<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant / /
Filed by a party other than the registrant /X/
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/x/ Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SARA LEE CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
BOWNE OF CHICAGO
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
/ / 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.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
- - --------------------------------------------------------------------------------
- - -------------------------
1Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE> 2
[SARA LEE CORPORATION LOGO]
---------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 27, 1994
---------------------------------------------------------------------------
TO THE STOCKHOLDERS OF
SARA LEE CORPORATION:
Notice is hereby given that the annual meeting of the stockholders of SARA
LEE CORPORATION will be held at THE ART INSTITUTE OF CHICAGO, ARTHUR RUBLOFF
AUDITORIUM, COLUMBUS DRIVE BETWEEN MONROE AND JACKSON STREETS, CHICAGO,
ILLINOIS, on Thursday, October 27, 1994, at 10:00 A.M., Chicago time, for the
following purposes:
1. to elect 18 directors;
2. to consider and vote upon proposed amendments to the Employee Stock
Purchase Plan, as amended;
3. to ratify the appointment of Arthur Andersen LLP as the independent
public accountants of Sara Lee Corporation for fiscal year 1995;
4. to consider and vote upon a stockholder proposal concerning annual
executive compensation, if properly presented to the meeting;
5. to consider and vote upon a stockholder proposal concerning Sara
Lee's executive severance policy, if properly presented to the
meeting; and
6. to transact such other business as may properly come before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on September 1, 1994, are
entitled to notice of and to vote at the annual meeting.
Your attention is directed to the accompanying Proxy Statement and Proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO MARK,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS
REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors
Gordon H. Newman
Senior Vice President and Secretary
September 15, 1994
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
NOTICE OF ANNUAL MEETING............................................................ Cover
PROXY STATEMENT..................................................................... 1
ELECTION OF 18 DIRECTORS............................................................ 2
OWNERSHIP OF COMMON STOCK BY DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS................................................... 8
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD........................................ 9
Audit Committee................................................................... 9
Compensation and Employee Benefits Committee...................................... 9
Board Affairs Committee........................................................... 9
DIRECTOR COMPENSATION............................................................... 9
EXECUTIVE COMPENSATION.............................................................. 10
Report of the Compensation and Employee Benefits Committee on Executive
Compensation................................................................... 10
Performance Graph................................................................. 13
Summary Compensation Table........................................................ 14
Option Grants Table............................................................... 15
Option Exercises and Fiscal Year-End Values....................................... 16
RETIREMENT PLANS.................................................................... 16
Pension Plan...................................................................... 16
Employee Stock Ownership Plan..................................................... 17
PROPOSED AMENDMENTS TO THE EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED................. 18
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS....................................... 19
STOCKHOLDER PROPOSAL CONCERNING ANNUAL EXECUTIVE COMPENSATION....................... 19
STOCKHOLDER PROPOSAL CONCERNING SARA LEE'S EXECUTIVE SEVERANCE POLICY............... 21
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING....................................... 22
OTHER MATTERS....................................................................... 23
APPENDIX A -- SEVERANCE POLICY FOR CORPORATE OFFICERS............................... A-1
</TABLE>
<PAGE> 4
[SARA LEE CORPORATION LOGO]
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Sara Lee
Corporation ("Sara Lee") to be voted at the annual meeting of stockholders to be
held on October 27, 1994, or any adjournments thereof ("Annual Meeting"). A
stockholder returning a proxy may revoke it at any time prior to the voting at
the Annual Meeting. A proxy returned by a stockholder which is not subsequently
revoked will be voted in accordance with the instructions indicated thereon. If
no instructions are indicated on a returned and duly executed proxy, the shares
represented by the proxy will be voted FOR the election of the 18 nominees for
director, FOR the proposed amendments to the Employee Stock Purchase Plan, FOR
the ratification of the appointment of Arthur Andersen LLP as the independent
public accountants of Sara Lee for fiscal year 1995, AGAINST the stockholder
proposal concerning annual executive compensation, and AGAINST the stockholder
proposal concerning Sara Lee's executive severance policy.
If you are a stockholder and also participate in the Sara Lee Corporation
Employee Stock Ownership Plan (the "ESOP"), in the Sara Lee Corporation Common
Stock Fund under any of Sara Lee's employee retirement or savings plans
(collectively, the "Savings Plans"), or in Sara Lee's Dividend Reinvestment Plan
(the "DRP"), you will receive one proxy with respect to all shares registered in
the same name. Stockholders whose accounts are not registered in the same name
will receive a separate proxy with respect to their individual and ESOP, Savings
Plan or DRP shares. The trustees of the ESOP or the Savings Plans, as
applicable, will vote shares held in any of such plans in accordance with the
instructions on your proxy. If a participant in the ESOP or any of the Savings
Plans does not return a proxy, the participant's ESOP or Savings Plan shares
shall be voted by the ESOP or Savings Plan trustee, as applicable, in the same
proportion as shares for which voting instructions have been received.
Sara Lee has a policy that all proxies, ballots and votes tabulated at a
meeting of the stockholders of Sara Lee which identify the specific vote of a
stockholder shall be confidential, and that such votes shall not be revealed to
any employee of Sara Lee or any third party other than to the non-employee
tabulator of such votes or an independent election inspector appointed to
certify the results of the stockholder vote, except (1) as shall be necessary to
meet applicable legal requirements or (2) in the event there shall be filed with
the Securities and Exchange Commission a proxy solicitation in opposition to the
election of the Board of Directors.
Only stockholders of record at the close of business on September 1, 1994,
are entitled to notice of and to vote at the Annual Meeting. As of September 1,
1994, there were 481,761,768 shares of Common Stock outstanding and entitled to
vote at the Annual Meeting, each share being entitled to cast one vote, and
4,637,113 shares of Employee Stock Ownership Plan Convertible Preferred Stock
("ESOP Stock") outstanding and entitled to vote at the Annual Meeting, each
share being entitled to cast 5.133 votes. A majority of the shares voting at the
Annual Meeting is required for approval of each of the proposals presented in
this Proxy Statement. Under applicable Maryland law, in determining whether a
proposal has received the requisite number of affirmative votes, abstentions and
broker non-votes will not be counted and will have no effect on the outcome of
the vote.
The mailing address of the principal office of Sara Lee is Three First
National Plaza, Chicago, Illinois 60602-4260. This Proxy Statement and enclosed
proxy were first mailed to stockholders entitled to notice of and to vote at the
Annual Meeting on or about September 15, 1994.
1
<PAGE> 5
ELECTION OF 18 DIRECTORS
The names of, and certain information with respect to, the nominees for
election as directors, to serve until the 1995 annual meeting of stockholders or
until their successors are elected and qualified, are set forth below and were
furnished to Sara Lee by the nominees. Except for Donald J. Franceschini, who
was elected as a director on January 27, 1994, and Hans B. van Liemt, all of the
nominees have been previously elected as directors by the stockholders. Baron
Gualtherus Kraijenhoff, a director since 1978, having attained retirement age,
is not standing for re-election. Sara Lee is deeply appreciative of Baron
Kraijenhoff's dedicated service and valuable contributions as a member of the
Board of Directors and its committees.
If, for any reason, any of the nominees shall become unavailable for
election, the individuals named in the enclosed proxy may exercise their
discretion to vote for any substitutes proposed by the Board of Directors,
unless the Board of Directors should decide to reduce the number of directors to
be elected at the Annual Meeting. The affirmative vote of a majority of the
votes cast is required for the election of each nominee for director.
The following information is furnished with respect to each nominee for
election as a director. The ages of the nominees are as of October 27, 1994.
- - ----------------------
(PHOTO OF PAUL A. ALLAIRE
PAUL A. ALLAIRE)
Chairman and Chief Executive Officer of Xerox
Corporation (information processing). Mr. Allaire
became a director of Sara Lee in 1989. He is a
director of Rank Xerox Limited, Fuji Xerox Co.,
Ltd., Xerox Financial Services, Inc., SmithKline
Beecham plc and the New York Stock Exchange, and a
trustee of Carnegie-Mellon University and
Worcester Polytechnic Institute. Mr. Allaire is a
member of the Board of the Council on Foreign
Relations and Chairman of the Council on
Competitiveness. He is a trustee of the National
Planning Association and a member of The Business
- - ---------------------- Council and the Business Roundtable. Mr. Allaire
is a member of the Compensation and Employee
Benefits and Finance Committees of Sara Lee.
Age 56.
- - ----------------------
(PHOTO OF FRANS H.J.J. ANDRIESSEN
FRANS H.J.J.
ANDRIESSEN)
Professor in European Integration at the
University of Utrecht in the Netherlands. Mr.
Andriessen became a member of the Commission of
the European Communities in 1981, and was first
Vice President of the Commission from 1989 until
1993. He became a director of Sara Lee in 1993.
Mr. Andriessen is a member of the Audit and
Employee and Public Responsibility Committees of
Sara Lee. Age 65.
- - ----------------------
2
<PAGE> 6
- - ----------------------
(PHOTO OF JOHN H. BRYAN
JOHN H. BRYAN)
Chairman of the Board and Chief Executive Officer
of Sara Lee. Mr. Bryan became a director of Sara
Lee in 1974. He is a director of Amoco
Corporation, First Chicago Corporation and its
subsidiary, The First National Bank of Chicago,
and General Motors Corporation. Mr. Bryan is a
past chairman and a director of the Grocery
Manufacturers of America, Inc., a member of The
Business Council and the Business Roundtable, and
a director and past national chairman of the
Business Committee for the Arts. He is Chairman of
Catalyst and a trustee of the University of
- - ---------------------- Chicago, Vice President and Treasurer of the
Board of Trustees of The Art Institute of Chicago
and Chairman of the Chicago Council on Foreign
Relations. Mr. Bryan is Chairman of the Executive
Committee and a member of the Board Affairs,
Employee and Public Responsibility and Finance
Committees of Sara Lee. Age 58.
- - ----------------------
(PHOTO OF DUANE L. BURNHAM
DUANE L. BURNHAM)
Chairman of the Board and Chief Executive Officer
of Abbott Laboratories (health care products and
services) since 1990. Mr. Burnham has held senior
management positions with Abbott Laboratories
since 1982. He became a director of Sara Lee in
1991. Mr. Burnham is a member of the Business
Roundtable and the Commercial Club of Chicago. He
is also a member of the boards of The Federal
Reserve Bank of Chicago, Evanston (Illinois)
Hospital, the Healthcare Leadership Council, the
Lyric Opera (Chicago), and the Chicago Council on
- - ---------------------- Foreign Relations. Mr. Burnham is a trustee of
Northwestern University and the Museum of Science
and Industry (Chicago), and a member of the
Advisory Board of the J. L. Kellogg Graduate
School of Management at Northwestern University.
He is a member of the Audit and Compensation and
Employee Benefits Committees of Sara Lee. Age 52.
