<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [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
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
<PAGE> 2
KELLOGG'S LOGO
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
Dear Stockholder:
It is my pleasure to invite you to attend the 1998 Annual Meeting of
Stockholders of Kellogg Company. The meeting will be held at 1:00 p.m. on
Friday, April 24, 1998, at the W.K. Kellogg Auditorium, 60 West Van Buren
Street, Battle Creek, Michigan.
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. Attendance at the Annual Meeting will be limited to
stockholders only. If you plan to attend the meeting, 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
PREREGISTERED WILL ONLY BE ADMITTED TO THE MEETING UPON VERIFICATION OF STOCK
OWNERSHIP.
Stockholders needing special assistance at the meeting are requested to contact
Shareholder Services at the address listed above.
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.
Sincerely,
Arnold G. Langbo
Arnold G. Langbo
Chairman of the Board
Chief Executive Officer
March 13, 1998
<PAGE> 3
KELLOGG COMPANY
ONE KELLOGG SQUARE
BATTLE CREEK, MICHIGAN 49016-3599
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1998
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Kellogg Company, a Delaware
corporation, will be held at 1:00 p.m. on Friday, April 24, 1998, at the W.K.
Kellogg Auditorium, 60 West Van Buren Street, Battle Creek, Michigan, for the
following purposes:
1. To elect five directors for a three-year term to expire at the 2001
Annual Meeting of Stockholders and to elect one director for a
two-year term to expire at the 2000 Annual Meeting of Stockholders;
and
2. To take action upon any other matters that may properly come before
the meeting and any adjournments of the meeting.
Only stockholders of record at the close of business on March 2, 1998, will
receive notice of and be entitled to vote at the meeting or any adjournments of
the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
RICHARD M. CLARK
Senior Vice President
General Counsel and Secretary
March 13, 1998
<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 24, 1998
SOLICITATION OF PROXY
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 24, 1998, and any
adjournments of the meeting. The Annual Report of the Company for 1997 including
financial statements, the Notice of Annual Meeting, this Proxy Statement, and
the Proxy were mailed to stockholders on March 13, 1998. The enclosed Proxy is
solicited by the Board of Directors of the Company.
RECORD DATE
The record date for determining stockholders entitled to vote at the Annual
Meeting is March 2, 1998. Each of the 410,813,655 shares of common stock of the
Company issued and outstanding on that date is entitled to one vote at the
Annual Meeting.
COSTS
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 forwarding proxy soliciting materials to the
beneficial owners of the common stock of the Company at the Company's expense.
PROXY INSTRUCTIONS
Please complete and sign the enclosed Proxy and return it to the Company.
You may revoke your Proxy at any time before it is voted, by delivering a
later-dated properly 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 according to their specifications. If no contrary instruction is
indicated in the Proxy, it will be voted "FOR" the election of directors as
nominated, and in the discretion of the person(s) named as the proxy if any
other business should properly come before the meeting. 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.
<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, 1997
---------------- ------------------------- -------------------
<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 138,861,540 shares(2) 33.8
George Gund III
1821 Union Street
San Francisco, CA 94123 49,677,098 shares(3) 12.1
</TABLE>
- ---------------
(1) The trustees of the W.K. Kellogg Foundation Trust (the "Trust") are Arnold
G. Langbo, William C. Richardson, Jonathan T. Walton, 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 721,920 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 702,000 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 163,532 shares, shared voting
power for 140,894,899 shares (including those shares beneficially owned by
the Trust), sole investment power for 90,992 shares, and shared investment
power for 138,905,240 shares (including those shares beneficially owned by
the Trust). The aggregate amount beneficially owned by The Bank of New York
is 141,058,431 shares.
(3) George Gund III has sole power to vote or direct the vote of 224,000 shares,
shared power to vote or direct the vote of 49,453,098 shares, and shared
power to dispose or direct the disposition of 14,056,692 shares. Of the
shares that Mr. Gund has shared power to vote and shared power to dispose,
11,940,000 are held by a nonprofit foundation of which George Gund III is
one of five trustees and one of nine 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 37,328,764 shares, shared voting power for 872,026
shares (including certain of the shares beneficially owned by George Gund
III), sole investment power for 2,507,974 shares, and shared investment
power for 29,600 shares. The aggregate amount beneficially owned by KeyCorp
is 38,241,270 shares.
