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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
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 Rule 14a-11(c) or Rule 14a-12
KELLOGG COMPANY
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[KELLOGG'S LOGO]
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
Dear Stockholder:
It is my pleasure to invite you to attend the 1997 Annual Meeting of
Stockholders of Kellogg Company to be held at 1 p.m. on Friday, April 25, 1997.
The meeting will be held at the W.K. Kellogg Auditorium, 60 West Van Buren
Street, Battle Creek, Michigan.
ATTENDANCE AT THE ANNUAL MEETING WILL BE LIMITED TO STOCKHOLDERS ONLY. IF YOU
ARE A STOCKHOLDER OF RECORD AND PLAN TO ATTEND, PLEASE COMPLETE AND RETURN THE
REQUEST FOR ADMISSION TICKET ATTACHED TO YOUR PROXY CARD. IF YOU ARE A
STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME AND YOU PLAN TO
ATTEND, PLEASE REQUEST AN ADMISSION TICKET BY WRITING TO: KELLOGG COMPANY
SHAREHOLDER SERVICES, ONE KELLOGG SQUARE, BATTLE CREEK, MI 49016-3599. EVIDENCE
OF YOUR STOCK OWNERSHIP, WHICH YOU CAN OBTAIN FROM YOUR BANK, STOCKBROKER, ETC.,
MUST ACCOMPANY YOUR LETTER. STOCKHOLDERS WHO ARE NOT PRE-REGISTERED WILL ONLY BE
ADMITTED TO THE MEETING UPON VERIFICATION OF STOCK OWNERSHIP.
The following pages contain the formal Notice of the Annual Meeting and the
Proxy Statement. You will want to review this material for information
concerning the business to be conducted at the meeting and the nominees for
election as directors.
Your vote is important. Whether you plan to attend the meeting or not, we urge
you to complete, sign, and return your Proxy as soon as possible in the envelope
provided. This will ensure representation of your shares in the event you are
unable to attend. You may, of course, revoke your Proxy and vote in person at
the meeting if you so desire.
Sincerely,
Arnold G. Langbo
Arnold G. Langbo
Chairman of the Board
Chief Executive Officer
March 13, 1997
<PAGE> 3
KELLOGG COMPANY
ONE KELLOGG SQUARE
BATTLE CREEK, MI 49016-3599
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 25, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Kellogg Company, a Delaware
corporation, will be held at 1 p.m. on Friday, April 25, 1997, at the W.K.
Kellogg Auditorium, 60 West Van Buren Street, Battle Creek, Michigan, for the
following purposes:
1. To elect three directors for a three-year term to expire at the 2000
Annual Meeting of Stockholders;
2. To consider and act upon a proposed amendment to the Kellogg Company
Key Employee Long Term Incentive Plan;
3. To consider and act upon a stockholder proposal; and
4. To take action upon any other matters that may properly come before
the meeting or any adjournments thereof.
In accordance with the Bylaws and action of the Board of Directors, only
stockholders of record at the close of business on February 28, 1997, will
receive notice of and be entitled to vote at the meeting or any adjournments
thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
RICHARD M. CLARK
Senior Vice President
General Counsel and Secretary
March 13, 1997
<PAGE> 4
KELLOGG COMPANY
ONE KELLOGG SQUARE
BATTLE CREEK, MICHIGAN 49016-3599
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, APRIL 25, 1997
This Proxy Statement and the accompanying Proxy are furnished to
stockholders of Kellogg Company (the "Company") in connection with the
solicitation of proxies for use at the Annual Meeting of Stockholders of the
Company to be held in Battle Creek, Michigan, on Friday, April 25, 1997, or any
adjournments thereof. The Annual Report of the Company for 1996 including
financial statements, the Notice of Annual Meeting, this Proxy Statement, and
the enclosed form of Proxy were mailed to stockholders on or about March 13,
1997. The enclosed Proxy is solicited by the Board of Directors of the Company.
The record date for determining stockholders entitled to vote at the Annual
Meeting is February 28, 1997. Each of the 208,986,548 shares of common stock of
the Company issued and outstanding on that date is entitled to one vote at the
Annual Meeting.
The cost of preparing and mailing the Notice of Annual Meeting and Proxy
Statement is borne by the Company. The Company has retained the services of
Morrow & Co., a professional soliciting organization, to assist in soliciting
proxies from brokerage houses, custodians, nominees, and other fiduciaries. The
fees and expenses of Morrow & Co. are expected to be approximately $16,000.
Arrangements have also been made with brokerage firms and other custodians,
nominees, and fiduciaries for the forwarding of proxy soliciting material to the
beneficial owners of the common stock of the Company at the Company's expense.
Please complete and sign the enclosed Proxy and return it to the Company.
Any person giving a Proxy has the power to revoke it at any time before it is
voted, by delivery of a later-dated duly executed Proxy or in person at the
Annual Meeting. Unless revoked, all properly executed Proxies received at or
prior to the meeting will be voted in accordance with their specifications. If
no contrary instruction is indicated in the Proxy, it will be voted "FOR" the
election of directors as nominated; "FOR" Proposal 2, the amendment of the
Company's Key Employee Long Term Incentive Plan; "AGAINST" Proposal 3, a
stockholder proposal concerning endorsement of the CERES environmental
principles; and in the discretion of the person(s) named as the proxy if any
other business should properly come before the meeting. For Proposal 2 and
Proposal 3, broker "non-votes" are not counted in determining the total number
of votes cast; abstentions are counted and have the effect of a vote against the
proposal. Broker "non-votes" and abstentions are counted as present at the
Annual Meeting for purposes of determining whether a quorum exists.
When a properly executed Proxy is received, the shares represented thereby,
including shares held under the Company's Dividend Reinvestment Plan, will be
voted by the person(s) named as the proxy according to each stockholder's
directions. Proxies will also be considered to be voting instructions to the
applicable Trustee with respect to shares held in accounts under the Company's
Savings and Investment Plans.
Upon written request of any person whose Proxy is solicited herein, the
Company will, after March 31, 1997, provide, without charge, a copy of the
Company's Annual Report on Form 10-K for 1996 filed with the Securities and
Exchange Commission, including the financial statements and schedules, but
without exhibits. Direct requests to the Consumer Affairs Office, Kellogg
Company, P.O. Box CAMB, Battle Creek, Michigan 49016-1986.
<PAGE> 5
SECURITY OWNERSHIP
The following table shows each person who, based upon their most recent
filings with the Securities and Exchange Commission, beneficially owns more than
five percent (5%) of the Company's common stock.
<TABLE>
<CAPTION>
PERCENT OF CLASS ON
BENEFICIAL OWNER SHARES BENEFICIALLY OWNED DECEMBER 31, 1996
---------------- ------------------------- -------------------
<S> <C> <C>
W. K. Kellogg Foundation Trust(1)
c/o The Bank of New York Company, Inc.
