:
• | Sales increased 3.5%, or $1.7 billion, to $50.4 billion; on a comparable 52-week basis, adjusted sales improved 1.5%; |
• | Operating income increased 50.5%, or $621.1 million, to $1.9 billion; |
• | Adjusted operating income increased 12.1%, or $217 million, to $2 billion; on a comparable 52-week basis, adjusted operating income increased 9.6%; |
• | Net earnings increased 38.3%, or $262.8 million, to $949.6 million; |
• | Adjusted net earnings increased 10.4%, or $114 million, to $1.2 billion; on a comparable 52-week basis, adjusted net earnings increased 8.0%; |
• | Basic earnings per share and diluted earnings per share in fiscal 2016 were $1.66 and $1.64, respectively, a 43.1% and 42.6% increase from the comparable prior year amount of $1.16 and $1.15 per share; and |
• | Adjusted diluted earnings per share were $2.10 in fiscal 2016, a 14.1% increase from the comparable prior year amount of $1.84 per share; on a comparable 52-week basis, adjusted diluted earnings per share were $2.06 in fiscal 2016, a 12.0% increase. |
See Annex I - “Non-GAAP Reconciliations” for an explanation of these non-GAAP financial measures.
SYSCO CORPORATION - 2016 Proxy Statement40
Say on Pay – Stockholder Feedback
At last year’s Annual Meeting, 90%91% of the stockholders who cast a vote for or against the Company’s “Say on Pay” proposal voted in favor of the Company’s “Say on Pay” proposal on executive compensation.proposal. Further, throughoutduring the past year, management and members of the Board have engaged in dialogue with some of our largest investorsstockholders to solicit their feedback and gather information on their views and opinions on various operations and governance issues, including executive compensation practices. TheDue to the strong results of the fiscal 2015 “Say on Pay” vote, the Company did not take specific actionany actions specifically in response to the 2013 “Saysuch vote. Based in part on Pay” vote. However, based on the results and our ongoing dialogue with our stockholders, however, the Committee and our Board concluded that, even though our overall executivedetermined to increase the emphasis on performance-based compensation policies and practices enjoy favorable stockholder support, it was appropriatefor fiscal 2017 by awarding performance share units, as described below under ” – Changes to continue to adjustExecutive Compensation Program – Fiscal 2017 Changes.” As this demonstrates, the compensation mix of our named executive officers to ensure that fixed and variable compensation components and target total direct compensation are set at levels that ensure that earned compensation awards are reflective of Sysco’s performance relative to its peers and our internal pay philosophy.
The Committee carefully considers feedback from our stockholders regarding our executive compensation program. In addition to the annual “Say on Pay” advisory vote on NEO compensation and the Company’s stockholder engagement efforts, stockholders are invited to express their views to the Committee as described under the heading “Corporate Governance–Communicating with the Board.”
Our Practices
Below we highlight certain executive compensation practices applicable to our NEOs that we have implemented to drive performance, as well as practices we have not implemented because we do not believe they would serve our stockholders’ long-term interests.
What We Do
• | Pay for Performance – We link pay to Sysco and individual performance. We retrospectively review the pay and performance relationship of our executive pay on an annual basis. By aligning annual and long-term incentive opportunities with Sysco’s annual operating plan, compensation is tightly aligned with stockholder interests. |
• | Reward Achievement Relative to Peers – For fiscal 2016, we linked portions of long-term incentive pay to the Company’s total shareholder return as compared to the S&P 500 for a 3-year performance period. |
• | Value Stockholders’ Input – We regularly communicate with some of our larger stockholders and consider their input when designing and implementing compensation programs. |
• | Mitigate Undue Risk – We mitigate undue risk associated with compensation, including utilizing a mix of elements, caps on potential payments, clawback provisions, multiple performance targets and robust Board and management processes to identify risk. We also utilize post-employment covenants designed to protect competitive information of Sysco. We do not believe any of Sysco’s compensation programs creates risks that are reasonably likely to have a material adverse impact on Sysco, which we validate through our compensation risk analysis each year. |
• | Align Target Compensation with Our Peers – We position the target total direct compensation levels for our NEOs within a tight range of the median for our peers, using a combination of lower fixed pay and an emphasis on pay for performance. |
• | Independent Compensation Consulting Firm – The Committee seeks counsel from an independent compensation consulting firm that does not provide any other services to Sysco. |
• | Executive Compensation Clawback Policy – The Committee has the authority to recoup compensation if there is (i) a restatement of our financial results, other than a restatement due to a change in accounting policy, within 36 months of the payment of the award and (ii) the restatement would result in the payment of a reduced award if the award were recalculated. |
• | Reasonable Change in Control Provisions – We believe we have reasonable change in control provisions that generally apply to executive officers in the same manner as the applicable broader employee population, including use of double-trigger vesting for stock options, PSUs and RSUs awarded since November 2013. |
• | Significant Stock Ownership Guidelines – We have adopted stringent stock ownership guidelines for our directors and senior officers, including a stock holding requirement. We review and adjust these guidelines when appropriate. |
• | Modest Perquisites – We provide only modest perquisites that have a sound benefit to Sysco’s business. We do not allow personal use of private aircraft provided by Sysco for business purposes or other egregious perquisites. |
• | Regular Review of Share Utilization – We evaluate share utilization by reviewing overhang levels (dilutive impact of equity compensation on our stockholders) and annual run rates (the aggregate shares awarded as a percentage of total outstanding shares). |
• | Limited Trading Windows – We require our directors and executive officers to conduct all transactions in Sysco common stock through pre-approved 10b5-1 trading plans established during open trading windows and subject to a 30-day waiting period before trades may commence. Further information about our trading restrictions is available under “Stock Ownership – Stock Trading Restrictions” above. |
What We Don’t Do
• | None of our NEOs has an employment contract. |
• | No stock option reloading. |
• | No tax gross-ups for financial planning or loss on sale of home in connection with a relocation. |
• | No separate change in control agreements. |
• | No hedging – Our insider trading policy prohibits executive officers and directors from using strategies or products (such as derivative securities or short-selling techniques) to hedge against the potential decrease in the market value of Sysco common stock. |
• | No excise tax gross-ups upon a change in control. |
• | No repricing of underwater stock options. |
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Changes to Executive Compensation Program
Sysco is committed to providing and maintaining a competitive executive compensation program. Recent changes to Sysco’s executive compensation programs approved by the Committee include the following:
Fiscal 2014 Changes:
Fiscal 2015 Changes:
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SYSCO CORPORATION -2014 Proxy Statement 37
How Pay is Tied to Performance
Sysco’s executive compensation program directly links a substantial portionthe great majority of executive compensation to Sysco’s financial performance through annual and long-term incentives. The mix of the key non-retirement compensation elements for the CEO and the other current NEOs for fiscal 20142016 is shown below. The Target Compensation Mix charts describe each element of compensation as a percent of total target direct compensation, while the Actual Compensation Paid charts describe each element of compensation that was actually paid out (for salary and cash incentives) or granted (for equity awards) in fiscal 2014,2016, other than those specifically described in the paragraph below.
SYSCO CORPORATION -20142016 Proxy Statement 3842
The Committee has not historically used an exact formula for allocating between fixed and variable, cash and non-cash, or short-term and longer-termlong-term compensation, allowing it to incorporate flexibility into our annual and longer-termlong-term compensation programs and adjust for the evolving business environment. The Target Compensation Mix charts above include award opportunities related to annual and long-term incentive compensation, granted in fiscal 20142016 and valued at target levels, and do not include (i) any amounts paid with respect to prior years’ incentive award grants, (ii) componentsthe value of any retirement benefits or (iii) the one-time, payments, such as sign-onincentive and retention awards or severance payments or transaction awards relatedgranted in July 2015 to the negotiation or closing ofNEOs (other than the proposed merger with USF, or (iii) any value of retirement benefits.CEO). The Actual Compensation Paid charts include the annual incentive and CPU award amounts, if any, paid out to the current NEOs in cash with respect to fiscal 20142016 or measurement period ending in fiscal 2014, and do not include (i) the value of the CPU award grant made in November 2013 for the 2013-2015 period or (ii) components of one-time payments, such as sign-on awards or severance payments or transaction awards related to the negotiation of the proposed merger with USF.2016. All charts include salary with respect to fiscal 20142016 and the estimated grant date value of stock options and RSUs granted during fiscal 20142016 as part of the current NEOs long-term incentive compensation.
The value of Sysco’s stock options and RSUs are time vested and the value of each depends uponis directly linked to Sysco’s stock performance. The value of Sysco’s CPUs are also time vested and the value dependsawarded in fiscal 2014 was determined based on Sysco’s relative shareholder return over athe three-year performance period.period ending in fiscal 2016. How we derive the values of the components of Sysco’s long-term incentives is discussed under “—How Executive Pay is Established.” Including the annual incentive award, payment of which is largely dependent on Sysco’s financial performance, these four performance-linked components constituted approximately 81%80% to 88%89% of the total target direct compensation, and approximately 72%80% to 82%90% of the total actual direct compensation paid for fiscal 20142016 to each of the current NEOs, after exclusion of certain pay elements described above.NEOs.
Changes to Executive Compensation Program
Sysco is committed to providing and maintaining a competitive executive compensation program. In addition, we continue to address ways in which our pay can be appropriately linked to Company performance, and we have made some changes for fiscal 2016 and fiscal 2017 incentives to further tighten this alignment. Recent changes to Sysco’s executive compensation programs approved by the Committee include the following:
Fiscal 2016 Changes:
Component: | Change: | Objective: | |||
Annual Incentive Award | Aligned performance goal setting and core financial objectives with Sysco’s annual operating plan, shifted return on invested capital to a long-term metric. | • | Ensure the goals, operating expectations and other key performance criteria are reflective of Sysco’s annual operating plan. | ||
Annual Incentive Award – NEO Individual Objectives | Increased percentage of individualized strategic bonus objectives (“SBOs”) as a discrete component of the program representing 25% of the target award annual incentive award. | • | Increase the significance of the specified SBOs and promote individual accountability for performance in achieving key financial and non-financial goals. | ||
Long-Term Incentives | Cash-performance units (CPU) metric modified to use average 3-year return on invested capital metric, as modified by relative total shareholder return during the 3-year performance period. | • | Strengthen alignment with business objectives and strike a more appropriate balance between a long-term strategic financial goal and relative market returns. | ||
Retention Incentive Award | Granted a special incentive and retention payment, subject to a 12-month recoupment provision. | • | Incentivize certain individuals who were instrumental in developing future state business strategies, in addition to their ordinary duties, and to retain those individuals for successful pursuit of key operational and strategic initiatives. |
Fiscal 2017 Changes:
Component: | Change: | Objective: | |||
Annual Incentive Award | Aligned performance goal setting and financial objectives with the 3-year strategic plan by retaining operating income versus plan as the primary measure. Also, introduced North American Broadline (“NABL”) total case growth as a metric in substitution for total sales growth in order to separate the influence of certain external factors (e.g., currency exchange rates and inflation/deflation) in assessing performance. | • Ensure that the goals reflect market conditions, operating expectations and other relevant factors as reflected in Sysco’s annual operating plan. • NABL cases growth is a critical top-line performance measure that can be measured consistently, without variation based on external factors such as currency exchange rates and inflation or deflation. • Reinforce accountability for achievement of annual operating plan goals. | |||
Annual Incentive Award – NEO Individual Objectives | Retained individualized strategic bonus objectives (“SBOs”) relevant to each leader’s role. SBOs were modified to focus on critical strategic objectives. | • Revised SBOs provide additional focus on critical strategic objectives that support both financial and non- financial goals. Individualized SBOs are closely tailored to each participant’s line-of-sight influence. |
SYSCO CORPORATION - 2016 Proxy Statement43
Component: | Change: | Objective: | |||
Long-Term Incentives | Introduced Performance Share Units (PSUs) for senior leadership, further enhancing the linkage between Sysco performance and individual compensation. PSUs represent 60% of the long-term incentive opportunity granted to NEOs in fiscal 2017. Performance metrics are based on the Company’s (i) earnings per share compound annual growth rate during the 3-year performance period and (ii) average annual return on invested capital over such performance period, each as compared to the Company’s pre-established performance targets. Beginning in fiscal 2017, restricted stock units (RSUs) and cash performance units (CPUs) will no longer be included as a part of senior executives’ annual LTI grants. | • Further strengthen the link between performance and compensation, with a larger percentage of the compensation opportunity for each senior executive at risk and directly linked to achievement of key company goals. • The use of PSUs instead of cash-based CPUs and RSUs is more common among Sysco’s peers. The removal of the RSU component eliminates a time-based award from the Company’s ongoing annual LTI grant practices. | |||
Long-Term Incentives | Maintained market competitiveness for key leaders by reducing pro-rata vesting of stock options from a 5-year period to a 3-year period. Stock options continued to represent 40% of the long-term incentive opportunity granted to NEOs in fiscal 2017. | • Maintain market competitiveness and an appropriate balance between long-term and short-term orientation to the business, with a continued strong focus on pay for performance. |
Philosophy of Executive Compensation Program
Historically, ourOur executive compensation plans have directly linkedlink a substantial portion of annual executive compensation to Sysco’s performance. These plans are designed to deliver superiorhighly competitive compensation for superior company performance. Likewise, when company performance falls short of expectations, certainthese variable incentive programs deliver lower levels of compensation. However, the Committee tries to balance pay-for-performance objectives with retention considerations, so that, even during temporary downturns in the economy and the foodservice industry, the programs continue to ensure that qualified, successful, high-achievingperformance-driven employees stay committed to increasing Sysco’s long-term value. Furthermore, to attract and retain highly skilled management, our compensation program must remain competitive with thatthose of comparable employers who compete with us for talent.
Core Principles
We use the following key principles as the cornerstone of Sysco’s executive compensation philosophy to attract, develop and retain business leaders to drive financial and strategic growth and build long-term stockholder value:
• | Pay for Performance:Provide base salaries that reflect each |
• | Competitiveness and Retention:Provide a competitive pay opportunity that attracts and retains the highest quality professionals; |
• | Accountability for Short- and |
• | Alignment with Stockholders’ Interests:Link the interests of our executive officers with those of our stockholders through |
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Our Practices
Below we highlight certain executive compensation practices applicable to our current NEOs that we have implemented to drive performance, as well as practices we have not implemented because we do not believe they would serve our stockholders’ long-term interests.
What We Do
What We Don’t Do
SYSCO CORPORATION -2014 Proxy Statement 40
Components and Objectives of Executive Compensation Program
The Committee has built the executive compensation program upon a framework that includes the following components and objectives, each of which is described in greater detail later in this Compensation Discussion and Analysis. The Committee routinely reviews each component of the executive compensation program to see how it affects target total pay levels and generally targets total direct compensation at or slightly above the median of the target total pay ranges for similar executive positions among companies in our peer group.
Component | Description | Objective of Element | ||||
Annual Compensation | Base Salary | The Committee generally sets | •Create a competitive pay mix with an appropriate balance between fixed and variable and short- and long-term pay components. •Generally targeted at or below the median of the salary ranges for similar executive positions among companies in our peer group. | |||
Incentive Award | The | •Pay annual cash incentive bonuses based on Sysco performance on key metrics that support the company’s •Promote pay for performance in a competitive •Generally targeted at or above the median annual incentive ranges among companies in our peer group upon achieving target performance goals. | ||||
Long-Term Incentives | Cash Performance Units (CPUs) | Each | • •Align pay with the creation of stockholder value, as compared • Generally targeted at or above the median long-term incentive ranges among companies in our peer group upon achieving target performance goals. | |||
Stock Options | •Closely align the executives’ interests with those of our | |||||
Restricted Stock Units (RSUs) | RSUs granted to NEOs generally vest one-third per year beginning one year from the date of grant. Dividend equivalents are paid to US-based participants, if and when the underlying RSUs vest. Beginning in fiscal 2017, RSUs will not be a component of the annual long-term incentive awards granted to the NEOs. | •Focus executives on multi-year activities that increase stockholder value. •
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Performance Share Units (PSUs) | For fiscal 2017, each NEO will have an opportunity to earn shares of Sysco common stock based on Sysco’s performance over a three-year period. The compensation opportunity under the | • Strengthen alignment with shareholders. • Strong performance and compensation alignment by • PSUs are more closely aligned with peer | ||||
Retirement, other Benefit Programs and Perquisites | Non-Qualified Retirement Benefits and Deferred Compensation Plan | The Management Savings Plan (the “MSP”) is a non-qualified, deferred compensation plan. The MSP | •Support executive performance and retention • • Provides a market competitive retirement savings opportunity for executives. | |||
Other Benefits and Perquisites | Executive officers, including the NEOs, are eligible to participate in the same benefit programs that are offered to other salaried employees. Limited perquisites are provided to executives, including payment of life and accidental death and dismemberment insurance coverage, long-term care insurance coverage, reimbursement of costs for annual medical exams, payment of long-term disability coverage, payment of fees related to the preparation of foreign tax returns where warranted due to company business, and certain expenses related to spousal travel in connection with business events. See “—Executive Perquisites & Other Benefits– Detailed Information” below. | •Provide limited market competitive benefits to protect employees’ and their covered dependents’ health and •Facilitate strong performance on the job and enhance productivity. |
In addition to the above annual process, in fiscal 2014, the Committee approved special incentive payments in connection with the negotiation of the proposed transaction with USF, as well as an incentive pool, contingent on, among other things, the successful closing of the proposed transaction. These awards are discussed below in “Transaction Incentive Awards – Detailed Information.”
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How Executive Pay Is Established
The Committee, in consultation with management and the Committee’s independent compensation consultant, Compensation Advisory Partners LLC, referred to herein as CAP, continues to focus on ensuring that our executive compensation programs reinforce our pay for performance philosophy and enhance stockholder value. CAPDuring fiscal 2016, the Committee utilized Exequity LLP, referred to herein as Exequity, as its independent compensation consultant. Exequity assisted the Committee in annual benchmarking of executive compensation at Sysco. After reviewing CAP competitive studies provided by its independent consultant, the Committee determined that each named executive officer’sNEO’s then current target compensation provided the executive with an appropriate compensation opportunity. The Committee later determined, based on the Company’s fiscal 20142016 performance, that each NEO’s total fiscal 20142016 compensation was generally appropriate in light of overall Company performance and the executive’s personal performance.
In developing our pay for performance policies, the Committee generally benchmarks elements of pay against a comparison peer group, as discussed below. However, the Committee has not historically used an exact formula for allocating between fixed and variable, cash and non-cash, or short-term and longer-termlong-term compensation, allowing it to incorporate flexibility into our annual and longer-termlong-term compensation programs and adjust for the evolving business environment.
Committee Oversight
The Committee, which is comprised entirely of independent directors, is responsible for overseeing Sysco’s executive compensation program. The Committee determines and approves all compensation of the CEO and Sysco’s other senior officers, including the NEOs. Although the Committee meets jointly with the Corporate Governance and Nominating Committee to discuss both the CEO’s personal goals and his performance in achieving such goals in each fiscal year, the Committee is solely approvesresponsible for approving all compensation awards and payoutpayment levels. The Committee develops and oversees programs designed to compensate our corporate officers, including the NEOs, as well as the presidents and executive vice presidents of our operating companies. The Committee is also authorized to approve all grants of restricted stock, restricted stock units, stock options, CPUs, PSUs and other awards to NEOs under our equity-basedlong-term incentive plans for Sysco employees. Further information regarding the Committee’s responsibilities is found under “Corporate Governance – Board Meetings and Committees” and in the Committee’s Charter, available on the Sysco website atwww.sysco.com under “Investors — Corporate Governance.”
The Committee has several resources and analytical tools they consider in making decisions related to executive compensation. The table that follows discusses the key tools the Committee uses.
Committee Resources | ||
Independent Committee Consultant |
•Research reports providing information regarding annual and long-term incentive practices among peer companies and other publicly-traded employers. • For all executive compensation decisions made
For purposes of the reports listed above, with respect to |
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Committee Resources | ||
Sysco’s Human Resources Department | Sysco’s •Assisting the CEO in making preliminary recommendations of base salary structure, annual and long-term incentive •Providing scenario •Providing comparison data on the internal equity of the compensation awarded within the Sysco organization.
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CEO | For other |
Role of CEO and/or Other Executive Officers in Determining Current NEO Compensation
As described in the table above, our CEO, Mr. DeLaney, provides recommendations to the Committee for each element of compensation for each of the current NEOs other than himself. In forming his recommendations, he is advised by HR as described above. HR assesses the design of, and makes recommendations related to, Sysco’s compensation and benefit programs. Mr. DeLaney also consults with other senior officers of the Company for recommendations related to the appropriate financial and non-financial performance measures used in our incentive programs. In developing recommendations for the Committee, Mr. DeLaney and HR consult benchmarking and other market data from CAPExequity and Towers Watsonother advisors as described elsewhere in this proxy statement, and follow the philosophy and pursue the objectives described above under “—“–Philosophy of Executive Compensation Program.” The Committee, with input from CAP,its independent compensation consultant, determines each element of compensation for Mr. DeLaney. With input from CAP,its independent compensation consultant, HR and Mr. DeLaney, the Committee determines each element of compensation for the other current NEOs. The Committee is under no obligation to utilize these recommendations. Executive officers and others may also attendparticipate in discussions with the Committee meetings when invited to do so.
Use of Peer Group and Survey Data
Sysco is the largest foodservice distributor in North America, and most of the other companies in the foodservice industry are significantly smaller, with nearly all of such companies also being privately-held. We believe that these smaller businesses would not create a satisfactory comparison group due to the greater skill levels and abilities required to manage a public company of Sysco’s size.size and complexity. Absent a robust industry peer group, the Committee concluded that the most comparable companies with respect to executive pay are companies whose business size and complexity are similar to ours and with which we compete for top executive positions. Therefore,talent. However, due to the lack of directly comparable publicly traded companies, the peer group developed for the executive compensation analysis for all of our current NEOs is not the same peer group that is used in the stock performance graph included in our annual report to stockholders.stockholders or for the benchmarking of performance. The Committee continually evaluates the compensation analysis peer group periodically for appropriateness and last made changes to the peer group in February 2013.
The companies in the peer group for executive pay and performance benchmarking for decisions made during fiscal 20142016 and so far in fiscal 2015 consists of2017 are the following:following, which we refer to as our “peer group” or “peer companies” throughout this proxy statement:
• | AmerisourceBergen Corporation | • | • | • | |||
• | Best Buy Company, Inc. | • | • | • | |||
• | ConAgra Foods Inc. | • | • | • | |||
• | Costco Wholesale Corp | • |
The peer group had the median market capitalization and revenue levels presented in the Exequity May 2015 executive compensation report and shown below:
Peer Group: | $48.8 billion as of December 31, 2014 | |||||
Sysco: | $23.3 billion as of December 31, 2014 |
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Peer group compensation data is limited to information that is publicly reported and, to the extent it deems appropriate, the Committee uses it to benchmark the major components of compensation for our NEOs.
The CAPindependent compensation studiesstudy from both May 2013 and May 20142015 compared Sysco’s actual pay (based on projected 2015 annual incentive payments) and projected fiscal financial performance for the applicable period to that of the peer companies as well as benchmarking theand was used to benchmark target pay program.levels and identify prevailing performance criteria. The following projected one-year and three-year performance measures were reviewed with respect to validating Sysco’s fiscal 2014 and fiscal 20152016 target pay and performance alignment:
• | |
• | Growth in sales and gross profit dollar growth; |
• | Return on Invested Capital; and |
• | Total shareholder return (computed as of December 31, |
ForSYSCO CORPORATION - 2016 Proxy Statement47
The Exequity May 2016 executive compensation report indicated that, for fiscal 2014,2016, Sysco’s performance rank based on these one-year and three-year financial metrics varied by measure, yet on average approximated the peer group median overall for both periods. CurrentTargeted NEO pay on average, approximated the peer median and iswas also confirmed to be in alignment with our compensation philosophy. Actual compensation earned for both periods, excluding the July 2015 incentive and retention payments, was tightly aligned with overall relative performance.
In addition, based on the comparison in this Exequity report of the Company’s fiscal 2016 total targeted compensation (i.e., base salary, target annual incentive and LTI grant value) for the NEOs to the peer group pay levels, the Committee confirmed that the total targeted compensation for (1) each of Messrs. DeLaney and Libby was between the median and the 75thpercentile and (2) each of Messrs. Bené, Grade and Shurts was between the 25thpercentile and the median. The Committee further reviewed in May 2016 the relationship between actual realizable pay for the NEOs, excluding the July 2015 incentive and retention payments, and the company’s total shareholder return and found that realizable pay positioning versus peers over the three year period of fiscal 2013 to fiscal 2015 was tightly aligned with the Company’s total shareholder return versus its peers.
– Compensation for Current NEOs
Base Salary–Salary – Detailed Information
We pay base salaries to attract and retain talented executives and to provide a fixed base of cash compensation. The table below shows the annualized salaries of each named executive officerNEO at the beginning of fiscal 2013, 20142015, 2016 and 2015,2017, with the effective datedates as noted below:
FY2013 | FY2014 | FY2015 | |||||||||||||||||||||
Named Executive Officer | Base Salary(1) | Base Salary(2) | Base Salary(3) | FY2015 Base Salary(1) | FY2016 Base Salary(2) | FY2017 Base Salary(3) | |||||||||||||||||
William J. DeLaney | $ | 1,175,000 | $ | 1,198,500 | $ | 1,225,000 | $ | 1,225,000 | $ | 1,250,000 | $ | 1,250,000 | |||||||||||
Thomas L. Bené | 643,750 | 750,000 | 800,000 | ||||||||||||||||||||
Joel T. Grade | 510,000 | 625,000 | 625,000 | ||||||||||||||||||||
Russell T. Libby | 540,750 | 600,000 | 600,000 | ||||||||||||||||||||
Wayne R. Shurts | 604,610 | 625,000 | 625,000 | ||||||||||||||||||||
Robert C. Kreidler | 700,000 | 715,000 | 736,000 | 736,450 | 736,450 | — | |||||||||||||||||
Thomas L. Bené | 575,000 | 625,000 | 644,000 | ||||||||||||||||||||
Michael W. Green | 700,000 | 715,000 | 733,000 | ||||||||||||||||||||
Wayne R. Shurts | 575,000 | 587,000 | 605,000 |
(1) | |
The Committee approved these base salaries effective as of September 1, 2014. Mr. Bené’s base salary was adjusted from $643,750 to $725,000, effective as of January 1, 2015, in connection with his promotion to Executive Vice President and President, Foodservice Operations. The base salary increase for Mr. Grade reflected the increased areas of responsibility in connection with his promotion to Executive Vice President and Chief Financial Officer. | |
(2) | The Committee approved these base salaries effective as of September 1, 2015. The base salary increase for Mr. Libby reflected the increased areas of responsibility in connection with his promotion to Executive Vice President, Administration and Corporate Secretary. Mr. Bené’s base salary was adjusted from $750,000 to $800,000, effective as of January 1, 2016, in connection with his promotion to President and Chief Operating Officer. |
(3) | The Committee approved these base salaries effective as of September 4, 2016. |
Base Salary – Analysis
Fiscal 20142016 Base Salary
For fiscal 20142016 base salary determinations, for current NEOs, the Committee once again reviewed, for each NEO, the executive’s job responsibilities, management experience, individual contributions, tenure in his position and then-current salary. An independent compensation study from May 2015 compared Sysco’s actual pay (based on projected annual incentive payments) and projected fiscal financial performance for the applicable period to that of the peer companies. The Committee determined, as recommended by Exequity and management, that it was appropriate to grant the salary increases for fiscal 20142016 described in the chart above. Following a comprehensive review of Mr. DeLaney’s performance in fiscal 20132015 by the Corporate Governance and Nominating Committee and the Committee, and Mr. DeLaney’s evaluation by the entire Board, the Committee approved a raisean increase in Mr. DeLaney’s salary for fiscal 20142016 of $23,500,$25,000, or 2%, reflecting the Company’s average merit increase. The Committee, after considering input from the CEO on each of their individual contributions and additional job responsibilities, approved an increase of approximately 2% to the base salary for each of Messrs. Kreidler, Bené, Green and Shurts for fiscal 2014. The Committee approved these salary increases for annual market adjustment as recommended by CAP and management. These changes place the fiscal 2014 base salaries of Messrs. DeLaney, Green and Bené near the median and of Messrs. Kreidler and Shurts between the 50thand 75thpercentile of the peer group.
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Fiscal 2015 Base Salary
For fiscal 2015 base salary determinations, the Committee again reviewed, for each current NEO, the executive’s job responsibilities, management experience, individual contributions, tenure in his position and then-current salary. The Committee determined that it was appropriate to grant the salary increases for fiscal 2015 described in the chart above. Following a comprehensive review of Mr. DeLaney’s performance in fiscal 2014 by the Corporate Governance and Nominating Committee and the Committee, and Mr. DeLaney’s evaluation by the entire Board, the Committee approved a raise in Mr. DeLaney’s salary for fiscal 2015 of $26,000, or 2.2%, reflecting the Company’s average merit increase.2.0%. The Committee, after considering input from the CEO on each of their individual contributions and additional job responsibilities, approved salary adjustments for eachMr. Bené of Messrs. Kreidler, Bené3.4%, Green,Mr. Grade of 22.5%, Mr. Libby of 11% and Mr. Shurts for fiscal 2015 of between 2.5% to 3%3.4%. The Committee approvedbase salary increase for Mr. Grade reflected the increased areas of responsibility in connection with his promotion to Executive Vice President and Chief Financial Officer, and Mr. Libby’s salary adjustment reflected increased areas of responsibility, effective September 1, 2015, in connection with his promotion to Executive Vice President, Administration & Corporate Secretary. As a result of these salary increases for annual market adjustments as recommended by CAP and management. These changes, placebased on the Exequity May 2015 compensation study, the fiscal 20152016 base salaries of Messrs. DeLaney Kreidler and ShurtsLibby approximated the median of the peer group, the fiscal 2016 base salary of Mr. Bené was positioned between the 50thand 75thpercentile of the peer group, the fiscal 2016 base salary of Mr. Shurts was positioned between the 25thand 50thpercentile of the peer group and the fiscal 2016 base salary of Mr. Grade approximated the 25thpercentile of the peer group. Mr. Kreidler’s 2016 base salary was not adjusted due to his scheduled departure from the Company, and Mr. Bené’s base salary was further adjusted from $750,000 to $800,000, effective as of January 1, 2016, in connection with his promotion to President and Chief Operating Officer.
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Fiscal 2017 Base Salary
For fiscal 2017 base salary determinations, the CEO recommended to the Committee that the base salaries of the NEOs be maintained at the fiscal 2016 levels based on the Company’s administrative cost management efforts and the Exequity May 2016 compensation study indicating that current compensation levels for the NEOs were consistent with the Committee’s executive compensation philosophy. In light of this recommendation, and following a review of each current NEO’s job responsibilities, management experience, individual contributions, tenure and then-current salary, the Committee determined that the base salaries of the current NEOs would not be adjusted for fiscal 2017. As a result, based on the Exequity May 2016 compensation study, the fiscal 2017 base salaries of Messrs. DeLaney and Libby approximated the median of the peer group, the fiscal 2017 base salaries of Messrs. Bené and GreenShurts were positioned between the 25thand 50thpercentile of the peer group and the medianfiscal 2017 base salary of Mr. Grade approximated the 25thpercentile of the peer group.
Annual Incentive Award – Detailed Information
The MIP annual incentive award is designed to offer opportunities for cash compensation tied directly to company performance. In August 2015, the Committee approved, pursuant to authority established by the 2013 Sysco Corporation Long-Term Incentive Plan, the Sysco Corporation Fiscal 2016 Management Incentive Program for MIP Bonus-Eligible Participants (the “2016 MIP”). In August 2016, pursuant to the same shareholder approved authority, the Committee approved the Sysco Corporation Fiscal 2017 Management Incentive Program (MIP) For Corporate MIP Bonus-eligible Positions (the “2017 MIP”).
Under the terms of the 2016 MIP and the 2017 MIP, we pay the annual incentive award in cash with payments made in the first quarter of the fiscal year for bonusesannual incentives earned with respect tofor performance in the prior fiscal year. Each year the Committee approves the incentive award framework for each of the current NEOs. In August 2013 and 2014, the Committee approved the incentive award framework for fiscal 2014 and 2015, respectively.
MIP Annual Incentive Award for Fiscal 20142016
The current NEOs’ fiscal 2014Under the 2016 MIP, the annual incentive award payout calculationopportunity for each of the NEO’s was based on the following corporate financial objectives, adjusted based on the respective weightingpre-determined metrics, weighted as shown in the chart below. The combined results of the corporate financial objectives are referred to as the Business Performance Factor. Once calculated, the results of the Business Performance Factor may then be adjusted by the Committee based on the Committee’s review and evaluation of each current NEO’s performance with respect to the pre-established SBOs. In fiscal 2014, 40% of the results from the Business Performance Factor was subject to adjustment based on SBO performance, while the remaining 60% of the annual incentive payment was based exclusively on the financial metrics that comprised the Business Performance Factor.indicated below:
Calculating the Business Performance Factor | ||||||||||||||||
Performance Metric(1) | Potential Payout | Weighting | x | 2014 Performance | = | Payout (% of target) | ||||||||||
Adjusted Fully Diluted Earnings Per Share | 0% - 150% | 50 | % | 0 | % | 0 | % | |||||||||
Adjusted Sales Growth/Gross Profit Dollar Growth | 0% - 150% | 30 | % | 75 | % | 22.5 | % | |||||||||
Adjusted ROIC(2) | 0% - 150% | 20 | % | 65.4 | % | 13.1 | % | |||||||||
TOTAL | 0% - 150% | 100 | % | 35.6 | % |
• | Individual strategic bonus objectives, or SBOs, for each |
Fiscal 2016 Financial Performance Targets.The fiscal 2014 program2016 MIP provided for minimum bonus payoutsannual incentive payments upon achieving adjusted fully diluted earnings per shareoperating income of at least $1.87, increases in$1.75 billion and/or adjusted sales growth of at least 3%1% and adjusted gross profit dollar growth of at least 2% and/or an adjusted return on invested capital of at least 12.00%. Because Sysco did not meet the minimumThe various levels of financial performance required to reach threshold, target and maximum payments are set forth below:
2016 MIP Financial Performance Targets - Fiscal 2016 | ||||||||||||
Adjusted Operating Income | Adjusted Sales Growth | Adjusted Gross Profit Dollar Growth | ||||||||||
Threshold | $ 1.750 billion | 1.0 | % | 2.0 | % | |||||||
Target | $ 1.892 billion | ≥4.0 – <5.0 | % | ≥4.0 – <5.0 | % | |||||||
Maximum | $ 2.034 billion | ≥6.0 | % | ≥6.0 | % |
Fiscal 2016 Financial Results and Performance Factors. For purposes of the 2016 MIP, actual results included adjusted fully diluted earnings per share, but did achieve an approximately 4.7% increase inoperating income of $1.982 billion (exceeded target performance level), adjusted sales growth a 2.3% increase inof 2.7% (exceeded threshold performance level), and adjusted gross profit dollarsdollar growth and 12.40% adjusted return on invested capital, we paid a fiscal 2014 MIP annual incentive award of approximately 35.6% of target.4.8% (equaled target performance level). SeeAnnex I for a reconciliation of these adjusted measures to the most directly comparable GAAP measures. Acquisition expenses, acquisition debt, if any, and any gainsBased on these results, which equaled or losses relating to or resulting from acquisitions with a purchase price in excessexceeded target performance for two of $100 million are excluded from the determination. During fiscal 2014, Sysco had no acquisitions with a purchase price over $100 million, The various levels ofthree metrics, we calculated weighted performance factors for the Adjusted Operating Income component and the percentageAdjusted Sales Growth/Gross Profit Dollar Growth component of base salary they would have yielded as a bonus are set forth in a table under “Executive Compensation — Management Incentive Plan.”the 2016 MIP:
Calculation of Weighted Financial Performance Factors (75% of target annual incentive opportunity) | ||||||||||||||||
Financial Performance Metric | Potential Payment | Weighting(1) | x | 2016 Performance | = | Weighted Financial Performance Factor | ||||||||||
Adjusted Operating Income(2) | 0% - 200% | 50 | % | 156.6 | % | 78.3 | % | |||||||||
Adjusted Sales Growth/Gross Profit Dollar Growth(3) | 0% - 200% | 25 | % | 87.5 | % | 21.9 | % |
(1) | This column represents, for each financial performance metric, the weighting of that metric for purposes of the total 2016 MIP annual incentive opportunity. |
(2) | The calculation of adjusted results for this performance metric excluded the following items: severance charges, professional fees on 3-year financial objectives, facility closure costs and costs associated with our revised business technology strategy; US Foods merger and integration planning and transaction costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition transaction costs (third and fourth quarters fiscal 2016 only); the financial impact of the additional week in fiscal 2016; and the impact of changes in foreign exchange rates compared to those assumed in the fiscal 2016 annual operating plan. |
(3) | The calculation of the adjusted results for each of these performance metrics excluded the following items: the financial impact of the additional week in fiscal 2016 and the impact of changes in foreign exchange rates compared to those assumed in the fiscal 2016 annual operating plan. |
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Fiscal 2014 Summary of Payments | ||||||||||||||||||||||||||||||||
Current NEO | Ending Base Salary | Target Annual Incentive (% of Base Salary) | Sysco Business Performance Factor | Award Funding on Business Performance Factor | Funded Award Not Subject to SBO (60%) | Individual SBO Performance Factor(1) | Amount of Award Funding on SBO (40%) | Total Earned Award for FY14 Performance | ||||||||||||||||||||||||
DeLaney | $ | 1,198,500 | 150 | % | 35.6 | % | $ | 639,999 | $ | 383,999 | 107.0 | % | $ | 273,920 | $ | 657,919 | ||||||||||||||||
Kreidler | $ | 715,000 | 100 | % | 35.6 | % | $ | 254,540 | $ | 152,724 | 107.0 | % | $ | 108,943 | $ | 261,667 | ||||||||||||||||
Green | $ | 715,000 | 125 | % | 35.6 | % | $ | 318,175 | $ | 190,905 | 105.0 | % | $ | 133,634 | $ | 324,539 | ||||||||||||||||
Bené | $ | 625,000 | 100 | % | 35.6 | % | $ | 222,500 | $ | 133,500 | 107.0 | % | $ | 95,230 | $ | 228,730 | ||||||||||||||||
Shurts | $ | 587,000 | 100 | % | 35.6 | % | $ | 208,972 | $ | 125,383 | 115.0 | % | $ | 96,127 | $ | 221,510 |
For each current NEO, the fiscal 2014Calculation of Total Award Earned under 2016 MIP. The total annual incentive award payment for each NEO under the 2016 MIP was subject to an initial earned award amount based on financial performance (the initial, unadjusted Business Performance Factor) equal to 35.6%calculated as indicated in the table below, with 50% of the target award. The actual final earned MIP award, however, was also subjectincentive opportunity based on the Company’s Adjusted Operating Income performance, 25% of the target incentive opportunity based on the Company’s Adjusted Sales Growth/Gross Profit Dollar Growth performance and the remaining 25% of the target incentive opportunity based on individual performance with regard to further review by the Committee, whereby the Committee considers pre-established individual SBOs, and haswhich the Committee had the discretion to adjust 40% of any earned MIP incentive awardpay out between 0% - 150% based on factors determined byits assessment of the Committee. These goals included, but were not limited to, performance against financial strategic goals and the current NEO’s personal performance. The assessment on this award component resulted in an adjustment to the Business Performance Factor as described above. The Committee believes the use of individual SBOs further promotes the overall executive compensation pay philosophy to link individual pay to performance.