- - ----------------------
(PHOTO OF CHARLES W. COKER
CHARLES W. COKER)
Chairman of the Board and Chief Executive Officer
of Sonoco Products Company (packaging products
manufacturer). Mr. Coker was President of Sonoco
Products Company from 1970 to 1990. He became a
director of Sara Lee in 1986. Mr. Coker is also a
director of NationsBank Corporation (formerly NCNB
Corporation), Springs Industries, Inc., Carolina
Power and Light Company, Palmetto Seed Capital
Corporation and the American Forest & Paper
Association. He is a member of the Board of
Hollings Cancer Center. Mr. Coker is a member of
- - ---------------------- the Audit and Finance Committees of Sara Lee.
Age 61.
3
<PAGE> 7
- - ----------------------
(PHOTO OF WILLIE D. DAVIS
WILLIE D. DAVIS)
President of All-Pro Broadcasting, Inc. (radio
stations), a privately owned company. Mr. Davis
became a director of Sara Lee in 1983. He is also
a director of The Dow Chemical Company, Kmart
Corporation, Alliance Bank (Culver City,
California), Johnson Controls Inc., MGM Grand Inc.
and WICOR. Mr. Davis is a trustee of the
University of Chicago, Marquette University and
Occidental College. He is Chairman of the Employee
and Public Responsibility Committee and a member
of the Board Affairs, Compensation and Employee
Benefits and Executive Committees of Sara Lee.
- - ---------------------- Age 60.
- - ----------------------
(PHOTO OF DONALD J. FRANCESCHINI
DONALD J.
FRANCESCHINI)
Executive Vice President of Sara Lee since January
1994, Senior Vice President from 1993 to January
1994, and Vice President from 1992 to 1993. Mr.
Franceschini was President of Playtex Apparel,
Inc. from 1986 until its acquisition by Sara Lee
in 1991. He became a director of Sara Lee in
January 1994. Mr. Franceschini is a past president
of the State of Delaware-American Institute of
Industrial Engineers, and a member/patron of The
Fairfield Historical Society (Fairfield,
Connecticut). He is a member of the Employee and
Public Responsibility and Finance Committees of
- - ---------------------- Sara Lee. Age 59.
- - ----------------------
(PHOTO OF ALLEN F. JACOBSON
ALLEN F. JACOBSON)
Retired Chairman of the Board and Chief Executive
Officer and a director of Minnesota Mining &
Manufacturing Company (industrial, imaging, and
health care products). Mr. Jacobson was Chairman
of the Board and Chief Executive Officer of
Minnesota Mining & Manufacturing Company from 1986
to 1991. He became a director of Sara Lee in 1990.
Mr. Jacobson is also a director of Abbott
Laboratories, Deluxe Corporation, Mobil
Corporation, Northern States Power Company,
Potlatch Corporation, Prudential Insurance
Company, Silicon Graphics, Inc., U S WEST, Inc.
- - ---------------------- and Valmont Industries, Inc. He is Chairman of
the United States Council for International
Business and The Conference Board. Mr. Jacobson
is also a member of The Business Council and the
National Academy of Engineering. He is Chairman
of the Compensation and Employee Benefits
Committee and a member of the Audit, Board
Affairs and Executive Committees of Sara Lee.
Age 68.
4
<PAGE> 8
- - ----------------------
(PHOTO OF VERNON E. JORDAN, JR.
VERNON E.
JORDAN, JR.)
Senior partner of the Washington, D.C. law firm of
Akin, Gump, Strauss, Hauer & Feld, L.L.P. Mr.
Jordan became a director of Sara Lee in 1989. He
served as President of the National Urban League,
Inc. from 1972 to 1982. Mr. Jordan is a director
of American Express Company, Bankers Trust New
York Corporation and its subsidiary, Bankers Trust
Company, Corning Incorporated, Dow Jones &
Company, Inc., J.C. Penney Company, Inc., Revlon
Group, Inc., Ryder System, Inc., Union Carbide
Corporation and Xerox Corporation. He is also a
- - ---------------------- director of the Ford Foundation and The Lyndon
Baines Johnson Foundation, and is Chairman
of the Board of the National Academy Foundation
and the Roy Wilkins Foundation. Mr. Jordan is a
trustee of Howard University and The Brookings
Institution and a governor of the Joint Center for
Political and Economic Studies. He is a member of
the Audit and Employee and Public Responsibility
Committees of Sara Lee. Age 59.
- - ----------------------
(PHOTO OF JAMES L. KETELSEN
JAMES L. KETELSEN)
Retired Chairman of the Board and Chief Executive
Officer of Tenneco Inc. (diversified industrial
corporation). He was Chairman of the Board and
Chief Executive Officer of Tenneco Inc. from 1978
to 1992. Mr. Ketelsen became a director of Sara
Lee in 1982. He is also a director of GTE
Corporation and J.P. Morgan & Co. and its
subsidiary, Morgan Guaranty Trust Co. Mr. Ketelsen
is a trustee of Northwestern University. He is a
member of the Employee and Public Responsibility
and Finance Committees of Sara Lee. Age 63.
- - ----------------------
- - ----------------------
(PHOTO OF HANS B. VAN LIEMT
HANS B. VAN LIEMT)
Retired Chairman of the Board of Management of DSM
NV (chemicals). Mr. van Liemt served as Chairman
of the Board of Management of DSM NV from 1984 to
1993. He is Vice Chairman of the Supervisory Board
of Sara Lee/DE, N.V., a wholly-owned subsidiary of
Sara Lee. Mr. van Liemt is Chairman of the
Supervisory Boards of Gamma Holding NV and Oce-Van
der Grinten NV and Vice Chairman of the
Supervisory Board of Hollandsche Beton Groep NV.
He is also a member of the Supervisory Boards of
ABN-AMRO Holding NV, Van Leer Group Foundation,
- - ---------------------- NV Verenigd Bezit VNU and Stienstra Holding BV.
Mr. van Liemt is a trustee of the Foundation of
the Catholic University of Nijmegen, the
Lucas-Franciscus Rehabilitation Foundation, the
Preference Shares Foundation of Koninklijke PTT
NV, and the Preference Shares Foundation of
Philips NV. Age 61.
5
<PAGE> 9
- - ----------------------
(PHOTO OF JOAN D. MANLEY
JOAN D. MANLEY)
Retired Group Vice President and retired director
of Time Incorporated (communications). Mrs. Manley
became a director of Sara Lee in 1982. She is also
a director of Aon Corporation, Scholastic
Corporation and Viking Office Products, Inc. Mrs.
Manley is a member of the Audit and Employee and
Public Responsibility Committees of Sara Lee. Age
62.
- - ----------------------
- - ----------------------
(PHOTO OF C. STEVEN MCMILLAN
C. STEVEN MCMILLAN)
Executive Vice President of Sara Lee since 1993,
Senior Vice President from 1986 to 1993. Mr.
McMillan became a director of Sara Lee in 1993. He
is a member of the Advisory Board of the Stedman
Nutrition Center of the Duke University Medical
School, a member of the Board of Advisors of Troy
State University Business School, and a member of
the Productivity Council of Grocery Manufacturers
of America, Inc. Mr. McMillan is a member of the
Employee and Public Responsibility and Finance
Committees of Sara Lee. Age 48.
- - ----------------------
- - ----------------------
(PHOTO OF NEWTON N. MINOW
NEWTON N. MINOW)
Counsel to, and former partner of, the Chicago law
firm of Sidley & Austin. He became a director of
Sara Lee in 1988. Mr. Minow served as Chairman of
the Federal Communications Commission from 1961 to
1963. He is also a director of Aon Corporation,
Foote, Cone & Belding Communications, Inc.,
Manpower, Inc. and Tribune Company. Mr. Minow is
Chairman of the Carnegie Corporation of New York,
a trustee and former chairman of the Board of
Trustees of the RAND Corporation, and former
chairman of the Board of Governors of the Public
- - ---------------------- Broadcasting Service. He is also a trustee of the
University of Notre Dame and a life trustee of
Northwestern University, where he is director of
the Annenberg Washington Program and serves as
the Walter H. Annenberg Professor of
Communications Law and Policy. Mr. Minow is
Chairman of the Audit Committee, and a member of
the Board Affairs, Employee and Public
Responsibility, and Executive Committees of Sara
Lee. Age 68.
- - ----------------------
(PHOTO OF MICHAEL E. MURPHY
MICHAEL E. MURPHY)
Vice Chairman and Chief Financial and
Administrative Officer of Sara Lee since 1993,
Executive Vice President and Administrative
Officer from 1979 to 1993. He became a director of
Sara Lee in 1979. Mr. Murphy is a director of GATX
Corporation. He is a member of the advisory board
of the J.L. Kellogg Graduate School of Management
of Northwestern University, member of the Chicago
Committee of the Chicago Council on Foreign
Relations, member of the Executive Committee of
the Civic Federation of Chicago and a director of
- - ---------------------- Northwestern Memorial Corporation (university
hospitals), the Lyric Opera (Chicago) and
Jobs-for-Youth (Chicago). Mr. Murphy is a member
of the Employee and Public Responsibility,
Executive and Finance Committees of Sara Lee. Age
58.
6
<PAGE> 10
- - ----------------------
(PHOTO OF SIR ARVI H. PARBO A.C.
SIR ARVI H.
PARBO A.C.)
Chairman of Western Mining Corporation Holdings
Limited (exploration and mining) since 1974, and
also Chairman of Alcoa of Australia Limited,
Munich Reinsurance Company of Australia Limited
and Zurich Australian Insurance Group. Sir Arvi
became a director of Sara Lee in 1991. He is a
director of Aluminum Company of America and of
Hoechst Australia Investments Proprietary Limited,
and a member of the Chase International Advisory
Committee. Sir Arvi is a member of the Audit and
Compensation and Employee Benefits Committees
- - ---------------------- of Sara Lee. Age 68.
- - ----------------------
(PHOTO OF ROZANNE L. RIDGWAY
ROZANNE L. RIDGWAY)
Co-Chair of The Atlantic Council of the United
States (association to promote understanding of
international security, political and economic
problems) since 1993, President from 1989 to 1993,
and since July 1994, Chair of the Baltic American
Enterprise Fund. She became a director of Sara Lee
in 1992. Ambassador Ridgway served in the U.S.
Foreign Service from 1957 until her retirement in
1989, including assignments as Deputy Assistant
Secretary of State and Ambassador for Oceans and
Fisheries Affairs; Ambassador to Finland;
- - ---------------------- Counselor of the Department of State; Special
Assistant to the Secretary of State; Ambassador
to the German Democratic Republic; and from 1985
to 1989, Assistant Secretary of State for
European and Canadian Affairs. Ambassador Ridgway
is a director of Bell Atlantic Corporation, The
Boeing Company, Citicorp and its subsidiary,
Citibank, Minnesota Mining & Manufacturing
Company, RJR Nabisco, Inc., and Union Carbide
Corporation. She serves on the International
Advisory Board of the New Perspective Fund.
Ambassador Ridgway is also a director of the
Center for Naval Analysis and of the Council on
Ocean Law and a trustee of the National
Geographic Society and of Hamline University,
Vice Chairman of the American Academy of
Diplomacy, and a Fellow of the National Academy
of Public Administration. She is a member of the
Employee and Public Responsibility and Finance
Committees of Sara Lee. Age 59.