One Wall Street
New York, NY 10286 71,675,220 shares(2) 34.2
George Gund III
1821 Union Street
San Francisco, CA 94123 25,058,959 shares(3) 11.9
</TABLE>
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(1) The trustees of the W.K. Kellogg Foundation Trust (the "Trust") are William
C. Richardson, Russell G. Mawby, William E. LaMothe, and The Bank of New
York. The W.K. Kellogg Foundation, a Michigan charitable corporation (the
"Foundation"), is the sole beneficiary of the Trust. Under the terms of the
Trust, if a majority of the trustees of the Trust (which majority must
include the Bank of New York as corporate trustee) are unable to agree, the
Foundation has the power to direct the voting of the common stock held in
the Trust. With certain limitations, the Foundation also has the power to
select or reject the selection of successor trustees of the Trust and to
remove any trustee. The Trust requires that at least one trustee of the
Trust be a trustee of the Foundation.
(2) Does not include 360,960 shares held in certain other trusts in which both
the Trust and the Foundation have present or contingent beneficial interests
and does not include an additional 355,000 shares held in trusts in which
the Foundation has present or contingent beneficial interests. The Bank of
New York is a trustee of the Trust and shares voting and investment power
with respect to shares owned by the Trust with the other three trustees. The
Bank of New York has sole voting power for 96,776 shares, shared voting
power for 74,695,245 shares (including those shares beneficially owned by
the Trust), sole investment power for 50,300 shares, and shared investment
power for 71,707,370 shares (including those shares beneficially owned by
the Trust). The aggregate amount beneficially owned by the Bank of New York
is 74,792,021 shares.
(3) George Gund III has sole power to vote or direct the vote of 112,000 shares,
shared power to vote or direct the vote of 24,946,959 shares, and shared
power to dispose or direct the disposition of 7,228,346 shares. 6,170,000 of
the shares that Mr. Gund has shared power to vote and shared power to
dispose are held by a nonprofit foundation of which George Gund III is one
of six trustees and one of ten members, as to which shares Mr. Gund
disclaims beneficial ownership. Gordon Gund, a director of the Company, is a
brother of George Gund III and does not have any voting or investment power
in any of the shares shown as beneficially owned by George Gund III.
KeyCorp, as trustee for certain Gund family trusts, as well as other trusts,
has sole voting power for 221,312 shares, shared voting power for 7,252,465
shares (including certain of the shares beneficially owned by George Gund
III), sole investment power for 18,111,222 shares, and shared investment
power for 1,020,952 shares. The aggregate amount beneficially owned by
KeyCorp is 25,321,999 shares.
2
<PAGE> 6
The following table shows the number of shares of common stock of the
Company beneficially owned as of February 1, 1997, by each continuing director
and nominee for director, each executive officer included in the Summary
Compensation Table, and all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME OWNED(1)
- ---- -------------------
<S> <C>
Donald G. Fritz.................. 116,697
Claudio X. Gonzalez(2)........... 3,241
Gordon Gund(2)................... 5,093
Carlos M. Gutierrez.............. 111,316
Thomas A. Knowlton............... 159,064
William E. LaMothe(3)............ 442,667
Arnold G. Langbo................. 607,763
Russell G. Mawby(3).............. 6,315
Ann McLaughlin(2)................ 3,704
</TABLE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME OWNED(1)
- ---- -------------------
<S> <C>
J. Richard Munro................. 4,097
Harold A. Poling................. 2,380
William C. Richardson(2)(3)...... 200
Donald Rumsfeld(2)............... 10,557
Donald W. Thomason............... 144,609
John L. Zabriskie................ 1,714
All executive officers and
directors as a group(4)........ 2,278,181
</TABLE>
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(1) The number of shares shown in the table includes the following shares that
certain executive officers of the Company may acquire by exercising options
granted them under Company-sponsored stock plans and which remain
unexercised on February 1, 1997: Donald G. Fritz, 95,623; Carlos M.
Gutierrez, 76,657; Thomas A. Knowlton, 127,705; Arnold G. Langbo, 509,694;
Donald W. Thomason, 112,844; all directors and executive officers as a
group, including the above named individuals, 1,386,079.
(2) Does not include the number of common stock units held at December 31, 1996
under the Deferred Compensation Plan for Non-Employee Directors as follows:
Mr. Gonzalez, 570; Mr. Gund, 10,578; Ms. McLaughlin, 2,036; Dr. Richardson,
401; and Mr. Rumsfeld, 4,511. The units have no voting rights.
(3) Does not include shares owned by the Trust as to which Mr. LaMothe and Drs.
Mawby and Richardson, as trustees of the Trust, share voting and investment
power or shares as to which the Trust or the Foundation has present or
contingent beneficial interests.
(4) Represents one percent of the Company's issued and outstanding common stock.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Amended Restated Certificate of Incorporation and the Bylaws of the
Company provide that the Board of Directors shall be comprised of not less than
seven nor more than fifteen directors divided into three classes as nearly equal
in number as possible and that each director shall be elected for a term of
three years with the term of one class expiring each year. There are currently
thirteen members of the Board.
Three directors are to be elected at the Annual Meeting to serve for a term
ending at the 2000 Annual Meeting of Stockholders. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE FOLLOWING NOMINEES: Arnold G.
Langbo, J. Richard Munro, and Harold A. Poling. Each nominee was proposed by the
Nominating Committee for consideration by the Board of Directors and presentment
to the stockholders. Timothy P. Smucker and Dolores D. Wharton, currently
directors of the Company, are not seeking re-election. Mr. Smucker has served as
a director since 1989, and Mrs. Wharton has served as a director since 1976. The
Company would like to express its appreciation to Mr. Smucker and Mrs. Wharton
for their years of dedicated service.
Persons receiving a plurality of the votes cast at the Annual Meeting will
be elected directors. "Plurality" means that the nominees who receive the
largest number of votes cast are elected as directors. Shares not voted (whether
by abstention, broker non-votes, or otherwise) have no effect on the election.
If any nominee is unable or declines to serve, Proxies will be voted for the
balance of those named and for such person as shall be designated by the Board
of Directors to replace any such nominee. However, the Board of Directors does
not anticipate this will occur.
3
<PAGE> 7
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE
2000 ANNUAL MEETING
[PHOTO] ARNOLD G. LANGBO. Mr. Langbo, age 59, has served as a
director of the Company since 1990 and has been Chairman of
the Board and Chief Executive Officer since 1992. He has
been employed by the Company since 1956. Mr. Langbo is a
director of Johnson & Johnson and Whirlpool Corporation.
[PHOTO] J. RICHARD MUNRO. Mr. Munro, age 66, has served as a
director of the Company since 1990. He is Chairman of
Genentech Inc., a biotechnology company. Prior thereto, he
was Co-Chairman and Co-Chief Executive Officer of Time
Warner Inc. Mr. Munro is a director of Time Warner Inc.;
Mobil Corporation; and K Mart Corporation.
[PHOTO] HAROLD A. POLING. Mr. Poling, age 71, has served as a
director of the Company since 1993. In 1993, Mr. Poling
retired as Chairman of the Board and Chief Executive
Officer of Ford Motor Company, an automobile manufacturing
company, a position he had held since 1990. He is a
director of Shell Oil Company; The LTV Corporation; and
Flint Ink Corporation.
