DEF 14A 1 monsanto_def14a.htm DEFINITIVE PROXY STATEMENT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A
 
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INFORMATION REQUIRED IN PROXY STATEMENT
 
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Monsanto Company
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  Notice of Annual Meeting
  of Shareowners and
  2012 Proxy Statement
   
   
   
   
  December 10, 2012
   
   
   
   
   
   
   
   
   
 




Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Phone (314) 694-1000
http://www.monsanto.com

December 10, 2012

You are cordially invited to attend our annual meeting of shareowners on January 31, 2013. We will hold the meeting at 1:30 p.m. Central Standard Time in “A” Building at our Creve Coeur Campus, 800 North Lindbergh Boulevard, St. Louis County, Missouri. A map with directions to our Creve Coeur Campus can be found near the end of the proxy statement on page E-1.

In connection with the meeting, we have prepared a notice of the meeting, a proxy statement, and our 2012 annual report to shareowners, which provides detailed information relating to our activities and operating performance. On or about December 10, 2012, we mailed to our shareowners a Notice containing instructions on how to access these materials online. We believe electronic delivery will expedite the receipt of materials, while lowering costs and reducing the environmental impact of our annual meeting by reducing printing and mailing of full sets of materials.

If you receive a Notice by mail, you will not receive a printed copy of the materials unless you specifically request one. However, the Notice contains instructions on how to receive a paper copy of the materials. If you have received paper copies of these materials, a proxy card will also be enclosed.

Whether or not you plan to attend the annual meeting of shareowners, we encourage you to vote your shares.

You may vote:

  • via Internet;
  • by telephone;
  • by mail; or
  • in person at the meeting.

If you plan to attend the annual meeting in person, you must provide proof of share ownership, such as an account statement, and a form of personal identification in order to be admitted to the meeting.

We will make available an alphabetical list of shareowners entitled to vote at the meeting for examination by any shareowner of record as of the close of business on December 3, 2012 during our ordinary business hours at our Shareowner Services Department, located in “E” Building at our Creve Coeur Campus, from January 21, 2013 until the meeting.

On behalf of the entire board of directors, we look forward to seeing you at the meeting.

Sincerely,


Hugh Grant
Chairman of the Board of Directors
and Chief Executive Officer

  2012 PROXY STATEMENT MONSANTO COMPANY



Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Phone (314) 694-1000
http://www.monsanto.com

NOTICE OF

ANNUAL MEETING OF SHAREOWNERS

JANUARY 31, 2013

The annual meeting of shareowners of Monsanto Company will be held in “A” Building at our Creve Coeur Campus, 800 North Lindbergh Boulevard, St. Louis County, Missouri, on Thursday, January 31, 2013, at 1:30 p.m. Central Standard Time for the following purposes:

      1.       To elect the four directors named in the proxy statement to serve until our 2016 annual meeting;
 
2. To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2013;
 
3. To approve, by non-binding vote, executive compensation;
 
4. To approve an amendment to the Amended and Restated Certificate of Incorporation of the Company to declassify the Board;
 
