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Section 240.14a-101 Schedule 14A.
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 [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BESTFOODS
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] 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:
.......................................................
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[Bestfoods Logo]
700 SYLVAN AVENUE, INTERNATIONAL PLAZA, ENGLEWOOD CLIFFS, NEW JERSEY 07632-9976
March 11, 1999
Dear Stockholder:
We will hold our 1999 annual meeting of stockholders at 9:30 a.m., local
time, on Thursday, April 22, 1999 at the Radisson Hotel Englewood in Englewood,
New Jersey.
At the meeting, we will vote on the matters shown in the notice of annual
meeting and, after the meeting, there will be an informal session to present a
brief report on the Company and respond to your questions.
This year, you can vote by the Internet, by telephone or by completing the
enclosed proxy card. Instructions for voting by the Internet or telephone are
given on the enclosed proxy card, or if you hold your shares in 'street name,'
you may vote your shares in accordance with your voting instruction form.
Your vote is important, whether or not you plan to attend. If you plan to
attend, please request an admission ticket when you vote.
Sincerely,
/s/ Charles R. Shoemate
Charles R. Shoemate
Chairman, President and
Chief Executive Officer
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BESTFOODS
700 SYLVAN AVENUE
INTERNATIONAL PLAZA
ENGLEWOOD CLIFFS, NEW JERSEY 07632-9976
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of Bestfoods will be held at the
Radisson Hotel Englewood, 401 South Van Brunt Street, Englewood, New Jersey, on
Thursday, April 22, 1999 at 9:30 a.m., local time, for the following purposes:
1. To elect four directors, each for a term of three years.
2. To ratify the appointment of independent auditors for the Company
for 1999.
3. To transact such other business, if any, that is properly brought
before the meeting.
February 26, 1999 is the record date for the meeting. Only stockholders of
record on that date can vote at the meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
ENSURE THAT YOUR VOTE WILL BE COUNTED BY VOTING BY THE INTERNET, BY TELEPHONE,
OR BY SIGNING, DATING AND RETURNING YOUR PROXY CARD OR VOTING INSTRUCTION FORM
IN THE PREPAID ENVELOPE PROVIDED.
By order of the Board of Directors,
/s/ Hanes A. Heller
Hanes A. Heller
Vice President, General Counsel
and Secretary
March 11, 1999
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TABLE OF CONTENTS
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PAGE
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Voting and Proxy Solicitation............................................................................. 1
Matters to be Acted Upon:
Proposal 1.
Election of Directors............................................................................... 2
Proposal 2.
Ratification of Appointment of Auditors............................................................. 7
General Information
Corporate Governance and the Board of Directors.................................................... 7
Section 16(a) Beneficial Ownership Reporting Compliance............................................ 13
Stock Ownership Table.............................................................................. 13
Report on Executive Compensation.......................................................................... 14
Executive Compensation............................................................................. 19
Stockholder Return Comparison...................................................................... 23
Stockholder Proposals for 2000 Annual Meeting............................................................. 24
Other Business............................................................................................ 24
</TABLE>
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BESTFOODS
700 SYLVAN AVENUE
INTERNATIONAL PLAZA
ENGLEWOOD CLIFFS, NEW JERSEY 07632-9976
PROXY STATEMENT
Our Board of Directors is soliciting proxies to be used at the annual
meeting of stockholders to be held on April 22, 1999, or any adjournment of it.
This proxy statement, the accompanying proxy card, and 1998 annual report to
stockholders are being mailed to stockholders on March 11, 1999.
VOTING AND PROXY SOLICITATION
WHO CAN VOTE
Record stockholders of common stock and ESOP preferred stock of Bestfoods
at the close of business on February 26, 1999 can vote at the meeting. On
February 26, 1999, 283,239,354 shares of common stock were issued and
outstanding and 1,747,240 shares of ESOP preferred stock were held by a trustee
under our Savings/Retirement Plan for Salaried Employees ('Savings Plan').
Each stockholder has one vote for each share of common stock and for each
share of common stock into which ESOP preferred stock can be converted.
Your proxy card covers, not only the Bestfoods shares that you hold
directly, but also your shares in our automatic dividend reinvestment plan, the
Bestfoods Stock Fund of the Savings Plan, and the ESOP component of the Savings
Plan. If you participate in the Bestfoods Stock Fund or the ESOP component of
the Savings Plan, your proxy will instruct the trustee of the Savings Plan how
to vote or, if you have not indicated your choice on your proxy card, the
trustee will vote your shares held in the Plan (together with the unallocated
shares held by the trustee) in proportion to the way other participants as a
group have voted their shares. Thus, by returning your completed proxy, you will
direct the voting of your own shares as well as the vote by the trustee with
respect to unallocated shares and allocated shares for which no instructions are
received.
HOW TO VOTE
Follow the instructions given on the enclosed proxy card or voting
instruction form for Internet or telephone voting. If voting by mail, sign and
date the enclosed proxy card and return it to us. Specify your choice on the
proxy card. If you do not specify your choice on the proxy card, we will vote
your shares in favor of the proposals. You can revoke your proxy any time before
it is voted by (i) notifying our Secretary at the above address, (ii) submitting
a later-dated proxy by the Internet or by telephone, (iii) returning a
later-dated, signed proxy card or voting instruction form, or (iv) voting in
person at the meeting.
REQUIRED VOTES
A majority of the issued and outstanding shares entitled to vote must be
represented at the meeting in person or by proxy in order to have a quorum. A
plurality of the shares so represented is required to elect directors and the
affirmative vote of a majority of the shares so represented is required to
approve other matters to be acted on. If you vote to abstain on any matter, your
shares will be counted as present at the meeting for quorum purposes, but will
not be counted as votes cast for the proposal specified. If you hold your stock
in 'street
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name' and have not returned a signed voting instruction form, your broker will
have authority to vote your shares on those matters that are considered
discretionary under New York Stock Exchange rules. If your broker does not have
such discretion on any matters (broker non-votes), we will count your shares as
present at the meeting for quorum purposes, but we will not vote them on such
matters.
Proxies will be inspected and tabulated by the First Chicago Trust Division
of EquiServe, our transfer agent.
SOLICITATION
We are soliciting proxies by mail and have retained D. F. King & Co, Inc.,
77 Water Street, New York, New York 10005, to assist in the solicitation for a
fee of $12,500 plus reasonable expenses. We will pay all costs of soliciting
proxies and will reimburse brokers, banks and other nominees of our shares for
their reasonable expenses for sending proxy materials to beneficial owners and
obtaining their instructions. In addition to solicitation by mail, directors,
officers and other employees of the Company may solicit proxies by telephone,
electronic means, or in person.
MATTERS TO BE ACTED UPON
PROPOSAL 1. ELECTION OF DIRECTORS
At the 1999 annual meeting, the terms of five directors are expiring. Four
are nominated for reelection to hold office for a three-year term expiring in
2002 and the fifth, Theodore H. Black, will retire from the Board on April 22,
1999, pursuant to the Board's policy on tenure of directors.
All of the nominees for election have consented to being named in this
proxy statement and to serve if elected. If, for any reason, any of the nominees
should not be a candidate for election at the meeting, the proxies will be cast
for substitute nominees designated by the Board of Directors unless the Board
has reduced its membership prior to the meeting. The Board does not anticipate
that any of the nominees will be unavailable. The nominees and the directors
continuing in office will normally hold office until the annual meeting of
stockholders in the year indicated on this and the following pages.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
Biographical information concerning each of the nominees and directors
continuing in office is presented on this and the following pages.