CONTINUING DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING
[PHOTO] CLAUDIO X. GONZALEZ. Mr. Gonzalez, age 62, has served as a
director of the Company since 1990. In 1973, he was named
Chairman of the Board and Chief Executive Officer of
Kimberly-Clark de Mexico, S.A. de C.V., a producer of
consumer disposable tissue products, writing and other
papers, and pulp. He is a director of Kimberly-Clark
Corporation; General Electric Company; Planet Hollywood
International, Inc.; Banco Nacional de Mexico; Grupo
Industrial ALFA; Grupo Modelo; Grupo Carso; Telefonos de
Mexico; and The Mexico Fund.
[PHOTO] WILLIAM C. RICHARDSON. Dr. Richardson, age 56, has served
as a director of the Company since 1996. He is President
and Chief Executive Officer and a member of the Board of
Trustees of the W. K. Kellogg Foundation and a trustee of
the W. K. Kellogg Foundation Trust. Before joining the
Foundation in 1995, Dr. Richardson had been president of
The Johns Hopkins University in Baltimore, Maryland since
1990. He is a director of CSX Corporation and Mercantile
Bankshares Corporation.
[PHOTO] DONALD RUMSFELD. Mr. Rumsfeld, age 64, has served as a
director of the Company since 1985. He currently serves as
Chairman of Gilead Sciences, Inc., a biotechnology company.
Mr. Rumsfeld has been in private business since 1993. In
1993, Mr. Rumsfeld retired as Chairman and Chief Executive
Officer of General Instrument Corporation, an international
electronics company, a position he had held since 1990. Mr.
Rumsfeld previously served as U.S. Ambassador to NATO,
White House Chief of Staff, Secretary of Defense, and CEO
of G.D. Searle & Co. Mr. Rumsfeld is a director of
Gulfstream Aerospace Corporation; Metricom, Inc.; Sears,
Roebuck and Co.; and Tribune Company.
4
<PAGE> 8
<TABLE>
<S> <C>
[PHOTO] JOHN L. ZABRISKIE. Dr. Zabriskie, age 57, has served as a
director of the Company since 1995. Until January 20, 1997,
he served as President and Chief Executive Officer of
Pharmacia & Upjohn, Inc., one of the largest drug
manufacturers in the world. From 1993 to 1994, Dr. Zabriskie
was Executive Vice President of Merck & Co., Inc. Prior to
1993, Dr. Zabriskie served as Senior Vice President of
Merck.
CONTINUING DIRECTORS TO SERVE UNTIL THE 1998 ANNUAL MEETING
[PHOTO] GORDON GUND. Mr. Gund, age 57, has served as a director of
the Company since 1986. He is Chairman and Chief Executive
Officer of Gund Investment Corporation, which manages
diversified investment activities. Mr. Gund is the principal
owner of the Cleveland Cavaliers NBA team; principal owner
and Chairman of Nationwide Advertising Service, Inc., a
recruitment advertising agency; and a co-owner of the San
Jose Sharks NHL team. He is a director of Corning
Incorporated.
[PHOTO] WILLIAM E. LAMOTHE. Mr. LaMothe, age 70, has served as a
director of the Company since 1972. He retired as Chairman
of the Board and Chief Executive Officer of the Company in
1991, and had been employed by the Company since 1950. He is
a member of the Board of Trustees of the W.K. Kellogg
Foundation and a trustee of the W.K. Kellogg Foundation
Trust. Mr. LaMothe is a director of Pharmacia & Upjohn, Inc.
[PHOTO] RUSSELL G. MAWBY. Dr. Mawby, age 69, has served as a
director of the Company since 1974. He is Chairman Emeritus
and a member of the Board of Trustees of the W.K. Kellogg
Foundation and a trustee of the W.K. Kellogg Foundation
Trust. Dr. Mawby was employed by the Foundation in 1964 and
was named Chief Executive Officer in 1970. He is a director
of The J. M. Smucker Company.
[PHOTO] ANN MCLAUGHLIN. Ms. McLaughlin, age 55, has served as a
director of the Company since 1989. She is Chairman of The
Aspen Institute, a nonprofit organization. She served as
President of the Federal City Council in Washington, D.C., a
nonprofit organization, from 1990 to 1995. She was President
and Chief Executive Officer of New American Schools
Development Corporation, a private, nonprofit education
reform organization, from July 1992 until April 1993. She is
a director of AMR Corporation (the parent company of
American Airlines); General Motors Corporation; Nordstrom,
Inc.; Potomac Electric Power Company; Host Marriott
Corporation; Union Camp Corporation; Federal National
Mortgage Association (Fannie Mae); Harman International
Industries, Incorporated; Sedgwick Group plc.; Vulcan
Materials Company; and Donna Karan International Inc.
</TABLE>
ABOUT THE BOARD OF DIRECTORS
The Board of Directors has the following standing committees: Executive
Committee, Audit Committee, Committee on Social Responsibility, Compensation
Committee, Employee Benefits Advisory Committee, Finance Committee, and
Nominating Committee.
The Executive Committee is generally empowered to act on behalf of the
Board. The Executive Committee did not meet during 1996. The members of the
Executive Committee are Mr. Langbo, Chairman, Mr. Gund, Mr. Poling, and Dr.
Richardson.
5
<PAGE> 9
The Audit Committee reviews the accounting principles, the controls and
scope of the audit practices of the Company, and makes reports and
recommendations to the Board of Directors on those matters and with respect to
the independent auditor and internal auditors. It met two (2) times in 1996. The
members of the Audit Committee are Mr. Gonzalez, Chairman, Ms. McLaughlin, Mr.
Munro, Dr. Richardson, Mr. Smucker, and Dr. Zabriskie.
The Committee on Social Responsibility investigates and reviews the manner
in which the Company discharges its social responsibilities and recommends to
the Board of Directors policies, programs, and procedures it deems appropriate
to enable the Company to carry out and discharge fully its social
responsibilities. It met one (1) time in 1996. The members of the Committee on
Social Responsibility are Ms. McLaughlin, Chairman, Mr. LaMothe, Dr. Mawby, Dr.
Richardson, and Mrs. Wharton.
The Compensation Committee reviews recommendations for compensating
management personnel, determines compensation of the Chief Executive Officer,
and provides advice and recommendations to the Board of Directors on these
subjects. It met two (2) times in 1996. The members of the Compensation
Committee are Dr. Mawby, Chairman, Mr. Gund, Mr. Munro, Mr. Poling, Mr.
Rumsfeld, and Mrs. Wharton.
The Employee Benefits Advisory Committee reviews the financial performance
of the Company's employee benefit plans and reports to the Board of Directors
with respect thereto. It met one (1) time in 1996. The members of the Employee
Benefits Advisory Committee are Mrs. Wharton, Chairman, Mr. Gonzalez, Dr. Mawby,
Mr. Smucker, and Dr. Zabriskie.
The Finance Committee reviews and makes recommendations to the Board of
Directors regarding the financial and capital structure of the Company,
borrowing commitments, and other significant financial matters. It met two (2)
times in 1996. The members of the Finance Committee are Mr. Rumsfeld, Chairman,
Mr. Gonzalez, Mr. LaMothe, Mr. Smucker, and Dr. Zabriskie.
The Nominating Committee advises the Board on corporate governance issues,
investigates and reviews the qualifications of candidates, recommends nominees
to the Board of Directors, and reviews the functioning of the Board and the
fulfillment of its duties and responsibilities. It met one (1) time in 1996. The
members of the Nominating Committee are Mr. Gund, Chairman, Mr. LaMothe, Ms.