- - ----------------------
(PHOTO OF RICHARD L. THOMAS
RICHARD L. THOMAS)
Chairman of the Board and Chief Executive Officer
of First Chicago Corporation (bank holding
company) and its subsidiary, The First National
Bank of Chicago. Mr. Thomas became a director of
Sara Lee in 1976. He is also a director of CNA
Financial Corporation. Mr. Thomas is a life
trustee of the Orchestral Association of Chicago
and a trustee of Rush-Presbyterian-St. Luke's
Medical Center (Chicago). He is also a trustee of
Northwestern University and Kenyon College. Mr.
Thomas is Chairman of the Board Affairs Committee
and a member of the Employee and Public
- - ---------------------- Responsibility, Executive and Finance Committees
of Sara Lee. Age 63.
7
<PAGE> 11
OWNERSHIP OF COMMON STOCK BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table contains information as to the beneficial ownership of
Sara Lee Common Stock as of September 1, 1994, by each director and nominee for
director, the executive officers named in the Summary Compensation Table on page
14, and by all directors and executive officers as a group. Except as otherwise
noted, the persons named in the table below have sole voting and investment
power with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES
NAME BENEFICIALLY OWNED
---- ------------------
<S> <C>
Paul A. Allaire.................................... 7,902
Frans H.J.J. Andriessen............................ 1,248
John H. Bryan...................................... 2,030,448(1),(2),(3),(4)
Duane L. Burnham................................... 5,580
Charles W. Coker................................... 43,458(2)
Willie D. Davis.................................... 11,178
Donald J. Franceschini............................. 754,903(1),(3),(4)
Allen F. Jacobson.................................. 6,698
Vernon E. Jordan, Jr............................... 6,702
James L. Ketelsen.................................. 22,778
Baron Gualtherus Kraijenhoff....................... 24,709
Hans B. van Liemt.................................. 1,120
Joan D. Manley..................................... 19,578
C. Steven McMillan................................. 325,467(1),(3),(4)
Newton N. Minow.................................... 64,718
Michael E. Murphy.................................. 618,592(1),(3),(4),(5)
Gordon H. Newman................................... 505,388(1),(3),(4)
Sir Arvi H. Parbo A.C.............................. 4,898
Rozanne L. Ridgway................................. 1,792
Richard L. Thomas.................................. 88,472(2),(5)
Directors and Executive Officers as a group........ 4,856,588(1),(2),(3),(4),(5)
</TABLE>
- - -------------------------
(1) Includes shares of Common Stock which the following directors and executive
officers have the right to acquire within 60 days upon the exercise of stock
options: Mr. Bryan, 532,220 shares; Mr. Franceschini, 17,933 shares; Mr.
McMillan, 155,242 shares; Mr. Murphy, 233,533 shares; Mr. Newman, 128,607
shares; executive officers other than named executive officers, 130,615
shares.
(2) Includes shares of Common Stock owned by relatives or held in trusts for the
benefit of relatives with respect to which the named persons disclaim any
beneficial interest.
(3) Does not include shares of ESOP Stock (as defined on page 1) held in trust
for the benefit of such persons in the ESOP.
(4) Includes Restricted Shares under Sara Lee's 1989 Incentive Stock Plan as
described on page 11.
(5) Includes shares of Common Stock with respect to which the following
directors and executive officers share voting and investment power with
others: Mr. Murphy, 232,074 shares; Mr. Thomas, 1,500 shares.
As of September 1, 1994, all directors and executive officers as a group
beneficially owned, or were deemed to beneficially own, 4,856,588 shares of
Common Stock, or 1.01% of the outstanding shares on that date, and 1,798.5
shares of ESOP Stock, or .039% of the outstanding ESOP shares on that date,
including 282.5 shares beneficially owned by each of Messrs. Bryan, McMillan,
Murphy, and Newman, and 113.8 shares beneficially owned by Mr. Franceschini. No
person named in the table owns more than 1% of the outstanding Common Stock or
of the outstanding ESOP Stock. State Street Bank and Trust Company of Boston,
200 Newport Avenue, North Quincy, Massachusetts, 02171, as Trustee of the ESOP
("Trustee") held 3,624,677 shares of ESOP Stock, or 78.2% of the outstanding
ESOP shares on that date, in trust under the ESOP. Participants in the ESOP have
the right to instruct the Trustee as to the voting of ESOP Stock allocated to
their respective accounts. The Trustee votes unallocated shares proportionally
in accordance with instructions given by participants with respect to their
allocated shares.
8
<PAGE> 12
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors held six regular meetings during the fiscal year
ended July 2, 1994. The average attendance by directors at the meetings of the
Board of Directors and Board committees was 92%. All directors attended at least
75% of the meetings of the Board of Directors and Board committees of which they
are members, except for F.H.J.J. Andriessen and Sir A.H. Parbo A.C.
AUDIT COMMITTEE. The Audit Committee, whose members are presently N.N.
Minow (Chairman), F.H.J.J. Andriessen, D.L. Burnham, C. W. Coker, A.F. Jacobson,
V.E. Jordan, Jr., J. D. Manley and Sir A. H. Parbo A.C., held three meetings
during fiscal year 1994. This Committee provides oversight regarding accounting,
auditing and financial reporting practices of Sara Lee. Each year it recommends
to the Board of Directors a firm of independent public accountants to serve as
auditors with whom it discusses the scope and results of their audit, non-audit
services, fees for services and their independence in servicing Sara Lee. The
Audit Committee meets with Sara Lee's internal auditors to discuss the work they
perform and also is informed by management and the independent public
accountants about the adequacy of compliance with Sara Lee's existing major
accounting and financial policies; procedures and policies relative to the
adequacy of Sara Lee's internal accounting controls; and compliance with the
Foreign Corrupt Practices Act of 1977 and other federal and state laws relating
to accounting practices.
COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE. The Compensation and Employee
Benefits Committee is presently comprised of A.F. Jacobson (Chairman), P.A.
Allaire, D.L. Burnham, W.D. Davis, Baron G. Kraijenhoff and Sir A. H. Parbo
A.C., all of whom are not, and have never been, employees of Sara Lee. The
functions of the Compensation and Employee Benefits Committee are to review and
approve Sara Lee's total compensation philosophy covering corporate officers and
other key management employees; review the competitiveness of Sara Lee's total
compensation practices; determine the annual base salaries and incentive awards
to be paid to specified executive officers and approve the annual salaries of
all corporate officers and certain other highly-paid executives; review and
approve salary ranges for corporate officers and other key management employees;
approve the terms and conditions of proposed incentive plans applicable to
corporate officers and other key management employees; approve and administer
Sara Lee's incentive and other employee benefit plans, subject to the approval
of the Board of Directors or the stockholders of Sara Lee, where appropriate;
review and approve special hiring and severance arrangements with executive
officers; and review the management succession plan. A director is not eligible
to serve as a member of the Compensation and Employee Benefits Committee if a
Sara Lee employee is a member of the board of directors of the company which
employs such director. The Compensation and Employee Benefits Committee held
three meetings in fiscal year 1994.
BOARD AFFAIRS COMMITTEE. The Board Affairs Committee is presently comprised
of R.L. Thomas (Chairman), J.H. Bryan, W. D. Davis, A.F. Jacobson, Baron G.
Kraijenhoff and N.N. Minow. The functions of the Board Affairs Committee are to
review and consider directorship policies and practices from time to time and to
screen and recommend candidates for director. The Board Affairs Committee held
one formal meeting in fiscal year 1994. Candidates for director suggested by
stockholders will be considered by the Board Affairs Committee. Such
suggestions, together with biographical information about the suggested
candidate, should be submitted to the Secretary, Sara Lee Corporation, Three
First National Plaza, Chicago, Illinois 60602-4260.
DIRECTOR COMPENSATION
Outside directors are currently paid an annual fee of $61,500 which is
comprised of $37,000 in cash, payable in equal quarterly payments of $9,250, and
shares of Sara Lee Common Stock having a market value of $24,500 on the first
business day of each November. Committee chairpersons are paid an annual fee of
$63,500. During fiscal year 1994, total outside directors' fees of $901,603 were
paid in cash and shares of Sara Lee Common Stock. Management directors receive
no fees for their services as a director. Outside directors may elect to defer
payment of all or a portion of their annual fees under a non-qualified, unfunded
deferred compensation plan. Deferred amounts are invested, at the election of
the director, in
9
<PAGE> 13
an interest-bearing account or a stock equivalent account. The amounts deferred,
plus any appreciation thereon, are paid in cash on the dates specified by the
director.
-------------------------
Notwithstanding anything to the contrary set forth in any of Sara Lee's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate future filings by reference,
including this Proxy Statement, in whole or in part, the following Report of the
Compensation and Employee Benefits Committee on Executive Compensation and the
Performance Graph shall not be incorporated by reference into any such filings.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE ON EXECUTIVE
COMPENSATION
OVERALL POLICY
The Compensation and Employee Benefits Committee ("Committee"), composed of
directors who are not employees or former employees of Sara Lee, is responsible
for the approval and administration of compensation programs for officers. In
conducting its review of executive compensation matters, the Committee utilizes
the compensation data and advisory services of independent compensation
consultants. Sara Lee's philosophy of executive compensation is based on the
following principles:
- - - Executive compensation programs shall support the attainment of Sara Lee's
short-term and long-term strategic and financial objectives by rewarding its
executive officers for continuous improvement in earnings per share and growth
in stockholder value.
- - - Total compensation shall represent competitive levels of compensation when
compared to the financial performance and compensation levels of executives of
global companies against which Sara Lee competes for management talent.
- - - Performance-related pay shall be a significant component of total compensation
placing a substantial portion of an executive officer's compensation at risk.
- - - Compensation programs shall reflect the highly competitive global environment
in which executive officers of Sara Lee must perform.
- - - Equity ownership plans shall be designed and maintained to encourage
significant stock ownership in Sara Lee by its executive officers to align
their interests with those of stockholders.
BASE SALARY
Executive officers' salaries are determined by evaluating the
responsibilities of their positions, their performance and by reference to the
median levels of salaries paid in the competitive marketplace for comparable
executive ability and experience. This marketplace consists of a select peer
group of the largest U.S. consumer products companies, the majority of which are
represented in the S&P Food/Household/Apparel Composite index shown in the
Performance Graph on page 13. Individual salary increases, which are reviewed
annually, are based on Sara Lee's financial performance and the attainment of
individual non-financial objectives during the preceding fiscal year. In the
case of operating executive officers, other factors considered are the financial
results of their business units as well as non-financial performance measures,
such as market share increases; improvements in manufacturing productivity;
improvement of product quality and relationships with customers, suppliers and
employees; employee safety; environmental quality of operations; business
ethics; leadership and management development. The Committee exercises its
judgment in making a determination on the impact which these or any other
relevant performance criteria has on setting the executive officers' salaries.