- --------------------------------------------------------------------------------
DIRECTORS NOMINATED THIS YEAR FOR TERMS EXPIRING IN 2002 (CLASS I)
- --------------------------------------------------------------------------------
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[PHOTO] CLATEO CASTELLINI
Age -- 63
Director since 1997
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF BECTON DICKINSON AND COMPANY
Mr. Castellini was elected Chairman, President and Chief Executive Officer of Becton
Dickinson and Company in June 1994. Previously, he served as Medical Sector President
from 1989 and was responsible for worldwide operations of medical supplies and devices.
</TABLE>
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- --------------------------------------------------------------------------------------------------------------------
[PHOTO] RICHARD G. HOLDER
Age -- 67
Director since 1992
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF REYNOLDS METALS COMPANY
Mr. Holder served as President and Chief Operating Officer of Reynolds Metals Company from
1988 until May 1992, and as Chairman and Chief Executive Officer until October 1996. Mr.
Holder is also a director of Corn Products International, Inc. and Universal Corp.
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] EILEEN S. KRAUS
Age -- 60
Director since 1994
CHAIRMAN OF FLEET NATIONAL BANK (CONNECTICUT)
Ms. Kraus served as Vice Chairman of Shawmut National Corporation and President of Shawmut
Bank Connecticut, N.A. from September 1992 until December 1995. She assumed her present
position following Fleet Financial Group's completion of its acquisition of Shawmut
National Corporation in December 1995. She is also a director of Kaman Corporation, The
Stanley Works and Yankee Energy System, Inc.
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] ALAIN LABERGERE
Age -- 64
Director since 1992
EXECUTIVE VICE PRESIDENT OF THE COMPANY AND PRESIDENT OF THE BESTFOODS EUROPE DIVISION
Mr. Labergere joined the Company in 1983 and in 1990 was appointed Vice President,
Regional Operations, for the CPC Europe Consumer Foods Division headquartered in Brussels.
In 1991 he was appointed President of the CPC Europe Division and elected a corporate Vice
President. He was elected a Senior Vice President of the Company in October 1991 and an
Executive Vice President on July 1, 1995. Mr. Labergere is an Officer of the French Legion
of Honor. He is also President of the Confederation of the Food and Drink Industries of
the EU in Brussels and sits on the Board of Trustees of the Thunderbird Graduate School of
International Management.
</TABLE>
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- -------------------------------------------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE UNTIL 2000 (CLASS II)
- -------------------------------------------------------------------------------------------------------------------
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[PHOTO] WILLIAM C. FERGUSON
Age -- 68
Director since 1988
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF NYNEX CORPORATION
Mr. Ferguson retired as Chairman of NYNEX in April 1995 and as Chief Executive Officer in
December 1994. He served as Vice Chairman from 1987 to 1989. Previously, Mr. Ferguson
served as President and Chief Executive Officer of NYNEX and New York Telephone Co. He is
also a director of Corn Products International, Inc. and serves on the Advisory Board of
Greenwich Street Capital Partners.
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] LEO I. HIGDON, JR.
Age -- 52
Director since 1993
PRESIDENT OF BABSON COLLEGE, WELLESLEY, MASSACHUSETTS
Mr. Higdon assumed the presidency of Babson College in Wellesley, Massachusetts in July
1997. From October 1993 until July 1997 he served as Dean of Colgate Darden Graduate
School of Business Administration at the University of Virginia. He joined the University
of Virginia from Salomon Brothers Inc., where he was a member of the Executive Committee.
During his 20-year career at Salomon Brothers, Mr. Higdon served as a managing director
with responsibilities for corporate finance and mergers and acquisitions, as the firm's
vice chairman, and as its co-head of global investment banking. He is also a director of
Crompton & Knowles Corp. and Newmont Mining Corp.
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- --------------------------------------------------------------------------------------------------------------------
[PHOTO] WILLIAM S. NORMAN
Age -- 60
Director since 1993
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE TRAVEL INDUSTRY ASSOCIATION OF AMERICA
Mr. Norman joined the Travel Industry Association of America as President and Chief
Executive Officer in the Fall of 1994. Previously, he served as Executive Vice President
of the National Railroad Passenger Corp. (AMTRAK) from 1987. Mr. Norman is also a director
of Corn Products International, Inc., and the Travel Industry Association of America.
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] CHARLES R. SHOEMATE
Age -- 59
Director since 1988
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY
Mr. Shoemate was elected Chairman of the Board and Chief Executive Officer in 1990. Prior
to his election as President in 1988, Mr. Shoemate served as Vice President of the
Company. Mr. Shoemate joined the Company in 1962 and progressed through a variety of
positions in manufacturing, finance and business management. He is also a director of
CIGNA Corporation, International Paper Co., and Texaco Inc.
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE UNTIL 2001 (CLASS III)
- ---------------------------------------------------------------------------------------------------------------------
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[PHOTO] ALFRED C. DECRANE, JR.
Age -- 67
Director since 1994
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF TEXACO INC.
Mr. DeCrane retired as Chairman and Chief Executive Officer of Texaco Inc. in July 1996.
He was elected President of Texaco in 1983, Chairman of the Board in 1987, and Chief
Executive Officer in 1993. He is a director of Birmingham Steel Corporation, CIGNA
Corporation, Corn Products International, Inc., Harris Corporation and U. S. Global
Leaders Growth Fund, Ltd.
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- --------------------------------------------------------------------------------------------------------------------
[PHOTO] ROBERT J. GILLESPIE
Age -- 56
Director since 1988
EXECUTIVE VICE PRESIDENT OF THE COMPANY
Mr. Gillespie was elected an Executive Vice President of the Company in July 1995. He
joined the Company in 1965 and in 1976 became President of Canada Starch Company, a
subsidiary of the Company. In 1980 he was elected a Vice President of the Company and
appointed President of the Corn Products Unit of CPC North America. From 1988 to July
1995, he served as President of the Best Foods Division and was elected a Senior Vice
President of the Company in 1991. Mr. Gillespie is also a director of Arkwright Mutual
Insurance Company.
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- --------------------------------------------------------------------------------------------------------------------
[PHOTO] ELLEN R. GORDON
Age -- 67
Director since 1991
PRESIDENT AND CHIEF OPERATING OFFICER OF TOOTSIE ROLL INDUSTRIES, INC.
Ms. Gordon was elected President and Chief Operating Officer of Tootsie Roll Industries,
Inc. in 1978 and she is a member of the Tootsie Roll Board. Prior to her election as
President, Ms. Gordon served as Senior Vice President. Ms. Gordon is also a Director and
Vice President of HDI Investment Corp., a family investment company.
</TABLE>
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- --------------------------------------------------------------------------------------------------------------------
[PHOTO] GEORGE V. GRUNE
Age -- 69
Director since 1985
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE READER'S DIGEST ASSOCIATION, INC.
Mr. Grune retired as Chairman and Chief Executive Officer of The Reader's Digest
Association, Inc. in April of 1998, offices in which he served for ten year periods until
1995 and 1994, respectively, and to which he returned in August 1997. He is currently
Chairman of the DeWitt Wallace-Reader's Digest Fund and the Lila Wallace-Reader's Digest
Fund. Mr. Grune is also a director of Avon Products, Inc., The Chase Manhattan Corporation
and Federated Department Stores, Inc.
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[PHOTO] HENRIQUE DE CAMPOS MEIRELLES
Age -- 53
Director since 1997
PRESIDENT AND CHIEF OPERATING OFFICER OF BANKBOSTON CORPORATION
Mr. Meirelles was elected President and Chief Operating Officer of BankBoston Corporation
in July 1996. Previously, he served as President and Regional Manager of BankBoston in
Brazil. Mr. Meirelles is also a director of the Raytheon Corporation, Champion
International Corporation and BankBoston Corporation.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, in accordance with the recommendation of its Audit
Committee, has appointed KPMG LLP ('KPMG') as independent auditors in respect of
the Company's operations in 1999, subject to ratification by the stockholders. A
partner of KPMG will be present at the stockholders' meeting and will have an
opportunity to make a statement and respond to appropriate questions. KPMG also
performs non-audit services for the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
GENERAL INFORMATION
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
CORPORATE GOVERNANCE
Our Board works continuously to maintain excellence in corporate
governance. In November 1998, in order to provide a more formal framework for
our outside directors to address governance issues of concern to shareholders,
the Board established a Corporate Governance Committee consisting of all outside
directors. The duties of the Corporate Governance Committee are set forth on
page 9 of this Proxy Statement.