McLaughlin, Mr. Munro, Mr. Poling, and Mr. Rumsfeld.
During 1996, the Board of Directors held seven (7) meetings. All of the
directors attended at least 75% of the total number of meetings of the Board and
of all Board committees of which the directors were members during 1996.
NON-EMPLOYEE DIRECTOR COMPENSATION AND BENEFITS
Each non-employee director receives an annual retainer fee of $25,000;
$1,000 for each meeting of the Board of Directors or committee of the Board of
Directors attended; $4,000 if he or she served as Chairman of a committee; and
reimbursement for all expenses incurred in attending such meetings.
Under the Stock Compensation Program for Non-Employee Directors, 500 shares
of common stock are awarded to all eligible non-employee directors following
each annual meeting. These shares are placed in the Kellogg Company Grantor
Trust for Non-Employee Directors (the "Grantor Trust"). Prior to February 16,
1996, non-employee directors were entitled to be paid an annual retirement
benefit for a maximum of up to ten years in an amount equal to the standard
annual retainer payable to non-employee directors at the time of such directors'
retirement. On February 16, 1996, the Board eliminated this benefit. The
actuarial equivalent of the amounts that would have been due to non-employee
directors upon retirement had the benefit not been eliminated, assuming all
directors had completed the vesting period, were converted into shares of common
stock and placed in the Grantor Trust. The number of shares placed in the
Grantor Trust for the eligible directors due to the discontinuation of this
benefit was, in the aggregate, 13,967. Under the terms of the Grantor Trust,
shares are available to a director only upon termination of service on the
Board.
Under the Deferred Compensation Plan for Non-Employee Directors,
non-employee directors may each year irrevocably elect to defer receipt of all
or a specified portion of cash compensation payable for the ensuing year to be
credited to an account in the form of units equivalent to the fair market value
of the Company's common stock. If dividends are declared by the Board, a
fractional unit representing the dividend paid per share is credited for each
whole unit then allocated to the account of a participating director. A
participant's account balance is paid in cash upon termination of service as a
director, over a period from one to ten years, at the election of the director.
The Company maintains Director and Officer Liability Insurance,
individually insuring the directors and officers of the Company against losses
that they become legally obligated to pay resulting from their actions while
performing duties on behalf of the Company. The Company also maintains travel
accident insurance for each director.
6
<PAGE> 10
Prior to December 1995, the Company had a Director's Charitable Awards
Program, in which each director could name up to four organizations to which the
Company would contribute an aggregate of $1 million upon the death of the
director. In 1995 the Board voted to discontinue this program for directors
first elected after December 1995.
OTHER TRANSACTIONS
The Company purchased $35,612,537 of products from The J.M. Smucker Company
during 1996. Timothy P. Smucker, a director of the Company, is Chairman of The
J.M. Smucker Company.
PROPOSAL 2.
PROPOSED AMENDMENT TO THE KELLOGG COMPANY
KEY EMPLOYEE LONG TERM INCENTIVE PLAN
Stockholders are asked to consider and act upon an amendment to the Kellogg
Company Key Employee Long Term Incentive Plan (the "1991 Incentive Plan") which
provides performance-based stock incentives to key employees of the Company.
Section 162(m) of the Internal Revenue Code limits the allowable tax deduction
to $1,000,000 for certain compensation paid to the executive officers named in
the Summary Compensation Table on page 10 of this Proxy Statement. This
amendment is required to ensure that performance-based compensation resulting
from stock-based awards granted under the 1991 Incentive Plan continues to be
tax deductible. Stockholders previously approved the 1991 Incentive Plan on
April 19, 1991. The terms of the 1991 Incentive Plan are described on pages 10,
11, and 15 of this Proxy Statement. The proposed amendment does not change the
basic terms of the 1991 Incentive Plan or increase the number of shares
authorized to be granted.
The proposed amendment, as approved by the Board of Directors, provides
that the maximum number of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock, Performance Shares, Performance Units, and Other Stock-Based
Awards that may be granted to any one individual in any fiscal year shall not
exceed, individually or in the aggregate, Awards to purchase or receive more
than one million (1,000,000) shares of common stock. The complete text of the
amendment is set forth in Appendix A.
The benefits or amounts that will be received in the future under the 1991
Incentive Plan are not determinable. Stock options granted under the 1991
Incentive Plan in 1996 to the five most highly compensated executive officers
are set forth on the Options Granted in Last Fiscal Year Table on page 11 of
this Proxy Statement. During 1996, all current executive officers, as a group,
were awarded 849,074 options and all non-executive officer employees, as a
group, were awarded 974,479 options. The closing price of the common stock of
the Company on February 28, 1997 was $68.50. As of February 1, 1997, 7,786,614
shares were available under the 1991 Incentive Plan.
Approval of the Amendment will require the affirmative vote of stockholders
holding a majority of the Company's shares present in person or by Proxy and
entitled to vote at the Annual Meeting of Stockholders.
The Board of Directors unanimously recommends that stockholders vote "FOR"
the adoption of the Amendment to the 1991 Incentive Plan.
PROPOSAL 3.
STOCKHOLDER PROPOSAL
The Missionary Oblates of Mary Immaculate, 8818 Cameron Street, Silver
Spring, Maryland 20910-4113, the holder of 4,000 shares of Kellogg Company
common stock, has given notice that it intends to present a resolution
requesting that the Company endorse the CERES Principles. Progressive Asset
Management, Inc., 1814 Franklin Street, Oakland, California 94612, has been
authorized by Mr. Henry Norr, beneficial owner of 1,200 shares of Kellogg
Company common stock, to co-sponsor the proposal. Adoption of the resolution
will require the affirmative vote of holders of a
7
<PAGE> 11
majority of the shares of common stock represented in person or by proxy at the
meeting. The proposal, as submitted, reads as follows:
ENDORSEMENT OF THE CERES PRINCIPLES FOR
PUBLIC ENVIRONMENTAL ACCOUNTABILITY
WHEREAS WE BELIEVE:
Responsible implementation of a sound, credible environmental policy increases
long-term shareholder value by raising efficiency, decreasing clean-up costs,
reducing litigation, and enhancing public image and product attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than standards created by industry alone. For maximum
credibility and usefulness, such standards should specifically meet the concerns
of investors and other stakeholders;
Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time. They
also attract investment from investors seeking companies which are
environmentally responsible and which minimize risk of environmental liability.
WHEREAS:
The Coalition for Environmentally Responsible Economies (CERES) -- which
includes shareholders of this Company; public interest representatives, and
environmental experts -- consulted with corporations to produce the CERES
Principles as comprehensive public standards for both environmental performance
and reporting. Fifty-four companies, including Sun [Sunoco], General Motors,
H.B. Fuller, Polaroid, and Bethlehem Steel, have endorsed these principles to
demonstrate their commitment to public environmental accountability. Fortune-500
endorsers say that benefits of working with CERES are public credibility;
'value-added' for the company's environmental initiatives;
<TABLE>
<S> <C> <C>
In endorsing the CERES Principles, a company commits to work toward: 7. Environmental restoration
1. Protection of the biosphere 4. Energy conservation 8. Informing the public
2. Sustainable natural resource
use 5. Risk reduction 9. Management commitment
3. Waste reduction and disposal 6. Safe products & services 10. Audits and reports
</TABLE>
[Full text of the CERES Principles and accompanying CERES Report Form obtainable
from CERES, 711 Atlantic Avenue, Boston MA 02110, tel: 617/451-0927].