If For further discussion of the current NEO’s performanceCommittee’s evaluation with respect to the individual SBOs of each NEO, as well as the calculation of each NEO’s “Weighted Individual SBO performance goals had met the target levels established by the Committee, the current NEO’s 2014 AwardPerformance Factor” for FY14 Performance would have equaled 100%purposes of the bonus determined by using the initial, unadjusted Business Performance Factor. Of the amount resulting from the initial, unadjusted Business Performance Factor, 40% is subject to adjustment by the Committee based on an evaluation of SBO performance. If the current NEO’s performance with respect to the goals had exceeded the target levels established by the Committee, the current NEO’s 2014 Awardtable below, please see “Compensation Discussion and Analysis—What We Paid and Why—Compensation for FY14 Performance would have equaled between 100% and 120% of the bonus determined by using the initial, unadjusted Business Performance Factor. If the current NEO’s performance was below the target levels of performance established by the Committee, the current NEO’s 2014 Award for FY14 Performance would have equaled between 60% and 100% of the bonus determined by using the initial, unadjusted Business Performance Factor.NEOs—Annual Incentive Award—Analysis” below.
For the reasons discussed in “—Annual Incentive Award – Analysis” below, the Committee adjusted the awards initially funded based on the Business Performance Factor and awarded (i) Messrs. DeLaney, Kreidler and Bené a 2014 MIP annual incentive award equal to 107% of the bonus that would have been paid using the initial, unadjusted Business Performance Factor, or 36.6% of target, (ii) Mr. Green a 2014 MIP annual incentive award equal to 105% of the bonus that would have been paid using the initial, unadjusted Business Performance Factor, or 36.3% of target, and (iii) Mr. Shurts a 2014 MIP annual incentive award equal to 115% of the bonus that would have been paid using the initial, unadjusted Business Performance Factor, or 37.7% of target.
Amount | ||||||||||||||||||||||||||||||||||||
Amount | of Award | Amount | ||||||||||||||||||||||||||||||||||
of Award | Funding on | of Award | ||||||||||||||||||||||||||||||||||
Funding on | Adjusted | Adjusted | Funding on | Total | ||||||||||||||||||||||||||||||||
Target | Adjusted | Adjusted | Sales Growth/ | Sales Growth/ | Weighted | Weighted | 2016 MIP | |||||||||||||||||||||||||||||
Annual | Operating | Operating | Gross Profit | Gross Profit | Individual | Individual | Award | |||||||||||||||||||||||||||||
Incentive | Income | Income | Dollar Growth | Dollar Growth | SBO | SBO | Earned | |||||||||||||||||||||||||||||
Ending Base | (% of Base | Performance | Performance | Performance | Performance | Performance | Performance | for FY16 | ||||||||||||||||||||||||||||
Name | Salary | Salary) | Factor | Factor | Factor | Factor | Factor | Factor | Performance | |||||||||||||||||||||||||||
DeLaney | $ | 1,250,000 | 150.0 | % | 78.3 | % | $ | 1,468,125 | 21.9 | % | $ | 410,625 | 33.0 | % | $ | 618,750 | $ | 2,497,500 | ||||||||||||||||||
Bené(1) | 775,000 | 125.0 | % | 78.3 | % | 758,531 | 21.9 | % | 212,156 | 30.0 | % | 290,625 | 1,261,313 | |||||||||||||||||||||||
Grade | 625,000 | 100.0 | % | 78.3 | % | 489,375 | 21.9 | % | 136,875 | 33.7 | % | 210,625 | 836,875 | |||||||||||||||||||||||
Libby | 600,000 | 100.0 | % | 78.3 | % | 469,800 | 21.9 | % | 131,400 | 32.5 | % | 195,000 | 796,200 | |||||||||||||||||||||||
Shurts | 625,000 | 100.0 | % | 78.3 | % | 489,375 | 21.9 | % | 136,875 | 28.1 | % | 175,625 | 801,875 | |||||||||||||||||||||||
Base | Target | OI PF | A = Base x Target x OI PF | SG/GP PF | B = Base x Target x SG/GP PF | SBO PF | C = Base x Target x SBO PF | Total = A+B+C |
(1) | Mr. Bené’s 2016 annual incentive payment was calculated using different base salaries for portions of fiscal 2016. For 50% of his 2016 annual incentive payment, covering the period from the beginning of the fiscal year to January 1, 2016, the effective date of his promotion, a base salary of $750,000 was used. For the remaining 50% of his annual incentive payment, covering the period from January 1, 2016 to the end of the fiscal year, a base salary of $800,000 was applied. |
In no event could any current NEO’s fiscal 2014 MIP annual incentive award have exceeded the maximum bonus amount set as part of the bonus pool amount discussed in “— Limit on Fiscal 2014 and Fiscal 2015 Maximum Annual Incentive Award Payouts” below. Executive Compensation Clawback Policy.The fiscal 20142016 awards are also subject to clawback provisions that provide that, subject to applicable law, all or a portion of the award paid pursuant to the 2014 awards2016 MIP may be recovered by Sysco if there is a restatement of our financial results, other than a restatement due to a change in accounting policy, within 36 months of the payment of the award and the restatement would result in the payment of a reduced award if the award was recalculated using the restated financial results. The Committee has the sole discretion to determine the form and timing of the repayment. See “— “Compensation Discussion and Analysis—Executive Compensation RecoupmentGovernance and Other Information—Executive Compensation Clawback Policy.”
MIP Annual Incentive Award Potential for Fiscal 20152017
In approvingAugust 2016, the Compensation Committee approved the fiscal 2017 annual incentive award opportunityopportunities described below for fiscal 2015,the eligible NEOs under the 2017 MIP, which was adopted by the Committee provided for:pursuant to the 2013 Sysco Corporation Long-Term Incentive Plan:
• | |
• | |
• | In measuring the Company’s performance with respect to these financial metrics under the 2017 MIP, the Committee, in its sole discretion, may make equitable adjustments in recognition of unusual or non-recurring events affecting the Company or its financial statements, including adjustments relating to the Company’s withdrawal from a multi-employer pension plan, restructuring charges, foreign exchange rate fluctuations and certain other events. For further discussion of performance factor adjustments, see “Executive Compensation – Annual Incentive Awards – 2013 Long-Term Incentive Plan – Performance Factor Adjustments” below. |
• | Each of the above components for the annual incentive |
• |
SYSCO CORPORATION - 20142016 Proxy Statement 4650
Limit on Fiscal 20142016 and Fiscal 20152017 Maximum Annual Incentive Award PayoutsPayments
The Committee established a bonusan annual incentive pool limit for each of fiscal 20142016 and fiscal 20152017 for the CFO and certain “covered employees” of Sysco, as defined in Section 162(m) of the Internal Revenue Code (the “Code”) to help ensure compliance with the deductibility requirements of Section 162(m) of the Code, as well asCode. Under the 2013 Long-Term Incentive Plan, the maximum dollar amount that may be paid under all cash-based awards granted to any individual for Mr. Kreidler. The bonus pool limit was set to be equal to two percent (2%) of Sysco’s net earnings for each ofany a fiscal 2014 and fiscal 2015 and in no event canyear under the sumPlan is 1% of the individual percentagesCompany’s earnings before income taxes as publicly disclosed in the “Consolidated Results of Operations” section of the bonus pool grantedCompany’s annual report to the participants in the pool exceed one hundred percent (100%). The maximum award for each Participant, expressed as a percentage of the bonus poolSecurities and Exchange Commission on Form 10-K for the programfiscal year ended immediately before the date the applicable award is set forth below and in no event can it exceed the individual award maximum set forth in the plan document:paid.
Percent of 2016 Incentive Pool | Percent of 2017 Incentive Pool | |||||||
Participant’s Title | Allocated to Participant | Allocated to Participant | ||||||
CEO | 41 | % | 39 | % | ||||
CFO | 13 | % | 14 | % | ||||
NEO 3 | 20 | % | 21 | % | ||||
NEO 4 | 13 | % | 13 | % | ||||
NEO 5 | 13 | % | 13 | % |
The umbrella structure of the bonusincentive pool limit serves only to provide a ceiling on the maximum bonusannual incentive amount that any NEO may receive, and the actual bonusincentive amount paid to each NEO will be determined pursuant to the applicable incentive award opportunityprogram described above.
Annual Incentive Award – Analysis
Fiscal 20142016
The MIP annual incentive award targets for fiscal 2014 continue2016 continued to align with Sysco’s profitannual operating plan, to link incentive pay to the Company’s profit plan and to provide that the goals reflect market conditions, operating expectations and other relevant factors as contemplated in the profitannual operating plan. CAP hasThe independent compensation consultant informed the Committee that this approach reflects sound design practices. In light of the foregoing, Sysco’s executive management team prepared, and the Committee approved, the earnings per share,adjusted operating income, sales growth and return on capital measurements ofgross profit dollar growth financial performance targets for the fiscal 2014 MIP2016 annual incentive award.awards. It was both management’s and the Committee’s intent to create an annual incentive award formula that was more likely to pay angenerally targeted at or above the median annual incentive awardranges among companies in the event Sysco performed at the median level relative to its peers than may have been the case with respect to prior year bonus formulas. our peer group upon achieving target performance goals.
The Committee excludes the extraordinary items described above because they represent items that generally involve current period costs that management and the Committee believe would not result in benefits until later periods, or vice versa. The Committee believes that the threshold and target levels of performance represented challenging, but reasonably obtainable, Sysco performance, while levels in excess of the target level represented exemplarysuperior and extremely challenging performance.
The Committee also set the target annual incentive award levels for each of the current NEOs to ensure that total cash compensation does not significantly exceed the median unless outstanding performance levels are achieved. The Committee maintained Mr. DeLaney’s target bonus level at 150% because it provided a target total cash compensation opportunity at approximately the median of the peer group. The Committee also asked CAP to validateAt the Committee’s request, Exequity validated that threshold, target and maximum performance expectations and associated payoutpayment levels under the fiscal 20142016 program were aligned.
Based upon the CAPExequity’s May 20132015 report and management reports containing Exequity data, target total cash compensation for fiscal 20142016 for each of the current NEOs, other than Mr. Grade, participating in the 2016 MIP compared as follows with respect to the comparablecorresponding peer group position: Mr.Messrs. DeLaney, — between the 25thpercentile and the median; Messrs. Kreidler, BenéLibby and Shurts — betweenapproximated the median and 75thpercentile;of the peer group and Mr. Green — nearBené approximated the 75thpercentile.percentile of the peer group. The Committee determinedfurther reviewed in May 2015 the relationship between actual realizable pay for the NEOs and the company’s total shareholder return and found that these target opportunities were appropriate.realizable pay positioning versus peers over the three year period of fiscal 2012 to fiscal 2014 was tightly aligned with the Company’s total shareholder return versus its peers.
The Committee believes that individual goals are extremely important in evaluating the CEO’s and other current NEO’sNEOs’ respective performance and that they should, therefore, also have an impact on each of their annual incentive opportunities. The Committee refinedUnder the 2016 MIP, annual incentive award for the current NEOs by providing that the Committee may considerestablished individual SBOs in order to further align the current NEOs’ objectives with the key components of Sysco’s overall strategy. The Committee believes that consideration of individual SBOs further promotes the overall executive compensation pay philosophy by strengthening the link between executive pay and individual performance. Each individual’s SBOs for fiscal 20142016 were pre-established by the Committee based on the critical components of Sysco’s overall strategy as set out by management and the Board. For each SBO, the Committee reviewed and rated each current NEO atusing the following rating/associated payment ranges: significantly below target (0%); below target (50% - 85%); on target (90% - 110%); above target (115% -125%- 125%) and significantly above target (130% to- 150%).
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Following the Committee’s evaluation in July 20142016 of each current NEO’s performance in fiscal 20142016 with respect to these individual SBOs, the Committee adjusteddetermined the Businessapplicable SBO Performance Factor for each NEO as described in the following table.
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SBOs | Committee’s Review and Determination | ||||||
1) 2) 3) 4) 5) 6) | Continued focus on acquisition opportunities. Continue development of Delivery of 3-year plan for increasing operating income. Achieve planned earnings per share. Achieve planned cost per piece. Achieve planned customer service goals. | Awarded Mr. DeLaney a | |||||
1) 2) | |||||||
Achieve planned cost per piece. Achieve planned customer | |||||||
Awarded Mr. | |||||||
Grade | 1) 2) | Achieve planned cost per piece. Achieve planned earnings per share. | Awarded Mr. Grade a 2016 MIP annual incentive award equal to 135% of target with respect to the SBO Factor | ||||
Libby | 1) 2) | Achieve expense plan goals, including | |||||
targeted reduction in legal fees. Establish newly identified corporate functions. | Awarded Mr. Libby a 2016 MIP annual incentive award equal to 130% of target with respect to the SBO Factor based on the evaluation of Mr. Libby’s performance. The above target payment was driven by performance significantly above target level with respect to the first SBO and above target performance with respect to the second SBO. | ||||||
Shurts | 1) 2) | Achieve expense plan goals, including planned business Deliver portfolio of | Awarded Mr. Shurts a | ||||
second SBO. |
Based upon the CAP May 2014 report, actual total cash compensation for fiscal 2014, using an annual incentive award payout estimate of 38% of target, for each of the current NEOs with respect to comparable peer group pay levels for Mr. DeLaney at approximately the 25thpercentile, for each of Messrs. Bené, Green and Shurts pay levels were generally between the 25thpercentile and the median, and for Mr. Kreidler at approximately the 75thpercentile. Actual total direct compensation was at approximately the 25thpercentile for Messrs. DeLaney and Green; was approximately at the median for Messrs. Bené and Shurts; and was between the median and the 75thpercentile for Mr. Kreidler. The Committee was satisfied that these payout levels appropriately correlated to Sysco’s overall financial performance, which was between the 25thpercentile and median relative to the peer group on select metrics.
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Fiscal 20152017
In the first quarter of fiscal 2015,2017, the Committee refined the MIP annual incentive awardfinancial performance targets for fiscal 20152017 under the 2017 MIP to continue alignment with Sysco’s profitannual operating plan and to provide that the goals continue to reflect market conditions, operating expectations and other relevant factors. Similar to the performance measures used in fiscal 2014, theThe Committee has determined that the fiscal 20152017 annual incentive financial performance measures are:will be: (1) adjusted operating income, a key earnings measure, as measured bycompared to projected, target adjusted fully diluted earnings per share,operating income and (2) capital efficiency, as measured by adjusted return on invested capital and (3) profitable sales growth. These metrics are calculatedgrowth in the same mannerCompany’s gross profit dollars, which represents a key top-line measure, and North American Broadline (“NABL”) total cases, which represents a key volume performance measure that is not subject to external market variations like currency exchange rates and inflation/deflation, in each case as fiscal 2014.compared to projected, target year over year growth for each measure. For fiscal 2015, the performance metrics based on financial performance provide 80%2017, adjusted operating income provides 50% of the target bonusannual incentive opportunity, growth in gross profit dollars and NABL total cases provides 25% of the target annual incentive opportunity, and the SBO assessment provides 20%. Withinperformance goals provide 25% of the portion governed by financial performance metrics, the relative weighting is as follows with respect to the current NEOs: adjusted diluted earnings per share (50%); profitable sales growth (30%); and capital efficiency (20%).target annual incentive opportunity. The Committee continues to believe that the threshold and target levels of performance represent challenging, but reasonably obtainable, Sysco performance levels, while levels in excess of the target level represent exemplarysuperior and extremely challenging performance. CAPExequity has informed the Committee that this approach continues to be in line with the majority of Sysco’s peer group and reflective ofreflects sound design practices.
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Long-term Incentives – Detailed Information
Fiscal 2016
The Committee granted long-term incentives in November 20132015 for the 2014 fiscal year2016 (the “Annual“Fiscal 2016 LTI Grant”). These incentives consisted of stock options, RSUs and CPUs. The long-term incentives arewere designed to provide our current NEOs competitive long-termlonger-term incentive opportunities that alignare consistent with our peer group and reflect our overall compensation philosophy.philosophy of aligning pay with performance. The Fiscal 2016 LTI Grant consisted of stock options, RSUs and CPUs. The targeted aggregate dollar value of the Fiscal 2016 LTI Grant was set by the Committee at 6.5x base salary for Mr. DeLaney, 3.5x base salary for Mr. Grade, 3.25x base salary for Messrs. Bené and Shurts and 3x base salary for Mr. Libby, and the total value of these long-term incentives for each NEO was allocated among the awards by the Committee as follows: approximately 40% of the value in stock options, approximately 35% in CPUs, and approximately 25% in RSUs. The options were valued at $5.77 per option using the Black-Scholes pricing model (as of October 15, 2015), each RSU was valued at $40.59 per share (i.e., the ten trading day average closing price of Sysco common stock prior to the grant date) and each CPU was valued at the target level of $1 per unit. The values referenced by the Committee for the stock options and RSUs awarded in connection with the Fiscal 2016 LTI Grant differ slightly from the values for such awards reported below in the Summary Compensation Table and the Grants of Plan-Based Awards table due to the requirement that those tables reflect the fair value of such awards on the date of grant (as opposed to the methods described above for estimating the value of RSUs and options in connection with modeling and allocating the Fiscal 2016 LTI Grant). For morefurther details regarding these grants and their respective grant date fair values, see “Executive Compensation —Cash— Summary Compensation Table,” “Executive Compensation — Cash Performance Unit Plan,Units,” “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End,” and “Executive Compensation — Grants of Plan-Based Awards.”
In fiscal 2014, through the Annual LTI Grant, Messrs. DeLaney, Kreidler, Bené, Green, and Shurts received approximately 40% of the value of their long-term incentives in stock options, approximately 35% in CPUs, and approximately 25% in grants of RSUs, with the options valued using the greater of $4 per option or the Black-Scholes calculated value per option, each RSU valued at the average ten-day closing price of Sysco common stock before the grant date, and each CPU valued at the target level of $1 per unit. The Black-Scholes value of the options calculated based on standard assumptions was $4.68 per option. See the footnotes to the Grants of Plan-Based Awards table below for detailed explanation of the Black-Scholes calculation for the options as of the date of grant. The targeted dollar value of the long-term incentive grants are set at 6x base salary for Mr. DeLaney, 3.5x base salary for Mr. Kreidler and 3.25x base salary for Messrs. Bené, Green and Shurts.
Stock Options and Restricted Stock Units
The Committee approved the fiscal 20142016 stock option and restricted stock unitRSU grants to Messrs. DeLaney, Kreidler,Grade, Bené, GreenLibby and Shurts in November 20132015 under our stockholder approved 2013 Long-Term Incentive Plan. All fiscal 20142016 grants are shown under “Executive Compensation— Grants of Plan-Based Awards.” The 2013 Long-Term Incentive Plan calls forrequires options to be priced at the closing price of our common stock on the business day prior to the grant date, and the fiscal 20142016 option grant agreement provides for ratable vesting over a five-year period. For stock options granted fromsince November 2013 forward,2014, the maximum term of the option has been extended from seven tois ten years. The fiscal 20142016 RSU grant agreements provide for vesting in three equal tranches over a three-year period following the date of grant. The Committee grants all stock options and RSUs pursuant to approved equity grant guidelines. These guidelines are more fully described under “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End.”
Cash Performance Units
UnderAs part of the Sysco Corporation 2008 Cash Performance Unit Plan, as amended,fiscal 2016 long-term incentive program, participants, inincluding each of the MIPNEOs, have the opportunity to receive cash incentive payments based on Sysco’s performance over a specified three-year period.period in the form of Cash Performance Units. CPU grants are forward-looking, and the grant of CPUs typically does not take into account prior Sysco or individual performance. CPU payoutspayments are based on Sysco’s actual performance over the three-year performance cycle beginning with the fiscal year in which the CPU is granted. In November 2013,2015, the Committee granted three-year CPUs under the 2008 Cash Performance Unit Plan for the2013 Long-Term Incentive Plan. The CPUs with a performance period commencing in fiscal 2014-2016 performance period. In addition,2014, which paid out in August 2016, and the CPUs that we issuedwith a performance period commencing in fiscal 2011 and fiscal 20122015, which become payable in August 2017, were issued under the 2008 Cash Performance Unit plan were paid out in August 2013 and August 2014, respectively (see discussion below). The 2008 Cash Performance Unit Plan expires November 30, 2014. CPU awards after that date will be made pursuant to the 2013 Long-Term Incentive Plan.
The CPU grants that the Committee made in fiscal 20112014 and fiscal 2012 related to the three-year performance period ending in fiscal 2013 and 2014, respectively, with payout2015 provided payment possibilities ranging from 0% to 150% of the total value of the units granted. The fiscal 20112014 and fiscal 20122015 grants each had a value of $1 per CPU. OfEach of the current NEOs Messrs. DeLaney, Kreidler, and Green each received a CPU grant of CPUs in fiscal 20112014 and fiscal 2012.2015. For the fiscal 2011 grant, one-half of the payout was based on the average growth in diluted earnings per share2014 and one-half of the payout was based on the average increase in sales. Achievement of the target performance goals would have yielded a 100% payout, while the minimum satisfaction of only one criterion would have yielded a 25% payout and maximum performance above target on both criteria would have provided a 150% payout. In order for generally accepted accounting principles to be applied consistently year-over-year, the performance measures for the CPUs may be calculated slightly differently from comparable measures in our financial statements.
For the fiscal 2012 grant, the Committee changed2015 CPU grants, the performance metrics/goals associated with the CPUs so that they arewere based solely on Sysco’s three-year total shareholder return, as compared to that of the S&P 500 companies. Based upon Sysco’s relative total shareholder return, CPUs willunder each award would pay out from 0% to 150% of the target award value. The threshold payment (which iswas 50% of target) requiresrequired Sysco’s three-year total shareholder return to equal or exceed that of the 30thpercentile of the S&P 500 companies, while the maximum payment is earnedrequired performance at the 75thpercentile, with graduated payoutspayments in between. The target payout is earnedpayment required performance between the 45thand 55thpercentile. These grants arewere subject to Sysco’s clawback policies. See “Executive Compensation— Cash Performance Unit Plan”Units” for an explanation of the calculation of total shareholder return.
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For the CPU award granted in fiscal 2011, our adjusted sales growth over the three-year performance period ended on June 29, 2013 was 6.76% and our average growth in fully diluted earnings per share over the performance period was negative 4.88%, which resulted in a CPU payout of $0.594 per unit in August 2013, which was approximately 59% of the aggregate target payout for the fiscal 2011 CPU grant. See Annex I - Non-GAAP Reconciliations for a reconciliation of these adjusted measures to the comparable GAAP measures. For the fiscal 20122014 CPU grant, our relative total shareholder return for the period ending June 28, 2014July 1, 2016 was in the 2766thpercentile, representing performance that was belowabove the thresholdtarget level set for the fiscal 2012 CPU grant.of performance. Consequently, the fiscal 20122014 CPU grant resulted in no payments.a payout at 140% of the target amount for participants, including each of the NEOs other than Mr. Kreidler.
The specific performance measures and related potential payoutspayments for the fiscal 2012 CPU award, the fiscal 20132014 CPU award and the fiscal 20142016 CPU award are shown under “Executive Compensation—Cash Performance UnitUnits.”
Fiscal 2017
The Committee granted long-term incentives in August 2016 for fiscal 2017 (the “Fiscal 2017 LTI Grant”). These long-term incentives were designed to provide our NEOs competitive longer-term incentive opportunities that are consistent with our peer group and reflect our overall compensation philosophy of aligning pay with performance. The Fiscal 2017 LTI Grant consisted of stock options and Performance Share Units (“PSUs”). The targeted aggregate dollar value of the Fiscal 2017 LTI Grant was set by the Committee at 6.5x base salary for Mr. DeLaney, 3.75x for Mr. Bené, 3.5x base salary for Mr. Grade, 3.25x base salary for Mr. Shurts and 3x base salary for Mr. Libby. The total target value of these long-term incentives for each NEO was allocated among the awards by the Committee as follows: approximately 40% of the target value in stock options and approximately 60% of the target value in PSUs. The options were valued at $6.00 per option using the Black-Scholes pricing model (as of July 15, 2016) and each PSU was valued at $52.35 per share (i.e., the ten trading day average closing price of Sysco common stock prior to the grant date).
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Stock Options and Performance Share Units
The Committee approved the fiscal 2017 stock option and PSU grants to Messrs. DeLaney, Bené, Grade, Libby and Shurts in August 2016 under our stockholder approved 2013 Long-Term Incentive Plan. The 2013 Long-Term Incentive Plan requires options to be priced at the closing price of our common stock on the business day prior to the grant date, and the fiscal 2017 option grant agreement provides for ratable vesting over a three-year period. The maximum term of the option under the fiscal 2017 grants is ten years. The fiscal 2017 PSU award agreements provide for cliff vesting at the conclusion of the three-year performance period if threshold performance levels are achieved. The Committee grants all stock options and PSUs pursuant to approved equity grant guidelines. These guidelines are more fully described under “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End.”
The fiscal 2017 awards of PSUs provide the opportunity for participants to receive shares of common stock based on pre-established financial performance targets over a performance period of three fiscal years. The performance criteria for the fiscal 2017 PSUs are based on (i) the Company’s earnings per share compound annual growth rate (“EPS CAGR”) as compared to projected, target EPS CAGR for the performance period, representing 66.7% of the total incentive opportunity under the PSUs, and (ii) the Company’s three-year average adjusted return on invested capital (“ROIC”), as compared to projected, target ROIC for the performance period, representing 33.3% of the total incentive opportunity under the PSUs. Each of these performance measures is assessed independently of the other, such that one portion of the award could be earned even if the threshold level of performance is not achieved for the other measure.
Each PSU granted to participants represents the right to receive one share of common stock, but the ultimate number of shares of common stock to be earned with respect to a participant’s PSUs will be determined at the end of the three-year performance period and could range from 0% to 200% of the target number of PSUs offered to the participant, based on the Company’s EPS CAGR and ROIC performance relative to the pre-established targets. Dividend equivalents accrue during the performance period and are paid either in shares or in cash, in the discretion of the Committee, based on the number of PSUs earned following certification of the Company’s performance.
Long-term Incentives – Analysis
The Committee determined the mix of CPUs, stock options and RSUs for the FY 2014 AnnualFiscal 2016 LTI Grant in order to continue to provide long-term incentives that are in line with those disclosed by the peer group and to provide further alignment of the executives’ interests with those of the stockholders based onusing incentive vehicles with varying vesting and payoutpayment periods. Total long-term incentive opportunities are generally targeted between the 60thand the 75thpercentile of the targeted grant value of long-term incentives awarded by companies in our peer group.
The Committee determined that in fiscal 2015, the annual LTI grant will consistmix of approximately 40% stock options 35% CPUs, and 25% RSUs. By shifting morePSUs for the Fiscal 2017 LTI Grant was an appropriate evolution of the current NEO’s long-termCompany’s incentive programs in light of shifting competitive market practices. PSUs, which are contingent on the successful completion of both performance-based and time-based requirements before any payout occurs, further strengthen the link between individual pay fromopportunities and Company performance and further enhance the Company’s efforts to retain key executives. The performance targets selected by the Committee for the PSUs also incentivize participants to align their efforts with the company’s 3-year strategic plan. In addition, the Committee maintained market competitiveness for key leaders by reducing pro-rata vesting of stock options from a 5-year period to CPUs, the current NEO’s compensation will be more strongly linked to the Company’s relative total shareholder return.
Based on the long-term incentives granted, as discussed above under “Long-term Incentives – Detailed Information,” the resulting target total direct compensation for fiscal 2014 was as follows: the positioning for Mr. DeLaney approximated the median, positioning for Mr. Kreidler approximated 75thpercentile, and positioning for Messrs. Bené, Green and Shurts was between median and 75thpercentile. These results were consistent with the Committee’s focus of providing competitive base salaries and competitive incentive opportunities such that target total direct compensation was closer to the median.
The minimum, target and maximum performance goals and corresponding payouts for the CPU awards, as well as the decision to use the S&P 500 companies, were based on an analysis of our peer group’s practices, the Committee’s desire to use a broad market index, and the Committee belief that total shareholder return is the ultimate measure of stockholder value creation and long-term Company success.3-year period.
The Committee believes that the long-term equity mix, including stock optionoptions, RSUs and RSU awards helpPSUs, helps to ensure that long-term strategic initiatives are not compromised by having executives focus solely on short-term profitability through the annual incentive award. Such awards also help focus executives on strategies that increase long-term stockholder value. Existing executive equity ownership levels are not generally a factor in the Committee’s granting of stock options, RSUs and RSUs.PSUs.
TransactionFiscal 2016 Incentive Awardsand Retention Payments – Detailed Information
On March 21, 2014,July 10, 2015, based on (i) the strong desire of the Committee to incentivize and retain certain senior officers as they transitioned their focus from integration planning for the terminated merger with US Foods to pursuing other operational and strategic initiatives, (ii) an effort to recognize that these individuals played critical roles in the development of the future business strategy of the Company in conjunction with their integration planning work, and (iii) recognition of the work product generated by the integration planning teams under the direction of senior officers, which would be of considerable value to the Company in the future, the Committee approved a one-time incentive and retention cash awards for certain officers of the Company, including current NEOs other than Mr. DeLaney, relatedpayment to such officers. Payments made to the proposed merger with USF. The Committee authorized the payment of immediate cash bonus payments to ten officers, including four of the current NEOs. These individuals were each instrumental in the successful negotiation of the proposed merger agreement.
The Committee also authorized the creation of an incentive pool of other employees of the Company who have been, and will be, directly involved in planning, leading and executing the complex integration of the proposed merger, while simultaneously leading the Company’s ongoing operations during the pendency of the proposed merger. Payment of awards will be contingent, among other things, upon the closing of the merger and approval of a definitive integration plan. Each award was made in recognition of the significant efforts undertaken to secure the terms of the proposed merger, the complexity of the integration of the Company and USF, and the importance of retaining key employees during the proposed merger.
Lump-Sum Transaction Cash Bonus Awards Paid in Fiscal 2014
Ten officers received cash bonuses in fiscal 2014 in connection with the proposed merger, expressed as a percentage of their then current base salary. Of the current NEOs Mr. Kreidler received an award valued at 60% of base salary and Messrs. Bené, Green and Shurts received an award valued at 20% of base salary. The payments in satisfaction of the awards were made on or around April 15, 2014, in the following amounts:were: Mr. Kreidler ($429,000),; Mr. Bené ($125,000)281,250), Mr. GreenLibby ($143,000)315,000) and Mr. Shurts ($117,400)264,150).
Lump-Sum Transaction Cash Bonus Awards Projected These incentive and retention payments were subject to Be Payable in Fiscal 2015
a twelve-month recoupment provision should the recipient have voluntarily terminated employment with the Company. The Committee also authorized the establishment of a closing bonus pool to recognize the contributions of 46 Sysco leaders who are expected to be involved in leading and executing the integration planning effort. The individuals have varying roles, including overall leadership and oversight, designing and managing their respective functional areas under the new structure, and executing the merger integration plans. The target valuewaived application of the cash bonus awards for any specific individual is contingent on the closing of the merger, successful completion of the project objective, significance of the role of the project and the expected duration of the project. Each of the cash bonus awards was expressed as a percentage of then current base salary. Of the current NEOs,recoupment provision to Mr. Kreidler, has a target cash bonus awardin light of 100%, based on his role as integration planning team leader, and Messrs. Bené, Green and Shurts each have a target cash bonus award of 75%, based on their respective roles as executive sponsors and/or sponsors of key aspects of the integration planning team. If the conditions precedent to the payment are satisfied in fiscal 2015, the resulting cash bonus payments to the current NEOspreviously scheduled departure from the bonus pool are projected to be as follows: Mr. Kreidler ($715,000), Mr. Bené ($468,750), Mr. Green ($536,250) and Mr. Shurts ($440,250).
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Compensation of the Former Executive Chairman
Mr. Fernandez was elected to the Executive Chairman position in April 2012. Prior to becoming Executive Chairman, Mr. Fernandez served as a non-employee director and non-executive chairman of the board of Sysco. For more detail regarding Mr. Fernandez’s compensation and target annual equity award as Executive Chairman, see the Form 8-K filed with the SEC on April 17, 2012.
As noted above, the establishment and monitoring of Mr. Fernandez’s compensation during his employment as Executive Chairman was not part of the process that applies to the current NEOs. Neither the CEO, nor any other employees of the Company, made any recommendation regarding Mr. Fernandez’s compensation. Rather, Mr. Fernandez’s compensation was determined by the Committee in consultation with CAP. In determining Mr. Fernandez’s compensation as Executive Chairman, the Committee considered various factors, including the Committee’s determination and assessment of the role, responsibilities and time requirements. The Committee also reviewed CAP materials concerning executive chairpersons at other Fortune 200 companies, as a ratio of compensation to the Chief Executive Officer in each such organization. On August 22, 2013, the Committee approved the following compensation for Mr. Fernandez:
Mr. Fernandez retired in good standing from the Company on November 15, 2013.Company.
Retirement/Career Benefits – Detailed Information
Retirement Plans – Current Programs – Management Savings Plan
As our business strategy and organization evolve, it is critical that our compensation programs support strategic and operational priorities. Additionally, our pay programs are continually evaluated to ensure they reflect best practices, engage and motivateincentivize executives, and support the Company’s ultimate goal of delivering shareholderstockholder value. Sysco monitors evolving best practices in executive rewards program design, and we modify our programs, as necessary.
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On January 1, 2013, Sysco introduced a new non-qualified, defined contribution savings plan, the Management Savings Plan (the “MSP”). The MSP allows individual deferrals and employer contributions in excess of IRS 401(k) contribution and compensation limits. The MSP allows eligible participants to defer up to 50% of their base salary (for calendar years 2013 and thereafter) and up to 100% of their eligible bonus (for fiscal years 2014 and thereafter). In addition, in conjunction with the freeze of accruals in the SERP,Supplemental Executive Retirement Plan (the “SERP”), certain participants (who would otherwise have incurred a sizable loss of future benefits under the SERP) are eligible for transition contributions of between 2.5% - 10% of their eligible pay for a period not to exceed (i) ten years or (ii) the date of their departure from the Company. To the extent that any portion of an employer contribution to an eligible individual’s tax-qualified defined contribution savings plan are limited by IRS regulation, these contributions will be recorded to the MSP as well.contributions. The participants in the MSP direct the investment for both their individual contributions and the company contributions. The MSP is described in further detaildetailed below under “Executive Compensation — Management Savings Plan.Fiscal 2016 Nonqualified Deferred Compensation – About the MSP.”
MSP Analysis
Currently, individual contributions to the 401(k) plan are limited by law to $17,500$18,000 per year.year, plus an additional $6,000 in “catch-up” contributions if the participant is at least 50 years of age. The Committee believes that the MSP motivatesincentivizes and assists in the retention of key employees by providing them with a supplemental retirement savings vehicle. The MSP is an important, and cost effective, recruitment and retention tool for Sysco, as the companies with which we compete for executive talent typically provide a similar plan to their senior employees.
Retirement Plans – Transition from Legacy Programs
During fiscalSince 2013, Sysco made significant changes to retirement benefits offered to employees, including the current NEOs. Wehas moved future retirement benefits from a defined benefit focus towards a defined contribution strategy. The transition to astrategy for future retirement benefit accruals. A defined contribution-based program further aligns Sysco with our peer group, increases flexibility, simplifies the benefit structure, retains key talent and both reduces and stabilizes costs. Going forward, in addition to the defined contribution retirement program,Since that time, wealth accumulation opportunities for current NEOs at Sysco will behave been further focused on variable annual and long-term incentive plans, each of which are better aligned with stockholder interests and Sysco performance.plans.
The retirement program changes, however, were expected to result in significant reductions in anticipated benefits for existing participants in the pension plan, the SERP and the EDCP. In order to help ensure retention of key leaders during the transition from the defined benefit focus towards a defined contribution strategy, Sysco amended the 401(k) and MSP to partially mitigate thesethe reductions in pension plan benefits by providing that, for a period of ten plan years commencing January 1, 2013, or until an eligible participant ceases employment with Sysco, whichever is earlier, Sysco will credit an automatic employer contribution of three percent (3%) of the participant’s gross base salary and bonus into the participant’s 401(k) account to the extent permitted under applicable IRS limitations, with the remainder credited to the MSP account of eligible participants (the “Pension Transition Contribution”). To be eligible to receiveMr. DeLaney is the Pension Transition Contribution, a participant must have been accruing benefits under the pension plan as
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of December 31, 2012 and have been at least age fifty (50) with fifteen (15) or more years of Sysco service as of that date. The Company will credit Pension Transition Contribution regardless of whether the participant defers any amounts under the MSP or 401(k), so long as he remains employed by the Company or leaves for qualifying retirement, death or disability in such calendar year. The Pension Transition Contribution is available to any eligible participant in the pension plan. Of the NEOs, Messrs. DeLaney and Green areonly NEO eligible to receive the Pension Transition Contribution.