10
<PAGE> 14
ANNUAL INCENTIVES
Executive officers are also eligible to earn an annual cash incentive
award, the amount of which is based on three factors: (i) the position level of
the executive officer, which determines the maximum percentage of annual base
salary which may be awarded, ranging from 125% to 95% of annual base salary;
(ii) the attainment of specified earnings per share of Sara Lee, and in the case
of an operating executive officer, the attainment of a specified level of
operating profits and of asset management goals for the fiscal year for those
operations for which the executive is accountable and (iii) individual non-
financial performance objectives, all of which are set at the beginning of the
fiscal year by the Committee for John H. Bryan, Chief Executive Officer, or by
the immediate superiors of the other executive officers. Maximum awards are set
at levels which would provide top quartile total annual cash compensation
opportunities if those performance objectives which are deemed to represent an
outstanding level of performance, are achieved. The same competitive peer group
is used for all components of the compensation package.
LONG RANGE INCENTIVE PLANS
The stock options and restricted stock granted under the 1989 Incentive
Stock Plan (approved by the stockholders in October 1989) provide an incentive
for executive officers to manage with a view to maximization of long-term
stockholder value. Stock options to purchase Common Stock are granted annually
to executive officers at an option price of 100% of the market value on the date
of grant, with a maximum term of 10 years. The Committee sets guidelines for the
number of shares subject to each option grant based on the evaluation of
competitive compensation data at the median level of the select peer group and
the executive officer's base salary and position. The total number of shares
available for the granting of stock options is determined by the number of
shares of Common Stock outstanding and the earnings per share performance of
Sara Lee during the immediately preceding fiscal year. In making its annual
determination of stock awards, the Committee does not consider an individual's
current stock option or other Sara Lee stock holdings.
To encourage stock ownership by executive officers, "restoration" stock
options ("Restoration Options") are granted simultaneously with the exercise of
the original stock option. The granting of Restoration Options has the effect of
inducing an executive officer to exercise a stock option in the early years of
the term of the stock option resulting in increased ownership. Restoration
Options are granted whenever an executive officer exercises an option
surrendering currently owned shares to purchase the shares subject to the option
as well as to satisfy tax withholding obligations related to the exercise of the
option, and are subject to the same terms and conditions as the original option,
including the expiration date, except that the option price of a Restoration
Option is the fair market value on the date of its grant rather than the option
price of the original option.
Sara Lee has no long-term cash incentive award plan, but has adopted the
Accelerated Growth Incentive Plan ("AGIP") as the only long-term performance
incentive program under which the Committee could award executive officers
shares of Common Stock which are subject to the risk of forfeiture for a period
of up to 10 years from the award date ("Restricted Shares"). The Restricted
Shares are held in escrow and are released to the executive officers in amounts
and at times during the 10 year period depending on (i) the executive officers'
remaining employed by Sara Lee and (ii) the attainment of compound earnings per
share growth goals for fiscal years 1990 through 1994, which were set by the
Committee in 1989. Eighty percent of the Restricted Shares awarded under the
AGIP remain subject to risk of forfeiture. The other twenty percent of the
Restricted Shares were released on June 26, 1992 to each executive officer who
was an employee of Sara Lee on that date. Dividends payable on Restricted Shares
are not paid to the executive officer, but are escrowed, together with interest
thereon, and will be released to the extent that Restricted Shares are released.
Since the growth targets established by the Committee in 1989 were not attained,
all remaining shares continue to be restricted until the end of fiscal year
1999. Those Restricted Shares will be forfeited if the executive does not
continue to be employed by Sara Lee through that date, except in the case of
retirement, death or disability, when the Committee will determine the number of
Restricted Shares that will vest. All dividends
11
<PAGE> 15
and interest previously accrued on those shares have been forfeited and no
additional dividends will be accrued after fiscal year 1994.
In keeping with Sara Lee's principle of designing and maintaining stock
incentive plans to encourage significant stock ownership in Sara Lee by its
executives, the Committee has approved target levels of stock ownership
(excluding stock options) to clarify for executives the levels of stock
ownership that Sara Lee believes are significant. The target levels of stock
ownership range from five times annual salary for the Chief Executive Officer to
two thirds of annual salary for operating unit vice presidents. These target
ownership levels are applicable to about 500 of Sara Lee's key executives. All
five executive officers maintain ownership levels which exceed their target.
TAX DEDUCTIBILITY CONSIDERATIONS
In 1993, the Internal Revenue Code was amended to limit the deductibility
of certain compensation expenses in excess of $1 million, which will apply to
Sara Lee in fiscal year 1995. The Committee believes that the compensation
payable for fiscal year 1995 will not result in any material loss of tax
deductions for Sara Lee. It is the Committee's intent, pending finalization of
the tax regulations, to adopt policies to obtain maximum deductibility of
executive compensation, consistent with its responsibility to provide
motivational and competitive compensation which is performance-based. The
Committee will continue to monitor the regulations as they are finalized to
determine whether any program changes are appropriate.
CHIEF EXECUTIVE OFFICER'S COMPENSATION AND CORPORATE PERFORMANCE FOR FISCAL
YEAR 1994
For fiscal year 1994, the Committee agreed with management's recommendation
to freeze salaries of executive officers, except in the case of significant
promotions or changes in job responsibilities. As a result, Mr. Bryan's
annualized salary, which was last increased on September 1, 1992, remained
unchanged during fiscal year 1994 at $892,500.
Under the annual incentive plan applicable to fiscal year 1994, Mr. Bryan
was eligible to earn a cash bonus equal to 125% of his base salary, of which 60%
was based on earnings per share performance and 40% was based on the attainment
of strategic and individual performance measured against the goals set by the
Committee at the beginning of fiscal year 1994. Sara Lee's primary earnings per
share of $1.47 represented a 5% percent increase over fiscal year 1993 after
excluding $530 million in extraordinary charges to net income related to its
restructuring program and the adoption of SFAS109. The Committee evaluated Mr.
Bryan's strategic and individual performance in achieving other financially
related goals, including debt to total capital ratio, return on equity and
market share growth in various product categories, as well as non-financial
goals related to employee and public responsibility goals such as workplace
diversity, employee safety improvement and management development. Based on
these factors, Mr. Bryan earned an incentive award of $676,515 which represented
75.8% of his base salary for fiscal year 1994.
On August 25, 1993, Mr. Bryan was granted an option to purchase 89,300
shares of Common Stock of Sara Lee by the Committee in accordance with the
guidelines of the Committee referred to above and Sara Lee's earnings per share
performance for fiscal year 1993. In addition, Restoration Options representing
10,789 shares were granted to Mr. Bryan for the remaining term of underlying
stock options exercised during fiscal year 1994 which replaced the number of
shares Mr. Bryan surrendered to pay the exercise price and tax withholding
obligations related to the exercise of previously granted stock options. No
grants were made to Mr. Bryan under the AGIP during fiscal year 1994.
Allen F. Jacobson, Chairman
Paul A. Allaire
Duane L. Burnham
Willie D. Davis
Baron Gualtherus Kraijenhoff
Sir Arvi H. Parbo A.C.
12
<PAGE> 16
PERFORMANCE GRAPH
The graph below compares the yearly percentage change in cumulative total
stockholder return on Sara Lee Common Stock with (i) the cumulative total return
of the Standard and Poor's 500 Stock Index ("S&P 500") and (ii) the cumulative
total return of a weighted composite of Standard and Poor's Foods, Household
Products and Textile-Apparel Manufacturers Indices, respectively ("S&P
Food/Household/ Apparel Composite").
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AS OF JUNE 30
<TABLE>
<CAPTION>
S&P
MEASUREMENT PERIOD FOOD/HOUSEHOLD/APPAREL
(FISCAL YEAR COVERED) SARA LEE S&P 500 COMPOSITE
<S> <C> <C> <C>
1989 100 100 100
1990 111 116 121
1991 159 125 143
1992 208 142 156
1993 203 161 155
1994 179 163 146
</TABLE>
______________________________________________________________________________
| |
| Assumes an investment of $100 on June 30, 1989, and the reinvestment |
| of dividends. |
| |
|______________________________________________________________________________|
Sara Lee has elected to utilize a weighted composite of the S&P Foods, Household
Products and Textile-Apparel Manufacturers Indices because no single
standardized industry index represents a comparable peer group. The three
Indices are comprised of the following companies: the S&P Foods Index -- Archer-
Daniels-Midland Co., Borden, Inc., CPC International Inc., Campbell Soup
Company, ConAgra, Inc., General Mills, Inc., H.J. Heinz Company, Hershey Foods
Corporation, Kellogg Company, Pet Incorporated, The Quaker Oats Company, Ralston
Purina Group, Sara Lee Corporation, Wm. Wrigley Jr. Company; the S&P Household
Products Index -- The Clorox Company, Colgate-Palmolive Company, The Procter &
Gamble Company, Unilever N.V.; and the S&P Textile-Apparel Manufacturers Index
- - -- Hartmarx Corporation, Liz Claiborne, Inc., Oshkosh B'Gosh, Incorporated,
Russell Corp., Springs Industries, V.F. Corporation. The returns on the S&P
Food/Household/Apparel Composite were calculated as follows: At the beginning of
each fiscal year the amount invested in each S&P industry sector index was
equivalent to the percentage of Sara Lee's operating profits in its food,
household and personal care, and apparel businesses, respectively, for the
preceding year. As a result, the investment allocation was re-weighted each year
to reflect the profit percentage change that occurred in Sara Lee's business mix
during the prior year.
13
<PAGE> 17
SUMMARY COMPENSATION TABLE
The following table sets forth information as to the cash compensation paid
to, or set aside for, the Chief Executive Officer and each of the four other
most highly compensated executive officers of Sara Lee (collectively, the "named
executive officers") for the fiscal years ended July 2, 1994, July 3, 1993, and
June 27, 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------------------
AWARDS
------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($)(1) ($)(2) (#)(3) ($)(1,4)
- - --------------------------- ------ -------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John Bryan 1994 $892,500 $ 676,515 $166,600(5) None 100,089 $ 53,517
Chairman of the Board 1993 $885,144 $ 870,053 $131,082 None 633,186 $ 76,365
and Director 1992 $841,346 $1,030,649 -- None 168,126 --
Michael E. Murphy 1994 $529,573 $ 394,532 $ 2,670 None 45,100 $ 25,658
Vice Chairman and 1993 $489,019 $ 418,111 (6) $246,250 239,634 $ 51,440
Director 1992 $465,846 $ 503,114 -- None 34,020 --
C. Steven McMillan 1994 $475,000 $ 441,750 $ 67,202(5) None 61,605 $ 32,467
Executive Vice President 1993 $439,065 $ 443,293 (6) $843,750 118,971 $ 38,881
and Director 1992 $385,673 $ 421,348 -- None None --
Donald J. Franceschini 1994 $379,250 $ 324,117 (6) $470,000 42,800 $ 13,546
Executive Vice President 1993 $263,135 $ 244,716 (6) $441,628 18,000 $ 8,204
and Director 1992 (7) (7) -- (7) (7) --
Gordon H. Newman 1994 $329,000 $ 250,000 $ 2,910 None 23,000 $ 23,607
Senior Vice President 1993 $326,667 $ 245,586 (6) None 147,494 $ 22,688
1992 $312,144 $ 287,172 -- None 108,684 --
</TABLE>
- - -------------------------
(1) Pursuant to the rules of the Securities and Exchange Commission, information
with respect to fiscal years prior to 1993 has not been included in the
table.