CERES is distinguished from other initiatives for corporate environmental
responsibility, in being (1) a successful model of shareholder relations; (2) a
leader in public accountability through standardized environmental reporting;
and (3) a catalyst for significant and measurable environmental improvement
within firms.
RESOLVED: Shareholders request the Company to endorse the CERES Principles as a
part of its commitment to be publicly accountable for its
environmental impact.
SUPPORTING STATEMENT
Many investors support this resolution. Those sponsoring similar resolutions at
various companies have portfolios totaling $75 billion. The number of public
pension funds and foundations supporting this resolution increases every year.
The objectives are: standards for environmental performance and disclosure;
methods for measuring progress toward these goals; and a format for public
reporting of progress. We believe this is comparable to the European Community
regulation for voluntary participation in verified and publicly-reported
eco-management and auditing, and fully compatible with ISO 14000 certification.
Your vote FOR this resolution will encourage scrutiny of our Company's
environmental policies and reports and adherence to standards upheld by
management and stakeholders alike.
8
<PAGE> 12
STATEMENT IN OPPOSITION TO THE PROPOSAL
Kellogg Company is proud of its longstanding record of global environmental
responsibility. In addition, the Company's environmental policies, business
practices, and public reporting are already consistent with the basic tenets of
the CERES Principles.
The Company's philosophy, reaffirmed in March of 1992 by 37 senior members
of Kellogg's Global Management Team, states that Kellogg Company will: "Conduct
our business in a manner which protects the environment and demonstrates good
stewardship of our world's natural resources."
Every Kellogg manufacturing facility has an environmental coordinator
responsible for ensuring compliance with all national, state, and local
requirements concerning the environment. Kellogg has individuals responsible for
environmental compliance at both Area and Global levels. The Company conducts
in-depth environmental assessments of all of its facilities to ensure compliance
with Kellogg standards, which in many countries often exceed governmental
standards. In addition, the Company has initiated a variety of recycling
programs, supports environmental education programs, and has used recycled
paperboard in its packaging since 1906.
Kellogg's public disclosure of environmental matters complies with all
legal disclosure requirements in all jurisdictions in which we do business.
Additionally, Kellogg provides information to independent agencies to confirm
our environmental commitment. In 1996, the Council on Economic Priorities, Inc.,
an independent organization which evaluates and grades companies on social
responsibility matters, gave Kellogg Company an "A" for our environmental
stewardship.
Adopting the CERES Principles would not help the Company better fulfill its
commitment to global environmental responsibility. The Company believes that
adopting the Principles would create a complex administrative burden and require
the Company to spend time and money better spent on continuing to improve our
global environmental program.
Management and the Board of Directors recommend a vote "AGAINST" this
proposal. Proxies solicited by the Board of Directors will be voted "AGAINST"
the proposal unless stockholders specify to the contrary in their proxies or
specifically abstain from voting on this matter.
9
<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation of the Company's Chief Executive Officer and the other four most
highly compensated executive officers for the last three years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- ------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($)(1) (#)(2) ($)(3)
--------- ---- ------ ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
A. G. Langbo 1996 932,500 315,000 -- 348,927 8,920
Chief 1995 880,000 765,000 -- 294,149 10,213
Executive Officer 1994 800,000 688,500 -- 83,000 9,967
T. A. Knowlton 1996 507,500 150,000 -- 77,900 8,800
Executive 1995 470,000 362,100 -- 75,712 10,013
Vice President 1994 379,167 255,000 82,934 18,500 10,034
D. W. Thomason 1996 410,000 120,000 -- 86,215 8,827
Executive 1995 380,000 260,100 -- 71,446 9,913
Vice President 1994 345,000 234,600 -- 20,000 9,634
D. G. Fritz 1996 406,250 114,000 151,785 67,280 10,193
Executive 1995 380,000 280,500 141,786 50,343 10,080
Vice President 1994 285,000 178,500 200,325 15,304 8,127
C. M. Gutierrez 1996 348,750 147,000 141,491 27,248 8,943
Executive 1995 330,000 214,200 113,729 56,576 8,712
Vice President 1994 287,615 153,000 149,155 12,000 6,883
</TABLE>
- ---------------
(1) Represents allowances paid to or on behalf of Mr. Knowlton, Mr. Fritz, and
Mr. Gutierrez primarily under the Company's Expatriate Compensation Program.
Mr. Knowlton's 1994 compensation included a housing allowance (net of Mr.
Knowlton's contribution) of $25,484. Mr. Fritz's compensation included a
housing allowance (net of Mr. Fritz's contribution) of $69,765 in 1996 and
$67,872 in 1995, a schooling allowance of $38,863 in 1996, and relocation
expenses of $80,016 in 1994. Mr. Gutierrez's compensation included a housing
allowance (net of Mr. Gutierrez's contribution) of $61,640 in 1996 and
$44,649 in 1995, and relocation expenses of $122,444 in 1994.
(2) Includes new stock options and reload options granted under the 1991
Incentive Plan. New stock options were granted in 1994, 1995, and 1996 for
83,000, 150,000, and 167,500 shares to Mr. Langbo (including 10,000 shares
granted in January 1995 and March 1996, and 7,500 shares granted in March
1997 in lieu of a portion of his bonus for 1994, 1995, and 1996); 18,500,
35,000, and 50,000 shares to Mr. Knowlton; 20,000, 27,000, and 32,000 shares
to Mr. Thomason; 11,500, 28,000, and 35,000 shares to Mr. Fritz; and 12,000,
17,000, and 24,000 shares to Mr. Gutierrez, respectively. All other options
granted to such persons were reload options. A "Reload Option" is granted
when Company stock is surrendered to pay the exercise price of a stock
option. The holder of the option is granted a Reload Option for the number
of shares surrendered. For all Reload Options, the expiration date is not
changed, but the option price becomes the fair market value of the Company's
stock on the date the Reload Option is granted.
(3) Represents Company matching contributions on behalf of each named individual
to the Kellogg Company Salaried Savings and Investment Plan.