5. To vote on a shareowner proposal described in the attached proxy statement, if properly presented at the meeting; and
 
6. To transact such other business as may properly come before the meeting.

By Order of the Board of Directors,

MONSANTO COMPANY


David F. Snively
Secretary
St. Louis, Missouri
December 10, 2012

IMPORTANT NOTICE
Please Vote Your Shares Promptly


  2012 PROXY STATEMENT MONSANTO COMPANY



Table of Contents to the Proxy Statement
 
General Information       1
Questions and Answers about the Annual Meeting and Voting 1
Caution Regarding Forward-Looking Statements 5
Corporate Governance and Ethics 6
Board of Directors’ Charter and Committee Charters 6
Director Independence 8
Board Leadership Structure   9
Board Role in Risk Oversight and Assessment 9
Related Person Transactions Policy 10
Other Policies and Practices That Guide and Govern Our Actions 11
Shareowner Communication with our Board of Directors 12
Information Regarding Board of Directors 13
Nominees for Director Whose Terms Would Expire at the 2016 Annual Meeting 13
Directors Whose Terms Expire at the 2014 Annual Meeting 15
Directors Whose Terms Expire at the 2015 Annual Meeting 16
Board Meetings and Committees 18
  Board Committee Membership   19
Executive Committee 19
Audit and Finance Committee 19
Nominating and Corporate Governance Committee 20
People and Compensation Committee 20
  Compensation Committee Interlocks and Insider Participation 21
Science and Technology Committee 21
Sustainability and Corporate Responsibility Committee 21
Compensation of Directors 21
Director Compensation Table 24
Stock Ownership of Management and Certain Beneficial Owners 25
Section 16(a) Beneficial Ownership Reporting Compliance 26
Proxy Item No. 1: Election of Directors 26
Report of the Audit and Finance Committee 26
Proxy Item No. 2: Ratification of Independent Registered Public Accounting Firm 28
Report of the People and Compensation Committee 29
Executive Compensation 30
Compensation Discussion and Analysis 30
               Executive Summary 30
               Overview of Our Executive Compensation Program 34
               Detailed Information About Our Executive Compensation Program 37
               Our Fiscal 2013 Executive Compensation Program 44
               Setting Executive Compensation 44
                                   Other Arrangements and Policies Related to Our Executive Compensation Program 47

  2012 PROXY STATEMENT MONSANTO COMPANY



Summary Compensation Table 49
Grants of Plan-Based Awards Table 51
Additional Information Explaining Summary Compensation and Grants of Plan-Based
Awards Tables
52
Outstanding Equity Awards at Fiscal Year-End Table 57
Option Exercises and Stock Vested Table 59
Pension Benefits 59
Non-Qualified Deferred Compensation 63
Potential Payments Upon Termination or Change of Control 65
Equity Compensation Plan Table 70
Proxy Item No. 3: Advisory (Non-binding) Vote Approving Executive Compensation 71
Proxy Item No. 4: Proposal to Amend the Amended and Restated Certificate of Incorporation of the Company
to Declassify the Board 72
Proxy Item No. 5: Shareowner Proposal 74
Other Matters 77
Shareowner Proposals for 2014 Annual Meeting 77
Other Information 78
  
Appendices
  
APPENDIX A    Board of Directors Independence Standards A-1
APPENDIX B Desirable Characteristics of Directors B-1
APPENDIX C Reconciliation of Non-GAAP Financial Measures C-1
APPENDIX D   Proposed Amendment to Certificate of Incorporation D-1
APPENDIX E Map E-1



MONSANTO COMPANY 2012 PROXY STATEMENT  



PROXY STATEMENT
 
General Information
 

Our board of directors is soliciting proxies from our shareowners in connection with our annual meeting of shareowners to be held on Thursday, January 31, 2013, and at any and all adjournments or postponements thereof. No business can be conducted at the annual meeting unless a majority of all outstanding shares entitled to vote are either present in person or represented by proxy at the meeting. As far as we know, the only matters to be brought before the annual meeting are those referred to in this proxy statement. If any additional matters are presented at the annual meeting, the persons named as proxies may vote your shares in their discretion.

This proxy statement and our 2012 Annual Report are first being mailed to shareowners who requested paper copies, or made available on our website at http://www.monsanto.com/investors/Pages/annual-report.aspx, on December 10, 2012. Information on our website does not constitute part of this proxy statement.

Unless otherwise noted, the information in this proxy statement covers our 2012 fiscal year (or “fiscal 2012”), which ran from September 1, 2011 through August 31, 2012, and in some cases our 2011 fiscal year (or “fiscal 2011”), which ran from September 1, 2010 through August 31, 2011, and our 2010 fiscal year (or “fiscal 2010”), which ran from September 1, 2009 through August 31, 2010. The term “Former Monsanto” in this proxy statement refers to a corporation that was then known as Monsanto Company that operated, among other businesses, an agricultural products division. Former Monsanto is now known as Pharmacia Corporation and is a wholly owned subsidiary of Pfizer Inc. Former Monsanto transferred its agricultural products division to us in September 2000.

