def14a
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant ý
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Under Rule 14a-12 |
KELLOGG COMPANY
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 |
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing. |
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KELLOGG
COMPANY, BATTLE CREEK, MICHIGAN
49017-3534
Dear Shareowner:
It is my pleasure to invite you to attend the 2008 Annual
Meeting of Shareowners of Kellogg Company. The meeting will be
held at 1:00 p.m. Eastern Daylight Time on
April 25, 2008 at the W. K. Kellogg Auditorium,
50 West Van Buren Street, Battle Creek, Michigan.
The following pages contain the formal Notice of the Annual
Meeting and the Proxy Statement. Please review this material for
information concerning the business to be conducted at the
meeting and the nominees for election as Directors. Attendance
at the annual meeting will be limited to Shareowners only. If
you are a holder of record of Kellogg common stock and you plan
to attend the meeting, please detach the admission ticket
attached to your proxy card and bring it to the meeting.
If you plan to attend the meeting, but your shares are not
registered in your own name or you receive our proxy materials
electronically, please request an admission ticket by writing to
the following address: Kellogg Company Shareowner Services, One
Kellogg Square, Battle Creek, MI
49017-3534.
Evidence of your stock ownership, which you may obtain from your
bank, stockbroker, etc., must accompany your letter.
Shareowners without tickets will only be admitted to the
meeting upon verification of stock ownership.
Shareowners needing special assistance at the meeting are
requested to contact Shareowner Services at the address listed
above.
Your vote is important. Whether you plan to attend the meeting
or not, I urge you to vote your shares as soon as possible.
Please either sign and return the accompanying card in the
postage-paid envelope or instruct us by telephone or via the
Internet as to how you would like your shares voted. This will
ensure representation of your shares if you are unable to
attend. Instructions on how to vote your shares by telephone or
via the Internet are on the proxy card or voting instruction
card.
Sincerely,
David Mackay
President and Chief Executive Officer
March 3, 2008
ELECTRONIC VOTING:
You may now vote your shares by telephone or over the Internet.
Voting electronically is quick, easy, and saves us money.
Just follow the instructions on your proxy card or voting
instruction card.
ELECTRONIC DELIVERY:
Reduce paper mailed to your home and help lower our printing and
postage costs!
We are pleased to offer the convenience of viewing proxy
statements, Annual Reports to Shareowners, and related materials
on-line. With your consent, we will stop sending paper copies of
these documents unless you notify us otherwise.
To participate, follow the easy directions below.
You will receive notification when the materials are available
for review.
ACT NOW. . . . ITS FAST AND
EASY
Just follow these 2 easy steps:
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Log on to the Internet at
www.icsdelivery.com/kelloggs.
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Follow the instructions on the website.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL MEETING OF SHAREOWNERS TO BE HELD ON
APRIL 25, 2008:
This proxy statement and the accompanying annual report are
available at: http://investor.kelloggs.com/
Among other things, this proxy statement contains information
regarding:
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the date, time and location of the meeting;
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a list of the matters being submitted to the
Shareowners; and
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information concerning voting in person at the meeting.
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KELLOGG
COMPANY
One Kellogg Square
Battle Creek, Michigan
49017-3534
NOTICE
OF THE ANNUAL MEETING OF SHAREOWNERS
TO
BE HELD APRIL 25, 2008
TO OUR
SHAREOWNERS:
The 2008 Annual Meeting of Shareowners of Kellogg Company, a
Delaware corporation, will be held at
1:00 p.m. Eastern Daylight Time on April 25, 2008
at the W. K. Kellogg Auditorium, 50 West Van Buren Street,
Battle Creek, Michigan, for the following purposes:
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1.
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To elect three Directors for a three-year term to expire at the
2011 Annual Meeting of Shareowners;
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2.
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To ratify the Audit Committees appointment of
PricewaterhouseCoopers LLP for our 2008 fiscal year;
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3.
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To consider and act upon a Shareowner proposal to enact a
majority voting requirement, if properly presented at the
meeting; and
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4.
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To take action upon any other matters that may properly come
before the meeting, or any adjournments thereof.
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Only Shareowners of record at the close of business on
March 4, 2008 will receive notice of and be entitled to
vote at the meeting or any adjournments. We look forward to
seeing you there.
By Order of the Board of Directors,
Gary Pilnick
Senior Vice President,
General Counsel, Corporate Development and Secretary
March 3, 2008
TABLE OF
CONTENTS
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KELLOGG
COMPANY
ONE KELLOGG SQUARE
BATTLE CREEK, MICHIGAN
49017-3534
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREOWNERS
TO BE HELD ON FRIDAY, APRIL 25, 2008
ABOUT THE
MEETING
Solicitation of Proxy. This
proxy statement and the accompanying proxy are furnished to
Shareowners of Kellogg Company in connection with the
solicitation of proxies for use at the 2008 Annual Meeting of
Shareowners of Kellogg to be held at 1:00 p.m. Eastern
Daylight Time at the W. K. Kellogg Auditorium, 50 West Van
Buren Street, in Battle Creek, Michigan, on Friday,
April 25, 2008, or any adjournments thereof.
The
enclosed proxy card is solicited by our Board of Directors,
which we refer to as the Board.
Mailing Date. Our Annual
Report for 2007, including financial statements, the Notice of
the Annual Meeting, this proxy statement, and the proxy, were
first mailed to Shareowners on or about March 11, 2008.
Who Can Vote Record
Date. The record date for determining
Shareowners entitled to vote at the annual meeting is
March 4, 2008. Each of the approximately
383,469,359 shares of Kellogg common stock issued and
outstanding on that date is entitled to one vote at the annual
meeting.
How to Vote Proxy
Instructions. If you are a holder of record
of Kellogg Company common stock, you may vote your shares either
(1) by attending the meeting and voting in person,
(2) over the telephone by calling a toll-free number,
(3) by using the Internet or (4) by mailing in your
proxy card. Shareowners who hold their shares in street
name will need to obtain a voting instruction card from
the institution that holds their shares and must follow the
voting instructions given by that institution.
The telephone and Internet voting procedures have been set up
for your convenience and have been designed to authenticate your
identity, to allow you to give voting instructions, and to
confirm that those instructions have been recorded properly. If
you would like to vote by telephone or by using the Internet,
please refer to the specific instructions on the proxy card. The
deadline for voting by telephone or via the Internet is
11:59 p.m. Eastern Daylight Time on Thursday,
April 24, 2008. If you wish to vote using the proxy card,
complete, sign, and date your proxy card and return it to us
before the meeting.
Whether you choose to vote by telephone, over the Internet or by
mail, you may specify whether your shares should be voted for
all, some or none of the nominees for Director
(Proposal 1); whether you approve, disapprove or abstain
from voting on the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public
accounting firm for fiscal year 2008 (Proposal 2); and
whether you approve, disapprove or abstain from voting on the
Shareowner proposal to enact a majority voting standard
requirement, which may be presented at the meeting
(Proposal 3).
When a properly executed proxy is received, the shares
represented thereby, including shares held under our Dividend
Reinvestment Plan, will be voted by the persons named as the
proxy according to each Shareowners directions. Proxies
will also be considered to be voting instructions to the
applicable Trustee with respect to shares held in accounts under
our Savings & Investment Plans.
If you do not specify how you want to vote your shares on
your proxy card or voting instruction card, or voting by
telephone or over the Internet, we will vote them
For the election of all nominees for Director as set
forth under Proposal 1 Election of
Directors below, For Proposal 2 and
Against Proposal 3, and otherwise at the
discretion of the persons named in the proxy card.
Revocation of Proxies. If
you are a holder of record, you may revoke your proxy at any
time before it is exercised in any of three ways:
(1) by submitting written notice of revocation to our
Secretary;
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(2)
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by submitting another proxy by telephone, via the Internet or by
mail that is later dated and, if by mail, that is properly
signed; or
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(3) by voting in person at the meeting.
If your shares are held in street name, you must contact your
broker or nominee to revoke and vote your proxy.
Quorum. A quorum of
Shareowners is necessary to hold a valid meeting. A quorum will
exist if the holders representing a majority of the votes
entitled to be cast by the Shareowners at the annual meeting are
present, in person or by proxy. Broker non-votes and
abstentions are counted as present at the annual meeting for
purposes of determining whether a quorum exists. A broker
non-vote occurs when a nominee, such as a bank or
broker, holding shares for a beneficial owner, does not vote on
a particular proposal because the nominee does not have
discretionary voting power for that particular item and has not
received instructions from the beneficial owner. Under current
New York Stock Exchange rules, nominees would have discretionary
voting power for the election of Directors
(Proposal 1) and for ratification of
PricewaterhouseCoopers LLP (Proposal 2), but not for the
Shareowner proposal (Proposal 3).
Required Vote. Our Board has
adopted a majority voting policy which applies to the election
of Directors. Under this policy, any nominee for Director who
receives a greater number of votes withheld from his
or her election than votes for such election is
required to offer his or her resignation following certification
of the Shareowner vote. Our Boards Nominating and
Governance Committee would then consider the offer of
resignation and make a recommendation to our independent
Directors as to the action to be taken with respect to the
offer. This policy does not apply in contested elections. For
more information about this policy, see Corporate
Governance Majority Voting for Directors; Director
Resignation Policy.
Under Delaware law, a nominee who receives a plurality of the
votes cast at the annual meeting will be elected as a Director
(subject to the resignation policy described above). The
plurality standard means the nominees who receive
the largest number of for votes cast are elected as
Directors. Thus, the number of shares not voted for the election
of a nominee (and the number of withhold votes cast
with respect to that nominee) will not affect the determination
of whether that nominee has received the necessary votes for
election under Delaware law. However, the number of
withhold votes with respect to a nominee will affect
whether or not our Director resignation policy will apply to
that individual. If any nominee is unable or declines to serve,
proxies will be voted for the balance of those named and for
such person as shall be designated by the Board to replace any
such nominee. However, the Board does not anticipate that this
will occur.
The affirmative vote of the holders representing a majority of
the shares present and entitled to vote at the annual meeting is
necessary to ratify the appointment of PricewaterhouseCoopers
LLP as our independent registered public accounting firm
(Proposal 2) and to approve the Shareowner proposal
(Proposal 3). Shares present but not voted because of
abstention will have the effect of a no vote on
Proposals 2 and 3. If you do not provide your broker or
other nominee with instructions on how to vote your street
name shares, your broker or nominee will not be permitted
to vote them on non-routine matters (a broker
non-vote) such as Proposal 3. Shares subject to
a broker non-vote will not be considered as present
with respect to Proposal 3 and will not affect the outcome
on that proposal.
Other Business. We do not
intend to bring any business before the meeting other than that
set forth in the Notice of the Annual Meeting and described in
this proxy statement. However, if any other business should
properly come before the meeting, the persons named in the proxy
card intend to vote in accordance with their best judgment on
such business and on any matters dealing with the conduct of the
meeting pursuant to the discretionary authority granted in the
proxy.
Costs. We pay for the
preparation and mailing of the Notice of the Annual Meeting and
proxy statement. We have also made arrangements with brokerage
firms and other custodians, nominees, and fiduciaries for
forwarding proxy-soliciting materials to the beneficial owners
of the Kellogg common stock at our expense. In addition, we have
retained Georgeson Inc. to aid in the solicitation of proxies by
mail, telephone, facsimile,
e-mail and
personal solicitation. For these services, we will pay Georgeson
a fee of $12,500, plus reasonable expenses.
Directions to Annual
Meeting. To obtain directions to attend the
annual meeting and vote in person, please contact Investor
Relations at
(269) 961-2800
or at investor.relations@kellogg.com.
2
SECURITY
OWNERSHIP
Five
Percent Holders. The following table
shows each person who, based upon their most recent filings or
correspondence with the SEC beneficially owns more than 5% of
our common stock.
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Percent of Class on
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Beneficial Owner
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Shares Beneficially
Owned
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December 29, 2007
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W. K. Kellogg Foundation Trust(1)
c/o The
Bank of New York Mellon Corporation
One Wall Street
New York, NY 10286
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95,596,986 shares(2
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24.5
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%
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George Gund III
39 Mesa Street
San Francisco, CA 94129
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33,477,992 shares(3
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8.6
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%
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KeyCorp
127 Public Square
Cleveland, OH
44114-1306
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30,752,212 shares(4
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7.9
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%
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Capital Research Global Investors
333 South Hope Street
Los Angeles, CA 90071
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24,597,800 shares(5
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6.3
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%
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The trustees of the W. K. Kellogg Foundation Trust (the
Kellogg Trust) are Jim Jenness, Sterling Speirn,
Shirley Bowser and The Bank of New York. The W. K. Kellogg
Foundation, a Michigan charitable corporation (the Kellogg
Foundation), is the sole beneficiary of the Kellogg Trust.
The Kellogg Trust owns 91,858,390 shares of Kellogg
Company, or 23.6% of our outstanding shares on December 29,
2007. Under the agreement governing the Kellogg Trust (the
Agreement), at least one trustee of the Kellogg
Trust must be a member of the Kellogg Foundations Board,
and one member of our Board must be a trustee of the Kellogg
Trust. The Agreement provides if a majority of the trustees of
the Kellogg Trust (which majority must include the corporate
trustee) cannot agree on how to vote the Kellogg stock, the
Kellogg Foundation has the power to direct the voting of such
stock. With certain limitations, the Agreement also provides
that the Kellogg Foundation has the power to approve successor
trustees, and to remove any trustee of the Kellogg Trust. |
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According to Schedule 13G/A filed with the SEC on
February 13, 2008, The Bank of New York Mellon Corporation
(BONYMC), as parent holding company for The Bank of
New York, and The Bank of New York (BONY), as
trustee of the Kellogg Trust, shares voting and investment power
with the other three trustees with respect to the
91,858,390 shares owned by the Kellogg Trust. The remaining
shares not owned by the Kellogg Trust that are disclosed in the
table above represent shares beneficially owned by BONYMC, BONY
and the other trustees unrelated to the Kellogg Trust. BONYMC
has sole voting power for 1,710,583 shares, shared voting
power for 91,999,407 shares (including those shares
beneficially owned by the Kellogg Trust), sole investment power
for 2,143,717 shares and shared investment power for
92,022,433 shares (including those shares beneficially
owned by the Kellogg Trust). |
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According to Schedule 13G/A filed with the SEC on
February 13, 2008, George Gund III has sole voting
power for 161,950 shares, shared voting power for
33,316,042 shares, sole investment power for
161,950 shares and shared investment power for
5,993,788 shares. Of the shares over which Mr. Gund
has shared voting and investment power, 2,691,096 shares
are held by a nonprofit foundation of which Mr. Gund is one
of eight trustees and one of twelve members. Mr. Gund
disclaims beneficial ownership as to all of these shares. Gordon
Gund, a Kellogg Director, is a brother of George Gund III
and may be deemed to share voting or investment power over the
shares shown as beneficially owned by George Gund III, as to
which shares Gordon Gund disclaims beneficial ownership. |
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According to a Schedule 13G/A filed with the SEC on
February 8, 2008, KeyCorp, as trustee for certain Gund
family trusts included under (3) above, as well as other
trusts, has sole voting power for 3,421,308 shares, shared
voting power for 5,650 shares, sole investment power for
30,478,201 shares and shared investment power for
261,471 shares. |
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According to Schedule 13G filed with the SEC on
February 12, 2008, Capital Research Global Investors has
sole voting power for 15,048,300 shares and sole investment
power for 24,597,800 shares. |
3
Officer and Director Stock
Ownership. The following table shows the
number of shares of Kellogg common stock beneficially owned as
of January 15, 2008, by each Director, each executive
officer named in the Summary Compensation Table and all
Directors and executive officers as a group.
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Deferred Stock
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Total Beneficial
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Name
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Shares(1)
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Options(2)
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Units(3)
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Ownership(4)
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Percentage
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Directors
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Benjamin Carson
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19,160
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40,000
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0
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59,160
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*
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John Dillon(5)
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19,581
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38,750
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0
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58,331
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*
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Claudio Gonzalez
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33,244
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34,999
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22,831
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91,074
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*
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Gordon Gund(6)
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50,479
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30,548
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50,828
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131,855
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*
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Jim Jenness(7)
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79,472
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897,043
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11,319
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987,834
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*
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Dorothy Johnson
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33,942
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34,715
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17,561
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86,218
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*
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Don Knauss(8)
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811
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0
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0
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811
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*
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Ann McLaughlin Korologos
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28,098
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40,000
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16,208
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84,306
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*
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Sterling Speirn(7)(9)
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2,407
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781
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0
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3,188
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*
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Robert Steele(10)
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1,746
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4,110
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0
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5,856
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*
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John Zabriskie
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28,650
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36,800
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20,323
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85,773
|
|
|
|
*
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Mackay
|
|
|
273,710
|
|
|
|
1,340,703
|
|
|
|
0
|
|
|
|
1,614,413
|
|
|
|
*
|
|
John Bryant
|
|
|
128,012
|
|
|
|
597,801
|
|
|
|
0
|
|
|
|
725,813
|
|
|
|
*
|
|
Jeff Montie
|
|
|
124,219
|
|
|
|
409,004
|
|
|
|
0
|
|
|
|
533,223
|
|
|
|
*
|
|
Tim Mobsby
|
|
|
100,543
|
|
|
|
349,226
|
|
|
|
0
|
|
|
|
449,769
|
|
|
|
*
|
|
Paul Norman
|
|
|
34,497
|
|
|
|
204,135
|
|
|
|
0
|
|
|
|
238,632
|
|
|
|
*
|
|
Brad Davidson
|
|
|
30,496
|
|
|
|
154,139
|
|
|
|
0
|
|
|
|
184,635
|
|
|
|
*
|
|
All Directors and executive officers as a group
(23 persons)(11)
|
|
|
1,248,262
|
|
|
|
5,196,651
|
|
|
|
139,070
|
|
|
|
6,583,983
|
|
|
|
1.7
|
%
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
Represents the number of shares beneficially owned, excluding
shares which may be acquired through exercise of stock options
and units held under our deferred compensation plans. Includes
the following number of shares held in Kelloggs Grantor
Trust for Non-Employee Directors which are subject to
restrictions on investment: Dr. Carson, 17,860 shares;
Mr. Dillon, 15,331 shares; Mr. Gonzalez,
24,737 shares; Mr. Gund, 24,627 shares;
Mr. Jenness, 9,614 shares; Ms. Johnson,
16,875 shares; Mr. Knauss, 811 shares;
Ms. McLaughlin Korologos, 24,391 shares;
Mr. Speirn, 2,407 shares; Mr. Steele,
1,746 shares; Dr. Zabriskie, 21,450 shares; and
all Directors as a group, 159,849 shares. |
|
(2) |
|
Represents shares which may be acquired through exercise of
stock options as of January 15, 2008 or within 60 days
after that date. |
|
(3) |
|
Represents the number of common stock units held under our
deferred compensation plans as of January 15, 2008. The
deferred stock units, or DSUs, have no voting rights. For
additional information, refer to 2007 Director
Compensation and Benefits Elective Deferral
Program and Compensation Discussion and
Analysis Elements of Our Compensation
Program Base Salaries for a description of
these plans. |
|
(4) |
|
None of the shares listed have been pledged as collateral. |
|
(5) |
|
Includes 250 shares held for the benefit of a minor son,
over which Mr. Dillon disclaims beneficial ownership. |
|
(6) |
|
Includes 10,000 shares owned by Mr. Gunds wife.
Gordon Gund disclaims beneficial ownership of the shares
beneficially owned by his wife and George Gund III. |
|
(7) |
|
Does not include shares owned by the Kellogg Trust, as to which
Mr. Jenness and Mr. Speirn, as trustees of the Kellogg
Trust as of the date of this table, share voting and investment
power, or shares as to which the Kellogg Trust |
4
|
|
|
|
|
or the Kellogg Foundation have current beneficial interest. On
January 31, 2007, Mr. Speirn assumed the position of
trustee of the Kellogg Trust. |
|
(8) |
|
Mr. Knauss was elected to the Board effective
December 6, 2007. |
|
(9) |
|
Mr. Speirn was elected to the Board effective March 1,
2007. |
|
(10) |
|
Mr. Steele was elected to the Board effective July 1,
2007. |
|
(11) |
|
Includes 12,500 shares owned by, or held for the benefit
of, spouses; 1,194 shares owned by, or held for the benefit
of, children, over which the applicable Director, or executive
officer disclaims beneficial ownership; 22,564 shares held
in our Savings & Investment Plans; and 317,276
restricted shares, which contain some restrictions on investment. |
Section 16(a) Beneficial Ownership
Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 requires our Directors,
executive officers, and greater-than-10% Shareowners to file
reports with the SEC. SEC regulations require us to identify
anyone who filed a required report late during the most recent
fiscal year. Based on our review of these reports and written
certifications provided to us, we believe that the filing
requirements for all of these reporting persons were complied
with, except that one Form 4 for each of Alan Andrews,
Donna Banks, John Bryant, Celeste Clark, David Mackay, Jeff
Montie, Gary Pilnick and Kathleen Wilson-Thompson was
inadvertently filed late by Kellogg. A Form 4 was filed in
March 2007 for each of these executive officers reporting this
transaction.
5
CORPORATE
GOVERNANCE
Board-Adopted Corporate Governance
Guidelines. We operate under corporate
governance principles and practices that are designed to
maximize long-term Shareowner value, align the interests of the
Board and management with those of our Shareowners and promote
high ethical conduct among our Directors and employees. The
Board has focused on continuing to build upon our strong
corporate governance practices over the years. The Boards
current corporate governance guidelines include the following:
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A majority of the Directors, and all of the members of the
Audit, Compensation, and Nominating and Governance Committees,
are required to meet the independence requirements of the New
York Stock Exchange.
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|
One of the Directors is designated a Lead Director, who approves
proposed meeting agendas and schedules, may call executive
sessions of the non-employee Directors and establishes a method
for Shareowners and other interested parties to use in
communicating with the Board.
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|
|
The Board reviews succession planning at least once per year.
|
|
|
|
The Board and each Board committee have the power to hire
independent legal, financial or other advisors as they may deem
necessary, at our expense.
|
|
|
|
Non-employee Directors meet in executive session at least three
times annually.
|
|
|
|
The Board and Board committees conduct annual self-evaluations.
|
|
|
|
The independent members of the Board use the recommendations
from the Nominating and Governance Committee and Compensation
Committee to conduct an annual review of the CEOs
performance and determine the CEOs compensation.
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|
Non-employee Directors who change their principal responsibility
or occupation from that held when they were elected shall offer
his or her resignation for the Board to consider continued
appropriateness of Board membership under the circumstances.
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|
Directors have free access to Kellogg officers and employees.
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|
Continuing education is provided to Directors consistent with
our Board Education Policy.
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|
No Director may be nominated for a new term if he or she would
be seventy-two or older at the time of election.
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|
No Director shall serve as a Director, officer or employee of a
competitor.