2
<PAGE> 6
OFFICER AND DIRECTOR STOCK OWNERSHIP
The following table shows the number of shares of common stock of the
Company beneficially owned as of February 16, 1998, by each 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
- ---- -------------------
<S> <C>
Benjamin S. Carson............... 0
Carleton S. Fiorina.............. 0
Donald G. Fritz(1)............... 275,727
Claudio X. Gonzalez(2)........... 7,592
Gordon Gund(2)................... 11,279
Carlos M. Gutierrez(1)........... 268,878
Dorothy A. Johnson............... 0
Thomas A. Knowlton(1)............ 379,407
William E. LaMothe............... 886,379
Arnold G. Langbo(1)(3)........... 1,473,111
</TABLE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME OWNED
- ---- -------------------
<S> <C>
Russell G. Mawby................. 13,757
Ann McLaughlin(2)................ 7,942
J. Richard Munro(2).............. 9,301
Harold A. Poling................. 5,824
William C. Richardson(2)(3)...... 1,415
Donald H. Rumsfeld(2)............ 22,228
Donald W. Thomason(1)............ 350,141
John L. Zabriskie................ 4,472
All directors and executive
officers as a group(1)(4)...... 5,451,218
</TABLE>
- ---------------
(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 16, 1998: Donald G. Fritz, 227,973; Carlos M.
Gutierrez, 170,275; Thomas A. Knowlton, 291,127; Arnold G. Langbo,
1,240,346; Donald W. Thomason, 275,710; all directors and executive officers
as a group, including the above named individuals, 3,458,194.
(2) Does not include the number of common stock units held at December 31, 1997,
under the Deferred Compensation Plan for Non-Employee Directors as follows:
Mr. Gonzalez, 2,267; Mr. Gund, 22,688; Ms. McLaughlin, 4,690; Mr. Munro,
1,074; Dr. Richardson, 1,757; and Mr. Rumsfeld, 10,363. The units have no
voting rights.
(3) Does not include shares owned by the Trust as to which Mr. Langbo and Dr.
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.
EXECUTIVE AND BOARD OF DIRECTOR STOCK OWNERSHIP GUIDELINES
Consistent with the Company's efforts to link compensation to stockholder
return, effective January 1, 1998, the Board adopted Executive and Board of
Director Stock Ownership Guidelines (the "Guidelines") requiring ownership of
shares of the Company's common stock in the following respective amounts:
<TABLE>
<S> <C>
Chief Executive Officer - 500% of Salary
Executive Vice Presidents - 350% of Salary
Senior Vice Presidents - 250% of Salary
Vice Presidents - 150% of Salary
Board of Directors - 10X annual retainer
</TABLE>
Executives and directors have until January 1, 2001, to meet the
Guidelines. Currently, all of the officers listed in the Summary Compensation
Table exceed the Guidelines.
3
<PAGE> 7
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.
Five directors are to be elected at the Annual Meeting to serve for a term
ending at the 2001 Annual Meeting of Stockholders, and one director is to be
elected at the Annual Meeting to serve for a term ending at the 2000 Annual
Meeting. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
FOLLOWING NOMINEES: Benjamin S. Carson, Gordon Gund, Dorothy A. Johnson, William
E. LaMothe, Ann McLaughlin, and Carleton S. Fiorina. Each nominee was proposed
by the Nominating and Corporate Governance Committee for consideration by the
Board of Directors and presentment to the stockholders. Dr. Russell G. Mawby,
currently a director of the Company, is not seeking re-election. Dr. Mawby has
served as a director since 1974, and the Company would like to express its
appreciation for his 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.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
BENJAMIN S. CARSON. Dr. Carson, age 46, has served as a director of the Company
since August 1997. He is the Director of Pediatric Neurosurgery, The Johns
Hopkins Medical Institutions, a position he has held since 1984.
GORDON GUND. Mr. Gund, age 58, 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.
DOROTHY A. JOHNSON. Ms. Johnson, age 57, is President and Chief Executive
Officer of the Council of Michigan Foundations, a position she has held since
1975. She has been a member of the Board of Trustees of the W.K. Kellogg
Foundation since 1980. She also serves on the Michigan Community Service
Commission. Ms. Johnson is a director of First of America Bank Corporation.