The Board seeks to improve its effectiveness through a number of measures
including:
Conducting an annual evaluation of Board structure and performance that
includes contrasting current corporate governance practices with evolving
expectations and making recommendations for improvements in corporate
governance practices.
Encouraging contact between outside directors and senior managers through
facility visits, attendance at senior management meetings, outside
director orientation programs, and work with corporate officers who serve
as committee executives.
Review of incumbent directors prior to recommendation for re-election
emphasizing: commitment to serving the Company, regular attendance at
meetings and familiarity with materials distributed in advance of
meetings, active participation in meetings, willingness to give advice and
counsel, and sense of commitment to stockholders, employees and other
communities served by the Company.
Periodic review of the Company's Shareholder Rights Plan in order to
ensure that the Plan continues to serve the best interests of our
shareholders.
7
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OVERSIGHT DUTIES
In addition to maintaining high standards of corporate governance, our
Board has wide-reaching oversight duties. In carrying out such oversight
responsibilities, the Board emphasizes the Company's strategy and performance
and management oversight. Through its committees the Board oversees the
Company's conduct and policy compliance, integrity of accounting and financial
controls, and financial structure.
STRATEGY AND PERFORMANCE
The Board reviews the Company's long-term strategies and the management
structures designed to implement these strategies. This review consists of steps
that foster Board involvement at important points in the strategy formation
process:
At the start of each year, the Board conducts a review of the Bestfoods
vision and the strategies supporting it.
Thereafter, the Board reviews the strategic plans of the operating
divisions based on the vision and strategies.
During the year, the Board examines the capital expenditures that support
the strategies and reviews the performance of recent acquisitions.
After the end of each year, the Board conducts an annual review of
operating results for the previous year and the goals and plans for the
upcoming year.
MANAGEMENT OVERSIGHT
In fulfilling its responsibility to oversee the performance of the chief
executive officer and other executive officers, our Board has the following
practices:
At the beginning of each year the Board, meeting in executive session,
reviews the performance of senior management, the management organization
and succession planning.
With the chief executive officer absent, the Board, meeting in executive
session, reviews his performance, emphasizing his: leadership in
development and implementation of strategies; leadership of the Company to
superior corporate performance; establishment of an effective
organizational structure that supports the strategies; development of an
effective chief executive officer succession plan; promotion and
implementation of Company principles that further the highest ethical
practices and social values; and recommendations for improvements in
corporate governance practices.
Throughout the year, directors have opportunities to review management
through informal one-on-one sessions with the chief executive officer,
routine executive sessions at the end of Board meetings, and contact
between outside directors and senior managers in informal settings,
including visits by Board members to Company facilities.
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COMMITTEES OF THE BOARD
In order to fulfill its responsibilities, our Board delegates to its five
Committees the authority to consider certain matters and report to the Board
with appropriate recommendations. To enhance the effectiveness of the
Committees:
Each Committee is chaired by an outside director.
The chairmanships and memberships of all of the Committees are rotated on
a regular 3-4 year basis to give the directors a broader knowledge of our
Company's affairs and to impart fresh ideas to each Committee. The
Chairman of a Committee is normally a director who has already served on
that Committee for several years, and he or she then serves for a longer
period than the other members.
The Board conducts an annual review of the charter of each Committee.
Each Committee establishes its own agendas for the year, and conducts a
year-end evaluation of its performance by comparing the topics considered
at meetings with its charter as established by the Board.
Oral reports of Committee activities are given at each Board meeting and
minutes of Committee meetings are sent to all of the directors.
CORPORATE GOVERNANCE COMMITTEE
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NUMBER OF MEETINGS
MEMBERS IN 1998 FUNCTIONS
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G. V. Grune (Chair) 0 Evaluates Board performance and
T. H. Black (Established 11/98) effectiveness.
C. Castellini Reviews the Compensation and
A. C. DeCrane, Jr. Nominating Committee criteria for
W. C. Ferguson nomination of new and incumbent
E. R. Gordon directors.
L. I. Higdon, Jr. Establishes guidelines for Board
R. G. Holder tenure.
E. S. Kraus Reviews corporate governance matters.
H. de C. Meirelles Reviews the size, structure and
W. S. Norman organization of the Board and its
(all outside directors) committees.
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CORPORATE AFFAIRS COMMITTEE
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NUMBER OF MEETINGS
MEMBERS IN 1998 FUNCTIONS
- ---------------------------------- ------------------ ------------------------------------------
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E. S. Kraus (Chair) 3 Reviews policies and programs of the
T. H. Black Company relating to customer and consumer
C. Castellini relations, employee relations, health,
R. J. Gillespie safety and the environment, community
E. R. Gordon relations, compliance with laws,
G. V. Grune disclosure of information and insider
W. S. Norman trading, and business ethics.
(a majority of outside directors) Reviews major litigation, crisis
management organization, and programs for
communication with investors, governments
and the public.
</TABLE>
AUDIT COMMITTEE
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NUMBER OF MEETINGS
MEMBERS IN 1998 FUNCTIONS
- ---------------------------------- ------------------ ------------------------------------------
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L. I. Higdon, Jr. (Chair) 4 Reviews the scope and results of the
T. H. Black annual audit, approves the non-audit
C. Castellini services rendered by the independent
W. C. Ferguson auditors and considers the effect of such
R. G. Holder non-audit services on the independence of
H. de C. Meirelles the auditors.
(all outside directors) Recommends to the Board appointment of
independent auditors for the ensuing year,
subject to stockholder approval.
Reviews internal control systems and
auditing procedures, accounting policies,
financial structure and financial
reporting. Meets privately on a regular
basis with both the independent auditors
and the corporate general auditor.
Reviews annually the independence of each
outside director.
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COMPENSATION AND NOMINATING COMMITTEE
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NUMBER OF MEETINGS
MEMBERS IN 1998 FUNCTIONS
- ---------------------------------- ------------------ ------------------------------------------
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W. S. Norman (Chair) 4 Approves executive officer compensation
A. C. DeCrane, Jr. and incentive plans, reviews employee
E. R. Gordon benefit plans and makes recommendations to
G. V. Grune the Board on such plans.
E. S. Kraus Recommends to the Board of Directors the
(all outside directors) compensation for outside directors and
administers their compensation plans.
Reviews the performance of incumbent
directors whose terms are expiring prior
to recommending to the Board the nominees
for election as directors at the annual
meeting of stockholders.
Develops criteria for Board membership and
considers candidates for membership on the
Board. (Stockholders who want to recommend
a candidate for consideration as a nominee
for director may do so by writing to the
Corporate Secretary and providing a
statement of the candidate's
qualifications and experience.)
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FINANCE COMMITTEE
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NUMBER OF MEETINGS
MEMBERS IN 1998 FUNCTIONS
- ---------------------------------- ------------------ ------------------------------------------
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A. C. DeCrane, Jr. (Chair) 3 Reviews policies and practices of the
W. C. Ferguson Company affecting its financial structure
L. I. Higdon, Jr. and position, short- and long-term
R. G. Holder financing, foreign exchange management,
A. Labergere financial derivatives including
H. de C. Meirelles commodities and hedging, capital
(a majority of outside directors) expenditures, dividends, insurance
coverage and taxes.