With respect to reductions in the expected value of benefits under the SERP and the EDCP, the cessation of future benefit accruals affected each individual in a different manner. While some existing SERP participants experienced no projected adverse impact, others were forecast to experience reductions of up to 49%. To address concerns over retention, the Committee developed a transition program intended to help ensure that no impacted participant experiences an aggregate reduction of more than 15% - 20% (depending on an individual’s prior years of service) in his or her expected retirement benefits under the Company’s non-qualified plans as a result of the retirement strategy changes.
The change in anticipated value was measured by comparing the projected lump-sum value of an individual’s anticipated benefit at his or her earliest unreduced retirement age under both the prior and the revised strategies. Projection of lump-sum values were based on assumed increases in annual salary, investment earnings and elective deferrals in-line with historical averages. The impact of the projected change varied depending on a participant’s age, years of service and compensation. The current NEOs’ projected reductions in non-qualified retirement benefits under the revised program, including consideration of any transitional contributions except for transitional RSU opportunities, were as follows: Mr. DeLaney (31%), Mr. Kreidler (44%) and Mr. Green (4%). While Messrs. Bené and Shurts were not eligible for the SERP or the EDCP. EDCP, Mr. DeLaney (31%), Mr. Kreidler (44%) and Mr. Libby (49%) each had a projected reduction in their respective non-qualified benefits in excess of the targeted range.
To mitigate the loss in projected non-qualified retirement benefits, impacted individuals were eligible for a transitional compensation opportunity in the form ofopportunities, including supplemental contributions to the MSP. Of the NEOs, Mr. Libby was eligible for a supplemental MSP a one-time transitional RSU grant, or a combination thereof.
Each transitional compensation opportunity is contingent on continued service to Sysco. Transitional RSUs vest in equal annual tranches over the 5-year period following grant. Supplemental contributions to the MSP are payable over up to eachcontribution of the next 10 plan years that commenced January 1, 2013, and eligible individuals only receive the contribution for any given plan year if they remain employed with Sysco through December 31 of the applicable year, or have experienced a termination of employment by reason of death, disability or qualifying retirement during the plan year. The first transitional contribution to the MSP10%, which was made on his behalf in the third quarter of fiscal 2014 for qualifying individuals who had remained employed with Sysco through December 31, 2013.
The amount and form of the transitional contribution available to each current NEO resulted from Committee determination of the level of mitigation necessary to retain key talent during this significant transition in non-qualified retirement benefits. The transitional compensation opportunity for each of the impacted current NEOs under the MSP is as follows: Mr. Kreidler (10%). Messrs. DeLaney, Bené, Green and Shurts are not eligible for supplemental MSP contributions. In addition, certain individuals for whom the projected reductions remained above the intended range received a one-time RSU grant on November 14, 2012. Of the NEOs, only Messrs. DeLaney and Kriedler received such an award. Including the transitional compensation opportunities discussed above, the projected reductions in the non-qualified retirement benefits for individuals eligible under the revised program are as follows: Mr. DeLaney (15%); Mr. Kreidler (20%); and Mr. Green (4%).2016.
Legacy Program - Supplemental Executive Retirement Plan
We historically havehad provided annual retirement benefits to all corporate employees and most of our non-union operating company employees under the tax-qualified Sysco Corporation Retirement Plan, a defined benefit program whichthat we simply refer to as the “pension plan.” Beginning January 1, 2013, however, most employees no longer accrue additional retirement benefits under the pension plan. From 2013 forward, the Sysco Corporation Employees’ 401(k) Plan, a tax-qualified, defined contribution program, will serve as the primary retirement vehicle for the Company. WhenHowever, when the pension plan was the primary retirement vehicle, the Company also maintained a Supplemental Executive Retirement Plan, or SERP, in order to retain loyalty and increaseddrive continued performance from certain employees. The Committee utilized the SERP to increase the retirement benefits available to officers whose benefits under the pension plan arewere limited by law. Of the NEOs, Messrs. Delaney, Kreidler and Green participatedLibby participate in the SERP.
The SERP was frozen and future accruals under the SERP ceased, effective June 29, 2013. Participants covered by theThose SERP as of June 29, 2013 were granted accelerated vesting. For thoseparticipants who retire and are not eligible for immediate commencement of their SERP benefit they will beare deemed 100% vested, with benefits payable upon reaching age 65. The earliest an executive can retire and receive any benefits under the SERP is age 55 with a minimum of 15 years of MIP service or age 60 with 10 years of Sysco service. Payments before the age of 65 are adjusted by an early retirement reduction factor. The SERP was designed to provide fully vestedfully-vested participants with post-retirement monthly payments, with annual benefits equaling up to 50% of a qualifying participant’s final average annual compensation, when combined with other retirement benefits, including other pension benefits, the company match under the 401(k) plan and social security payments. The participating NEOs will receive a SERP benefit based on the greater of the accrued benefit determined as of the relevant separation date from service under the current provisions of the SERP, or the accrued benefit determined as of June 28, 2008 under the prior provisions of the SERP, but with vesting, benefit limits and eligibility for immediate benefit payments determined as of the relevant separation from service date. Annual retirement benefits from the SERP are limited to approximately $2,393,832 per year, reduced for early commencement of benefit payments, as applicable. The terms of the SERP are more specifically described under “Executive Compensation — Pension Benefits — Supplemental Executive Retirement Plan.” The amounts accrued by each participating NEO under the pension plan and the SERP as of June 28, 2014July 2, 2016 are set forth under “Executive Compensation — Pension Benefits.”
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SERP Analysis
The Committee previously amended the SERP to freeze benefits, stop future accruals and to provide for immediate vesting of accrued benefits in order to achieve the following goals:
• | Bring the value of retirement benefits more in line with the practices of the peer group; and |
• |
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Legacy Program - Executive Deferred Compensation Plan
Prior to December 31, 2012, Sysco offered an Executive Deferred Compensation Plan, or EDCP, to provide MIP participants, including the current NEOs other than Messrs. BenéDeLaney and Shurts,Libby, the opportunity to save for retirement and accumulate wealth in a tax-efficient manner beyond savings opportunities under Sysco’s 401(k) retirement savings plan. Participants were able to defer up to 100% of their base salary and up to 40% of their MIP bonus, or any bonus paid in lieu of or as a replacement for the MIP bonus, to the EDCP. Sysco did not match any base salary deferrals into the EDCP in fiscal 2014, and2016, as deferrals are no longer permitted. For participants who chose to defer a portion of their qualifying bonus, Sysco matched 15% of the first 20% deferred, making the maximum possible match to the EDCP 3% of the MIP bonus. An executive is always 100% vested in his or her past deferrals and each Sysco match,matches, but any portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his or her deferrals, is subject to forfeiture for specified cause or competing against Sysco in certain instances. Participants who have deferred compensation under the EDCP may choose from a variety of investment options, including Moody’s Average Corporate Bond Yield, with respect to amounts deferred. Company matching contributions are credited with the Moody’s Average Corporate Bond Yield.options. The EDCP is described in further detail under “Executive Compensation — ExecutiveFiscal 2016 Nonqualified Deferred Compensation Plan.– About the EDCP.”
EDCP Analysis
Currently, individual contributions to the 401(k) plan are limited by law to $17,500 per year. For many years, the EDCP served as a recruitment and retention tool for Sysco. In connection with the broader transition in retirement philosophy, beginning in fiscal 2013, a new deferred compensation plan, the MSP, has been utilized.utilized to fulfill this objective.
Executive Perquisites & Other Benefits – Detailed Information
We provide benefits for executives that we believe are reasonable, particularly since the cost of these benefits constitutes a very small percentage of each NEO’s total compensation. Certain of these benefits are described below.
Sysco’s NEOs are generally eligible to participate in Sysco’s regular employee benefit programs, which include a 401(k) plan, an employee stock purchase plan, group life insurance and other group welfare benefit plans, and until the changes were made to retirement benefits in fiscal 2013, the defined benefit pension plan. We also provide MIP participants, including the NEOs, with additional life insurance and accidental death and dismemberment insurance benefits, long-term disability coverage, including disability income coverage, and long-term care insurance, as well as reimbursement for an annual comprehensive wellness examination by a physician of their choice. We believe many of these benefits are required to remain competitive with our competitors for executive talent. Although the executive officers are eligible to participate in Sysco’s group medical and dental coverage, we adjust employees’ contributions towards the monthly cost of the medical plan according to salary level; therefore, executives’ pay a higher employee contribution than do non-executives to participate in these welfare plans.plans than do non-executives.
MIP participants, including the NEOs, are encouraged to occasionally have their spouses accompany them at business dinners and other business functions in connection with some meetings of the Board of Directors, certain business meetings and other corporate-sponsored events, and Sysco pays, either directly or by reimbursement, all expenses associated with their spouses’ travel to and attendance at these business-related functions. Furthermore, Sysco owns fractional interests in private aircraft that are made available to members of the Board of Directors, executives and other members of management for business use, but these aircraft are not allowed to be used for personal matters. Spouses may occasionally accompany executive officers on such flights in connection with travel to and from business-related functions if there is space available on the aircraft.
All employees, including our NEOs, as well as members of our Board, are also entitled to receive discounts on all products carried by Sysco and its subsidiaries. Although Sysco does provide the NEOs with certain additional perquisites, we do not provide any of the NEOs with automobiles, security monitoring or split-dollar life insurance.
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Executive Compensation Governance and Other Information
Severance and Employment Agreements
None of Sysco’s current executive officers are currently partiesis party to any severance or employment agreements providing for guaranteed severance or other compensation upon termination. Consistent with our approach of rewarding performance, employment is not guaranteed, and either the Company or the NEO may terminate the employment relationship at any time. In some cases, the Committee or Board of Directors may agree to provide separation payments to departing executives upon their termination to obtain an extended non-compete, non-solicitation and non-disclosure agreement and a release of claims.
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Relocation Expenses
To address the Committee’s desire for Sysco to comply with best corporate governance and compensation practices, in October 2010, the Committee adopted an executive relocation expense reimbursement policy that applies to all of the NEOs. The reimbursement policy provides that Sysco will not reimburse any of such executives for any loss on the sale of the executive’s house sold in connection with the executive’s relocation. The reimbursement policy also provides that only certain pre-approved relocation expenses will be eligible for increased payments to cover all applicable taxes on the reimbursed amounts, such as state and federal income taxes, FICA, and Medicare taxes. The relocation expenses subject to such increased payments to cover applicable taxes will be limited to the cost of moving the executive’s household goods and vehicles; real estate fees incurred in selling the executive’s residence; closing costs associated with the purchase of a new residence, including cost of credit reports, mortgage and deed taxes, recording fees and title search, title insurance, surveys, if required, and reasonable attorney’s fees; and up to six months’ rental expense for a temporary residence in the area to which the executive has been asked to relocate. No other relocation expenses will be eligible for increased payments to cover applicable taxes. In addition, the reimbursement policy provides that all future relocation agreements with any named executive officer will include a clawbackrecoupment provision that requires the executive to reimburse Sysco for all or a part of the reimbursement if his employment is terminated for any reason other than death, disability or change of control of Sysco, or termination without cause or for good reason, within a specified amount of time after receiving the reimbursement.
Benefits Following Change in Control
We currently have no separate severance or similar agreements that would cause an immediate or “single trigger” cash payment obligation solely as a result of a change in control of Sysco. We have included change of control provisions in several of Sysco’s benefit plans and agreements, including an immediate payoutpayment of CPUs at the target payoutpayment level for grants, under the 2008 Cash Performance Unit Plan, a prorated payoutpay out of an MIP annual incentive payment through the date of change of control, and 100% vesting of options, restricted stockPSUs (assuming target achievement) and RSUs upon a change in control. See “Executive Compensation — Quantification—Quantification of Termination/Change in Control Payments” for a detailed explanation of potential benefits under the various provisions.
Moreover, forFor equity-based awards issued to date under thefrom and after November 2013, Long-Term Incentive Plan, the Board has approved the concept ofestablished “double-trigger” acceleration of equity-award vesting for the Company’s senior executives. The stock option and RSUs granted to current NEOs in November 2013 incorporate a move from single-trigger to double-trigger for accelerated vesting for future long-term incentive grants under certain change of control scenarios. Under this “double trigger,” the vesting of these equity-based awards is only accelerated upon a change in control if, during the period commencing 12 months prior to the change in control and ending 24 months after such change in control, the participant’s employment is terminated without “cause” (as defined in the applicable award agreement) or the participant terminates his or her employment for “good reason” (as defined in the applicable award agreement).
The Committee continues to believe that these provisions will preserve executive morale and productivity and encourage retention in the face of the disruptive impact of an actual or rumored change in control of Sysco. The Committee has balanced the impact of these acceleration provisions with corresponding provisions in the MSP, the SERP andand/or the EDCP that provide for a reduction in benefits to the extent they are not deductible under Section 280G of the Internal Revenue Code.
Executive Compensation Recoupment PolicyClawback and Protective Covenants
In the event of a restatement of our financial results, other than a restatement due to a change in accounting policy, it is the Committee’s policy that it will review all incentive payments made to MIP participants, including the NEOs, within the 36 month36-month period prior to the restatement on the basis of having met or exceeded specific performance targets in grants or awards made on or after May 14, 2009. If such incentive payments would have been lower had they been calculated based on the restated results, the Committee will, to the extent permitted by applicable law, seek to recoup any such excess payments for the benefit of Sysco. The MIP annual incentive awards and CPU grants made by the Committee forsince fiscal 2011 and later years contain a contractual provision binding the grantee to this recovery right, and the Committee anticipates that future grants will contain similar provisions. The Committee has the sole discretion, subject to applicable law, to determine the form and timing of the recoupment,clawback, which may include repayment from the MIP participant or an adjustment to the payoutpayment of a future incentive. In addition, the executives’ benefits under the SERP, EDCP and MSP may be subject to forfeiture or adjustment as a result of any such restatement of financial results. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
In addition, pursuant to the award agreements governing certain equity-based awards, in order to be eligible to receive an equity-based award, each participant is required to have entered into an agreement (the “Protective Covenants Agreement”) protecting the Company’s interests and confidential information by restricting certain recipient behavior during, and following termination of, employment. The Protective Covenants Agreement includes, among other things, restrictions on unfair post-employment competitive activities, improper solicitation of Company employees and customers, and the misuse of confidential information. In the event that a participant violates any of the restrictive covenants in the Protective Covenants Agreement, the participant forfeits the benefits and proceeds of the related equity awards. The forfeiture of benefits and proceeds has been required with regard to all awards of PSUs and RSUs since November 2013 and awards of stock options since August 2016.
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Tax Impact on Compensation
Income Deduction Limitations
Section 162(m) of the Internal Revenue Code generally sets a limit of $1 million on the amount of non-performance-based compensation that Sysco may deduct for federal income tax purposes in any given year with respect to the compensation of each of the NEOs other than the chief financial officer. The Committee has adopted a general policy of structuring the performance-based compensation arrangements, including the MIP bonus and CPUs, in order to preserve deductibility to the extent feasible after taking into account all relevant considerations. However, the Committee also believes that Sysco needs flexibility to meet its pay objectives, even if Sysco may not deduct all of the compensation paid to the NEOs. The Committee structured its 20142016 and 20152017 incentive program for the NEOs, and intends to structure future annual incentive programs for the NEOs, under an umbrella plan program in order to obtain deductibility of the annual bonus under Section 162(m), generally, but maintains flexibility to pay compensation or make certain awards that may not be deductible under 162(m), if the Committee determines in its discretion that it is in the best interest of the Company.
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Based on the factors discussed under “What We Paid and Why,” in fiscal 20142016 Sysco paid, and in fiscal 20152017 the Committee expects Sysco to pay, certain current NEOs a base salary that, when aggregated with anticipated vesting of RSUs, will exceedexceeds $1 million in value. The Committee believes that this compensation is necessary in order to maintain the competivenesscompetitiveness of each of the total compensation package in light of peer compensation practices, and as a result, has determined that it is appropriate, even though approximately $2,748,418certain amounts of Mr. DeLaney’s fiscal 2014 compensation, approximately $311,025 of Mr. Bené’s fiscal 2014 compensation, approximately $401,806 of Mr. Green’s fiscal 2014 compensation, and approximately $176,846 of Mr. Shurts’ fiscal 20142016 compensation will not be deductible, and the excess of anticipated salary plus the value of RSUs vesting in fiscal 2015 and any transaction-related bonus paid in fiscal 20152017 over $1 million, respectively, will not be deductible for federal income tax purposes.
Section 409A of the Internal Revenue Code
Section 409A of the Internal Revenue Code deals specifically with non-qualified deferred compensation plans. Although the Company makes no guarantees with respect to exemption from, or compliance with, Section 409A of the Internal Revenue Code, we have designed all of our executive benefit plans including the MSP, SERP, EDCP, 2008 Cash Performance Unit Plan and 2013 Long-Term Incentive Plan, with the intention that they are exempt from, or otherwise comply with, the requirements of Section 409A of the Internal Revenue Code.
Stock Ownership Guidelines for NEOs
We have adopted stringent stock ownership guidelines, and review and adjust the guidelines when appropriate in order to align the interests of our executives with those of our stockholders. In August 2013, the Committee, together with the Corporate Governance and Nominating Committee, upon the recommendation of management and following consultation with CAP amended our Corporate Governance Guidelines in order to increase the requirements applicable to the CEO and Executive Chairman positions, and to provide clarity to the stock ownership guidelines. The modifications included an increase in Mr. DeLaney’s ownership requirement to 225,000 shares and clarified the guidelines regarding the counting of RSUs and the retention requirements for officers still working toward meeting future holding requirements. These changes were recommended by the Corporate Governance and Nominating Committee and approved by the Board of Directors in order to bring Sysco’s policies more in line with its peer group and strengthen such guidelines. See “Stock Ownership— Stock Ownership Guidelines” for a description of our executive stock ownership guidelines and stock retention policies and these recent changes.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of Sysco Corporation has reviewed and discussed the foregoing Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K and this Proxy Statement.
COMPENSATION COMMITTEE
John M. Cassaday,Chairman
Judith B. Craven
Joshua D. Frank
Larry C. Glasscock
Jackie M. Ward
SYSCO CORPORATION - 2016 Proxy Statement58
The following discussion, as well as the Compensation Discussion and Analysis contained herein, contains references to target performance levels for our long-term incentive compensation. These targets and goals are discussed in the limited context of Sysco’s compensation programs and should not be interpreted as management’s expectations or estimates of results or other guidance. We specifically caution stockholders not to apply these statements to other contexts.
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The following table sets forth information with respect to each of the NEOs – our Chief Executive Officer, our current Chief Financial Officer, our former Chief Financial Officer and the three most highly compensated of the other executive officers of Sysco and its subsidiaries employed at the end of fiscal 2014, as well as information with respect to Manuel A. Fernandez. Mr. Fernandez would have been one of the three other most highly compensated executive officers had he been an executive officer at fiscal year end; however, he was not serving as an executive officer at the end of the fiscal year.2016. In determining the most highly compensated executive officers, we excluded the amounts shown under “Change in Pension Value and Nonqualified Deferred Compensation Earnings.”
Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compen- sation ($)(7) | Total ($) | |||||||||||||||||||||||||||
William J. DeLaney | 2014 | $ | 1,194,583 | — | $ | 1,819,225 | $ | 2,858,081 | $ | 657,919 | $ | 1,132,628 | $ | 152,958 | $ | 7,815,394 | ||||||||||||||||||||
President and | 2013 | 1,170,833 | — | 4,611,949 | 2,400,000 | 1,470,280 | 1,227,127 | 5,800 | 10,885,989 | |||||||||||||||||||||||||||
Chief Executive Officer | 2012 | 1,150,000 | — | 1,719,403 | 2,752,500 | 857,482 | 1,941,349 | 1,066 | 8,421,800 | |||||||||||||||||||||||||||
Robert C. Kreidler | 2014 | 712,500 | 429,000 | 633,097 | 994,626 | 261,667 | 78,752 | 141,670 | 3,251,312 | |||||||||||||||||||||||||||
Executive Vice President | 2013 | 683,333 | — | 1,828,489 | 980,000 | 530,198 | 165,874 | 6,437 | 4,194,331 | |||||||||||||||||||||||||||
and Chief Financial Officer | 2012 | 600,000 | — | 523,297 | 963,375 | 304,195 | 142,678 | 7,096 | 2,540,641 | |||||||||||||||||||||||||||
Michael W. Green | 2014 | 712,500 | 143,000 | 587,878 | 923,579 | 324,539 | 1,128,887 | 91,099 | 3,911,482 | |||||||||||||||||||||||||||
Executive Vice President | 2013 | 691,667 | — | 556,267 | 910,000 | 611,781 | 273,109 | 5,575 | 3,048,399 | |||||||||||||||||||||||||||
and President of Foodservice | 2012 | 650,000 | — | 526,412 | 969,109 | 386,688 | 1,419,955 | 211,021 | 4,163,185 | |||||||||||||||||||||||||||
Operations | ||||||||||||||||||||||||||||||||||||
Thomas L. Bené(8) | 2014 | 616,667 | 375,000 | 513,890 | 807,323 | 228,730 | 353 | 77,433 | 2,619,396 | |||||||||||||||||||||||||||
Executive Vice President | 2013 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||
and Chief Commercial | 2012 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||
Officer | ||||||||||||||||||||||||||||||||||||
Wayne Shurts(9) | 2014 | 585,000 | 267,400 | 482,636 | 758,240 | 221,510 | 30,740 | 54,973 | 2,400,499 | |||||||||||||||||||||||||||
Executive Vice President | 2013 | 407,292 | 150,000 | 945,987 | 747,501 | 174,379 | 12 | 85,619 | 2,510,790 | |||||||||||||||||||||||||||
and Chief Technology Officer | 2012 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |||||||||||||||||||||||||||
Manuel A. Fernandez(10) | 2014 | 337,500 | — | 1,458,320 | 1,458,332 | — | 7,588 | — | 3,261,740 | |||||||||||||||||||||||||||
Former Executive Chairman | 2013 | 900,000 | — | — | — | — | 2,428 | 56,917 | 959,345 | |||||||||||||||||||||||||||
2012 | 615,385 | — | 2,685,010 | 2,425,000 | — | 47,874 | 190 | 5,773,459 |
Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(6) | All Other Compen- sation ($)(7) | Total ($) | ||||||||||||||||||
William J. DeLaney | 2016 | $ | 1,245,833 | $ | — | $ | 2,031,327 | $ | 3,379,548 | $ | 6,021,090 | $ | 1,097,895 | $ | 304,113 | $ | 14,079,806 | ||||||||||
Chief Executive Officer | 2015 | 1,220,583 | — | 2,017,963 | 3,322,980 | 2,356,410 | 251,301 | 158,696 | 9,327,933 | ||||||||||||||||||
2014 | 1,194,583 | — | 1,819,225 | 2,858,081 | 657,919 | 1,132,628 | 152,958 | 7,815,394 | |||||||||||||||||||
Thomas L. Bené | 2016 | 770,833 | 281,250 | 737,725 | 1,263,858 | 2,256,626 | 3,331 | 98,794 | 5,412,417 | ||||||||||||||||||
President and Chief | 2015 | 681,250 | — | 530,226 | 873,127 | 1,050,851 | 1,883 | 93,341 | 3,230,678 | ||||||||||||||||||
Operating Officer | 2014 | 616,667 | 375,000 | 513,890 | 807,323 | 228,730 | 353 | 77,433 | 2,619,396 | ||||||||||||||||||
Joel T. Grade(8) | 2016 | 605,833 | 60,000 | 546,869 | 909,876 | 1,335,625 | 23,364 | 633,628 | 4,115,195 | ||||||||||||||||||
Executive Vice President and | |||||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||||
Russell T. Libby(9) | 2016 | 590,125 | 315,000 | 450,021 | 748,698 | 1,192,867 | 70,680 | 194,411 | 3,561,802 | ||||||||||||||||||
Executive Vice President, | 2015 | 538,125 | — | 411,145 | 677,011 | 693,458 | 3,337 | 110,322 | 2,433,398 | ||||||||||||||||||
Administration and | |||||||||||||||||||||||||||
Corporate Secretary | |||||||||||||||||||||||||||
Wayne R. Shurts | 2016 | 621,602 | 264,150 | 507,821 | 844,884 | 1,736,673 | 7,165 | 76,057 | 4,058,352 | ||||||||||||||||||
Executive Vice President | 2015 | 601,675 | — | 497,986 | 820,043 | 772,933 | 901 | 44,829 | 2,738,367 | ||||||||||||||||||
and Chief Technology | 2014 | 585,000 | 267,400 | 482,636 | 758,240 | 221,510 | 30,740 | 54,973 | 2,400,499 | ||||||||||||||||||
Officer | |||||||||||||||||||||||||||
Robert C. Kreidler(10) | 2016 | 368,225 | 429,000 | — | — | — | 9,672 | 252,423 | 1,059,320 | ||||||||||||||||||
Former Executive Vice | 2015 | 732,875 | — | 653,235 | 1,075,693 | 944,423 | 7,469 | 152,630 | 3,566,325 | ||||||||||||||||||
President and Chief | 2014 | 712,500 | 429,000 | 633,097 | 994,626 | 261,667 | 78,752 | 141,670 | 3,251,312 | ||||||||||||||||||
Financial Officer |
(1) | The salary amounts reflect the actual base salary payments |
(2) | Mr. Bené was paid a new hire bonus of $250,000, less applicable withholding for taxes, in September 2013, subject to clawback provisions requiring Mr. Bené to repay the full amount of the bonus in the event of a voluntary resignation or an involuntary termination for cause (as defined in the offer letter) within one year after the 6-month anniversary of his start date. Mr. Shurts was paid a new hire bonus |
(3) | |
(4) | The amounts in these columns reflect the grant date fair value of the awards. See Note 19 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the year ended July 2, 2016, Note 18 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the year ended June 27, 2015, and Note 18 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the year ended June 28, 2014, |
(5) | These amounts include the |
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(6) | The amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column reflect above-market interest on amounts in the EDCP and MSP, and the actuarial increase in the present value of the NEOs’ benefits under all pension plans established and maintained by Sysco, determined using interest rate and mortality rate assumptions consistent with those used in Sysco’s financial statements. The pension plan amounts, some of which may not be currently vested, include: | |
• | increase in pension plan value; and | |
• | increase in Supplemental Executive Retirement Plan, or SERP, value. |
To the extent that the aggregate change in the actuarial present value of the named executive officer’s accumulated benefit under the pension plan and the SERP was a decrease, this decrease is not included in the amounts shown in the column. | |
The following table shows, for each named executive officer, the change in the actuarial present value for each of the pension plan and the SERP and the above-market interest on amounts in the EDCP and MSP for fiscal |
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Name | Change in Pension Plan Value | Change in SERP Value | Above-Market Interest on Deferred Compensation | Total | ||||||||||||||
DeLaney | $ | 113,770 | $ | 948,762 | $ | 35,363 | $ | 1,097,895 | ||||||||||
Bené | N/A | N/A | 3,331 | 3,331 | ||||||||||||||
Grade | 23,364 | N/A | — | 23,364 | ||||||||||||||
Libby | 31,822 | 38,858 | — | 70,680 | ||||||||||||||
Shurts | 6,697 | N/A | 468 | 7,165 | ||||||||||||||
Kreidler | 22,387 | (16,690 | ) | 3,975 | 9,672 |
Name | Change in Pension Plan Value | Change in SERP Value | Above-Market Interest on Deferred Compensation | Total | ||||||||||||
DeLaney | $ | 104,041 | $ | 1,002,754 | $ | 25,833 | $ | 1,132,628 | ||||||||
Kreidler | 20,133 | 56,958 | 1,661 | 78,752 | ||||||||||||
Green | 100,569 | 1,028,097 | 221 | 1,128,887 | ||||||||||||
Bené | N/A | N/A | 353 | 353 | ||||||||||||
Shurts | 30,664 | N/A | 76 | 30,740 | ||||||||||||
Fernandez | 7,558 | N/A | N/A | 7,558 |
(7) | Fiscal | |
a. | the full amount paid for life insurance coverage for each individual (the excess coverage over the amounts paid for other employees is not determinable since the deductibles and coverages may be different); | |
b. | the following amounts of 401(k) Plan and Management Savings Plan |
Name | 401(k) Employer Contribution | MSP Employer Contribution | ||||||
DeLaney | $ | 21,675 | $ | 131,283 | ||||
Kreidler | 14,025 | 127,645 | ||||||
Green | 21,675 | 69,424 | ||||||
Bené | 14,025 | 15,983 | ||||||
Shurts | 12,303 | 29,133 |
Name | 401(k) Employer Contribution | MSP Employer Contribution | ||||||
DeLaney | $ | 22,525 | $ | 281,588 | ||||
Bené | 15,631 | 83,163 | ||||||
Grade | 8,986 | — | ||||||
Libby | 15,487 | 178,924 | ||||||
Shurts | 14,820 | 61,237 | ||||||
Kreidler | 7,560 | 244,863 |
c. | Mr. Grade received $17,785 during fiscal 2016 to reimburse | ||
d. | the following perquisites and personal benefits for Mr. Grade (the aggregate value of all perquisites and personal benefits received by each | ||
• | the | ||
• | the | ||
• | the | ||
• | the amounts paid for long-term disability coverage under the | ||
• | $494,154 in foreign tax payments made by the | ||
• | |||
• | $56,578 in expenses in connection with | ||
(8) | Mr. | ||
(9) | |||
(10) | Mr. |
SYSCO CORPORATION - 20142016 Proxy Statement 5760
The following table provides information on CPU grants, annual incentive award opportunities under the MIP,our 2013 Long-Term Incentive Plan, stock options restricted stock and restricted stock units granted during fiscal 20142016 to each of the NEOs. Mr. Kreidler was not eligible to receive any plan-based awards during fiscal year 2016.
All Other | All Other Option | Exercise | Closing | Grant Date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Awards: | Awards: Number | or Base | Market | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non- | Number of | of Securities | Price of | Price on | of Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
All Other Stock Awards: | All Other Option Awards: Number | Exercise or Base | Closing Market | Grant Date Fair Value | Number of | Equity Incentive Plan Awards | Shares of | Underlying | Option | the Date | and Option | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of | Estimated Future Payouts Under Non- Equity Incentive Plan Awards | Number of Shares of | of Securities Underlying | Price of Option | Price on the Date | of Stock and Option | Shares, Units or | Threshold | Target | Maximum | Stock or Units | Options | Awards | of Grant | Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Shares, Units or Other Rights | Threshold ($) | Target ($) | Maximum ($) | Stock or Units (#)(1) | Options (#)(2) | Awards ($/Sh)(3) | of Grant ($) | Awards ($)(4) | Grant Date | Other Rights | ($) | ($) | ($) | (#)(1) | (#)(2) | ($/Sh)(3) | ($) | ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||
DeLaney | 11/14/13 | (5) | 2,516,850 | $ | 1,258,425 | $ | 2,516,850 | $ | 3,775,275 | 11/17/15 | (5) | 2,843,750 | $ | 1,137,500 | $ | 2,843,750 | $ | 5,118,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | 610,701 | $ | 33.40 | $ | 33.57 | $ | 2,858,081 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/15/13 | 54,192 | 1,819,225 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/22/13 | (6) | 898,875 | 1,797,750 | 2,696,625 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kreidler | 3/21/14 | (7) | — | 715,000 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | (5) | 875,875 | 437,938 | 875,875 | 1,313,813 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | 212,527 | $ | 33.40 | $ | 33.57 | 994,626 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/15/13 | 18,859 | 633,097 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/22/13 | (6) | 357,500 | 715,000 | 1,072,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Green | 3/21/14 | (7) | — | 536,250 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | (5) | 813,313 | 406,656 | 813,313 | 1,219,969 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | 197,346 | $ | 33.40 | $ | 33.57 | 923,579 | 11/17/15 | 563,258 | $ | 40.59 | $ | 40.48 | $ | 3,379,548 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/15/13 | 17,512 | 587,878 | 11/17/15 | 50,045 | 2,031,327 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/22/13 | (6) | 446,875 | 893,750 | 1,340,625 | 8/20/15 | (6) | 937,500 | 1,875,000 | 3,515,625 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bené | 3/21/14 | (7) | — | 468,750 | — | 2/18/16 | (7) | 40,849 | $ | 44.38 | $ | 44.52 | 249,996 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | (5) | 710,938 | 355,469 | 710,938 | 1,066,406 | 2/18/16 | (8) | 2,892 | 128,347 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | 172,505 | $ | 33.40 | $ | 33.57 | 807,323 | 11/17/15 | (5) | 853,125 | 341,250 | 853,125 | 1,535,625 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/15/13 | 15,308 | 513,890 | 11/17/15 | 168,977 | $ | 40.59 | $ | 40.48 | 1,013,862 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/22/13 | (6) | 312,500 | 625,000 | 937,500 | 11/17/15 | 15,013 | 609,378 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/20/15 | (6) | 500,000 | 1,000,000 | 1,875,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grade | 11/17/15 | (5) | 765,625 | 306,250 | 765,625 | 1,378,125 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/17/15 | 151,646 | $ | 40.59 | $ | 40.48 | 909,876 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/17/15 | 13,473 | 546,869 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/20/156) | 312,500 | 625,000 | 1,171,875 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Libby | 11/17/15 | (5) | 630,000 | 252,000 | 630,000 | 1,134,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/17/15 | 124,783 | $ | 40.59 | $ | 40.48 | 748,698 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/17/15 | 11,087 | 450,021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/20/15 | (6) | 300,000 | 600,000 | 1,125,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shurts | 3/21/14 | (7) | — | 440,250 | — | 11/17/15 | (5) | 710,938 | 284,375 | 710,938 | 1,279,688 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | (5) | 667,713 | 333,856 | 667,713 | 1,001,569 | 11/17/15 | 140,814 | $ | 40.59 | $ | 40.48 | 844,884 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/14/13 | 162,017 | $ | 33.40 | $ | 33.57 | 758,240 | 11/17/15 | 12,511 | 507,821 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11/15/13 | 14,377 | 482,636 | 8/20/15 | (6) | 312,500 | 625,000 | 1,171,875 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/22/13 | (6) | 293,500 | 587,000 | 880,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fernandez(8) | 8/22/13 | 364,583 | $ | 31.98 | $ | 32.28 | 1,458,332 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8/22/13 | 45,601 | 1,458,320 |
(1) | With respect to Messrs. DeLaney, | |
• | committed fraud, embezzlement, theft, a felony, or proven dishonesty in the course of his employment and by any such act, damaged us or our subsidiaries; | |
• | disclosed our trade secrets; or | |
• | participated, engaged or had a financial or other interest in any commercial venture in the United States competitive with our business in violation of our Code of Conduct or that would have violated our Code of Conduct had he been an employee when he engaged in the prohibited activity. | |
(2) | With respect to Messrs. DeLaney, | |
• | committed fraud, embezzlement, theft, a felony, or proven dishonesty in the course of his employment and by any such act, damaged us or our subsidiaries; | |
• | disclosed our trade secrets; or | |
• | participated, engaged or had a financial or other interest in any commercial venture in the United States competitive with our business in violation of our Code of Conduct or that would have violated our Code of Conduct had he been an employee when he engaged in the prohibited activity. | |
(3) | Pursuant to the plans under which these options were granted, the exercise price of all options may not be less than the Fair Market Value on the date of the grant, which is defined under our 2013 Long-Term Incentive Plan as the closing sale price during regular trading hours of the stock on the immediately preceding date on the principal securities market in which shares of stock is then traded, or, if there were no trades on that date, the closing sale price during regular trading hours of the stock on the first trading day prior to that | |
(4) | We determined the estimated grant date present value for the options issued on | |
We valued the restricted stock units granted on November | ||
(5) | These amounts relate to cash performance units with a three-year performance period that we granted in November | |
(6) | These amounts relate to | |
(7) | Represents options granted to Mr. Bené under the 2013 Long-Term Incentive Plan on February 18, 2016, in connection with his promotion to President and Chief Operating Officer. See footnote (2) above for a discussion of the | |
(8) | Represents RSUs granted to Mr. Bené under the 2013 Long-Term Incentive Plan on | |
SYSCO CORPORATION- 20142016 Proxy Statement 5861
Employment Arrangements with Messrs. Bené, Shurts and FernandezAnnual Incentive Awards
Mr. Bené.2013 Long-Term Incentive Plan
Pursuant to the terms and conditions of an offer of employment dated February 28,Sysco Corporation 2013 Sysco offered, and Mr. Bené accepted, employment with Sysco as the Executive Vice President and Chief Merchandising Officer. This offer of employment stated his initial annual base salary of $575,000, confirmed his eligibility for a pro-rated fiscal 2013 MIP bonus with an initial target of 100% of base salary, and provided for one-time bonus awards of $500,000 within 30 days of his hire date and an additional $250,000 within 30 days of the six month anniversary of his employment, subject to certain conditions regarding his continued employment. Mr. Bené is eligible to participate in Sysco’s disability income plan, all broad based employee benefits plans, as well as all executive benefit and retirement savings programs. In addition, Sysco agreed to reimburse Mr. Bené for certain temporary housing and moving expenses, subject to his obligation to repay any such expenses if he is terminated by Sysco for certain reasons within one year of such reimbursements.
Upon the recommendation of Sysco management and consistent with the offer of employment,Long-Term Incentive Plan, the Compensation Committee grantedis authorized to Mr. Bené (1) a one-time RSU grant in May 2013 with a value of $1,000,000 and (2) an annual long term incentive award in November 2013 representing 325% of his annual base salary and consisting of 50% of the value in stock options, 25% in CPUs and 25% in RSUs.
Mr. Shurts. Pursuant to the terms and conditions of an offer of employment dated September 13, 2012, Sysco offered, and Mr. Shurts accepted, employment with Sysco as the Executive Vice President, Chief Technology Officer. This offer of employment stated his initial annual base salary of $575,000, confirmed his eligibility for a pro-rated fiscal 2013 MIP bonus with an initial target of 100% of base salary, and provided for one-time bonus award of $150,000 within 30 days of his hire date and an additional $150,000 on the first anniversary of his employment, subject to certain conditions regarding his continued employment. Mr. Shurts is eligible to participate in Sysco’s disability income plan, all broad based employee benefits plans, as well as all executive benefit and retirement savings programs. In addition, Sysco agreed to reimburse Mr. Shurts for certain temporary housing and moving expenses, subject to his obligation to repay any such expenses if he is terminated by Sysco for certain reasons within one year of such reimbursements.