10
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted
during 1996 to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO DATE
OPTIONS EMPLOYEES EXERCISE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (#)(1) YEAR (%) ($/SHARE) DATE ($)(3)
---- ---------- ---------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
A. G. Langbo New options
160,000(2) 6.18 77.5000 3/15/06 2,094,400
Reload options
38,085 1.47 69.6875 1/29/03 442,929
3,792 0.15 69.6875 1/21/04 44,101
40,427 1.56 69.6875 1/20/05 470,166
3,487 0.13 69.6875 10/22/96 20,608
50,025 1.93 66.8125 1/24/02 559,280
11,571 0.45 66.8125 1/29/03 129,364
34,040 1.31 66.8125 1/21/04 380,567
T. A. Knowlton New options
50,000 1.93 77.5000 3/15/06 654,500
Reload options
2,492 0.10 71.5000 1/24/02 29,530
13,944 0.54 71.5000 1/29/03 165,236
8,689 0.34 71.5000 1/21/04 102,965
2,775 0.11 71.5000 1/20/05 32,884
D. W. Thomason New options
32,000 1.24 77.5000 3/15/06 418,880
Reload options
2,751 0.11 69.6875 1/24/02 31,994
11,112 0.43 69.6875 1/29/03 129,233
16,251 0.63 69.6875 1/21/04 188,999
3,609 0.14 67.0000 3/15/00 40,565
9,162 0.35 67.0000 1/24/01 102,981
11,330 0.44 67.0000 1/24/02 127,349
D. G. Fritz New options
35,000 1.35 77.5000 3/15/06 458,150
Reload options
3,141 0.12 70.3125 1/24/01 36,907
2,316 0.09 70.3125 1/24/02 27,213
9,511 0.37 70.3125 1/20/05 111,754
5,568 0.22 66.8125 1/24/02 62,250
9,326 0.36 66.8125 1/29/03 104,265
2,418 0.09 66.8125 1/21/04 27,033
C. M. Gutierrez New options
24,000 0.93 77.5000 3/15/06 314,160
Reload options
3,248 0.13 71.5000 1/21/04 38,489
</TABLE>
- ---------------
(1) Stock options granted under the 1991 Incentive Plan. The new options are
exercisable on the date granted, have an exercise price equal to the fair
market value of the common stock on the date of grant, generally expire ten
years and one day after grant, and include (a) the right to pay the exercise
price in cash or with shares of stock previously acquired by the optionee;
(b) the right to have shares of stock withheld by the Company to pay tax
withholding obligations due in connection with the exercise; and (c) the
right to receive a Reload Option as described in footnote (2) to the Summary
Compensation Table.
11
<PAGE> 15
(2) Includes 10,000 options which the Compensation Committee granted in March
1996 to Mr. Langbo in lieu of a portion of his cash bonus for 1995. Does not
include 7,500 options which the Compensation Committee granted in March 1997
to Mr. Langbo in lieu of a portion of his cash bonus for 1996.
(3) Grant date present value is determined using the Black-Scholes model. The
model makes assumptions about future variables, so the actual value of the
options may be greater or less than the values stated in the table. For new
options the calculations assume a dividend yield of 2.09%, volatility of
approximately 18%, and a risk-free rate of return of 5.79% based on the U.S.
Treasury bill rate for three-year maturities on the grant date. For Reload
Options the calculations assume a dividend yield of between 2.27% and 2.42%,
volatility of approximately 18%, and a risk-free rate of return of between
5.64% and 6.27% based on the U.S. Treasury bill rate for three-year
maturities on the grant date. In view of the Company's experience and the
inherent motivation to exercise options early in their terms because of the
reload option feature, options were assumed to be outstanding for three
years at the time of exercise. Optionees may decide to exercise their
options either earlier or later than this assumed period resulting in
different values from those shown in the table. No downward adjustments were
made to the resulting grant date option value to account for potential
forfeiture or the nontransferable nature of these options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table provides information regarding the pre-tax value
realized from the exercise of stock options during 1996 and the value of
unexercised in-the-money options held at December 31, 1996 by the persons named
in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED,
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS AT FY-END($)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. G. Langbo 202,602 1,460,070 509,694 0 93,505 0
T. A. Knowlton 32,344 317,665 127,705 0 18,438 0
D.W. Thomason 58,391 287,968 112,844 0 0 0
D. G. Fritz 37,418 355,729 95,623 0 43,949 0
C. M. Gutierrez 3,676 30,556 76,657 0 0 0
</TABLE>
- ---------------
(1) Share amounts reflected as acquired are gross amounts, not reduced for any
shares tendered by the individual as payment on exercise.
SELECTED BENEFIT PLANS
KELLOGG COMPANY SALARIED PENSION PLAN
Retirement benefits under the Kellogg Company Salaried Pension Plan (the
"Pension Plan"), a defined benefit plan qualified under Section 401(a) of the
Internal Revenue Code (the "Code"), are payable to salaried employees who have
vested upon retirement at age 65 or in reduced amounts upon earlier retirement
prior to age 65 in accordance with the Pension Plan. Benefits are based upon
credited years of service and average annual compensation (salary and bonus) for
the three consecutive years during the last ten years of employment producing
the greatest average. Benefits are reduced by a portion of the retiree's Social
Security-covered compensation and, for retirees who were participants of a
previous profit-sharing plan, by certain amounts accrued pursuant to that plan.
The Company also maintains a Supplemental Retirement Plan and an Excess Benefit
Retirement Plan that provide for payment of benefits to all participants in the
Pension Plan equal to the benefits that would have been payable under the
Pension Plan but for certain limitations imposed by the Code. Estimated annual
benefits payable upon retirement to persons of the specified compensation and
years of credited service classifications, as reduced by Social Security
benefits (assuming their present levels), are as shown in the following table.
Such amounts assume payments in the form of a straight life annuity and include
the payment of benefits under the Company's Supplemental Retirement Plan and
Excess Benefit Retirement Plan.
12
<PAGE> 16
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
------------------------
REMUNERATION 15 25 30 40 45
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 300,000................................ $ 66,197 $110,328 $ 132,394 $ 176,960 $ 199,460
$ 500,000................................ $111,197 $185,328 $ 222,394 $ 296,960 $ 334,460
$ 750,000................................ $167,447 $279,078 $ 334,894 $ 446,960 $ 503,210
$1,000,000................................ $223,697 $372,828 $ 447,394 $ 596,960 $ 671,960
$1,500,000................................ $336,197 $560,328 $ 672,394 $ 896,960 $1,009,460
$2,000,000................................ $448,697 $747,828 $ 897,394 $1,196,960 $1,346,960
</TABLE>
At December 31, 1996, credited years of service under the Pension Plan for
the executive officers named in the Summary Compensation Table were: Mr. Langbo,
40 years; Mr. Knowlton, 17 years; Mr. Thomason, 30 years; Mr. Fritz, 17 years;
and Mr. Gutierrez, 21 years. The compensation covered by the pension plans is
equal to the amounts shown in the Summary Compensation Table as Salary and
Bonus.
The Company has an International Retirement Plan ("IRP") to provide
supplemental death, disability, and retirement benefits to certain Company
employees who, at the Company's request, serve with one or more of the Company's
international subsidiaries and, consequently, do not otherwise accrue the same
level of benefits which would have accrued had their employment with the Company
been continuous in the United States. Participants in the IRP are those
designated by the Company or any participating subsidiary if approved by a
committee appointed by the Chairman of the Board. Covered compensation and the
calculation of average annual compensation under the IRP is generally the same
as under the Pension Plan. At December 31, 1996, Mr. Langbo had 40 years of
credited service and Mr. Fritz had 17 years of credited service under the IRP.
Annual benefits payable under the IRP are offset by the value of certain other
Company or subsidiary pension programs, government-sponsored benefits, e.g.,
Social Security or state mandated termination benefits, and Company or
subsidiary contributions to savings or thrift programs. Estimated annual
benefits payable upon retirement of Mr. Langbo and Mr. Fritz, assuming the
specified compensation and years of credited service, without the offsets
described above, are as shown in the following table. Such amounts assume
payments in the form of a straight life annuity.