Recommends to the Board the appointment of
trustees and investment managers under
employee benefit plans and reviews their
performance, and recommends the annual
contributions by the Company to fund such
plans.
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QUALIFICATIONS OF DIRECTORS
Our Board of Directors presently consists of fourteen members, of whom
eleven qualify as independent directors. The Board is divided into three
classes, with one class standing for election each year for a three-year term.
Our Board believes that all of the independent directors act autonomously from
management and do not have any relationships that would interfere with their
free exercise of judgment and are eligible to serve on the Audit Committee and
the Compensation and Nominating Committee under the rules and regulations of the
Securities and Exchange Commission, the New York Stock Exchange and the Internal
Revenue Service. Every year the Audit Committee reviews the independent status
of all such directors and reports on this to the Board. Based upon such review
none of these eleven directors:
is a current or former employee or officer of the Company;
provides regular or personal services to the Company other than as a
director or is employed by a company which receives remuneration for
personal services;
is an owner of 5% or more of a company which receives remuneration from
the Company;
is an officer, employee or owner of 5% or more of any company that acts as
a supplier or customer of the Company where such purchases or sales exceed
5% of either entity's annual revenues;
had a personal transaction with or indebtedness to the Company in excess
of $60,000;
received compensation from the Company in any capacity other than as a
director;
and are thus independent.
Our policy on tenure of directors requires independent directors and former
chief executive officers of the Company to retire from the Board at the annual
meeting of stockholders in the year following their 70th birthday, and employee
directors when they leave the Company, whether or not the term for which they
have been elected has expired.
DIRECTOR COMPENSATION
Employee directors do not receive compensation for serving as directors.
Independent directors are compensated as follows:
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Annual Board retainer......................................................... $60,000
Annual retainer for Committee chair........................................... 3,000
Board attendance fee (per meeting)............................................ 1,250
Committee attendance fee (per meeting)........................................ 1,250
Company facility visitation fee (per day)..................................... 1,250
</TABLE>
One-half of the Annual Board retainer is paid in cash and one-half is paid
in the form of common stock of the Company which is mandatorily deferred until
retirement under the Deferred Compensation Plan for Outside Directors (the
'Plan'). All or part of the cash portion of the retainer and fees may, at the
director's option under the terms of the Plan, be deferred in the form of common
stock of the Company or in an interest-bearing account, and paid after
retirement from the Board. In 1998, each outside director was also credited with
400 shares of mandatorily deferred common stock of the Company under the Plan.
12
<PAGE>
<PAGE>
DIRECTOR ATTENDANCE
Our Board held seven meetings in 1998, and each of the directors attended
at least 85 percent of these meetings. Attendance of all directors at meetings
of the Board and of Committees on which they served averaged 97 percent.
CHARITABLE CONTRIBUTIONS
To promote charitable giving, directors participate in our Charitable
Awards Program under which the Company donates a total amount of up to $1
million to as many as four educational institutions with which we have
recruiting, research and other relationships, as designated by each director. We
pay these donations in ten annual installments after the director's death.
Outside directors become vested in the program upon completion of ten years of
service or retirement from the Board at age 70, and employee directors become
vested upon completion of five years of service as a director or retirement at
or after age 62. The program is financed through the purchase of life insurance
policies and the Company receives a charitable deduction for donations made from
the proceeds of the policies. Directors derive no financial benefit from the
program.
Each director may contribute up to $5,000 per year to certain tax-exempt
organizations under the Company's matching gifts program which is available to
full-time U.S. employees and their spouses as well as the directors. For each
dollar contributed within the $5,000 limit, we contribute two dollars. The
Company provides $100,000 of group term life insurance and $175,000 of travel
accident insurance to the directors as well as director liability insurance for
all directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1998 all reports for the Company's
executive officers and directors that were required to be filed under Section 16
of the Securities Exchange Act of 1934 were timely filed.
STOCK OWNERSHIP TABLE
All of the unallocated shares of ESOP preferred stock (905,319 shares and
52 percent of the outstanding preferred stock of the Company) are held by
Fidelity Management Trust Company of Boston, Massachusetts, the owner of record.
To our best knowledge, there was no beneficial owner (person or group) of more
than five percent of the outstanding common stock of the Company on February 26,
1999.
The following table shows the common stock ownership as of February 26,
1999 of each director, the chief executive officer and each of the other four
most highly compensated executive officers of the Company (the 'named executive
officers'), and all directors and executive officers as a group. All directors
and executive officers as a group own beneficially less than two percent of the
outstanding common stock and less than four percent of the ESOP preferred stock.
13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SHARES STOCK
NAME OWNED(1) OTHER(2) UNITS(3) TOTAL(4)
---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
T. H. Black................................................ 10,000 -- 10,053 20,053
C. Castellini.............................................. 2,000 -- 2,810 4,810
A. C. DeCrane, Jr. ........................................ 1,000 -- 10,308 11,308
W. C. Ferguson............................................. 5,624 -- 12,428 18,052
R. J. Gillespie............................................ 94,813 180,374 25,360 300,547
E. R. Gordon............................................... 4,000 -- 20,277 24,277
G. V. Grune................................................ 4,400 -- 12,662 17,062
L. I. Higdon, Jr........................................... 2,000 -- 4,127 6,127
R. G. Holder............................................... 2,000 2,000 13,567 17,567
B. H. Kastory.............................................. 119,873 4,200 30,599 154,672
E. S. Kraus................................................ 400 -- 9,565 9,965
A. Labergere............................................... 103,249 -- -- 103,249
J. J. Langdon.............................................. 20,531 29,413 -- 49,944
H. de C. Meirelles......................................... -- -- 2,780 2,780
W. S. Norman............................................... 2,038 -- 6,976 9,014
C. R. Shoemate............................................. 1,174,507 235,401 77,452 1,487,360
All directors and executive officers as a
group (31 persons)...................................... 2,264,273 599,784 312,946 3,177,003
</TABLE>
- ------------
(1) Includes all shares which may be purchased before April 27, 1999 upon the
exercise of stock options as follows: R. J. Gillespie, 93,382; B. H.
Kastory, 54,620; A. Labergere, 37,148; J. J. Langdon, 17,327; C. R.
Shoemate, 1,174,507; and all directors and executive officers as a group,
1,786,611. Also includes shares held in the Bestfoods Stock Fund of the
Savings Plan.
(2) Includes shares held jointly with or owned by spouses or minor children, or
held in trust. C. R. Shoemate disclaims beneficial ownership of 46,408 of
such shares. No other director or executive officer disclaims beneficial
ownership.
(3) For the executive officers, the stock units represent an annual bonus that
is deferred and credited in the form of common stock under the Deferred
Stock Unit Plan. Such bonuses are payable in cash following retirement or
termination of employment. For the outside directors, the stock units
represent retainer and fees deferred in the form of common stock under the
Deferred Compensation Plan for Outside Directors.
(4) In addition, Messrs. Gillespie, Kastory, Langdon and Shoemate have,
respectively, 6,069, 6,158, 3,898, and 6,013 shares, and all executive
officers as a group have a total of 66,900 shares, of ESOP preferred stock
allocated to their accounts in the Savings Plan.
COMPENSATION AND NOMINATING COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION AND NOMINATING COMMITTEE RESPONSIBILITIES
The Compensation and Nominating Committee of the Board of Directors,
composed entirely of independent directors, has the responsibility to approve
the compensation of all
14
<PAGE>
<PAGE>
executive officers and to administer executive incentive compensation plans.
This report describes the manner in which we addressed those responsibilities in
1998.