WILLIAM E. LAMOTHE. Mr. LaMothe, age 71, 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. Mr. LaMothe is a
director of Pharmacia & Upjohn, Inc.
ANN MCLAUGHLIN. Ms. McLaughlin, age 56, 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 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; Fannie Mae; Harman International Industries,
Incorporated; Sedgwick Group plc.; Vulcan Materials Company; and Donna Karan
International Inc.
NOMINEE FOR ELECTION FOR A TWO-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
CARLETON S. FIORINA. Mrs. Fiorina, age 43, has served as a director of the
Company since August 1997. She is Group President, Global Service Provider
Business, Lucent Technologies Inc., a communications systems and technology
company. She has held this position since October 1997. From October 1996 to
October 1997, she was President of Lucent Technologies Consumer Products
business. From January 1996 to October 1996, she was Executive Vice President,
Corporate Operations. From January 1995 to January 1996, she was President,
North America in the Network
4
<PAGE> 8
Systems Group of AT&T. Lucent Technologies was created in 1996 when AT&T split
into three separate companies. From July 1994 to January 1995, she was
President, Atlantic and Canada Region within the Network Systems Group of AT&T.
Prior to that time Mrs. Fiorina held a number of senior positions with AT&T.
CONTINUING DIRECTORS TO SERVE UNTIL THE 2000 ANNUAL MEETING
ARNOLD G. LANGBO. Mr. Langbo, age 60, 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 trustee of
the W.K. Kellogg Foundation Trust, and a director of Johnson & Johnson and
Whirlpool Corporation.
J. RICHARD MUNRO. Mr. Munro, age 67, has served as a director of the Company
since 1990. Since 1996, he has served as 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 Mobil Corporation;
Sensormatic Electronics Corporation; and K Mart Corporation.
HAROLD A. POLING. Mr. Poling, age 72, 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; Meritor
Automotive, Inc.; The LTV Corporation; Karrington Health, Inc.; Bar Technologies
Inc.; and Flint Ink Corporation.
CONTINUING DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING
CLAUDIO X. GONZALEZ. Mr. Gonzalez, age 63, 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.
WILLIAM C. RICHARDSON. Dr. Richardson, age 57, 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.
DONALD H. RUMSFELD. Mr. Rumsfeld, age 65, has served as a director of the
Company since 1985. Mr. Rumsfeld has been in private business since August 1993.
From October 1990 to August 1993, he served as Chairman and CEO of General
Instrument Corporation. Previously, he had served as Chairman and CEO of G.D.
Searle & Co. Mr. Rumsfeld is currently Chairman of the Board of Directors of
Gilead Sciences, Inc., and a member of the Boards of Gulfstream Aerospace
Corporation, Sears, Roebuck and Co., and Tribune Company. From 1962-1977, Mr.
Rumsfeld served in a variety of U.S. Government posts, including U.S. Ambassador
to NATO, White House Chief of Staff, and Secretary of Defense.
JOHN L. ZABRISKIE. Dr. Zabriskie, age 58, has served as a director of the
Company since 1995. He is Chairman and Chief Executive Officer of NEN Life
Science Products, Inc., a manufacturer of specialty biochemicals. From January
1994 to November 1995, Dr. Zabriskie served as Chairman of the Board and Chief
Executive Officer of The Upjohn Company, and from November 1995 to January 1997,
Dr. Zabriskie served as President and Chief Executive Officer of Pharmacia &
Upjohn, Inc. From 1993 to 1994, Dr. Zabriskie was Executive Vice President of
Merck & Co., Inc. Dr. Zabriskie is a director of Apex Bioscience, Inc. and The
Stroh Companies, Inc.
ABOUT THE BOARD OF DIRECTORS
The Board of Directors has the following standing committees: Executive
Committee, Audit Committee, Social Responsibility Committee, Compensation
Committee, Finance Committee, and Nominating and Corporate Governance Committee.
The Executive Committee is generally empowered to act on behalf of the
Board of Directors. The Executive Committee met one (1) time in 1997. 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 1997. The
members of the Audit Committee are Ms. McLaughlin, Chairman, Dr. Carson, Dr.