(2) Market value of Restricted Shares awarded under the AGIP on the date of
grant. No dividends will be accrued or paid on Restricted Shares after
fiscal year 1994. In the event of a change of control, the restrictions
imposed on the Restricted Shares will lapse, and all Restricted Shares will
be released to participants. The number of Restricted Shares awarded during
fiscal year 1994 and the aggregate number and market value of Restricted
Shares held by each of the named executive officers at July 2, 1994, is set
forth below. The share amounts set forth below have been adjusted to reflect
the 2-for-1 stock split in December 1992.
<TABLE>
<CAPTION>
TOTAL
RESTRICTED
SHARES SHARES AWARDED
AWARDED -----------------------
NAME IN 1994 SHARES MARKET VALUE
------------------------------------------------- ------- ------- ------------
<S> <C> <C> <C>
J. H. Bryan...................................... None 192,000 $3,960,000
M. E. Murphy..................................... None 106,000 $2,186,250
C. S. McMillan................................... None 94,000 $1,938,750
D. J. Franceschini............................... 20,000 36,800 $ 759,000
G. H. Newman..................................... None 48,000 $ 990,000
</TABLE>
(3) Amounts reported in this column have been adjusted to reflect the 2-for-1
stock split in December 1992, and include Restoration Options granted during
fiscal years 1992, 1993 and 1994, as discussed on pages 15 and 16.
(4) The amounts reported in this column for fiscal year 1994 include (i) all
amounts allocated to the following named executive officers under the ESOP
and the Supplemental ESOP: Mr. Bryan, $42,022, Mr. Murphy, $15,656, Mr.
McMillan, $24,271, Mr. Franceschini, $13,546, and Mr. Newman, $16,278, and
(ii) interest accrued at above-market rates (as defined by the rules of the
Securities and Exchange Commission) on compensation deferred by the named
executive officers: Mr. Bryan, $11,495, Mr. Murphy, $10,002, Mr. McMillan,
$8,196, and Mr. Newman, $7,329.
14
<PAGE> 18
(5) The amount reported for Mr. Bryan includes $60,675 for personal financial
services, and the amount reported for Mr. McMillan includes $48,228 for the
personal use of corporate transportation.
(6) The named executive officer received other compensation not required to be
reported in this column.
(7) Mr. Franceschini was not an executive officer of Sara Lee during fiscal year
1992.
OPTION GRANTS TABLE
The following table shows stock option award information for the named
executive officers during fiscal year 1994. The table includes both new options
and Restoration Options (as defined in footnote 2) granted upon the exercise of
existing options. The grant of a Restoration Option upon the exercise of an
existing option is intended to promote increased employee share ownership by
encouraging the early exercise of existing options. The grant of a Restoration
Option does not result in an increase in the total combined number of shares and
options held by an employee. The amounts shown as potential realizable values
for all stockholders represent the corresponding increases over a ten year
period (the term of a new option grant) in the market value of 480,765,240
shares outstanding held by all stockholders as of July 2, 1994, based on a share
price of $20.625.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------------------------- ---------------------------
% OF
TOTAL
OPTIONS
GRANTED
NUMBER OF SECURITIES TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS GRANTED IN FISCAL PRICE EXPIRATION 5%(3) 10%(3)
NAME (#) YEAR ($/SH) DATE ($) ($)
- - ---------------------- ---------------------- --------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
John H. Bryan New Grant(1)
89,300 2.41% $26.06 8/25/03 $1,463,537 $3,708,891
Restoration Options(2)
10,789 0.29% $26.06 11/30/98 $ 82,083 $ 182,571
Michael E. Murphy New Grant(1)
45,100 1.22% $26.06 8/25/03 $ 739,144 $1,873,135
C. Steven McMillan New Grant(1)
38,000 1.02% $26.06 8/25/03 $ 622,782 $1,578,251
Restoration Options(2)
23,605 0.64% $26.06 7/3/99 $ 202,532 $ 457,448
Donald J. Franceschini New Grant(1)
22,800 0.61% $26.06 8/25/03 $ 373,669 $ 946,951
20,000 0.54% $23.56 1/27/04 $ 296,335 $ 750,971
Gordon H. Newman New Grant(1)
23,000 0.62% $26.06 8/25/03 $ 376,947 $ 955,257
All Stockholders N.A. N.A. N.A. N.A. $6.2 Billion $15.8 Billion
</TABLE>
- - -------------------------
(1) New options granted under Sara Lee's 1989 Incentive Stock Plan. All options
were granted at 100% of the fair market value of the Common Stock on the
date of grant and may be exercised within 10 years. The options generally
become exercisable in equal annual installments, which are cumulative over a
period of three years. No option may be exercised until the expiration of
one year from the date of grant. In the event of a change of control, all
outstanding stock options become immediately exercisable. The grant of a
non-qualified option includes the right to a Restoration Option.
(2) Restoration Options awarded under the 1989 Incentive Stock Plan. A
Restoration Option is an option to purchase the same number of shares that
was used by the optionee in lieu of cash to pay for the exercise of the
original option as well as those shares used to satisfy his or her tax
withholding obligation related to the exercise of the original option. A
Restoration Option has an exercise price equal to 100% of the fair market
value of the
15
<PAGE> 19
Common Stock on the date on which it is granted, expires on the same
expiration date as the original option, and cannot be exercised earlier than
six months from the date of its grant.
(3) The dollar amounts indicated in these columns are the result of calculations
assuming 5% and 10% growth rates as required by the rules of the Securities
and Exchange Commission. These growth rates are not intended by Sara Lee to
forecast future appreciation, if any, of the price of Sara Lee Common Stock,
and Sara Lee expressly disclaims any representation to that effect.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to the named
executive officers concerning the exercise of stock options during fiscal year
1994, and concerning unexercised options held at the end of fiscal year 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END(#) FY-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ----------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John H. Bryan.......... 16,000 $ 236,640 502,454 122,033 None None
Michael E. Murphy...... None None 218,500 66,234 None None
C. Steven McMillan..... 31,800 $ 353,616 142,576 38,000 None None
Donald J.
Franceschini......... None None 10,333 50,467 None None
Gordon H. Newman....... None None 120,941 31,467 None None
</TABLE>
- - -------------------------
(1) Calculated based on the share price of Common Stock on July 1, 1994 (the
last business day of fiscal year 1994) of $20.625 less the option exercise
price. An option is in-the-money if the market value of the Common Stock
subject to the option exceeds the exercise price.
RETIREMENT PLANS
PENSION PLAN
The named executive officers participate in the Sara Lee Corporation
Pension and Retirement Plan (the "Pension Plan"), a defined benefit pension plan
which is qualified under Section 401(a) of the Internal Revenue Code, and the
Sara Lee Corporation Supplemental Benefit Plan (the "Supplemental Plan"), an
unfunded non-qualified plan. The Pension Plan has approximately 15,800
participants, and the named executive officers participate in the Pension Plan
on the same basis as all other eligible employees. The annual pension benefit
under the plans, taken together, is in general determined by a participant's
credited years of service multiplied by a percentage of the participant's final
average compensation (compensation during the highest five consecutive years of
the last ten years of employment). For the named executive officers, the sum of
amounts listed in the "Salary" and "Bonus" column of the Summary Compensation
Table, plus a percentage of the amount listed in the "Bonus" column, is used as
compensation in the calculation of annual pension benefits. The Internal Revenue
Code places certain limitations on the amount of pension benefits that may be
paid under qualified plans. Any benefits payable in excess of those limitations
will be paid under the Supplemental Plan. Benefits accrued under the
Supplemental Plan with present values exceeding $100,000 are funded with
periodic payments by Sara Lee to individual trusts established by the
participants.
The following table may be used to calculate the approximate annual
benefits payable under the Pension Plan and the Supplemental Plan to
participants in specified final average compensation and
16
<PAGE> 20
years of service classifications, assuming retirement on July 1, 1995, at age
65, payment in the form of a straight-life annuity and no offset for Social
Security benefits or individual trust balances.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL NORMAL RETIREMENT PENSION
FINAL BASED UPON THE INDICATED CREDITED SERVICE
AVERAGE -------------------------------------------------
COMPENSATION 10 YEARS 15 YEARS 25 YEARS 35 YEARS
- - ------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 500,000 $ 87,500 $131,250 $218,750 $ 306,250
$ 750,000 131,250 196,875 328,125 459,375
$1,000,000 175,000 262,500 437,500 612,500
$1,250,000 218,750 328,125 546,875 765,625
$1,500,000 262,500 393,750 656,250 918,750
$1,750,000 306,250 459,375 765,625 1,071,875
$2,000,000 350,000 525,000 875,000 1,225,000
</TABLE>
As of September 1, 1994, Messrs. Bryan, Franceschini, McMillan, Murphy and
Newman have 20, 2, 16, 15 and 27 full years of credited service, respectively,
under the Pension Plan and all except for Messrs. McMillan and Newman have
additional accrued benefits under predecessor pension plans of companies
acquired by Sara Lee. The annual compensation covered by the Pension Plan for
each of the named executive officers for fiscal year 1994 is as follows: Mr.
Bryan, $1,704,242, Mr. Franceschini, $767,218, Mr. McMillan, $1,003,775, Mr.
Murphy, $1,006,299, and Mr. Newman, $628,395.
EMPLOYEE STOCK OWNERSHIP PLAN
Sara Lee's ESOP is a tax-qualified leveraged employee stock ownership plan.
In general, employees of a participating subsidiary or division, other than
employees covered by collective bargaining agreements, are eligible to
participate in the ESOP after having completed one year of service and attained
the age of 21. The named executive officers participate in the ESOP on the same
basis as all other eligible employees. Each year Sara Lee makes contributions to
the ESOP which, with the dividends paid on the ESOP Stock held by the ESOP, are
used to pay loan interest and principal incurred by the ESOP to purchase ESOP
Stock. With each principal payment, a portion of the ESOP Stock is allocated to
participating employees, at a rate of at least 1.75% of the participant's
compensation. The Internal Revenue Code places certain limitations on the amount
of ESOP Stock that may be allocated to a participant under a tax-qualified
employee stock ownership plan. Any allocation in excess of those limitations
will be reserved on an unfunded basis under the Supplemental Plan described
above under the caption "Pension Plan".
Participants are fully vested in their ESOP accounts upon completion of
five years of service, disability, retirement or death. A participant is not
entitled to a distribution from the ESOP until he terminates employment with
Sara Lee, becomes disabled, or dies. The distribution will be made, at the
election of the participant, in Common Stock or cash. Distributions of excess
ESOP allocations from the Supplemental Plan are only in cash.
For the calendar year ended December 31, 1993, Messrs. Bryan, Franceschini,
McMillan, Murphy and Newman were respectively allocated 64.4, 57.1, 64.4, 64.4
and 64.4 shares each of ESOP Stock to their accounts. All participants in the
ESOP had an aggregate of 271,084 shares allocated to their accounts. Under the
Supplemental Plan, Messrs. Bryan, Franceschini, McMillan, Murphy and Newman were
respectively allocated 234.6, 55.3, 117.8, 71.2 and 66.9 supplemental ESOP
shares to their accounts.