In November 2012, upon the recommendation of Sysco management and consistent with the offer of employment, the Compensation Committee granted to Mr. Shurts (1) a one-time RSU grant with a value of $500,000 and (2) an annual long-term incentive award representing 325% of his annual base salary and consisting of 50% of the value in stock options, 25% in CPUs and 25% in RSUs.
Mr. Fernandez. The Company’s compensation arrangements with Mr. Fernandez, in his capacity as the former Executive Chairman, are described in “Compensation Discussion and Analysis—What We Paid and Why—Compensation of the Former Executive Chairman.”
Our 2009 Management Incentive Plan (“MIP”) providesprovide key executives, including the NEOs, with the opportunity to earn bonusesincentive cash payments through the grant of annual, performance-based incentive awards, payable in cash.awards. The Committee generally grants annual incentive awards under the MIP in the first quarter of the fiscal year to which the awards relate. We payrelate, and we have historically paid amounts owed under such awards during the first fiscal quarter following the conclusion of the fiscal year corresponding to such awards. Annual
Performance Factors. In connection with granting annual incentive opportunities awardedawards, the Committee may determine the performance factors that must be met for the NEO to corporate participants, includingreceive payment with respect to the NEOs, underaward, as well as the MIPrelative weights of those performance factors. The performance factors may be based on any onerelate to, among other things, the Company’s achievement of certain financial, operational or moretransactional objectives, as well as the individual performance of the following:NEO.
Performance Factor Adjustments. The 2013 Long-Term Incentive Plan allows the Committee, in its sole discretion, to make equitable adjustments to the performance factors in recognition of unusual or non-recurring events affecting the Company or the financial statements of the Company, in response to changes in applicable laws or regulations, including changes in | |
All of these performance measures relate to performance for completed fiscal years or multiple completed fiscal year periods. For period to period comparisons, we compare results in accordance with generally accepted accounting principles applied on a consistent basis, and we adjust themor practices, or to account for any fiscal year containing 53 weeks. The Committee has the discretionitems of gain, loss or expense determined to determine which performance factors will be used for a particular award and the relative weights of the factors. No named executive officer may receive an aggregate bonus for any given fiscal year under the MIPextraordinary or unusual in excess of $10,000,000. The Committee will determine and pay all annual incentive awards within 90 days following the end of the fiscal year for which the award was earned.
The MIP provides that, if a changenature or infrequent in control occurs during the performance period, we will pay a cash bonus to each participant, within 90 days of the change in control, equal to a pro-rata portion of the bonus amount that would have been paidoccurrence or related to the participant based on actual performance under the performance measures, for the period from the startdisposal of the performance period through the datea segment of the change in control. For these purposes, actual performance will be determined based on results of the most recently completed fiscal quarter that occurs during the performance period. In addition, if (1) any participant remains employed from the date of the change in control through the end of the original performance period and (2) the amount of the cash bonus that would have been paid under the MIP in the absence of the change in control exceeds the amount actually received following the change in control, then the participant will receive the amount of such excess.
The MIP allows for the Compensation Committee to make certain permissible deviations from GAAP standards and provides for permissible methods for modifying bonus formulas after the first 90 days of the applicable fiscal year in order to give the Compensation Committee additional flexibility in structuring performance metrics.a business. Application of any permissible deviations from GAAP standard or changessuch equitable adjustments to any performance metricsfactors with respect to “covered employees” under Section 162(m) of the Internal Revenue Code, which includes each of the NEOs except the current and former CFO, iswas limited to circumstances where any deviations from GAAP are objectively determinable and the modification of performance metrics complies withfactors will not impact the “performance-based compensation” exceptiondeductibility of the annual incentive compensation under Section 162(m) of the Internal Revenue Code. The MIP also includes a provision implementing Sysco’s clawback policies. Beginning with
SYSCO CORPORATIONAward Limits. - 2014 Proxy Statement 59
the fiscal 2013 MIP grants, the Compensation Committee has implemented a bonus pool concept designed to overlay the MIP program and help to ensure income tax deductibility for purposes of Section 162(m). The MIP will expire on November 18, 2014, unless sooner terminated by the Board. Annual cash incentive awards after that date may be made under the 2013 Long-Term Incentive Plan.Plan, no NEO could have received an aggregate annual incentive award under the 2016 MIP in excess of 1% of the Company’s earnings before income taxes for fiscal 2016.
Fiscal 20142016 MIP Annual Incentive Awards
The NEOs could have earned aIn August 2015, the Compensation Committee approved the incentive award structure for fiscal 20142016 pursuant to the Sysco Corporation Fiscal 2016 Management Incentive Program for MIP Bonus-Eligible Participants (the “2016 MIP”). Under the 2016 MIP, the annual incentive award equal to the sumopportunity for each of the following:NEO’s was based on the following pre-determined metrics, weighted as indicated below:
• | |
• | |
• |
Fiscal 2016 Financial Performance Targets. The 2016 MIP provided for minimum annual incentive payments upon achieving adjusted operating income of at least $1.75 billion and/or adjusted sales growth of at least 1% and adjusted gross profit dollar growth of at least 2%. The various levels of financial performance required to reach threshold, target and maximum payments are set forth below:
2016 MIP Financial Performance Targets - Fiscal 2016 | ||||||
Adjusted Operating | Adjusted Sales | Adjusted Gross Profit | ||||
Income | Growth | Dollar Growth | ||||
Threshold | $ 1.750 billion | 1.0% | 2.0% | |||
Target | $ 1.892 billion | ≥4.0 – <5.0% | ≥4.0 – <5.0% | |||
Maximum | $ 2.034 billion | ≥6.0% | ≥6.0% |
Fiscal 2016 Financial Results and Performance Factors. For purposes of the 2016 MIP, actual results included adjusted operating income of $1.982 billion(exceeded target performance level), adjusted sales growth of 2.7%(exceeded threshold performance level), and adjusted gross profit dollar growth of 4.8%(equaled target performance level). SeeAnnex I for a reconciliation of these adjusted measures to the most directly comparable GAAP measures. Based on these results, which equaled or exceeded target performance for two of the three metrics, we calculated weighted performance factors for the Adjusted Operating Income component and the Adjusted Sales Growth/Gross Profit Dollar Growth component of the 2016 MIP:
Calculation of Weighted Financial Performance Factors (75% of target annual incentive opportunity) | ||||||||||||
Potential | 2016 | Weighted Financial | ||||||||||
Financial Performance Metric | Payment | Weighting(1) | x | Performance | = | Performance Factor | ||||||
Adjusted Operating Income(2) | 0% - 200% | 50% | 156.6% | 78.3% | ||||||||
Adjusted Sales Growth/Gross Profit Dollar Growth(3) | 0% - 200% | 25% | 87.5% | 21.9% |
(1) | This column represents, for each financial performance metric, the weighting of that metric for purposes of the total 2016 MIP annual incentive | |
(2) | The calculation of adjusted results for this performance metric excluded the following items: severance charges, professional fees on 3-year financial objectives, facility closure costs and costs associated with our revised business technology strategy; US Foods merger and integration planning and transaction costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition transaction costs (third and fourth quarters fiscal 2016 only); the financial impact of the additional week in fiscal 2016; and the impact of changes in foreign exchange rates. | |
(3) | ||
We refer to this calculationSYSCO CORPORATION - 2016 Proxy Statement62
Calculation of Total Award Earned under 2016 MIP. The total annual incentive award payment for each NEO under the 2016 MIP was calculated as indicated in the “Business Performance Factor.” The calculationtable below, with 50% of the adjusted results with respect to eachtarget incentive opportunity based on the Company’s Adjusted Operating Income performance, 25% of the target incentive opportunity based on the Company’s Adjusted Sales Growth/Gross Profit Dollar Growth performance metrics excluded from each measureand the following items,remaining 25% of the financial returns fromtarget incentive opportunity based on individual performance with regard to pre-established individual SBOs, which we expected to be beyond fiscal 2014: measures provided pursuant to executive retirement plan restructuring, multiemployer pension withdrawals, severance charges, merger and integration costs associated with our pending USF merger, change in estimate for self-insurance costs, charges from a liability for a settlement, facility closure charges, amortization of US Foods financing costs and an acquisition-related charge specific to fiscal 2013. Thethe Committee had the discretion to include certain of these excluded items, except where such inclusion would have caused a named executive officer’s MIP bonus to become non-deductible for federal income tax purposes pursuant to Section 162(m)pay out between 0% - 150% based on its assessment of the Internal Revenue Code; however,NEO’s performance. The Committee believes the Committee did not use such discretion.
These three performance measures were independent of each other, and one portionindividual SBOs further promotes the overall executive compensation pay philosophy to link individual pay to performance. For further discussion of the incentive award could be earned even if the threshold level of one or both of the other measures was not achieved. If the threshold requirements for one or more of the bonus measures were not met, those portions of the incentive award would not be paid.
Each NEO’s fiscal 2014 annual incentive award was subject to a maximum amount that was equal to 120% of the award the NEO would have received based solely on the initial Business Performance Factor. Each NEO’s fiscal 2014 annual incentive award was initially calculated as equal to the maximum amount. The actual Business Performance Factor used to determine each NEO’s award, however, was subject to further review by the Compensation Committee, whereby the Committee considered pre-established, individual SBOs to adjust any annual incentive award based on factors determined by the Committee, including but not limited to, performance against financial strategic goals and the NEO’s personal performance, which resulted in an adjustment to the awards initially calculated based on the Business Performance Factor as described below.
The Committee reviewed each NEO’s performanceCommittee’s evaluation with respect to the non-financial performance goals described inindividual SBOs of each NEO, as well as the calculation of each NEO’s “Weighted Individual SBO Performance Factor” for purposes of the table below, please see “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs—Annual Incentive Award–Analysis—Fiscal 2014.”Award—Analysis” above.
The Committee had the discretion to adjust Mr. DeLaney’s and the other NEO’s award payouts based on their performance with respect to these pre-established individual SBOs. If the NEO’s performance with respect to the SBO performance goals had met the target levels established by the Committee, the NEO’s 2014 Award for FY14 Performance would have equaled 100% of the bonus determined by using the initial, unadjusted Business Performance Factor. If the NEO’s performance with respect to the goals had exceeded the target levels established by the Committee, the NEO’s 2014 Award for FY14 Performance would have equaled between 100% and 120% of the bonus determined by using the initial, unadjusted Business Performance Factor. If the NEO’s performance was below the target levels of performance established by the Committee, the NEO’s 2014 Award for FY14 Performance would have equaled between 60% and 100% of the bonus determined by using the initial, unadjusted Business Performance Factor.
Name | Ending Base Salary | Target Annual Incentive (% of Base Salary) | Adjusted Operating Income Performance Factor | Amount of Award Funding on Adjusted Operating Income Performance Factor | Adjusted Sales Growth/ Gross Profit Dollar Growth Performance Factor | Amount of Award Funding on Adjusted Sales Growth/ Gross Profit Dollar Growth Performance Factor | Weighted Individual SBO Performance Factor | Amount of Award Funding on Weighted Individual SBO Performance Factor | Total 2016 MIP Award Earned for FY16 Performance | |||||||||||||||||||||||||||
DeLaney | $ | 1,250,000 | 150.0 | % | 78.3 | % | $ | 1,468,125 | 21.9 | % | $ | 410,625 | 33.0 | % | $ | 618,750 | $ | 2,497,500 | ||||||||||||||||||
Bené(1) | 775,000 | 125.0 | % | 78.3 | % | 758,531 | 21.9 | % | 212,156 | 30.0 | % | 290,625 | 1,261,313 | |||||||||||||||||||||||
Grade | 625,000 | 100.0 | % | 78.3 | % | 489,375 | 21.9 | % | 136,875 | 33.7 | % | 210,625 | 836,875 | |||||||||||||||||||||||
Libby | 600,000 | 100.0 | % | 78.3 | % | 469,800 | 21.9 | % | 131,400 | 32.5 | % | 195,000 | 796,200 | |||||||||||||||||||||||
Shurts | 625,000 | 100.0 | % | 78.3 | % | 489,375 | 21.9 | % | 136,875 | 28.1 | % | 175,625 | 801,875 | |||||||||||||||||||||||
Base | Target | OI PF | A = Base x Target x OI PF | SG/GP PF | B = Base x Target x SG/GP PF | SBO PF | C = Base x Target x SBO PF | Total = A+B+C |
(1) | Mr. Bené’s 2016 annual incentive payment was calculated using different base salaries for portions of fiscal 2016. For 50% of his 2016 annual incentive payment, covering the period from the beginning of the fiscal year to January 1, 2016, the effective date of his promotion, a base salary of $750,000 was used. For the remaining 50% of his annual incentive payment, covering the period from January 1, 2016 to the end of the fiscal year, a base salary of $800,000 was applied. |
For the reasons discussed in “Compensation Discussion and Analysis—What We Paid and Why—Annual Incentive Award – Analysis—Fiscal 2014”, the Committee adjusted the awards initially funded based on the Business Performance Factor and awarded: (i) Messrs. DeLaney, Kreidler and Bené a 2014 MIP annual incentive award equal to 107% of the bonus that would have been paid using the initial, unadjusted Business Performance Factor, or 36.6% of target, (ii) Mr. Green a 2014 MIP annual incentive award equal to 105% of the bonus that would have been paid using the initial, unadjusted Business Performance Factor, or 36.3% of target, and (iii) Mr. Shurts a 2014 MIP annual incentive award equal to 115% of the bonus that would have been paid using the initial, unadjusted Business Performance Factor, or 37.7% of target.
In approving the agreements for fiscal 2014, the Committee targeted each named executive officer’s MIP annual incentive award at the following percentages of base salary: 150% for Mr. DeLaney, 125% for Mr. Green and 100% for Messrs. Kreidler, Bené and Shurts. In no event could any NEO’s fiscal 2014 MIP annual incentive award have exceeded the maximum bonus amount set as part of the bonus pool amount discussed in “—Limit on Fiscal 2014 Maximum Annual Incentive Award Payouts” below.Executive Compensation Clawback Policy. The fiscal 20142016 awards are also subject to clawback provisions that provide that, subject to applicable law, all or a portion of the award paid pursuant to the 2014 awards2016 MIP may be recovered by Sysco if there is a restatement of our financial results, other than a restatement due to a change in accounting policy, within 36 months of the payment of the award and the restatement would result in the payment of a reduced award if the award was recalculated using the restated financial results. The Committee has the sole discretion to determine the form and timing of the repayment. See “Compensation Discussion and Analysis—Executive Compensation Governance and Other Information—Executive Compensation Clawback Policy.”
SYSCO CORPORATION- 2014 Proxy Statement 60Fiscal 2017 Annual Incentive Awards
Calculating the Business Performance Factor | ||||||||||||||||||
Performance Metric(1) | Potential Payout | Weighting | x | 2014 Performance | = | Payout (% of target) | ||||||||||||
Adjusted Fully Diluted Earnings Per Share | 0% - 150% | 50 | % | 0 | % | 0 | % | |||||||||||
Adjusted Sales Growth/Gross Profit Dollar Growth | 0% - 150% | 30 | % | 75 | % | 22.5 | % | |||||||||||
Adjusted ROIC(2) | 0% - 150% | 20 | % | 65.4 | % | 13.1 | % | |||||||||||
TOTAL | 0% - 150% | 100 | % | 35.6 | % |
In August 2016, the Compensation Committee approved the fiscal 2017 annual incentive award opportunities for the eligible NEOs under the Sysco Corporation Fiscal 2017 Management Incentive Program (MIP) For Corporate MIP Bonus-eligible Positions, which was adopted by the Committee pursuant to the 2013 Sysco Corporation Long-Term Incentive Plan and which is described in “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs—Annual Incentive Award—Detailed Information— Annual Incentive Award Potential for Fiscal 2017.”
Limit on Fiscal 2016 and Fiscal 2017 Maximum Annual Incentive Award Payments
The fiscal year 2014 program provided for minimum bonus payouts upon adjusted diluted earnings per share of at least $1.87, increases in adjusted fully diluted earnings per share of at least 3% and in gross profit dollars growth of at least 2% andCommittee established an adjusted return on invested capital of at least 12.0%. Because Sysco did not meet the minimum levels of adjusted diluted earnings per share, we did not pay a bonus with respect to that performance measure. Based on Sysco’s achieving approximately a 4.7% increase in adjusted sales growth, 2.3% increase in gross profit dollars growth and 12.4% adjusted return on invested capital, the NEOs earned a fiscal 2014 MIP annual incentive awardpool limit for each of approximately 35.6% of target prior to adjustment related to the SBOs.
Fiscal 2014 Summary of Payments | ||||||||||||||||||||||||||||||||
NEO | Ending Base Salary | Target Annual Incentive (% of Base Salary) | Sysco Business Performance Factor | Award Funding on Business Performance Factor | Funded Award Not Subject to SBO (60%) | Individual SBO Performance Factor(1) | Amount of Award Funding on SBO (40%) | Total Earned Award for FY14 Performance | ||||||||||||||||||||||||
DeLaney | $ | 1,198,000 | 150 | % | 35.6 | % | $ | 639,999 | $ | 383,999 | 107.0 | % | $ | 273,920 | $ | 657,919 | ||||||||||||||||
Kreidler | $ | 715,000 | 100 | % | 35.6 | % | $ | 254,540 | $ | 152,724 | 107.0 | % | $ | 108,943 | $ | 261,667 | ||||||||||||||||
Green | $ | 715,000 | 125 | % | 35.6 | % | $ | 318,175 | $ | 190,905 | 105.0 | % | $ | 133,634 | $ | 324,539 | ||||||||||||||||
Bené | $ | 625,000 | 100 | % | 35.6 | % | $ | 222,500 | $ | 133,500 | 107.0 | % | $ | 95,230 | $ | 228,730 | ||||||||||||||||
Shurts | $ | 587,000 | 100 | % | 35.6 | % | $ | 208,972 | $ | 125,383 | 115.0 | % | $ | 96,127 | $ | 221,510 |
The various levels of performance to reach threshold, targetfiscal 2016 and maximum payouts are described in the table below.
MIP Annual Incentive Award Targets - Fiscal 2014 | ||||||||||||||||
Adjusted Sales Growth | Gross Profit Dollar Growth | Adjusted Fully Diluted Earnings Per Share | Adjusted Return on Invested Capital | |||||||||||||
Threshold | 3.0 | % | 2.0 | % | $ | 1.87 | 12.0 | % | ||||||||
Target | 4.5 | % | 3.0 | % | $ | 1.92 | 13.3 | % | ||||||||
Maximum | 5.5 | % | 4.0 | % | $ | 2.04 | 14.6 | % |
Limit on Fiscal 2014 maximum annual incentive award payouts.In August 2013, the Committee further refined the MIP annual incentive awardsfiscal 2017 for the NEOs, by establishing a bonus pool for fiscal year 2014 forCFO and certain “covered employees” of Sysco, as defined in Section 162(m) of the Internal Revenue Code (the “Code”) to help ensure compliance with the deductibility requirements of Section 162(m) of the Code, as well asCode. Under the 2013 Long-Term Incentive Plan, the maximum dollar amount that may be paid under all cash-based awards granted to any individual for Mr. Kreidler. The bonus pool was set to be equal to two percent (2%) of Sysco’s net earnings forany a fiscal year 2014 and in no event canunder the sumPlan is 1% of the individual percentagesCompany’s earnings before income taxes as publicly disclosed in the “Consolidated Results of Operations” section of the bonus pool grantedCompany’s annual report to the participants inSecurities and Exchange Commission on Form 10-K for the pool exceed one hundred percent (100%). fiscal year ended immediately before the date the applicable award is paid.
Participant’s Title | Percent of 2016 Incentive Pool Allocated to Participant | Percent of 2017 Incentive Pool Allocated to Participant | ||
CEO | 41% | 39% | ||
CFO | 13% | 14% | ||
NEO 3 | 20% | 21% | ||
NEO 4 | 13% | 13% | ||
NEO 5 | 13% | 13% |
The maximum award for each participant, expressed as a percentageumbrella structure of the bonusincentive pool for the program year, is set forth below and in no event can it exceed the individual award maximum set forth in the plan document:
The bonus poollimit serves only to provide a ceiling on the maximum bonusannual incentive amount that any NEO may receive, and the actual bonusincentive amount paid to each NEO will be determined pursuant to the fiscal 2014applicable incentive award opportunityprogram described above.
SYSCO CORPORATION - 20142016 Proxy Statement 6163
Fiscal 2015 MIP Awards
In approving the MIP annual incentive award opportunity for fiscal 2015, the Compensation Committee provided for:
The Compensation Committee believes that this modified approach with respect to the SBOs will further incentivize the NEOs to achieve the strategic objectives that are most critical to Sysco’s long-term success.
Limit on Fiscal 2015 maximum annual incentive award payouts.In July 2014, the Committee established a bonus pool for fiscal year 2015 for certain “covered employees” of Sysco, as defined in Section 162(m) of the Internal Revenue Code (the “Code”) to help ensure compliance with the deductibility requirements of Section 162(m) of the Code, as well as for Mr. Kreidler. The bonus pool was set to be equal to two percent (2%) of Sysco’s net earnings for fiscal year 2015, and in no event can the sum of the individual percentages of the bonus pool granted to the participants in the pool exceed one hundred percent (100%). The maximum award for each participant, expressed as a percentage of the bonus pool for the program year, is set forth below, and in no event can it exceed the individual award maximum set forth in the plan document:
The bonus pool serves only to provide a ceiling on the maximum bonus amount that any NEO may receive, and the actual bonus paid to each NEO will be determined pursuant to the fiscal 2015 incentive award opportunity described above.
Cash Performance Unit PlanUnits
The 2008 Cash Performance Unit Plan,Company’s cash performance units, which we refer to as amended, provides“CPUs,” provide certain key employees, including the NEOs, the opportunity to earn cash incentive payments based on pre-established performance criteria over performance periods of at least three years. We refer to these units as “CPUs.” The Committee currently makes grants annually for three year performance periods, ending at the end of the third fiscal year, including the year of grant. TheCPUs awarded prior to fiscal year 2016 were issued pursuant to the 2008 Cash Performance Unit Plan, provides that,as amended, which expired on November 30, 2014. CPUs awarded in fiscal year 2016 were made, and any future grants of CPUs may be made, pursuant to the Sysco 2013 Long-Term Incentive Plan.
Under these plans, the Committee may select performance goals from those specified in the event of the death of a participant, payments are determined using Sysco’s performance for the entire three-year performance period. Payments following a change of control areapplicable plan, based on targetthe performance values. With respect to participants whose employment terminates due to retirementof Sysco generally or death, such individuals will receive a pro-rata payment based uponon the numberperformance of years during which the participant was actively employed during the relevant performance period.
subsidiaries or divisions. The Committee establishes the performance goals for the CPU awards during the first ninety days of the performance period, and communicates individual awards after its meeting the following November. The CPU plan will expire on November 30, 2014, unless sooner terminated by the Board. CPU grants after that date may be made pursuant to the Sysco 2013 Long-Term Incentive Plan.
Under the plan, the Committee may select performance goals from those specified in the plan, based on the performance of Sysco generally or on the performance of subsidiaries or divisions. With respect to the grants in fiscal 2011 that were paid in August 2013, the Committee set performance criteria based on the average increases in Sysco’s earnings per share and sales over the performance periods. With respect to the grants in fiscal 2012, 2013 and 2014, the Committee set the performance criteria based on relative total shareholder return, as described below. Outstanding CPU Awards
As of September 22, 2014,19, 2016, the named executive officers listed below held cash performance unit grants in the amounts and for the performance periods set forth below:
Payout Amount ($) | Payout Amount ($) | ||||||||||||||||||||||||||||||||||||||||||||||
Name | Fiscal Year in Which Granted | Target Value Per CPU | Number of CPUs Held | Performance Period | Minimum | Target | Maximum | Fiscal Year in Which Granted | Target Value Per CPU | Number of CPUs Held | Performance Period | Threshold | Target | Maximum | |||||||||||||||||||||||||||||||||
DeLaney | 2014 | $ | 1 | 2,516,850 | 7/1/13-6/30/16 | $ | 1,258,425 | $ | 2,516,850 | $ | 3,775,275 | 2016 | $ | 1 | 2,843,750 | 6/27/15-6/30/18 | $ | 1,137,500 | $ | 2,843,750 | $ | 5,118,750 | |||||||||||||||||||||||||
2013 | 1 | 1,762,500 | 7/1/12-6/27/15 | 881,250 | 1,762,500 | 2,643,750 | 2015 | 1 | 2,786,875 | 6/28/14-7/1/17 | 1,393,438 | 2,786,875 | 4,180,313 | ||||||||||||||||||||||||||||||||||
Kreidler | 2014 | 1 | 875,875 | 7/1/13-6/30/16 | 437,938 | 875,875 | 1,313,813 | ||||||||||||||||||||||||||||||||||||||||
Bené | 2016 | 1 | 853,125 | 6/27/15-6/30/18 | 341,250 | 853,125 | 1,535,625 | ||||||||||||||||||||||||||||||||||||||||
2013 | 1 | 612,500 | 7/1/12-6/27/15 | 306,250 | 612,500 | 918,750 | 2015 | 1 | 732,266 | 6/28/14-7/1/17 | 366,133 | 732,266 | 1,098,398 | ||||||||||||||||||||||||||||||||||
Green | 2014 | 1 | 813,313 | 7/1/13-6/30/16 | 406,656 | 813,313 | 1,219,969 | ||||||||||||||||||||||||||||||||||||||||
Grade | 2016 | 1 | 765,625 | 6/27/15-6/30/18 | 306,250 | 765,625 | 1,378,125 | ||||||||||||||||||||||||||||||||||||||||
2013 | 1 | 568,750 | 7/1/12-6/27/15 | 284,375 | 568,750 | 853,125 | 2015 | 1 | 382,500 | 6/28/14-7/1/17 | 191,250 | 382,500 | 573,750 | ||||||||||||||||||||||||||||||||||
Bené | 2014 | 1 | 710,938 | 7/1/13-6/30/16 | 355,469 | 710,938 | 1,066,406 | ||||||||||||||||||||||||||||||||||||||||
Libby | 2016 | 1 | 630,000 | 6/27/15-6/30/18 | 252,000 | 630,000 | 1,134,000 | ||||||||||||||||||||||||||||||||||||||||
2013 | 1 | — | 7/1/12-6/27/15 | — | — | — | 2015 | 1 | 567,788 | 6/28/14-7/1/17 | 283,894 | 567,788 | 851,681 | ||||||||||||||||||||||||||||||||||
Shurts | 2014 | 1 | 667,713 | 7/1/13-6/30/16 | 333,856 | 667,713 | 1,001,569 | 2016 | 1 | 710,938 | 6/27/15-6/30/18 | 284,375 | 710,938 | 1,279,688 | |||||||||||||||||||||||||||||||||
2013 | 1 | 467,188 | 7/1/12-6/27/15 | 233,594 | 467,188 | 700,782 | 2015 | 1 | 687,744 | 6/28/14-7/1/17 | 343,872 | 687,744 | 1,031,616 |
Fiscal 2016 CPU Awards
In November 2015, the Committee approved awards of CPUs to eligible NEOs under Sysco’s Fiscal Year 2016 Cash Performance Unit Program, which was adopted by the Committee in August 2015 pursuant to the 2013 Sysco Corporation Long-Term Incentive Plan. For purposes of these CPUs, the Committee has adopted modified financial performance metrics. The principal metric for the fiscal 2016 CPU awards is the Company’s average 3-year return on invested capital (“ROIC”) as compared to the target ROIC established by the Committee on an annual basis, subject to modification based on the Company’s relative total shareholder return for the performance period. Target ROIC for each of the fiscal years during the performance period will be established by the Committee within the first 90 days of each respective fiscal year, and calculations may be adjusted for certain extraordinary or non-recurring items.
Average Capital Efficiency Performance Factor. For each year during the performance period, Company ROIC performance is measured against the target ROIC, yielding an annual capital efficiency performance factor. For fiscal 2016, the annual capital efficiency performance factor was calculated based on the following:
• | Below Minimum - if Company ROIC for a fiscal year is less than 90% of target ROIC, the performance factor is 0%; |
• | Threshold - if Company ROIC for a fiscal year is 90% of target ROIC, the performance factor is 50%; |
• | Target - if Company ROIC for a fiscal year is 100% of target ROIC, the performance factor is 100%; and |
• | Maximum - if Company ROIC for a fiscal year is greater than or equal to 110% of target ROIC, the performance factor is 150%. |
The sum of the annual capital efficiency performance factor for each fiscal year in the performance period is then divided by the total number of fiscal years in the performance period to determine the average capital efficiency performance factor.
Relative Total Shareholder Return Modifier. The payout under the fiscal 2016 CPU awards is further modified by the Company’s relative total shareholder return during the 3-year performance period. In order to compute total shareholder return, the following sum is first calculated:
• | the closingprice of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the last day of the three fiscal-performance period, plus, |
Total shareholder return is then computed as that sum divided by the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the first day of the three-year performance period.
SYSCO CORPORATION - 20142016 Proxy Statement 6264
Based on the Company’s total shareholder return for the performance period, relative to that of the S&P 500, the total shareholder return modifier is determined as follows:
• | Minimum – 80% modifier if relative total shareholder return is equal to or below the 30thpercentile; |
• | Target – 100% modifier if relative total shareholder return is equal to the 50thpercentile; and |
• | Maximum – 120% modifier if relative total shareholder return is equal to or greater than the 75thpercentile. |
Calculation of CPU Payout. The cash payout under the fiscal 2016 CPU awards is calculated by multiplying the number of CPUs held by the NEO by the product of (1) the average capital efficiency performance factor (ranging from 0% to 150%) and (2) the relative total shareholder return modifier (ranging from 80% to 120%), which represents a total incentive opportunity of between 0% and 180% of the number of CPUs awarded to such NEO.
Payment under Fiscal 2014 CPU Awards
Following the conclusion of each three-year performance period, if we meet the relevant performance criteria, we will pay each named executive an amount obtained by multiplying the number of performance units that the executive received by the value assigned to each unit and then multiplying the resulting product by a specified percentage. Each CPU is assigned a value of $1.00 per unit. We make all payments due with respect to the CPUs in cash. No payments made under the 2008 Cash Performance Unit Plan to any named executive officer in any fiscal year may be higher than 1% of Sysco’s earnings before income taxes, as publicly disclosed in the “Consolidated Results of Operations” section of Sysco’s Annual Report on Form 10-K for the fiscal year ended immediately before the applicable payment date.
With respect to the CPU grants that we made in fiscal year 2012,2014, which were scheduled to paypaid out in August 2014,2016, the Committee replaced the previousestablished performance criteria with a measure based on Sysco’s total shareholder return over the three-year performance period including fiscal years 2012, 20132014, 2015 and 2014,2016, relative to that of the S&P 500. Based upon where Sysco’s total shareholder return for that period falls relative to the other S&P 500 companies, CPUs are expected to pay at a rate from 50% to 150% of the aggregate value of the CPUs, which are valued at $1 per unit. In order to compute total shareholder return, the following sum is first calculated:
• | the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the last day of the three fiscal-performance period, plus, |
• | the per share cash dividends paid on company common stock during the three-year performance period, minus, |
• | the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the first day of the three-year performance period. |
Total shareholder return is then computed as that sum divided by the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the first day of the three-year performance period. The threshold payment level requires Sysco’s total shareholder return for the three-year performance period to equal or exceed that of the 30thpercentile of the S&P 500, the target payment level requires company performance to equal the 45thpercentile, and the maximum payment level is expected to be reached at the 75thpercentile, with graduated bonus levels in between the threshold and maximum levels. These grants are subject to Sysco’s clawback policies.
Based on Sysco’s shareholder return during the three-year performance period ending June 28, 2014,July 2, 2016, which was in the 2766.8thpercentile relative to the S&P 500, resulted in a CPU payout of $1.40 per unit in August 2016, which represented approximately 140% of the threshold performance was not achieved and the named executive officers did not receive a payment with respect to the CPUs issued in fiscal year 2012.target payout level.
CPU Benefits upon Termination of Employment or Change in Control under the CPU Plan
If the executive’s employment terminates during a performance period because the executive leaves our employment due to disability, the executive will nonetheless receive the specified payment on the applicable payment date, as if he remained employed on that date. date, which payment is determined using Sysco’s performance for the entire three-year performance period.
If the executive’s employment terminates during a performance period because the executive experiences a retirement in good standing or due to the executive’s death, the executive will receive the specified payment on the applicable payment date, as if he remained employed on that date, reduced on a pro-rata basis based on the number of fiscal years during which the executive was actively employed, at any time, during the applicable three-year performance period. The executive will get credit for aany fiscal year in the applicable performance period if the executive was actively employed by Sysco at any time during a relevantthat fiscal year. year, and the payment will be determined using Sysco’s performance for the entire three-year performance period.
If the executive’s employment terminates before the end of the performance period for any reason other than retirement in good standing, death or disability, we will cancel the executive’s performance units,CPUs, and the executive will not receive any payments under the plan with respect to thesuch cancelled CPUs. The plan provides that if
If a change in control occurs during a performance period, we will pay the executive the target amount payable under the plan for the executive’s CPUs for that performance period, as if the target performance levels had been achieved. In such instances, the CPUs awarded with respect to the performance period will be considered vested and payment will be made to the executive within 90 days after the date of the change in control.
Transaction IncentiveSYSCO CORPORATION - 2016 Proxy Statement65
Fiscal 2017 Awards of Performance Share Units
On March 21, 2014,In August 2016, the Compensation Committee approved awards of a new long-term incentive, and retention cash awards forperformance share units, pursuant to the 2013 Sysco Corporation Long-Term Incentive Plan. The performance share units provide certain officers of the Company,key employees, including the currentparticipating NEOs, other than Mr. DeLaney, relatedthe opportunity over a three-year performance period to proposed merger with USF. These awards areearn shares of Sysco common stock based on the financial performance metrics described in “Compensation Discussion and Analysis—Transaction Incentive Awards—Detailed Information.Executive Summary—Changes to Executive Compensation Program—Fiscal 2017 Changes.”
Outstanding Equity Awards at Fiscal Year-End
WhileOption grants to the NEOs prior to fiscal 2017 under the 2013 Long-Term Incentive Plan and its predecessor, the 2007 Stock Incentive Plan, allow for optionswhich we refer to vest and become exercisable in no more than one-third increments each year, option grants underas the plans to the NEOs“plans,” have generally vested and become exercisable in five equal annual installments, beginning one year after the grant date, and the option grants to NEOs in fiscal 2017 will vest and become exercisable in three equal, annual installments, beginning one year after the grant date, in each case to create a long-term incentive for the executives. The Committee will at times, however, grant options that vest one-third per year beginning on the first anniversary of the date of grant. The restricted stock units that have been granted pursuant to the 2013 Long-Term Incentive Plan and the 2007 Stock Incentive Planplans generally vest one-third per year over three years. The 2013 Long-Term Incentive Plan allows the Committee the discretion to grant stock options, restricted stock, and restricted stock units, performance share units, as well as other stock-based awards.
According to the terms of our stock plans, the exercise price of options may not be less than the Fair Market Value on the date of the grant, which is defined in our 2013 Long-Term Incentive Plan as the closing sale price during regular trading hours of the stock on the immediately preceding date on the principal securities market in which shares of stock is then
SYSCO CORPORATION - 2014 Proxy Statement 63
traded, or, if there were no trades on that date, the closing sale price during regular trading hours of the stock on the first trading day prior to that date, and which is defined in our 2007 Stock Incentive Plan as the closing price of our stock on the New York Stock Exchange on the firstlast business day prior tobefore the grant date. Our stock plans specifically prohibit repricing of outstanding grants without stockholder approval. The Committee grants all of our stock options and restricted stock units pursuant to our equity grant guidelines.
Pursuant to our equity grant guidelines in effect prior to August 2011, the Committee generally made option and restricted stock unit grants on the second Tuesday in November each year, a date when we were typically in a trading “window” under our Policy on Trading in Company Securities. In August 2011, the Committee revised our equity grant guidelines to provide that grants may be made during any open trading windows pursuant to our Policy on Trading in Company Securities, subject to certain conditions and qualifications. The guidelines provide that the Committee should generally make equity grants at a point in time when we have publicly disseminated all material information likely to affect the trading price of Sysco’s common stock. Under the guidelines, the Committee will generally not make grants during a period preceding an anticipated event that is likely to cause a substantial increase or a substantial decrease in the trading price of Sysco’s common stock, such as an earnings release. If we have grants scheduled to occur when Sysco is in possession of material non-public information, then:
• | management must inform the Committee or the Board of Directors, as the case may be, of all material information in its possession regarding Sysco; and |
• | if, in the Committee’s or Board’s judgment, such information is reasonably likely to affect the trading price of Sysco’s common stock, then due consideration should be given to the number and exercise price of options and the number of any equity grants that may be granted in light of such material non-public information. |
The following table provides information on each named executive officer’s stock option, restricted stock and restricted stock unit grants outstanding as of June 28, 2014.