Mawby, Mr. Munro, Mr. Poling, and Dr. Zabriskie.
The Social Responsibility Committee 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 1997. The members of the Social Responsibility Committee
are Mr. Munro, Chairman, Dr. Carson, Mrs. Fiorina, Mr. LaMothe, Dr. Mawby, Ms.
McLaughlin, and Dr. Richardson.
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 five (5) times in 1997. The members of the Compensation
Committee are Mr. Gonzalez, Chairman, Mr. Gund, Dr. Mawby, Mr. Munro, Mr.
Rumsfeld, 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 1997. The members of the Finance Committee are Mr. Rumsfeld, Chairman,
Mrs. Fiorina, Mr. Gonzalez, Mr. LaMothe, Dr. Richardson, and Dr. Zabriskie.
The Nominating and Corporate Governance 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 two (2) times in 1997. The members of the Nominating and Corporate
Governance Committee are Mr. Gund, Chairman, Mr. Gonzalez, Mr. LaMothe, Ms.
McLaughlin, Mr. Poling, and Mr. Rumsfeld.
During 1997, 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 1997.
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, 1,000
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"). 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 all or a portion
of their cash compensation payable for the ensuing year. The amount deferred is
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 is credited to the account of each
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.
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 $1 million upon the death of the
director. In 1995, the Board voted to discontinue this program for directors
first elected after December 1995.
6
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information concerning the compensation of the
Company's Chief Executive Officer and the other four most highly compensated
executive officers for the last three years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($)(2) ($)(3) (#)(4) ($)(5)
--------- ---- ------ ------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
A. G. Langbo 1997 980,000(1) 665,754 -- 681,339 10,200
Chief Executive Officer 1996 932,500 315,000 -- 697,854 8,920
1995 880,000 765,000 -- 588,298 10,213
T. A. Knowlton 1997 535,000 235,303 -- 149,150 10,333
Executive Vice President 1996 507,500 150,000 -- 155,800 8,800
1995 470,000 362,100 -- 151,424 10,013
D. W. Thomason 1997 431,250 294,840 -- 200,875 10,300
Executive Vice President 1996 410,000 120,000 -- 172,430 8,827
1995 380,000 260,100 -- 142,892 9,913
D. G. Fritz 1997 430,000 275,890 109,376 131,959 10,333
Executive Vice President 1996 406,250 114,000 151,785 134,560 10,193
1995 380,000 280,500 141,786 100,686 10,080
C. M. Gutierrez 1997 390,000 118,640 -- 170,572 10,433
Executive Vice President 1996 348,750 147,000 141,491 54,496 8,943
1995 330,000 214,200 113,729 113,152 8,712
</TABLE>
- ---------------
(1) Pursuant to the Executive Compensation Deferral Plan (further described
under the heading "Salaries" on page 12 of this Proxy Statement), $30,000 of
Mr. Langbo's salary is deferred until his retirement.
(2) Under the Company's Bonus Replacement Stock Option Plan (further described
under the heading "Long-Term Incentives" on pages 12-13 of this Proxy
Statement), senior executives of the Company may annually elect to forego
all, or a portion, of their annual cash bonus and receive stock options. For
1997, Mr. Langbo elected to forego 15% of his annual cash bonus ($117,486),
Mr. Knowlton elected to forego 35% of his annual cash bonus ($126,702), and
Mr. Gutierrez elected to forego 50% of his annual cash bonus ($118,641).
(3) Represents payments to or on behalf of Mr. Fritz and Mr. Gutierrez primarily
under the Company's Expatriate Compensation Program. Mr. Fritz's
compensation included a housing allowance (net of Mr. Fritz's contribution)
of $54,110 in 1997, $69,765 in 1996, and $67,872 in 1995, a company-provided
automobile in 1997, valued at $27,888, and a schooling allowance of $38,863
in 1996. Mr. Gutierrez's compensation included a housing allowance (net of
Mr. Gutierrez's contribution) of $61,640 in 1996 and $44,649 in 1995.