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|
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|
All Directors are expected to comply with stock ownership
guidelines for Directors, under which they are generally
expected to hold at least five times their annual cash retainer
in stock and stock equivalents.
|
Majority Voting for Directors; Director
Resignation Policy. In an uncontested
election of Directors (that is, an election where the number of
nominees is equal to the number of seats open) any nominee for
Director who receives a greater number of votes
withheld from his or her election than votes
for such election shall promptly tender his or her
resignation to the Nominating and Governance Committee
(following certification of the Shareowner vote) for
consideration in accordance with the following procedures.
The Nominating and Governance Committee would promptly consider
such resignation and recommend to the Qualified Independent
Directors (as defined below) the action to be taken with respect
to such offered resignation, which may include
(1) accepting the resignation; (2) maintaining the
Director but addressing what the Qualified Independent Directors
believe to be the underlying cause of the withheld votes;
(3) determining that the Director will not be renominated
in the future for election; or (4) rejecting the
resignation. The Nominating and Governance Committee would
consider all relevant factors including, without limitation,
(a) the stated reasons why votes were withheld from such
Director; (b) any alternatives for curing the underlying
cause of the withheld votes; (c) the tenure and
qualifications of the Director; (d) the Directors
past and expected future contributions to Kellogg; (e) our
Director criteria; (f) our Corporate Governance Guidelines;
and (g) the overall composition of the Board, including
whether accepting the resignation would cause Kellogg to fail to
meet any applicable SEC or NYSE requirement.
The Qualified Independent Directors would act on the Nominating
and Governance Committees recommendation no later than
90 days following the date of the Shareowners meeting
where the election occurred. In considering the Nominating and
Governance Committees recommendation, the Qualified
Independent Directors would consider the
6
factors considered by the Nominating and Governance Committee
and such additional information and factors the Board believes
to be relevant. Following the Qualified Independent
Directors decision, Kellogg would promptly disclose in a
current report on
Form 8-K
the decision whether to accept the resignation as tendered
(providing a full explanation of the process by which the
decision was reached and, if applicable, the reasons for
rejecting the tendered resignation).
To the extent that any resignation is accepted, the Nominating
and Governance Committee would recommend to the Board whether to
fill such vacancy or vacancies or to reduce the size of the
Board.
Any Director who tenders his or her resignation pursuant to this
provision would not participate in the Nominating and Governance
Committees recommendation or Qualified Independent
Directors consideration regarding whether to accept the
tendered resignation. Prior to voting, the Qualified Independent
Directors would afford the Director an opportunity to provide
any information or statement that he or she deems relevant. If a
majority of the members of the Nominating and Governance
Committee received a greater number of votes
withheld from their election than votes
for their election at the same election, then the
remaining Qualified Independent Directors who are on the Board
who did not receive a greater number of votes
withheld from their election than votes
for their election (or who were not standing for
election) would consider the matter directly or may appoint a
Board committee amongst themselves solely for the purpose of
considering the tendered resignations that would make the
recommendation to the Board whether to accept or reject them.
For purposes of this policy, the term Qualified
Independent Directors means:
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|
All Directors who (1) are independent Directors (as defined
in accordance with the NYSE Corporate Governance Rules) and
(2) are not required to offer their resignation in
accordance with this policy.
|
|
|
|
If there are fewer than three independent Directors then serving
on the Board who are not required to offer their resignations in
accordance with this policy, then the Qualified Independent
Directors shall mean all of the independent Directors and each
independent Director who is required to offer his or her
resignation in accordance with this Policy shall recuse himself
or herself from the deliberations and voting only with respect
to his or her individual offer to resign.
|
Director Independence. The
Board has determined that all current Directors (other than
Mr. Jenness and Mr. Mackay) are independent based on
the following standards: (a) no entity (other than a
charitable entity) of which a Director is an employee in any
position or any immediate family member (as defined) is an
executive officer, made payments to, or received payments from,
Kellogg and its subsidiaries in any of the 2007, 2006, or 2005
fiscal years in excess of the greater of (1) $1,000,000 or
(2) two percent of that entitys annual consolidated
gross revenues; (b) no Director, or any immediate family
member employed as an executive officer of Kellogg or its
subsidiaries, received in any twelve month period within the
last three years more than $100,000 per year in direct
compensation from Kellogg or its subsidiaries, other than
Director and committee fees and pension or other forms of
deferred compensation for prior service not contingent in any
way on continued service; (c) Kellogg did not employ a
Director in any position, or any immediate family member as an
executive officer, during the past three years; (d) no
Director was currently employed by the present or former
independent or internal Kellogg auditor (Auditor),
no immediate family member of a Director was a current partner
of the Auditor, no Director or immediate family member was an
employee of the Auditor who personally worked on our audit
during the past three years and no immediate family member of a
Director was a current employee of the Auditor and participated
in the Auditors audit, assurance or tax compliance
practice; (e) no Director or immediate family member served
as an executive officer of another company during the past three
years at the same time as a current executive officer of Kellogg
served on the compensation committee of such company; and
(f) no other material relationship exists between any
Director and Kellogg or our subsidiaries. The Board also
determined that Mr. Jorndt and Dr. Richardson met the
above standards for Director independence in 2007 while they
served as Directors.
In connection with its independence determinations for
Mr. Speirn, the Board noted that Kellogg entered into two
agreements with the W. K. Kellogg Foundation Trust (the
Kellogg Trust), one dated as of November 8,
2005 (the 2005 Agreement) and one dated as of
February 16, 2006 (the 2006 Agreement, and
together with the 2005 Agreement, the Agreements)
under which we repurchased a total of 22,156,318 shares of
our common stock from the Kellogg Trust for an aggregate cash
purchase price of $950,000,000 (collectively, the
Trust Transactions). Mr. Speirn, a Kellogg
Director elected on March 1, 2007, became a trustee of the
Kellogg Trust in January 2007 and became the President and Chief
Executive Officer of the W. K. Kellogg Foundation (the
Kellogg Foundation), a charitable foundation that is
the sole beneficiary of the Kellogg Trust, in January 2006. In
connection with Mr. Speirns election to the Board,
the Board
7
determined that Mr. Speirn was independent under the NYSE
listing standards, and that the Agreements and the
Trust Transactions were not material for these purposes. In
reaching this conclusion, the Board took into account that:
|
|
|
|
|
the Agreement and the contemplated Trust Transactions were
each negotiated on an arms-length basis and, on behalf of
the full Board, by a committee of the Board comprised of
independent Directors (with Directors who are affiliated with
the Kellogg Trust or Kellogg Foundation not participating in the
deliberations or approval);
|
|
|
|
Mr. Speirn, and his predecessor, Dr. William C.
Richardson, did not participate in any of the Board
deliberations regarding the Agreements or any of the
Trust Transactions;
|
|
|
|
the price of the shares sold in the Trust Transactions was
based on a discount to market;
|
|
|
|
Mr. Speirn is not a beneficiary of the Kellogg Trust or of
the Kellogg Foundation;
|
|
|
|
Mr. Speirns compensation with respect to his service
to the Kellogg Trust and the Kellogg Foundation was not related
to the Kellogg Trust Transactions; and
|
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|
Mr. Speirn did not and will not receive, directly or
indirectly, any of the proceeds of, or other interest in, the
Kellogg Trust Transaction.
|
The Board also considered commercial ordinary-course
transactions with respect to several Directors as it assessed
independence status, including transactions relating to
purchasing supplies, selling product and marketing arrangements.
The Board concluded that these transactions did not impair
Director independence for a variety of reasons including that
the amounts in question were considerably under the thresholds
set forth in our independence standards and the relationships
were not deemed material.
Shareowner Recommendations for Director
Nominees. The Nominating and Governance
Committee will consider Shareowner nominations for membership on
the Board. For the 2009 Annual Meeting of Shareowners,
nominations may be submitted to the Office of the Secretary,
Kellogg Company, One Kellogg Square, Battle Creek, Michigan
49017, which will forward them to the Chairman of the Nominating
and Governance Committee. Recommendations must be in writing and
we must receive the recommendation not earlier than the
120th day prior to the 2009 annual meeting and not later
than January 25, 2009. Recommendations must also include
certain other requirements specified in our bylaws.
The Nominating and Governance Committee believes that all
nominees must, at a minimum, meet the criteria set forth in the
Boards Code of Conduct and the Corporate Governance
Guidelines, which specify, among other things, that the
Nominating and Governance Committee will consider criteria such
as independence, diversity, age, skills and experience in the
context of the needs of the Board. The Nominating and Governance
Committee also will consider a combination of factors for each
nominee, including (1) the nominees ability to
represent all Shareowners without a conflict of interest;
(2) the nominees ability to work in and promote a
productive environment; (3) whether the nominee has
sufficient time and willingness to fulfill the substantial
duties and responsibilities of a Director; (4) whether the
nominee has demonstrated the high level of character and
integrity that we expect; (5) whether the nominee possesses
the broad professional and leadership experience and skills
necessary to effectively respond to the complex issues
encountered by a multi-national, publicly-traded company; and
(6) the nominees ability to apply sound and
independent business judgment.
When filling a vacancy on the Board, the Nominating and
Governance Committee identifies the desired skills and
experience of a new Director in light of the criteria described
above and the skills and experience of the then-current
Directors. The Nominating and Governance Committee may, as it
has done in the past, engage third parties to assist in the
search and provide recommendations. Also, Directors are
generally asked to recommend candidates for the position. The
candidates would be evaluated based on the process outlined in
the Corporate Governance Guidelines and the Nominating and
Governance Committee charter, and the same process would be used
for all candidates, including candidates recommended by
Shareowners.
Communication with the
Board. Mr. Gund, the Chairman of the
Nominating and Governance Committee and the Lead Director,
usually presides at executive sessions of the independent
members of the Board. Mr. Gund may be contacted at
gordon.gund@kellogg.com. Any communications which Shareowners
may wish to send to the Board may be directly sent to
Mr. Gund at this
e-mail
address.
Attendance at Annual
Meetings. All Directors properly nominated
for election are expected to attend the annual meeting of
Shareowners. All of our Directors attended the 2007 annual
meeting of Shareowners.
Code of Ethics. We have
adopted the Code of Conduct for Kellogg Company Directors and
Global Code of Ethics for Kellogg Company employees (including
the chief executive officer, chief financial officer and
corporate controller).
8
Any amendments to or waivers of the Global Code of Ethics
applicable to our chief executive officer, chief financial
officer or corporate controller will be posted on
www.kelloggcompany.com. There were no amendments to or waivers
of the Global Code of Ethics in 2007.
Availability of Corporate Governance
Documents. Copies of the Corporate Governance
Guidelines, the Charters of the Audit, Compensation, and
Nominating and Governance Committees of the Board, the Code of
Conduct for Kellogg Company Directors, and Global Code of Ethics
for Kellogg Company employees can be found on the Kellogg
Company website at www.kelloggcompany.com under Corporate
Governance. Shareowners may also request a free copy of
these documents from: Kellogg Company, P.O. Box CAMB,
Battle Creek, Michigan
49016-1986
(phone:
(800) 961-1413),
Ellen Leithold of the Investor Relations Department at that same
address (phone:
(269) 961-2800)
or investor.relations@kellogg.com.
BOARD AND
COMMITTEE MEMBERSHIP
In 2007, the Board had the following standing committees: Audit,
Compensation, Nominating and Governance, Finance, Social
Responsibility, Consumer Marketing and Executive.
The Board held nine meetings in 2007. All of the incumbent
Directors attended at least 75% of the total number of meetings
of the Board and of all Board committees of which the Directors
were members during 2007.
The table below provides 2007 membership and meeting information
for each Board committee as of December 29, 2007:
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Nominating
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and
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Social
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|
Consumer
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|
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|
Name(1)
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|
Audit
|
|
|
Compensation
|
|
|
Governance
|
|
|
Finance
|
|
|
Responsibility
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|
|
Marketing
|
|
|
Executive
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|
|
Benjamin Carson
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ü
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ü
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ü
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|
John Dillon
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Chair
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ü
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ü
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ü
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Claudio Gonzalez
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ü
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ü
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ü
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Chair
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ü
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|
Gordon Gund
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ü
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Chair
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ü
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ü
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ü
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|
Jim Jenness(2)
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Chair
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Dorothy Johnson
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ü
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Chair
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ü
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ü
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David Mackay(2)
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ü
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Don Knauss(3)
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ü
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ü
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Ann McLaughlin Korologos
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ü
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ü
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Chair
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ü
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ü
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Sterling Speirn(4)
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ü
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ü
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Robert Steele(5)
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ü
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ü
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ü
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John Zabriskie
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ü
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Chair
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ü
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ü
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|
2007 Meetings
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6
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5
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3
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3
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2
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2
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0
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|
(1) |
|
Dr. Bill Richardson and Dan Jorndt retired from the Board
during 2007. Consequently, they are not included in the table
above because they were not members of the Board as of
December 29, 2007. During 2007, Dr. Richardson served
on the Compensation, Finance, Social Responsibility, Consumer
Marketing and Executive Committees, and Mr. Jorndt served
on the Audit, Compensation, Finance and Consumer Marketing
Committees. |
|
(2) |
|
Mr. Jenness and Mr. Mackay attend committee meetings
as members of management, other than portions of those meetings
held in executive session. |
|
(3) |
|
On November 1, 2007, the Board elected Mr. Knauss as a
Director effective December 6, 2007. |
|
(4) |
|
On February 16, 2007, the Board elected Mr. Speirn as
a Director effective March 1, 2007. |
|
(5) |
|
On May 25, 2007, the Board elected Mr. Steele as a
Director effective July 1, 2007. |
Audit Committee. Pursuant to a written
charter, the Audit Committee assists the Board in monitoring the
integrity of our financial statements, the independence and
performance of our independent registered public accounting
firm, the performance of our internal audit function and our
compliance with financial, legal and regulatory requirements.
The Audit Committee, or its Chair, also pre-approves all audit,
internal control-related and permitted non-audit engagements and
services by the independent registered public accounting firm
and their affiliates. It also discusses
and/or
reviews specified matters with, and receives specified
information or assurances from, Kellogg management and the
independent registered
9
public accounting firm. The Committee also has the sole
authority to appoint or replace the independent registered
public accounting firm, which directly report to the Audit
Committee, and is directly responsible for the compensation and
oversight of the independent registered public accounting firm.
Each member of the Audit Committee has been determined by the
Board to be an audit committee financial expert, as
that term is defined in paragraph (h) of Item 401 of
SEC
Regulation S-K.
Each member has experience actively supervising a principal
financial officer
and/or
principal accounting officer. Each of the Committee members
meets the independence requirements of the New York Stock
Exchange.
Compensation Committee. Pursuant to a written
charter, the Compensation Committee (a) reviews and makes
recommendations for the compensation of senior management
personnel and monitors overall compensation for senior
executives; (b) reviews and recommends the compensation of
the Chief Executive Officer; (c) has sole authority to
retain or terminate any compensation consultant used to evaluate
senior executive compensation; (d) oversees and administers
employee benefit plans to the extent provided in those plans;
and (e) reviews trends in management compensation. The
Committee may form and delegate authority to subcommittees or
the Chair when appropriate. The Compensation Committee, or its
Chair, also pre-approves all engagements and services to be
performed by any consultants to the Compensation Committee. To
assist the Compensation Committee in discharging its
responsibilities, the Committee has retained an independent
compensation consultant Towers Perrin. The
consultant reports directly to the Compensation Committee. Other
than the work it performs for the Compensation Committee and the
Board, Towers Perrin does not provide any consulting services to
Kellogg or its executive officers. Each of the Committee members
meets the independence requirements of the New York Stock
Exchange. For additional information about the Compensation
Committees processes for establishing and overseeing
executive compensation, refer to Compensation Discussion
and Analysis Our Compensation Methodology.
Nominating and Governance Committee. Pursuant
to a written charter, the Nominating and Governance Committee
assists the Board by (a) identifying and reviewing the
qualifications of candidates for Director and in determining the
criteria for new Directors; (b) recommends nominees for
Director to the Board; (c) recommends committee
assignments; (d) reviews annually the Boards
compliance with the Corporate Governance Guidelines;
(e) reviews annually the Corporate Governance Guidelines
and recommends changes to the Board; (f) monitors the
performance of Directors and conducts performance evaluations of
each Director before the Directors renomination to the
Board; (g) administers the annual evaluation of the Board;
(h) provides annually an evaluation of CEO performance used
by the independent members of the Board in their annual review
of CEO performance; (i) considers and evaluates potential
waivers of the Codes of Conduct and Ethics for Directors and
senior officers (for which there were none in 2007), and makes a
report to the Board on succession planning at least annually;
(j) provides an annual review of the independence of
Directors to the Board; and (k) reviews Director
compensation. The Chair of the Nominating and Governance
Committee, as Lead Director, also presides at executive sessions
of independent Directors of the Board. Each of the Nominating
and Governance Committee members meets the independence
requirements of the New York Stock Exchange. In 2007, we paid a
third-party search firm to identify for the Nominating and
Governance Committee possible Director nominees that meet our
established criteria.
Finance Committee. As of the date of this
proxy statement, the Finance Committee is no longer a standing
committee of the Board and its responsibilities have been
reallocated to the other committees of the Board. Prior to its
dissolution, the Finance Committee reviewed matters regarding
our financial affairs, such as strategic and operating plans,
the financial terms of acquisitions, divestitures, joint
ventures and other transactions, short- and long-term financing,
foreign exchange management, financial derivatives including
commodities and hedging, capital expenditures, dividends and
taxes, financial policies including cash flow, borrowing and
dividend policy, sales or repurchases of equity and long-term
debt, finance, treasury and related functions, insurance
programs, pension investment performance and pension plan
compliance. The Committee also received a report from management
which covered any off-balance sheet transactions and confirmed
that Kellogg has not made or arranged for any personal loan to
any executive officer or Director.
Social Responsibility Committee. Pursuant to a
written charter, the Social Responsibility Committee reviews the
manner in which we discharge our social responsibilities and
recommends to the Board policies, programs and practices it
deems appropriate to enable us to carry out and discharge our
social responsibilities. This commitment means investing in and
enriching communities in which we conduct business, as well as
encouraging employee involvement in these activities.
Consumer Marketing Committee. Pursuant to a
written charter, the Consumer Marketing Committee reviews
matters regarding our marketing activities, including
strategies, programs, spending and execution quality in order to
help ensure that our marketing is consistent with, and is
sufficient to support, our overall strategy and performance
goals.
Executive Committee. Pursuant to a written
charter, the Executive Committee is generally empowered to act
on behalf of the Board between meetings of the Board, with some
exceptions.
10
PROPOSAL 1
ELECTION OF DIRECTORS
Our amended restated certificate of incorporation and bylaws
provide that the Board shall be comprised of not less than seven
and no more than fifteen Directors divided into three classes as
nearly equal in number as possible, and that each Director shall
be elected for a term of three years with the term of one class
expiring each year.
Three Directors are to be re-elected at the 2008 Annual Meeting
to serve for a term ending at the 2011 Annual Meeting of
Shareowners, and the proxies cannot be voted for a greater
number of persons than the number of nominees named. There are
currently twelve members of the Board. Mr. Claudio Gonzalez
is not standing for re-election at the annual meeting because he
has reached the retirement age set forth in our Corporate
Governance Guidelines.
The Board recommends that the Shareowners vote
FOR the following nominees: David Mackay,
Sterling Speirn and Dr. John Zabriskie. Each nominee was
proposed for re-election by the Nominating and Governance
Committee for consideration by the Board and proposal to the
Shareowners.
Nominees
for Election for a Three-Year Term Expiring at the 2011 Annual
Meeting
DAVID MACKAY. Mr. Mackay, age 52, has served as
a Kellogg Director since February 2005. On December 31,
2006, he assumed the role as our President and Chief Executive
Officer after having served as our President and Chief Operating
Officer since September 2003. Mr. Mackay joined Kellogg
Australia in 1985 and held several positions with Kellogg USA,
Kellogg Australia and Kellogg New Zealand before leaving Kellogg
in 1992. He rejoined Kellogg Australia in 1998 as managing
director and was appointed managing director of Kellogg United
Kingdom and Republic of Ireland later in 1998. He was named
Senior Vice President and President, Kellogg USA in July 2000,
Executive Vice President in November 2000 and President and
Chief Operating Officer in September 2003. He is also a director
of Fortune Brands, Inc.
STERLING SPEIRN. Mr. Speirn, age 60, has served
as a Kellogg Director since March 1, 2007. He is President
and Chief Executive Officer of the W. K. Kellogg Foundation. He
is also a trustee of the W. K. Kellogg Foundation Trust. Prior
to joining the W. K. Kellogg Foundation in January 2006, he was
President of Peninsula Community Foundation from November 1992
to the end of 2005 and served as a director of the Center for
Venture Philanthropy, which he co-founded in 1999. The
Nominating and Governance Committee and the Board were
introduced to Mr. Speirn through his activities with the
Kellogg Foundation. After reviewing his qualifications, skills,
and experience against the established criteria for nominees,
the Committee recommended and the Board subsequently appointed
Mr. Speirn to the Kellogg Board.
JOHN ZABRISKIE. Dr. Zabriskie, age 68, has
served as a Kellogg Director since 1995. He is also co-founder
and Director of PureTech Ventures, LLC, a firm that co-founds
life science companies. In 2001, he became Chairman of the Board
of Directors of MacroChem Corporation. In 1999, he retired as
Chief Executive Officer of NEN Life Science Products, Inc., a
position he had held since 1997. From November 1995 to January
1997, Dr. Zabriskie served as President and Chief Executive
Officer of Pharmacia & Upjohn, Inc. Dr. Zabriskie
is a director of the following public companies: Array
Biopharma, Inc. and MacroChem Corporation. He is also a director
of the following privately-held companies: Protein Forest, Inc.,
Puretech Ventures, L.L.C., ARCA Discovery and Cellicon
Biotechnologies.
Continuing
Directors to Serve Until the 2010 Annual Meeting
BENJAMIN CARSON. Dr. Carson, age 56, has served
as a Kellogg Director since 1997. He is Professor and Director
of Pediatric Neurosurgery, The Johns Hopkins Medical
Institutions, a position he has held since 1984, as well as
Professor of Oncology, Plastic Surgery, Pediatrics and
Neurosurgery at The Johns Hopkins Medical Institutions.
Dr. Carson is also a director of Costco Wholesale
Corporation.
GORDON GUND. Mr. Gund, age 68, has served as a
Kellogg Director since 1986. He is Chairman and Chief Executive
Officer of Gund Investment Corporation, which manages
diversified investment activities. He is also a director of
Corning Incorporated.
DOROTHY JOHNSON. Ms. Johnson, age 67, has
served as a Kellogg Director since 1998. Ms. Johnson is
President of the Ahlburg Company, a philanthropic consulting
agency, a position she has held since February 2000, and
President Emeritus of the Council of Michigan Foundations, which
she led as President and Chief Executive Officer from 1975 to
2000. She is also on the Board of Directors of AAA Michigan,
Grand Valley State University and The League, and has been a
member of the Board of Trustees of the W. K. Kellogg Foundation
since 1980.
11
ANN MCLAUGHLIN KOROLOGOS. Ms. McLaughlin Korologos,
age 66, has served as a Kellogg Director since 1989. She is
currently Chairman, RAND Board of Trustees, Chairman Emeritus of
The Aspen Institute, a nonprofit organization, and is a former
U.S. Secretary of Labor. She is also a director of AMR
Corporation (and its subsidiary, American Airlines), Host
Hotels & Resorts, Inc., Harman International
Industries, Inc. and Vulcan Materials Company.