DISCUSSION OF SHORT-TERM COMPENSATION (BASE SALARY AND ANNUAL INCENTIVE)
The Company's short-term compensation program, consisting of base salary
and annual incentive, is administered by using the concepts of salary and
incentive ranges for each executive position. Salary and incentive ranges are
established reflecting data from salary surveys of companies in the consumer
goods and food sectors. The companies surveyed are those with which the Company
competes in the marketplace in business results, for human resources, and in
stockholder return. These companies are similar but not identical to those in
the S&P Foods Index and the Peer Group Index in the Stockholder Return
Comparison graph on page 23 because survey data are not available for all of the
Index companies.
Each salary range has a midpoint which represents the average salary for
comparable surveyed positions, and a range that varies about 27% above and below
midpoint for the highest level position and about 24% for the lowest level
position. An individual executive's progress through and position in the salary
range depend primarily upon individual performance and time in the job. Annual
incentive ranges and midpoints also have been established for each position as a
percentage of salary. These annual incentive ranges are highly leveraged and
correlated to Bestfoods financial performance relative to competitor companies
and preestablished goals. Actual incentive payments can vary significantly
depending upon the performance of the Company, the business unit, and the
individual. The principal factors used in assessing such performance include
earnings per share growth at the Company level; sales and operating income
growth at both the Company and business unit levels; asset utilization; and
achievement at the business unit and individual levels of agreed-upon goals
under the 'Balanced Scorecard' performance system described later. In addition
to surveys of competitive practice, the Committee periodically uses outside
consultants to review these salary ranges and incentive targets for accuracy and
appropriateness, and to review the appropriateness of compensation actually
paid. The Committee conducted such a review in 1998. It is the Company's
objective to be fully competitive in salaries and annual incentive opportunities
with companies with which it competes, based on relative performance with these
companies.
BASIS FOR SPECIFIC SHORT-TERM COMPENSATION ACTIONS
Studies of competitive short-term compensation practices, confirmed by a
study by outside compensation consultants in 1998, indicated that the Company's
base salary midpoints, actual salaries paid, and annual incentive awards are in
line with competition.
The base salaries paid in 1998 to the five highest paid executive officers
named in the Summary Compensation Table on page 19 vary from 3.4% below to 8.7%
above the midpoint of their respective ranges for 1998. As noted earlier, the
salary range midpoint for a position represents the average salary for that
position within the surveyed group of companies. We believe this information
indicates that the Company's base salaries are competitive with surveyed
companies. In the salaries reported in the Table, variances from midpoint
correlate to individual performance and time in position.
Incentive payments for executive officers with corporate responsibilities
reflect overall corporate performance, Balanced Scorecard performance and
individual performance.
15
<PAGE>
<PAGE>
Incentive payments for executive officers with operations responsibilities
primarily reflect business unit performance, as well as corporate performance,
Balanced Scorecard performance and individual performance.
For 1998, Bestfoods had an excellent year with outstanding results achieved
in Europe, Latin America and Baking, while North America and Asia struggled in
difficult environments. Overall, before special items, operating income
increased by 10.1% despite the 6.5% unfavorable impact of currencies in Europe,
Latin America and Asia. Volumes, including acquisitions were up nearly 2.5%, and
return on equity exceeded 56%.
Earnings per share in 1998 increased by 13.8% for the Company. Based on
these results, the Committee believes the incentive awards for executive
officers are reasonable and within competitive norms. Incentive awards for the
five highest paid executive officers range from about 5% below to 12% above
their mid-range targets.
Specifically with regard to the chief executive officer, Mr. Shoemate, the
Committee authorized a salary increase of 6.2% effective May 1, 1998. The
Committee also approved an incentive award under the Executive Annual Incentive
Plan for 1998 of $1,600,000 representing 169% of his salary at the time of the
award. Both the salary increase and the annual incentive award were based on
evaluations of Mr. Shoemate's performance conducted by all of the Company's
independent directors, using the process and performance criteria described on
page 8. In approving the salary increase, the Committee considered Mr.
Shoemate's time in his current job, his position in his salary range,
competitive pay data, and the performance of the Company. In approving the
annual incentive award, the Committee considered in particular his leading the
Company to achieve excellent financial results and his strategic leadership in
pursuing the Company's vision to become 'The Best International Food Company in
the World' and progress toward that vision by executing the supporting
strategies; his continued progress in worldwide implementation of the 'Balanced
Scorecard' performance measurement system which focuses all levels of management
on strategic business drivers including customer satisfaction, business
practices, people development, and innovation and learning, in order to foster
superior financial results; and his implementation of sound and effective
systems of corporate governance.
DISCUSSION OF LONG-TERM COMPENSATION
The Company's long-term compensation program consists of annual awards of
performance units and stock options under the Stock and Performance Plan. The
number of options granted is equal to the number of performance units. For a
more detailed description of how these tandem awards work, refer to footnote (1)
to the Option Grants table on page 21. The size of performance awards granted to
each participant depends upon the position level, the individual's performance
and, to a lesser extent, time in position. The size of awards is generally in
the mid-range of long-term compensation practices among surveyed consumer goods
and food sector companies. Competitiveness is assessed by independent
consultants' evaluations of survey data. Because of the wide range of approaches
to long-term compensation and the availability of data, companies surveyed for
this purpose are similar but not identical to those surveyed for short-term
compensation.
Earning of awards depends entirely upon the Company's stockholder return
(stock price appreciation plus dividends paid) compared to a group of food and
other consumer products companies with which the Company believes it competes
for investors. Each year the
16
<PAGE>
<PAGE>
Committee reviews and approves the companies to be included in the comparator
group for the performance cycle established in that year. The comparator group
approved for the cycles established in 1995, 1996, 1997 and 1998 is the Peer
Group described under 'Stockholder Return Comparison' on page 23 (except in
1995, 1996 and 1997, ADM was included and Nabisco was not). To the extent that
performance awards are earned, an equivalent number of the options granted in
tandem are canceled. The value of the award earned is dependent upon the value
of Company stock and its price appreciation from the beginning to the end of the
four-year performance cycle. Payments are made at the end of the four-year
cycle.
BASIS FOR SPECIFIC LONG-TERM COMPENSATION ACTIONS
Award payments made in January 1999 and reported in the Summary
Compensation Table on page 19 reflect annual and cumulative stockholder return
results over a four-year period beginning January 1, 1995 and ending December
31, 1998. During the four-year award cycle, participants had the opportunity to
earn from zero to 25% of their awards in each year of the cycle based on
Bestfoods total shareholder return relative to the peer group of companies.
Company results in the top quartile of the peer group would result in executives
earning 25% and results in the bottom quartile earn the executive 0%. A
graduated schedule provides award levels between the top and bottom quartiles.
In the first cycle year (1995), 21.25% was earned. In the second year (1996),
16.25% was earned. In the third year (1997), 3.75% was earned, and in the fourth
and final year (1998), 25.00% was earned. Thus, over the four years, 66.25% of
the potential performance award was earned and paid at the end of the cycle.
During this period, the Company's share price increased $27.5876, from $25.9124
to $53.50 (adjusted for the two-for-one stock split in April 1998). The cash
portion of the long-term award was equal to the Company's share appreciation
times the total number of units earned.
Since 66.25% of the performance award was earned, 66.25% of the tandem
options were canceled. The balance of 33.75% of the stock options granted remain
in effect with an exercise price equal to the fair market value of the Company's
common stock at the date of the award in 1995 ($25.9124). This provides
continuing incentive to increase share price and, therefore, return to the
stockholder. Without share price increase, these options have no value to the
executive. Studies provided by outside consultants to the Committee show that
the design of the Plan provides opportunities for executive incentive payouts
competitive with market compensation at each level of relative shareholder
return performance.