(4) New stock options were granted in 1995, 1996, and 1997, respectively, for
300,000, 320,000, and 274,400 shares to Mr. Langbo (including 20,000 shares
granted in January 1995 and March 1996, and 15,000 shares granted in March
1997 in lieu of a portion of his bonus for 1994, 1995, and 1996); 70,000,
100,000, and 74,000 shares to Mr. Knowlton; 54,000, 64,000, and 64,000
shares to Mr. Thomason; 56,000, 70,000, and 50,000 shares to Mr. Fritz; and
34,000, 48,000, and 60,000 shares to Mr. Gutierrez. All other options
granted to such persons were accelerated ownership feature ("AOF") options.
An AOF option is granted when Company stock is surrendered to pay the
exercise price of a stock option and related taxes. The holder of the option
is granted an AOF option for the number of shares surrendered. For AOF
options, the expiration date is not changed, and the option price is the
fair market value of the Company's stock on the date the AOF option is
granted.
(5) Represents Company matching contributions on behalf of each named individual
to the Kellogg Company Salaried Savings and Investment Plan.
7
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted
during 1997 to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO DATE
OPTIONS EMPLOYEES EXERCISE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (#)(1) YEAR (%) ($/SHARE) DATE ($)(2)
---- ---------- ---------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
A. G. Langbo New options(3)
274,400 4.60 33.4375 3/14/07 1,734,976
AOF options(4)
17,160 0.29 35.2500 3/15/00 113,601
54,428 0.91 35.2500 1/24/01 360,319
28,230 0.47 35.2500 1/24/02 186,885
61,312 1.03 35.2500 1/21/04 405,892
7,228 0.12 35.2500 10/21/97 47,850
17,432 0.29 35.2500 11/30/98 115,402
82,646 1.39 43.8750 1/24/02 652,647
20,184 0.34 43.8750 1/29/03 159,391
59,380 1.00 43.8750 1/21/04 468,918
43,344 0.73 43.8750 3/14/07 342,283
15,595 0.26 43.8750 11/30/98 123,152
T. A. Knowlton New options
74,000 1.24 33.4375 3/14/07 467,887
AOF options(4)
12,144 0.20 35.0938 1/21/04 82,186
2,500 0.04 47.9375 1/24/02 22,507
8,890 0.15 47.9375 1/21/04 80,035
51,616 0.87 47.9375 3/14/07 464,689
D. W. Thomason New options
64,000 1.07 33.4375 3/14/07 404,659
AOF options(4)
3,046 0.05 35.6563 3/15/00 20,397
60,016 1.01 35.6563 3/14/07 401,891
3,471 0.06 43.8437 3/15/00 27,390
16,007 0.27 43.8437 1/24/01 126,314
24,691 0.41 43.8437 1/24/02 194,842
19,781 0.33 43.8437 1/29/03 156,096
5,151 0.09 43.8437 1/21/04 40,648
4,712 0.08 43.8437 11/30/98 37,183
D. G. Fritz New options
50,000 0.84 33.4375 3/14/07 316,140
AOF options(4)
6,860 0.12 35.2500 3/15/00 45,414
2,442 0.04 35.2500 1/24/01 16,166
7,284 0.12 35.2500 1/24/02 48,221
13,886 0.23 35.2500 1/21/04 91,927
2,034 0.03 35.2500 10/21/97 13,465
4,360 0.07 35.2500 11/30/98 28,864
2,947 0.05 44.8125 1/24/02 23,769
15,945 0.27 44.8125 1/29/03 128,606
4,134 0.07 44.8125 1/21/04 33,343
22,067 0.37 44.8125 3/14/07 177,984
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO DATE
OPTIONS EMPLOYEES EXERCISE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (#)(1) YEAR (%) ($/SHARE) DATE ($)(2)
---- ---------- ---------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
C. M. Gutierrez New options
60,000 1.01 33.4375 3/14/07 379,368
AOF options(4)
5,964 0.10 35.4688 3/15/00 40,793
10,816 0.18 35.4688 1/24/01 73,980
18,432 0.31 35.4688 1/24/02 126,073
5,196 0.09 35.4688 11/30/98 35,540
4,220 0.07 50.1250 3/15/00 38,610
7,652 0.13 50.1250 1/24/01 70,010
13,042 0.22 50.1250 1/24/02 119,325
1,550 0.03 50.1250 1/21/04 14,181
40,024 0.67 50.1250 3/14/07 366,192
3,676 0.06 50.1250 11/30/98 33,633
</TABLE>
- ---------------
(1) Stock options granted under the 1991 Kellogg Company Key Employee Long-Term
Incentive Plan (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 an AOF option as described in footnote (4) on page 7 of this Proxy
Statement.