Outstanding Equity Awards at Fiscal Year-End
Option Awards | Stock Awards | |||||||||||||||||||||||||
Name | Date Granted | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | |||||||||||||||||||
DeLaney | November 2013 | — | — | — | — | 54,192 | (2) | $ | 2,051,167 | |||||||||||||||||
November 2013 | — | 610,701 | (3) | $ | 33.40 | 11/14/2023 | — | — | ||||||||||||||||||
February 2013 | — | — | — | — | 20,596 | (4) | 779,559 | |||||||||||||||||||
November 2012 | — | — | — | — | 51,084 | (5) | 1,933,529 | |||||||||||||||||||
November 2012 | — | — | — | — | 38,359 | (6) | 1,451,888 | |||||||||||||||||||
November 2012 | 150,000 | 600,000 | (7) | 29.96 | 11/13/2019 | — | — | |||||||||||||||||||
November 2011 | — | — | — | — | 20,728 | (8) | 784,555 | |||||||||||||||||||
November 2011 | 150,000 | 450,000 | (9) | 27.65 | 11/14/2018 | — | — | |||||||||||||||||||
November 2010 | 100,000 | 200,000 | (10) | 28.87 | 11/10/2017 | — | — | |||||||||||||||||||
November 2009 | 70,400 | 70,400 | (11) | 27.44 | 11/9/2016 | — | — | |||||||||||||||||||
February 2009 | 64,400 | — | 23.36 | 2/10/2016 | — | — | ||||||||||||||||||||
November 2008 | 25,001 | — | 24.99 | 11/10/2015 | — | — | ||||||||||||||||||||
Kreidler | November 2013 | — | — | — | — | 18,859 | (2) | 713,813 | ||||||||||||||||||
November 2013 | — | 212,527 | (3) | 33.40 | 11/14/2023 | — | — | |||||||||||||||||||
November 2012 | — | — | — | — | 32,829 | (5) | 1,242,578 | |||||||||||||||||||
November 2012 | — | — | — | — | 13,330 | (6) | 504,541 | |||||||||||||||||||
November 2012 | 61,250 | 245,000 | (7) | 29.96 | 11/13/2019 | — | — | |||||||||||||||||||
November 2011 | — | — | — | — | 6,308 | (8) | 238,758 | |||||||||||||||||||
November 2011 | 105,000 | 157,500 | (9) | 27.65 | 11/14/2018 | — | — | |||||||||||||||||||
November 2010 | 94,500 | 63,000 | (10) | 28.87 | 11/10/2017 | — | — | |||||||||||||||||||
November 2009 | 48,000 | 24,000 | (11) | 27.44 | 11/9/2016 | — | — | |||||||||||||||||||
October 2009 | 27,303 | 15,000 | (12) | 24.38 | 10/5/2016 | — | — | |||||||||||||||||||
Green | November 2013 | — | — | — | — | 17,512 | (2) | 662,829 | ||||||||||||||||||
November 2013 | — | 197,346 | (3) | 33.40 | 11/14/2023 | — | — | |||||||||||||||||||
November 2012 | — | — | — | — | 12,378 | (6) | 468,507 | |||||||||||||||||||
November 2012 | — | 227,500 | (7) | 29.96 | 11/13/2019 | — | — | |||||||||||||||||||
November 2011 | — | — | — | — | 6,346 | (8) | 240,196 | |||||||||||||||||||
November 2011 | — | 158,439 | (9) | 27.65 | 11/14/2018 | — | — | |||||||||||||||||||
November 2010 | — | 66,000 | (10) | 28.87 | 11/10/2017 | — | — | |||||||||||||||||||
November 2009 | — | 26,700 | (11) | 27.44 | 11/9/2016 | — | — | |||||||||||||||||||
November 2008 | 4,002 | — | 24.99 | 11/10/2015 | — | — |
SYSCO CORPORATION - 20142016 Proxy Statement 6466
Option Awards | Stock Awards | |||||||||||||||||||||||||
Name | Date Granted | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | |||||||||||||||||||
Bené | November 2013 | — | — | — | — | 15,308 | (2) | 579,408 | ||||||||||||||||||
November 2013 | — | 172,505 | (3) | 33.40 | 11/14/2023 | — | — | |||||||||||||||||||
May 2013 | — | — | — | — | 18,976 | (13) | 718,242 | |||||||||||||||||||
Shurts | November 2013 | — | — | — | — | 14,377 | (2) | 544,169 | ||||||||||||||||||
November 2013 | — | 162,017 | (3) | 33.40 | 11/14/2023 | — | — | |||||||||||||||||||
November 2012 | — | — | — | — | 10,882 | (5) | 411,884 | |||||||||||||||||||
November 2012 | — | — | — | — | 10,168 | (6) | 384,859 | |||||||||||||||||||
November 2012 | 46,718 | 186,876 | (7) | 29.96 | 11/13/2019 | — | — | |||||||||||||||||||
Fernandez | August 2013 | — | — | — | — | 45,601 | (14) | 1,725,998 | ||||||||||||||||||
August 2013 | — | 364,583 | (15) | 31.98 | 8/21/2020 | — | — | |||||||||||||||||||
April 2012 | 416,666 | 208,334 | (16) | 29.44 | 4/12/2019 | — | — | |||||||||||||||||||
April 2012 | — | — | — | — | 26,494 | (17) | 1,002,798 | |||||||||||||||||||
April 2012 | — | — | — | — | 1,812 | (17) | 68,584 |
The following table provides information on the stock option and restricted stock unit grants held by each named executive officer, other than Mr. Kreidler, as of July 2, 2016. The outstanding stock options and restricted stock units previously held by Mr. Kreidler expired pursuant to their respective terms upon his departure from the Company on December 31, 2015.
Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | Number of | ||||||||||||||
Underlying | Underlying | Shares or | Market Value of | |||||||||||||
Unexercised | Unexercised | Option | Units of Stock | Shares or Units | ||||||||||||
Options | Options | Exercise | Option | That Have | of Stock That | |||||||||||
Exercisable | Unexercisable | Price | Expiration | Not Vested | Have Not Vested | |||||||||||
Name | Date Granted | (#) | (#) | ($) | Date | (#) | ($)(1) | |||||||||
DeLaney | November 2015 | — | — | — | — | 50,045 | (2) | 2,538,783 | ||||||||
November 2015 | — | 563,258 | (3) | 40.59 | 11/17/2025 | — | — | |||||||||
November 2014 | — | — | — | — | 34,593 | (4) | 1,754,903 | |||||||||
November 2014 | 114,982 | 459,928 | (5) | 38.89 | 11/18/2024 | — | — | |||||||||
November 2013 | — | — | — | — | 18,064 | (6) | 916,387 | |||||||||
November 2013 | 244,280 | 366,421 | (7) | 33.40 | 11/14/2023 | — | — | |||||||||
November 2012 | — | — | — | — | 25,542 | (8) | 1,295,746 | |||||||||
November 2012 | 450,000 | 300,000 | (9) | 29.96 | 11/13/2019 | — | — | |||||||||
November 2011 | 450,000 | 150,000 | (10) | 27.65 | 11/14/2018 | — | — | |||||||||
November 2010 | 300,000 | — | 28.87 | 11/10/2017 | — | — | ||||||||||
November 2009 | 80,456 | — | 27.44 | 11/9/2016 | — | — | ||||||||||
Bené | February 2016 | — | — | — | — | 2,892 | (11) | 146,711 | ||||||||
February 2016 | — | 40,849 | (12) | 44.38 | 2/18/2026 | — | — | |||||||||
November 2015 | — | — | — | — | 15,013 | (2) | 761,609 | |||||||||
November 2015 | — | 168,977 | (3) | 40.59 | 11/17/2025 | — | — | |||||||||
November 2014 | — | — | — | — | 9,089 | (4) | 461,085 | |||||||||
November 2014 | 30,212 | 120,848 | (5) | 38.89 | 11/18/2024 | — | — | |||||||||
November 2013 | — | — | — | — | 5,102 | (6) | 258,824 | |||||||||
November 2013 | 69,002 | 103,503 | (7) | 33.40 | 11/14/2023 | — | — | |||||||||
Grade | November 2015 | — | — | — | — | 13,473 | (2) | 683,485 | ||||||||
November 2015 | — | 151,646 | (3) | 40.59 | 11/17/2025 | — | — | |||||||||
November 2014 | — | — | — | — | 6,647 | (4) | 337,202 | |||||||||
November 2014 | 13,808 | 55,235 | (5) | 38.89 | 11/18/2024 | — | — | |||||||||
November 2013 | — | — | — | — | 3,579 | (6) | 181,563 | |||||||||
November 2013 | 30,254 | 45,383 | (7) | 33.40 | 11/14/2023 | — | — | |||||||||
November 2012 | 18,477 | 34,876 | (9) | 29.96 | 11/13/2019 | — | — | |||||||||
November 2011 | — | 8,375 | (10) | 27.65 | 11/14/2018 | — | — | |||||||||
Libby | November 2015 | — | — | — | — | 11,087 | (2) | 562,444 | ||||||||
November 2015 | — | 124,783 | (3) | 40.59 | 11/17/2025 | — | — | |||||||||
November 2014 | — | — | — | — | 7,048 | (4) | 357,545 | |||||||||
November 2014 | 23,426 | 93,704 | (5) | 38.89 | 11/18/2024 | — | — | |||||||||
November 2013 | — | — | — | — | 2,847 | (6) | 144,428 | |||||||||
November 2013 | 24,062 | 36,094 | (7) | 33.40 | 11/14/2023 | — | — | |||||||||
November 2012 | — | — | — | — | 12,380 | (8) | 628,037 | |||||||||
November 2012 | 40,000 | 26,667 | (9) | 29.96 | 11/13/2019 | — | — | |||||||||
November 2011 | — | 12,500 | (10) | 27.65 | 11/14/2018 | — | — | |||||||||
Shurts | November 2015 | — | — | — | — | 12,511 | (2) | 634,683 | ||||||||
November 2015 | — | 140,814 | (3) | 40.59 | 11/17/2025 | — | — | |||||||||
November 2014 | — | — | — | — | 8,536 | (4) | 433,031 | |||||||||
November 2014 | 28,375 | 113,501 | (5) | 38.89 | 11/18/2024 | — | — | |||||||||
November 2013 | — | — | — | — | 4,792 | (6) | 243,098 | |||||||||
November 2013 | 64,806 | 97,211 | (7) | 33.40 | 11/14/2023 | — | — | |||||||||
November 2012 | 140,156 | 93,438 | (9) | 29.96 | 11/13/2019 | — | — |
(1) | The aggregate dollar value is calculated using the closing price of our common stock on |
(2) | These restricted stock units vest in equal portions on December 1 of 2016, 2017 and 2018, and may be settled solely by delivery of an equal number of shares of Sysco common stock. Vesting is contingent upon executive’s continued service with the Company, except that the units will remain in effect and continue to vest according to the vesting schedule upon executive’s termination of employment due to retirement in good standing or disability. Additionally, the units will vest immediately upon executive’s death or a change in control of the Company. |
(3) | These options vest in equal portions on November 17 of 2016, 2017, 2018, 2019 and 2020. |
SYSCO CORPORATION - 2016 Proxy Statement 67
(4) | These restricted stock units vest in equal portions on November |
(5) | These options vest in equal portions on November 18 of 2016, 2017, 2018 and 2019. |
(6) | These restricted stock units vest on November 15, 2016, and may be settled solely by delivery of an equal number of shares of Sysco common stock. Vesting is contingent upon executive’s continued service with the |
These options vest in equal portions on November 15 of | |
These restricted stock units vest in equal portions on | |
These options vest in equal portions on November 13 of 2016 and 2017. | |
(10) | These options vest on November 15, 2016. |
(11) | These restricted stock units vest in equal portions on |
These options vest in equal portions on | |
Awards pursuant to the 2013 Long-Term Incentive Plan and 2007 Stock Incentive Plan
All of the option awards listed above provide that, if the executive’s employment terminates as a result of retirement in good standing or disability, the option will remain in effect, vest and be exercisable in accordance with its terms as if the executive remained an employee of Sysco. All unvested options will vest immediately upon the executive’s death. Furthermore, the options provide that the executive’s estate or designees may exercise the options at any time within three years after his death, but in no event later than the original termination date.
All of the options listed above granted prior to November 2013 provide for the vesting of unvested options upon a change in control. In addition, grants made prior to November 2013 provide that, if the named executive’s
SYSCO CORPORATION - 2014 Proxy Statement 65
employment is terminated other than for cause during the 24 month period following a change in control, the outstanding options under the plans will be exercisable to the extent the options were exercisable as of the date of termination for 24 months after employment termination or until the expiration of the stated term of the option, whichever period is shorter.
The options granted insince November 2013 provide that, if the Company terminates the executive’s employment within 12 months before, or 24 months following, a change in control of the Company, then the option will remain in effect, vest and be exercisable in accordance with its terms as if the executive had remained an employee of Sysco.
Option Exercises and Stock Vested
The following table provides information with respect to aggregate option exercises and the vesting of stock awards during the last fiscal year for each of the NEOs.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||
Number | Number | |||||||||||||||||||||||||||||||
of Shares Acquired | Value Realized | Number of Shares | Value Realized on | of Shares Acquired | Value Realized | Number of Shares | Value Realized on | |||||||||||||||||||||||||
on Exercise | on Exercise | Acquired on Vesting | Vesting | on Exercise | on Exercise | Acquired on Vesting | Vesting | |||||||||||||||||||||||||
Name | (#) | ($) | (#) | ($)(1) | (#) | ($) | (#) | ($)(1) | ||||||||||||||||||||||||
DeLaney | — | $ | — | 77,409 | $ | 2,603,772 | 149,745 | $ | 2,802,657 | 77,609 | $ | 3,142,834 | ||||||||||||||||||||
Bené | — | — | 19,136 | 863,772 | ||||||||||||||||||||||||||||
Grade | 76,362 | 1,225,047 | 10,699 | 430,283 | ||||||||||||||||||||||||||||
Libby | 47,800 | 977,619 | 15,462 | 620,539 | ||||||||||||||||||||||||||||
Shurts | — | — | 19,586 | 787,661 | ||||||||||||||||||||||||||||
Kreidler | — | — | 25,747 | 858,123 | 787,784 | 9,187,031 | 26,757 | 1,073,999 | ||||||||||||||||||||||||
Green | 185,386 | 1,704,826 | 17,301 | 576,098 | ||||||||||||||||||||||||||||
Bené | — | — | 9,489 | 345,400 | ||||||||||||||||||||||||||||
Shurts | — | — | 10,525 | 348,904 | ||||||||||||||||||||||||||||
Fernandez | — | — | 30,324 | 1,068,288 |
(1) | We computed the value realized upon vesting by multiplying the number of shares of stock that vested by the closing price of Sysco’s common stock on the |
SYSCO CORPORATION - 2016 Proxy Statement 68
Fiscal 2016 Nonqualified Deferred Compensation
The following table provides information regarding executive contributions and related company matches, earnings and account balances under the Executive Deferred Compensation Plan (“EDCP”) and the Management Savings Plan (“MSP”) for each of the NEOs during fiscal 2016. Other than Mr. Kreidler, who received a distribution of $649,151 from the MSP in January 2016 following his departure from the Company, none of the NEOs made any withdrawals or received any distributions under these plans with respect to fiscal 2016.
Name | Applicable Plan | Executive Contributions for Fiscal 2016 ($)(1) | Registrant Contributions for Fiscal 2016 ($)(2) | Aggregate Earnings in Fiscal 2016 ($)(3) | Aggregate Balance at July 2, 2016 ($)(4) | |||||||||||||
DeLaney | MSP | $ | 180,128 | $ | 281,588 | $ | 15,002 | $ | 945,100 | |||||||||
EDCP | — | — | 77,808 | 1,483,321 | ||||||||||||||
Bené | MSP | 700,832 | 83,163 | (6,111 | ) | 1,536,851 | ||||||||||||
EDCP | — | — | — | — | ||||||||||||||
Grade(5) | MSP | 8,413 | — | 147 | 8,561 | |||||||||||||
EDCP | — | — | — | — | ||||||||||||||
Libby | MSP | 54,374 | 178,924 | 7,922 | 485,634 | |||||||||||||
EDCP | — | — | — | — | ||||||||||||||
Shurts | MSP | 230,545 | 61,237 | 16,509 | 512,077 | |||||||||||||
EDCP | — | — | — | — | ||||||||||||||
Kreidler | MSP | 94,442 | 244,863 | 8,297 | — | |||||||||||||
EDCP | — | — | 7,028 | 162,023 |
(1) | For the MSP, the amount shown for each of Messrs. DeLaney, Bené, Grade, Libby and Shurts includes the deferral of a portion of the salary paid to the NEO for fiscal 2016. The amount of such deferred salary is included in the Summary Compensation Table under the “Salary” column for 2016. |
(2) | As discussed below, the MSP allows participants to defer a portion of their salary and annual incentive award and provides for Company contributions to participants’ accounts, including matching, non-elective and transitional contributions. The amount shown is composed of the following Company contributions for each current NEO: |
Match | Non-elective | Pension Transition | SERP Transition | |||||||||||||
DeLaney | $ | 82,820 | $ | 99,384 | $ | 99,384 | $ | — | ||||||||
Bené | 37,801 | 45,362 | — | — | ||||||||||||
Grade | — | — | — | — | ||||||||||||
Libby | 24,584 | 29,501 | — | 124,838 | ||||||||||||
Shurts | 27,835 | 33,402 | — | — | ||||||||||||
Kreidler | 35,220 | 42,264 | — | 167,379 |
(3) | The above-market interest portion of these amounts is included in the fiscal 2016 disclosure under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column and footnote 6 of the Summary Compensation Table, in the following amounts: $31,626 for EDCP and $3,737 for MSP for Mr. DeLaney, $3,331 for MSP for Mr. Bené, $468 for MSP for Mr. Shurts and $1,935 for EDCP and $2,039 for MSP for Mr. Kreidler. |
(4) | Portions of the amounts disclosed in this column for Messrs. DeLaney, Bené, Kreidler and Shurts have previously been reported in Summary Compensation Tables for previous years, including the following amounts: for Mr. DeLaney: $26,039 for fiscal 2015 and $25,833 for fiscal 2014; for Mr. Bené: $1,883 for fiscal 2015 and $353 for fiscal 2014; for Mr. Shurts: $269 for fiscal 2015 and $76 for fiscal 2014; and for Mr. Kreidler: $2,388 for fiscal 2015 and $1,661 for fiscal 2014. |
(5) | As Mr. Grade was ineligible to participate in the MSP during calendar 2015 due to his status as a Canadian resident at such time, he did not receive any registrant contributions during fiscal 2016. |
About the MSP
In order to provide certain highly compensated employees of the Company with the continued opportunity to build retirement savings on a tax-deferred basis through deferrals and Company contributions, Sysco adopted the MSP, effective November 14, 2012. The MSP is a competitive plan for nonqualified executive retirement benefits and is designed to supplement our 401(k) plan. It allows participants, including the current NEOs, to defer a portion of their salary compensation and up to 100% of their annual incentive award. The MSP also provides for Company contributions to participants’ accounts, including non-elective and matching contributions, as well as transition contributions, which are designed to compensate participants for a portion of the value lost as a result of the freezing of Sysco’s then-current plans. The MSP allows for deferrals and contributions that would not be permitted under the Company’s 401(k) plan due to IRS limits. The following discussion summarizes the material terms of the MSP that are applicable to the named executive officers who participate in it. The definition of bonus for purposes of the MSP includes amounts that are paid as a bonus or annual incentive award under the 2009 Plan or as a substitute for or in lieu of such bonus or annual incentive award.
Executive Deferrals. Participants may initially elect to defer up to fifty percent (50%) of their annual salary and/or all or a portion of their bonus under the MSP. A deferral election, once made, is irrevocable for the applicable calendar year (for salary deferrals) or fiscal year (for bonus deferrals). Bonus deferral elections are contingent upon the participant’s award qualifying as “performance based compensation” under Section 409A of the Code. The Committee retains the discretion to alter the minimum and maximum percentages of awards that may be deferred, but such discretion must be exercised prior to the beginning of the applicable fiscal year for which such award may be earned. Salary deferrals were effective for calendar year 2013, with performance based annual incentive award deferrals effective beginning in fiscal 2014.
Company Contributions. Sysco will make a matching contribution (determined based on compensation not taken into account under the Company’s 401(k) plan), to the account of participants who elect to defer a portion of their compensation under the MSP (the “Company Match”). The Company Match will be made on a calendar year basis. The Company
SYSCO CORPORATION - 2016 Proxy Statement69
Match, determined on a combined plan basis for the MSP and 401(k) plan, will be a maximum of fifty percent (50%) of the first five percent (5%) of a participant’s annual base salary and bonus deferred by the participant.
In addition to the Company Match described above, Sysco will credit an automatic Company contribution equal to three percent (3%) of the participant’s gross base salary and bonus, less the amount of a similar Company contribution into the participant’s 401(k) account, to the participant’s account in the MSP (the “Non-elective Contribution”). The Company will credit this contribution regardless of whether the participant defers any amounts under the MSP or 401(k).
In addition to the contributions described above, for a period of ten years through 2023, or until a participant ceases employment with Sysco, whichever is earlier, Sysco will credit an automatic Company contribution of three percent (3%) of the participant’s gross base salary and bonus, less the amount of a similar Company contribution into the participant’s 401(k) account, to the MSP account of eligible participants (the “Pension Transition Contribution”). To be eligible to receive the Pension Transition Contribution, a participant must have been accruing benefits under Sysco’s pension plan as of December 31, 2012 and have been at least age fifty (50) with fifteen (15) or more years of Sysco service as of that date. The Company will credit this contribution regardless of whether the participant defers any amounts under the MSP or 401(k) so long as he remains employed by Sysco or leaves for retirement, death or disability in such calendar year. Mr. DeLaney is eligible to receive these contributions.
In addition to the contributions described above, Mr. Libby’s MSP account will be credited annually with an automatic fully vested Company contribution of ten percent (10%) of his base salary and bonus for a period of ten years through 2023 (each contribution referred to as a “SERP Transition Contribution”) so long as the executive remains employed by Sysco or leaves for retirement, death or disability in such calendar year.
Investment Options. The portion of a participant’s account attributable to salary and bonus deferrals will be deemed invested and reinvested in certain investments, as designated by the participant from a list of available investment options. The investment options include a variety of generally available investment funds. The portion of a participant’s account attributable to Sysco company contributions will be deemed invested as directed by the participant.
Vesting of Deferrals and Company Contributions. Participant deferrals, including associated investment earnings and losses, will be fully vested at all times. The Company Match, as adjusted for associated investment earnings and losses, will vest based upon a participant’s number of years of service. As of July 2, 2016, Messrs. DeLaney, Grade and Libby were fully vested, and Messrs. Bené and Shurts were each 50% vested, with the remainder to vest through the fifth anniversary of service. In addition, each of Messrs. Bené and Shurts will become fully vested in the event of his death or disability or a defined change of control of Sysco. The Non-elective contribution, the Pension Transition Contribution, and the SERP Transition Contribution, as such amounts are adjusted for associated investment earnings and losses, will be fully vested at all times.
Timing and Form of Distributions. Other than elected in-service distributions or deferrals, the participant’s vested account may generally only be distributed upon the participant’s termination for any reason, including death, disability or retirement. Except with respect to in-service distributions or distributions following a participant’s termination (for a reason other than death, disability or retirement), the participant may elect to have his account distributed in:
• | a lump sum; |
• | annual installments over a period of up to 20 years; or |
• | a combination of a lump sum and installments. |
In-service distributions and distributions following a participant’s termination (for a reason other than death, disability or retirement) will be distributed in a lump sum.
Delay of Distributions to NEOs. Distributions to a specified employee, including an NEO, upon the specified employee’s or NEO’s “separation from service” as defined under Section 409A of the Internal Revenue Code, will be delayed for a period of six months to the extent that making payments during such six-month period would violate Section 409A of the Internal Revenue Code.
Forfeiture. The MSP contains a forfeiture provision whereby participants will forfeit the balance of their accounts attributable to Company contributions, adjusted for deemed investment losses and earnings, and even if such amounts may have previously vested, in the event the Committee finds that the participant engaged in fraudulent or certain other illegal acts while employed by the Company, or impermissibly competes with the Company after termination. Participants also have an obligation to repay any amounts previously distributed to them under the MSP attributable to Company contributions if the Committee finds they engaged in such acts.
About the EDCP
Sysco maintained the EDCP to provide certain executives the opportunity to defer the receipt of a portion of their annual salaries, bonuses and deemed earnings thereon on a tax-deferred basis. Federal income taxes on all amounts credited under the EDCP will be deferred until payout under current tax law. The EDCP is administered by the Compensation Committee.
Eligibility. All Sysco executives who were participants in the MIP, excluding those whose income was subject to Canadian income tax laws, were eligible to participate.
Executive Deferrals. Executives were permitted to defer up to 40% of their bonuses under the MIP and up to 100% of salary. In September 2009, the EDCP was amended to clarify that any bonus paid in lieu of or as a substitute for the MIP bonus in the future was eligible for deferral under the EDCP.
Sysco Matching Credit. Sysco did not match salary deferrals under the EDCP. Sysco provided matching credit of 15% of the first 20% of bonus deferred, resulting in a maximum possible match credit of 3% of an executive’s bonus. The Committee was permitted to authorize additional discretionary company contributions, although it did not authorize any from fiscal year 2008 through December 31, 2012, the date on which the EDCP was frozen.
Investment Options. An executive may invest the deferral portion of his or her account among nine investment options, which may be changed as often as daily. Participants are also permitted to direct the investment of company matches under the EDCP.
Vesting. An executive is always 100% vested in his or her deferrals and each Sysco match, but any portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his or her deferrals, is subject to forfeiture for specified cause or competing against Sysco in certain instances.
In-Service Distribution Elections and Hardship Withdrawals. Unless an executive has previously made an in-service distribution election, an executive will generally not have access to amounts deferred under the
SYSCO CORPORATION - 2016 Proxy Statement 70
EDCP while employed by Sysco unless he or she requests and qualifies for a hardship withdrawal. Such withdrawals are available under very limited circumstances in connection with an unforeseeable emergency.
Distribution Events. We will distribute the vested portion of the amount credited to an executive’s EDCP account upon the earlier to occur of the executive’s death, disability, retirement or other separation event.
Distributions. Effective January 1, 2009, a participant who terminates employment, other than due to death, disability or a qualifying retirement, will receive a lump sum. A participant may elect the form of distribution of his account in the event of death or disability, or if the participant terminates employment after the earlier of age 60, or age 55 with 10 years of service with the Company.
An executive who has the right to elect the form of payment of his vested account balance may choose annual or quarterly installments over a specified period of up to 20 years, a lump sum or a combination of both. An executive may change his distribution elections prior to separation, subject to limitations in the EDCP required by Section 409A of the Internal Revenue Code.
When we pay installments under the EDCP, we will credit the executive’s unpaid vested account balance with a fixed investment return during the entire payout period. This fixed return will equal the Moody’s Average Corporate Bond Yield for either the six- or twelve-month period ending two months prior to the month of the first installment payment, whichever is higher.
Delay of Distributions to NEOs. Distributions to a specified employee, including a named executive, upon the specified employee or named executive officer’s “separation from service” as defined under Section 409A of the Internal Revenue Code will be delayed for a period of six months to the extent that making payments during such six-month period would violate Section 409A of the Internal Revenue Code.
Forfeiture for Cause or Competition. Any portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his deferrals, is subject to forfeiture for specified cause or competition. No such forfeiture can occur, however, for a participant who is discharged (i) during a plan year in which a change in control occurs or (2) during the three plan years thereafter.
Limits on Excess Parachute Payments. The EDCP contains cutback provisions that will reduce amounts payable to each named executive officer by the amount of any payments that cannot be deducted by Sysco under Section 280G of the Internal Revenue Code.
Sysco maintains two defined benefit pension plans. One is the Sysco Corporation Retirement Plan, or pension plan, which is intended to be a tax-qualified plan under the Internal Revenue Code. The second is the Sysco Corporation Supplemental Executive Retirement Plan, or SERP, which is not a tax-qualified plan. The pension plan ceased all non-union participant accruals effective December 31, 2012. In November 2012, the SERP was further amended to freeze benefits and stop future accruals, effective June 29, 2013. Participants covered by the SERP as of June 29, 2013 were granted accelerated vesting. For those who retire and are not eligible for immediate commencement of their SERP benefit, they will be deemed 100% vested, with benefits payable upon reaching age 65.
For those who are eligible for a SERP benefit at the time of retirement, an early retirement reduction factor will be used to determine the amount available. As of January 1, 2013, the broad-based, tax-qualified Sysco Corporation Employee’s 401(k) Plan (the “401(k) plan”) was enhanced to provide a higherlarger benefit going forward. The following table shows the years of credited service for benefit accrualeligibility purposes (e.g., early retirement rights) and the present value of the accrued benefits for each of the NEOs under each of the pension plan and SERP as of June 28, 2014.July 2, 2016. Mr. Bené is not a participant in either of the Sysco maintained defined benefit plans, Mr. Fernandez wasand Messrs. Grade and Shurts are not a particant in the SERP, and Mr. Shurts is not a participantparticipants in the SERP.
Number of | ||||||||||||||||||||||||||||
Years Credited | Present Value | |||||||||||||||||||||||||||
Service | of Accumulated | Payments During | ||||||||||||||||||||||||||
Name | Plan Name | (#) | Benefit | Last Fiscal Year | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit | Payments During Last Fiscal Year | ||||||||||||||||||||
DeLaney | Pension Plan | 25.333 | $ | 594,383 | $ | — | Pension Plan | 27.333 | $ | 725,504 | $ | — | ||||||||||||||||
SERP | 25.333 | 8,043,422 | — | SERP | 27.333 | 9,200,095 | — | |||||||||||||||||||||
Kreidler | Pension Plan | 4.667 | 87,894 | — | ||||||||||||||||||||||||
Bené | Pension Plan | N/A | N/A | N/A | ||||||||||||||||||||||||
SERP | 4.667 | 330,750 | — | SERP | N/A | N/A | N/A | |||||||||||||||||||||
Green | Pension Plan | 23.333 | 501,128 | — | ||||||||||||||||||||||||
Grade | Pension Plan | 18.167 | 97,557 | — | ||||||||||||||||||||||||
SERP | 23.333 | 8,121,226 | — | SERP | N/A | N/A | N/A | |||||||||||||||||||||
Bené | Pension Plan | N/A | N/A | — | ||||||||||||||||||||||||
Libby | Pension Plan | 8.667 | 147,896 | — | ||||||||||||||||||||||||
SERP | N/A | N/A | — | SERP | 8.667 | 220,276 | — | |||||||||||||||||||||
Shurts | Pension Plan | 1.167 | 30,664 | — | Pension Plan | 3.167 | 37,993 | — | ||||||||||||||||||||
SERP | N/A | N/A | — | SERP | N/A | N/A | N/A | |||||||||||||||||||||
Fernandez | Pension Plan | 1.583 | 48,740 | 1,903 | ||||||||||||||||||||||||
Kreidler | Pension Plan | 6.167 | 111,226 | — | ||||||||||||||||||||||||
SERP | N/A | N/A | — | SERP | 6.167 | 318,196 | — |
SYSCO CORPORATION - 2014 Proxy Statement 66
We will pay the pension plan benefits in the form of a life annuity with payments guaranteed for five years. As required by SEC rules, we calculated the participating officers’ accrued benefits under the pension plan by assuming that the named executives will remain in service with the companyCompany until age 65, which is the earliest age at which the NEOs can retire without any reduction in benefits. Amounts shown below assume the pension plan benefit will be paid in the form of a life-only annuity with a 5-year guarantee. Amounts for present value purposes assume that 50% will elect the 100% joint-life annuity and 50% will elect a single life-only annuity. Other optional forms of payment are available from the pension plan.
For the SERP, we calculated the participating officers’ accrued benefits by assuming that the named executives will remain in service with Sysco until the earliest age they could retire without any reduction in SERP benefits. This date is at age 60.41760.667 for Mr. DeLaney, and age 6361 for Mr. Kreidler and age 57 for Mr. Green.Libby. These ages differ because the SERP early retirement factors are
SYSCO CORPORATION - 2016 Proxy Statement71
based on a combination of the participant’s age, Sysco service, and/or MIP service. Note that some of these ages may represent the executive’s current age as of the 20142016 fiscal year-end due to prior attainment of their earliest unreduced date. We payThe amounts shown below and for present value purposes assume the SERP benefitswill be paid as a life-only annuity with a 10-year guarantee; however, married members also have the option to elect a joint-life annuity, reducing to two-thirds upon the death of either the executive or his spouse, with the unreduced payment guaranteed for at least 10 years.years; however, members also have the option to elect a life-only annuity with a 10-year guarantee.
We calculated the present value of the accumulated pension plan and SERP benefits based on a 4.74%4.07% discount rate for the pension plan and a 4.59%3.91% discount rate for the SERP, with a post-retirement mortality assumption based on Mercer’s Industry Longevity Experience Study, Consumer Goods and Food & Drink, gender-distinct and no collar, applying the RP2000 Generational Table, gender distinct, projected withMSS2007 scale BB.for annuitants.
Following are the estimated accrued benefits earned through the fiscal year ending 20142016 for the pension plan or SERP, as noted. These annual amounts would be payable at the earliest unreduced retirement age, as described above, if the named executive officer remains in the service of Sysco until such age. Projected benefits that may be earned due to pay and service after the fiscal year ended June 28, 2014July 2, 2016 are not included in these estimates.
Earliest Unreduced | Expected Years of | Estimated Annual | ||||||||||||||||||||||||||
Name | Plan Name | Retirement Age | Payments | Benefit | Plan Name | Earliest Unreduced Retirement Age | Expected Years of Payments | Estimated Annual Benefit | ||||||||||||||||||||
DeLaney | Pension Plan | 65 | 21.5 | $ | 62,038 | Pension Plan | 65 | 21.1 | $ | 62,038 | ||||||||||||||||||
SERP | 60.417 | 28.5 | 561,029 | SERP | 60.667 | 27.2 | 559,758 | |||||||||||||||||||||
Kreidler | Pension Plan | 65 | 22.3 | 12,922 | ||||||||||||||||||||||||
Bené | Pension Plan | N/A | N/A | N/A | ||||||||||||||||||||||||
SERP | 63 | 27.0 | 38,055 | SERP | N/A | N/A | N/A | |||||||||||||||||||||
Green | Pension Plan | 65 | 21.8 | 61,285 | ||||||||||||||||||||||||
Grade | Pension Plan | 65 | 21.9 | 14,693 | ||||||||||||||||||||||||
SERP | 57 | 31.9 | 539,237 | SERP | N/A | N/A | N/A | |||||||||||||||||||||
Bené | Pension Plan | N/A | N/A | N/A | ||||||||||||||||||||||||
Libby | Pension Plan | 65 | 21.7 | 18,854 | ||||||||||||||||||||||||
SERP | N/A | N/A | N/A | SERP | 61 | 27.5 | 19,022 | |||||||||||||||||||||
Shurts | Pension Plan | 65 | 21.8 | 3,750 | Pension Plan | 65 | 21.3 | 3,750 | ||||||||||||||||||||
SERP | N/A | N/A | N/A | SERP | N/A | N/A | N/A | |||||||||||||||||||||
Fernandez | Pension Plan | 68.167 | 26.7 | 3,263 | ||||||||||||||||||||||||
Kreidler | Pension Plan | 65 | 21.6 | 12,922 | ||||||||||||||||||||||||
SERP | N/A | N/A | N/A | SERP | 65 | 27.3 | 31,190 |
In addition to the above, the participating officers are entitled towe provide a temporary social securitySocial Security bridge benefit to an executive commencing at their earliest unreduced retirementSERP benefits before age 62, payable until the earlier of deathage 62 or age 62.death. The amount of this monthly benefit for each eligible participating officer, based on the SERP early retirement assumptions above, is $1,912 for Mr. DeLaney and $1,479$1,586 for Mr. Green. Mr. Fernandez began receiving his Pension Plan benefit effective December 1, 2013. The age shown above is his age as at June 28, 2014.Libby.
Pension PlanAbout the MSP
The pension plan, which is intendedIn order to be tax-qualified, is funded through an irrevocable tax-exempt trust and covered approximately 24,300 eligibleprovide certain highly compensated employees as of the endCompany with the continued opportunity to build retirement savings on a tax-deferred basis through deferrals and Company contributions, Sysco adopted the MSP, effective November 14, 2012. The MSP is a competitive plan for nonqualified executive retirement benefits and is designed to supplement our 401(k) plan. It allows participants, including the current NEOs, to defer a portion of their salary compensation and up to 100% of their annual incentive award. The MSP also provides for Company contributions to participants’ accounts, including non-elective and matching contributions, as well as transition contributions, which are designed to compensate participants for a portion of the value lost as a result of the freezing of Sysco’s then-current plans. The MSP allows for deferrals and contributions that would not be permitted under the Company’s 401(k) plan due to IRS limits. The following discussion summarizes the material terms of the MSP that are applicable to the named executive officers who participate in it. The definition of bonus for purposes of the MSP includes amounts that are paid as a bonus or annual incentive award under the 2009 Plan or as a substitute for or in lieu of such bonus or annual incentive award.
Executive Deferrals. Participants may initially elect to defer up to fifty percent (50%) of their annual salary and/or all or a portion of their bonus under the MSP. A deferral election, once made, is irrevocable for the applicable calendar year (for salary deferrals) or fiscal 2014. In general, a participant’s accrued benefit is equal to 1.5% timesyear (for bonus deferrals). Bonus deferral elections are contingent upon the participant’s average monthly eligible earningsaward qualifying as “performance based compensation” under Section 409A of the Code. The Committee retains the discretion to alter the minimum and maximum percentages of awards that may be deferred, but such discretion must be exercised prior to the beginning of the applicable fiscal year for eachwhich such award may be earned. Salary deferrals were effective for calendar year or partial year of service2013, with performance based annual incentive award deferrals effective beginning in fiscal 2014.
Company Contributions.Sysco orwill make a subsidiary. As previously noted above, as of January 1, 2013, non-union employees no longer earn additional retirement benefits under the pension plan, so earnings and service after December 31, 2012 werematching contribution (determined based on compensation not taken into account for determining non-union participants’ accrued benefits under the pension plan. The accrued benefitCompany’s 401(k) plan), to the account of participants who elect to defer a portion of their compensation under the pension plan is expressed in the form ofMSP (the “Company Match”). The Company Match will be made on a monthly annuity for the participant’s life, beginning at age 65, the plan’s normal retirement age, and with payments guaranteed for five years. If the participant remains with Sysco until at least age 55 with 10 years of service, the participant is entitled to early retirement payments. In such case, we reduce the benefit 6.67% percalendar year for the first 5 years prior to normal retirement age and an additional 3.33% per year for years prior to age 60. Employees vest in the pension plan after five years of service, and the amendment to freeze benefit accruals under the pension plan after December 31, 2012 did not impact service determination for vesting purposes.basis. The Company
Benefits provided under the pension plan are based on compensation up to a limit, which is $260,000 for calendar year 2014, under the Internal Revenue Code. In addition, annual benefits provided under the pension plan may not exceed a limit, which is $210,000 for calendar year 2014, under the Internal Revenue Code.