-------------------------
Sara Lee has a severance policy applicable to the named executive officers
and all corporate officers of Sara Lee which was adopted in 1994, the full text
of which is set forth in Appendix A to this Proxy Statement. The Policy provides
that if an officer's employment is terminated other than for cause, such officer
is entitled to receive severance payments equal to a minimum of 12 and a maximum
of 30 months of salary, the number of which would depend on the officer's
position, length of service and age, and a
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<PAGE> 21
pro rata payment under the incentive plans applicable to the fiscal year in
which the termination occurs. The terminated officer's participation in Sara
Lee's insurance plans, except for disability which ends on the date of
termination of employment, will continue for the same number of months for which
he or she is receiving severance payments. At the discretion of the Chief
Executive Officer of Sara Lee, the severance payments may be increased by up to
6 months' salary, if the terminated officer is 50 years of age or older, or up
to 3 months' salary, if the terminated officer is 40 to 49 years of age.
Severance payments terminate if the terminated officer becomes employed by a
competitor of Sara Lee.
During fiscal year 1994, Sara Lee paid fees for legal services performed by
the law firm of Sidley & Austin, to which Newton N. Minow is counsel, and the
law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P., of which Vernon E.
Jordan, Jr. is a senior partner. Sara Lee paid fees for investment banking
services to The First National Bank of Chicago, of which Richard L. Thomas is
Chairman of the Board and Chief Executive Officer.
PROPOSED AMENDMENTS TO EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
The Board of Directors recommends approval of proposed amendments to the
Employee Stock Purchase Plan, as amended, (the "Purchase Plan") to (i) increase
by 10,000,000 the number of shares of Sara Lee Common Stock available for
purchase by participants under the Purchase Plan, and (ii) clarify those
divisions and subsidiaries of Sara Lee which participate in the Purchase Plan.
A summary of the Purchase Plan, as proposed to be amended is set forth
below. The Purchase Plan is administered by the Compensation Committee, none of
the members of which are eligible to participate in the Purchase Plan.
When the Purchase Plan was initially approved by the stockholders on
October 28, 1976, 2,000,000 shares were authorized to be available for purchase.
Due to amendments to the Purchase Plan in 1980, 1984 and 1991 and 2-for-1 stock
splits in 1983, 1986, 1989 and 1992, the number of shares authorized for
purchase under the Purchase Plan increased to 50,000,000 as of December 31,
1992. As of August 25, 1994, a total of 48,427,361 shares had been purchased
under the Purchase Plan, and only 1,572,639 shares remained available for
purchase. On that date, the Board of Directors approved a 10,000,000 share
increase in the number of shares authorized for purchase under the Purchase Plan
(from 50,000,000 to 60,000,000 shares), because at the rate of quarterly stock
purchases by participants the Plan would terminate for lack of available shares
in February 1995. Consequently, in order that the Purchase Plan not terminate
for lack of available shares, the stockholders are requested to approve the
first proposed amendment to increase the number of shares authorized for
purchase under the Purchase Plan.
Because of variations in securities, labor and tax laws in the foreign
countries in which Sara Lee has employees, the Purchase Plan is currently
offered only to employees of Sara Lee subsidiaries and divisions in the United
States, Canada and Puerto Rico. The second proposed amendment permits the
Compensation Committee, in its discretion and subject to local laws, to extend
the Purchase Plan to subsidiaries in other foreign countries.
The Purchase Plan provides that an eligible employee may elect to
participate by authorizing payroll deductions of not less than $5.00 per week to
be applied toward the purchase of Sara Lee Common Stock. Four offerings to
purchase shares are made under the Purchase Plan in each calendar year,
beginning on the first Monday of February, May, August and November ("Grant
Date") and ending on the first Monday of the next succeeding three month period
("Exercise Date"). The purchase price per share is the lesser of (a) 85% of its
fair market value on the Grant Date, or (b) 85% of its fair market value on the
Exercise Date. Fair market value is defined as the average of the highest and
lowest quoted selling prices per share as reported on the New York Stock
Exchange Composite Transactions Tape. A participant, including executive
officers, may not purchase more than $25,000 worth of Sara Lee Common Stock
under the plan in any year.
Purchases of shares under the Purchase Plan are made automatically on the
Exercise Date, and a new Grant Date is fixed automatically on the same date. A
participant may withdraw from the Purchase Plan at any time and cannot rejoin
thereafter for two successive offering periods. Appropriate
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adjustments in the number of shares reserved under the Purchase Plan and to the
option price and number of shares subject to each then outstanding option shall
be made in the event of any future stock dividends, stock splits or corporate
reorganizations.
The Board of Directors believes that the Purchase Plan is an important
employee benefit and that it is in the best interests of Sara Lee and its
stockholders for employees to own Sara Lee Common Stock. There are currently
25,903 employees participating in the Purchase Plan.
The affirmative vote of a majority of the votes cast on this proposal shall
constitute approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSED
AMENDMENTS TO THE EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee and subject to ratification
by the stockholders at the Annual Meeting, the Board of Directors has appointed
Arthur Andersen LLP ("Andersen") to serve as the independent public accountants
of Sara Lee for its fiscal year ending July 1, 1995. Fees paid to Andersen for
audit and audit-related services for fiscal year 1994 were approximately
$6,581,000. Andersen, which has served as the independent public accountants of
Sara Lee since 1965, follows a policy of rotating the partner in charge of Sara
Lee's audit every seven years. Other partners and non-partner personnel are
rotated on a periodic basis. Representatives of Andersen are expected to be
present at the Annual Meeting, will have the opportunity to make a statement, if
they desire to do so, and will be available to respond to questions. If the
appointment of Andersen is not ratified by the stockholders, the Board of
Directors will appoint other independent public accountants based upon the
recommendation of the Audit Committee.
The affirmative vote of a majority of the votes cast on this proposal shall
constitute ratification of the appointment of Andersen.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL
YEAR 1995.
STOCKHOLDER PROPOSAL REGARDING EXECUTIVE PAY
Sara Lee has been advised that Seymour Grossman, Skokie, Illinois, who
holds 5,000 shares of Common Stock, intends to submit the following proposal at
the Annual Meeting:
WHEREAS, in 1993 Congress passed a law that annual compensation over
$1,000,000 to any of a company's five highest-paid officers is not
tax-deductible unless awarded under a performance-based compensation plan
approved by shareholders.
THEREFORE, BE IT RESOLVED that shareholders recommend that Sara Lee not pay
any compensation to its five highest-compensated officers which is not
deductible under current law and that Sara Lee not allow deferred compensation
to avoid the $1,000,000 cap; however, this resolution shall have no effect on
any legally-enforceable promise to pay compensation made prior to the date this
resolution was submitted.
SUPPORTING STATEMENT
With the President's support, Congress enacted a law in 1993 capping a
company's tax deduction for each executive's compensation at $1,000,000, unless
paid according to a performance-based plan approved by shareholders.(1)
In 1993, all five of Sara Lee's highest-paid executives received over
$1,000,000 worth of cash and restricted stock awards. The top two officers
exceeded $1,000,000 in both prior years. If they continue
- - ---------------
(1)Internal Revenue Code 162(m)
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receiving salary increases at the 1991-93 rates, each will soon be receiving
over $1,000,000 per year in salary alone.
Many companies keep the tax deduction by obtaining shareholder approval of
a performance-based pay plan. I don't want our Company to forego the deduction,
thereby burdening itself with added taxes. Nor should it use the loophole where
executives defer compensation in excess of $1,000,000 to future years.
I think Congress was right to seek greater shareholder voice in setting
executive pay.
Are our Board's Compensation Committee members as inclined to restrain
executive compensation as we would like? In 1993, every single committee member
was a large corporation's top executive or a recently-retired top executive. The
four members whose executive compensation was reported publicly each received
over $1,350,000 in the year last reported. Over 8 years there has never been
more than one member from outside the ranks of senior executives.
Sara Lee's track record on executive compensation offers another reason for
this proposal: for seven years it failed to disclose that all officers enjoyed a
severance policy; then its first description ever of this policy in the proxy
statement was found by a court to be inconsistent with the actual policy.
Note how we are paying more than other companies:
<TABLE>
<CAPTION>
1993 CEO SALARY + BONUS(2) COMPANY
- - -------------------------- --------------
<S> <C>
$ 574,100................................................... Liz Claiborne
$ 600,000................................................... Tyson Foods
$ 743,400................................................... Hartmarx
$ 748,300................................................... Dean Foods
$ 786,300................................................... Wrigley
$ 808,500................................................... Clorox
$ 831,300................................................... Hormel
$ 864,900................................................... McCormick
$ 886,600................................................... Heinz
$1,755,200................................................... SARA LEE
</TABLE>
- - -------------------------
(2) Source: Wall Street Journal, April 13, 1994
Our company's officers are paid far more than executives outside the U.S.
The enormous pay disparity between our U.S. executives and the average Sara Lee
employee or customer cannot be good for employee or customer relations.
However, you need not share my view on this: ALL THIS PROPOSAL DOES IS URGE
THAT SHAREHOLDERS HAVE THE FINAL SAY ON EXECUTIVE COMPENSATION OVER $1,000,000.
LET'S PREVENT COMPANY MONEY FROM GOING TO TAXES WHICH COULD INSTEAD GO TO
SHAREHOLDERS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
The proposal imposes an arbitrary limitation on executive compensation that
would place Sara Lee at a distinct competitive disadvantage in attracting and
retaining experienced and competent executives. It would not be in the best
interest of Sara Lee and its stockholders, since no other companies with which
Sara Lee competes in the marketplace and for managerial talent have such a
limitation. Ultimately, such a limitation may adversely affect the value of Sara
Lee shares.
The Compensation and Employee Benefits Committee of the Board of Directors
("Committee") intends to adopt policies to obtain maximum deductibility of
executive compensation payments, as discussed on page 12 of this Proxy
Statement. The Committee intends to take such action in the future as shall be
required to assure that Sara Lee's executive incentive compensation plans are
designed to obtain maximum deductibility, consistent with its responsibility to
provide motivational and competitive
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compensation based upon performance. The potential recipients of non-deductible
executive compensation with respect to fiscal year 1995 have irrevocably elected
to defer a portion of their bonus award to the extent necessary for Sara Lee to
obtain the maximum deduction until such time as the payment of the deferred
compensation is deductible by Sara Lee.
The Committee is comprised of independent, outside directors who endeavor
to act in the best interest of Sara Lee and its stockholders, irrespective of
their individual compensation levels. To suggest otherwise is unwarranted. It is
not meaningful to compare absolute dollar amounts of executive compensation paid
by Sara Lee with those of other companies that are not comparable in size,
industries and financial position. There is no evidence that customer relations
are adversely affected by the executive compensation policies of Sara Lee.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
REJECT THE PROPOSAL.
The affirmative vote of a majority of the votes cast is required for the
approval of the stockholder proposal.