In 1998, Mr. Shoemate received a post stock split award of 110,000
performance units which may be earned over a four-year cycle ending in 2001, a
tandem award of 110,000 stock options and a stand-alone award of 110,000 stock
options. The Committee's decision to grant this award was based upon its
assessment of the long-term compensation survey data, and outside consultants'
evaluations thereof, referred to above, and the evaluation of Mr. Shoemate's
performance for 1998 conducted by the independent directors, using the process
and performance criteria described on page 8. The award was designed to provide
further incentive for Mr. Shoemate to lead the Company in maximizing stockholder
value. In addition, the Committee granted Mr. Shoemate 207,430 non-qualified
stock options at an exercise price equal to the fair market value on April 27,
1998, the date of grant, providing Mr. Shoemate remains with the Company as
chief executive officer. This award was the third of three awards to be made in
response to competitive long-term compensation activity and to help ensure
management continuity and an appropriate succession process at Bestfoods.
17
<PAGE>
<PAGE>
OVERALL PROGRAM RISK AND LEVERAGE
As the compensation tables in this proxy statement indicate, a significant
portion of executive compensation has been placed at risk. Payments under the
annual incentive program are dependent upon annual business results compared to
preestablished goals and competitor performance and individual performance.
Long-term award payments are dependent upon the Company's stockholder return
relative to the comparator group of companies referred to earlier. In the case
of Mr. Shoemate, 87% of his annual and long-term compensation came from
incentive compensation plans which relate to Company performance and only 13%
from base salary. Similar degrees of risk exist for the four other highest paid
executive officers.
EXECUTIVE STOCK OWNERSHIP TARGETS
In 1993, the Company established stock ownership targets for all
participants in the Stock and Performance Plan. The ownership target for the
chief executive officer is seven times base salary; for the most senior
operating and corporate staff officers it is five times base salary; for
remaining officers, it is three times base salary; and for select non-officer
participants, it is equal to base salary. Stock used to assess these ownership
targets includes stock directly owned by the executive, and stock owned
indirectly through participation in the Deferred Stock Unit Plan described in
footnote (3) to the Stock Ownership Table on page 14, but excludes shares
covered by unexercised stock options. Executives are expected to attain these
ownership targets within three to five years from the time the executive's
target was established or increased. All of the executive officers named in the
Summary Compensation Table, including Mr. Shoemate, exceed their targets.
DEDUCTIBILITY CAP ON COMPENSATION EXCEEDING $1,000,000
The tax law limits to $1 million the deductibility of annual compensation
payments made to each of the five highest paid executives. However, there is an
exception to this loss of tax deduction for payments that meet certain objective
performance standards. It is the Committee's general policy to avoid the loss of
tax deductibility to the extent it believes prudent and feasible. To this
effect, the Company amended the 1993 Stock and Performance Plan so that
long-term compensation payments, including stock options, meet the objective
performance exception. In 1997, stockholders approved a new Executive Annual
Incentive Plan so that short-term incentive payments also meet this exception.
It is the Committee's conclusion that for 1998 the $1 million cap rules will not
result in any lost tax deductions. However, notwithstanding its general policy,
the Committee retains the discretion to authorize payments that may not be
deductible if it believes that to do so is in the best interest of the Company
and its stockholders.
Compensation and Nominating Committee:
W. S. Norman, Chairman
A. C. DeCrane, Jr.
E. R. Gordon
G. V. Grune
E. S. Kraus
18
<PAGE>
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation awarded or paid to the
named executive officers during each of the last three fiscal years.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------ -----------------------------------------
AWARDS PAYOUTS
------------ -------------
RESTRICTED SECURITIES LONG-TERM
NAME AND SALARY BONUS STOCK UNDERLYING INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) AWARDS($) OPTIONS #(1) PAYOUTS($)(2) COMPENSATION($)(3)
- ------------------------- ---- ------- --------- ------------ ------------ ------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Shoemate .......... 1998 926,667 1,600,000 0 427,430 4,702,703 128,675
Chairman, President 1997 871,667 725,000 0 435,602 3,268,514 111,548
and Chief Executive 1996 821,250 650,000 0 534,124 2,252,813 111,693
Officer
R. J. Gillespie ......... 1998 600,000 725,000 0 40,000 2,090,057 92,952
Executive Vice 1997 560,000 510,000 0 41,486 1,634,207 78,329
President -- Strategic 1996 536,667 290,000 0 108,764 1,126,406 77,993
Business Development
A. Labergere ............ 1998 570,000 765,000 0 60,000 2,090,057 34,300
Executive Vice 1997 540,500 545,000 0 49,782 1,634,207 32,530
President and 1996 483,083 300,000 0 41,486 1,126,406 28,630
President, Bestfoods
Europe
B. H. Kastory ........... 1998 445,000 520,000 0 32,000 1,254,003 78,460
Senior Vice 1997 412,500 300,000 0 28,002 898,809 63,648
President -- Finance 1996 345,000 190,000 375,000(4) 60,120 625,781 60,067
and Administration
J. J. Langdon ........... 1998 370,000 460,000 0 18,000 835,977 78,793
Vice President and 1997 348,750 325,000 170,500(4) 18,668 653,643 57,869
President, Bestfoods 1996 315,000 137,000 262,500(4) 18,668 375,469 83,696
Baking
</TABLE>
- ------------
* Changes in the identity of the five most highly compensated officers since
the Company's 1998 Proxy Statement reflect relative performance of Company
divisions.
(1) In all compensation tables, the number of securities have been adjusted to
reflect changes due to the spin-off of the Company's corn refining business
on December 31, 1997 and the impact of a two-for-one stock split to holders
of record on March 31, 1998 payable on April 24, 1998.
(2) Includes cash and the market value of the Company's common stock paid in
respect of performance units awarded under the 1993 Stock and Performance
Plan at the end of four-year performance cycles.
(footnotes continued on next page)
19
<PAGE>
<PAGE>
(footnotes continued from previous page)
(3) Includes the following for 1998:
a. Company matching contributions to defined contribution plans as follows:
C. R. Shoemate, $77,897; R. J. Gillespie, $58,297; A. Labergere, $34,300;
B. H. Kastory, $48,997; and J. J. Langdon, $44,497.
b. Value of premiums paid by the Company under the Executive Life Insurance
Plan as follows: C. R. Shoemate, $47,850; R. J. Gillespie, $34,655; B.
H. Kastory, $29,440; and J. J. Langdon, $26,297.
c. For C. R. Shoemate and J. J. Langdon, $2,928 and $8,107, respectively, of
above-market interest at the rate credited to all participants in the
Deferred Compensation Plan, pursuant to which all or a portion of annual
bonus may be deferred and credited to an interest-bearing account, and
paid over a fifteen-year period following retirement.
(4) Represents the value of shares of restricted stock on the date of award.
Dividends are paid on restricted stock at the rate paid to all stockholders.
All restrictions on 1996 awards to B. H. Kastory (10,370 shares) and J. J.
Langdon (7,260 shares) lapsed after twenty-four months. Restrictions on J.
J. Langdon's 1997 award (4,148 shares) lapse on one-fourth of the shares on
each of the first four anniversary dates of the award. Restrictions remain
on 3,111 shares of J. J. Langdon's award. The named executive officers hold
no other shares of restricted stock.