Continuing
Directors to Serve Until the 2009 Annual Meeting
JOHN DILLON. Mr. Dillon, age 69, has served as
a Kellogg Director since 2000. He is Vice Chairman of Evercore
Capital Partners and a Senior Managing Director of that
firms investment activities and private equity business.
He retired in October 2003 as Chairman of the Board and Chief
Executive Officer of International Paper Company, a position he
held since 1996, and retired as Chairman of the Business
Roundtable in June 2003. He is a director of the following
public companies: Caterpillar Inc. and E. I. du Pont de Nemours
and Company.
JIM JENNESS. Mr. Jenness, age 61, has been
Kellogg Chairman since February 2005 and has served as a Kellogg
Director since 2000. He was our Chief Executive Officer from
February 2005 through December 30, 2006, and Chief
Executive Officer of Integrated Merchandising Systems, LLC, a
leader in outsource management of retail promotion and branded
merchandising, from 1997 to December 2004. Before joining
Integrated Merchandising Systems, Mr. Jenness served as
Vice Chairman and Chief Operating Officer of the Leo Burnett
Company from 1996 to 1997 and, before that, as Global Vice
Chairman North America and Latin America from 1993 to 1996. He
has also been a trustee of the W. K. Kellogg Foundation Trust
since 2005, and is a director of Kimberly-Clark Corporation.
DON KNAUSS. Mr. Knauss, age 57, has served as a
Kellogg Director since December 6, 2007. Mr. Knauss
was elected Chairman and Chief Executive Officer of The Clorox
Company in October 2006. He was executive vice president of The
Coca-Cola
Company and president and chief operating officer for
Coca-Cola
North America from February 2004 until August 2006. Previously,
he was president of the Retail Division of
Coca-Cola
North America from January 2003 through February 2004 and
president and chief executive officer of The Minute Maid
Company, a division of The
Coca-Cola
Company, from January 2000 until January 2003 and President of
Coca-Cola
South Africa from March 1998 until January 2000. Prior to that,
he held various positions in marketing and sales with PepsiCo,
Inc. and Procter & Gamble, and served as an officer in
the United States Marine Corps.
ROBERT STEELE. Mr. Steele, age 52, has served
as a Kellogg Director since July 1, 2007. He was appointed
Vice Chairman Global Health and Well-Being of
Procter & Gamble in July 2007. He was Group
President Global Household Care from April 2006 to
July 2007 and Group President North America from
July 2004 through April 2006. Prior to that, he was President,
North America from July 2000 through July 2004.
Retiring
Director
CLAUDIO GONZALEZ. Mr. Gonzalez, age 73, a
Kellogg Director since 1990, has reached the retirement age set
forth in our Corporate Governance Guidelines and will not stand
for re-election at the 2008 annual meeting. He was Chairman of
the Board and Chief Executive Officer of Kimberly-Clark de
Mexico, S.A. de C.V., a producer of consumer disposable tissue
products until April 1, 2007, and has continued as Chairman
of the Board since such date. He is a director of the following
public companies: General Electric Company, The Home Depot,
Inc., The Investment Company of America, Grupo ALFA, Grupo
Mexico, Grupo Carso, Grupo Televisa and The Mexico Fund.
12
2007
DIRECTOR COMPENSATION AND BENEFITS
Only non-management Directors receive compensation for their
services as Directors. For information about the compensation of
Mr. Mackay, our President and Chief Executive Officer,
refer to Executive Compensation beginning on
page 30. Because Mr. Jenness, our Chairman of the
Board, is not a named executive officer, we have included the
compensation he receives as a Kellogg employee in the
Directors Compensation Table.
Our 2007 compensation package for non-management Directors was
comprised of cash (annual retainers and committee meeting fees),
stock awards and stock option grants. The annual pay package is
designed to attract and retain highly-qualified, independent
professionals to represent our Shareowners, and is targeted at
the median of our peer group. Refer to Compensation
Discussion and Analysis Our Compensation
Methodology for a description of the companies that make
up our peer group. The Nominating and Governance Committee
reviews our Director compensation program on an annual basis
with Towers Perrin, the independent compensation consultant,
including the competitiveness and appropriateness of the
program. Although the Nominating and Corporate Governance
Committee conducts this review on an annual basis, its general
practice is to consider adjustments to Director compensation
every other year.
Our compensation package is also designed to create alignment
between our Directors and our Shareowners through the use of
equity-based grants. In 2007, approximately 65% of
non-management Director pay was in equity and approximately 35%
in cash. Actual annual pay varies among non-management Directors
based on Board committee memberships, committee chair
responsibilities, meetings attended and whether a Director
elects to defer his or her fees.
Our letter agreement with Mr. Jenness, our former Chief
Executive Officer, outlines the compensation and benefits to
which he is entitled while serving as executive Chairman of the
Board. In 2007, it was the preference of Mr. Jenness to
forfeit certain awards that had been previously granted to him
and not receive any additional annual base salary, bonus or
long-term compensation. Consequently, he did not receive any
Director fees, base salary, bonus or long-term incentive grants
in 2007. Given the ongoing time commitment of serving as
executive Chairman, the valuable service he provides Kellogg and
its Shareowners and his affection for Kellogg, the Board
determined in February 2008 it was appropriate to provide
compensation to Mr. Jenness beginning in 2008. The total
amount of his annual compensation is $630,000, which is
comprised of the same long-term incentives granted to
non-management Directors (2,100 shares of restricted stock
and 5,000 stock options), with the remaining compensation paid
in cash. Mr. Jenness received these equity grants in 2008
on the same day the annual long-term incentives were granted to
other employees of Kellogg. The stock options will vest in the
same manner as those received by other employees (50% on
February 22, 2009 (the first anniversary of the grant
date), and 50% on February 22, 2010 (the second anniversary
of the grant date)). The shares of restricted stock vested
immediately, but Mr. Jenness must hold the shares as long
as he is a Kellogg employee or Director. Working with Towers
Perrin, the Board determined the total compensation amount for
Mr. Jenness to be reasonable and competitive. Refer to
Employment Agreements Mr. Jenness
for a description of the employment agreement with
Mr. Jenness.
2007 compensation for non-management Directors consisted of the
following:
|
|
|
|
|
Type of Compensation
|
|
Amount
|
|
Annual Cash Retainer(1)
|
|
|
$70,000
|
|
Annual Stock Options Retainer
|
|
|
5,000 shares
|
|
Annual Stock Awards Retainer
|
|
|
2,100 shares
|
|
Annual Retainer for Committee Chair:
|
|
|
|
|
Audit Committee
|
|
|
$15,000
|
|
Compensation Committee
|
|
|
$10,000
|
|
All Other Committees
|
|
|
$5,000
|
|
Board or Committee Attendance Fee (per meeting attended):
|
|
|
|
|
Board Meeting Fee
|
|
|
$0
|
|
Audit Committee Meeting Fee
|
|
|
$2,000
|
|
All Other Committee Meetings(2)
|
|
|
$1,500
|
|
|
|
|
(1) |
|
The annual cash retainer is paid in quarterly installments. |
|
(2) |
|
No fee is payable for Executive Committee meetings held on the
same day as a regular Board meeting. |
13
Stock Option Awards. Stock option grants
(1) are made each year on January 31 or the next business
day, (2) are exercisable six months after the date of grant
and (3) have a ten-year term. Prior to October 2007, all
options granted to non-management Directors were granted with
exercise prices equal to the average of the high and low trading
prices of our stock on the date of grant. Beginning in October
2007, the exercise price of all options granted to
non-management Directors is set at the officially quoted closing
price of our common stock on the date of grant.
Prior to 2004, we granted original options with an
accelerated ownership feature (AOF). Under the terms
of the original option grant, a new option, or AOF
option, is generally received when Kellogg stock is used
to pay the exercise price of a stock option and related taxes.
The holder of the option receives an AOF option for the number
of shares used. For AOF options, the expiration date is the same
as the original option and, beginning in October 2007, the
option exercise price is the officially quoted closing price of
our common stock on the date the AOF option is granted.
The Compensation Committee began using the AOF options over
fifteen years ago in order to create greater stock ownership by
encouraging Directors and executives to exercise valuable stock
options and retain the shares received as a result of the option
exercise. The Compensation Committee discontinued the use of the
AOF feature in all new original option grants after
2003 to better align with peer group compensation practices and
in anticipation of new accounting rules for the expensing of
stock options. Although we discontinued the AOF feature in new
option grants, a number of the outstanding options disclosed in
the Directors Compensation Table were granted prior to
2004. Consequently, those AOF options could continue until their
natural expiration date (generally, ten years after the date of
the original grant). The Compensation Committee further changed
the AOF options in 2007 so that they may only be exercised once
each fiscal year. Prior to this change, AOF options were
generally exercised twice during each fiscal year. Our overall
stock option expense is reduced by limiting the number of times
an AOF option can be exercised during any given fiscal year.
Stock Awards. Stock awards are granted each
May 1 or the next business day and are automatically deferred
pursuant to the Kellogg Company Grantor Trust for Non-Employee
Directors. Under the terms of the Grantor Trust, shares are
available to a Director only upon termination of service on the
Board.
Business Expenses. The Directors are
reimbursed for their business expenses related to their
attendance at Kellogg meetings, including room, meals and
transportation to and from board and committee meetings. On rare
occasions, a Directors spouse accompanies a Director when
traveling on Kellogg business. At times, a Director travels to
and from Kellogg meetings on Kellogg corporate aircraft.
Directors are also eligible to be reimbursed for attendance at
qualified Director education programs.
Director and Officer Liability Insurance and Travel Accident
Insurance. Director and officer liability
insurance insures our Directors and officers against certain
losses that they are legally required to pay as a result of
their actions while performing duties on our behalf. Our
D&O insurance policy does not break out the premium for
Directors versus officers and, therefore, a dollar amount cannot
be assigned for individual Directors. Travel accident insurance
provides benefits to each Director in the event of death or
disability (permanent and total) during travel on Kellogg
corporate aircraft. Our travel accident insurance policy also
covers employees and others while traveling on Kellogg corporate
aircraft and, therefore, a dollar amount cannot be assigned for
individual Directors.
Elective Deferral Program. Under the Deferred
Compensation Plan for Non-Employee Directors, non-employee
Directors may each year irrevocably elect to defer all or a
portion of their board annual cash retainer, committee Chair
annual retainers and committee meeting fees payable for the
following year. The amount deferred is credited to an account in
the form of units equivalent to the fair market value of our
common stock. If the Board declares dividends, a fractional unit
representing the dividend is credited to the account of each
participating Director. A participants account balance is
paid in cash or stock, at the election of the Director, upon
termination of service as a Director. The balance is paid in a
lump sum or over a period from one to ten years at the election
of the Director and the unpaid account balance accrues interest
annually at the prime rate in effect when the termination of
service occurred.
Minimum Stock Ownership Requirement. All
non-management Directors are expected to comply with stock
ownership guidelines, under which they are expected to hold at
least five times the annual cash retainer ($350,000
five times the $70,000 retainer) in stock or stock equivalents,
subject to a five-year phase-in period for newly-elected
Directors. As of December 29, 2007, all of the
non-management Directors met or were on track to meet this
requirement. Mr. Mackay and Mr. Jenness are expected
to comply with the stock ownership guidelines described in
Compensation Discussion and Analysis Executive
Compensation Policies Executive Stock Ownership
Guidelines.
Kellogg Matching Grant Program. Directors are
eligible to participate in our Corporate Citizenship
Fund Matching Grant Program, which is also available to all
of our active, full-time U.S. employees. Under this
program,
14
our Corporate Citizenship Fund matches 100 percent of
donations made to eligible organizations up to a maximum of
$10,000 per calendar year for each individual. These limits
apply to both employees and Directors.
Discontinued Programs. Prior to December 1995,
we had a Directors Charitable Awards Program pursuant to
which each Director could name up to four organizations to which
Kellogg would contribute an aggregate of $1 million upon
the death of the Director. In 1995, the Board discontinued this
program for Directors first elected after December 1995. In
2007, the following current Directors, who were first elected to
the Board in 1995 or earlier, continued to be eligible to
participate in this program: Mr. Gonzalez, Mr. Gund,
Ms. McLaughlin Korologos and Dr. Zabriskie. We funded
the cost of this program for three out of the four eligible
Directors through the purchase of insurance policies prior to
2007. We will have to make cash payments in the future under
this program if insurance proceeds are not available at the time
of the Directors death. There were no cash payments made
in 2007 with respect to this program; however, in 2007, we
recognized nonpension postretirement benefits expense associated
with this obligation as follows: Mr. Gonzalez
$27,872, Mr. Gund $22,777, Ms. McLaughlin
Korologos $18,787 and Dr. Zabriskie
$23,613. These benefits are not reflected in the Directors
Compensation Table.
15
DIRECTORS
COMPENSATION TABLE
The individual components of the total compensation calculation
reflected in the table below are as follows:
Fees and Retainers. The amounts shown under
the heading Fees Earned or Paid in Cash consist of
annual retainers and per meeting attendance fees earned by or
paid in cash to our Directors in 2007.
Stock Awards. The amounts disclosed under the
heading Stock Awards consist of the compensation
expense recognized by Kellogg in 2007 under Financial Accounting
Standards Board Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based
Payment (SFAS No. 123(R)) for either the
annual grant of deferred shares of common stock, which are
placed in the Kellogg Company Grantor Trust for Non-Employee
Directors, or restricted stock awards granted prior to 2007.
Under the terms of the Grantor Trust, shares are available to a
Director only upon termination of service on the Board.
Option Awards. The amounts disclosed under the
heading Option Awards consist of the
SFAS No. 123(R) compensation expense associated with
the grant of options to purchase shares of common stock
(including AOF options received by the Director). As discussed
above, when a Director exercises an original option with an AOF,
the AOF option is treated as a new grant for disclosure and
accounting purposes even though the new grant relates back to
the approval of the original grant.
All Other Compensation. The amounts disclosed
under the heading All Other Compensation, for
Directors other than Mr. Jenness, consist of charitable
matching contributions made under our Corporate Citizenship
Fund Matching Grant Program. As discussed above,
Mr. Jenness preferred not to receive compensation for 2007
in connection with transitioning into the executive Chairman
position. However, Mr. Jenness retained the broad-based
benefits received by other senior executives or as set forth in
his 2004 employment agreement.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity
|
|
and Nonqualified
|
|
|
|
|
|
|
Fees Earned
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Deferred
|
|
All Other
|
|
|
|
|
or Paid in
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name
|
|
Cash ($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
Earnings ($)(5)
|
|
($)(6)
|
|
($)
|
|
Benjamin Carson
|
|
|
80,500
|
|
|
|
111,594
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
232,358
|
|
John Dillon
|
|
|
105,000
|
|
|
|
111,594
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
266,858
|
|
Claudio Gonzalez
|
|
|
91,500
|
|
|
|
111,594
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
243,358
|
|
Gordon Gund
|
|
|
93,000
|
|
|
|
111,594
|
|
|
|
92,555
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
307,149
|
|
Jim Jenness
|
|
|
0
|
|
|
|
333,332(7
|
)
|
|
|
224,134(8
|
)
|
|
|
|
|
|
|
31,000(9
|
)
|
|
|
1,160,117(10
|
)
|
|
|
1,748,583
|
|
Dorothy Johnson
|
|
|
85,500
|
|
|
|
111,594
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
247,358
|
|
Daniel Jorndt(11)
|
|
|
75,000
|
|
|
|
111,594
|
|
|
|
58,150
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
254,744
|
|
Don Knauss(12)
|
|
|
10,652
|
|
|
|
44,054
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
54,706
|
|
Ann McLaughlin Korologos
|
|
|
88,000
|
|
|
|
111,594
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
240,858
|
|
Bill Richardson(13)
|
|
|
20,500
|
|
|
|
0
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
65,764
|
|
Sterling Speirn(14)
|
|
|
58,500
|
|
|
|
124,762
|
|
|
|
6,351
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
189,613
|
|
Robert Steele(15)
|
|
|
47,334
|
|
|
|
89,113
|
|
|
|
32,718
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
169,165
|
|
John Zabriskie
|
|
|
100,500
|
|
|
|
111,594
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
252,358
|
|
|
|
|
(1) |
|
The aggregate dollar amount of all fees earned or paid in cash
for services as a Director, including annual board and committee
chair retainer fees, and committee meeting fees, in each case
before deferrals. |
|
(2) |
|
Other than for Mr. Jenness, the amount reflects the
compensation expense recognized by Kellogg during 2007 under
SFAS No. 123(R) for the annual grant of 2,100 deferred
shares of common stock or, in the cases of Messrs. Knauss,
Speirn and Steele, 811, 2,365 and 1,726 deferred shares of
common stock, respectively. Due to his retirement from the
Board, Dr. Richardson did not receive any deferred shares
of common stock in 2007. The compensation expense reflected in
the table above is the same as the grant-date fair value
pursuant to SFAS No. 123(R) because all of the stock
awards vested during 2007. Refer to Notes 1 and 8 to the
Consolidated Financial Statements included in our Annual Report
on
Form 10-K
for the year ended December 29, 2007, for a discussion of
the relevant assumptions used in calculating the compensation
expense and grant-date fair value pursuant to
SFAS No. 123(R). The recognized compensation expense
and grant-date fair value of the stock-based awards will likely
vary from the actual amount the Director receives. The actual
value the Director receives will depend on the number of shares
and the price of our |
16
|
|
|
|
|
common stock when the shares or their cash equivalent are
distributed. As of December 29, 2007, none of our
non-management Directors was deemed to have outstanding
restricted stock awards, because all of those awards vested
earlier in the year (or in prior years). The number of shares of
restricted stock held by each of our Directors is shown under
Officer and Director Stock Ownership on page 4
of this proxy statement. |
|
(3) |
|
Other than for Mr. Jenness, the amount reflects the
compensation expense recognized by Kellogg during 2007 under
SFAS No. 123(R) the annual grant of options to purchase
5,000 shares of common stock or, in the cases of
Messrs. Knauss, Speirn and Steele, 1,931, 781 and
4,110 shares of common stock, plus any AOF options received
by the Director. Other than with respect to Mr. Knauss, the
compensation expense reflected in the table above is the same as
the grant-date fair value pursuant to SFAS No. 123(R)
because all of the option awards vested during 2007. Refer to
Notes 1 and 8 to the Consolidated Financial Statements
included in our Annual Report on
Form 10-K
for the year ended December 29, 2007, for a discussion of
the relevant assumptions used in calculating the recognized
compensation expense and grant-date fair value pursuant to
SFAS No. 123(R). Because Mr. Knauss received his
grant of options upon joining the Board in December 2007,
Kellogg did not recognize compensation expense for such grant
until January 2008 in accordance with its accounting practices.
The grant-date fair value pursuant to SFAS No. 123(R)
of such grant of options was $14,592. The recognized
compensation expense and grant-date fair value of the stock
option awards will likely vary from the actual value the
Director receives. The actual value the Director receives will
depend on the number of shares exercised and the price of our
common stock on the date exercised. As of December 29,
2007, the Directors had the following stock options outstanding:
Benjamin Carson 40,000 options; John Dillon 38,750 options;
Claudio Gonzalez 34,999 options; Gordon Gund 30,548 options; Jim
Jenness 897,043 options; Dorothy Johnson 34,715 options; Don
Knauss 1,931 options; Ann McLaughlin Korologos 40,000 options;
Sterling Speirn 781 options; Robert Steele 4,110 options; and
John Zabriskie 36,800 options. The number of stock options held
by our Directors is a function of years of Board service and the
timing of exercise of vested awards. |
The table below presents the recognized compensation expense
separately for regular options and AOF options received by our
Directors in 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular
|
|
AOF
|
|
|
|
|
Options
|
|
Options
|
|
Total
|
|
|
($)
|
|
($)
|
|
($)
|
|
Benjamin Carson
|
|
|
40,264
|
|
|
|
0
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Dillon
|
|
|
40,264
|
|
|
|
0
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claudio Gonzalez
|
|
|
40,264
|
|
|
|
0
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gordon Gund
|
|
|
40,264
|
|
|
|
52,291
|
|
|
|
92,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jim Jenness
|
|
|
0
|
|
|
|
224,134
|
|
|
|
224,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dorothy Johnson
|
|
|
40,264
|
|
|
|
0
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel Jorndt
|
|
|
40,264
|
|
|
|
17,886
|
|
|
|
58,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don Knauss
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ann McLaughlin Korologos
|
|
|
40,264
|
|
|
|
0
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill Richardson
|
|
|
40,264
|
|
|
|
0
|
|
|
|
40,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sterling Speirn
|
|
|
6,351
|
|
|
|
0
|
|
|
|
6,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Steele
|
|
|
32,718
|
|
|
|
0
|
|
|
|
32,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Zabriskie
|
|
|
40,264
|
|
|
|
0
|
|
|
|
40,264
|
|
|
|
|
(4) |
|
Kellogg does not have a non-equity incentive plan for
non-management Directors. |
|
(5) |
|
Kellogg does not have a pension plan for non-management
Directors and does not pay above-market or preferential rates on
non-qualified deferred compensation for non-management Directors. |
|
(6) |
|
For Directors other than Mr. Jenness, represents charitable
matching contributions made under our Corporate Citizenship
Fund Matching Grant Program. |
|
(7) |
|
Mr. Jenness did not receive a grant of deferred shares of
common stock in 2007. Consequently, the amount disclosed under
the heading Stock Awards for Mr. Jenness only
reflects the compensation expense recognized under
SFAS No. 123(R) and as reported in our audited
financial statements in 2007 for the restricted stock award
granted to Mr. Jenness in 2005. Refer to Notes 1 and 8
to the Consolidated Financial Statements included in our Annual |
17
|
|
|
|
|
Report on
Form 10-K
for the year ended December 29, 2007 for a discussion of
the relevant assumptions used in calculating the compensation
expense. |
|
(8) |
|
Mr. Jenness did not receive an annual grant of options in
2007. Consequently, the amount disclosed under the heading
Options Awards for Mr. Jenness only reflects
the compensation expense recognized under SFAS No. 123(R)
and as reported in our audited financial statements in 2007 for
AOF options. |
|
(9) |
|
As Chairman, Mr. Jenness is covered as an employee by our
U.S. Pension Plans provided to other
U.S.-based
NEOs. The increase in his pension value represents changes in
the assumptions used to establish his accumulated pension
present value. |
|
(10) |
|
Reflects Kellogg contributions to our Savings &
Investment Plan and Restoration Plan, the annual cost of the
Executive Survivor Income Plan (Kellogg funded death benefit
provided to executive employees), financial and tax planning
assistance, physical exams and relocation and home sale
benefits. Pursuant to the terms of the letter agreement between
Mr. Jenness and Kellogg, dated December 20, 2004, we
provided relocation and home sale benefits to Mr. Jenness
upon his transition from Chairman and Chief Executive Officer to
Chairman. This relocation and home sale program has numerous
features, but principally offered Mr. Jenness the
opportunity to sell his home to a third party relocation firm,
as agent for Kellogg, based on an arms-length appraisal
process. The sale occurred only after Mr. Jenness had made
reasonable efforts to sell his home to a third party. The
purchase price paid by the third-party relocation firm was based
on the average of three appraisals performed by independent,
qualified relocation appraisers recommended by such relocation
firm. Following the third-party relocation firms home
purchase, such relocation firm engaged a realtor to sell the
home on our behalf. Once the third-party relocation firm
purchased Mr. Jenness home and reimbursed
Mr. Jenness for any losses, we were charged by such
relocation firm for its net expenses. Of the disclosed amount,
$964,613 represents the expenses related to the direct benefits
that Mr. Jenness received under this relocation and home
sale program including Mr. Jenness loss on the sale
of his home, gross up for tax purposes and moving expenses. |
|
(11) |
|
Mr. Jorndt retired as a Director on August 7, 2007. |
|
(12) |
|
On November 1, 2007, the Board elected Mr. Knauss as a
Director effective December 6, 2007. |
|
(13) |
|
Dr. Richardson retired as a Director on February 16,
2007. |
|
(14) |
|
On February 16, 2007, the Board elected Mr. Speirn as
a Director effective March 1, 2007. |
|
(15) |
|
On May 25, 2007, the Board elected Mr. Steele as a
Director effective July 1, 2007. |
18
COMPENSATION
DISCUSSION AND ANALYSIS
We are required to provide information regarding the
compensation program in place for our CEO, CFO and the three
other most highly-compensated executive officers. We have also
voluntarily elected to include information concerning an
additional executive officer. In this proxy statement, we refer
to our CEO, CFO and the other four most highly-compensated
executive officers as our Named Executive Officers
or NEOs. This section includes information
regarding, among other things, the overall objectives of our
compensation program and each element of compensation that we
provide. This section should be read in conjunction with the
detailed tables and narrative descriptions under Executive
Compensation beginning on page 30 of this proxy
statement.