Questions and Answers about the Annual Meeting and Voting

When and where is the annual meeting?
When: Thursday, January 31, 2013, at 1:30 p.m. Central Standard Time
      
Where: “A” Building at our Creve Coeur Campus, 800 North Lindbergh Boulevard, St. Louis, Missouri 63167. A map with directions to the meeting can be found near the back of the proxy statement on page E-1.

Who is entitled to vote at the meeting?
You are entitled to vote at the meeting if you owned Monsanto shares (directly or in “street name,” as defined below) as of the close of business on December 3, 2012, the record date for the meeting. On that date, 534,960,050 shares of our common stock were outstanding and entitled to vote and no shares of our preferred stock were outstanding. Each share of our common stock is entitled to one vote with respect to each matter on which it is entitled to vote; there is no cumulative voting with respect to any proposal.

What do I need to do if I plan to attend the meeting in person?
If you plan to attend the annual meeting in person, you must provide proof of your ownership of our common stock as of the record date, such as an account statement, and a form of personal identification for admission to the meeting.

If you hold your shares in “street name,” and you also wish to be able to vote at the meeting, you must obtain a proxy, executed in your favor, from your bank or broker.

  2012 PROXY STATEMENT MONSANTO COMPANY 1



  
What is the difference between holding shares directly as a shareowner of record and holding shares in “street name” at a bank or broker?
Most of our shareowners hold their shares directly through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are differences between shares held of record and those held in “street name.”

Shareowner of Record. If your shares are registered directly in your name with our transfer agent, you are considered the shareowner of record with respect to those shares, and a Notice containing instructions on how to access our proxy statement and annual report online was sent directly to you. As the shareowner of record, you have the right to vote your shares as described herein.

“Street Name” Shareowner. If your shares are held by a bank or broker as your nominee, you are considered the beneficial owner of shares held in “street name,” and the Notice containing instructions on how to access our proxy statement and annual report online was forwarded to you by your bank or broker who is considered the shareowner of record with respect to those shares. Your bank or broker will send you, as the beneficial owner, a separate package describing the procedure for voting your shares. You should follow the instructions provided by your bank or broker to vote your shares. You are also invited to attend the annual meeting.

What matters am I being asked to vote on at the meeting and what vote is required to approve each matter?
You are being asked to vote on five proposals. Proposal 1 requests election of directors. Because this election is not a contested election, each director will be elected by the vote of the majority of the votes cast when a quorum is present. A “majority of the votes cast” means that the number of votes cast “for” a director exceeds the number of votes cast “against” that director. “Votes cast” excludes abstentions and any votes withheld by brokers in the absence of instructions from street-name holders (“broker non-votes”).

The affirmative vote of a majority of the votes cast is required to: ratify the appointment of our independent registered public accounting firm (Proposal 2); approve, by non-binding vote, executive compensation (Proposal 3); and to approve the shareowner proposal (Proposal 5). Abstentions and broker non-votes will therefore have no effect on Proposals 2, 3, and 5 under our company’s bylaws.

Under the Certificate of Incorporation and the Bylaws, approval of the proposed amendment to the Certificate of Incorporation to declassify the board (Proposal 4) must be approved by the affirmative vote of the holders of at least 70% of the voting power of the outstanding shares of common stock of the company entitled to vote generally in the election of directors, voting together as a single class. Accordingly, Proposal 4 will be approved upon the affirmative vote of the holders of 70% of our outstanding common stock. Abstentions and broker non-votes will therefore have the same effect as an “against” vote with respect to Proposal 4.

Although the advisory vote on Proposal 3 is non-binding, as provided by law, our board will review the results of the vote and, consistent with our record of shareowner engagement, will take it into account in making a determination concerning executive compensation.

Who counts the votes?
We have engaged Broadridge Financial Solutions, Inc. as our independent agent to receive and tabulate shareowner votes. Broadridge will separately tabulate “for”, “against” and “withhold” votes, abstentions and broker non-votes. We have also retained an independent election inspector to certify the results, determine the existence of a quorum and the validity of proxies and ballots, and perform any other acts required under the General Corporation Law of Delaware.