20
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
OPTION GRANTS IN 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ---------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF
SECURITIES TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------------
NAME GRANTED(#)(1) IN 1998 ($/SHARE) DATE 0% ($) 5% ($) 10% ($)
- -------------------------------------------- ------------- --------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Shoemate................. 110,000 4.3349 50.3125 1/20/08 0 3,480,539 8,820,368
110,000 4.3349 50.3125 1/20/08 0 3,480,539 8,820,368
207,430 8.1743 54.2815 4/27/08 0 7,081,109 17,944,921
R. J. Gillespie................ 40,000 1.5763 50.3125 1/20/08 0 1,265,650 3,207,407
A. Labergere................... 60,000 2.3645 50.3125 1/20/08 0 1,898,476 4,811,110
B. H. Kastory.................. 32,000 1.2610 50.3125 1/20/08 0 1,012,520 2,565,925
J. J. Langdon.................. 18,000 0.7093 50.3125 1/20/08 0 569,543 1,443,333
</TABLE>
- ------------
(1) The options listed were granted at an exercise price equal to the fair
market value of Bestfoods stock on the date of grant and, except as
described below, in tandem with an equivalent number of performance units
under the 1993 Stock and Performance Plan. The performance units were issued
for a cycle of four years' duration, with a goal based on relative
performance in total shareholder return, determined by the increase in the
value of common stock of the Company during each year of the cycle assuming
reinvestment of dividends, measured against the performance of a Peer Group
of companies. Up to 25% of the units may be earned in each year of the cycle
and are payable at the conclusion of the cycle. To the extent performance
units are earned and payable, a corresponding number of options are
canceled. These options were granted on January 20, 1998 and became
exercisable on January 20, 2008. This column also includes, with respect to
Mr. Shoemate, additional option awards under the Stock and Performance Plan
and separately, both of which were granted at an exercise price equal to the
fair market value of the Company's stock on the date of grant. Under the
1993 Plan, in the event of a change in control of the Company, all
performance cycles will terminate and participants will receive the value in
cash of the performance units theretofore earned and 100% of the units that
could have been earned during the remainder of the cycles. The amounts paid
to the named executive officers for the cycles ending in 1998, 1997 and 1996
are shown as 'Long-Term Incentive Payouts' in the Summary Compensation Table
on page 19.
(2) The amounts shown under these columns are calculated at 0% and at the 5% and
10% rates set by the Securities and Exchange Commission and are not intended
to forecast future appreciation of the Company's stock price. The amounts
shown assume that no performance units will be earned so that all options
granted will be exercisable.
21
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1998
AND OPTION VALUES AS OF DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1998(#) DECEMBER 31, 1998($)(2)
-------------------- -----------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
- ----------------------------- --------------- -------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
C. R. Shoemate............... 25,022 476,191 850,202/588,194 15,517,166/3,464,411
R. J. Gillespie.............. 21,002 522,288 90,882/102,232 2,072,124/1,230,625
A. Labergere................. 21,004 664,879 33,398/128,454 714,858/1,374,358
B. H. Kastory................ 8,818 233,276 51,792/ 73,230 1,167,480/ 824,121
J. J. Langdon................ 8,294 244,865 15,166/ 45,488 316,453/ 539,658
</TABLE>
- ------------
(1) Amounts shown are based on the difference between the market value of
Bestfoods' common stock on the date of exercise and the exercise price.
(2) Amounts shown are based on the difference between the closing price of
Bestfoods' common stock on December 31, 1998 ($53.25) and the exercise price
or base price.
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5-YEAR AVERAGE YEARS OF SERVICE
ANNUAL ---------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30
- ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 800,000................... $ 48,000 $ 96,000 $144,000 $192,000 $240,000 $288,000
1,000,000................... 60,000 120,000 180,000 240,000 300,000 360,000
1,200,000................... 72,000 144,000 216,000 288,000 360,000 432,000
1,400,000................... 84,000 168,000 252,000 336,000 420,000 504,000
1,600,000................... 96,000 192,000 288,000 384,000 480,000 576,000
1,800,000................... 108,000 216,000 324,000 432,000 540,000 648,000
2,000,000................... 120,000 240,000 360,000 480,000 600,000 720,000
2,200,000................... 132,000 264,000 396,000 528,000 660,000 792,000
2,400,000................... 144,000 288,000 432,000 576,000 720,000 864,000
2,600,000................... 156,000 312,000 468,000 624,000 780,000 936,000
</TABLE>
The table shows annual pension benefits payable under the Company's defined
benefit plans for salaried employees. No additional benefits accrue after 30
years of service. This table is based upon the current pension plan formula of
1.2% of average compensation per year of service up to 30 years. Prior to 1989
the formula provided a benefit of 1.5% of average compensation per year of
service up to 30 years reduced by the social security benefit. Messrs. Shoemate,
Gillespie and Kastory benefit from the prior formula for their years of service
before 1989. Mr. Labergere is covered by the international pension plan.
Compensation covered by the plans is the combined annual compensation
reported in the Salary and Bonus columns of the Summary Compensation Table on
page 19. Each of the named executive officers has 30 years of service for
purposes of the plans, except A. Labergere and J. J. Langdon, who have 15 and 6
years, respectively. Amounts shown in the Table are computed as a straight life
annuity upon retirement at age 62 or later and are not subject to any deduction
for Social Security benefits.
22
<PAGE>
<PAGE>
STOCKHOLDER RETURN COMPARISON
The following graph compares the five-year cumulative total return to
stockholders of our common stock with the cumulative total return of the
Standard & Poor's Foods Index, the Standard & Poor's 500 Stock Index and a Peer
Group Index of food and food-related companies. The companies in the Peer Group
were approved by the Compensation and Nominating Committee in order to measure
the Company's performance during each of the 1996, 1997 and 1998 performance
cycles under the 1993 Stock and Performance Plan (see the Compensation and
Nominating Committee Report on page 16). The historical performance of the Peer
Group Index, weighted for market capitalization, is shown as a reference. The
Peer Group consists of: Campbell Soup Company, Con Agra, Inc., General Mills,
Inc., H.J. Heinz Company, Hershey Foods Corporation, Hormel Foods Corporation,
Kellogg Company, McCormick & Company, Incorporated, Nabisco Holdings Corp., The
Quaker Oats Company, Sara Lee Corporation, Smucker (J.M.), Co., Unilever N.V.,
and Wm. Wrigley Jr. Company. The graph assumes initial investments of $100 on
December 31, 1993 and reinvestment of dividends.
BESTFOODS
STOCKHOLDER RETURN COMPARISON
FOR FIVE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
BASE PERIOD RETURN RETURN RETURN RETURN RETURN
1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bestfoods 100 114.94 151.68 175.01 247.39 268.35
- ----------------------------------------------------------------------------------------------
S&P Foods Index 100 111.78 142.59 168.93 242.12 262.02
- ----------------------------------------------------------------------------------------------
S&P 500 Index 100 101.32 139.40 171.40 228.59 293.91
- ----------------------------------------------------------------------------------------------
Peer Group Index 100 104.96 135.98 159.55 228.17 251.21
- ----------------------------------------------------------------------------------------------
</TABLE>
[PERFORMANCE GRAPH]
SEVERANCE ARRANGEMENTS
The Company maintains severance agreements with its executive officers,
including the named executive officers, which provide for a lump sum payment
equal to three times the sum of the annual salary and bonus of the officer, and
continuation of medical and insurance plans for a three-year period, if the
officer's employment is terminated involuntarily other than for cause or
voluntarily for good reason, within two years after a change in control of the
Company. The agreements also provide that the amount of excise tax, if any,
under the Internal Revenue Code to be paid by any executive officer shall be
reimbursed by the Company.
23
<PAGE>
<PAGE>
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
If any stockholder wants to submit a proposal for inclusion in the proxy
material for the 2000 annual meeting which will be held on Thursday, April 27,
2000, it must be received by the Corporate Secretary by November 11, 1999. Also,
under our By-Laws, a stockholder can present at an annual meeting any other
business, including the nomination of candidates for director, only if the
stockholder notifies the Corporate Secretary in writing of the business or
candidates between January 28, 2000 and February 25, 2000. There are other
procedural requirements in the By-Laws pertaining to stockholder nominations and
proposals. Any stockholder may receive a copy of the By-Laws without charge by
writing to the Corporate Secretary.
OTHER BUSINESS
We do not know of any other matters to be brought before the meeting.
However, if other proposals are properly presented, the persons named in the
accompanying proxy will vote upon them in accordance with their best judgment.