Overview of Kellogg Company. We are the
worlds leading producer of cereal and a leading producer
of convenience foods, including cookies, crackers, toaster
pastries, cereal bars, fruit snacks, frozen waffles, and veggie
foods. Kellogg products are manufactured and marketed globally.
We manage our company for sustainable performance defined by our
long-term annual growth targets. During the periods presented in
our Annual Report on
Form 10-K
for the year ended December 29, 2007, these targets were
low single-digit for internal net sales, low to mid single-digit
for internal operating profit, and high single-digit for net
earnings per share. In combination with an attractive dividend
yield, we believe this profitable growth has and will continue
to provide a strong total return to our Shareowners. We plan to
continue to achieve this sustainability through a strategy
focused on growing our cereal business, expanding our snacks
business, and pursuing selected growth opportunities. We support
our business strategy with operating principles that emphasize
profit-rich, sustainable sales growth, as well as cash flow and
return on invested capital. We believe our steady earnings
growth, strong cash flow and continued investment during a
multi-year period of significant commodity and energy-driven
cost inflation demonstrates the strength and flexibility of our
business model.
Our Compensation Philosophy and Principles. We
operate in a competitive and challenging industry, both
domestically and internationally. We believe that our executive
compensation program for the CEO and the other NEOs should be
designed to (a) provide a competitive level of total
compensation necessary to attract and retain talented and
experienced executives; (b) motivate them to contribute to
our short- and long-term success; and (c) help drive strong
total return to our Shareowners. Consistent with our business
strategy discussed above, our executive compensation program is
driven by the following principles:
|
|
|
|
1.
|
Overall Objectives. Compensation should be
competitive with the organizations with which we compete for
talent, and should reward performance and contribution to
Kellogg objectives.
|
|
|
2.
|
Pay for Performance. As employees assume
greater responsibility, a larger portion of their total
compensation should be at risk incentive
compensation (both annual and long-term), subject to corporate,
business unit and individual performance measures.
|
|
|
3.
|
Long-Term Focus. Consistent, long-term
performance is expected. Performance standards are established
to drive long-term sustainable growth.
|
|
|
4.
|
Shareowner Alignment. Equity-based incentives
are an effective method of facilitating an ownership culture and
further aligning the interests of executives with those of our
Shareowners. For example, about 70% of the 2007 target
compensation (salary, annual incentives and long-term
incentives) for Mr. Mackay was comprised of equity-based
incentives.
|
|
|
5.
|
Values-Based. The compensation program
encourages both desired results as well as the right behaviors.
In other words, our compensation is linked to how we
achieve as well as what we achieve. The shared
behaviors that Kellogg believes are essential to achieving
long-term growth in sales and profits and increased value for
Shareowners (what we call our K Values) are:
|
|
|
|
|
|
Being passionate about our business, our brands and our food;
|
|
|
|
Having the humility and hunger to learn;
|
|
|
|
Striving for simplicity;
|
|
|
|
Acting with integrity and respect;
|
|
|
|
Being accountable for our actions and results; and
|
|
|
|
Recognizing success.
|
19
Our Compensation Methodology. The Compensation
Committee of the Board is responsible for administering the
compensation program for executive officers and certain other
senior management of Kellogg. The Board has determined that each
member of the Compensation Committee meets the definition of
independence under our corporate governance guidelines and
further qualifies as a non-employee Director for purposes of
Rule 16b-3
under the Securities Exchange Act of 1934. The members of the
Compensation Committee are not current or former employees of
Kellogg and are not eligible to participate in any of our
executive compensation programs. Additionally, the Compensation
Committee operates in a manner designed to meet the tax
deductibility criteria included in Section 162(m) of the
Internal Revenue Code. Refer to Board and Committee
Membership beginning on page 9 for additional
information about the Compensation Committee and its members.
To assist the Compensation Committee in discharging its
responsibilities, the Compensation Committee has retained an
independent compensation consultant Towers Perrin.
The consultant reports directly to the Compensation Committee.
Other than the work it performs for the Compensation Committee
and the Board, Towers Perrin does not provide any consulting
services to Kellogg or its executive officers.
Each year, Towers Perrin presents the Compensation Committee
with peer group benchmarking data and information about other
relevant market practices and trends, and makes recommendations
to the Compensation Committee regarding target levels for
various elements of total compensation for senior executives,
which the Compensation Committee reviews and considers in its
deliberations. The CEO makes recommendations to the Compensation
Committee regarding the compensation package for each of the
NEOs (other than himself). Based on its review of the peer group
information, individual performance, input from the compensation
consultant and other factors, the Compensation Committee makes
recommendations to the Board regarding the compensation for the
CEO and the other NEOs. The independent members of the Board,
meeting in executive session, determine the compensation of the
CEO. The full Board determines the compensation of the other
NEOs (unless an NEO is also a Director, in which case he
abstains from the determination of his own compensation).
To ensure that our executive officer compensation is competitive
in the marketplace, we benchmark ourselves against a comparator
group (our compensation peer group). For 2007, our
compensation peer group is comprised of the following branded
consumer products companies:
|
|
|
|
|
Anheuser-Busch Cos., Inc.
|
|
ConAgra Foods, Inc.
|
|
Kraft Foods Inc.
|
Campbell Soup Co.
|
|
General Mills, Inc.
|
|
PepsiCo Inc.
|
Clorox Co.
|
|
H.J. Heinz Co.
|
|
Sara Lee Corporation
|
The
Coca-Cola
Co.
|
|
The Hershey Co.
|
|
Wm. Wrigley Jr. Co.
|
Colgate-Palmolive Co.
|
|
Kimberly-Clark Corporation
|
|
|
We believe that our compensation peer group is representative of
the market in which we compete for talent. The size of the group
has been established so as to provide sufficient benchmarking
data across the range of senior positions in Kellogg. Our
compensation peer group companies were chosen because of their
leadership positions in branded consumer products and their
general relevance to Kellogg. The quality of these organizations
has allowed Kellogg to maintain a high level of continuity in
the peer group over many years, providing a consistent measure
for benchmarking compensation. The Compensation Committee
periodically reviews the compensation peer group to confirm that
it continues to be an appropriate benchmark for our executive
officers with respect to base salary, target annual and
long-term incentives and total compensation.
All components of our executive compensation package are
targeted at the 50th percentile of our compensation peer
group. Actual pay varies from the 50th percentile based
primarily on our performance relative to that of our performance
peer group. Our performance peer group consists of
the nine food companies in the broader compensation peer group
(Campbell Soup Co., ConAgra Foods, Inc., General Mills, Inc.,
H.J. Heinz Co., The Hershey Co., Kraft Foods, Inc., PepsiCo
Inc., Sara Lee Corporation and Wm. Wrigley Jr. Co.), plus
Unilever N.V. and Nestlé S.A. The performance peer
companies were chosen because they compete with us in the
consumer marketplace
and/or face
similar business dynamics and challenges.
The Use of Pay Tallies. The
Compensation Committee annually reviews executive pay tallies
for NEOs (detailing the executives annual pay
target and actual and total accumulated wealth under
various scenarios) to help ensure that the design of our program
is consistent with our compensation philosophy and that the
amount of compensation is within appropriate competitive
parameters. The Compensation Committee finds tools like pay
tallies helpful in its analysis of our program, but focuses more
on the benchmarking results of the compensation peer group in
determining specific compensation levels for the NEOs. Based on
the Compensation Committees review of pay tallies in 2007,
the Compensation Committee has concluded that the total
compensation of the NEOs (and, in the case of the
20
severance and
change-in-control
scenarios, potential payouts) is appropriate and reasonable and,
therefore, did not make any adjustments based on this review.
Elements of Our Compensation Program. Our
executive officer compensation package includes a combination of
annual cash and long-term incentive compensation. Annual cash
compensation for executive officers is comprised of base salary
and the annual incentive plan (the Kellogg performance bonus
plan). Long-term incentives currently consist of stock option
grants and a three-year long-term performance plan.
Total Compensation. The target for total
compensation and each element of total compensation (salary,
annual incentives, long-term incentives and benefits) is the
50th percentile of our compensation peer group.
Compensation peer group practices are analyzed annually for base
salary, target annual incentives and target long-term
incentives, and periodically for other pay elements. In setting
compensation of each executive, the Compensation Committee
considers individual performance, experience in the role and
contributions to achieving our business strategy.
We are unable to compare actual to target compensation on a
percentile basis for our NEOs because actual compensation
percentiles for the preceding fiscal year are not available. The
companies in our compensation peer group do not all report
actual compensation on the same twelve month basis. Even if this
information were available we do not believe it would provide
Shareowners with a fair understanding of our executive
compensation program because actual compensation can be impacted
by a variety of factors, including changes in stock prices,
company performance and vesting of retirement benefits.
We apply the same philosophy, principles and methodology in
determining the compensation for all of our NEOs, including the
CEO. The differences in the amount of total compensation among
our NEOs is a result of our benchmarking process and
market-based approach. As discussed, the compensation package
for each of the NEOs is intended to contain a mix of
compensation elements that the Compensation Committee believes
best reflects his responsibilities and that will best achieve
our overall objectives. To that end, an executives
compensation is generally designed so that performance based (or
at-risk) compensation increases as a percentage of
total targeted compensation as job responsibilities increase.
One result of this structure is that the difference between
actual total compensation for the CEO as compared to the other
NEOs will be greater when Kellogg over-performs and less when
Kellogg under-performs. In addition, the differences in actual
compensation among the NEOs are directly impacted by
(1) the amount of AOF options exercised and
(2) whether an NEO became retirement eligible in 2007.
The basic construct of the primary elements of our 2007
executive officer pay package is outlined below.
|
|
|
|
|
|
|
|
|
|
Element
|
|
Purpose
|
|
|
Characteristics
|
|
|
Base Salaries
|
|
Compensate executives for their level of responsibility and
sustained individual performance. Also helps attract and retain
strong talent.
|
|
|
Fixed component; NEOs eligible for annual salary increases.
|
|
|
|
|
|
|
|
|
|
|
Annual
Incentives
|
|
Promotes achieving our annual corporate and business unit
financial goals, as well as individual goals.
|
|
|
Performance-based cash opportunity; amount varies based on
company and business results and individual performance.
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Incentives
|
|
Promotes achieving (a) our long-term corporate financial goals
through the Executive Performance Plan and (b) stock price
appreciation through stock options.
|
|
|
Performance-based equity opportunity; amounts earned/realized
will vary from the targeted grant-date fair value based on
actual financial and stock price performance.
|
|
|
|
|
|
|
|
|
|
|
Retirement
Plans
|
|
Provide an appropriate level of replacement income upon
retirement. Also provide an incentive for a long-term career
with Kellogg, which is a key objective.
|
|
|
Fixed component; however, retirement contributions tied to pay
will vary based on performance.
|
|
|
|
|
|
|
|
|
|
|
Post-Termination
Compensation
|
|
Facilitates attracting and retaining high caliber executives in
a competitive labor market in which formal severance plans are
common.
|
|
|
Contingent component; only payable if the executives
employment is terminated under certain circumstances.
|
|
|
|
|
|
|
|
|
In setting total compensation, we apply a consistent approach
for all executive officers. The Compensation Committee also
exercises appropriate business judgment in how it applies the
standard approaches to the facts and circumstances associated
with each executive. Additional detail about each pay element is
presented below.
21
Base Salaries. Data on salaries paid to
comparable positions in our compensation peer group are gathered
and reported to the Compensation Committee by the independent
compensation consultant each year. The Compensation Committee,
after receiving input from the compensation consultant,
recommends to the Board the base salaries for the NEOs. The CEO
provides input for the base salaries for the CFO and other NEOs.
The Compensation Committee generally establishes base salaries
for the NEOs at the 50th percentile of our compensation
peer group. The salary of an executive is generally at, above or
below the 50th percentile based on experience and
proficiency in their role.
Mr. Mackays annualized base salary increased from
$907,000 in 2006 to $1.1 million in 2007 in connection with
becoming Chief Executive Officer on December 31, 2006, and
in order to maintain market competitiveness for his base salary.
In addition, in February 2007, the Compensation Committee
approved salary increases for the other NEOs. These increases
were made to maintain market competitiveness based on available
market comparison data. After these adjustments, the
Compensation Committee judged each NEOs salary for 2007 to
be correctly positioned relative to the 50th percentile for
his position based on his experience, proficiency and sustained
performance.
By policy, we require any executive base salary above $950,000
(after pre-tax deductions for benefits and similar items) to be
deferred into deferred stock units under our Executive Deferral
Program. This policy ensures that all base salary will be
deductible under Section 162(m) of the Internal Revenue
Code. The deferred amounts are credited to an account in the
form of units that are equivalent to the fair market value of
our common stock. The units are payable in cash upon the
executives termination from employment. As a result of
pre-tax deductions elected by our NEOs (for example,
participation in our Savings & Investment and
Restoration Plans), none of our NEOs were affected by this
policy in 2007.
Annual Incentives. Annual incentive awards to
the CEO, CFO and NEOs are paid under the terms of the Kellogg
Senior Executive Annual Incentive Plan (AIP), which
was approved by the Shareowners and is administered by the
Compensation Committee. The total of all annual incentives
granted in any one year under the AIP may not exceed 1% of our
annual net income, as defined in the plan. We did not pay any
bonuses outside of our AIP to our NEOs in 2007, other than the
third and final installment of a relocation incentive premium
payment paid to Mr. Mobsby. This payment was pursuant to
Mr. Mobsbys 2004 agreement described under
Employment Agreements Mr. Mobsby.
Awards granted to NEOs under the terms of the AIP are designed
to qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code. Accordingly,
objective measures were established within the first
90 days of fiscal 2007 in order to determine the
performance levels that would qualify for maximum
possible payouts under the 2007 AIP. These targets are tied to
our projected operating plan and, therefore, their achievement
is substantially uncertain at the time they are set. In February
2008, when our 2007 annual audited financial statements were
completed, the Compensation Committee reviewed how well Kellogg
performed versus the previously agreed upon targets established
for purposes of Section 162(m). In each of the last three
fiscal years, the targets set for purposes of
Section 162(m) under the AIP have been reached. The
Compensation Committee then uses a judgment-based methodology in
exercising downward, negative discretion to determine the actual
payout for each NEO.
As part of its judgment-based methodology, the Compensation
Committee established at the beginning of fiscal 2007 for each
NEO annual incentive opportunities as a percentage of an
executives base salary, which were targeted at the
50th percentile of the compensation peer group. In
addition, for each NEO, the Compensation Committee approved
performance ranges (which we refer to as bandwidths)
for internal operating profit, internal net sales and cash flow,
aligning the middle of the bandwidths generally with the
forecasted medians of the performance peer group and ensuring
that maximums and minimums generally fall within the top and
bottom quartiles respectively. Since target performance goals
are generally set at the median of the performance peer group,
actual performance above the median would result in incentive
payments above the target level, with payments at the maximum
level being made for performance in the top quartile of the
performance peer group on a composite basis for all three AIP
metrics. Conversely, performance below the median would
generally result in incentive payments below the target level,
with no payment being made for performance below a minimum
threshold (generally set in the bottom quartile). The
Compensation Committee and management believe that the metrics
for the 2007 AIP which are the same as the metrics
used for the AIPs in the last several years align
well with our strategy of attaining sustainable growth. The
specific targets and bandwidths set for the NEOs under the 2007
AIP are not disclosed because we believe disclosure of this
information would cause Kellogg competitive harm. These targets
and bandwidths are based on our confidential operating plan for
the fiscal year. The bandwidths are intended to be realistic and
reasonable, but challenging, in order to drive sustainable
growth and performance on an individual basis.
Actual AIP payments each year can range from 0% to 200% of the
target opportunity, based on corporate, business unit, and
individual performance with the greatest emphasis placed on
performance against the three AIP metrics
22
internal operating profit, internal net sales, and cash flow.
With respect to individual goals, the Compensation Committee
considers an NEOs individual achievements during the
performance period relative to pre-established individual goals,
including overall performance, behaving consistently with our
K Values, and the extent to which each NEO has
strengthened the culture and helped create the future for
Kellogg. With respect to NEOs other than the CEO, the Committee
also considers the CEOs assessment of their individual
performance.
At the beginning of fiscal 2007, Kellogg projected low
single-digit growth for internal net sales, mid single-digit
growth for internal operating profit and high single-digit
growth for net earnings per share. Based on its financial
results for fiscal 2007, Kellogg achieved mid single-digit
growth for internal sales, achieved low single-digit growth for
internal operating profit and exceeded high single-digit growth
for net earnings per share, and its overall performance among
these metrics ranked Kellogg in the second quartile of its
performance peer group.
When evaluating Kelloggs performance, the Compensation
Committee may consider adjustments to ensure that AIP payouts
are consistent with our overall compensation philosophy. In
other words, any adjustments are made to ensure that
compensation is competitive with the market, payouts are
properly aligned with the Kelloggs performance, and
management operates the business to drive long-term sustainable
growth. Consequently, the Compensation Committee would consider
making adjustments based on the unbudgeted impact of investments
in the business to drive long-term growth including some brand
building initiatives, accounting charges, and other unusual or
non-recurring gains or losses. In 2007, the Compensation
Committee made an adjustment with respect to the unbudgeted
impact of a cost savings initiative intended to drive long-term
growth.
Based on this information and in exercising its judgment-based
methodology, the Compensation Committee determined the
percentage of AIP target achieved. The chart below includes
information about 2007 AIP opportunities and actual payout.
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2007 AIP Payout
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AIP Target
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AIP Maximum
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(paid in March 2008)
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% of Base
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% of AIP
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% of AIP
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Salary(1)
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Amount($)
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Target
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Amount($)
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Target
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Amount($)(2)
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David Mackay
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125
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%
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1,375,000
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200
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%
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2,750,000
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155
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%
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2,131,300
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John Bryant
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90
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%
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571,500
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200
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%
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1,143,000
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166
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%
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950,000
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Jeff Montie
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90
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%
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576,000
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200
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%
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1,152,000
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135
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%
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777,600
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Tim Mobsby(3)
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70
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%
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469,551
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200
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%
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939,102
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200
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%
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938,400
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Paul Norman
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70
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%
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385,000
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200
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%
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770,000
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143
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%
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550,500
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Brad Davidson
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70
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%
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385,000
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200
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%
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770,000
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200
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%
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770,000
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(1) |
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For AIP purposes, incentive opportunities are based on
executives salary levels at December 29, 2007. Annual
salary increases become effective in April of each year. |
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(2) |
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This amount is calculated by multiplying the executives
AIP Target Amount as shown in the second column of the table by
the percentage of the AIP Target achieved as shown in the fifth
column of the table. For example, Mr. Mackays amount
is calculated by multiplying his AIP Target Amount of $1,375,000
by 155%. |
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(3) |
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Mr. Mobsby is employed in Ireland and paid in euros. In
calculating the U.S. dollar equivalent for disclosure purposes,
we use a conversion rate to convert the sum of his payments from
euros into U.S. dollars based on an average of the closing
monthly exchange rates in effect for each month during the
fiscal year in which the payments were made. According to the
Wall Street Journal, this conversion rate of euros to U.S.
dollars for the fiscal year ending December 29, 2007 was
1.374. |
Long-Term
Incentives. General. Long-term
incentive awards for the NEOs promote achieving our long-term
corporate financial goals and earnings growth. Each year, the
Compensation Committee reviews and recommends long-term
incentive awards for each of the NEOs to the Board. In
determining the total value of the long-term incentive
opportunity for each executive, the Compensation Committee
reviews the compensation peer group data presented by its
compensation consultant on a
position-by-position
basis. Our long-term compensation program has consisted of a mix
of stock options and performance-based stock awards, which the
Compensation Committee evaluates each year.
Long-term incentives are provided to our executives under the
2003 Long-Term Incentive Plan, or LTIP (the LTIP was
approved by Shareowners). The LTIP permits grants of stock
options, stock appreciation rights, restricted shares and
performance shares and units (such as Executive Performance Plan
awards). The plan is intended to meet the deductibility
23
requirements of Section 162(m) of the Internal Revenue Code
as performance-based pay (resulting in paid awards being tax
deductible to Kellogg).
All of the 2007 long-term incentive opportunity was provided
through equity-based awards, which the Compensation Committee
believes best achieves the compensation principles for the
program. For 2007, the Compensation Committee determined that
the NEOs would receive 70% of their total long-term incentive
opportunity in stock options and the remaining 30% in
performance shares (granted under the Executive Performance Plan
as discussed below). The Compensation Committee established this
mix of awards after considering our compensation principles,
compensation peer group practices and cost implications. The
total amount of long-term incentives (based on the grant date
expected value) is generally targeted at the
50th percentile of the compensation peer group.
Stock Options. The Compensation Committee
grants stock options to deliver competitive compensation that
recognizes executives for their contributions to Kellogg and
aligns executives with Shareowners in focusing on long-term
growth and stock performance. These options provide value to the
executive only if our stock price increases after the grants are
made.
Stock options are granted annually to a wide range of employees
(approximately 2,700 in 2007) based on pre-established
grant guidelines calibrated to competitive standards and
approved by the Compensation Committee under the LTIP. Prior to
2007, all options granted under the LTIP were granted with
exercise prices equal to the average of the high and low trading
prices of our stock on the date of grant. Beginning in 2007, the
exercise price of our options is now set at the closing trading
price on the date of grant. Our options have a ten-year term.