Elements Included in Benefit Formula— Compensation included in the pension plan’s benefit calculation is generally earned income excluding deferred bonuses.
Policy Regarding Extra Years of Credited Service— Generally, we do not credit service in the pension plan beyond the actual number of years an employee participates in the plan. We base the years of credited service for the NEOs only on their service while eligible for participation in the plan.
Benefit Payment Options— Participants may choose their method of payment from several options, including a life annuity option, spousal joint and survivor annuity, Social Security leveling and life annuity options with minimum guaranteed terms. Only de minimis lump sums are available.
SYSCO CORPORATION - 20142016 Proxy Statement 6769
Supplemental Executive Retirement PlanMatch, determined on a combined plan basis for the MSP and 401(k) plan, will be a maximum of fifty percent (50%) of the first five percent (5%) of a participant’s annual base salary and bonus deferred by the participant.
We offer supplemental retirement plans, includingIn addition to the SERP,Company Match described above, Sysco will credit an automatic Company contribution equal to approximately 183three percent (3%) of the participant’s gross base salary and bonus, less the amount of a similar Company contribution into the participant’s 401(k) account, to the participant’s account in the MSP (the “Non-elective Contribution”). The Company will credit this contribution regardless of whether the participant defers any amounts under the MSP or 401(k).
In addition to the contributions described above, for a period of ten years through 2023, or until a participant ceases employment with Sysco, whichever is earlier, Sysco will credit an automatic Company contribution of three percent (3%) of the participant’s gross base salary and bonus, less the amount of a similar Company contribution into the participant’s 401(k) account, to the MSP account of eligible executives,participants (the “Pension Transition Contribution”). To be eligible to receive the Pension Transition Contribution, a participant must have been accruing benefits under Sysco’s pension plan as of June 28, 2014, to provide for retirement benefits beyond the amounts available under Sysco’s various broad-based USDecember 31, 2012 and Canadian pension plans. Messrs. DeLaney, Kreidler and Green participate in the SERP. It is our intent that the SERP comply with Section 409A of the Internal Revenue Code in both form and operation. The SERP is an unsecured obligation of Sysco and is not qualified for tax purposes. In December 2008, the Board of Directors substantially revised the SERP by reducing its benefits and to limit the class of employees eligible to participate in the SERP on or after June 28, 2008 and added an alternative MIP Retirement Program, which generally provides for lesser benefits than the SERP, for certain employees who would otherwise have participated in the SERP. None of the NEOs participates in this alternative program. In May 2011, the SERP was amended in order to close the SERP to future participants. In November 2012, the SERP was further amended to freeze benefits and stop future accruals, effective June 29, 2013. Participants covered by the SERP as of June 29, 2013 were granted accelerated vesting. For those who retire and are not eligible for immediate commencement of their SERP benefit, they will be deemed 100% vested, with benefits payable upon reaching age 65. For those who are eligible for a SERP benefit at the time of retirement, an early retirement reduction factor will be used to determine the amount available.
The SERP was designed to provide, in combination with other retirement benefits, 50% of an executive’s final average compensation, provided an executive hadbeen at least 20age fifty (50) with fifteen (15) or more years of Sysco service including serviceas of that date. The Company will credit this contribution regardless of whether the participant defers any amounts under the MSP or 401(k) so long as he remains employed by Sysco or leaves for retirement, death or disability in such calendar year. Mr. DeLaney is eligible to receive these contributions.
In addition to the contributions described above, Mr. Libby’s MSP account will be credited annually with an acquired company. “Otherautomatic fully vested Company contribution of ten percent (10%) of his base salary and bonus for a period of ten years through 2023 (each contribution referred to as a “SERP Transition Contribution”) so long as the executive remains employed by Sysco or leaves for retirement, benefits” include Social Security, benefits from the pension plan, and employer contributions under Sysco’s 401(k) plan and similar qualified plans of acquired companies. We reduce the gross accrued benefit of 50% of final average compensation by 5% per year for each year of Sysco service including service with an acquired company of less than 20 years. For purposes of this service calculation, Sysco service was frozen effective June 29, 2013. Additionally, final average compensation is determined using the monthly average of a participant’s eligible earnings for the last 10 fiscal years prior to June 29, 2013,death or the date he ceases to be covered under the SERP, if earlier. With respect to the determination of a participant’s accrued benefit as of June 28, 2008, as discussed below, final average compensation is determined using the monthly average of a participant’s eligible earnings for the highest 5 of the 10 fiscal years prior to, and including, the fiscal year ended June 28, 2008.disability in such calendar year.
Investment Options.The term “eligible earnings” refers to compensation taken into account for SERP purposes. As discussed below, beginning with fiscal 2009, the portion of a participant’s MIPaccount attributable to salary and bonus counteddeferrals will be deemed invested and reinvested in certain investments, as eligibledesignated by the participant from a list of available investment options. The investment options include a variety of generally available investment funds. The portion of a participant’s account attributable to Sysco company contributions will be deemed invested as directed by the participant.
Vesting of Deferrals and Company Contributions. Participant deferrals, including associated investment earnings is cappedand losses, will be fully vested at 150%all times. The Company Match, as adjusted for associated investment earnings and losses, will vest based upon a participant’s number of years of service. As of July 2, 2016, Messrs. DeLaney, Grade and Libby were fully vested, and Messrs. Bené and Shurts were each 50% vested, with the remainder to vest through the fifth anniversary of service. In addition, each of Messrs. Bené and Shurts will become fully vested in the event of his death or disability or a defined change of control of Sysco. The Non-elective contribution, the Pension Transition Contribution, and the SERP Transition Contribution, as such amounts are adjusted for associated investment earnings and losses, will be fully vested at all times.
Timing and Form of Distributions. Other than elected in-service distributions or deferrals, the participant’s rate of base salary as ofvested account may generally only be distributed upon the last day of the applicable fiscal year. Eligible earningsparticipant’s termination for fiscal years priorany reason, including death, disability or retirement. Except with respect to fiscal 2009, including eligible earnings for purposes of determiningin-service distributions or distributions following a participant’s accrued benefit as of June 28, 2008, as discussed below, are not affected by this plan change. The definition of eligible earnings that placestermination (for a cap onreason other than death, disability or retirement), the MIP bonus for fiscal years after fiscal 2008 will be used in all benefit calculations except for certain death benefit calculations and a participant’s accrued benefit as of June 28, 2008, as discussed below.
A SERP participant will receive a SERP benefit equalmay elect to the greater of:have his account distributed in:
• | |
• |
• |
Under the SERP, Sysco has the ability to cause the forfeiture of any remaining SERP payments toIn-service distributions and distributions following a participant who was not discharged for “cause,” but who after hisparticipant’s termination was determined by the Compensation Committee to have engaged(for a reason other than death, disability or retirement) will be distributed in behavior while employed that would have constituted grounds for a discharge for “cause.” For this purpose, termination for “cause” includes termination for fraud or embezzlement. Sysco also has the ability to cause a forfeiture of any remaining SERP payments to a participant if the participant violates certain non-competition covenants. These non-competition covenants are applicable for the year following termination and to the entire period over which any SERP benefits are to be paid.
Participants covered by the SERP as of June 29, 2013 are 100% vested. For those who are eligible for early payment at retirement, their benefits may be reduced by an early retirement factor. The early retirement factor is based upon age and MIP participation service and/or Sysco service. The early retirement factor is 50% when executives reach the earlier of age 60 with 10 years of MIP participation service and 20 years of Sysco service or age 55 with 15 years of MIP participation service. The early retirement factor increases with additional years of age and/or MIP participation service or Sysco service. An executive with at least 20 years of Sysco service (including service with companies acquired by Sysco) can retire with unreduced benefits when the early retirement factor is 100%. The executive generally attains an early retirement factor of 100% on the earliest of:
Upon the occurrence of a change in control, the early retirement factor will become 100% for each named executive officer. However, the criteria for determining whether an executive is eligible for early payment remains unchanged (i.e., the enhancement on the early retirement factor only impacts participants who otherwise meet the early payment criteria upon retirement). Notwithstanding this, the SERP contains cutback provisions that will reduce amounts payable to each named executive officer by the amount of any payments that cannot be deducted by Sysco under Section 280G of the Internal Revenue Code.
We pay the SERP benefit as a monthly life annuity with a guaranteed minimum period of 10 years if the participant is not married at the time payments commence. If the participant is married at the time payments commence, the participant has the option to elect a joint life annuity whereby the participant and spouse are entitled to a monthly annuity for life with a guaranteed minimum period of 10 years, and generally, on the participant’s or spouse’s death, the survivor is entitled to receive a monthly annuity for life with each payment equal to two-thirds of each payment made to the couple. The benefit payable upon the death of a vested, terminated participant reflects a reduction of 5/9 of 1% for each of the first 120 months prior to age 65 and an actuarial reduction for the difference between age 55 and the executive’s age at death.
We provide a temporary Social Security bridge benefit to an executive commencing SERP benefits before age 62, payable until the earlier of age 62 or death.
Elements of Compensation included in Benefit Formula — Compensation generally includes base pay, the MIP bonus or any bonus paid in lieu of or as a substitute for the MIP bonus (although this is limited to 150% of
SYSCO CORPORATION - 2014 Proxy Statement 68
the annual rate of base salary for fiscal 2009 and later years), the fiscal 2007 supplemental performance bonus, and stock matches under the 2005 Management Incentive Plan and predecessor plans with respect to fiscal 2005 and prior fiscal years. Compensation earned after June 29, 2013 is not applicable to the SERP.
Funding Status — Sysco’s obligations under the SERP are partially funded by a rabbi trust holding life insurance and an interest in certain real property occupied by Sysco. Sysco’s obligations under the SERP are maintained as a book reserve account. In the event of Sysco’s bankruptcy or insolvency, however, the life insurance, the real property interest, and any other assets held by the rabbi trust become subject to the claims of Sysco’s general creditors.
Policy with Regard to Extra Years of Credited Service — Generally, Sysco does not award extra years of credited service under the SERP. However, in certain cases, the company may increase the early retirement factor, or award additional Sysco service for purposes of determining the reduction applicable to the participant’s final average compensation. As of the date of this proxy statement, none of the NEOs have been awarded additional credited service, or an increase in the early retirement factor applicable to their accrued benefits under the SERP.
Lump Sum Availability — Retirement benefits may not be paid as a lump sum.
Delay of Distributions to Named Executives—NEOs. Distributions to a named executive officerspecified employee, including an NEO, upon the named executive officer’sspecified employee’s or NEO’s “separation from service” as defined under Section 409A of the Internal Revenue Code, will be delayed for a period of six months to the extent that making payments during such six-month period would violate Section 409A.
On November 14, 2012, the Committee amended the SERP to provide that benefit accruals for all participants were frozen as of June 29, 2013. Subsequent to June 29, 2013, the frozen SERP benefits continue to be payable pursuant to the terms409A of the SERP, as amended.
Also effective June 29, 2013, all SERP participants vested in their then accrued benefit. However, an early retirement reduction factor has been added to apply in the case of an employee who retires before age 65 who would not have been fully vested at his retirement date under the SERP prior to the amendment. The early retirement factor mirrors the benefit reduction that would have occurred as a result of the application of the vesting formula if the participant had taken early retirement under the SERP as it existed prior to its amendment. These changes do not alter the benefit commencement or other payment schedules for any SERP participant. In addition, the age threshold previously applicable to the SERP death benefit was removed, effective June 29, 2013. As a result, if an active participant dies, the participant’s beneficiary will be entitled to a monthly annuity actuarially equivalent to the greater of: (i) an annual payment equal to 25% of the participant’s three-year final average compensation for ten years certain, or (ii) the participant’s vested accrued benefit as of his date of death, reduced by an actuarial reduction factor to take into account age at death prior to normal retirement age of 65.Internal Revenue Code.
Fiscal 2014 Nonqualified Deferred CompensationForfeiture. The MSP contains a forfeiture provision whereby participants will forfeit the balance of their accounts attributable to Company contributions, adjusted for deemed investment losses and earnings, and even if such amounts may have previously vested, in the event the Committee finds that the participant engaged in fraudulent or certain other illegal acts while employed by the Company, or impermissibly competes with the Company after termination. Participants also have an obligation to repay any amounts previously distributed to them under the MSP attributable to Company contributions if the Committee finds they engaged in such acts.
The following table provides information regarding executive contributions and related company matches, earnings and account balances under the Executive Deferred Compensation Plan (EDCP) and Management Savings Plan (MSP) for each of the NEOs during fiscal 2014. No executive officer made any withdrawals or received any distributions with respect to fiscal 2014.
Executive | Registrant | Aggregate | Aggregate | |||||||||||||||
Contributions | Contributions | Earnings in | Balance at | |||||||||||||||
Applicable | for Fiscal 2014 | for Fiscal 2014 | Fiscal 2014 | June 28, 2014 | ||||||||||||||
Name | Plan | ($)(1) | ($)(2) | ($)(3) | ($)(4) | |||||||||||||
DeLaney | EDCP | $ | — | $ | — | $ | 69,361 | $ | 1,330,618 | |||||||||
MSP | 59,729 | 131,283 | 5,147 | 225,818 | ||||||||||||||
Kreidler | EDCP | — | — | 6,378 | 148,138 | |||||||||||||
MSP | — | 127,645 | 2,438 | 130,083 | ||||||||||||||
Green | EDCP | — | — | — | — | |||||||||||||
MSP | 35,625 | 69,424 | 9,215 | 132,117 | ||||||||||||||
Bené | EDCP | — | — | — | — | |||||||||||||
MSP | 217,083 | 15,983 | 10,028 | 257,367 | ||||||||||||||
Shurts | EDCP | — | — | — | — | |||||||||||||
MSP | 29,250 | 29,133 | 5,590 | 78,529 | ||||||||||||||
Fernandez | EDCP | — | — | — | — | |||||||||||||
MSP | — | — | — | — |
Non-elective | Match | Pension Transition | SERP Transition | ||||||||||||||
DeLaney | $ | 49,668 | $ | 31,946 | $ | 49,668 | $ | — | |||||||||
Kreidler | 22,389 | 5,125 | — | 100,131 | |||||||||||||
Green | 24,503 | 20,419 | 24,503 | — | |||||||||||||
Bené | 8,718 | 7,265 | — | — | |||||||||||||
Shurts | 14,951 | 14,181 | — | — |
SYSCO CORPORATION - 2014 Proxy Statement 69
About the EDCP —
Sysco maintained the EDCP to provide certain executives the opportunity to defer the receipt of a portion of their annual salaries, bonuses and deemed earnings thereon on a tax-deferred basis. Federal income taxes on all amounts credited under the EDCP will be deferred until payout under current tax law. The EDCP is administered by the Compensation Committee.
Eligibility —Eligibility. All Sysco executives who arewere participants in the MIP, excluding those whose income iswas subject to Canadian income tax laws, were eligible to participate.
Executive Deferrals and Sysco Matching Credit—Deferrals. Executives were permitted to defer up to 40% of their bonuses under the MIP and up to 100% of salary. In September 2009, the EDCP was amended to clarify that any bonus paid in lieu of or as a substitute for the MIP bonus in the future was eligible for deferral under the EDCP.
Sysco Matching Credit. Sysco did not match salary deferrals under the EDCP. Sysco provided matching credit of 15% of the first 20% of bonus deferred, resulting in a maximum possible match credit of 3% of an executive’s bonus. The Committee was permitted to authorize additional discretionary company contributions, although it did not authorize any infrom fiscal yearsyear 2008 through 2014.December 31, 2012, the date on which the EDCP was frozen.
Investment Options —Options. An executive may invest the deferral portion of his or her account among nine investment options, which may be changed as often as daily. The returns for these options of varying risk/reward ranged from 3.53% to 29.03% for the year ended June 28, 2014.
Prior to July 2, 2008, Moody’s plus 1%, or the “risk free” option, was one of nine available deemed investment options under the EDCP and was the default investment option for participants who failed to make an investment election. In addition, company matches were automatically credited with interest at the Moody’s plus 1% rate, and interest credited during an installment payout period under a fixed payment distribution option available under the EDCP was credited at Moody’s plus 1%. For a given calendar year, the Moody’s + 1% option provides an annual return equal to the Moody’s Average Corporate Bond Yield for the higher of the six or twelve-month period ending on the preceding October 31, plus 1%. The Moody’s + 1% return was 7.1950% for calendar year 2008.
Beginning as of July 2, 2008, the Moody’s plus 1%, or “risk free,” option and the default investment rate were changed to Moody’s without the addition of the 1%. As a result, the interest rate credited on company matches for future years, and the investment return on salary deferrals after July 1, 2008 and bonus deferrals for years after fiscal 2008, as well as any transfers from another investment option to the risk free option after July 1, 2008,Participants are based on Moody’s and not Moody’s plus 1%. In addition, for participants whose employment terminates after July 1, 2008, interest credited to the participant’s account during an installment payout period will be Moody’s and not Moody’s plus 1%.
Notwithstanding these changes, interest will continue to be credited at the Moody’s plus 1% rate on each participant’s accumulated company match account as of July 1, 2008, and on that portion of the participant’s deferral account invested in the Moody’s plus 1% option on July 1, 2008, and not otherwise transferred at a later time.
Effective January 1, 2014, participants arealso permitted to direct the investment of company matches under the EDCP. Prior to such date, company matches earned interest at a rate equal to Moody’s or Moody’s plus 1% yield, as applicable, to the crediting date of such match.
Vesting —Vesting. An executive is always 100% vested in his or her deferrals and each Sysco match, but any portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his or her deferrals, is subject to forfeiture for specified cause or competing against Sysco in certain instances.
In-Service Distribution Elections and Hardship Withdrawals —Withdrawals. Unless an executive has previously made an in-service distribution election, an executive will generally not have access to amounts deferred under the
SYSCO CORPORATION - 2016 Proxy Statement 70
EDCP while employed by Sysco unless he or she requests and qualifies for a hardship withdrawal. Such withdrawals are available under very limited circumstances in connection with an unforeseeable emergency. An executive may make separate in-service distribution elections with respect to a given year’s salary deferral and bonus deferral, concurrent with that year’s deferral election.
Distribution Events—Events. We will distribute the vested portion of the amount credited to an executive’s EDCP account upon the earlier to occur of the executive’s death, disability, retirement or other separation event.
Distributions—Distributions. Effective January 1, 2009, a participant who terminates employment, other than due to death, disability or a qualifying retirement, will receive a lump sum. A participant may elect the form of distribution of his account in the event of death or disability, or if the participant terminates employment after the earlier of age 60, or age 55 with 10 years of service with the company.Company.
An executive who has the right to elect the form of payment of his vested account balance may choose annual or quarterly installments over a specified period of up to 20 years, a lump sum or a combination of both. An executive may change his distribution elections prior to separation, subject to limitations in the EDCP required by Section 409A of the Internal Revenue Code.
When we pay installments under the EDCP, we will credit the executive’s unpaid vested account balance with a fixed investment return during the entire payout period. This fixed return will equal the Moody’s Average Corporate Bond Yield for either the six- or twelve-month period ending two months prior to the month of the first installment payment, whichever is higher.
As with the SERP amendments described above, the November 2012 amendments to the EDCP did not alter the benefit commencement schedule for any EDCP participant.
Delay of Distributions to Named Executives—NEOs. Distributions to a specified employee, including a named executive, upon the specified employee or named executive officer’s “separation from service” as defined under Section 409A of the Internal Revenue Code will be delayed for a period of six months to the extent that making payments during such six-month period would violate Section 409A of the Internal Revenue Code.
Forfeiture for Cause or Competition —Competition. Any portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his deferrals, is subject to forfeiture for specified cause or competition. No such forfeiture can occur, however, for a participant who is discharged (i) during a plan year in which a change in control occurs or (2) during the three plan years thereafter.
Limits on Excess Parachute Payments —Payments. The EDCP contains cutback provisions that will reduce amounts payable to each named executive officer by the amount of any payments that cannot be deducted by Sysco under Section 280G of the Internal Revenue Code.
Sysco maintains two defined benefit pension plans. One is the Sysco Corporation Retirement Plan, or pension plan, which is intended to be a tax-qualified plan under the Internal Revenue Code. The second is the Sysco Corporation Supplemental Executive Retirement Plan, or SERP, which is not a tax-qualified plan. The pension plan ceased all non-union participant accruals effective December 31, 2012. In November 2012, the SERP was amended to freeze benefits and stop future accruals, effective June 29, 2013. Participants covered by the SERP as of June 29, 2013 were granted accelerated vesting. For those who retire and are not eligible for immediate commencement of their SERP benefit, they will be deemed 100% vested, with benefits payable upon reaching age 65.
For those who are eligible for a SERP benefit at the time of retirement, an early retirement reduction factor will be used to determine the amount available. As of January 1, 2013, the broad-based, tax-qualified Sysco Corporation Employee’s 401(k) Plan (the “401(k) plan”) was enhanced to provide a larger benefit going forward. The following table shows the years of credited service for eligibility purposes (e.g., early retirement rights) and the present value of the accrued benefits for each of the NEOs under each of the pension plan and SERP as of July 2, 2016. Mr. Bené is not a participant in either of the Sysco maintained defined benefit plans, and Messrs. Grade and Shurts are not participants in the SERP.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit | Payments During Last Fiscal Year | ||||||||||
DeLaney | Pension Plan | 27.333 | $ | 725,504 | $ | — | ||||||||
SERP | 27.333 | 9,200,095 | — | |||||||||||
Bené | Pension Plan | N/A | N/A | N/A | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Grade | Pension Plan | 18.167 | 97,557 | — | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Libby | Pension Plan | 8.667 | 147,896 | — | ||||||||||
SERP | 8.667 | 220,276 | — | |||||||||||
Shurts | Pension Plan | 3.167 | 37,993 | — | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Kreidler | Pension Plan | 6.167 | 111,226 | — | ||||||||||
SERP | 6.167 | 318,196 | — |
As required by SEC rules, we calculated the participating officers’ accrued benefits under the pension plan by assuming that the named executives will remain in service with the Company until age 65, which is the earliest age at which the NEOs can retire without any reduction in benefits. Amounts shown below assume the pension plan benefit will be paid in the form of a life-only annuity with a 5-year guarantee. Amounts for present value purposes assume that 50% will elect the 100% joint-life annuity and 50% will elect a single life-only annuity. Other optional forms of payment are available from the pension plan.
For the SERP, we calculated the participating officers’ accrued benefits by assuming that the named executives will remain in service with Sysco until the earliest age they could retire without any reduction in SERP benefits. This date is at age 60.667 for Mr. DeLaney, and age 61 for Mr. Libby. These ages differ because the SERP early retirement factors are
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based on a combination of the participant’s age, Sysco service, and/or MIP service. Note that some of these ages may represent the executive’s current age as of the 2016 fiscal year-end due to prior attainment of their earliest unreduced date. The amounts shown below and for present value purposes assume the SERP will be paid as a joint-life annuity, reducing to two-thirds upon the death of either the executive or his spouse, with the unreduced payment guaranteed for 10 years; however, members also have the option to elect a life-only annuity with a 10-year guarantee.
We calculated the present value of the accumulated pension plan and SERP benefits based on a 4.07% discount rate for the pension plan and a 3.91% discount rate for the SERP, with a post-retirement mortality assumption based on Mercer’s Industry Longevity Experience Study, Consumer Goods and Food & Drink, gender-distinct and no collar, applying the MSS2007 scale for annuitants.
Following are the estimated accrued benefits earned through the fiscal year ending 2016 for the pension plan or SERP, as noted. These annual amounts would be payable at the earliest unreduced retirement age, as described above, if the named executive officer remains in the service of Sysco until such age. Projected benefits that may be earned due to pay and service after the fiscal year ended July 2, 2016 are not included in these estimates.
Name | Plan Name | Earliest Unreduced Retirement Age | Expected Years of Payments | Estimated Annual Benefit | ||||||||||
DeLaney | Pension Plan | 65 | 21.1 | $ | 62,038 | |||||||||
SERP | 60.667 | 27.2 | 559,758 | |||||||||||
Bené | Pension Plan | N/A | N/A | N/A | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Grade | Pension Plan | 65 | 21.9 | 14,693 | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Libby | Pension Plan | 65 | 21.7 | 18,854 | ||||||||||
SERP | 61 | 27.5 | 19,022 | |||||||||||
Shurts | Pension Plan | 65 | 21.3 | 3,750 | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Kreidler | Pension Plan | 65 | 21.6 | 12,922 | ||||||||||
SERP | 65 | 27.3 | 31,190 |
In addition to the above, we provide a temporary Social Security bridge benefit to an executive commencing SERP benefits before age 62, payable until the earlier of age 62 or death. The amount of this monthly benefit for each eligible participating officer, based on the SERP early retirement assumptions above, is $1,912 for Mr. DeLaney and $1,586 for Mr. Libby.
About the MSPIn order to provide certain highly compensated employees of the Company including the current NEOs, with the continued opportunity to build retirement savings on a tax-deferred basis through deferrals and Company contributions, Sysco adopted the MSP, effective November 14, 2012. The MSP is a competitive plan for nonqualified executive retirement benefits and is designed to supplement our recently-amended 401(k) plan. It allows participants, including the current NEOs, to defer a portion of their salary compensation and up to 100% of their annual incentive award. The MSP also provides for Company contributions to participants’ accounts, including non-elective and matching contributions, as well as transition contributions, which are designed to compensate participants for a portion of the value lost as a result of the freezing of Sysco’s currentthen-current plans. The MSP allows for deferrals and contributions
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that would not be permitted under the Company’s 401(k) plan due to IRS limits. The following discussion summarizes the material terms of the MSP that are applicable to the named executive officers who participate in it. The definition of bonus for purposes of the MSP includes amounts that are paid as a bonus or annual incentive award under the MIP2009 Plan or as a substitute for or in lieu of the participant’s MIPsuch bonus or annual incentive award.
Executive Deferrals and Company Contributions —Deferrals. Participants may initially elect to defer up to fifty percent (50%) of their annual salary and/or all or a portion of their bonus under the MSP. A deferral election, once made, is irrevocable for the applicable calendar year (for salary deferrals) or fiscal year (for bonus deferrals). Bonus deferral elections are contingent upon the participant’s award qualifying as “performance based compensation” under Section 409A of the Code. The Committee retains the discretion to alter the minimum and maximum percentages of awards that may be deferred, but such discretion must be exercised prior to the beginning of the applicable fiscal year for which such award may be earned. Salary deferrals were effective for calendar year 2013, with performance based annual incentive award deferrals effective beginning in fiscal 2014.
Company Contributions.Sysco will make a matching contribution (determined based on compensation not taken into account under the Company’s 401(k) plan), to the account of participants who elect to defer a portion of their compensation under the MSP (the “Company Match”). The Company Match will be made on a calendar year basis. The Company
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Match, determined on a combined plan basis for the MSP and 401(k) plan, will be a maximum of fifty percent (50%) of the first five percent (5%) of a participant’s annual base salary and bonus deferred by the participant.
In addition to the Company Match described above, Sysco will credit an automatic Company contribution equal to three percent (3%) of the participant’s gross base salary and bonus, less the amount of a similar Company contribution into the participant’s 401(k) account, to the participant’s account in the MSP (the “Non-elective Contribution”). The Company will credit this contribution regardless of whether the participant defers any amounts under the MSP or 401(k).
In addition to the contributions described above, for a period of ten years through 2022,2023, or until a participant ceases employment with Sysco, whichever is earlier, Sysco will credit an automatic Company contribution of three percent (3%) of the participant’s gross base salary and bonus, less the amount of a similar Company contribution into the participant’s 401(k) account, to the MSP account of eligible participants (the “Pension Transition Contribution”). To be eligible to receive the Pension Transition Contribution, a participant must have been accruing benefits under Sysco’s pension plan as of December 31, 2012 and behave been at least age fifty (50) with fifteen (15) or more years of Sysco service as of that date. The Company will credit this contribution regardless of whether the participant defers any amounts under the MSP or 401(k) so long as he remains employed by Sysco or leaves for retirement, death or disability in such calendar year. Messrs.Mr. DeLaney and Green areis eligible to receive these contributions.
In addition to the contributions described above, Mr. Kreidler’sLibby’s MSP account will be credited annually with an automatic fully vested Company contribution of ten percent (10%) of his base salary and bonus for a period of ten years through 20222023 (each contribution referred to as a “SERP Transition Contribution”) so long as the executive remains employed by Sysco or leaves for retirement, death or disability in such calendar year.
Investment Options —Options. The portion of a participant’s account attributable to salary and bonus deferrals will be deemed invested and reinvested in certain investments, as designated by the participant from a list of available investment options. The investment options include a variety of generally available investment funds, as well as an investment option with an annual return equal of the Moody’s average corporate bond yield.funds. The portion of a participant’s account attributable to Sysco company contributions will be deemed invested as directed by the participant.
Vesting of Deferrals and Company Contributions —Contributions. Participant deferrals, including associated investment earnings and losses, will be fully vested at all times. The Company Match, as adjusted for associated investment earnings and losses, will vest based upon a participant’s number of years of service. As of June 28, 2014,July 2, 2016, Messrs. DeLaney, Grade and GreenLibby were fully vested, Mr. Kreidler was 75%and Messrs. Bené and Shurts were each 50% vested, with the remainder to vest through his fifth anniversary of service, and each of Messrs. Bené and Shurts was 0% vested, with the remainder to vest through his fifth anniversary of service. In addition, each of Messrs. Kreidler, Bené and Shurts will become fully vested in the event of his death or disability or a defined change of control of Sysco. The Non-elective contribution, the Pension Transition Contribution, and the SERP Transition Contribution, as such amounts are adjusted for associated investment earnings and losses, will be fully vested at all times.
Timing and Form of Distributions —Distributions. Other than elected in-service distributions or deferrals, the participant’s vested account may generally only be distributed at the earliest to occur of the following: (i) the participant’s death; (ii) the participant’s disability; (iii) the participant’s retirement; or (iv)upon the participant’s termination (for afor any reason, other thanincluding death, disability or retirement).retirement. Except with respect to in-service distributions or distributions following a participant’s termination (for a reason other than death, disability or retirement), the participant may elect to have his account distributed in (i) a lump sum; (ii) annual installments over a period of up to 20 years; or (iii) a combination of a lump sum and installments. in:
• | a lump sum; |
• | annual installments over a period of up to 20 years; or |
• | a combination of a lump sum and installments. |
In-service distributions and distributions following a participant’s termination (for a reason other than death, disability or retirement) will be distributed in a lump sum.
Forfeiture —Delay of Distributions to NEOs. Distributions to a specified employee, including an NEO, upon the specified employee’s or NEO’s “separation from service” as defined under Section 409A of the Internal Revenue Code, will be delayed for a period of six months to the extent that making payments during such six-month period would violate Section 409A of the Internal Revenue Code.
Forfeiture. The MSP contains a forfeiture provision whereby participants will forfeit the balance of their accounts attributable to Company contributions, adjusted for deemed investment losses and earnings, and even if such amounts may have previously vested, in the event the Committee finds that the participant engaged in fraudulent or certain other illegal acts while employed by the Company, or impermissibly competes with the Company after termination. Participants also have an obligation to repay any amounts previously distributed to them under the MSP attributable to Company contributions if the Committee finds they engaged in such acts.
About the EDCP
Sysco maintained the EDCP to provide certain executives the opportunity to defer the receipt of a portion of their annual salaries, bonuses and deemed earnings thereon on a tax-deferred basis. Federal income taxes on all amounts credited under the EDCP will be deferred until payout under current tax law. The EDCP is administered by the Compensation Committee.
Eligibility. All Sysco executives who were participants in the MIP, excluding those whose income was subject to Canadian income tax laws, were eligible to participate.
Executive Deferrals. Executives were permitted to defer up to 40% of their bonuses under the MIP and up to 100% of salary. In September 2009, the EDCP was amended to clarify that any bonus paid in lieu of or as a substitute for the MIP bonus in the future was eligible for deferral under the EDCP.
Sysco Matching Credit. Sysco did not match salary deferrals under the EDCP. Sysco provided matching credit of 15% of the first 20% of bonus deferred, resulting in a maximum possible match credit of 3% of an executive’s bonus. The Committee was permitted to authorize additional discretionary company contributions, although it did not authorize any from fiscal year 2008 through December 31, 2012, the date on which the EDCP was frozen.
Investment Options. An executive may invest the deferral portion of his or her account among nine investment options, which may be changed as often as daily. Participants are also permitted to direct the investment of company matches under the EDCP.
Vesting. An executive is always 100% vested in his or her deferrals and each Sysco match, but any portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his or her deferrals, is subject to forfeiture for specified cause or competing against Sysco in certain instances.
In-Service Distribution Elections and Hardship Withdrawals. Unless an executive has previously made an in-service distribution election, an executive will generally not have access to amounts deferred under the
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EDCP while employed by Sysco unless he or she requests and qualifies for a hardship withdrawal. Such withdrawals are available under very limited circumstances in connection with an unforeseeable emergency.
Distribution Events. We will distribute the vested portion of the amount credited to an executive’s EDCP account upon the earlier to occur of the executive’s death, disability, retirement or other separation event.
Distributions. Effective January 1, 2009, a participant who terminates employment, other than due to death, disability or a qualifying retirement, will receive a lump sum. A participant may elect the form of distribution of his account in the event of death or disability, or if the participant terminates employment after the earlier of age 60, or age 55 with 10 years of service with the Company.
An executive who has the right to elect the form of payment of his vested account balance may choose annual or quarterly installments over a specified period of up to 20 years, a lump sum or a combination of both. An executive may change his distribution elections prior to separation, subject to limitations in the EDCP required by Section 409A of the Internal Revenue Code.
When we pay installments under the EDCP, we will credit the executive’s unpaid vested account balance with a fixed investment return during the entire payout period. This fixed return will equal the Moody’s Average Corporate Bond Yield for either the six- or twelve-month period ending two months prior to the month of the first installment payment, whichever is higher.
Delay of Distributions to NEOs. Distributions to a specified employee, including a named executive, upon the specified employee or named executive officer’s “separation from service” as defined under Section 409A of the Internal Revenue Code will be delayed for a period of six months to the extent that making payments during such six-month period would violate Section 409A of the Internal Revenue Code.
Forfeiture for Cause or Competition. Any portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his deferrals, is subject to forfeiture for specified cause or competition. No such forfeiture can occur, however, for a participant who is discharged (i) during a plan year in which a change in control occurs or (2) during the three plan years thereafter.
Limits on Excess Parachute Payments. The EDCP contains cutback provisions that will reduce amounts payable to each named executive officer by the amount of any payments that cannot be deducted by Sysco under Section 280G of the Internal Revenue Code.
Sysco maintains two defined benefit pension plans. One is the Sysco Corporation Retirement Plan, or pension plan, which is intended to be a tax-qualified plan under the Internal Revenue Code. The second is the Sysco Corporation Supplemental Executive Retirement Plan, or SERP, which is not a tax-qualified plan. The pension plan ceased all non-union participant accruals effective December 31, 2012. In November 2012, the SERP was amended to freeze benefits and stop future accruals, effective June 29, 2013. Participants covered by the SERP as of June 29, 2013 were granted accelerated vesting. For those who retire and are not eligible for immediate commencement of their SERP benefit, they will be deemed 100% vested, with benefits payable upon reaching age 65.
For those who are eligible for a SERP benefit at the time of retirement, an early retirement reduction factor will be used to determine the amount available. As of January 1, 2013, the broad-based, tax-qualified Sysco Corporation Employee’s 401(k) Plan (the “401(k) plan”) was enhanced to provide a larger benefit going forward. The following table shows the years of credited service for eligibility purposes (e.g., early retirement rights) and the present value of the accrued benefits for each of the NEOs under each of the pension plan and SERP as of July 2, 2016. Mr. Bené is not a participant in either of the Sysco maintained defined benefit plans, and Messrs. Grade and Shurts are not participants in the SERP.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit | Payments During Last Fiscal Year | ||||||||||
DeLaney | Pension Plan | 27.333 | $ | 725,504 | $ | — | ||||||||
SERP | 27.333 | 9,200,095 | — | |||||||||||
Bené | Pension Plan | N/A | N/A | N/A | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Grade | Pension Plan | 18.167 | 97,557 | — | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Libby | Pension Plan | 8.667 | 147,896 | — | ||||||||||
SERP | 8.667 | 220,276 | — | |||||||||||
Shurts | Pension Plan | 3.167 | 37,993 | — | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Kreidler | Pension Plan | 6.167 | 111,226 | — | ||||||||||
SERP | 6.167 | 318,196 | — |
As required by SEC rules, we calculated the participating officers’ accrued benefits under the pension plan by assuming that the named executives will remain in service with the Company until age 65, which is the earliest age at which the NEOs can retire without any reduction in benefits. Amounts shown below assume the pension plan benefit will be paid in the form of a life-only annuity with a 5-year guarantee. Amounts for present value purposes assume that 50% will elect the 100% joint-life annuity and 50% will elect a single life-only annuity. Other optional forms of payment are available from the pension plan.
For the SERP, we calculated the participating officers’ accrued benefits by assuming that the named executives will remain in service with Sysco until the earliest age they could retire without any reduction in SERP benefits. This date is at age 60.667 for Mr. DeLaney, and age 61 for Mr. Libby. These ages differ because the SERP early retirement factors are
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based on a combination of the participant’s age, Sysco service, and/or MIP service. Note that some of these ages may represent the executive’s current age as of the 2016 fiscal year-end due to prior attainment of their earliest unreduced date. The amounts shown below and for present value purposes assume the SERP will be paid as a joint-life annuity, reducing to two-thirds upon the death of either the executive or his spouse, with the unreduced payment guaranteed for 10 years; however, members also have the option to elect a life-only annuity with a 10-year guarantee.
We calculated the present value of the accumulated pension plan and SERP benefits based on a 4.07% discount rate for the pension plan and a 3.91% discount rate for the SERP, with a post-retirement mortality assumption based on Mercer’s Industry Longevity Experience Study, Consumer Goods and Food & Drink, gender-distinct and no collar, applying the MSS2007 scale for annuitants.
Following are the estimated accrued benefits earned through the fiscal year ending 2016 for the pension plan or SERP, as noted. These annual amounts would be payable at the earliest unreduced retirement age, as described above, if the named executive officer remains in the service of Sysco until such age. Projected benefits that may be earned due to pay and service after the fiscal year ended July 2, 2016 are not included in these estimates.