PENSION PLAN TABLE
INTERNATIONAL RETIREMENT PLAN
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
------------------------
REMUNERATION 15 25 30 40 45
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 300,000................................ $ 88,200 $142,200 $ 169,200 $ 223,200 $ 250,200
$ 500,000................................ $147,000 $237,000 $ 282,000 $ 372,000 $ 417,000
$ 750,000................................ $220,500 $355,500 $ 423,000 $ 558,000 $ 625,500
$1,000,000................................ $294,000 $474,000 $ 564,000 $ 744,000 $ 834,000
$1,500,000................................ $441,000 $711,000 $ 846,000 $1,116,000 $1,251,000
$2,000,000................................ $588,000 $948,000 $1,128,000 $1,488,000 $1,668,000
</TABLE>
STOCK OPTION LOANS AND EXECUTIVE OFFICER INDEBTEDNESS
Effective December 7, 1990, the Company terminated a loan program that had
existed for financing the exercise of options and the payment of associated
taxes. As of December 31, 1996, the following executive officers had outstanding
loans, bearing interest at 7.11% per year, in the respectively indicated
principal amounts: A. G. Langbo, $90,899; W. A. Camstra, $62,687; T. A.
Knowlton, $45,933; and J. M. Stewart, $58,571. The largest aggregate amount of
such stock option indebtedness for each such person during 1996 was,
respectively: $126,961; $116,097; $63,408; and $80,130.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of
non-employee, independent directors and is responsible for the establishment
and oversight of executive compensation policies. The Company's executive
compensation program is significantly linked to stockholder return and the
emphasis is on pay for performance with individual, business unit, and corporate
performance on a short- and long-term basis as the major considerations.
13
<PAGE> 17
COMPENSATION PRINCIPLES
The Committee's review of executive compensation incorporates the following
basic compensation principles:
- Compensation should encourage behavior that exemplifies the values which
the Company believes are essential in building long-term growth in volume
and profit, enhancing its worldwide leadership position, and providing
increased value for stockholders. These shared values are profit and
growth, people, consumer satisfaction and quality, integrity and ethics,
and social responsibility.
- Compensation at all levels should be competitive with comparable
organizations and should reward performance and contribution to the
Company's objectives.
- As employees assume greater responsibilities, a larger proportion of
their total compensation will be "at-risk" incentive compensation (both
short- and long-term), subject to individual and corporate performance
measures.
- Continuous improvement is expected in the defined targets and measures.
- Stock options are an effective method of aligning the interests of
employees and stockholders and encouraging employees to think and act like
owners.
It is the Committee's belief that a compensation program designed with
these basic principles in mind should work to ensure present and future
leadership performance which will result in optimal returns to the Company's
stockholders over time. The executive compensation program is composed of three
key elements: base salary, annual bonus awards, and long-term incentives. Each
of these components is described below.
SALARIES
Salaries are determined by a process that includes evaluating levels of
responsibility, utilizing competitive surveys to determine appropriate salary
ranges, and evaluating individual performance to determine salary increases. The
Company uses a job evaluation process to develop the relative value of each
position. Salary ranges are targeted at the 75th percentile of a compensation
survey covering over 600 companies (the "Compensation Survey") prepared by an
independent national compensation consultant. The companies included within the
Compensation Survey operated in numerous industries and include most of the
companies which currently comprise the S&P Food Index, the performance of which
is reflected on the "Stock Performance Graph" on page 16 of this Proxy
Statement. Another compensation survey covering salary, bonus, long-term
incentives, benefits, and perquisites (the "Second Survey") was also used for
1996 to ensure that the total remuneration package was competitive. This Second
Survey confirmed that the Company's compensation planning methodology, as
described in this Report, would result in competitive compensation packages at
not less than the median of such survey. The Second Survey consisted of 30
comparable organizations among which the Company competes for executive talent,
including most of the companies comprising the S&P Food Index, and was conducted
by an independent national compensation consultant. For the purpose of
determining cash compensation, the Committee believes that the companies
included in both surveys provide a reasonable base of comparable organizations.
Effective January 1, 1997, the portion of any executive's salary that is over
$950,000 will be automatically deferred and credited to an account, in the form
of units equivalent to the fair market value of the Company's common stock, and
payable upon retirement.
BONUS
Target bonuses, which are a percentage of the midpoint of the applicable
salary range, are determined using as an objective the 75th percentile of the
Compensation Survey. Bonus awards are determined by first adjusting the target
bonus awards based on individual performance factors. This result is then
adjusted further (from a range of 0-150%), based on the Company's earnings per
share as compared to the target earnings per share. In addition, the Company has
a Senior Executive Officer Performance Bonus Plan (the "Performance Bonus Plan")
that is a performance-based plan intended to meet the deductibility requirements
of Section 162(m) of the Internal Revenue Code. The Performance Bonus Plan is
administered by the Compensation Committee and awards are based on the
achievement of pre-established performance factors, including long-term
financial and non-financial objectives. With respect to the Chief Executive
Officer, the factors are the same as those utilized by the Committee in its
annual determination of his performance. The total of all bonuses granted under
the Performance Bonus Plan shall not exceed 3/4 of 1 percent of the net income
of the Company.
14
<PAGE> 18
LONG-TERM INCENTIVES
The Company's long-term incentive program currently consists of grants of
options to purchase shares of the Company's common stock under the 1991
Incentive Plan. Compensation pursuant to stock options is tied directly and
exclusively to stock price performance so that each stockholder must benefit
before the optionee can receive any benefit from the option. The 1991 Incentive
Plan is designed to attract, retain, and reward key employees of the Company and
strengthen the mutuality of interest between key employees and the stockholders
of the Company. Stock option targets are established by determining the 50th
percentile value of all long-term incentives provided at various levels of
responsibility based on the Second Survey. For the purpose of determining
long-term incentives, the Committee believes that the Second Survey is an
appropriate survey base of comparable companies providing long-term incentives
among which the Company competes for executive talent. Individual performance,
as determined by the performance management process, is used to modify the
target award.
PERQUISITES
The Company does not grant significant perquisites to its employees or
officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
For 1996, the salary, bonus, and long-term incentive awards of the Chief
Executive Officer ("CEO") were determined by the Committee substantially in
conformance with the policies described above for all other executives of the
Company. The Committee evaluates the CEO's contribution to the Company's
achievement of its long-term financial and nonfinancial objectives on an ongoing
basis. In addition, the Committee evaluates the performance of the CEO at least
annually based upon a variety of factors including the Company's earnings per
share, return on equity, return on assets, growth in sales and earnings, market
share, total return to stockholders (based on the market value of the Company's
stock and dividends thereon), and the extent to which strategic and business
plan goals are met. The Committee does not assign relative weights or rankings
to each of such factors but instead makes a subjective determination based upon
a consideration of all such factors.