The options granted in 2007 become exercisable in two equal
annual installments, with 50% vesting on February 16, 2008
(the first anniversary of the grant date), and the other 50%
vesting on February 16, 2009 (the second anniversary of the
grant date). The per-share exercise price for the stock options
is $49.78, the closing trading price of Kellogg common stock on
the date of the grant. The stock options expire on
February 16, 2017. Approximately 84% of the stock options
covered by the February 16, 2007 grant were made to
employees other than the NEOs. Individual awards may vary from
target levels based on the individuals performance,
ability to impact financial performance and future potential.
Executive Performance Plan. The Executive
Performance Plan (EPP) is a stock-based,
pay-for-performance, multi-year incentive plan intended to focus
senior management on achieving critical multi-year operational
goals. These goals, such as cash flow, internal net sales growth
and operating profit growth, are designed to increase Shareowner
value. Approximately 100 of our most senior employees
participate in the EPP, including the NEOs. Performance under
EPP is measured over the three-year performance period based on
performance levels set at the start of the period. Vested EPP
awards are paid in Kellogg common stock.
2007-2009 EPP. Similar to the
AIP, awards granted to NEOs under the terms of the EPP are
designed to qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code. Accordingly,
an objective measure was established within the first
90 days of fiscal 2007 in order to determine the
performance level that would qualify for maximum possible
payouts under the EPP after the end of fiscal 2009. These
targets are tied to our projected operating plan and, therefore,
their achievement is substantially uncertain at the time they
are set at the beginning of the performance period. The
Compensation Committee approved the targets and bandwidths for
the
2007-2009
EPP in the same manner as the targets and bandwidths for the
AIP. The specific targets and bandwidths set for the NEOs are
not disclosed because we believe disclosure of this information
would cause Kellogg competitive harm. The bandwidths are based
on our confidential long-range operating plan, and are intended
to be realistic and reasonable, but challenging, in order to
drive sustainable growth.
The Compensation Committee and management believe that the
metric for the
2007-2009
EPP cumulative cash flow emphasizes the
importance of cash flow in driving Shareowner value. Like with
the AIP, once the Compensation Committee confirms the
performance level delivered is at the level for which the NEOs
are eligible to receive a payout under the EPP, the Compensation
Committee uses a judgment-based methodology in exercising
downward, negative discretion to determine the actual payout for
each NEO. However, unlike the AIP, the Compensation Committee
does not consider individual performance in determining payouts.
The Compensation Committee weighs only company performance when
determining actual payouts under the EPP. The Compensation
Committee also takes into account the unbudgeted impact of
unusual or nonrecurring gains and losses, accounting changes or
other extraordinary events not foreseen at the time the
performance goals or award opportunities were established.
The Compensation Committee set each individuals target at
30% of his or her total long-term incentive opportunity.
Participants in the EPP have the opportunity to earn between 0%
and 200% of their EPP target. The
2007-2009
EPP cycle began on January 1, 2007 (first day of fiscal
2007) and concludes on January 2, 2010 (last day of
fiscal 2009). Dividends
24
are not paid on unvested EPP awards. The
2007-2009
EPP award opportunities, presented in number of potential shares
that can be earned, are included in the Grant of Plan-Based
Awards Table on page 36 of this proxy statement.
2005-2007 EPP. For the
2005-2007
EPP awards, the performance period ended on December 29,
2007 (the last day of fiscal 2007). In February 2008, when our
2007 annual audited financial statements were completed, the
Compensation Committee reviewed our performance versus the
internal net sales target established in 2005 for purposes of
Section 162(m) and the relevant bandwidths. At the
beginning of 2005, our stated goals were low single-digit growth
in internal net sales. For the period covering
2005-2007,
Kellogg achieved strong mid-single-digit growth which ranked at
the top of the second quartile compared to our performance peer
group. Despite actual internal net sales growth over the three
year performance period exceeding the upper limit of the
projected bandwidths established in 2005 for each NEO, the
Compensation Committee followed its established precedent of
capping payouts for EPP at 200% of target. The Compensation
Committee did not make any adjustment when determining payouts
under the
2005-2007
EPP. Because each NEO had to be actively employed by Kellogg on
the date the awards were paid out, the
2005-2007
EPP awards did not vest until February 2008.
The chart below includes information about
2005-2007
EPP opportunities and actual payouts:
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2005-2007 EPP Payout
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(paid in February 2008)
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EPP Target
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EPP Maximum
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% of EPP
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Amount(#)
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Amount(#)
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Target
|
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Amount(#)
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Amount($)(1)
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David Mackay
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30,100
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60,200
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200
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%
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60,200
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3,114,146
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John Bryant
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12,400
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24,800
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200
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%
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24,800
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1,282,904
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Jeff Montie
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13,800
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27,600
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|
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200
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%
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27,600
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1,427,748
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Tim Mobsby
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5,700
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11,400
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|
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200
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%
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11,400
|
|
|
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589,722
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Paul Norman
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7,500
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15,000
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|
|
|
200
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%
|
|
|
15,000
|
|
|
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775,950
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|
Brad Davidson
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5,700
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|
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11,400
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|
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200
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%
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11,400
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589,722
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(1) |
|
The payout amount is calculated by multiplying the earned shares
by the closing price of our common stock on February 15,
2008 (the last trading day prior to the date the award was paid
out). |
Restricted Stock. In addition, we award
restricted shares from time to time to selected executives and
employees based on a variety of factors, including facilitating
recruiting and retaining key executives. In 2007, none of our
NEOs received a restricted stock award.
Post-Termination Compensation. The NEOs are
covered by arrangements which specify payments in the event the
executives employment is terminated. These severance
benefits, which are competitive with the compensation peer group
and general industry practices, are payable if and only if the
executives employment is terminated without cause.
The Kellogg Severance Benefit Plan and the Change in Control
Policy have been established primarily to attract and retain
talented and experienced executives and further motivate them to
contribute to our short- and long-term success for the benefit
of our Shareowners, particularly during uncertain times.
The Kellogg Severance Benefit Plan provides market-based
severance benefits to employees who are terminated by Kellogg
under certain circumstances. Kellogg benefits from this program
in a variety of ways, including the fact that Kellogg has the
right to receive a general release, non-compete,
non-solicitation and non-disparagement provisions from separated
employees.
The Change in Control Policy provides market-based benefits to
executives in the event an executive is terminated without cause
or the executive terminates employment for good
reason in connection with a change in control. The Change
in Control Policy protects Shareowner interests by enhancing
employee focus during rumored or actual change in control
activity by providing incentives to remain with Kellogg despite
uncertainties while a transaction is under consideration or
pending.
For more information, please refer to Potential
Post-Employment Payments, which begins on page 46 of
this proxy statement.
Retirement Plans. Our CEO, CFO and other NEOs
are eligible to participate in Kellogg-provided pension plans
which provide benefits based on years of service and pay (salary
plus annual incentive) to a broad base of employees. These NEOs
are eligible to receive market-based benefits when they retire
from Kellogg. The Compensation Committee utilizes an industry
survey prepared by Hewitt & Associates to help
determine the appropriate level of benefits. The
25
industry survey contains detailed retirement income benefit
practices for a broad-based group of consumer products
companies, which includes Kellogg, the companies in our
compensation peer group (other than The
Coca-Cola
Co.) and the following additional consumer products companies:
Armstrong World Industries, Inc., The Gillette Company, S.C.
Johnson Consumer Products, LOreal USA, Inc.,
Johnson & Johnson, The Procter & Gamble Co.,
Nestle USA, Inc., Pfizer, Inc., R. J. Reynolds Tobacco Company
and Unilever United States, Inc. Rather than commissioning a
customized survey, the Compensation Committee uses the same
survey used by Kellogg to set these benefits for all
U.S. salaried employees. Since our
U.S.-based
NEOs participate in the same plans (with exceptions noted) as
all of our U.S. salaried employees, the industry survey is
a cost-effective way to set these benefits. Based on the
industry survey, the Compensation Committee targets the median
retirement income replacement among similarly situated
executives. The targeted amount of the total retirement benefits
is provided through a combination of qualified and non-qualified
defined contribution plans and qualified and non-qualified
defined benefit plans. The plans are designed to provide an
appropriate level of replacement income upon retirement. These
benefits consist of:
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annual accruals under our pension plans; and
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|
deferrals by the executive of salary and annual incentives, and
matching contributions by us, under our savings and investment
plans.
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Both our U.S. pension program and our U.S. savings and
investment program include restoration plans for our
U.S. executives, which allow us to provide benefits
comparable to those which would be available under our IRS
qualified plans if the IRS regulations did not include limits on
covered compensation and benefits. We refer to these plans as
restoration plans because they restore benefits that
would otherwise be available under the plans in which
substantially all of our U.S. salaried employees are
eligible to participate. These plans use the same benefit
formulas as our broad-based IRS qualified plans, and use the
same types of compensation to determine benefit amounts.
Amounts earned under long-term incentive programs such as EPP,
gains from stock options and awards of restricted stock are not
included when determining retirement benefits for any employee
(including executives). We do not pay above-market interest
rates on amounts deferred under our savings and investment plans.
The amount of an employees compensation is an integral
component of determining the benefits provided under pension and
savings plan formulas, and thus an individuals performance
over time will influence the level of his or her retirement
benefits. For more information, please refer to Retirement
and Non-Qualified Defined Contribution and Deferred Compensation
Plans, which begins on page 41 of this proxy
statement.
As a result of his service while in the Great Britain and
Ireland, Mr. Mobsby has accrued benefits under the Senior
Executives Benefits Plan, which we refer to as the U.K.
Executive Pension Plan, and the Kellogg Group Irish Pension
Plan, Senior Executive Section, which we refer to as the Irish
Executive Pension Plan. There is no additional non-qualified
pension plan, as there is for U.S. executives, because
applicable tax laws do not function in a way that would require
us to restore benefits limited by the applicable tax
laws. The U.K. Executive Pension Plan was developed
30 years ago based on what was allowable under U.K. tax law
at the time. The Irish Executive Plan was developed to mirror
the benefits of the U.K. Executive Pension Plan and, therefore,
provides similar benefits that are calculated in the same way as
the U.K. Executive Pension Plan.
Perquisites. The Compensation Committee
believes that it has taken a conservative approach to
perquisites relative to other companies in the compensation peer
group. For example, Kellogg does not provide company cars or
club memberships to its U.S. NEOs. Perquisites provided to
our foreign NEOs may vary depending on the standard market
practices and regulations for the country in which an NEO is
based. Pursuant to a policy adopted by the Board, our CEO is
generally required, when practical, to use company aircraft for
personal travel for security reasons. Personal use of company
aircraft by other NEOs is infrequent. The Summary Compensation
Table beginning on page 32 of this proxy statement contains
itemized disclosure of all perquisites to our NEOs, regardless
of amount.
Employee Stock Purchase Plan. We have a
tax-qualified employee stock purchase plan, which is made
available to substantially all U.S. employees, which allows
participants to acquire Kellogg stock at a discount price. The
purpose of the plan is to encourage employees at all levels to
purchase stock and become Shareowners. Prior to 2008, the plan
allowed participants to buy Kellogg stock at 85% of the lower of
the starting or ending market price for the period with up to
10% of their base salary (subject to IRS limits). As of
January 1, 2008, the plan allows participants to buy
Kellogg stock at a 5% discount to the market price. This change
was made to reduce our overall compensation expense. Under
applicable tax law, no plan participant may purchase more than
$25,000 in market value (based on the market value of Kellogg
stock on the last trading day prior to the beginning of the
enrollment period for each subscription period) of
26
Kellogg stock in any calendar year. Although this benefit is
generally available to all U.S. employees, we have included
the compensation expense of any discounted stock purchased by
our NEOs in the Summary Compensation Table.
The Kellogg Europe Trading Limited Employee Share Purchase
Plan. We have a tax qualified employee stock
purchase plan, which is made available to all Irish tax-paying
employees of Kellogg Europe Trading Limited, which we refer to
as KETL, who have been with KETL or another company within
Kellogg for three consecutive months (including
Mr. Mobsby), which allows participants to invest in shares
of Kellogg stock every three months and qualify for a 100%
matching contribution of Kellogg stock (subject to Irish tax law
limits). The purpose of the Kellogg Europe Trading Limited
Employee Share Purchase Plan, which we refer to as the KPlan, is
to provide KETL employees with the opportunity to acquire a
stake in the future of Kellogg. The KPlan allows participants to
buy the largest whole number of shares of Kellogg stock for an
amount no less than 10 per month, but no more than 3.5% of
one months net basic salary, and limited to a maximum
value of 12,700 per tax year. Participants purchase these
shares of Kellogg stock at the price at which those shares are
available on the New York Stock Exchange. Participants in the
KPlan must agree that all shares acquired under the plan be held
on their behalf by a trustee for three years, subject to certain
exceptions. Although this benefit is generally available to all
employees of KETL, we have included the compensation expense of
any matching stock received by Mr. Mobsby in the Summary
Compensation Table.
Executive
Compensation Policies.
Executive Stock Ownership Guidelines. In order
to preserve the linkage between the interests of senior
executives and those of Shareowners, senior executives are
expected to establish and maintain a significant level of direct
stock ownership. This can be achieved in a variety of ways,
including by retaining stock received upon exercise of options
or the vesting of stock awards (including EPP awards),
participating in the Employee Stock Purchase Plan and purchasing
stock in the open market. The CEOs stock ownership
requirement under our stock ownership guidelines is five times
annual base salary. The stock ownership requirement for our
other NEOs under our stock ownership guidelines is three times
annual base salary. Our current stock ownership guidelines
(minimum requirements) are as follows:
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Chief Executive Officer
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5x annual base salary
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Global Leadership Team members (other than the CEO)
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3x annual base salary
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Other senior executives
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2x annual base salary
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These executives have five years from the date they first become
subject to a particular level of the guidelines to meet them.
All of our NEOs currently meet the guidelines, and all of our
other senior executives currently meet or are on track to meet
their ownership guideline. The Compensation Committee reviews
compliance with the guidelines on an annual basis. Executives
who are not in compliance with the guidelines may not sell stock
without prior permission from our Chief Executive Officer,
except for stock sales used to fund the payment of taxes and
transaction costs incurred in connection with the exercise of
options and the vesting of stock awards.
Practices Regarding the Grant of Equity
Awards. The Compensation Committee has generally
followed a practice of making all option grants to executive
officers on a single date each year. Prior to the relevant
Compensation Committee meeting, the Compensation Committee
reviews an overall stock option pool for all participating
employees (approximately 2,700 in 2007) and recommendations
for individual option grants to executives. Based on this
review, the Compensation Committee approves the overall pool and
the individual option grants to executives.
The Board grants these annual awards at its regularly-scheduled
meeting in mid-February. The February meeting usually occurs
within 2 or 3 weeks following our final earnings release
for the previous fiscal year. We believe that it is appropriate
that annual awards be made at a time when material information
regarding our performance for the preceding year has been
disclosed. We do not otherwise have any program, plan or
practice to time annual option grants to our executives in
coordination with the release of material non-public
information. EPP Awards are granted at the same time as options.
While most of our option awards to NEOs have historically been
made pursuant to our annual grant program, the Compensation
Committee and Board retain the discretion to make additional
awards of options or restricted stock to executives at other
times for recruiting or retention purposes. We do not have any
program, plan or practice to time off-cycle awards
in coordination with the release of material non-public
information.
All option awards made to our NEOs, or any of our other
employees or Directors, are made pursuant to our LTIP. As noted
above, prior to 2007, all options under the LTIP were granted
with an exercise price equal to the average of the high and low
trading prices of our stock on the date of grant. Beginning in
2007, the exercise price of our options is now
27
set at the closing trading price on the date of grant. We do not
have any program, plan or practice of awarding options and
setting the exercise price based on the stocks price on a
date other than the grant date, and we do not have a practice of
determining the exercise price of option grants by using average
prices (or lowest prices) of our common stock in a period
preceding, surrounding or following the grant date. All grants
to NEOs are made by the Board itself and not pursuant to
delegated authority. Pursuant to authority delegated by the
Board and subject to the Compensation Committee-approved
allocation, awards of options to employees below the executive
level are made by our CEO or other authorized senior executive
officer.
Securities Trading Policy. Our securities
trading policy prohibits our Directors, executives and other
employees from engaging in any transaction in which they may
profit from short-term speculative swings in the value of our
securities. This includes short sales (selling
borrowed securities which the seller hopes can be purchased at a
lower price in the future) or short sales against the
box (selling owned, but not delivered securities),
put and call options (publicly available
rights to sell or buy securities within a certain period of time
at a specified price or the like) and hedging transactions, such
as zero-cost collars and forward sale contracts. In addition,
this policy is designed to ensure compliance with relevant SEC
regulations, including insider trading rules.
Recoupment of Option Awards. We maintain
clawback provisions relating to stock option exercises. Under
these clawback provisions, if an executive voluntarily leaves
our employment to work for a competitor within one year after
any option exercise, then the executive must repay to Kellogg
any gains realized from such exercise (but reduced by any tax
withholding or tax obligations).
Deductibility of Compensation and Other Related
Issues. Section 162(m) of the Internal
Revenue Code includes potential limitations on the deductibility
of compensation in excess of $1 million paid to the
companys CEO and four other most highly compensated
executive officers serving on the last day of the year. Based on
the regulations issued by the Internal Revenue Service, we have
taken the necessary actions to ensure the deductibility of
payments under the AIP and with respect to stock options and
performance shares granted under our plans, whenever possible.
We intend to continue to take the necessary actions to maintain
the deductibility of compensation resulting from these types of
awards. In contrast, restricted stock granted under our plans
generally does not qualify as performance-based
compensation under Section 162(m). Therefore, the
vesting of restricted stock in some cases will result in a loss
of tax deductibility of compensation, including in the case of
the CEO. We view preserving tax deductibility as an important
objective, but not the sole objective, in establishing executive
compensation. In specific instances we have and in the future
may authorize compensation arrangements that are not fully tax
deductible but which promote other important objectives of the
company.
The Compensation Committee also reviews projections of the
estimated accounting (pro forma expense) and tax impact of all
material elements of the executive compensation program.
Generally, accounting expense is accrued over the requisite
service period of the particular pay element (generally equal to
the performance period) and Kellogg realizes a tax deduction
upon the payment to/realization by the executive. As a result of
the impact AOF options have on our overall non-cash compensation
expense, the Compensation Committee discontinued the use of the
AOF in all new option grants after 2003. In 2006, the
Compensation Committee also changed the AOF feature so that AOF
options may be received only once each calendar year. This
change began in 2007 and reduces our non-cash compensation
expense resulting from AOF options.
28
COMPENSATION
COMMITTEE REPORT
As detailed in its charter, the Compensation Committee of the
Board oversees our compensation program on behalf of the Board.
In the performance of its oversight function, the Compensation
Committee, among other things, reviewed and discussed with
management the Compensation Discussion and Analysis set forth in
this proxy statement.
Based upon the review and discussions referred to above, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in our Annual
Report on
Form 10-K
for the fiscal year ended December 29, 2007 and our proxy
statement to be filed in connection with our 2008 Annual Meeting
of Shareowners, each of which will be filed with the SEC.
COMPENSATION COMMITTEE
Dr. John Zabriskie, Chair
Claudio Gonzalez
Gordon Gund
Ann McLaughlin Korologos
29
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following narrative, tables and footnotes describe the
total compensation earned during 2006 and 2007 by
our NEOs; however, 2006 information is not provided pursuant to
the SECs rules and regulations for Messrs. Mobsby,
Norman and Davidson because they were not named executive
officers of Kellogg during fiscal 2006. The total compensation
presented below does not reflect the actual compensation
received by our NEOs in 2007 or the target compensation of our
NEOs in 2006 and 2007. The actual value realized by our NEOs in
2007 from long-term incentives (options and restricted stock) is
presented in the Option Exercises and Stock Vested Table on
page 40 of this proxy statement. Target annual and
long-term incentive awards for 2007 are presented in the Grants
of Plan-Based Awards table on page 36 of this proxy
statement.
The individual components of the total compensation calculation
reflected in the Summary Compensation Table are broken out below:
Salary. Base salary earned during 2007. Refer
to Compensation Discussion and Analysis
Elements of Our Compensation Program Base
Salaries.
Bonus. We did not pay any bonuses to our NEOs
in 2007, other than the third and final installment of a
relocation incentive premium payment paid to Mr. Mobsby.
This payment was pursuant to Mr. Mobsbys 2004
agreement described under Employment
Agreements Mr. Mobsby. Each NEO earned an
annual performance-based cash incentive under our AIP, as
discussed below under Non-Equity Incentive Plan
Compensation. Refer to Compensation Discussion and
Analysis Elements of Our Compensation
Program Annual Incentives.
Stock Awards. The awards disclosed under the
heading Stock Awards consist of:
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for 2007, (1) the
2005-2007
EPP awards granted in 2005, (2) the
2006-2008
EPP awards granted in 2006, (3) the
2007-2009
EPP awards granted in 2007 and (4) restricted stock
awards; and
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for 2006, (1) the
2005-2007
EPP awards granted in 2005 and, in the case of Mr. Mackay,
an increase to his
2005-2007
EPP award resulting from him assuming the role of Chief
Executive Officer, (2) the
2006-2008
EPP awards granted in 2006 and (3) restricted stock awards.
The Stock Awards column also includes relatively
small compensation expense adjustments relating to
2003-2005
EPP awards as a result of a true up made in 2006.
|
The dollar amounts for the awards represent the grant-date fair
value-based compensation expense recognized in 2007 and in 2006
under SFAS No. 123(R) for each NEO and as reported in
our audited financial statements contained in our Annual Report
on
Form 10-K.
Details about the EPP awards granted in 2007 are included in the
Grant of Plan-Based Awards Table below. Refer to also
Compensation Discussion and Analysis Elements
of Our Compensation Program Long-Term
Incentives for additional information. The recognized
compensation expense of the stock-based awards will likely vary
from the actual amount the NEO receives. The actual value the
NEO receives will depend on the number of shares earned and the
price of our common stock when the shares vest.
Option Awards. The awards disclosed under the
heading Option Awards consist of annual option
grants (each a regular option) and accelerated
ownership feature (AOF) option grants (each an
AOF option) granted in 2007 and in 2006 and in prior
fiscal years (to the extent such awards remained unvested in
whole or in part at the beginning of fiscal 2007 and 2006,
respectively). The dollar amounts for the awards represent the
grant-date fair value-based compensation expense recognized in
2007 and in 2006 under SFAS No. 123(R) for each NEO
and as reported in our audited financial statements contained in
our Annual Report on
Form 10-K.
Details about the option awards made during 2006 are included in
the Grant of Plan-Based Awards Table below. Refer to also
Compensation Discussion and Analysis Elements
of Our Compensation Program Long-Term
Incentives Stock Options for additional
information. The recognized compensation expense of the stock
option awards will likely vary from the actual value the NEO
receives. The actual value the NEO receives will depend on the
number of shares exercised and the price of our common stock on
the date exercised.