Name | Plan Name | Earliest Unreduced Retirement Age | Expected Years of Payments | Estimated Annual Benefit | ||||||||||
DeLaney | Pension Plan | 65 | 21.1 | $ | 62,038 | |||||||||
SERP | 60.667 | 27.2 | 559,758 | |||||||||||
Bené | Pension Plan | N/A | N/A | N/A | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Grade | Pension Plan | 65 | 21.9 | 14,693 | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Libby | Pension Plan | 65 | 21.7 | 18,854 | ||||||||||
SERP | 61 | 27.5 | 19,022 | |||||||||||
Shurts | Pension Plan | 65 | 21.3 | 3,750 | ||||||||||
SERP | N/A | N/A | N/A | |||||||||||
Kreidler | Pension Plan | 65 | 21.6 | 12,922 | ||||||||||
SERP | 65 | 27.3 | 31,190 |
In addition to the above, we provide a temporary Social Security bridge benefit to an executive commencing SERP benefits before age 62, payable until the earlier of age 62 or death. The amount of this monthly benefit for each eligible participating officer, based on the SERP early retirement assumptions above, is $1,912 for Mr. DeLaney and $1,586 for Mr. Libby.
Pension Plan
The pension plan, which is intended to be tax-qualified, is funded through an irrevocable tax-exempt trust and covered approximately 48,280 participants as of December 31, 2015. In general, a participant’s accrued benefit is equal to 1.5% times the participant’s average monthly eligible earnings for each year or partial year of service with Sysco or a subsidiary. As previously noted above, as of January 1, 2013, non-union employees no longer earn additional retirement benefits under the pension plan, so earnings and service after December 31, 2012, were not taken into account for determining non-union participants’ accrued benefits under the pension plan. The accrued benefit under the pension plan is expressed in the form of a monthly annuity for the participant’s life, beginning at age 65, the plan’s normal retirement age, and with payments guaranteed for five years. If the participant remains with Sysco until at least age 55 with 10 years of service, the participant is entitled to early retirement payments. In such case, we reduce the benefit 6.67% per year for the first 5 years prior to normal retirement age and an additional 3.33% per year for years prior to age 60. Employees vest in the pension plan after five years of service, and the amendment to freeze benefit accruals under the pension plan after December 31, 2012 did not impact service determination for vesting purposes.
Benefits provided under the pension plan are based on compensation up to a limit, which is $265,000 for calendar year 2016, under the Internal Revenue Code. In addition, annual benefits provided under the pension plan may not exceed a limit, which is $210,000 for calendar year 2016, under the Internal Revenue Code.
Elements Included in Benefit Formula. Compensation included in the pension plan’s benefit calculation is generally earned income excluding deferred bonuses.
Policy Regarding Extra Years of Credited Service. Generally, we do not credit service in the pension plan beyond the actual number of years an employee participates in the plan. We base the years of credited service for the NEOs only on their service while eligible for participation in the plan.
Benefit Payment Options. Participants may choose their method of payment from several options, including a life annuity option, spousal joint and survivor annuity, Social Security leveling and life annuity options with minimum guaranteed terms. Only de minimis lump sums are available.
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Supplemental Executive Retirement Plan
We maintain a supplemental executive retirement plan, which we refer to as the SERP, for the benefit of 98 eligible executives, as of July 2, 2016, to provide for retirement benefits beyond the amounts available under Sysco’s various broad-based US and Canadian pension plans. Messrs. DeLaney, Kreidler and Libby participate in the SERP. It is our intent that the SERP comply with Section 409A of the Internal Revenue Code in both form and operation. The SERP is an unsecured obligation of Sysco and is not qualified for tax purposes. In November 2012, the SERP was amended to freeze benefits and stop future accruals, effective June 29, 2013. Participants covered by the SERP as of June 29, 2013 were granted accelerated vesting. For those who retire and are not eligible for immediate commencement of their SERP benefit, they will be deemed 100% vested, with benefits payable upon reaching age 65. For those who are eligible for a SERP benefit at the time of retirement, an early retirement reduction factor will be used to determine the amount available.
The SERP was designed to provide, in combination with other retirement benefits, 50% of an executive’s final average compensation, provided an executive had at least 20 years of Sysco service, including service with an acquired company. “Other retirement benefits” include Social Security, benefits from the pension plan, and employer contributions under Sysco’s 401(k) plan and similar qualified plans of acquired companies. We reduce the gross accrued benefit of 50% of final average compensation by 5% per year for each year of Sysco service including service with an acquired company of less than 20 years. For purposes of this service calculation, Sysco service was frozen effective June 29, 2013. Additionally, final average compensation is determined using the monthly average of a participant’s eligible earnings for the last 10 fiscal years prior to June 29, 2013, or the date he ceases to be covered under the SERP, if earlier. With respect to the determination of a participant’s accrued benefit as of June 28, 2008, as discussed below, final average compensation is determined using the monthly average of a participant’s eligible earnings for the highest 5 of the 10 fiscal years prior to, and including, the fiscal year ended June 28, 2008.
The term “eligible earnings” refers to compensation taken into account for SERP purposes. As discussed below, beginning with fiscal 2009, the portion of a participant’s MIP bonus counted as eligible earnings is capped at 150% of the participant’s rate of base salary as of the last day of the applicable fiscal year. Eligible earnings for fiscal years prior to fiscal 2009, including eligible earnings for purposes of determining a participant’s accrued benefit as of June 28, 2008, as discussed below, are not affected by this plan change. The definition of eligible earnings that places a cap on the MIP bonus for fiscal years after fiscal 2008 will be used in all benefit calculations except for certain death benefit calculations and a participant’s accrued benefit as of June 28, 2008, as discussed below.
A SERP participant will receive a SERP benefit equal to the greater of:
• | The accrued benefit determined as of June 29, 2013 (the plan freeze date); or |
• | The accrued benefit determined as of June 28, 2008, but the early retirement factor and eligibility for immediate benefit payments determined as of the date service with Sysco ends, using the following components: |
– | average pay, based on the highest five fiscal years, which need not be successive, of eligible earnings in the ten fiscal year period ending June 28, 2008; | |
– | full years of service with Sysco, including service with companies acquired by Sysco, as of June 28, 2008; and | |
– | offsets as of June 28, 2008, with the standard adjustment to reflect the form and timing of the SERP benefit payments as of the date service with Sysco ends. |
Under the SERP, Sysco has the ability to cause the forfeiture of any remaining SERP payments to a participant who was not discharged for “cause,” but who, after termination, was determined by the Compensation Committee to have engaged in behavior while employed that would have constituted grounds for a discharge for “cause.” For this purpose, termination for “cause” includes termination for fraud or embezzlement. Sysco also has the ability to cause a forfeiture of any remaining SERP payments to a participant if the participant violates certain non-competition covenants. These non-competition covenants are applicable for the year following termination and to the entire period over which any SERP benefits are to be paid.
Participants covered by the SERP as of June 29, 2013 are 100% vested. For those who are eligible for early payment at retirement, their benefits may be reduced by an early retirement factor. The early retirement factor is based upon age and MIP participation service and/or Sysco service. The early retirement factor is 50% when participants reach the earlier of age 60 with 10 years of MIP participation service and 20 years of Sysco service or age 55 with 15 years of MIP participation service. The early retirement factor increases with additional years of age and/or MIP participation service or Sysco service. A participant with at least 20 years of Sysco service (including service with companies acquired by Sysco) can retire with unreduced benefits when the early retirement factor is 100%. The participant generally attains an early retirement factor of 100% on the earliest of:
• | age 65 if the participant has at least 10 years of Sysco service; |
• | age 55 if the participant has at least 15 years of MIP service, but only if the sum of his or her age and MIP service is equal to or exceeds 80; and |
• | age 62 if the participant has at least 25 years of Sysco service and at least 15 years of MIP service. |
Upon the occurrence of a change in control, the early retirement factor will become 100% for each participant. However, the criteria for determining whether a participant is eligible for early payment remains unchanged (i.e., the enhancement on the early retirement factor only impacts participants who otherwise meet the early payment criteria upon retirement). Notwithstanding this, the SERP contains cutback provisions that will reduce amounts payable to each participant by the amount of any payments that cannot be deducted by Sysco under Section 280G of the Internal Revenue Code.
We pay the SERP benefit as a monthly life annuity with a guaranteed minimum period of 10 years if the participant is not married at the time payments commence. If the participant is married at the time payments commence, the participant has the option to elect a joint life annuity whereby the participant and spouse are entitled to a monthly annuity for life with a guaranteed minimum period of 10 years, and generally, on the participant’s or spouse’s death, the survivor is entitled to receive a monthly annuity for life with each payment equal to two-thirds of each payment made to the couple. The benefit payable upon the death of a vested, terminated participant who did not meet the early payment criteria as of his or her date of death reflects a reduction of 5/9thsof 1% for each of the first 120 months prior to age 65 and an actuarial reduction for the difference between age 55 and the executive’s age at death.
We provide a temporary Social Security bridge benefit to an executive commencing SERP benefits before age 62, payable until the earlier of age 62 or death.
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Elements of Compensation included in Benefit Formula. Compensation generally includes base pay, the MIP bonus or any bonus paid in lieu of or as a substitute for the MIP bonus (although this is limited to 150% of the annual rate of base salary for fiscal 2009 and later years), the fiscal 2007 supplemental performance bonus, and stock matches under the 2005 Management Incentive Plan and predecessor plans with respect to fiscal 2005 and prior fiscal years. Compensation earned after June 29, 2013 is not applicable to the SERP.
Funding Status. Sysco’s obligations under the SERP are partially funded by a rabbi trust holding life insurance and an interest in certain real property occupied by Sysco. Sysco’s obligations under the SERP are maintained as a book reserve account. In the event of Sysco’s bankruptcy or insolvency, however, the life insurance, the real property interest, and any other assets held by the rabbi trust become subject to the claims of Sysco’s general creditors.
Lump Sum Availability. Retirement benefits may not be paid as a lump sum.
Delay of Distributions to NEOs. Distributions to an NEO upon the NEO’s “separation from service” as defined under Section 409A of the Internal Revenue Code will be delayed for a period of six months to the extent that making payments during such six-month period would violate Section 409A.
In November 2012, the Committee amended the SERP to provide that benefit accruals for all participants were frozen as of June 29, 2013. Subsequent to June 29, 2013, the frozen SERP benefits continue to be payable pursuant to the terms of the SERP, as amended.
Also effective June 29, 2013, all SERP participants vested in their then accrued benefit. However, an early retirement reduction factor has been added to apply in the case of an employee who retires before age 65 who would not have been fully vested at his retirement date under the SERP prior to the amendment. The early retirement factor mirrors the benefit reduction that would have occurred as a result of the application of the vesting formula if the participant had taken early retirement under the SERP as it existed prior to its amendment. These changes do not alter the benefit commencement or other payment schedules for any SERP participant. In addition, the age threshold previously applicable to the SERP death benefit was removed, effective June 29, 2013. As a result, if an active participant dies, the participant’s beneficiary will be entitled to a monthly annuity actuarially equivalent to the greater of: (i) an annual payment equal to 25% of the participant’s three-year final average compensation for ten years certain, or (ii) the participant’s vested accrued benefit as of his date of death, reduced by an actuarial reduction factor to take into account age at death prior to normal retirement age of 65.
Quantification of Termination/Change in Control Payments
We have entered into certain agreements and maintain certain plans that will require us to provide compensation for the NEOs in the event of specified terminations of their employment or upon a change in control of Sysco. We have listed the amount of compensation we would be required to pay to each named executive officer in each situation in the tables below. Amounts included in the tables are estimates and are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts we pay or distribute may differ materially. Factors that could affect these amounts include the timing during the year of any such event, the amount of future bonuses, the value of our stock on the date of the change in control and the ages and life expectancy of each executive and his spouse. TheExcept in the case of Mr. Kreidler, the amounts shown in the tables below assume that the event that triggered the payment occurred on June 28, 2014.July 2, 2016. All amounts shown represent total payments, except as otherwise noted. We expect to time the payment of all amounts shown to comply with Section 409A of the Internal Revenue Code.
WILLIAM J. DELANEY
Compensation Components | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination Scenario | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | |||||||||||||||||||||||||||||||||||||||||
Retirement | $ | 0 | $ | 605,571 | $ | 136,714 | $ | 7,099,618 | $ | 1,507,175 | $ | 21,593,312 | $ | 0 | $ | 127,240 | $ | — | $ | 888,712 | $ | 582,531 | $ | 9,216,786 | $ | 2,117,869 | $ | 33,705,854 | $ | — | $ | 132,192 | |||||||||||||||||||||||||
Death | 0 | 605,571 | 136,714 | 7,124,521 | 1,507,175 | 21,593,312 | 1,200,000 | 127,240 | — | 888,712 | 582,531 | 9,192,894 | 2,117,869 | 33,705,854 | 1,200,000 | 132,192 | |||||||||||||||||||||||||||||||||||||||||
Disability | 0 | 605,571 | 136,714 | 7,099,618 | 3,209,513 | 21,593,312 | 1,753,333 | 127,240 | — | 888,712 | 582,531 | 9,216,786 | 4,222,969 | 33,705,854 | 1,150,000 | 132,192 | |||||||||||||||||||||||||||||||||||||||||
Voluntary Resignation | 0 | 605,571 | 136,714 | 7,099,618 | 1,507,175 | 21,593,312 | 0 | 127,240 | — | 888,712 | 582,531 | 9,216,786 | 2,117,869 | 33,705,854 | — | 132,192 | |||||||||||||||||||||||||||||||||||||||||
Termination for Cause | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Involuntary Termination w/o Cause, or Resignation for Good Reason | 0 | 605,571 | 136,714 | 7,099,618 | 1,507,175 | 21,593,312 | 0 | 127,240 | — | 888,712 | 582,531 | 9,216,786 | 2,117,869 | 33,705,854 | — | 132,192 | |||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination(9) | 0 | 605,571 | 136,714 | 0 | 4,279,350 | 21,593,312 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Cause following a Change in Control(9) | 0 | 605,571 | 136,714 | 9,123,946 | 4,279,350 | 21,593,312 | 0 | 127,240 | |||||||||||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination(8) | — | 888,712 | 582,531 | — | 5,630,625 | 10,988,746 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Causefollowing a Change inControl(8) | — | 888,712 | 582,531 | 9,216,786 | 5,630,625 | 33,705,854 | — | 132,192 |
ROBERT C. KREIDLER
Compensation Components | ||||||||||||||||||||||||||||
Termination Scenario | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | ||||||||||||||||||||
Retirement | $ | 0 | $ | 34,438 | $ | 130,083 | $ | 250,910 | $ | N/A | (8) | $ | N/A | (8) | $ | N/A | (8) | $ | N/A | (8) | ||||||||
Death | 0 | 34,438 | 130,083 | 2,382,833 | 524,075 | 8,202,632 | 1,200,000 | 61,500 | ||||||||||||||||||||
Disability | 0 | 34,438 | 130,083 | 250,910 | 1,116,281 | 8,202,632 | 4,135,833 | 61,500 | ||||||||||||||||||||
Voluntary Resignation | 0 | 34,438 | 130,083 | 250,910 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Termination for Cause | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Involuntary Termination w/o Cause, or Resignation for Good Reason | 0 | 34,438 | 130,083 | 250,910 | 0 | 0 | 0 | 61,500 | ||||||||||||||||||||
Change in Controlw/o Termination(9) | 0 | 34,438 | 130,083 | 0 | 1,488,375 | 8,202,632 | 0 | 0 | ||||||||||||||||||||
Termination w/o Cause following a Change inControl(9) | 0 | 34,438 | 130,083 | 250,910 | 1,488,375 | 8,202,632 | 0 | 61,500 |
SYSCO CORPORATION -20142016 Proxy StatemenStatement t 7274
THOMAS L. BENÉ
MICHAEL W. GREEN
Compensation Components | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination Scenario | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | ||||||||||||||||||||||||||||||||||||||||||||
Retirement | $ | 0 | $ | 0 | $ | 78,992 | $ | 4,563,631 | $ | N/A | (8) | $ | N/A | (8) | $ | N/A | (8) | $ | N/A | (8) | $ | — | $ | — | $ | 153,056 | $ | — | $ | N/A | (9) | $ | N/A | (9) | $ | N/A | (9) | $ | N/A | (9) | ||||||||||||||||||||
Death | 0 | 0 | 78,992 | 2,871,447 | 486,641 | 6,531,390 | 1,200,000 | 50,500 | — | — | 153,056 | — | 583,297 | 6,825,646 | 1,200,000 | 73,538 | ||||||||||||||||||||||||||||||||||||||||||||
Disability | 0 | 0 | 78,992 | 4,563,631 | 1,036,547 | 6,531,390 | 2,860,833 | 50,500 | — | — | 153,056 | — | 1,189,043 | 6,825,646 | 3,141,667 | 73,538 | ||||||||||||||||||||||||||||||||||||||||||||
Voluntary Resignation | 0 | 0 | 78,992 | 4,563,631 | 0 | 0 | 0 | 0 | — | — | 153,056 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Termination for Cause | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination w/o Cause, or Resignation for Good Reason | 0 | 0 | 78,992 | 4,563,631 | 0 | 0 | 0 | 50,500 | — | — | 153,056 | — | — | — | — | 73,538 | ||||||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination(9) | 0 | 0 | 78,992 | 0 | 1,382,063 | 6,531,390 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Cause following a Change in Control(9) | 0 | 0 | 78,992 | 4,563,631 | 1,382,063 | 6,531,390 | 0 | 50,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination(8) | — | — | 153,056 | — | 1,585,391 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Causefollowing a Change inControl(8) | — | — | 153,056 | — | 1,585,391 | 6,825,646 | — | 73,538 |
THOMAS BENÉJOEL T. GRADE
Compensation Components | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination Scenario | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | ||||||||||||||||||||||||||||||||||||||||||||
Retirement | $ | 0 | $ | 0 | $ | 25,909 | $ | 0 | $ | N/A | (8) | $ | N/A | (8) | $ | N/A | (8) | $ | N/A | (8) | $ | — | $ | — | $ | 147 | $ | — | $ | N/A | (9) | $ | N/A | (9) | $ | N/A | (9) | $ | N/A | (9) | ||||||||||||||||||||
Death | 0 | 0 | 25,909 | 0 | 176,920 | 2,065,322 | 1,200,000 | 38,442 | — | — | 147 | — | 385,704 | 5,098,093 | 1,200,000 | 60,077 | ||||||||||||||||||||||||||||||||||||||||||||
Disability | 0 | 0 | 25,909 | 0 | 533,203 | 2,065,322 | 3,745,000 | 38,442 | — | — | 147 | — | 861,094 | 5,098,093 | 5,554,167 | 60,077 | ||||||||||||||||||||||||||||||||||||||||||||
Voluntary Resignation | 0 | 0 | 25,909 | 0 | 0 | 0 | 0 | 0 | — | — | 147 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Termination for Cause | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination w/o Cause, or Resignation for Good Reason | 0 | 0 | 25,909 | 0 | 0 | 0 | 0 | 38,442 | — | — | 147 | — | — | — | — | 60,077 | ||||||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination(9) | 0 | 0 | 25,909 | 0 | 710,938 | 2,065,322 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Cause following a Change in Control(9) | 0 | 0 | 25,909 | 0 | 710,938 | 2,065,322 | 0 | 38,442 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination(8) | — | — | 147 | — | 1,148,125 | 917,653 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Causefollowing a Change inControl(8) | — | — | 147 | — | 1,148,125 | 5,098,093 | — | 60,077 |
WAYNE R. SHURTSRUSSELL T. LIBBY
Compensation Components | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination Scenario | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | ||||||||||||||||||||||||||||||||||||||||||||
Retirement | $ | 0 | $ | 0 | $ | 19,760 | $ | 0 | $ | N/A | (8) | $ | N/A | (8) | $ | N/A | (8) | $ | N/A | (8) | $ | — | $ | — | $ | 376,002 | $ | 73,413 | $ | N/A | (9) | $ | N/A | (9) | $ | N/A | (9) | $ | N/A | (9) | ||||||||||||||||||||
Death | 0 | 0 | 19,760 | 0 | 399,650 | 3,536,333 | 1,170,000 | 23,288 | — | — | 376,002 | 1,541,655 | 444,304 | 5,535,060 | 1,200,000 | 46,615 | ||||||||||||||||||||||||||||||||||||||||||||
Disability | 0 | 0 | 19,760 | 0 | 851,175 | 3,536,333 | 2,867,500 | 23,288 | — | — | 376,002 | 73,413 | 898,341 | 5,535,060 | 4,257,500 | 46,615 | ||||||||||||||||||||||||||||||||||||||||||||
Voluntary Resignation | 0 | 0 | 19,760 | 0 | 0 | 0 | 0 | 0 | — | — | 376,002 | 73,513 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Termination for Cause | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination w/o Cause, or Resignation for Good Reason | 0 | 0 | 19,760 | 0 | 0 | 0 | 0 | 23,288 | — | — | 376,002 | 73,413 | — | — | — | 46,615 | ||||||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination(9) | 0 | 0 | 19,760 | 0 | 1,134,901 | 3,536,333 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Cause following a Change in Control(9) | 0 | 0 | 19,760 | 0 | 1,134,901 | 3,536,333 | 0 | 23,288 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination(8) | — | — | 376,002 | — | 1,197,788 | 1,470,387 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Causefollowing a Change inControl(8) | — | — | 376,002 | 73,413 | 1,197,788 | 5,535,060 | — | 46,615 |
SYSCO CORPORATION -20142016 Proxy Statement 7375
MANUEL A. FERNANDEZ(10)WAYNE R. SHURTS
Compensation Components | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination Scenario | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | Severance Payment | Payments and Benefits Under EDCP(1) | Payments and Benefits Under MSP(2) | Payments and Benefits Under SERP(3) | CPU Payment(4) | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units(5) | Insurance Payments(6) | Other(7) | |||||||||||||||||||||||||||||||||||||||||
Retirement | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 6,744,423 | $ | 0 | $ | 12,000 | $ | — | $ | — | $ | 149,772 | $ | — | $ | N/A | (9) | $ | N/A | (9) | $ | N/A | (9) | $ | N/A | (9) | |||||||||||||||||||||
Death | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | — | — | 149,772 | — | 524,966 | 7,707,918 | 1,200,000 | 36,038 | |||||||||||||||||||||||||||||||||||||||||
Disability | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | — | — | 149,772 | — | 1,049,011 | 7,707,918 | 2,264,167 | 36,038 | |||||||||||||||||||||||||||||||||||||||||
Voluntary Resignation | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | — | — | 149,772 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Termination for Cause | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Involuntary Termination w/o Cause, or Resignation for Good Reason | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | — | — | 149,772 | — | — | — | — | 36,038 | |||||||||||||||||||||||||||||||||||||||||
Change in Controlw/o Termination(8) | — | — | 149,772 | — | 1,398,681 | 1,940,699 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Termination w/o Causefollowing a Change inControl(8) | — | — | 149,772 | — | 1,398,681 | 7,707,918 | — | 36,038 | |||||||||||||||||||||||||||||||||||||||||||||||||
ROBERT C. KREIDLER | ROBERT C. KREIDLER | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Termination Scenario | Severance Payment | Payments and Benefits Under EDCP | Payments and Benefits Under MSP | Payments and Benefits Under SERP | CPU Payment | Acceleration and Other Benefits from Unvested Stock Options and Restricted Stock Units | Insurance Payments | Other | |||||||||||||||||||||||||||||||||||||||||||||||||
Retirement | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||
Death | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Disability | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Voluntary Resignation(10) | — | 162,630 | 649,151 | 314,817 | — | — | 15,256 | 19,828 | |||||||||||||||||||||||||||||||||||||||||||||||||
Termination for Cause | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination w/o Cause, or Resignation for Good Reason | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Change in Control w/o Termination | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Termination w/o Cause following a Change in Control | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | — | — | — | — | — | — | — | — |
(1) | See |
• | Mr. DeLaney has elected to receive annual installments over 5 years in the event of his death, disability or retirement. |
(2) | See |
• | Messrs. DeLaney, |
(3) | All amounts shown are present values of eligible benefits as of |
• | Death — |
Estimated # of Payments | Amount of Payment | Payment Frequency | ||||
DeLaney | 355 | $ 37,741 | Monthly | |||
Kreidler | 529 | 10,626 | Monthly | |||
Green | 402 | 114,334 | Monthly |
Estimated # of Payments | Amount of Payment | Payment Frequency | ||||||||
DeLaney | 316 | $ | 48,013 | Monthly | ||||||
Libby | 432 | 6,794 | Monthly |
SYSCO CORPORATION - 2016 Proxy Statement 76
• | Disability; Involuntary Termination without Cause, or Resignation for Good Reason; Termination without Cause following a Change in Control—The amounts shown reflect the following monthly payments plus the amounts shown below attributable to the monthly PIA supplement, which is paid only until the executive reaches age 62. Because Mr. DeLaney has already met the conditions of Early Payment Criteria as of the |
SYSCO CORPORATION - 2014 Proxy Statement 74
Disability, Involuntary Termination without Cause, | Termination without Cause following | |||||||||||||||||||||||
or Resignation for Good Reason | a Change in Control | |||||||||||||||||||||||
Monthly | Monthly PIA | Monthly | Monthly PIA | |||||||||||||||||||||
# of Monthly | Payment | Supplement | # of Monthly | Payment | Supplement | |||||||||||||||||||
Name | Payments | Amounts | (Until Age 62) | Payments | Amounts | (Until Age 62) | ||||||||||||||||||
DeLaney | 328 | $ | 46,536 | $ | 1,912 | 328 | $ | 46,536 | $ | 1,912 | ||||||||||||||
Libby | 284 | 715 | — | 284 | 715 | — |
Disability, Involuntary Termination without Cause, | Termination without Cause following | |||||||||||||||||||||||
or Resignation for Good Reason | a Change in Control | |||||||||||||||||||||||
Monthly | Monthly PIA | Monthly | Monthly PIA | |||||||||||||||||||||
# of Monthly | Payment | Supplement | # of Monthly | Payment | Supplement | |||||||||||||||||||
Name | Payments | Amounts | (Until Age 62) | Payments | Amounts | (Until Age 62) | ||||||||||||||||||
DeLaney | 363 | $ | 36,652 | $ | 1,912 | 363 | $ | 47,210 | $ | 1,912 | ||||||||||||||
Kreidler | 339 | 2,599 | 0 | 339 | 2,599 | 0 | ||||||||||||||||||
Green | 296 | 41,803 | 0 | 296 | 41,803 | 0 |
• | Change in Control without Termination—Benefit payments are not triggered. |
(4) | See “Cash Performance |
Retirement—Amounts reflect the pro-rated estimated value of awards pursuant to (i) the fiscal | |
Disability—Amounts reflect the estimated value of awards pursuant to (i) the fiscal | |
Death—Amounts reflect the estimated value of awards pursuant to the fiscal | |
Change in Control—Amounts reflect the target award value of awards pursuant to the fiscal | |
(5) | The amounts shown include the value of unvested accelerated restricted stock units, |
(6) | Includes payments we will make in connection with additional life insurance coverage, long-term disability coverage and long-term care insurance. In the event of death, a lump sum Basic Life Insurance benefit is payable in an amount equal to one-times the executive’s prior year W-2 earnings, capped at $150,000. An additional benefit is paid in an amount equal to |
(7) | Includes retiree medical benefits and the payment of accrued but unused vacation. |
(8) | |
As a result of the assumption that the change in control occurred on | |
(9) | Indicates that the NEO did not qualify for retirement with respect to the applicable compensation component as of July 2, 2016. |
(10) | The values in this table for Mr. |
• | A lump sum payment of $162,630 under the EDCP, received on July 18, 2016; | |
• | A lump sum payment of $649,151 under the MSP, received on July 29, 2016; | |
• | Monthly annuity payments under the SERP for a period of ten years commencing in November 2028 with a present value of $314,817; | |
• | Reimbursement for up to 12 months of COBRA health care continuation coverage premiums, valued at approximately $15,256; and | |
• | A lump sum payment of $19,828 as compensation for accrued and unused vacation days. | |
Mr. Kreidler did not receive any other payments or benefits in connection with his resignation. |
SYSCO CORPORATION-20142016 Proxy Statement 7577
The Compensation Committee oversees the company’sCompany’s executive compensation program and regularly reviews the program against Sysco’s strategic goals, industry practices and emerging trends in order to ensure alignment with stockholder interests. The Committee believes that Sysco’s performance-based bonus and equity programs provide executives with incentives to create long-term stockholder value.
In 2010, the Committee expanded its review of compensation programs across the Sysco enterprise to monitor whether the program components encourage or otherwise promote the taking of inappropriate or unacceptable risks that could threaten the company’sCompany’s long-term value. This review was updated in 2014.In 2016, the Committee engaged Exequity to assist with the assessment of Sysco’s fiscal 2016 enterprise-wide compensation programs. The assessment placed particular emphasis on identifying employees who have both significant compensation risk in the variability of their compensation and also the ability to expose the companyCompany to significant business risk. The Committee primarily focused on the compensation for the senior executives of Sysco Corporation and its operating companies, as these are the employees whose actions have the greatest potential to expose the companyCompany to significant business risk, although the review addressed all forms and levels of variable and other compensation that the Committee believed could reasonably provide employees with incentives to undertake risky behavior on behalf of Sysco. Having completed this review, the Committee continues to believe that many of Sysco’s long-standing practices are designed to effectively promote the creation of long-term value, discourage behavior that leads to excessive risk, and mitigate the material risks associated with executive and other compensation programs.
These practices includewith respect to fiscal 2016 included the following:
• | Sysco’s executive compensation programs are designed to include a mix of elements so that the compensation mix is not overly focused on either short-term or long-term incentives. |
• | Sysco’s executive annual incentive award programs (both the |
• | Sysco’s incentive programs do not allow for unlimited |
• | Selection of three different types of long-term incentives (stock options, restricted stock units and cash performance units) for executives helps to minimize the risk that they will take actions that could cause harm to the Company and its stockholders. The value of stock options and restricted stock units are primarily based on stock price appreciation, which is determined by how the market values our common stock. |
• | Longer performance periods encourage executives to attain sustained performance over several periods, rather than performance in a single period. CPUs are based on a three-year performance period. Stock options become exercisable over a five year period and remain exercisable for up to seven years to ten years from the date of grant (depending on the grant), encouraging executives to look to long-term appreciation in equity values. |
• | The stock ownership guidelines described under “Stock Ownership — Stock Ownership Guidelines” above align the interests of our executive officers with the long-term interests of all stockholders and encourage our executives to execute our strategies for growth in a prudent manner. |
• | In 2009, the Committee adopted a clawback policy, which is described under “Compensation Discussion and Analysis — Executive Compensation Governance and Other Information — Executive Compensation |
Based on its most recent review, management and the Committee do not believe that the compensation policies and practices of Sysco create risks that are reasonably likely to have a material adverse effect on the Company.
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VOTE TO APPROVE THE ADOPTION OF THE SYSCO 2015 EMPLOYEE STOCK PURCHASE PLAN (ITEM 2)
Approval of 2015 Employee Stock Purchase Plan
We are requesting that our stockholders approve the 2015 Employee Stock Purchase Plan (the “ESPP”), which was adopted by the Board of Directors on August 22, 2014, subject to stockholder approval. If approved by the stockholders at the Annual Meeting, the ESPP will become effective on January 1, 2015. The Amended and Restated 1974 Employees’ Stock Purchase Plan (the “Prior Plan”) will expire on December 31, 2014.
The Board of Directors recommends approval of the ESPP so the Company can continue to offer its employees the ability to invest in the Company’s common stock at an attractive price providing employees with a more direct stake in the Company’s welfare, thereby stimulating the employees’ efforts on the company’s behalf and strengthening such employees’ desire to remain with the Company.
The following is a summary of the material features of the ESPP. This summary does not purport to be a complete description of all of the provisions of the ESPP, and is qualified in its entirety by reference to the full text of the ESPP. A copy of the ESPP is attached to this proxy statement as Annex II. Capitalized terms used in this summary that are not otherwise defined have the respective meanings given such terms in the ESPP.
ESPP Terms
The ESPP permits Employees of the Company and its Participating Subsidiaries to purchase Company common stock at a 15% discount from Fair Market Value, subject to limits set by the Internal Revenue Code (the “Code”) and the ESPP. Sales of shares under the ESPP will generally be made pursuant to offerings that are intended to satisfy the requirements of Section 423 of the Code. The Plan Administrator may authorize one or more offerings under the Plan that do not comply with the requirements of Section 423 but do comply with the requirements of the foreign jurisdictions in which those offerings are conducted. Such offerings authorized under the ESPP shall be separate from any offerings designed to comply with the Code Section 423 requirements, but may be conducted concurrently with those offerings.
Administration
The Compensation Committee will administer the ESPP and, subject to the provisions of the ESPP, will have full authority and discretion to amend, prescribe, rescind, administer, and interpret such rules and regulations as it deems necessary to administer the ESPP, and its decisions will be final and binding upon all participants in the ESPP. The Compensation Committee may delegate its administrative authority to a committee comprised of officers or senior level Employees of the Company (the “Administrative Committee”). However, the Administrative Committee shall not have the authority to (i) increase the maximum number of shares available for issuance under the ESPP or the maximum number of shares that may be purchased per participant for any Offering Period, (ii) modify the eligibility requirements under the ESPP, (iii) designate a Subsidiary as a Participating Subsidiary, (iv) change the duration of the Offering Periods or (v) change the Purchase Price for any Offering Period.
Eligibility and Participation
The ESPP allows Employees of Sysco and its Participating Subsidiaries to participate, excepting Employees whose customary employment is for not more than twenty hours of service per week for more than five months a year and Employees who would own outstanding options or other rights to purchase stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company. As of June 28, 2014, approximately 49,024 Employees were within the class eligible to participate in the ESPP. ESPP participants may authorize payroll deductions from 1% to 10% of cash performance-based pay (including salary, commissions, overtime or performance bonuses, and other incentive compensation) to be applied toward the purchase of the Company’s common stock.
Offerings
The ESPP provides for separate three-month offerings, commencing on January 1, April 1, July 1, and October 1 of each year. The terms and conditions of each Offering Period may vary, and two or more Offering Periods may run concurrently under the ESPP, each with its own terms and conditions. The Plan Administrator may authorize one or more offerings under the plan that are not designed to comply with the requirements of Code Section 423, but with the requirements of the foreign jurisdictions in which those offerings are conducted. Such offerings shall be separate from any offerings designed to comply with the Code Section 423 requirements, but may be conducted concurrently with those offerings.
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Payroll Deductions, Purchase Price, and Shares Purchased
An Employee must authorize a payroll deduction on or before the start of an Offering Period in order to participate in that offering. On the last day of the offering period, the Employee will be deemed to have exercised the option to purchase the maximum number of shares that the Employee’s payroll deduction will allow at the option price, but no more than 1,250 shares in any single offering. The purchase price shall be equal to 85% of the Fair Market Value per share of the Company’s common stock on the exercise date for the Offering Period unless the Plan Administrator determines otherwise. Payment for shares of Company common stock purchased under the ESPP shall be made solely through payroll deductions. As of September 22, 2014, the closing price of Company common stock on the New York Stock Exchange was $37.56 per share.
No Employee will be permitted to purchase any shares under the ESPP (i) if such Employee, immediately after such purchase, owns shares possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any subsidiary corporations or (ii) to the extent that his or her rights to purchase stock under all of the Company’s employee stock purchase plans accrues at a rate which exceeds $25,000 worth of stock (determined at the Fair Market Value of the shares at the time such purchase right is granted) for each calendar year in which the purchase right is outstanding.
Suspension; Termination of Employment
An Employee may suspend participation by delivering notice in accordance with the procedures established by the Company at any time. An Employee who has suspended participation in an offering will not receive a refund of previously accumulated Stock Purchase Contributions. A participant’s Stock Purchase Contributions previously accumulated for the Offering Period in which such a suspension occurs shall be applied to the purchase of shares of Common Stock on the next scheduled Exercise Date.
Upon termination of employment for any reason, the Employee’s participation in the ESPP will immediately terminate and the payroll deductions credited to the Employee’s account will be refunded to him or her as soon as administratively practicable and such Employee’s rights to purchase Company common stock under the ESPP will automatically terminate.
Transferability
No participant will be permitted to sell, assign, transfer, pledge, or otherwise dispose of or encumber either the payroll deductions credited to his or her account or an option or any rights granted under the ESPP other than by will or the laws of descent and distribution. During the participant’s lifetime, only the participant can make decisions regarding the participation in or withdrawal from an offering under the ESPP.
Adjustments Upon Changes in Capitalization
In the event of any change in the structure of the Company’s common stock, such as a reorganization, recapitalization, spinoff, stock split, stock dividend, combination of shares, merger, consolidation offerings of rights, or other similar event, then adjustments in the number, kind, and price of shares available for purchase under the ESPP shall automatically be proportionately adjusted with no action required on the part of the Compensation Committee.
Amendment and Termination of the ESPP
The Compensation Committee or the Board of Directors may at any time amend or terminate the ESPP, provided that no amendment may adversely affect an Employee’s existing rights under any offering already commenced. In addition, no amendment may be made to the ESPP without prior approval of the stockholders of the Company if such amendment would increase the number of shares reserved thereunder or materially modify the eligibility requirements. The ESPP will terminate in the event all shares reserved under the ESPP have been purchased.
Federal Income Tax Consequences
The following discussion is a summary of the general U.S. federal income tax rules applicable to purchases offered by the Company and its Participating Subsidiaries under the ESPP offerings that are intended to comply with Section 423 of the Code. Employees should consult their own tax advisors since a taxpayer’s particular situation may be such that some variation of the rules described below will apply.
The ESPP and the right of participants to make purchases under it are intended to qualify under the provisions of Code Sections 421 and 423. Under those provisions, no income will be taxable to a participant at the time of grant of the option or purchase of shares. However, a participant may become liable for tax upon dispositions of shares acquired under the ESPP, and the tax consequences will depend on how long a participant has held the shares prior to disposition.