By order of the Board of Directors,
/s/ Hanes A. Heller
Hanes A. Heller
Vice President, General Counsel
and Secretary
24
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[RECYCLED LOGO]
Printed on Recycled Paper
<PAGE>
<PAGE>
APPENDIX 1
BESTFOODS
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting on April 22, 1999
The undersigned hereby appoints CHARLES R. SHOEMATE and HANES A. HELLER, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated on the
reverse side hereof, all the shares of common and ESOP preferred stock of
Bestfoods which the undersigned is entitled to vote at the annual meeting of
stockholders to be held at the Radisson Hotel Englewood, 401 South Van Brunt
Street, Englewood, New Jersey on April 22, 1999 at 9:30 a.m., local time, or any
adjournment thereof, and in their discretion, upon any other matters which may
properly come before the meeting.
<TABLE>
<S> <C> <C>
Election of four Directors, each for a term of three years. (Change of Address)
Nominees: ------------------------------
1. Clateo Castellini 3. Eileen S. Kraus
2. Richard G. Holder 4. Alain Labergere ------------------------------
------------------------------
------------------------------
(If you have written in the
above space, please mark the
corresponding box on the
reverse side of this card.)
SEE REVERSE
SIDE
[RECYCLED LOGO] Printed on Recycled Paper
- ------------------------------------------------------------------------------------------------
</TABLE>
Fold and Detach Here
Get the Information You Need Now
[GRAPHIC]
http://www.bestfoods.com
If you have an interest in Bestfoods, you'll want to visit bestfoods.com. We've
got the latest earnings reports and press releases; annual report and Forms 10-K
and 10-Q; job openings; and stock price (20-minute delay) on our site, as well
as some interesting facts about our company and a history of some of our brands.
And we're adding more material all the time.
If you like to stay abreast of Bestfoods news, visit our investor
information section and register in our e-mail administrative facility. We'll
send our press releases right to your desktop the minute they're posted on the
website. And if you're looking for a career at Bestfoods, or know someone who
is, we even have an on-line resume form.
So please stop by and see us when you're on the Internet. And send us your
comments by e-mail in the "Contact Us" section.
<PAGE>
<PAGE>
6654
Please mark your
[X] votes as in this
example.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Proposals 1 and 2. The ESOP Trustee shall vote unallocated ESOP preferred
stock as directed on this proxy by the participant.
<TABLE>
<CAPTION>
The Board of Directors recommends a vote FOR Proposals 1 and 2.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Election of FOR WITHHELD 2. Appointment of KPMG FOR AGAINST ABSTAIN Special Action
Directors [ ] [ ] LLP as Independent [ ] [ ] [ ] Discontinue Annual Report Change of
(see reverse) Auditors Mailing for this Account [ ] Address on [ ]
Reverse Side
For, except vote withheld from the following nominee(s): Admission
Ticket No. of
Request [ ] Persons -----
- ---------------------------------------------
Please date, sign exactly as name appears
hereon and return promptly in the enclosed
envelope. When shares are held by joint
tenants, both should sign. When signing as
attorney, executor, administrator, trustee
or guardian, please give full title as such.
If a corporation, please sign in full corporate
name by president or other authorized officer.
If a partnership, please sign in partnership
name by authorized person.
---------------------------------------------
---------------------------------------------
SIGNATURE(S) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Fold and Detach Here
BESTFOODS
Dear Stockholder:
Bestfoods now offers you the ability to vote your shares by the Internet or by
telephone, thus eliminating the need to return your proxy card. To vote your
shares by these means, please use the control number printed in the box above,
just below the perforation. The series of numbers that appears in the box above
must be used to access the system. To ensure that your vote will be counted,
please cast your Internet or telephone vote before 11:00 p.m. on April 21.
1. To vote by the Internet
Log onto the Internet, go to the web site http://www.vote-by-net.com, and
follow the instructions provided.
2. To vote by telephone
On a touch-tone phone, call 1-800-OK2-VOTE (1-800-652-8683) 24 hours a day,
seven days a week.
First, you will be asked about a ticket request to attend
the annual meeting.
Next, you will be asked about discontinuance of annual
report mailings for your account.
Last, you will be prompted to vote your shares:
Proposal 1: Election of Directors, each for a term of three
years
1. Clateo Castellini
2. Richard G. Holder
3. Eileen S. Kraus
4. Alain Labergere
Proposal 2: Ratification of appointment of independent
auditors
Your Internet or telephone vote authorizes the named proxies in the same
manner as if you marked, signed, dated and returned the proxy card, thus
there is no need for you to mail back your proxy card.
Your vote is important. Thank you for your time and attention.
<PAGE>
<PAGE>
Page 1 of 3
Appendix 2
FCTC's Vote-By-Net
If you have more than one proxy card, please vote only one
card at a time.
<TABLE>
<S> <C>
[1] Enter the three part Voter [ ]
Control Number
(including the # signs)
that appears in the box on
your proxy card.
[2] Enter the last 4 digits of [ ]
your U.S. Taxpayer
Identification (Social
Security) Number for this
account.
</TABLE>
If you do not have a U.S. Taxpayer Identification Number
for this account, please leave this box blank.
Important: For your vote to be cast, the Voter Control
Number and the last four digits of the U.S. Taxpayer
Identification (Social Security) Number for this account
must match the numbers on our records.
Proceed
https://www.vote-by-net.com/cgi-bin/login.pl
<PAGE>
<PAGE>
Page 2 of 3
Online Proxy Voting for Bestfoods
Bestfoods
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting on April 22, 1999
The undersigned hereby appoints CHARLES R. SHOEMATE and HANES A. HELLER, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated below,
all the shares of common and ESOP preferred stock of Bestfoods which the
undersigned is entitled to vote at the annual meeting of stockholders to be held
at the Radisson Hotel Englewood, 401 South Van Brunt Street, Englewood, New
Jersey on April 22, 1999 at 9:30 a.m., local time, or any adjournment thereof,
and in their discretion, upon any other matters which may properly come before
the meeting.
The Board of Directors Recommends a Vote:
"FOR" all Nominees for Director
"FOR" Proposal 2
- -------------------------------------------------------------------------------
Check this box to vote all proposals in accordance with the recommendations of
the Board of Directors [ ]
The Board Recommends a Vote "FOR" all Nominees for Director
<TABLE>
<CAPTION>
For All Nominees Withhold
Except As Noted As To All
Below Nominees
<S> <C> <C>
1. Election of Directors [ ] [ ]
</TABLE>
Check the box for the director(s) from whom you wish to withhold your vote
<TABLE>
<S> <C> <C>
[ ] Clateo Castellini [ ] Richard G. Holder [ ] Eileen S. Kraus
[ ] Alain Labergere
</TABLE>
The Board Recommends a Vote "FOR" Proposal 2
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
2. Appointment of KPMG LLP as [ ] [ ] [ ]
Independent Auditors
</TABLE>
- -----------------------------------------------------------------------------
Check the box for the options which apply to you.
[ ] Discontinue Annual Report Mailing for this Account
[ ] Admission Ticket Request
To submit your vote please click the button below
(Your vote will not be counted until the Submit Vote button is pressed)
Submit Your Vote
- -----------------------------------------------------------------------------
https://www.vote-by-net.com/cgi-bin/proxy.pl
<PAGE>
<PAGE>
Page 3 of 3
FCTC's Vote-By-Net
Vote By Net
Success! Your vote has been cast and will be tabulated within
24 hours.
Thank you for using EquiServe's Vote-By-Net Facility.
To provide comments regarding the proxy you have just voted,
please press the button below.
Submit Comments
You can now vote another proxy card, or return to the
EquiServe Homepage
Vote Another Proxy
https://www.vote-by-net.com/cgi-bin/vote.pl