SHAREHOLDER PROPOSAL TO REQUIRE SHAREHOLDER APPROVAL OF
EXECUTIVE SEVERANCE PAY POLICY
Sara Lee has been advised that Melvin Hershkowitz, M.D., Providence, Rhode
Island, who holds 10,000 shares of Common Stock, intends to submit the following
proposal at the Annual Meeting:
RESOLVED, shareholders recommend that absent shareholder approval of such a
policy at a single regular annual shareholders' meeting, severance pay should
not be paid to executive officers terminated for poor performance, change in
control or violating company policies.
SUPPORTING STATEMENT
Shareholders should be concerned about Sara Lee management performance. In
February 1994, a Merrill Lynch analyst wrote:
An industry icon [Sara Lee] has fallen, and we do not consider that
expression extreme.*** The problem with analysts and investors, we are
certain, is deeper than a mature nylon stocking business in the U.S. and a
horrendous E.C. consumer economy. The fact that management could not
effectively gauge the extent of its future problems in an area where it had
concentrated its best talent may concern potential stock buyers when things
do get better.
In February 1994, analysts at Brown Brothers Harriman and PNC Institutional
Investment (PNC Bank Philadelphia) also downgraded Sara Lee's rating.
If executives are fired for poor performance, shareholders should not
suffer the added insult of having to pay them 12 to 30 months' salary as
severance.
In May 1994, federal Judge Saundra Brown Armstrong, a Republican, found
inconsistencies between the Company's officer severance policy and its response
in the proxy statement to a similar proposal last year. I thus believe last
year's vote understated shareholder concern about the policy.
Last year's proposal caused the Board to revise its policy, deleting
benefits for those who voluntarily quit. Unfortunately, the Board has not gone
nearly far enough to correct this policy.
The policy's critical language is that severance is always paid to
executives who are fired or asked to quit, the lone exception being "when the
officer has willfully engaged in conduct demonstrably and materially injurious
to the Corporation or is convicted of or confesses to a crime involving
dishonesty, moral turpitude or other disreputable behavior."
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That means severance could be paid to executives who engage in sexual or
racial harassment, use alcohol on the job, consistently show up late, leave
early, or fail to show up at all.
Sara Lee does not give severance pay in these circumstances to non-officer
executives, nor to its rank-and-file. It is unacceptable for an officer making
millions of dollars a year to receive additional millions when he is fired for
good reasons simply because the misconduct fell short of proven criminality or
intentional injury to the Company.
This year's proposal has been clarified to prevent any distortion: no one
is asking for a separate vote each time severance is to be paid. Rather, an
executive severance policy should simply be put up for a single shareholder vote
at a regular annual meeting.
In settlement of the lawsuit claiming that last year's proxy statement was
misleading, the Company agreed to include the entire text of its officers'
severance policy in this year's proxy statement. After you read it, I think
you'll agree it should be subject to shareholder approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
Sara Lee's severance policy for corporate officers was approved by the
Compensation and Employee Benefits Committee ("Committee"), comprised entirely
of independent, outside directors. The Committee is familiar with the
intricacies of executive compensation and relies on the advice of an
independent, outside compensation consultant retained by the Committee.
Therefore, it is in the best position to determine whether the terms of the
severance policy are balanced and fair to the executives and Sara Lee. The full
text of the current severance policy is set forth in Appendix A to this Proxy
Statement.
Severance arrangements for executive employees, including corporate
officers, as well as non-executive employees who are not covered by collective
bargaining agreements, are customary elements of compensation programs of
companies which compete with Sara Lee in the marketplace and for competent and
experienced executive talent.
The executive compensation programs of Sara Lee, including the severance
policy, are continually reviewed and evaluated by the Committee to ascertain
whether such programs comply with applicable laws and are competitive. To
require stockholder approval of the terms of Sara Lee's severance policies in
toto and of subsequent modifications as shall be legally required or as the
Committee shall deem appropriate from time to time is an unworkable procedure
and would not be in the best interest of Sara Lee and its stockholders.
The examples of behavior mentioned in the stockholder's supporting
statement could be examples of "conduct demonstrably and materially injurious
to" Sara Lee under the terms of the severance policy, and in such cases the
payment of severance benefits to an officer terminated for those reasons would
be unlikely.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
REJECT THE PROPOSAL.
The affirmative vote of a majority of the votes cast is required for
approval of the stockholder proposal.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1995 annual meeting
of stockholders must be received by Sara Lee no later than May 18, 1995.
Proposals may be mailed to Sara Lee Corporation, to the attention of the
Secretary, Three First National Plaza, Chicago, Illinois 60602-4260.
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OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the meeting, it is intended that the persons named in the
proxy will act in respect thereof in accordance with their best judgment.
A copy of Sara Lee's Annual Report on Form 10-K for the fiscal year ended
July 2, 1994, as filed with the Securities and Exchange Commission will be sent
to any stockholder without charge upon written request addressed to Sara Lee
Corporation, to the attention of the Investor Relations and Corporate Affairs
Department, Three First National Plaza, Chicago, Illinois, 60602-4260.
The cost of solicitation of the proxies will be borne by Sara Lee. In
addition to solicitation of the proxies by use of the mails, employees of Sara
Lee, without extra remuneration, may solicit proxies personally or by telephone.
Kissel-Blake Inc. has been retained by management to assist in the solicitation
of proxies for a fee of $14,000 plus reimbursement of expenses. Sara Lee will
reimburse brokerage firms, nominees, custodians and fiduciaries for their
out-of-pocket expenses for forwarding proxy materials to beneficial owners and
seeking instruction with respect thereto.
Under the federal securities laws, directors, officers and ten percent
stockholders of Sara Lee are required to report to the Securities and Exchange
Commission, within specified monthly and annual due dates, their initial
ownership in Sara Lee Common Stock, and all subsequent transactions in such
stock. Sara Lee believes that during fiscal year 1994 all of such filing
requirements were timely satisfied.
By Order of the Board of Directors
Gordon H. Newman
Senior Vice President and Secretary
September 15, 1994
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APPENDIX A
SARA LEE CORPORATION
SEVERANCE POLICY FOR CORPORATE OFFICERS
EFFECTIVE FEBRUARY 1, 1994
1. INTRODUCTION. This document sets forth the policy of Sara Lee
Corporation ("Corporation") governing severance payments and benefits
("Severance") to be made in the event of the involuntary termination of
employment with the Corporation of an officer of the Corporation elected by the
Board of Directors and eligible to participate in the Corporation's Long-Term
Performance Incentive Plans ("Officer" or "Terminated Officer").
2. STATEMENT OF GENERAL POLICY. It is the policy of the Corporation that an
Officer whose employment with the Corporation has been involuntarily terminated
for any reason other than for "Cause" (as defined in Section 3(i) below), death,
disability or retirement shall be entitled to specified Severance. This Policy
duly recognizes the circumstances of termination, years of service with the
Corporation and age on the date of termination as factors to be considered in
the determination of the amount of Severance to be paid to a Terminated Officer.
The objectives of this Policy are to: (1) provide a Terminated Officer with
reasonable compensation to bridge the Terminated Officer until reemployment or
normal retirement, and (2) provide reasonable consideration for the release of
the Corporation of all claims against it by a Terminated Officer.
This Policy is inapplicable to a Terminated Officer in circumstances where
(i) the Officer is relieved of his or her responsibility and is immediately
offered new employment with the Corporation or is transferred to a subsidiary or
affiliate of the Corporation, with the consent of the Officer, (ii) the
Corporation divests itself of a subsidiary, division or operation as a going
concern which employed the Officer and the employment of the Officer by such
division, subsidiary or operation is continued by the new or acquiring entity
either on substantially the same financial terms and conditions as prior to the
disposition of such division, subsidiary or operation or on such financial terms
and conditions acceptable to the Officer, or (iii) the Terminated Officer
voluntarily resigns.
3. CATEGORIES OF TERMINATION OF EMPLOYMENT. The categories of termination,
which shall determine the amount of Severance to be paid to a Terminated
Officer, are:
(i) TERMINATION FOR CAUSE ("Category I Termination"). Termination for
Cause is a termination of employment by the Corporation when the Officer
has willfully engaged in conduct demonstrably and materially injurious to
the Corporation or is convicted of or confesses to a crime involving
dishonesty, moral turpitude or other disreputable behavior.
(ii) TERMINATION FOR GOOD REASON ("Category II
Termination"). Termination for Good Reason is a termination of employment
when (a) the Officer is terminated because of unacceptable performance, (b)
the Officer's employment is terminated involuntarily due to an organization
restructuring which results in the elimination of the Officer's position or
function, or (c) the Officer terminates his or her employment at the
request of the Corporation.
The characterization of an Officer's termination under this Policy shall be made
by the Corporation's Senior Vice President-Human Resources.
4. SEVERANCE BENEFITS PAYABLE.
CATEGORY I TERMINATION. An Officer terminated under the circumstances of a
Category I Termination shall receive no Severance from the Corporation under
this Policy.
CATEGORY II TERMINATION. An Officer terminated under the circumstances of a
Category II Termination shall:
(A) receive, for each full year of employment with the Corporation or
any subsidiary or affiliate of the Corporation (including the years of
employment with a corporation acquired by the
A-1
<PAGE> 28
Corporation), three (3) months' salary (in effect on the date of
termination), if he or she is an Executive Vice President or an officer
senior thereto and a Director of the Corporation; two (2) months' salary
(in effect on the date of termination), if he or she is a Senior Vice
President; or one (1) month's salary (in effect on the date of
termination), if he or she is a Vice President, but in no event shall this
Salary Portion of Severance be less than twelve (12) months' salary or more
than twenty four (24) months' salary;
(B) be paid a pro-rata amount (to the effective date of termination of
employment) of
(i) the annual bonus payable under the Annual Bonus Plan of the
Corporation in effect with respect to the fiscal year in which the
termination of employment shall occur, assuming a Superior level of
performance with respect to the non-discretionary portion of such bonus;
and
(ii) the long-term bonus payable under the Long-Term Performance
Bonus Plan of the Corporation terminating at the end of the fiscal year
closest to the date of termination (forfeiting participation in any
long-term bonus plans ending thereafter); and
(C) at the discretion of the Chief Executive Officer of the
Corporation, be paid an additional Salary Portion of Severance up to three
(3) additional months' salary if the Officer is age 40 years or older but
less than age 50 on the date of termination of employment or up to six (6)
additional months' salary if the Officer is age 50 or older on the date of
termination of employment.
TERMINATION OF BENEFITS. All Severance shall cease on the earliest of (1)
the Terminated Officer's 62nd birthday, provided that he or she is eligible to
begin to receive pension benefits under the Sara Lee Corporation Consolidated
Pension and Retirement Plan or any other qualified retirement plan of the
Corporation (a "Retirement Plan") at age 62, (2) the date the Terminated Officer
becomes employed by a competitor of the Corporation or any of its subsidiaries
or becomes reemployed by the Corporation and (3) the date the Terminated Officer
begins to receive benefits from a Retirement Plan.