Due to the Company's achieving 80% of targeted earnings per share for 1996,
bonuses for all employees, including Mr. Langbo, were 50% of the bonus amount
initially determined based on the individual performance factors referenced
under the heading "Bonus" above. In determining Mr. Langbo's compensation
package for 1996, the Committee specifically reviewed, in addition to the
financial factors described above, the Company's continued leadership in new
market development, initiatives to reduce excess manufacturing capacity, the
acquisition of growth opportunities consistent with the Company's core
businesses, and the emphasis on a "value-based" strategic planning process.
The Committee believes that option grants under the 1991 Incentive Plan
meet the requirements for deductible compensation under Section 162(m) of the
Internal Revenue Code. The Committee certified that the bonus granted to Mr.
Langbo under the Performance Bonus Plan met the requirements of the plan. The
Committee reserves the flexibility to award compensation outside of any plan
qualifying under Section 162(m) should circumstances arise under which payment
of such additional compensation would be in the best interests of the Company
and its stockholders.
COMPENSATION COMMITTEE:
Russell G. Mawby (Chairman)
Gordon Gund
J. Richard Munro
Harold A. Poling
Donald Rumsfeld
Dolores D. Wharton
February 20, 1997
15
<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative, five-year total stockholder return with the Standard and Poor's 500
Stock Index (the "S&P 500 Index") and the Standard and Poor's Food Group Index
(the "S&P Food Index"). The graph assumes that $100 was invested on December 31,
1991, in each of the Company's common stock, the S&P 500 Index, and the S&P Food
Index, and that all dividends were reinvested. The graph is not, nor is it
intended to be, indicative of future performance of the Company's common stock.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P 500 S&P FOOD KELLOGG
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
1991 100 100 100
1992 108 100 104
1993 118 92 91
1994 120 102 95
1995 165 131 129
1996 203 155 112
</TABLE>
STOCKHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES AND
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Stockholder recommendations for nominees for membership on the Board of
Directors will be considered by the Nominating Committee. Recommendations may be
submitted to the Office of the Secretary, Kellogg Company, One Kellogg Square,
P.O. Box 3599, Battle Creek, Michigan 49016-3599, which will forward them to the
Chairman of the Nominating Committee. With respect to the 1998 Annual Meeting of
Stockholders, a stockholder may nominate one or more persons for election as
director only if written notice of such stockholder's intent to make such
nomination(s) is received by the Company not earlier than November 30, 1997, and
not later than January 29, 1998, and such stockholder complies with certain
other requirements specified in the Company's Bylaws. Stockholder proposals
submitted for presentation at the 1998 Annual Meeting of Stockholders of the
Company must be received by the Company no later than November 13, 1997.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP is the independent auditor for the Company. A
representative of Price Waterhouse LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if he or she desires to do so.
The Price Waterhouse LLP representative is also expected to be available to
respond to appropriate questions at the meeting.
16
<PAGE> 20
OTHER BUSINESS
It is not intended that any business other than that set forth in the
Notice of Annual Meeting and described in this Proxy Statement will be brought
before the meeting. However, if any other business should properly come before
the meeting, the persons named in the enclosed Proxy intend to vote in
accordance with their best judgment on such business and on any matters dealing
with the conduct of the meeting pursuant to the discretionary authority granted
in the Proxy.
By Order of the Board of Directors,
Richard M. Clark
Senior Vice President
General Counsel and Secretary
March 13, 1997
17
<PAGE> 21
APPENDIX A
AMENDMENT TO THE KELLOGG COMPANY
KEY EMPLOYEE LONG TERM INCENTIVE PLAN
Section 3.2(b) of the Kellogg Company Key Employee Long Term Incentive Plan
is hereby amended to state:
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock, Performance Shares, Performance
Units and Other Stock-Based Awards, or any combination thereof, are to be
granted hereunder to one or more eligible employees; provided, however, that the
maximum number of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock, Performance Shares, Performance Units, and Other Stock-Based
Awards that may be granted to any one individual in any fiscal year shall not
exceed, individually or in the aggregate, Awards to purchase or receive more
than one million (1,000,000) shares of common stock;
<PAGE> 22
[KELLOGG'S LOGO]
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
THE BEST TO YOU EACH MORNING(R)
[RECYCLED LOGO]
recycled
<PAGE> 23
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /x/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2, AND "AGAINST"
PROPOSAL 3.
<TABLE>
<CAPTION>
<S><C>
For Withheld For All (To withhold authority to vote for any individual
1. Election of Three All All Except nominee(s), strike a line through the nominee's name
Directors--Nominees: / / / / / / to the left and fill in the For All Except oval).
Arnold G. Langbo,
J. Richard Munro and
Harold A. Poling.
2. Proposal amending the For Against Abstain 3. Stockholder proposal requesting For Against Abstain
Kellogg Company Key / / / / / / endorsement of the CERES / / / / / /
Employee Long Term environmental principles.
Incentive Plan.
Signature(s) should agree with the name(s)
shown on this Proxy. For joint accounts,
both owners should sign.
-----------------------------------------
-----------------------------------------
Dated: ,1997
--------------------------
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</TABLE>
FOLD AND DETACH HERE
REQUEST FOR ADMISSION TICKET
If you plan to attend the Annual Meeting of Stockholders and would like to
obtain an admission ticket in advance of the meeting, detach this form and mail
it to: Kellogg Company, Shareholder Services, P.O. Box 3599, Battle Creek,
Michigan 49016-3599. If your request is received by April 15, 1997, an
admission ticket will be mailed to you. All other admission tickets can be
obtained at the registration area located in the W. K. Kellogg Auditorium lobby
beginning at 11:30 a.m. on the day of the Annual Meeting.
NOTE: If your shares are currently held in the name of your broker, bank, or
other nominee and you wish to attend the meeting, you MUST provide proof of
ownership to obtain an admission ticket (i.e. a letter from your broker, bank,
or other nominee indicating that you are the beneficial owner of Kellogg
Company stock as of February 28, 1997, the record date).
Attendance will be limited to stockholders only. The number of tickets sent
will be determined by how the shares are registered, as indicated below.
<PAGE> 24
KELLOGG COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS APRIL 25, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints A. G. Langbo and W. C. Richardson or each one or more
of them as shall be in attendance at the meeting, as proxy or proxies, with full
power of substitution, to represent the undersigned at the Annual Meeting of
Stockholders of Kellogg Company to be held on April 25, 1997 and at any
adjournment thereof, and to vote as specified on this Proxy the number of shares
of common stock of Kellogg Company the undersigned would be entitled to vote,
if personally present, upon the matters referred to on the reverse side hereof,
and, in their discretion, upon any other business as may properly come before
the meeting.
IF NOT MARKED TO THE CONTRARY, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS, "FOR" PROPOSAL 2, AND "AGAINST" PROPOSAL 3.
IMPORTANT: THIS PROXY IS CONTINUED AND MUST BE SIGNED AND DATED ON THE REVERSE
SIDE.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
IMPORTANT: THIS IS YOUR PROXY CARD. CAREFULLY FOLD AND TEAR ALONG
PERFORATION. WHETHER OR NOT YOU ARE ABLE TO ATTEND THE ANNUAL MEETING OF
STOCKHOLDERS, IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. PLEASE SIGN AND
RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, THERE IS A REQUEST FOR ADMISSION
TICKET ON THE REVERSE SIDE OF THIS FORM.