(2) 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 2.00%, volatility of
approximately 20%, and a risk-free rate of return of 6.38% based on the U.S.
Treasury bill rate for three-year maturities on the grant date. For AOF
options the calculations assume a dividend yield of 2.00%, volatility of
approximately 20%, and a risk-free rate of return of between 5.74% and 6.64%
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 AOF 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 of these options.
(3) Includes 15,000 options which the Compensation Committee granted in March
1997 to Mr. Langbo in lieu of a portion of his cash bonus for 1996.
(4) AOF options are granted to replace shares surrendered as payment on exercise
of options and related taxes.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding the pre-tax value
realized from the exercise of stock options during 1997 and the value of
unexercised in-the-money options held at December 31, 1997, by the persons named
in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR-END
ACQUIRED ON VALUE ------------------------------
NAME EXERCISE(#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE
---- -------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
A. G. Langbo 460,381 3,187,103 1,240,346 0
T. A. Knowlton 102,908 1,314,271 301,652 0
D.W. Thomason 150,853 950,329 275,710 0
D. G. Fritz 95,232 748,054 227,973 0
C. M. Gutierrez 143,754 1,651,750 180,132 0
<CAPTION>
VALUE OF UNEXERCISED,
IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END($)
------------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
A. G. Langbo 15,312,599 0
T. A. Knowlton 3,145,115 0
D.W. Thomason 3,070,433 0
D. G. Fritz 2,660,481 0
C. M. Gutierrez 1,393,082 0
</TABLE>
- ---------------
(1) Shares acquired on exercise are gross amounts, not reduced for shares
surrendered as payment on exercise of options. Messrs. Langbo, Knowlton,
Thomason, Fritz, and Gutierrez had net increases of 40,412, 15,010,
12,040, 10,038, and 17,782 shares resulting from their surrender of
419,969, 87,898, 138,813, 85,194, and 125,972 shares, respectively, as
payment on exercise of options.
KELLOGG COMPANY RETIREMENT PLANS
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.
At December 31, 1997, credited years of service under the Pension Plan for
the executive officers named in the Summary Compensation Table were: Mr. Langbo,
41 years; Mr. Knowlton, 18 years; Mr. Thomason, 31 years; Mr. Fritz, 18 years;
and Mr. Gutierrez, 22 years. The compensation covered by the pension plans is
equal to the amounts shown in the Summary Compensation Table as Salary and
Bonus, including any amount of salary deferred pursuant to the Executive
Compensation Deferral Plan (see footnote 1 on page 7 of this Proxy Statement)
and any bonus forgone pursuant to the Bonus Replacement Stock Option Plan (see
footnote 2 on page 7 of this Proxy Statement).
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
------------------------
REMUNERATION 15 25 30 40 45
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 300,000................................ $ 66,115 $ 110,192 $ 132,231 $ 176,769 $ 199,269
$ 500,000................................ $111,115 $ 185,192 $ 222,231 $ 296,769 $ 334,269
$ 750,000................................ $167,365 $ 278,942 $ 334,731 $ 446,769 $ 503,019
$1,000,000............................... $223,615 $ 372,692 $ 447,231 $ 596,769 $ 671,769
$1,500,000............................... $336,115 $ 560,192 $ 672,231 $ 896,769 $1,009,269
$2,000,000............................... $448,615 $ 747,692 $ 897,231 $1,196,769 $1,346,769
$3,000,000............................... $673,615 $1,122,692 $1,347,231 $1,796,769 $2,021,769
</TABLE>
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
10
<PAGE> 14
of the Board. Covered compensation and the calculation of average annual
compensation under the IRP are generally the same as under the Pension Plan. At
December 31, 1997, Mr. Langbo had 41 years of credited service and Mr. Fritz had
18 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.