Prior to 2004, we granted original options with an
accelerated ownership feature (AOF). Under the terms
of the original option grant, a new option, or AOF
option, is generally received when Kellogg stock is used
to pay the exercise price of a stock option and related taxes.
The holder of the option receives an AOF option for the number
of shares used.
30
For AOF options, the expiration date is the same as the original
option and, beginning in January 2007, the option exercise price
is the officially quoted closing price of our common stock on
the date the AOF option is granted.
The Compensation Committee began using the AOF options over
fifteen years ago in order to create greater stock ownership by
encouraging Directors and executives to exercise valuable stock
options and retain the shares received as a result of the option
exercise. The Compensation Committee discontinued the use of the
AOF feature in all new original option grants after
2003 to better align with peer group compensation practices and
in anticipation of new accounting rules for the expensing of
stock options. Although we discontinued the AOF feature in new
option grants, a number of the outstanding options disclosed in
the Summary Compensation Table were granted prior to 2004.
Consequently, those AOF options could continue until their
natural expiration date (generally, ten years after the date of
the original grant). The Compensation Committee further changed
the AOF options in 2007 so that they may only be exercised once
each fiscal year. Prior to this change, AOF options were
generally exercised twice during each fiscal year. Our overall
stock option expense is reduced by limiting the number of times
an AOF option can be exercised during any given fiscal year.
Non-Equity Incentive Plan Compensation. The
amount of Non-Equity Incentive Plan Compensation consists of the
Kellogg Senior Executive Annual Incentive Plan (AIP)
awards granted and earned in 2007 and in 2006. At the outset of
2007 and 2006, the Compensation Committee granted AIP awards to
the CEO, CFO and the other NEOs. Such awards are based on our
performance during 2007 and 2006, respectively, and were paid in
March 2008 (for 2007 grants) and in March 2007 (for 2006
grants). For information on these awards refer to
Compensation Discussion and Analysis Elements
of Our Compensation Program Annual Incentives.
Change in Pension Value. The amounts disclosed
under the heading Change in Pension Value and
Non-Qualified Deferred Compensation Earnings solely
represent the actuarial increase during 2007 and during 2006 in
the pension value provided under the pension plans. Kellogg does
not pay above-market or preferential rates on non-qualified
deferred compensation for employees, including the NEOs. A
detailed narrative and tabular discussion about our pension
plans and non-qualified deferred compensation plans, our
contributions to our pension plans and the estimated actuarial
increase in the value of our pension plans are presented under
the heading Retirement and Non-Qualified Defined
Contribution and Deferred Compensation Plans.
All Other Compensation. Consistent with our
emphasis on performance-based pay, perquisites and other
compensation are limited in scope and primarily comprised of
retirement benefit contributions and accruals for NEOs based in
the United States.
31
SUMMARY
COMPENSATION TABLE
It is important to note that the information required by the
Summary Compensation Table does not necessarily reflect the
target or actual compensation for our NEOs in 2007 and in 2006.
In addition, the SEC regulations and accounting rules require
certain compensation expense reflected in the table to be
recognized immediately if any of the NEOs were retirement
eligible in 2007 and in 2006, respectively.
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Change in
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Pension
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Value and
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Non-Equity
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Non-Qualified
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Incentive
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Deferred
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Stock
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Option
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Plan
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Compensation
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All Other
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Name and Principal
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Position(2)
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Year
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($)
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($)
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($)(3)
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($)(4)
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($)
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($)(5)
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($)(6)
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($)
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David Mackay,
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2007
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1,096,297
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0
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2,674,151
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5,108,269
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2,131,300
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809,000
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249,230
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12,068,247
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President and Chief Executive Officer
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2006
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898,743
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0
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4,939,572
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4,809,773
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1,571,400
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878,000
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135,600
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13,233,088
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(1)
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John Bryant,
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2007
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626,247
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0
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1,237,317
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1,458,408
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950,000
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244,000
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70,660
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4,586,632
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Executive Vice President and Chief
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2006
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561,948
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0
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1,186,127
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1,811,463
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697,000
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80,000
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67,585
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4,404,123
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Financial Officer and President,
Kellogg North America
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Jeff Montie,
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2007
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630,568
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0
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1,348,563
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1,414,079
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777,600
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(7)
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75,450
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4,246,260
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Executive Vice President and President,
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2006
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594,361
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0
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1,267,579
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1,624,620
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761,100
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335,000
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79,561
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4,662,221
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Kellogg International
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Tim Mobsby(8)
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2007
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665,909
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81,410
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(9)
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414,034
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883,598
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938,400
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2,187,000
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(10)
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76,568
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5,246,919
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Senior Vice President and Executive
Vice President, Kellogg International
and President Europe
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Paul Norman
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2007
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526,022
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0
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702,669
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748,289
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550,500
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(7)
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48,353
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2,575,833
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Senior Vice President, Kellogg
Company and President,
U.S. Morning Foods
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Brad Davidson
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2007
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531,339
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0
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575,157
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568,297
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770,000
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125,000
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104,971
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2,674,764
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Senior Vice President, Kellogg
Company and President, U.S. Snacks
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(1) |
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In 2006, Mr. Mackay became retirement eligible. If
Mr. Mackay were not considered retirement eligible, his
Total Compensation in 2006 would have been
$9,861,662, (as opposed to $13,233,088, which appears in the
table). This difference is a result of compensation expense for
certain equity-based awards being recognized immediately under
applicable accounting rules when an employee is considered
retirement eligible. Specifically, the amounts that would have
been reflected in the table are as follows: (a) Stock
Awards: $2,336,357 in 2006 (as opposed to $4,939,572 in the
table); and (b) Option Awards: $4,041,562 in 2006 (as
opposed to $4,809,773 in the table). |
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(2) |
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On July 23, 2007, the following titles changed:
(a) Mr. Bryant became Executive Vice President and
Chief Financial Officer, Kellogg Company, and President, Kellogg
North America; and (b) Mr. Montie became Executive
Vice President, Kellogg Company, and President, Kellogg
International. |
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(3) |
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Reflects the compensation expense recognized in 2007 and 2006
for stock awards under SFAS No. 123(R) for each NEO
and as reported in our audited financial statements. Refer to
Notes 1 and 8 to the Consolidated Financial Statements
included in our Annual Report on
Form 10-K
for the year ended December 29, 2007 for a discussion of |
32
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the relevant assumptions used in calculating the compensation
expense. The table below presents separately the compensation
expense recognized in 2007 and in 2006 for our outstanding EPP
awards and restricted stock awards: |
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Restricted
|
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EPP
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Stock
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Total
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($)
|
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($)
|
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($)
|
|
David Mackay(a)
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2007
|
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2,674,151
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|
|
|
0
|
|
|
|
2,674,151
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|
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|
2006
|
|
|
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4,939,572
|
|
|
|
0
|
|
|
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4,939,572
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John Bryant
|
|
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2007
|
|
|
|
891,374
|
|
|
|
345,943
|
|
|
|
1,237,317
|
|
|
|
|
2006
|
|
|
|
653,712
|
|
|
|
532,415
|
|
|
|
1,186,127
|
|
Jeff Montie
|
|
|
2007
|
|
|
|
967,722
|
|
|
|
380,841
|
|
|
|
1,348,563
|
|
|
|
|
2006
|
|
|
|
737,560
|
|
|
|
530,019
|
|
|
|
1,267,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tim Mobsby
|
|
|
2007
|
|
|
|
414,034
|
|
|
|
0
|
|
|
|
414,034
|
|
Paul Norman
|
|
|
2007
|
|
|
|
525,367
|
|
|
|
177,302
|
|
|
|
702,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brad Davidson
|
|
|
2007
|
|
|
|
427,207
|
|
|
|
147,950
|
|
|
|
575,157
|
|
|
|
|
(a) |
|
Mr. Mackay is considered retirement eligible. |
|
|
|
|
|
Prior to adoption of SFAS No. 123(R) on
January 1, 2006, we generally recognized stock compensation
expense over the stated vesting period of the award, with any
unamortized expense recognized immediately if an acceleration
event occurred (for example, retirement).
SFAS No. 123(R) specifies that a stock-based award is
considered vested for expense attribution purposes when the
employees retention of the award is no longer contingent
on providing subsequent service. Accordingly, compensation
expense is recognized immediately for awards granted to
retirement-eligible individuals or over the period from the
grant date to the date retirement eligibility is achieved, if
less than the stated vesting period. |
|
|
|
(4) |
|
Reflects the compensation expense recognized for stock option
grants made in 2007 (for 2007 compensation), in 2006 (for 2006
compensation) and in prior fiscal years (to the extent such
awards remained unvested in whole or in part at the beginning of
fiscal 2007 and 2006, respectively). Refer to Notes 1 and 8
to the Consolidated Financial Statements included in our Annual
Report on
Form 10-K
for the year ended December 29, 2007 for a discussion of
the relevant assumptions used in calculating the compensation
expense. The table below presents separately the compensation
expense recognized in 2007 between our regular options and our
AOF options. When an executive exercises an original option with
an AOF, the AOF option is treated as a new grant for disclosure
and accounting purposes even though the new grant relates back
to the approval of the original grant. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options ($)
|
|
AOF Options ($)
|
|
Total ($)
|
|
David Mackay(a)
|
|
|
2007
|
|
|
|
3,733,822
|
|
|
|
1,374,447
|
|
|
|
5,108,269
|
|
|
|
|
2006
|
|
|
|
2,219,699
|
|
|
|
2,590,074
|
|
|
|
4,809,773
|
|
John Bryant
|
|
|
2007
|
|
|
|
937,994
|
|
|
|
520,414
|
|
|
|
1,458,408
|
|
|
|
|
2006
|
|
|
|
915,500
|
|
|
|
895,963
|
|
|
|
1,811,463
|
|
Jeff Montie
|
|
|
2007
|
|
|
|
984,244
|
|
|
|
429,835
|
|
|
|
1,414,079
|
|
|
|
|
2006
|
|
|
|
1,011,525
|
|
|
|
613,095
|
|
|
|
1,624,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tim Mobsby
|
|
|
2007
|
|
|
|
415,065
|
|
|
|
468,533
|
|
|
|
883,598
|
|
Paul Norman
|
|
|
2007
|
|
|
|
526,185
|
|
|
|
222,104
|
|
|
|
748,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brad Davidson
|
|
|
2007
|
|
|
|
477,400
|
|
|
|
90,897
|
|
|
|
568,297
|
|
|
|
|
(a) |
|
Mr. Mackay is considered retirement eligible. |
|
|
|
|
|
Prior to adoption of SFAS No. 123(R) on
January 1, 2006, we generally recognized stock compensation
expense on a pro forma basis over the stated vesting period of
the award, with any unamortized expense recognized immediately
if an acceleration event occurred (for example, retirement).
SFAS No. 123(R) specifies that a stock-based award is
considered vested for expense attribution purposes when the
employees retention of the award is no longer contingent
on providing subsequent service. Accordingly, beginning in 2006,
we prospectively revised our expense attribution method so that
the related compensation expense is recognized immediately for
awards granted to retirement-eligible individuals or over the
period from the grant date to the date retirement eligibility is
achieved, if less than the stated vesting period. |
|
|
|
(5) |
|
Solely represents the actuarial increase or decrease during 2007
(for 2007 compensation) and during 2006 (for 2006 compensation)
in the pension value provided under the U.S. Pension Plans for
Messrs. Mackay, Bryant, Montie, Norman and Davidson and the
U.K. and Irish Executive Pension Plans for Mr. Mobsby as we
do not pay above-market or preferential earnings on
non-qualified deferred compensation. A variety of factors impact
the actuarial |
33
|
|
|
|
|
increase in present value (pension value). Factors typically
increasing the pension value include service accruals during the
year and increases in pay. For 2007, factors reducing the
pension value included an increase in the year end discount rate
and for Messrs. Bryant, Montie, Norman and Davidson, an
increase in the rate used to determine lump sum payments from
the non-qualified pension plans. In addition,
Mr. Mobsbys pension value was increased by foreign
exchange and Mr. Bryants pension value was increased
by his employment agreement. Mr. Bryants employment
agreement is described under Employment
Agreements Mr. Bryant and Mr. Montie. |
|
(6) |
|
The table below presents an itemized account of All Other
Compensation provided in 2007 and 2006 to the NEOs,
regardless of the amount and any minimal thresholds provided
under the SEC rules and regulations. Consistent with our
emphasis on performance-based pay, perquisites and other
compensation are limited in scope and primarily comprised of
retirement benefit contributions and accruals for NEOs based in
the United States. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kellogg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
Company
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to S&I and
|
|
|
Paid
|
|
|
Financial
|
|
|
Employee
|
|
|
Business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restoration
|
|
|
Death
|
|
|
Planning
|
|
|
Stock
|
|
|
Aircraft
|
|
|
Physical
|
|
|
Automobile
|
|
|
Education
|
|
|
Mortgage
|
|
|
|
|
|
|
|
|
|
Plans(a)
|
|
|
Benefit(b)
|
|
|
Assistance(c)
|
|
|
Purchases(d)
|
|
|
Usage(e)
|
|
|
Exams(f)
|
|
|
Allowance(g)
|
|
|
Assistance(h)
|
|
|
Assistance(i)
|
|
|
TOTAL
|
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
David Mackay
|
|
|
2007
|
|
|
|
106,708
|
|
|
|
133,265
|
|
|
|
5,935
|
|
|
|
0
|
|
|
|
1,352
|
|
|
|
1,970
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
249,230
|
|
|
|
|
2006
|
|
|
|
100,882
|
|
|
|
26,593
|
|
|
|
8,125
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
135,600
|
|
John Bryant
|
|
|
2007
|
|
|
|
52,930
|
|
|
|
6,256
|
|
|
|
3,525
|
|
|
|
4,627
|
|
|
|
1,352
|
|
|
|
1,970
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
70,660
|
|
|
|
|
2006
|
|
|
|
52,158
|
|
|
|
5,133
|
|
|
|
5,414
|
|
|
|
4,880
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
67,585
|
|
Jeff Montie
|
|
|
2007
|
|
|
|
55,667
|
|
|
|
9,498
|
|
|
|
5,970
|
|
|
|
4,315
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
75,450
|
|
|
|
|
2006
|
|
|
|
57,702
|
|
|
|
8,938
|
|
|
|
8,125
|
|
|
|
4,796
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
79,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tim Mobsby
|
|
|
2007
|
|
|
|
0
|
|
|
|
19,079
|
|
|
|
1,992
|
|
|
|
15,996
|
|
|
|
0
|
|
|
|
0
|
|
|
|
38,780
|
|
|
|
721
|
|
|
|
0
|
|
|
|
76,568
|
|
Paul Norman
|
|
|
2007
|
|
|
|
39,441
|
|
|
|
4,666
|
|
|
|
0
|
|
|
|
4,246
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
48,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brad Davidson
|
|
|
2007
|
|
|
|
46,454
|
|
|
|
29,764
|
|
|
|
2,900
|
|
|
|
4,252
|
|
|
|
0
|
|
|
|
3,230
|
|
|
|
0
|
|
|
|
0
|
|
|
|
18,371
|
|
|
|
104,971
|
|
|
|
|
(a) |
|
For information about our Savings & Investment Plan
and Restoration Plan, refer to Retirement and
Non-Qualified Defined Contribution and Deferred Compensation
PlansNon-Qualified Deferred Compensation beginning
on page 43. |
|
(b) |
|
Annual cost for Kellogg-paid life insurance, Kellogg-paid
accidental death and dismemberment, Executive Survivor Income
Plan (Kellogg funded death benefit provided to executive
employees). |
|
(c) |
|
Reflects reimbursement for financial and tax planning assistance. |
|
(d) |
|
Messrs. Bryant, Montie, Norman and Davidson participate is
our tax-qualified ESPP, which is generally available to all U.S.
salaried employees. The price paid by all U.S. salaried
employees under the ESPP, including the NEOs, is 85% of the
price of our common stock at the beginning or the end of each
quarterly purchase period, whichever is lower. Mr. Mobsby
participates in the KPlan, which is a broad-based employee stock
purchase plan qualified under Irish tax laws and generally
available to all employees of KETL. Each participant in the
KPlan, including Mr. Mobsby, receive one additional share
of Kellogg common stock for each share of Kellogg common stock
purchased by such participant under the plan at 100% of the
price of our common stock. The dollar amounts represent the
grant-date fair value-based compensation expense of the discount
recognized in 2007 under SFAS No. 123(R) for each NEO
and as reported in our audited financial statements contained in
our Annual Report on
Form 10-K. |
|
(e) |
|
The 2007 amounts for Mr. Mackay and Mr. Bryant
represent the incremental cost of a flight to and from the
company-provided physical exam. The incremental cost of this
flight was divided equally among the executives on the aircraft.
The incremental cost of Kellogg aircraft used for a non-business
flight is calculated by multiplying the aircrafts hourly
variable operating cost by a trips flight time, which
includes any flight time of an empty return flight. Variable
operating costs include: (1) landing, parking, passenger
ground transportation, crew travel and flight planning services
expenses; (2) supplies, catering and crew traveling
expenses; (3) aircraft fuel and oil expenses;
(4) maintenance, parts and external labor (inspections and
repairs); and (5) any customs, foreign permit and similar
fees. Fixed costs that do not vary based upon usage are not
included in the calculation of direct operating cost. On certain
occasions, an NEOs spouse or other family member may
accompany the NEO on a flight. No additional direct operating
cost is incurred in such situations under the foregoing
methodology because the costs would not be incremental. Kellogg
does not pay its NEOs any amounts in respect of taxes (i.e.,
gross up payments) on income imputed to them for
non-business aircraft usage. |
|
(f) |
|
Actual cost of a physical exam. |
|
(g) |
|
Cost of annual automobile allowance for executives not based in
the United States. |
|
(h) |
|
Represents an educational allowance paid to Mr. Mobsby
under his employment agreement. |
34
|
|
|
(i) |
|
Represents a mortgage interest subsidy paid on behalf of
Mr. Davidson in connection with his relocation as President
of U.S. Snacks. |
In addition to the foregoing compensation, the NEOs also
participated in health and welfare benefit programs, including
vacation and medical, dental, prescription drug and disability
coverage. These programs are generally available and comparable
to those programs provided to all salaried employees in the
region in which each NEO is based.
|
|
|
(7) |
|
The year-over-year change in actuarial value of benefits earned
under the U.S. Pension Plans, resulted in a negative sum of
$103,000 for Mr. Montie and $1,000 for Mr. Norman. The
primary reason for this negative actuarial value under the U.S.
Pension Plans was a change in the discount rate used to value
the plans without a sufficient increase in pensionable earnings
to offset the decrease. |
|
(8) |
|
Mr. Mobsby is employed in Ireland and is paid in euros. In
calculating the U.S. dollar equivalent for disclosure purposes
other than as noted below, we used a conversion rate to convert
the sum of his payments from euros into U.S. dollars based on an
average of the closing monthly exchange rates in effect for each
month during the fiscal year in which the payments were made.
According to the Wall Street Journal, this conversion rate of
euros to U.S. dollars for the fiscal year ending
December 29, 2007 was 1.374. With respect to the amount
shown under the heading Change in Pension Value and
Non-Qualified Deferred Compensation Earnings for
Mr. Mobsby, we calculated this value using the difference
of the U.S. dollar equivalents of the beginning and ending
balances of Mr. Mobsbys pension benefit during fiscal
2007 after converting these amounts from euros to U.S. dollars.
In order to calculate these two values, we used the conversion
rates in effect for the last day of fiscal 2006 and last day of
fiscal 2007 for converting the beginning and ending balances,
respectively. For more information on foreign currency rate
fluctuations, refer to footnote (10) below. |
|
(9) |
|
As discussed in more detail under Employment
Agreements Mr. Mobsby, represents the
final installment of the relocation incentive premium payment he
received for relocating to Ireland in 2004. |
|
(10) |
|
Foreign currency exchange rates, such as the exchange rate
between the U.S. dollar and the euro, can be volatile and
affected by, among other factors, the general economic
conditions of a country, the actions of the U.S. and
non-U.S.
governments or central banks, the imposition of currency
controls, and speculation. In 2007, $918,000 of
Mr. Mobsbys change in pension value reflects foreign
currency exchange rate fluctuations. |
35
Grant of
Plan-Based Awards Table
During 2007, we granted the following plan-based awards to our
NEOs:
1. Stock Options (both Regular and AOF Options);
2. 2007 AIP grants (annual cash performance-based
awards); and
3. 2007-2009
EPP grants (multi-year stock performance-based awards).