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If the shares are disposed of (a) more than two years after the date of the beginning of the offering period and (b) more than one year after the stock is purchased in accordance with the ESPP (or if the Employee dies while holding the shares), the following tax consequences will apply. The lesser of (a) the excess of fair market value of the shares at the time of such disposition over the purchase price of the shares (the “option price”), or (b) the excess of the fair market value of the shares at the time the option was granted over the option price (which option price will be computed as of the offering date) will be taxed as ordinary income to the participant. Any further gain upon disposition generally will be taxed at long-term capital gain rates. If the shares are sold and the sales price is less than the option price, there is no ordinary income and the participant has a long-term capital loss equal to the difference. If an Employee holds the shares for the holding periods described above, no deduction in respect of the disposition of such shares will be allowed to the Company.
If the shares are sold or disposed of (including by way of gift) before the expiration of either the two year or the one year holding periods described above, the following tax consequences will apply. The amount by which the fair market value of the shares on the date the option is exercised (which is the last business day of the offering period and which is hereafter referred to as the “termination date”) exceeds the option price will be taxed as ordinary income to the participant. This excess will constitute ordinary income in the year of sale or other disposition even if no gain is realized on the sale or a gratuitous transfer of the shares is made. The balance of any gain will be taxed as capital gain and will qualify for long-term capital gain treatment if the shares have been held for more than one year following the exercise of the option. If the shares are sold for an amount that is less than their fair market value as of the termination date, the participant recognizes ordinary income equal to the excess of the fair market value of the shares on the termination date over the option price, and the participant may recognize a capital loss equal to the difference between the sales price and the value of such shares on the termination date. The Company, in the event of an early disposition, will be allowed a deduction for federal income tax purposes equal to the ordinary income realized by the disposing Employee.
Shares Available for Issuance
11,000,000 shares of Sysco Corporation common stock will be reserved for issuance under the ESPP, comprised of 10,000,000 new shares and up to 1,000,000 shares remaining available for issuance under the Prior Plan, which will terminate following the distribution of shares attributable to the offering period ending on December 31, 2014. As of June 28, 2014, 2,454,932 shares remained available for purchase under the Prior Plan.
New Plan Benefits
The amounts of future purchases of Sysco common stock under the ESPP are not determinable because participation is voluntary, participation levels depend on each participant’s elections and the restrictions of Section 423 of the Code and the ESPP, and the per-share purchase price depends on the future value of Sysco common stock.
Vote Required and Board Recommendation
Pursuant to Sysco’s Bylaws, the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting, either for or against, is required for approval of the ESPP.
The Board of Directors unanimously recommends a vote FOR approval of the 2015 Employee Stock Purchase Plan.
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ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (ITEM 3)2)
Sysco seeks a non-binding vote from its stockholders to approve the compensation paid to our named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion. This vote is commonly referred to as a “Say on Pay” vote because it gives stockholders a direct opportunity to express their approval or disapproval to the companyCompany regarding its pay practices.
As discussed in detail in the Compensation Discussion and Analysis, our executive compensation programs are designed to attract, retain and motivateincentivize highly talented individuals who are committed to driving Sysco’s vision and strategy. We strive to link executives’ pay to their performance and their advancement of Sysco’s overall performance and business strategies, while also aligning the executives’ interests with those of stockholders and encouragingstockholders. We also aim to encourage high-performing executives to drive long-term results and to remain with Sysco over the course of their careers. We believe that the amount of compensation for each named executive officer reflects their extensive management experience, continued high performance and exceptional service to Sysco and our stockholders.
We invite you to consider the details of our executive compensation as disclosed more fully throughout this proxy statement.
Regardless of the outcome of this “Say on Pay” vote, Sysco welcomes input from its stockholders regarding executive compensation and other matters related to the company’sCompany’s success generally. We believe in a corporate governance structure that is responsive to stockholder concerns, and we view this vote as a meaningful opportunity to gauge stockholder approval of our executive compensation policies. Given the information provided above and elsewhere in this proxy statement, the Board of Directors asks you to approve the following advisory resolution:
“Resolved, that Sysco’s stockholders approve, on an advisory basis, the compensation paid to Sysco’s named executive officers, as disclosed in this proxy statement.”
Required Vote
The votes cast for this proposal must exceed the votes cast against it in order for it to be approved. Accordingly, abstentions and broker non-votes will not be relevant to the outcome.
The Board of Directors unanimously recommends a vote FOR the approval of the compensation paid to Sysco’s Named Executive Officers.
TheSysco’s Audit Committee reports to, and acts on behalf of, the Board of Directors, and is composed of four directors who each satisfy the independence, financial literacy and other requirements of the New York Stock Exchange listing standards and the U.S. federal securities laws. The role of the Audit Committee is to assist the Board in its oversight of:
• | Compliance with legal and regulatory requirements; |
• | Corporate accounting; |
• | Reporting practices; |
• | The integrity of the Company’s financial statements; |
• | The qualifications, independence and performance of the Ernst & Young LLP, Sysco’s independent registered public accounting firm (“Ernst & Young”); |
• | The performance of Sysco’s internal audit function; and |
• | Risk assessment and risk management. |
During fiscal year 2016, the Audit Committee held nine meetings and fulfilled all of its responsibilities as set forth in the committee’s charter, including: | |
• | Reviewing with Ernst & Young and the internal auditors the overall scope and plans for their respective audits for the fiscal year; |
• | Approving all audit engagement fees and terms, as well as permissible non-audit engagements with Ernst & Young (please refer to “Fees Paid to Independent Registered Public Accounting Firm” below for a detailed discussion of such fees and related approvals); |
• | Reviewing the experience and qualifications of the senior members of Ernst & Young’s audit team; |
• | Assuring the regular rotation of Ernst & Young’s lead audit partner as required by law, and considering whether there should be rotation of the independent registered public accounting firm itself; |
• | Reviewing and discussing with management the earnings press releases prior to release to the public; |
• | Meeting with Ernst & Young and the internal auditors, with and without management present, to discuss the adequacy and effectiveness of Sysco’s internal control over financial reporting and the overall quality of the Company’s financial reporting; and |
• | Meeting independently with each of Sysco’s Chief Executive Officer and Sysco’s Chief Financial Officer and Chief Accounting Officer. |
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As required by its charter, the Audit Committee has also met and held discussions with management and the independent public accountantsErnst & Young regarding Sysco’s audited consolidated financial statements for the year ending June 28, 2014.July 2, 2016. Management represented to the Audit Committee that Sysco’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the audited consolidated financial statements with management and the independent public accountants.Ernst & Young. The Audit Committee also discussed with the independent public accountantsErnst & Young the matters required to be discussed by Statement on Auditing Standards No. 61(Codification61 (Codification of Statements on Auditing Standards, AU Sec. 380), as modified or supplemented. Sysco’s independent public accountantsErnst & Young provided to the Audit Committee the written disclosures and the letter required by Public Company Accounting Oversight Board Rule 3526, “Communication with Audit Committees Concerning Independence”, as modified or supplemented, and the Audit Committee discussed with the independent public accountantsErnst & Young that firm’s independence.
Based on the Audit Committee’s discussion with management and the independent public accountantsErnst & Young and the Audit Committee’s review of the representations of management and theErnst & Young’s report, of the independent public accountants, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Sysco’s Annual Report on Form 10-K for the year ended June 28, 2014July 2, 2016 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Joseph A. Hafner, Jr.
Hans-Joachim Koerber
Nancy S. Newcomb
Richard G. Tilghman,Chairman
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FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents fees billed for professional audit services rendered by Ernst & Young LLP for the audit of Sysco’s annual financial statements for fiscal 20142016 and 2013,2015, as well as other services rendered by Ernst & Young LLP during those periods:
Fiscal 2014 | Fiscal 2013 | Fiscal 2016 | Fiscal 2015 | |||||||||
Audit Fees(1) | $ | 5,245,110 | $ | 4,947,618 | $ | 6,066,000 | $ | 5,485,000 | ||||
Audit-Related Fees(2) | 1,117,138 | 124,971 | 1,800,000 | 178,995 | ||||||||
Tax Fees(3) | 2,549,861 | 2,672,384 | 2,366,000 | 1,700,244 | ||||||||
All Other Fees | — | — | — | — |
(1) | Audit fees |
(2) | Audit-related fees |
(3) | Tax fees |
Pre-Approval Policy
In February 2003, the Audit Committee adopted a formal policy concerning approval of audit and non-audit services to be provided by the independent auditor to the company.Company. The policy requires that all services, including audit services and permissible audit related, tax and non-audit services, to be provided by Ernst & Young LLP to the company,Company, be pre-approved by the Audit Committee. All of the services performed by Ernst & Young in or with respect to fiscal 20142016 and fiscal 20132015 were approved in advance by the Audit Committee pursuant to the foregoing pre-approval policy and procedures. During fiscal 2014,2016, Ernst & Young did not provide any services prohibited under the Sarbanes-Oxley Act of 2002.
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RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 4)3)
The Audit Committee of the Board has appointed Ernst & Young LLP as Sysco’s independent registered public accounting firm for fiscal 2015.2017. Ernst & Young LLP has served as the company’sCompany’s independent public registered public accounting firm providing auditing, financial and tax services since their engagement in fiscal 2002. In determining to appoint Ernst & Young, the Audit Committee carefully considered Ernst & Young’s past performance for the company,Company, its independence with respect to the services to be performed and its general reputation for adherence to professional auditing standards.
Although the companyCompany is not required to seek ratification, the Audit Committee and the Board believe it is sound corporate governance to do so. If stockholders do not ratify the appointment of Ernst & Young, the current appointment will stand, but the Audit Committee will consider the stockholders’ action in determining whether to appoint Ernst & Young as the company’sCompany’s independent registered public accounting firm for fiscal 2016.2018.
Representatives of Ernst & Young LLP will be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so. They will also be available to respond to appropriate questions.
Required Vote
The votes cast for this proposal must exceed the votevotes cast against it in order for it to be approved. Accordingly abstentions and broker non-votes will not be relevant to the outcome.
The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of the independent registered public accounting firm for fiscal 2015.2017.
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The Teamsters General Fund of 25 Louisiana Avenue, NW, Washington, D.C. 20001, owner of 280 shares of Sysco common stock, has notified us that it intends to present the following proposal at the Annual Meeting. In accordance with applicable proxy regulations, the proposal and supporting statement, for which Sysco accepts no responsibility, are set forth below exactly as they were submitted by the proponent.
RESOLVED: The shareholders ask the board of directors ofSysco Corporation (“Company”) to adopt a policy that in the event of a change in control (as defined under any applicable employment agreement, equity incentive plan or other plan), there shall be no acceleration of vesting of any equity award granted to any senior executive, provided, however, that the board’s Compensation Committee may provide in an applicable grant or purchase agreement that any unvested award will vest on a partial,pro rata basis up to the time of the senior executive’s termination, with such qualifications for an award as the Committee may determine.
For purposes of this Policy, “equity award” means an award granted under an equity incentive plan as defined in Item 402 of the SEC’s Regulation S-K, which addresses elements of executive compensation to be disclosed to shareholders. This resolution shall be implemented so as not to affect any contractual rights in existence on the date this proposal is adopted, and it shall apply only to equity awards made under equity incentive plans or plan amendments that shareholders approve after the date of the 2016 annual meeting.
SUPPORTING STATEMENT:
Sysco Corporation allows senior executives to receive an accelerated award of unearned equity under certain conditions after a change of control of the Company. We do not question that some form of severance payments may be appropriate in that situation. We are concerned, however, that current practices at the Company may permit windfall awards that have nothing to do with an executive’s performance.
According to last year’s proxy statement, a change in control at the end of the 2015 fiscal year could have accelerated the vesting of $30 million worth of long-term equity to the Company’s five senior executives.
We are unpersuaded by the argument that executives somehow “deserve” to receive unvested awards. To accelerate the vesting of unearned equity on the theory that an executive was denied the opportunity to earn those shares seems inconsistent with a “pay for performance’’ philosophy worthy of the name.
We do believe, however, that an affected executive should be eligible to receive an accelerated vesting of equity awards on apro rata basis as of his or her termination date, with the details of anypro rata award to be determined by the Compensation Committee.
Other major corporations, including: Apple, Chevron, ExxonMobil, IBM, Intel, Microsoft, and Occidental Petroleum, have limitations on accelerated vesting of unearned equity, such as providingpro rata awards or simply forfeiting unearned awards. Research from James Reda & Associates found that over one-third of the largest 200 companies nowpro rate, forfeit, or only partially vest performance shares upon a change of control.
We urge you to voteFOR this proposal.
BOARD OF DIRECTORS’ STATEMENT IN OPPOSITION OF THE PROPOSAL
The Board unanimously recommends a vote “AGAINST” the stockholder proposal.
The Board believes that the most effective executive compensation program is one that places a heavy emphasis on pay for performance and is designed to align the interests of company executives with those of our shareholders, with the ultimate objective of increasing shareholder value. The Board does not believe that the adoption of a “one-size fits all” policy restricting the Compensation Committee’s discretion to provide for accelerated vesting and requiring executives to forfeit a portion of their equity awards would be in the best interests of the Company or its stockholders. As discussed more fully below, implementation of this policy would disrupt the alignment of interests between executives and stockholders, particularly in the context of a significant transaction resulting in a change in control of Sysco, unduly limit the Company’s ability to attract, retain and incentivize talented executives and impose undue restrictions on the ability of the Compensation Committee to structure our executive compensation program.
Implementing the proposal would disrupt the alignment between executive and stockholder interests during a time of uncertainty.
For equity-based awards issued to date under Sysco’s 2013 Long-Term Incentive Plan, the Board has provided for “double trigger” accelerated vesting, under which an executive’s outstanding equity awards will only fully and immediately vest if (1) a change in control occurs and (2) the executive’s employment is terminated by the Company or its subsidiaries without cause (or the executive terminates his or her employment for good reason) within the period commencing 1 year prior to the change in control and ending 2 years after the change in control.
The Board believes that the acceleration of awards in these circumstances appropriately aligns the interests of executives with the interests of stockholders in the context of a change in control transaction. A change in control creates uncertainty surrounding the plans of new ownership and whether, through loss of employment, executives will forfeit their ability to realize value from unvested equity awards. The risk of that loss
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creates undesirable disincentives for the executives in connection with the consideration, negotiation and implementation of a change-in-control transaction. The Board believes that our current “double trigger” approach eliminates these disincentives by enabling our executives to remain objective, preserves executive morale and productivity and encourages retention in the face of the disruptive impact of an actual or rumored change in control of Sysco. Retaining key executives while a change in control transaction is pending can be particularly important, since the loss of such executives could adversely affect the Company’s business or operations if the transaction is not completed.
Additionally, our Board believes that the retention of executives in the context of a change in control transaction would preserve the value of such transaction for our stockholders, as the prospect of losing valued executives in connection with a change in control could reduce the value of the Company to an acquirer and, consequently, reduce the amount current stockholders would realize in the transaction.
By assuring executives that they would realize the full value of their equity awards if their employment were terminated in connection with a change in control, the current acceleration provisions maintain the proper alignment of the interests of executives and stockholders.
Implementing the proposal would significantly limit Sysco’s ability to attract, retain and incentivize talented executives.
The Board believes that it is critical for the Company to offer compensation and benefits that are competitive in the marketplace for talent. Based on recent surveys and studies, a substantial majority of companies fully vest outstanding equity awards upon a termination following a change in control, including many of the companies with which we compete for executive talent. As a result, implementing the policy as outlined in the proposal would place us at a competitive disadvantage and significantly jeopardize the objective of our executive compensation program to attract, retain, reward and incentivize exceptional, talented executives who will lead the Company in the successful execution of its strategy, particularly if a change in control transaction were pending or contemplated.
The proponent of this proposal references companies that place limitations on accelerated vesting of unearned equity. The companies referenced are among the largest in the world by market capitalization. As it is very unlikely that any of them would undergo a change in control, executives and potential executives do not view equity acceleration provisions for these mega-capitalization companies in the same manner as they do for all other companies.
Implementing the proposal would impose undue restrictions on the ability of the Compensation Committee to structure executive compensation.
Our Board believes that the interests of our stockholders are best served by recognizing that the Compensation Committee, comprised of five independent, non-management directors, is in the best position to determine the terms of our executive compensation arrangements. The Board believes that the Compensation Committee should continue to retain the flexibility to design and administer competitive compensation programs that reflect market conditions. Permitting the Compensation Committee to accelerate vesting of equity awards in accordance with our “double trigger” provision can incentivize management to maximize stockholder value, further aligning the interests of management with our stockholders. Conversely, adopting the rigid policy advanced by the proponent would frustrate the purpose of the Compensation Committee and interfere with the objective of our compensation program.
Stockholders have demonstrated their support for our executive compensation program
Our executive compensation program is designed to link executive pay with the interests of our stockholders. Sysco has a robust shareholder engagement program and the Board incorporates shareholders feedback into it decision-making processes. During these conversations, shareholders have indicated their support for our executive compensation program. Furthermore, Sysco has consistently received strong support for our executive compensation program in the annual, advisory “say on pay” vote, with 91% approval at the 2015 annual meeting.
For the reasons described above, the Board unanimously recommends that you vote “AGAINST” this proposal, and, if the proposal is properly presented at the meeting, your proxy will be voted AGAINST the proposal unless you specify otherwise.
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Presenting BusinessBusiness/Nominating Directors for Election
Submitting Proposals under Rule 14a-8
If you would like to present a proposal under Rule 14a-8 of the Exchange Act at our 20142017 Annual Meeting of Stockholders, send the proposal in time for us to receive it no later than June 10, 2015.7, 2017. If the date of our 20152017 Annual Meeting is subsequently changed by more than 30 days from the date of this year’s Annual Meeting, we will inform you of the change and the date by which we must receive such proposals. If you want to present business at our 2015 Annual Meeting outside of the stockholder proposal rules of Rule 14a-8 of the Exchange Act and instead pursuant to Article I, Section 8 of the company’s Bylaws, the Corporate Secretary must receive notice of your proposal by August 21, 2015, but not before July 12, 2015, and you must be a stockholder of record on the date you provide notice of your proposal to the company and on the record date for determining stockholders entitled to notice of the meeting and to vote.
Nominating Directors for ElectionRecommending Director Nominees
The Corporate Governance and Nominating Committee will consider any director nominees you recommend in writing for the 20152017 Annual Meeting, if you submit such written recommendation in conformity with the procedural and informational requirements set forth above at “Board Ofof Directors Matters —Election— Election of Directors at 20142016 Annual Meeting (Item 1) – Nomination Process” no later than May 1, 2015. You may also nominate someone yourself at2017.
Submitting Proxy Access Director Nominees
If you wish to submit up to two director nominees for inclusion in the 2015proxy statement for our 2017 Annual Meeting as long aspursuant to Article I, Section 9 of the Company’s bylaws, the Corporate Secretary receivesmust receive your proxy access notice by August 18, 2017, but not before July 9, 2017. You must satisfy the applicable eligibility requirements of, such nomination between July 12, 2015 and August 21, 2015, andyour proxy access notice must include the information required by, the Company’s bylaws.
Other Proposals or Director Nominees
If you followwant to present any other business at our 2017 Annual Meeting, including nominating one or more individuals to serve as director outside of the procedures outlined inproxy access process pursuant to Article I, Section 7 of the company’s Bylaws.Company’s bylaws, the Corporate Secretary must receive notice of your proposed business pursuant to Article I, Section 8 of the Company’s bylaws, by August 18, 2017, but not before July 9, 2017, and you must be a stockholder of record on the date you provide notice of your proposal to the Company and on the record date for determining stockholders entitled to notice of the meeting and to vote.
If the date of next year’s Annual Meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the date of this year’s Annual Meeting, we will inform you of the change, and we must receive your director nominee notices or your stockholder proposals outside of Rule 14a-8 of the Exchange Act by the latest of 90 days before the Annual Meeting, 10 days after we mail the notice of the changed date of the Annual Meeting or 10 days after we publicly disclose the changed date of the Annual Meeting.
SYSCO CORPORATION -20142016 Proxy Statement 8284
ANNEX I – NON-GAAP RECONCILIATIONS
More information on the rationale for the use of these measures can be found in our Annual Report on Form 10-K. In the reconciliation tables below, “NM” indicates that the percentage change is not meaningful.
Adjusted Diluted Earnings per ShareSales Non-GAAP Reconciliation:
(in thousands, except for share and per share data) | 2014 | |||
Net earnings (GAAP)(1) | $ | 931,533 | ||
Impact of restructuring executive retirement plans | 2,102 | |||
Impact of MEPP charge | 916 | |||
Impact of severance charges | 4,546 | |||
Impact of US Foods merger and integration costs | 57,176 | |||
Impact of FY13 acquisition-related charge | — | |||
Impact of change in estimate of self insurance | 15,050 | |||
Impact of settlement liability | 18,156 | |||
Impact of facility closure charges | 2,173 | |||
Impact of US Foods financing costs | 4,286 | |||
ADJUSTED NET EARNINGS (NON-GAAP)(1) | $ | 1,035,938 | ||
Diluted earnings per share (GAAP)(1) | $ | 1.58 | ||
Impact of restructuring executive retirement plans | — | |||
Impact of MEPP charge | — | |||
Impact of severance charges | 0.01 | |||
Impact of US Foods merger and integration costs | 0.10 | |||
Impact of FY13 acquisition-related charge | — | |||
Impact of change in estimate of self insurance | 0.03 | |||
Impact of settlement liability | 0.03 | |||
Impact of facility closure charges | — | |||
Impact of US Foods financing costs | 0.01 | |||
ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP)(1) | $ | 1.76 | ||
Diluted shares outstanding | 590,216,220 |
Period Change | Period Change | |||||||||||||||
(in thousands) | 2016 | 2015 | ($) | (%) | ||||||||||||
Sales (GAAP) | $ | 50,366,919 | $ | 48,680,752 | $ | 1,686,167 | 3.5 | % | ||||||||
Less 1 week fourth quarter sales | (974,849 | ) | — | (974,849 | ) | NM | ||||||||||
Comparable Sales Using a 52 Week Basis (Non-GAAP) | $ | 49,392,070 | $ | 48,680,752 | $ | 711,318 | 1.5 | % |
Adjusted Operating Income Non-GAAP Reconciliation:
Period Change | Period Change | |||||||||||||||
(in thousands) | 2016 | 2015 | ($) | (%) | ||||||||||||
Operating income (GAAP) | $ | 1,850,500 | $ | 1,229,362 | $ | 621,138 | 50.5 | % | ||||||||
Impact of restructuring cost(1) | 123,134 | 7,801 | 115,333 | NM | ||||||||||||
Impact of acquisition-related costs(2) | 35,614 | 554,667 | (519,052 | ) | (93.6 | )% | ||||||||||
Subtotal - Operating Income Excluding Certain Items (Non-GAAP) | 2,009,248 | 1,791,830 | 217,419 | 12.1 | % | |||||||||||
Less 1 week fourth quarter operating income | (44,876 | ) | — | (44,876 | ) | NM | ||||||||||
Operating Income Adjusted for Certain Items and Extra Week (Non-GAAP) | $ | 1,964,372 | $ | 1,791,830 | $ | 172,543 | 9.6 | % |
(1) | |
(2) | Includes US Foods merger and integration planning and transaction costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition transaction costs (third and fourth quarters fiscal 2016 only). |
Adjusted Net Earnings Non-GAAP Reconciliation:
Period Change | Period Change | |||||||||||||||
(in thousands) | 2016 | 2015 | ($) | (%) | ||||||||||||
Net earnings (GAAP) | $ | 949,622 | $ | 686,773 | $ | 262,849 | 38.3 | % | ||||||||
Impact of restructuring cost(1) | 123,134 | 7,801 | 115,333 | NM | ||||||||||||
Impact of acquisition-related costs(2) | 35,614 | 554,667 | (519,053 | ) | (93.6 | )% | ||||||||||
Impact of acquisition financing costs(3) | 123,990 | 138,422 | (14,432 | ) | (10.4 | )% | ||||||||||
Impact of foreign currency remeasurement and hedging | 146,950 | — | 146,950 | NM | ||||||||||||
Tax impact of restructuring cost(4) | (47,333 | ) | (3,200 | ) | (44,133 | ) | NM | |||||||||
Tax impact of acquisition-related costs(4) | (13,690 | ) | (227,518 | ) | 213,828 | (94.0 | )% | |||||||||
Tax impact of acquisition financing costs(4) | (47,662 | ) | (56,779 | ) | 9,117 | (16.1 | )% | |||||||||
Tax impact of foreign currency remeasurement and hedging(4) | (56,488 | ) | — | (56,488 | ) | NM | ||||||||||
Subtotal - Earnings Excluding Certain Items (Non-GAAP) | 1,214,137 | 1,100,166 | 113,971 | 10.4 | % | |||||||||||
Less 1 week fourth quarter net earnings | (26,119 | ) | — | (26,119 | ) | NM | ||||||||||
Net Earnings Adjusted for Certain Items and Extra Week (Non-GAAP) | $ | 1,188,018 | $ | 1,100,166 | $ | 87,852 | 8.0 | % |
(1) | Includes severance charges, professional fees on 3-year financial objectives, facility closure costs and costs associated with our revised business technology strategy. |
(2) | Includes US Foods merger and integration planning and transaction costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition transaction costs (third and fourth quarters fiscal 2016 only). |
(3) | Includes US Foods financing costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition financing costs (third and fourth quarter fiscal 2016 only). |
(4) | The |
Free Cash Flow Non-GAAP Reconciliation:
(In thousands) | 2014 | |||
Net cash provided by operating activities (GAAP) | $ | 1,492,815 | ||
Additions to plant and equipment | (523,206 | ) | ||
Proceeds from sales of plant and equipment | 25,790 | |||
Free Cash Flow (Non-GAAP) | $ | 995,399 |
Fiscal 2014 | ||||
change from | ||||
Decrease in Cost per Case: | Fiscal 2013 | |||
(Decrease) in cost per case | $ | (0.10 | ) | |
Impact of Certain Items(1) | 0.04 | |||
(Decrease) in adjusted cost per case (Non-GAAP basis) | $ | (0.06 | ) |
SYSCO CORPORATION- 20142016 Proxy Statement 8385
Adjusted Diluted Earnings Per Share Non-GAAP reconciliationReconciliation:
Period Change | Period Change | |||||||||||||||
(in thousands, except for share and per share data) | 2016 | 2015 | ($) | (%) | ||||||||||||
Diluted earnings per share (GAAP) | $ | 1.64 | $ | 1.15 | $ | 0.49 | 42.6 | % | ||||||||
Impact of restructuring cost(1) | 0.21 | — | 0.21 | NM | ||||||||||||
Impact of facility closure charges | 1.26 | — | 1.26 | NM | ||||||||||||
Impact of acquisition-related costs(2) | 0.06 | 0.93 | (0.87 | ) | (93.5 | )% | ||||||||||
Impact of acquisition financing costs(3) | 0.21 | 0.24 | (0.03 | ) | (12.5 | )% | ||||||||||
Impact of foreign currency remeasurement and hedging | 0.25 | — | 0.25 | NM | ||||||||||||
Tax impact of restructuring cost(4) | (0.08 | ) | — | (0.08 | ) | NM | ||||||||||
Tax impact of acquisition-related costs(4) | (0.02 | ) | (0.38 | ) | 0.36 | (94.7 | )% | |||||||||
Tax impact of acquisition financing costs(4) | (0.08 | ) | (0.10 | ) | 0.02 | (20.0 | )% | |||||||||
Tax impact of foreign currency remeasurement and hedging(4) | (0.10 | ) | — | (0.10 | ) | NM | ||||||||||
Diluted EPS Excluding Certain Items (Non-GAAP) | 2.10 | 1.84 | 0.26 | 14.1 | % | |||||||||||
Less 1 week impact of fourth quarter diluted earnings per share | (0.05 | ) | — | (0.05 | ) | NM | ||||||||||
Diluted EPS Adjusted for Certain Items and Extra Week (Non-GAAP)(5) | 2.06 | 1.84 | 0.22 | 12.0 | % | |||||||||||
Diluted shares outstanding | 577,391,406 | 596,849,034 | — | — |
(1) | (Includes severance charges, professional fees on 3-year financial objectives, facility closure costs and costs associated with our revised business technology strategy. |
(2) | Includes US Foods merger and integration planning and transaction costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition transaction costs (third and fourth quarters fiscal 2016 only). |
(3) | Includes US Foods financing costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition financing costs (third and fourth quarter fiscal 2016 only). |
(4) | The tax impact of adjustments for Certain Items is calculated based on jurisdictions by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction. As a result, the effective tax rate for each Certain Item may differ based on the jurisdiction where the Certain Item was incurred. |
(5) | Individual components of diluted earnings per share may not add to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding. |
Non-GAAP Reconciliation for adjusted sales growth usedAdjusted Sales Growth and Gross Profit Growth Used in management incentive bonus measurement:Management Incentive Plan Measurement:
Sysco’s management incentive bonus plan requires adjustments to sales and gross profit growth metrics to exclude the removalimpact of salesresults from acquired companies where the purchase price exceeds $100 million for fiscal 2014extra week and $40 million for fiscal 2013. No acquisitions exceededto remove the threshold applicableimpact of changes in fiscal 2014. Three acquisitions exceeded the threshold applicable in fiscal 2013.foreign exchange rates. As a result, in the non-GAAP reconciliation below for fiscal 2013,2016, sales and gross profits have been adjusted to remove the sales achieved by these acquired companies in fiscal 2013.adjustments. The resulting adjusted sales increase, excludingand adjusted gross profit increases were used in the measurement of the results of the management incentive bonus plan.
(In thousands) | 2016 | 2015 | ||||||
Sales (GAAP) | $ | 50,366,919 | $ | 48,680,752 | ||||
Impact of extra week | (974,849 | ) | ||||||
Impact of changes in foreign exchange rates | 614,159 | |||||||
Adjusted Sales (Non-GAAP) | $ | 50,006,229 | $ | 48,680,752 | ||||
Sales growth (GAAP) | 3.5 | % | ||||||
Sales growth (Non-GAAP) | 2.7 | % | ||||||
(In thousands) | 2016 | 2015 | ||||||
Gross profit (GAAP) | $ | 9,040,472 | $ | 8,551,516 | ||||
Impact of extra week | (178,774 | ) | ||||||
Impact of changes in foreign exchange rates | 104,519 | |||||||
Adjusted Gross Profit (Non-GAAP) | $ | 8,966,217 | $ | 8,551,516 | ||||
Gross profit growth (GAAP) | 5.7 | % | ||||||
Gross profit growth (Non-GAAP) | 4.8 | % |
SYSCO CORPORATION - 2016 Proxy Statement86
Non-GAAP Reconciliation for Adjusted Operating Income Used in Management Incentive Plan Measurement:
Sysco’s management incentive bonus plan requires adjustments to the operating income growth metric to exclude Certain items, the impact of results from the extra week and to remove the impact of changes in foreign exchange rates. As a result, in the non-GAAP reconciliation below for fiscal 2016, operating income has been adjusted to remove these acquired companies,adjustments. The resulting adjusted operating income increase was used in the measurement of the results of the management incentive bonus plan.
(In thousands) | 2013 | 2012 | ||||||
Sales (GAAP) | $ | 44,411,233 | $ | 42,380,939 | ||||
Sales of acquired company | 173,791 | — | ||||||
ADJUSTED SALES (NON-GAAP) | $ | 44,237,442 | $ | 42,380,939 | ||||
Sales growth (GAAP) | 4.79 | % | ||||||
Sales growth (Non-GAAP) | 4.38 | % |
Non-GAAP reconciliation for adjusted return on invested capital used in management incentive bonus measurement:
Sysco’s management incentive bonus plan requires the removal of earnings and related debt incurred from acquired companies where the purchase price exceeds $100 million. No acquisitions exceeded this threshold in fiscal 2014. The calculation of the adjusted results also requires the exclusion of withdrawals by Sysco operating companies from multi-employer pension plans and restructuring charges, including but not limited to those relating to severance, facility closures and consolidations and asset write downs. As a result, in the non-GAAP reconciliation below for fiscal 2014, adjusted total invested capital is computed as the sum of (i) adjusted stockholder’s equity, computed as the average of adjusted stockholders’ equity at the beginning of the year and at the end of each fiscal quarter during the year; and (ii) adjusted long-term debt, computed as the average of the adjusted long-term debt at the beginning of the year and at the end of each fiscal quarter during the year.
(In thousands) | 2014 | |||
Net earnings (GAAP)(1) | $ | 931,533 | ||
Impact of restructuring executive retirement plans | 2,102 | |||
Impact of MEPP charge | 916 | |||
Impact of severance charges | 4,546 | |||
Impact of US Foods merger and integration costs | 57,176 | |||
Impact of FY13 acquisition-related charge | — | |||
Impact of change in estimate of self insurance | 15,050 | |||
Impact of settlement liability | 18,156 | |||
Impact of facility closure charges | 2,173 | |||
Impact of US Foods financing costs | 4,286 | |||
ADJUSTED NET EARNINGS (NON-GAAP)(1) | $ | 1,035,938 | ||
Invested Capital (GAAP) | $ | 8,247,977 | ||
Adjustments to invested capital | 89,571 | |||
ADJUSTED INVESTED CAPITAL (GAAP) | $ | 8,337,547 | ||
Return on investment capital (GAAP) | 11.3 | % | ||
Return on investment capital (Non-GAAP) | 12.4 | % |
(In thousands) | 2016 | |||
Operating income (GAAP) | $ | 1,850,500 | ||
Impact of restructuring cost(1) | 123,134 | |||
Impact of acquisition-related costs(2) | 35,614 | |||
Less 1 week fourth quarter operating income | (44,876 | ) | ||
Impact of changes in foreign exchange rates | 17,605 | |||
Adjusted Operating Income (Non-GAAP) | $ | 1,981,977 |
(1) | |
(2) | Includes US Foods merger |
SYSCO CORPORATION - 20142016 Proxy Statement 84
Non-GAAP reconciliations for adjusted sales and earnings per share growth used in cash performance units measurement:
Sysco’s fiscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year for fiscal 2013, fiscal 2012, fiscal 2011 and a 53-week year for fiscal 2010. Because the fourth quarter of fiscal 2010 contained an additional week as compared to fiscal 2011, our results of operations for fiscal 2010 are not directly comparable to fiscal 2011. Management’s cash performance unit plan requires an adjustment to fiscal 2010 sales and diluted earnings per share for the estimated impact of the additional week which management believes provides a more comparable measurement of sales and diluted earnings per share on a year-over-year basis. As a result, in the non-GAAP reconciliations below for fiscal 2010, sales and diluted earnings per share have been adjusted by one-fourteenth of the total metric for the fourth quarter of fiscal 2010 and the resulting sales and earnings per share increase on a 52-week basis were used in the measurement of the results of the cash performance units.
(In thousands) | 2013 | 2012 | 2011 | 2010 | ||||||||||||
Sales (GAAP) | $ | 44,411,233 | $ | 42,380,939 | $ | 39,323,489 | $ | 37,243,495 | ||||||||
Impact of 53rdweek | — | — | — | 739,177 | ||||||||||||
ADJUSTED SALES (NON-GAAP) | $ | 44,411,233 | $ | 42,380,939 | $ | 39,323,489 | $ | 36,504,318 | ||||||||
Sales growth (GAAP) | 4.8 | % | 7.8 | % | 5.6 | % | ||||||||||
Sales growth (Non-GAAP) | 4.8 | % | 7.8 | % | 7.7 | % | ||||||||||
Cash performance unit measurement: Three year average sales growth (Non-GAAP) | 6.76 | % |
2013 | 2012 | 2011 | 2010 (53 Weeks) | |||||||||||||
Diluted earnings per share (GAAP) | $ | 1.67 | $ | 1.90 | $ | 1.96 | $ | 1.99 | ||||||||
Impact of 53rdweek | — | — | — | 0.04 | ||||||||||||
ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP) | $ | 1.67 | $ | 1.90 | $ | 1.96 | $ | 1.95 | ||||||||
Diluted earnings per share (GAAP) | -12.1 | % | -3.1 | % | -1.5 | % | ||||||||||
Diluted earnings per share (Non-GAAP) | -12.1 | % | -3.1 | % | 0.5 | % | ||||||||||
Cash performance unit measurement: Three year average diluted earnings per share growth (Non-GAAP) | -4.88 | % |
SYSCO CORPORATION- 2014 Proxy Statement 85
ANNEX II – EMPLOYEE STOCK PURCHASE PLAN
SYSCO CORPORATION 2015 EMPLOYEE STOCK PURCHASE PLAN
SYSCO CORPORATION- 2014 Proxy Statement 86
SYSCO CORPORATION-2014 Proxy Statement87
Participants in each separate Offering Period conducted for one or more Participating Subsidiaries in the United States shall have equal rights and privileges under that offering in accordance with the requirements of Section 423(b)(5) of the Code and the applicable Treasury Regulations thereunder.
SYSCO CORPORATION - 2014 Proxy Statement 88
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APPENDIX A – LIST OF PARTICIPATING SUBSIDIARIES
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SYSCO CORPORATION - 2014 Proxy Statement 91
Food isn’t the only thing that comes off the back of a Sysco truck.
We deliver ingredients for success.
At Sysco, we offer our customers more good things than they expect. We go beyond our basic commitment to get customers the foodservice products they want, when they want them, at the right price and as promised. We do more because we know that when our customers are successful, we’re successful.
Explore Sysco
Scan these QR codes with a smart device or use the URLs to learn more about Sysco:
The Sysco Story
Our story began with a promise to assist foodservice operators in providing consumers with solutions for meals consumed away from home. Since the initial public offering in 1970, when sales were $115 million, Sysco has grown to $45.6 billion in sales for fiscal year 2014.
Today, Sysco has sales and service relationships with approximately 425,000 customers and remains committed to helping them succeed in the foodservice industry and satisfy consumers’ appetites. Operating from more than 190 locations throughout the United States, Canada, the Bahamas, Ireland and Puerto Rico, Sysco’s product lines are as diverse as the more than 50,000 employees who support its daily operations. They include not only the ingredients needed to prepare meals, but also numerous ancillary preparation and serving items. As a result, Sysco can make a difference in its customers’ lives and the success of their businesses.
1390 Enclave Parkway
Houston, Texas 77077-2099
281.584.1390
www.sysco.com