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE
------------------------
REMUNERATION 15 25 30 40 45
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 300,000................................ $ 88,800 $ 142,800 $ 169,800 $ 223,800 $ 250,800
$ 500,000................................ $148,000 $ 238,000 $ 283,000 $ 373,000 $ 418,000
$ 750,000................................ $222,000 $ 357,000 $ 424,500 $ 559,500 $ 627,000
$1,000,000............................... $296,000 $ 476,000 $ 566,000 $ 746,000 $ 836,000
$1,500,000............................... $444,000 $ 714,000 $ 849,000 $1,119,000 $1,254,000
$2,000,000............................... $592,000 $ 952,000 $1,132,000 $1,492,000 $1,672,000
$3,000,000............................... $888,000 $1,428,000 $1,698,000 $2,238,000 $2,508,000
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and greater-than-10% stockholders to file reports
with the Securities and Exchange Commission ("SEC") and the New York Stock
Exchange. SEC regulations require the Company to identify anyone who filed a
required report late during the most recent fiscal year. Based on our review of
these reports and written certifications provided to the Company, we believe
that all of these reporting persons complied with their filing requirements for
1997, except that T. A. Knowlton was late in filing a Form 4 relating to one
transaction concerning his holdings in the Kellogg Company Salaried Savings and
Investment Plan.
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, 1997, A. G. Langbo and W. A. Camstra had outstanding
loans, bearing interest at 7.11% per year, in the amounts of $52,188 and
$32,519, respectively. The largest amount of such indebtedness for Mr. Langbo
and Mr. Camstra during 1997 was, respectively, $90,899 and $62,687.
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, operational area, and
corporate performance on a short- and long-term basis as the major
considerations.
The Company's objective in developing its officer compensation plans is to
attract, retain, and motivate high-caliber executives needed to deliver superior
performance that enhances stockholder value by providing performance-based total
compensation opportunities (base salary, annual bonus, and long-term incentives)
targeted at the 50th percentile of the Company's comparison of peer group
companies.
COMPENSATION PRINCIPLES
To achieve the Company's objectives, the Committee's review of executive
compensation incorporates the following 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.
11
<PAGE> 15
- 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, operational area, 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 guided by these
basic principles 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, and long-term incentives. Each of these components is
described below.
SALARIES
Salaries are determined by a process that includes evaluating levels of
responsibility and utilizing competitive surveys to determine appropriate salary
ranges. The Company uses a job evaluation process to develop the relative value
of each position. Salary increases are determined by evaluating individual
performance against pre-established business objectives. Salary ranges are
targeted at the 75th percentile of a compensation survey covering approximately
200 industrial companies with over one billion dollars in annual revenues (the
"Compensation Survey").
Additionally, another compensation survey covering salary, annual bonus,
long-term incentives, benefits, and perquisites (the "Second Survey") was also
used to ensure that the Company's total compensation package for senior
executives was competitive. The Second Survey consisted of 20 comparable
organizations among which the Company competes for executive talent, including
most of the companies comprising the S&P Food Index, the performance of which is
reflected on the "Stock Performance Graph" on page 14 of this Proxy Statement.
This Second Survey was utilized to confirm that the Company's total compensation
package for senior executives would be equivalent to the 50th percentile for
comparable companies. The Committee believes that the companies included in both
surveys provide a reasonable base of comparable organizations.
Pursuant to the Executive Compensation Deferral Plan, a plan designed to
ensure that compensation is deductible under Section 162(m) of the Internal
Revenue Code, the portion of any executive's salary that is over $950,000 is
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 is
payable upon retirement.
ANNUAL BONUSES
Target Bonuses are a percentage of the midpoint of the applicable salary
range and are determined using as an objective the 75th percentile of the
Compensation Survey. The Target Bonus is adjusted for appropriate corporate,
operational area, and individual performance factors, given the functions of the
particular executive. Corporate performance is determined by a weighted
combination of targeted earnings per share and economic profit. Operational area
performance is determined by a weighted combination of targeted volume and
economic profit. Bonuses may range from 0% to 150% of the Target Bonus.
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). 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 ("CEO"), 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 annual
net income of the Company.
LONG-TERM INCENTIVES
The Company's long-term incentive program 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.
12
<PAGE> 16
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 Company's performance management process, is
used to modify the target award. Under the 1991 Incentive Plan no individual may
be granted more than one million options in any fiscal year.