Information with respect to each of these awards on a
grant-by-grant
basis is set forth in the table below. For a detailed discussion
of each of these awards and their material terms, refer to
Executive Compensation Summary Compensation
Table and Compensation Discussion and
Analysis Elements of Our Compensation Program
above. We no longer grant new options with the AOF feature, but
as disclosed in the Outstanding Equity Awards at Fiscal Year-End
Table, a number of options granted prior to 2004 contain this
feature. When an executive exercises an original option with an
AOF, the AOF option is treated as a new grant for disclosure and
accounting purposes even though the new grant relates back to
the approval of the original option grant. All of our regular
and AOF options are granted with an exercise price equal to the
fair market value of our common stock on the date of grant. As
of 2007, fair market value is defined under our LTIP as the
officially quoted closing price of our common stock on the date
of grant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible
|
|
|
|
|
|
|
|
Awards:
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
Payouts Under
|
|
Estimated Future
|
|
Number
|
|
Awards:
|
|
Exercise or
|
|
|
|
|
|
|
|
|
Non-Equity Incentive
|
|
Payouts Under Equity
|
|
of Shares
|
|
Number of
|
|
Base Price
|
|
|
|
|
|
|
|
|
Plan Awards
|
|
Incentive Plan Awards
|
|
of Stock
|
|
Securities
|
|
of Option
|
|
Grant-date Fair
|
|
|
Grant
|
|
Approval
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or Units
|
|
Underlying
|
|
Awards
|
|
Value of Stock and
|
Name
|
|
Date(1)
|
|
Date(1)
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
Options (#)
|
|
($/Sh)
|
|
Option Awards
|
|
David Mackay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
341,300
|
|
|
|
49.78
|
|
|
|
3,733,822
|
(2)
|
AOF Options
|
|
|
5/16/2007
|
|
|
|
3/13/1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,691
|
|
|
|
53.58
|
|
|
|
33,171
|
(2)
|
|
|
|
5/16/2007
|
|
|
|
1/4/1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,937
|
|
|
|
53.58
|
|
|
|
93,880
|
(2)
|
|
|
|
5/16/2007
|
|
|
|
8/1/2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,167
|
|
|
|
53.58
|
|
|
|
45,445
|
(2)
|
|
|
|
5/16/2007
|
|
|
|
2/16/2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,565
|
|
|
|
53.58
|
|
|
|
448,976
|
(2)
|
|
|
|
5/16/2007
|
|
|
|
3/26/2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,553
|
|
|
|
53.58
|
|
|
|
399,341
|
(2)
|
|
|
|
5/16/2007
|
|
|
|
2/22/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,333
|
|
|
|
53.58
|
|
|
|
353,633
|
(2)
|
2007 AIP(3)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
1,375,000
|
|
|
|
2,750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007-09 EPP
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
40,600
|
|
|
|
81,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,870,036
|
(4)
|
John Bryant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,700
|
|
|
|
49.78
|
|
|
|
904,738
|
(2)
|
AOF Options
|
|
|
5/16/2007
|
|
|
|
2/16/2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,441
|
|
|
|
53.58
|
|
|
|
51,761
|
(2)
|
|
|
|
5/16/2007
|
|
|
|
2/22/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,994
|
|
|
|
53.58
|
|
|
|
242,888
|
(2)
|
|
|
|
5/16/2007
|
|
|
|
2/21/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,540
|
|
|
|
53.58
|
|
|
|
225,765
|
(2)
|
2007 AIP(3)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
571,500
|
|
|
|
1,143,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007-09 EPP
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
9,800
|
|
|
|
19,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
451,388
|
(4)
|
Jeff Montie
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,700
|
|
|
|
49.78
|
|
|
|
904,738
|
(2)
|
AOF Options
|
|
|
3/19/2007
|
|
|
|
3/13/1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,249
|
|
|
|
51.02
|
|
|
|
40,894
|
(2)
|
|
|
|
3/19/2007
|
|
|
|
1/4/1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,636
|
|
|
|
51.02
|
|
|
|
32,898
|
(2)
|
|
|
|
3/19/2007
|
|
|
|
1/31/2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,798
|
|
|
|
51.02
|
|
|
|
63,446
|
(2)
|
|
|
|
3/19/2007
|
|
|
|
2/22/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,067
|
|
|
|
51.02
|
|
|
|
243,250
|
(2)
|
|
|
|
3/19/2007
|
|
|
|
2/21/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,954
|
|
|
|
51.02
|
|
|
|
49,347
|
(2)
|
2007 AIP(3)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
576,000
|
|
|
|
1,152,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007-09 EPP
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
9,800
|
|
|
|
19,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
451,388
|
(4)
|
Tim Mobsby
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,100
|
|
|
|
49.78
|
|
|
|
427,754
|
(2)
|
AOF Options
|
|
|
5/2/2007
|
|
|
|
3/13/1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,880
|
|
|
|
52.98
|
|
|
|
123,343
|
(2)
|
|
|
|
5/2/2007
|
|
|
|
1/4/1999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,914
|
|
|
|
52.98
|
|
|
|
49,149
|
(2)
|
|
|
|
5/2/2007
|
|
|
|
2/16/2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,678
|
|
|
|
52.98
|
|
|
|
206,619
|
(2)
|
|
|
|
5/2/2007
|
|
|
|
2/21/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,038
|
|
|
|
52.98
|
|
|
|
89,423
|
(2)
|
2007 AIP(3)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
469,551
|
|
|
|
939,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007-09 EPP
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
4,700
|
|
|
|
9,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,482
|
(4)
|
Paul Norman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,000
|
|
|
|
49.78
|
|
|
|
525,120
|
(2)
|
AOF Options
|
|
|
6/7/2007
|
|
|
|
2/22/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,757
|
|
|
|
51.85
|
|
|
|
43,981
|
(2)
|
|
|
|
6/7/2007
|
|
|
|
2/21/2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,881
|
|
|
|
51.85
|
|
|
|
64,694
|
(2)
|
2007 AIP(3)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
385,000
|
|
|
|
770,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007-09 EPP
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,300
|
|
|
|
10,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244,118
|
(4)
|
Brad Davidson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
49.78
|
|
|
|
492,300
|
(2)
|
AOF Options
|
|
|
2/14/2007
|
|
|
|
3/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,189
|
|
|
|
49.63
|
|
|
|
11,207
|
(2)
|
|
|
|
2/14/2007
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,070
|
|
|
|
49.63
|
|
|
|
31,077
|
(2)
|
|
|
|
2/14/2007
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,495
|
|
|
|
49.63
|
|
|
|
48,613
|
(2)
|
2007 AIP(3)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
385,000
|
|
|
|
770,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007-09 EPP
|
|
|
2/16/2007
|
|
|
|
2/16/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
5,300
|
|
|
|
10,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244,118
|
(4)
|
36
|
|
|
(1) |
|
The grant date for our AOF options is different than
the approval date because an AOF option is treated
as a new grant for disclosure and financial reporting purposes
under SFAS No. 123(R) even though the new grant
relates back to the date the original option was approved by the
Compensation Committee. The Compensation Committee takes no new
action in connection with the grant of AOF options. For a
discussion of AOF options, refer to Executive
Compensation Summary Compensation Table
Option Awards. |
|
(2) |
|
Represents the grant-date fair value calculated under
SFAS No. 123(R), and as presented in our audited
financial statements contained in our Annual Report on
Form 10-K.
The fair value of the stock option awards will likely vary from
the actual value the NEO receives. The actual value the NEO
receives will depend on the number of shares exercised and the
price of our common stock on the date exercised. |
|
(3) |
|
Represents estimated possible payouts on the grant date for
annual performance cash awards granted in 2007 under the 2007
AIP for each of our NEOs. The AIP is an annual cash incentive
opportunity and, therefore, these awards are earned in the year
of grant. See the column captioned Non-Equity Incentive
Plan Compensation in the Summary Compensation Table for
the actual payout amounts related to the 2007 AIP. See also
Compensation Discussion and Analysis Elements
of Our Compensation Program Annual Incentives
for additional information about the 2007 AIP. |
|
(4) |
|
Represents the grant-date fair value calculated under
SFAS No. 123(R), and as presented in our audited
financial statements contained in our Annual Report on
Form 10-K.
This grant-date fair value assumes that each participant earns
the target EPP award (i.e., 100% of EPP target). The actual
value the NEO receives will depend on the number of shares
earned and the price of our common stock when the shares vest. |
Outstanding
Equity Awards at Fiscal Year-End Table
The following equity awards granted to our NEOs were outstanding
as of the end of fiscal 2007:
Regular Options (disclosed under the Option
Awards columns). Represents annual option
grants made in February of each year to our NEOs.
AOF Options (disclosed under the Option Awards
columns). Represents AOF options granted when
Kellogg stock is used to pay the exercise price of a stock
option and related taxes. Beginning in 2007, options with an AOF
may only be exercised once each calendar year.
Restricted Stock Awards (disclosed under the Stock
Awards columns). In 2005, each of
Mr. Montie, Mr. Bryant and Mr. Davidson received
a restricted stock award for retention purposes. In 2006,
Mr. Norman received a restricted stock award for retention
purposes.
2005-2007
EPP Grants (disclosed under the Stock Awards
columns). The
2005-2007
EPP cycle began on January 1, 2005 (first day of fiscal
2005) and concluded on December 29, 2007 (last day of
fiscal 2007). Although the performance period ended on
December 29, 2007, each NEO had to be actively employed by
Kellogg on the date the awards were paid out (February 18,
2008) in order to receive the payout. See
Compensation Discussion and Analysis Elements
of Our Compensation Program Long-Term
Incentives
2005-2007
EPP for additional information, including the ultimate
value of the awards that were paid out on or about
February 18, 2008.
2006-2008
EPP Grants (disclosed under the Stock Awards
columns). The
2006-2008
EPP cycle began on January 1, 2006 (first day of fiscal
2006) and concludes on January 3, 2009 (last day of
fiscal 2008). The
2006-2008
awards are based on compound annual growth in internal net
sales. The ultimate value of the awards will depend on the
number of shares earned and the price of our common stock at the
time awards are issued.
2007-2009
EPP Grants (disclosed under the Stock Awards
columns). The
2007-2009
EPP cycle began on January 1, 2007 (first day of fiscal
2007) and concludes on January 2, 2010 (last day of
fiscal 2009). The
2007-2009
awards are based on cumulative cash flow. The ultimate value of
the awards will depend on the number of shares earned and the
price of our common stock at the time awards are issued.
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Equity
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Incentive
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Plan Awards:
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
Market or
|
|
|
Number of
|
|
Number of
|
|
Awards:
|
|
|
|
|
|
|
|
Market
|
|
Shares,
|
|
Payout Value
|
|
|
Securities
|
|
Securities
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Units or
|
|
of Unearned
|
|
|
Underlying
|
|
Underlying
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Other
|
|
Shares, Units
|
|
|
Unexercised
|
|
Unexercised
|
|
Underlying
|
|
Option
|
|
|
|
Units of
|
|
Units of
|
|
Rights
|
|
or Other
|
|
|
Options (#)
|
|
Options (#)
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
That Have
|
|
Rights That
|
|
|
Exercisable
|
|
Unexercisable
|
|
Unearned
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
|
Not Vested
|
|
Have Not
|
Name
|
|
(1)
|
|
(2)
|
|
Options (#)(3)
|
|
($)(4)
|
|
Date(5)
|
|
Vested (#)(6)
|
|
Vested ($)(7)
|
|
(#)(8)
|
|
Vested ($)(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Mackay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
262,000
|
|
|
|
0
|
|
|
|
|
|
|
|
38.93
|
|
|
|
2/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151,000
|
|
|
|
0
|
|
|
|
|
|
|
|
44.04
|
|
|
|
2/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,050
|
|
|
|
83,050
|
(10)
|
|
|
|
|
|
|
44.46
|
|
|
|
2/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
341,300
|
(11)
|
|
|
|
|
|
|
49.78
|
|
|
|
2/16/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOF Options
|
|
|
6,691
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
3/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,937
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
1/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,884
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
8/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,167
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
8/1/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,611
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,565
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,511
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
3/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,553
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
3/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,770
|
|
|
|
0
|
|
|
|
|
|
|
|
46.29
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,333
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,931
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
2005-07
EPP(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,200
|
|
|
|
3,185,784
|
|
2006-08 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,800
|
|
|
|
5,334,336
|
|
2007-09 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,200
|
|
|
|
4,297,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Bryant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
125,500
|
|
|
|
0
|
|
|
|
|
|
|
|
38.93
|
|
|
|
2/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,000
|
|
|
|
0
|
|
|
|
|
|
|
|
44.04
|
|
|
|
2/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,500
|
|
|
|
52,500
|
(10)
|
|
|
|
|
|
|
44.46
|
|
|
|
2/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
82,700
|
(11)
|
|
|
|
|
|
|
49.78
|
|
|
|
2/16/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOF Options
|
|
|
2,719
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
3/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,131
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
1/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,236
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
1/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,245
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,441
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,999
|
|
|
|
0
|
|
|
|
|
|
|
|
46.12
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,118
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,994
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,528
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,540
|
|
|
|
0
|
|
|
|
|
|
|
|
53.58
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,800
|
(13)
|
|
|
1,206,576
|
|
|
|
|
|
|
|
|
|
2005-07
EPP(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,800
|
|
|
|
1,312,416
|
|
2006-08 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,800
|
|
|
|
1,312,416
|
|
2007-09 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,600
|
|
|
|
1,037,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeff Montie
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
106,000
|
|
|
|
0
|
|
|
|
|
|
|
|
44.04
|
|
|
|
2/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,500
|
|
|
|
57,500
|
(10)
|
|
|
|
|
|
|
44.46
|
|
|
|
2/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
82,700
|
(11)
|
|
|
|
|
|
|
49.78
|
|
|
|
2/16/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOF Options
|
|
|
8,249
|
|
|
|
0
|
|
|
|
|
|
|
|
51.02
|
|
|
|
3/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,418
|
|
|
|
0
|
|
|
|
|
|
|
|
49.93
|
|
|
|
1/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,636
|
|
|
|
0
|
|
|
|
|
|
|
|
51.02
|
|
|
|
1/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,510
|
|
|
|
0
|
|
|
|
|
|
|
|
49.93
|
|
|
|
1/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,798
|
|
|
|
0
|
|
|
|
|
|
|
|
51.02
|
|
|
|
1/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,946
|
|
|
|
0
|
|
|
|
|
|
|
|
49.93
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,858
|
|
|
|
0
|
|
|
|
|
|
|
|
49.93
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,067
|
|
|
|
0
|
|
|
|
|
|
|
|
51.02
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,218
|
|
|
|
0
|
|
|
|
|
|
|
|
49.93
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,954
|
|
|
|
0
|
|
|
|
|
|
|
|
51.02
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,100
|
(13)
|
|
|
1,328,292
|
|
|
|
|
|
|
|
|
|
2005-07
EPP(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,600
|
|
|
|
1,460,592
|
|
2006-08 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,600
|
|
|
|
1,460,592
|
|
2007-09 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,600
|
|
|
|
1,037,232
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Equity
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Incentive
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Plan Awards:
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
Market or
|
|
|
Number of
|
|
Number of
|
|
Awards:
|
|
|
|
|
|
|
|
Market
|
|
Shares,
|
|
Payout Value
|
|
|
Securities
|
|
Securities
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Units or
|
|
of Unearned
|
|
|
Underlying
|
|
Underlying
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Other
|
|
Shares, Units
|
|
|
Unexercised
|
|
Unexercised
|
|
Underlying
|
|
Option
|
|
|
|
Units of
|
|
Units of
|
|
Rights
|
|
or Other
|
|
|
Options (#)
|
|
Options (#)
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
Stock That
|
|
Stock That
|
|
That Have
|
|
Rights That
|
|
|
Exercisable
|
|
Unexercisable
|
|
Unearned
|
|
Price
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
|
Not Vested
|
|
Have Not
|
Name
|
|
(1)
|
|
(2)
|
|
Options (#)(3)
|
|
($)(4)
|
|
Date(5)
|
|
Vested (#)(6)
|
|
Vested ($)(7)
|
|
(#)(8)
|
|
Vested ($)(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tim Mobsby
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
94,500
|
|
|
|
0
|
|
|
|
|
|
|
|
38.93
|
|
|
|
2/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
0
|
|
|
|
|
|
|
|
44.04
|
|
|
|
2/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,750
|
|
|
|
21,750
|
(10)
|
|
|
|
|
|
|
44.46
|
|
|
|
2/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
39,100
|
(11)
|
|
|
|
|
|
|
49.78
|
|
|
|
2/16/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOF Options
|
|
|
24,880
|
|
|
|
0
|
|
|
|
|
|
|
|
52.98
|
|
|
|
3/13/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,140
|
|
|
|
0
|
|
|
|
|
|
|
|
49.80
|
|
|
|
1/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,499
|
|
|
|
0
|
|
|
|
|
|
|
|
49.80
|
|
|
|
4/19/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,914
|
|
|
|
0
|
|
|
|
|
|
|
|
52.98
|
|
|
|
1/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,143
|
|
|
|
0
|
|
|
|
|
|
|
|
49.80
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,678
|
|
|
|
0
|
|
|
|
|
|
|
|
52.98
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,331
|
|
|
|
0
|
|
|
|
|
|
|
|
49.80
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,053
|
|
|
|
0
|
|
|
|
|
|
|
|
49.80
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,038
|
|
|
|
0
|
|
|
|
|
|
|
|
52.98
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
2005-07
EPP(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,400
|
|
|
|
603,288
|
|
2006-08 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,400
|
|
|
|
603,288
|
|
2007-09 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,400
|
|
|
|
497,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Norman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
53,000
|
|
|
|
0
|
|
|
|
|
|
|
|
44.04
|
|
|
|
2/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,500
|
|
|
|
28,500
|
(10)
|
|
|
|
|
|
|
44.46
|
|
|
|
2/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
48,000
|
(11)
|
|
|
|
|
|
|
49.78
|
|
|
|
2/16/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOF Options
|
|
|
7,800
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
11/1/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
830
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
1/31/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,385
|
|
|
|
0
|
|
|
|
|
|
|
|
47.60
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,761
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,757
|
|
|
|
0
|
|
|
|
|
|
|
|
51.85
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,957
|
|
|
|
0
|
|
|
|
|
|
|
|
46.62
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,764
|
|
|
|
0
|
|
|
|
|
|
|
|
49.92
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,881
|
|
|
|
0
|
|
|
|
|
|
|
|
51.85
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
(14)
|
|
|
582,120
|
|
|
|
|
|
|
|
|
|
2005-07
EPP(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
793,800
|
|
2006-08 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
793,800
|
|
2007-09 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,600
|
|
|
|
560,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brad Davidson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regular Options
|
|
|
44,000
|
|
|
|
0
|
|
|
|
|
|
|
|
44.04
|
|
|
|
2/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
25,000
|
(10)
|
|
|
|
|
|
|
44.46
|
|
|
|
2/17/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
45,000
|
(11)
|
|
|
|
|
|
|
49.78
|
|
|
|
2/16/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOF Options
|
|
|
4,823
|
|
|
|
0
|
|
|
|
|
|
|
|
48.45
|
|
|
|
1/4/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,873
|
|
|
|
0
|
|
|
|
|
|
|
|
48.45
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,070
|
|
|
|
0
|
|
|
|
|
|
|
|
49.63
|
|
|
|
2/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,846
|
|
|
|
0
|
|
|
|
|
|
|
|
48.45
|
|
|
|
2/22/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,242
|
|
|
|
0
|
|
|
|
|
|
|
|
48.45
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,785
|
|
|
|
0
|
|
|
|
|
|
|
|
49.63
|
|
|
|
2/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(15)
|
|
|
529,200
|
|
|
|
|
|
|
|
|
|
2005-07
EPP(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,400
|
|
|
|
603,288
|
|
2006-08 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,400
|
|
|
|
603,288
|
|
2007-09 EPP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,600
|
|
|
|
560,952
|
|
|
|
|
(1) |
|
On an
award-by-award
basis, the number of securities underlying unexercised options
that are exercisable and that are not reported in Column
3 Number of Securities Underlying Unexercised
Unearned Options. |
|
(2) |
|
On an
award-by-award
basis, the number of securities underlying unexercised options
that are unexercisable and that are not reported in Column
3 Number of Securities Underlying Unexercised
Unearned Options. |
|
(3) |
|
On an
award-by-award
basis, there were no shares underlying unexercised options
awarded under any equity incentive plan that have not been
earned. |
|
(4) |
|
The exercise price for each option reported in Columns 1 and
2 Number of Securities Underlying Unexercised
Options and Column 3 Number of
Securities Underlying Unexercised Unearned Options. |
39
|
|
|
(5) |
|
The expiration date for each option reported in Columns 1 and
2 Number of Securities Underlying Unexercised
Options and Column 3 Number of
Securities Underlying Unexercised Unearned Options. |
|
(6) |
|
The total number of shares of stock that have not vested and
that are not reported in Column 8 Number of
Unearned Shares, Units or Other Rights That Have Not
Vested. |
|
(7) |
|
Represents the number of shares of stock that have not vested
and that are not reported in Column 9 Equity
Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested
multiplied by the closing price of our common stock on
December 28, 2007 (the last trading day of fiscal 2007). |
|
(8) |
|
Represents the maximum number of shares that could
be earned under outstanding EPP awards. The cycle for the
2006-08 EPP
grants concludes on January 3, 2009 and the cycle for the
2007-09 EPP
grants concludes on January 2, 2010. The ultimate number of
shares issued under the EPP awards will depend on the number of
shares earned and the price of our common stock on the actual
vesting date. For additional information with respect to these
awards, refer to Executive Compensation
Summary Compensation Table and Compensation
Discussion and Analysis Elements of Our Compensation
Program. |
|
(9) |
|
Represents the maximum number of shares that could
be earned under outstanding EPP awards multiplied by the closing
price of our common stock on December 28, 2007 (the last
trading day of fiscal 2007). The ultimate value of the EPP
awards will depend on the number of shares earned and the price
of our common stock on the actual vesting date. |
|
(10) |
|
These options vested on February 17, 2008. |
|
(11) |
|
50% of these options vested on February 16, 2008 and 50% vests
on February 16, 2009. |
|
(12) |
|
Vested and paid out on or about February 18, 2008. |
|
(13) |
|
Vested on February 4, 2008. |
|
(14) |
|
Vests on December 1, 2008. |
|
(15) |
|
Vests on July 1, 2009. |
Option
Exercises and Stock Vested Table
With respect to our NEOs, this table shows the stock options
exercised by such officers during 2007 (disclosed under the
Option Awards columns). The dollar value reflects
the total pre-tax value realized by such officers
(Kellogg stock price at exercise minus the options
exercise price), not the grant-date fair value or recognized
compensation expense disclosed elsewhere in this proxy
statement. Value from these option exercises were only realized
to the extent our stock price increased relative to the stock
price at grant (exercise price). These options have been granted
to the NEOs since 1997. Consequently, the value realized by the
executives upon exercise of the options was actually earned over
a period of up to 10 years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards(1)
|
|
|
|
Number of Shares
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
Acquired on Vesting
|
|
|
Value Realized on
|
|
Name
|
|
Exercise (#)
|
|
|
Exercise ($)
|
|
|
(#)
|
|
|
Vesting ($)
|
|
|
David Mackay
|
|
|
302,916
|
|
|
|
2,326,129
|
|
|
|
|
|
|
|
|
|
John Bryant
|
|
|
115,692
|
|
|
|
921,139
|
|
|
|
|
|
|
|
|
|
Jeff Montie
|
|
|
202,019
|
|
|
|
1,611,063
|
|
|
|
|
|
|
|
|
|
Tim Mobsby
|
|
|
123,347
|
|
|
|
920,594
|
|
|
|
|
|
|
|
|
|
Paul Norman
|
|
|
24,046
|
|
|
|
181,048
|
|
|
|
|
|
|
|
|
|
Brad Davidson
|
|
|
22,277
|
|
|
|
89,025
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The
2005-2007
EPP cycle began on January 1, 2005 (first day of fiscal
2005) and concluded on December 29, 2007 (last day of
fiscal 2007). Although the performance period ended on
December 29, 2007, each NEO had to be actively employed by
Kellogg on the date the awards were paid out (February 18,
2008) in order to receive the payout. See
Compensation Discussion and Analysis Elements
of Our Compensation Program Long-Term
Incentives Executive Performance Plan
2005-2007
EPP for additional information. |
40
RETIREMENT
AND NON-QUALIFIED DEFINED CONTRIBUTION
AND DEFERRED COMPENSATION PLANS
Pension
Plans
The CEO, CFO and other NEOs are eligible to participate in
Kellogg-provided pension plans which provide benefits based on
years of service and pay (salary plus annual incentive) to a
broad base of employees.
U.S. Pension Plans. Our U.S. pension
plans are comprised of the Kellogg Company Pension Plan and the
non-qualified restoration plans, which include the Kellogg
Company Executive Excess Plan for accruals after
December 31, 2004, and the Kellogg Company Excess Benefit
Retirement Plan for accruals on or before December 31, 2004
(collectively, the U.S. Pension Plans).
