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Section 240.14a-12
Monsanto Company
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(Name of Registrant as Specified In Its Charter)
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Monsanto
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Monsanto Company
ROBERT B. SHAPIRO 800 N. Lindbergh Boulevard
Chairman and St. Louis, Missouri 63167
Chief Executive Officer (314) 694-1000
March 14, 1996
Dear Monsanto Shareowner:
By all measures, last year was an outstanding one for Monsanto's shareowners.
As you'll see in the Annual Report, our business performance produced the
highest earnings in our Company's history, and our stock's total return
substantially outpaced that of the Standard & Poor's 500 Index.
We're now taking the following steps to build on that momentum and to create
additional shareowner value:
Because we believe that Monsanto stock continues to be an attractive
investment, we plan to resume our stock repurchase program and have Board
authorization to buy back over 8 million shares.
We also want to tie our compensation programs to shareowner value even more
tightly than in the past. Two actions are planned.
The first is a stock option grant for about 27,000 Monsanto employees who don't
currently receive options. This will give a much larger group of our people a
direct economic stake in our shareowners' success.
The second is a total revamping of our compensation program for senior
management. Shareowner approval of the Monsanto Management Incentive Plan of
1996 (the Incentive Plan) and the Monsanto Executive Stock Purchase Plan (the
Purchase Plan), which are described in detail in the proxy statement, will
enable Monsanto to grant premium priced stock options to senior executives at
exercise prices substantially above current market, and will enable executives
to make leveraged purchases of Monsanto Common Stock.
Premium priced options under the Incentive Plan may be exercised only if the
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Company's stock meets or exceeds specific price targets within prescribed
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times. They can only be exercised at or above the target stock price. For
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executives to gain from these options, the stock has to exceed these price
targets. This contrasts dramatically with conventional stock options, which are
typically exercised at the price of the stock on the day the options were
granted.
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<TABLE>
The table below demonstrates the clear alignment between management and
shareowners that results from the use of premium priced options:
<CAPTION>
Gain to Gain to Shareowner
Maximum Years to Participants at Value From
Percent of Grant Premium Exercise Price Attain Exercise Price Exercise Price<F1> $135/share<F2>
- ----------------- ----------------------- ---------------------- ------------------ -------------------
<C> <C> <C> <S> <C>
20% $150 3 $0 $1.8 billion
30% $175 4 $15 million $4.7 billion
30% $200 5 $52.5 million $7.7 billion
20% $225 6 $112.5 million $10.6 billion
<FN>
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<F1> Assumes options granted on 3 million shares
<F2> Assumes 118 million shares outstanding; $135 was the closing price of
Monsanto's Common Stock on March 1, 1996
</TABLE>
Under most option-based incentive plans, executives share in the upward
opportunities of stock ownership, but not in the downward risks. Under the
Purchase Plan, participants will stand alongside shareowners in both risk and
reward. To do so, participants must purchase a substantial amount of Monsanto
shares using full-recourse loans financed by the Company.
The Purchase Plan offers participants financial incentives based two-thirds on
long-term stock price performance and one-third on retention. The total
incentives can't exceed the amount to be repaid under the loan agreement. None
of the performance portion of the incentive will be paid unless the total
return to Monsanto's shareowners through the year 2000 is at or above the total
shareholder return of companies at the 50th percentile of the Standard & Poor's
Industrials. For maximum incentives, Monsanto's total shareholder return must
be at or above the 75th percentile. This means that the Company's stock must
perform well for all shareowners in order for the Purchase Plan to pay off for
executives.
You'll also note in the proxy that we're asking for authorization for
additional shares. This will give us the flexibility we need to react quickly
to opportunities that will benefit our shareowners, and permits us to consider
a stock split in the range of four- or five-for-one.
Finally, as explained on page 25 of the Annual Report, we're adopting Economic
Value Added as our new financial measurement system. We expect this approach to
drive decisions that increase shareowner value.
Taken together, these actions will motivate aggressive business performance
that will benefit all shareowners.
Sincerely,
/s/ Robert B. Shapiro
Robert B. Shapiro
Chairman and Chief Executive Officer