Pursuant to the Company's Bonus Replacement Stock Option Plan, senior
executives of the Company may annually elect to forego all, or a portion, of
their annual bonus and receive stock options under the Company's 1991 Incentive
Plan. The formula for determining the number of options each senior executive
receives is determined by the Committee based on the fair market value of the
Company's common stock on the date of grant. For 1997 bonuses, options will be
granted on March 13, 1998.
PERQUISITES
The Company does not grant significant perquisites to its employees or
officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
For 1997, the salary, bonus, and long-term incentive awards of the 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 performance of the CEO based on the Company's achievement of its long-term
financial and non-financial objectives on an on-going basis. In addition, the
Committee evaluates the performance of the CEO at least annually based upon a
variety of factors, including the Company's net sales, net earnings, earnings
per share, return on assets, return on equity, economic profit, 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.
In determining Mr. Langbo's total compensation package for 1997, the
Committee reviewed, in addition to the factors described above, the Company's
continued development of its global organizational structure, the global
expansion of the convenience foods business, reduction in cost of goods sold,
and new product development.
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 annual 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:
Claudio X. Gonzalez (Chairman)
Gordon Gund
Russell G. Mawby
J. Richard Munro
Donald H. Rumsfeld
John L. Zabriskie
February 19, 1998
13
<PAGE> 17
STOCK PERFORMANCE GRAPH
The following graph compares the yearly 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, 1992, 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.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) S&P 500 S&P FOOD KELLOGG
<S> <C> <C> <C>
1992 100 100 100
1993 110 92 87
1994 112 103 91
1995 153 131 124
1996 189 155 108
1997 252 222 166
</TABLE>
STOCKHOLDER RECOMMENDATIONS FOR DIRECTOR NOMINEES
The Nominating and Corporate Governance Committee will consider stockholder
recommendations for nominees for membership on the Board of Directors.
Recommendations may be submitted to the Office of the Secretary, Kellogg
Company, One Kellogg Square, Battle Creek, Michigan 49016-3599, which will
forward them to the Chairman of the Nominating and Corporate Governance
Committee. For the 1999 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 December 2, 1998, and not later than January 29, 1999, and such
stockholder complies with certain other requirements specified in the Company's
Bylaws.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Stockholder proposals submitted for presentation at the 1999 Annual Meeting
of Stockholders of the Company must be received by the Company no later than
November 13, 1998.
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.
14
<PAGE> 18
ANNUAL REPORT ON FORM 10-K
Upon written request, the Company will provide any stockholder, without
charge, a copy of the Company's Annual Report on Form 10-K for 1997 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. You may also
obtain this document and certain other of the Company's SEC filings through the
Internet at www.sec.gov.
OTHER BUSINESS
The Company does not intend to bring any business before the meeting other
than that set forth in the Notice of Annual Meeting and described in this Proxy
Statement. 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, 1998
15
<PAGE> 19
KELLOGG'S LOGO
KELLOGG COMPANY, BATTLE CREEK, MICHIGAN 49016-3599
THE BEST TO YOU EACH MORNING(R)
(LOGO)
recycled
<PAGE> 20
KELLOGG COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS APRIL 24, 1998
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 24, 1998 and at any
adjournments of the meeting, 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 matter 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
THE DIRECTORS.
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.
<PAGE> 21
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS.]
[ ]
<TABLE>
<S><C>
For Withheld For All
1.ELECTION OF SIX DIRECTORS: For a three- All All Except (To withhold authority to vote for any individual
year term expiring at the 2001 Annual Meeting [] [] [] nominee(s), strike a line through the nominee's
of Stockholders: Benjamin S. Carson, Gordon name to the left and fill in the For All Except
Gund, Dorothy A. Johnson, William E. LaMothe oval.)
and Ann McLaughlin; and for a two-year term
expiring at the 2000 Annual Meeting of
Stockholders: Carleton S. Fiorina. SIGNATURES: Signature(s) should agree
with the name(s) shown on this Proxy. For
joint accounts, both owners should sign.
_______________________________________
_______________________________________
Dated: ___________________________, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
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, 1998, 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 March 2, 1998, 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.