HEALTH COVERAGE. If a Terminated Officer eligible for Severance elects to
continue health insurance coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), the period such coverage will be offered
will not be less than the Severance Period (i.e. the period the Terminated
Officer is expected to receive the Salary Portion of Severance) and the
Corporation will subsidize the premium for such continuation coverage during the
Severance Period to the extent that the Terminated Officer would otherwise be
required to pay more for such coverage during that period than a similarly
situated active employee would be required to pay for comparable coverage. After
the end of the Severance Period, the Terminated Officer will be required to pay
the full COBRA premium. If the Terminated Officer is eligible for early
retirement under the terms of the Sara Lee Corporation Consolidated Pension and
Retirement Plan (or would become eligible if the Severance Period is considered
as employment) the Terminated Officer may elect to receive retiree health care
coverage.
PARTICIPATION IN OTHER PLANS. Except as otherwise provided herein,
participation in all other plans available to the Executive Benefit Group,
including but not limited to, qualified pension plans, stock purchase plans,
401(k) plans and ESOPs, personal accident insurance, travel accident insurance,
short and long term disability insurance and accidental death and dismemberment
insurance, shall cease on the Officer's date of termination. Non-qualified
supplemental ESOP and pension benefits will be provided to a Terminated Officer
eligible for Severance through the Corporation's Supplemental Benefit Plan by
treating the Severance Period as a period of employment with the Corporation.
The Corporation shall continue to pay premiums during the Severance Period on
any policy purchased by such a Terminated Officer under the Executive Life
Insurance Program and will continue to pay premiums after the Severance Period
pursuant to the Executive Life Insurance Program if the Terminated Officer is
eligible for early retirement or becomes eligible for early retirement during
the Severance Period. Any stock option awards such Terminated Officer received
prior to the date of termination shall continue to vest during the Severance
Period pursuant to the terms of the stock option plan. Any stock option awards
that vest prior to the end of the Severance Period must be exercised by the
Terminated Officer within the applicable periods specified in the option plan. A
Terminated Officer who continues to be eligible for Severance shall
A-2
<PAGE> 29
continue to participate in the Estate Builder Plan at the Target Rate. The
Terminated Officer can surrender the Corporation car at termination of
employment or purchase the car from the Corporation at the car's then fair
market value. Reimbursement of club memberships and expenses incurred after the
Terminated Officer terminates employment shall cease on the termination of
employment and the Matching Grant Program shall also terminate at termination of
employment.
5. MODE OF PAYMENT OF SEVERANCE. The Salary Portion of the Severance shall
be paid bi-weekly in accordance with the Corporation's Corporate Office pay
schedule, unless the Chief Executive Officer of the Corporation, at his sole
discretion, shall elect to pay the Salary Portion in a lump sum payment or a
combination of bi-weekly payments and a lump sum payment. The bonus payment
segment, if any, of the Severance shall be paid to the Terminated Officer on the
same date the active participants under the bonus plans are paid.
6. RELEASE AGREEMENT. No benefits under this Policy shall be payable to any
Terminated Officer until the Terminated Officer and the Corporation have
executed a release (in a form approved by the Corporation) of all of such
Terminated Officer's then existing rights and legal claims against the
Corporation and the payment of benefits under this Policy shall be subject to
the terms and conditions of such release agreement.
7. DEATH OF TERMINATED OFFICER. In the event that the Terminated Officer
shall die prior to the completion of the payments of the Salary Portion and
prior to the payment of the bonus payment segment of the Severance, the
Terminated Officer's estate or beneficiary, whichever is applicable, shall be
paid the remaining payments of the Salary Portion and the unpaid bonus payment.
Such payments shall not affect or reduce any other death benefits which the
Terminated Officer's estate or beneficiary shall be entitled to receive under
other plans of the Corporation.
8. POLICY INTERPRETATIONS AND VARIATIONS. The Compensation and Employee
Benefits Committee of the Corporation shall administer this Policy, the
Committee or its representative shall decide any issues and disputes arising
under this Policy, and the decision of the Committee shall be binding and
conclusive on the Terminated Officer and the Corporation. Any variations from
the Policy may only be made by the Committee in its sole discretion.
- - -------------------------
As revised by the Compensation and Employee Benefits Committee on January 27,
1994.
A-3
<PAGE> 30
[SARA LEE CORPORATION LOGO]
Three First National Plaza
Chicago, Illinois 60602-4260
Notice of
1994
Annual Meeting
of Stockholders and
Proxy Statement
______________________________________________________________________________
| |
| |
| 10 A.M., THURSDAY, OCTOBER 27, 1994 |
| |
| |
| |
| PLEASE NOTE THAT THE PLACE OF THE ANNUAL MEETING WILL BE AT |
| THE ART INSTITUTE OF CHICAGO |
| ARTHUR RUBLOFF AUDITORIUM |
| COLUMBUS DRIVE BETWEEN MONROE AND JACKSON STREETS |
| CHICAGO, ILLINOIS |
|______________________________________________________________________________|
YOUR VOTE IS IMPORTANT
Please sign and promptly return your
proxy in the enclosed envelope
<PAGE> 31
<TABLE>
<CAPTION>
SARA LEE CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY / /
<S> <C> <C>
1. Election of Directors For All
Paul A. Allaire, Frans H.J.J. Andriessen, For Withheld Except 2. Proposed amendments to the For Against Abstain
John H. Bryan, Duane L. Burnham, Charles W. / / / / Nominee(s) Employee Stock Purchase Plan, / / / / / /
Coker, Willie D. Davis, Donald J. Franceschini, written as amended.
Allen F. Jacobson, Vernon E. Jordan, Jr., James below
L. Ketelsen, Hans B. van Liemt, Joan D. Manley, 3. Ratify the appointment of For Against Abstain
C. Steven McMillan, Newton N. Minow, Michael E. __________ Arthur Anderson LLP as / / / / / /
Murphy, Sir Arvi H. Parbo A.C., Rozanne L. independent public accountants.
Ridgway and Richard L. Thomas.
___________________________________________________ 4. Stockholder proposal For Against Abstain
|The Board of Directors recommends a vote FOR | concerning annual executive / / / / / /
| propsals 1,2,and 3 and AGAINST proposals 4 and 5. | compensation.
| |
|___________________________________________________|
Dated ________, 1994 5. Stockholder proposal For Against Abstain
________________________________________________ concerning Sara Lee's / / / / / /
Signature severance policy.
________________________________________________
Signature
NOTE: Please sign exactly as your name or names appear on the THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
reverse side. For joint accounts, each owner should sign. SPECIFICATION MADE. IF NO CHOICES ARE INDICATED,
When signing as executor, administator, attorney, trustee or THIS PROXY WILL BE VOTED FOR PROPOSALS 1,2, AND
guardian, etc., please give your full title. 3 AND AGAINST PROPOSALS 4 AND 5.
__________________________________________________________________________________________________________________________________
Detach Proxy Card Here
<CAPTION>
<S> <C>
Admission Ticket
Sara Lee Corporation
Annual Meeting of Stockholders
Thursday, October 27, 1994
10 a.m.
The Art Institute of Chicago
Arthur Rubloff Auditorium
Columbus Drive between Monroe and Jackson streets
Chicago, Illinios
</TABLE>
Your vote is important. Please complete, date, sign and detach the proxy card
and promptly return it in the enclosed envelope.
<PAGE> 32
SARA LEE CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING, OCTOBER 27, 1994
THE UNDERSIGNED HEREBY APPOINTS JOHN H. BRYAN, MICHAEL E. MURPHY AND GORDON H.
NEWMAN, OR ANY OF THEM, AS THE UNDERSIGNED'S PROXY OR PROXIES, WITH FULL POWER
OF SUBSTITUTION, TO VOTE ALL SHARES OF COMMON STOCK OF SARA LEE CORPORATION
WHICH THE UNDERSIGNED IS ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD IN THE ART INSTITUTE OF CHICAGO, ARTHUR RUBLOFF AUDITORIUM, COLUMBUS
DRIVE BETWEEN MONROE AND JACKSON STREETS, CHICAGO, ILLINOIS, ON OCTOBER 27,
1994, AT 10:00 A.M., CHICAGO TIME, AND ANY ADJOURNMENTS THEREOF, AS FULLY AS
THE UNDERSIGNED COULD IF PERSONALLY PRESENT, UPON THE PROPOSALS SET FORTH ON
THE REVERSE SIDE HEREOF AND TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING REVOKING ANY PROXY OR PROXIES HERETOFORE GIVEN.
IMPORTANT -- This Proxy must be signed and dated on the reverse side.
_______________________________________________________________________________
<PAGE> 1
September 15, 1994
STOCKHOLDER ALERT
You have received, or will receive, a solicitation from a self-styled "Sara Lee
Shareholders Committee," supplementing two stockholder proposals which appear
in Sara Lee's 1994 proxy statement ("Proposals"). Sara Lee believes that the
solicitation is misleading.
The self-styled Sara Lee Shareholders Committee was conceived by the United
Food & Commercial Workers Local 120, Oakland, California ("Union"). The Union,
which represents approximately 100 employees, and Sara Lee recently agreed to a
collective bargaining agreement after a protracted negotiation. Although
submitted by two individual stockholders, the Proposals were prepared by the
Union's attorneys. The Union enlisted the two well-meaning stockholders to
submit the Proposals under their respective names. This Committee consists of
only two members brought together by the Union. It should be noted that the
Committee's address and its telephone number are those of the Union's
headquarters in Oakland. The stockholders reside in Skokie, Illinois, and
Providence, Rhode Island. This is a continuation of the Union's campaign
against Sara Lee which began more than a year ago.
Sara Lee did not provide the Union with the names and addresses of the
stockholders who will receive the solicitation. Stamped envelopes were
provided by the Union, and Sara Lee attached the mailing labels to them, as it
is required to do under the proxy rules of the Securities and Exchange
Commission. Sara Lee has good reason to believe that any stockholder who
responds to the Union's questionnaire will be solicited for funds to recoup a
portion of the Union's expenses, including attorney fees, incurred in its
solicitation activities.
The first Proposal in the solicitation is entitled "Shareholder Proposal
Against Golden Parachutes." The proposal does not relate to a golden parachute
arrangement. It is erroneously described for inflammatory purposes. The
Union's attorney agreed to withdraw the use of that phrase from the
stockholder's proposal that appears in the proxy statement.
The solicitation refers to comparative compensation paid to chief executive
officers of conveniently selected corporations, most of which are substantially
smaller than Sara Lee and in different businesses than Sara Lee's (i. e.,
chewing gum, spices, dairy products, candy, pet foods). It is not a meaningful
comparison for executive compensation purposes. Except for three of the
corporations, their sales, earnings, stockholders' equity and market value are
substantially less than Sara Lee's.
The solicitation infers that since the members of Sara Lee's compensation
committee are, or were former, senior executives of other corporations (which
is not correct), their actions are biased in favor of excessive compensation.
This inference is insulting and unwarranted. The members of the compensation
committee are independent directors who act only in the best interests of Sara
Lee and its stockholders.
Gordon H. Newman
Senior Vice President and Secretary