Below is an overview of our U.S. Pension Plans in which
Messrs. Mackay, Bryant, Montie, Norman and Davidson
participate.
|
|
|
|
|
|
|
|
|
|
U.S. Pension Plan
|
|
|
U.S. Non-Qualified Plans
|
Reason for Plan
|
|
|
Provide eligible employees with a competitive level of
retirement benefits based on pay and years of service.
|
|
|
Provide eligible employees with a competitive level of
retirement benefits, U.S. Non-Qualified Plan on the formula used
in the Salaried Pension Plan, by restoring the
benefits limited by the Internal Revenue Code.
|
Eligibility
|
|
|
Salaried employees, including the CEO, CFO and other NEOs, and
certain hourly and union employees.
|
|
|
Eligible employees impacted under the Internal Revenue Code by
statutory limits on the level of compensation and benefits that
can be considered in determining Kellogg-provided retirement
benefits.
|
Payment Form
|
|
|
Monthly annuity.
|
|
|
Monthly annuity or lump sum at the choice of the executive.
|
Participation, as of January 1, 2003
|
|
|
Active Kellogg heritage employees who are 40 years of age
or older or have 10 or more years of service.
|
Retirement Eligibility
|
|
|
Full Unreduced Benefit:
Normal retirement age 65
Age 55 with 30 or more years of
service
Age 62 with 5 years of service
Reduced Benefit:
Age 55 with 20 years of
service
Any age with 30 years of service
|
Pension Formula
|
|
|
Single Life Annuity = 1.5% x (years of service) x (final average
pay based on the average of highest three consecutive
years) (Social Security offset)
|
Pensionable Earnings
|
|
|
Includes only base pay, overtime pay and annual incentive
payments. We do not include any other compensation, such as
restricted stock grants, EPP payouts, gains from stock option
exercises and any other form of stock- or option-based
compensation in calculating pensionable earnings.
|
|
|
|
|
|
|
|
Foreign Pension Plans. Mr. Mobsby, who is
based in Ireland, participates in the Irish Executive Pension
Plan. There is no additional non-qualified pension plan, as
there is for U.S. executives, because applicable tax laws
do not function in a way that would require us to
restore benefits limited by the applicable tax laws.
In order to become a participant in the Irish Executive Pension
Plan, an executive must be nominated for participation and
subsequently have his or her nomination approved by the Board of
Trustees of the Irish Executive Pension Plan. The Board of
Trustees is chaired by a Kellogg-nominated trustee and comprised
of a combination of Kellogg- and member-nominated trustees.
The formula for the single life annuity benefit under the Irish
Executive Pension Plan is 1.67% of the final average pay
multiplied by the executives years of service. The final
average pay amount is based on the average pay of the best
41
three of the last ten years and includes only base salary and
bonus and does not include any other compensation. Once an
executive reaches 20 years of service, the years of service
factor automatically increases to 40 years, at which point
it is capped under applicable Irish law. Years of service also
includes all years of service worked by the executive at Kellogg
prior to participation in the Irish Executive Pension Plan.
Executives are eligible to retire and receive the full unreduced
benefit at age 63. Executives who joined the Irish
Executive Pension Plan prior to December 1, 1991 are
eligible to retire and receive the full unreduced benefit at
age 60, while executives who joined subsequent to that date
must receive consent in order to retire between the ages of 60
and 65 before receiving the full unreduced benefit. Executives
may retire and receive a reduced benefit upon reaching the age
of 50, but must receive consent before receiving the reduced
benefit. Mr. Mobsby also received pension benefits under
the U.K. Executive Pension Plan. The benefits provided under the
U.K. Executive Pension Plan mirror those provided under the
Irish Executive Pension Plan. Consequently,
Mr. Mobsbys benefit shown in the Pension Benefits
Table under the U.K. Executive Pension Plan is calculated in the
same way.
Actuarial Present Value. The estimated
actuarial present value of the retirement benefit accrued
through December 29, 2007 appears in the table below. The
calculation of actuarial present value is generally consistent
with the methodology and assumptions outlined in our audited
financial statements, except that benefits are reflected as
payable as of the date the executive is first entitled to full
unreduced benefits (as opposed to the assumed retirement date)
and without consideration of pre-retirement mortality.
Specifically, present value amounts were determined based on the
financial accounting discount rate of 6.45% for the
U.S. Pension Plans, 5.50% for the Irish Executive Pension
Plan and 5.75% for the U.K. Executive Pension Plan. Benefits
subject to lump-sum distributions in the US were determined
using an interest rate of 3.95% and PBGC mortality assumptions
for Mr. Mackay and an interest rate of 6.45% and current
statutory mortality under the Pension Protection Act for
Messrs. Montie, Bryant, Davidson and Norman. Lump sum
conversion factors in the UK and Ireland include a more complex
mix of interest rate, mortality and the anticipated rate of
future increases in pension benefits; these factors are
plan-specific, determined by the Trustees on actuarial advice
and apply equally to all plan members, differing by age only.
For further information on our accounting for pension plans,
refer to Note 9 within Notes to the Consolidated Financial
Statements included in our Annual Report on
Form 10-K
for the year ended December 29, 2007. The actuarial
increase in 2007 of the projected retirement benefits can be
found in the Summary Compensation Table under the heading
Change in Pension Value and Non-Qualified Deferred
Compensation Earnings (all amounts reported under that
heading represent actuarial increases in the U.S. Pension
Plans, Irish Executive Pension Plan and U.K. Executive Pension
Plan). No payments were made to our NEOs under the
U.S. Pension Plans, Irish Executive Pension Plan and U.K.
Executive Pension Plan during 2007. The number of years of
credited service disclosed below equals an executives
length of service with Kellogg, except that in 2003
Mr. Mackay (who is retirement-eligible) received additional
years of credited service under the U.S. Pension Plans for
retention purposes. Refer to Employment Agreements.
42
PENSION
BENEFITS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Years
|
|
|
|
Present Value of
|
|
|
|
|
|
|
|
|
|
|
|
Credited Service
|
|
|
|
Accumulated
|
|
|
|
Payments During
|
|
Name
|
|
|
Plan Name
|
|
|
(#)
|
|
|
|
Benefit ($)
|
|
|
|
Last Fiscal Year ($)
|
|
David Mackay(1)
|
|
|
Pension Plan
|
|
|
|
17
|
|
|
|
|
267,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2004 and before)
|
|
|
|
14
|
|
|
|
|
1,665,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2005 and after)
|
|
|
|
9
|
|
|
|
|
4,014,000
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
5,946,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Bryant
|
|
|
Pension Plan
|
|
|
|
10
|
|
|
|
|
76,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2004 and before)
|
|
|
|
7
|
|
|
|
|
128,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2005 and after)
|
|
|
|
3
|
|
|
|
|
445,000
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
649,000
|
|
|
|
|
0
|
|
Jeff Montie
|
|
|
Pension Plan
|
|
|
|
20
|
|
|
|
|
369,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2004 and before)
|
|
|
|
17
|
|
|
|
|
640,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2005 and after)
|
|
|
|
3
|
|
|
|
|
1,821,000
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
2,830,000
|
|
|
|
|
0
|
|
Tim Mobsby(2)
|
|
|
U.K. Executive Pension Plan
|
|
|
|
22
|
|
|
|
|
8,739,000
|
|
|
|
|
|
|
|
|
|
Irish Executive Pension Plan
|
|
|
|
3
|
|
|
|
|
1,043,000
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
9,782,000
|
|
|
|
|
0
|
|
Paul Norman
|
|
|
Pension Plan
|
|
|
|
21
|
|
|
|
|
335,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2004 and before)
|
|
|
|
18
|
|
|
|
|
255,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2005 and after)
|
|
|
|
3
|
|
|
|
|
1,274,000
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
1,864,000
|
|
|
|
|
0
|
|
Brad Davidson
|
|
|
Pension Plan
|
|
|
|
24
|
|
|
|
|
489,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2004 and before)
|
|
|
|
21
|
|
|
|
|
478,000
|
|
|
|
|
|
|
|
|
|
Non-Qualified Plan (2005 and after)
|
|
|
|
3
|
|
|
|
|
2,096,000
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
3,063,000
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Mackay was granted 6 years of additional service
credit in 2003 for retention purposes. This additional service
credit increased the actuarial present value of his
non-qualified pension benefit shown above by $1,594,000. |
|
(2) |
|
Mr. Mobsby is employed in Ireland and is paid in euros. In
calculating the U.S. dollar equivalent for disclosure purposes,
we calculated this value using the U.S. dollar equivalents of
the ending balance of Mr. Mobsbys pension benefit as
of the last day of fiscal 2007 after converting this amount from
euros to U.S. dollars with the conversion rates in effect for
the last day of fiscal 2007. |
Non-Qualified
Deferred Compensation
We offer both qualified and non-qualified defined contribution
plans for employees to elect voluntary deferrals of salary and
annual incentive awards. Our defined contribution plans are
comprised of (1) the Savings & Investment Plan
(which is a qualified plan available to substantially all
salaried employees) and (2) the Restoration
Savings & Investment Plan (Restoration
Plan), which is a non-qualified plan as described below.
Effective on January 1, 2005, the Restoration Plan was
renamed the Grandfathered Restoration Plan to preserve certain
distribution options previously available in the old Restoration
Plan, but no longer allowed under IRS regulations on deferrals
after January 1, 2005. Deferrals after January 1, 2005
are contributed to a new Restoration Plan, which complies with
the new IRS regulations on distributions. Under these plans,
employees can defer up to 50% of base salary plus annual
incentives. Payouts are generally made after retirement or
termination of employment with Kellogg either as annual
installments or as a lump sum, based on the distribution payment
alternative elected under each plan. Participants in the
Restoration Plan may not make withdrawals during their
employment. Participants in the Grandfathered Restoration Plan
may make withdrawals during employment, but must pay a 10%
penalty on any in-service withdrawal.
43
In order to assist employees with saving for retirement, we
provide matching contributions on employee deferrals. Under this
program, we match dollar for dollar up to 3% of eligible
compensation (i.e., base salary plus annual incentive) which is
deferred by employees, and 50% of the deferred compensation
between 3% and 5% of eligible compensation deferred by
employees. Accordingly, if employees contribute 5% of eligible
compensation, we provide a matching contribution of 4% of
eligible compensation. No Kellogg contributions are provided
above 5% of eligible compensation deferred by employees. Kellogg
contributions are immediately vested.
Our Restoration Plan is a non-qualified, unfunded plan we offer
to employees who are impacted by the statutory limits of the
Internal Revenue Code on contributions under our qualified plan.
The Restoration Plan allows us to provide the same matching
contribution, as a percentage of eligible compensation, to
impacted employees as other employees. All contributions to the
Restoration Plan are invested in the Stable Income Fund, which
was selected by Kellogg (and is one of the 11 investment choices
available to employees participating in the Savings &
Investment Plan). The Stable Income Fund has provided an
interest rate of about 5% per year. As an unfunded plan, no
money is actually invested in the Stable Income Fund;
contributions and earnings/losses are tracked in a book-entry
account and all account balances are general Kellogg obligations.
The following table provides information with respect to our
Restoration Plan for each NEO. This table excludes information
with respect to our Savings & Investment Plan, which
is a qualified plan available to all salaried Kellogg employees
as described above. Because Mr. Mobsby is employed in
Ireland and our Restoration Plan is governed by the laws of the
United States, he does not participate in our Restoration Plan
or similar plan in Ireland. In lieu of receiving this benefit,
Mr. Mobsby participates in the KPlan described in
Compensation Discussion and Analysis Elements
of Our Compensation Program The Kellogg Europe
Trading Limited Employee Share Purchase Plan.
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Executive
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Aggregate
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Aggregate
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Aggregate
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Contributions in
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Registrant
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Earnings
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Withdrawals/
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Balance
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Last FY
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Contributions in
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in Last FY
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Distributions
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at Last FYE
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Name
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($)(1)
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Last FY ($)(2)
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($)(3)
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($)
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($)(4)(5)
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David Mackay
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366,404
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97,708
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93,947
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0
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2,175,285
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John Bryant
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54,912
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43,930
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24,211
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0
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557,342
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Jeff Montie
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140,000
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46,667
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48,031
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0
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1,100,267
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Tim Mobsby
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0
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0
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0
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0
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0
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Paul Norman
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44,134
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35,308
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24,526
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0
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557,446
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Brad Davidson
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48,379
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38,704
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27,562
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0
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624,144
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(1) |
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Amounts in this column are included in the Salary
and/or Non-Equity Incentive Plan Compensation column
in the Summary Compensation Table. |
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(2) |
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Amounts in this column are Kellogg matching contributions and
are reflected in the Summary Compensation Table under the
heading All Other Compensation. |
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(3) |
|
Represents at-market/non-preferential earnings on the
accumulated balance in 2007. |
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(4) |
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Aggregate balance as of December 29, 2007 is the total
market value of the deferred compensation account, including
executive contributions, Kellogg contributions and any earnings,
including contributions and earnings from past fiscal years. |
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(5) |
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The amounts in the table below are also being reported as
compensation in the Summary Compensation Table in the years
indicated below: |
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Fiscal Year
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Reported Amounts ($)
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David Mackay
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2007
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464,112
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2006
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437,388
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John Bryant
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2007
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98,842
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2006
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97,555
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Jeff Montie
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2007
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186,667
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2006
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195,609
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Tim Mobsby
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2007
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0
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Paul Norman
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2007
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79,442
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Brad Davidson
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2007
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87,083
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44
EMPLOYMENT
AGREEMENTS
Mr. Jenness. Our letter agreements with
Mr. Jenness outline the compensation and benefits to which
he is entitled while serving as Chairman of the Board. In 2007,
it was Mr. Jennesss preference to forfeit certain
awards that had been previously granted to him and not receive
any additional annual base salary, bonus or long-term
compensation. Consequently, he did not receive any Director
fees, base salary, bonus or long-term incentive grants in 2007.
Mr. Jenness retained the equity awards previously granted
to him and continues to vest in the stock options granted to him
in 2005 and 2006, the stock grant he received when he became
Chairman and Chief Executive Officer in February 2005 and his
2005-2007
EPP award, both of which vested pursuant to their terms. Based
on Mr. Jenness preference at the time he transitioned
out of the Chief Executive Officer position, he forfeited his
2006-2008
EPP award granted to him in February 2006. While serving as
Chairman, Mr. Jenness remains eligible to participate in
our employee benefit plans and senior executive benefit plans,
such as our pension plans, life insurance, medical insurance,
dental plan and savings and investment plan. In 2007, he
received relocation and home sale benefits as described in the
letter agreement between him and Kellogg, dated
December 20, 2004. He also remains entitled to receive the
retiree medical insurance described in that letter agreement.
Mr. Jenness is entitled to a lump sum pension benefit from
Kellogg calculated as of January 1, 2008, which we refer to
as the election date. The benefit is payable six months after
the termination of his employment from Kellogg as a result of
Section 409A of the Internal Revenue Code. In accordance
with our Pension Plans, the pension benefit (stated as a single
life annuity of $155,167) will be converted to a lump sum amount
using the PBGC interest rate in effect in October 2007. The lump
sum will accrue interest at the
30-year
treasury rate from the election date.
Given the ongoing time commitment of serving as executive
Chairman, the valuable service he provides Kellogg and its
Shareowners and his affection for Kellogg, the Board determined
in February 2008 it was appropriate to provide compensation to
Mr. Jenness beginning in 2008. The total amount of his
annual compensation is $630,000, which is comprised of the same
long-term incentives granted to non-management Directors
(2,100 shares of restricted stock and 5,000 stock options),
with the remaining compensation paid in cash. Mr. Jenness
received these equity grants in 2008 on the same day the annual
long-term incentives were granted to other employees of Kellogg.
The stock options will vest in the same manner as those received
by other employees (50% on February 22, 2009 (the first
anniversary of the grant date), and 50% on February 22,
2010 (the second anniversary of the grant date)). The shares of
restricted stock vested immediately, but Mr. Jenness must
hold the shares as long as he is a Kellogg employee or Director.
Working with Towers Perrin, the Board determined the total
compensation amount for Mr. Jenness to be reasonable and
competitive. If Mr. Jenness employment is terminated
by us for cause (as defined in the agreement), he will forfeit
all outstanding equity awards and will not be entitled to a
pension payment.
Mr. Mackay. On October 23, 2006, we
announced that on December 31, 2006 (the first day of our
2007 fiscal year), David Mackay, our then President and Chief
Operating Officer, would assume the role of Chief Executive
Officer. In connection with this announcement, we entered into a
letter agreement with Mr. Mackay.
Our letter agreement with Mr. Mackay outlines certain
compensation and benefits relating to his 2007 pay as the Chief
Executive Officer. The agreement provides that his starting base
salary for 2007 would be $1,100,000 per year, and he would be
eligible for his first annual merit adjustment in April 2008.
In addition, he is a participant in:
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the 2007 Kellogg Company Senior Executive Annual Incentive Plan
(the AIP), with a target award for 2007 under the
AIP of 125% of his base salary; and
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our LTIP, with a target award to be established by the
Compensation Committee at approximately $6,000,000, which amount
is consistent with our philosophy of targeting long-term
incentives at the 50th percentile of the compensation peer
group.
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In addition, his
2005-2007
EPP target award was increased from 19,900 shares to
30,100 shares and his
2006-2008
EPP target award was increased from 19,900 shares to
50,400 shares (which was the Chief Executive Officer target
award in 2006) to reflect his additional responsibilities.
Mr. Mackay is entitled to certain relocation benefits under
an agreement entered into with us on September 1, 2003 (the
2003 Agreement). He is also entitled to certain
pension benefits under the 2003 Agreement and under an agreement
entered into with us on August 17, 2004 (the 2004
Agreement). If Mr. Mackays employment is
terminated by Kellogg without cause prior to December 31,
2008, Mr. Mackays relocation benefits would include
(1) business class airfare to
45
Australia for Mr. Mackay and his family, (2) shipping
expenses for personal and household effects transported by ocean
freight and a limited number of personal items shipped by air
transport, (3) normal and customary closing costs payable
in connection with the sale of his residence in the Battle
Creek/Kalamazoo metropolitan area and (4) the loss on the
sale of his residence, if any. Under the 2003 Agreement,
Mr. Mackay received six additional years of service credit.
In addition, if his employment is terminated by Kellogg without
cause, he would be entitled to take a leave of absence through
August 16, 2010, during which he would be eligible to
receive benefits under the Kellogg Company Severance Benefit
Plan. Mr. Mackay will be eligible to retire at the end of
the leave of absence and he would receive at that time benefits
in accordance with the terms of the plans payable at the
retirement of salaried retirees. He could also become entitled
to such benefits upon certain terminations of his employment in
connection with a change in control of Kellogg.
Mr. Bryant and Mr. Montie. On
July 23, 2007, we announced management changes concerning
senior executive leaders, including John Bryant and Jeff Montie.
Mr. Bryant was appointed Executive Vice President, Kellogg
Company, President, Kellogg North America and retained the role
of Chief Financial Officer. Previously, Mr. Bryant had been
Executive Vice President and Chief Financial Officer, Kellogg
Company, President, Kellogg International. Mr. Montie was
appointed Executive Vice President, Kellogg Company, President,
Kellogg International and assumed the additional
responsibilities for leading our global marketing, consumer
promotions, and sales teams. Previously, Mr. Montie had
been Executive Vice President, Kellogg Company, President,
Kellogg North America.
In connection with these changes, we entered into retention
agreements with Mr. Bryant and Mr. Montie pursuant to
which (a) if the executive is terminated by Kellogg without
cause or leaves Kellogg for good reason prior to his retirement
date under our pension plans (November 2020 for Mr. Bryant
and June 2016 for Mr. Montie), he would receive pension
benefits under these plans as if he reached his earliest
retirement age as of such date; (b) Mr. Bryants
pension benefits would be calculated based on the same formula
applicable to most other senior executives; and (c) each
executive will be subject to non-compete and non-solicit
obligations.
Mr. Mobsby. Effective as of
April 20, 2004, as part of a relocation and retention
program intended to guarantee benefits otherwise available to
management employees, we provided to Tim Mobsby a summary of
benefits, terms and conditions of his employment. The summary
provides for minimum annual base salary and annual bonus, and
other benefits customarily provided to management in Ireland
such as life insurance of four times his annual base salary,
participation in our stock option plan, European pension plans
and the Kellogg Europe Trading Limited Employee Share Purchase
Plan, vehicle allowance, benefits relating to private health
care, sickness absence, paternity, notice period entitlements
and paid vacation days.
In addition, in 2007 Mr. Mobsby received (1) a
relocation incentive premium payment equal to his initial base
salary, payable over three years, with the final payment made in
2007; and (2) an education allowance for primary and
secondary education in Ireland of $721. Per the terms of his
agreement, Mr. Mobsby is no longer entitled to receive an
education allowance beginning in 2008.
POTENTIAL
POST-EMPLOYMENT PAYMENTS
Our executive officers are eligible to receive benefits in the
event their employment is terminated (1) by Kellogg without
cause, (2) upon their retirement, disability or death or
(3) in certain circumstances following a change in control.
The amount of benefits will vary based on the reason for the
termination.
The following sections present calculations as of
December 29, 2007 of the estimated benefits our executive
officers would receive in these situations. Although the
calculations are intended to provide reasonable estimates of the
potential benefits, they are based on numerous assumptions and
may not represent the actual amount an executive would receive
if an eligible termination event were to occur.
In addition to the amounts disclosed in the following sections,
each executive officer would retain the amounts which he has
earned or accrued over the course of his employment prior to
the termination event, such as the executives balances
under our deferred compensation plans, accrued retirement
benefits and previously vested stock options. For further
information about previously earned and accrued amounts, see
Executive Compensation Summary Compensation
Table, Executive Compensation
Outstanding Equity Awards at Fiscal Year End Table,
Executive Compensation Option Exercises and
Stock Vested Table and Retirement and Non-Qualified
Defined Contribution and Deferred Compensation Plans.
46
Severance
Benefits
If the employment of an executive is terminated without cause,
then he or she will be entitled to receive benefits under the
Kellogg Company Severance Benefit Plan. Benefits under this plan
are not available if an executive is terminated for cause. Our
NEOs participate in our severance plan, which is described below.
In the event we terminate the at-will employment of
the NEOs for reasons other than cause, they would receive
severance-related benefits under the Kellogg Company Severance
Benefit Plan. The plan is designed to apply in situations where
Kellogg terminates employment for reasons such as
(1) individual and company corporate performance;
(2) a reduction in work force; (3) the closing, sale
or relocation of a Kellogg facility; (4) elimination of a
position; or (5) other reasons approved by the Kellogg
ERISA Administrative Committee. Under the plan:
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The executive is entitled to receive cash compensation equal to
two times base salary and two times target annual incentive
award, paid in installments over a two-year severance period.
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We have the discretion to pay the executive an annual incentive
award for the current year at no higher than the target level,
prorated as of the date of termination.
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Previously-granted stock option and restricted stock awards
continue to vest during the two-year severance period. All
awards not vested or earned after the two-year period are
forfeited. EPP awards do not vest under the terms of the
severance plan unless the executive is eligible to retire at the
time of his termination.
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The executive is entitled to continue to participate in health,
welfare and insurance benefits during the two-year severance
period. However, executives do not earn any additional service
credit during the severance period and severance payments are
not included in pensionable earnings.
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The executive is entitled to receive outplacement assistance for
12 months following termination. Mr. Mackay would also
be entitled to relocation benefits if his employment is
terminated by Kellogg without cause prior to December 31,
2008.
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Severance-related benefits are provided only if the executive
executes a separation agreement prepared by Kellogg, which may
include non-compete, non-solicitation, non-disparagement and
confidentiality provisions.