2 MONSANTO COMPANY 2012 PROXY STATEMENT  



  
How can I vote?
Most shareowners can vote in one of four ways:

  • over the Internet at www.proxyvote.com;
  • using a toll-free telephone number 1-800-690-6903;
  • completing a proxy/voting instruction card and mailing it in the postage-paid envelope provided (if you received paper copies of the proxy materials); or
  • in person at the meeting.

The telephone and Internet voting facilities for shareowners of record, but not including shares held in our Savings and Investment Plan (“SIP”) (which are described below), will close at 11:59 p.m. Eastern Standard Time on January 30, 2013. The Internet and telephone voting procedures are designed to authenticate shareowners by use of a control number and to allow you to confirm that your instructions have been properly recorded.

If you hold your shares in street name, your bank or broker will send you a separate package describing the procedures and options for voting your shares. Please read the voting instructions on the Notice or proxy card or the information sent by your broker or bank.

What does it mean to give a proxy?
Your properly completed proxy/voting instruction card will appoint Hugh Grant and David F. Snively as proxy holders or your representatives, or The Northern Trust Company (“Northern”) as trustee of our SIP, as the case may be, to vote your shares in the manner directed therein by you. Mr. Grant is our chairman of the board and chief executive officer. Mr. Snively is our executive vice president, secretary and general counsel. If you hold shares in the SIP, your proxy permits you to direct the proxy holders or to instruct Northern, as the case may be, to vote “for,” “against,” or “abstain” from the nominees for director and Proposals 2, 3, 4, and 5.

All of your shares entitled to vote and represented by a properly completed proxy or voting instruction received prior to the meeting and not revoked will be voted at the meeting in accordance with your instructions.

What happens if I sign, date and return my proxy or voting instruction card but do not specify how I want my shares voted on one of the proposals?
Your proxy will be counted as a vote “for” all of the nominees for directors, “for” Proposals 2, 3, and 4, and “against” Proposal 5.

What happens if I do not return a proxy card?
Shareowner of Record: Your shares will not be voted if you do not return a proxy card.

“Street Name” Shareowner: Your broker or nominee may vote your shares only on those proposals on which it has discretion to vote. We believe that under NYSE rules your broker or nominee has discretion to vote your shares on routine matters such as the ratification of our independent registered public accounting firm. However, your broker or nominee does not have discretion to vote your shares on non-routine matters such as the election of directors and Proposals 3, 4, and 5.

Can I change my vote before the meeting?
Except as discussed below with respect to voting instructions for shares held in our Savings and Investment Plan, you can change your vote at any time before your proxy is exercised by delivering a properly executed, later-dated proxy (including an Internet or telephone vote), by revoking your proxy by written notice to the Secretary of Monsanto, or by voting at the meeting. The method by which you vote by a proxy will in no way limit your right to vote at the meeting if you decide to attend in person.

Voting instructions with respect to shares held in our Savings and Investment Plan cannot be revoked or changed after 5:00 p.m. Eastern Standard Time on January 25, 2013.

If you are a Street Name Shareowner, please refer to the information forwarded by your bank or broker for procedures on changing your voting instructions.

How can I get assistance in voting my shares?
To get help in voting your shares, please contact Morrow & Co., LLC toll-free within the United States at (800) 607-0088 and at (203) 658-9400 outside of the U.S.

  2012 PROXY STATEMENT MONSANTO COMPANY 3



 
Why haven’t I received a printed copy of the proxy statement or annual report?
This year we again have elected to take advantage of the SEC’s rule that allows us to furnish proxy materials to you online. We believe electronic delivery will expedite shareowners’ receipt of materials, while lowering costs and reducing the environmental impact of our annual meeting by reducing printing and mailing of full sets of materials. On or about December 10, 2012, we mailed to our shareowners a Notice containing instructions on how to access our proxy statement and annual report online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials, unless you specifically request one. However, the Notice contains instructions on how to receive a paper copy of the materials.

Is the proxy statement available on the Internet?
Yes. As described in the prior question, most shareowners will receive the proxy statement online. If you received a paper copy, you can also view these documents on the Internet by accessing our website at http://www.monsanto.com/investors/Pages/annual-report.aspx. You can elect to receive future proxy statements and annual reports over the Internet instead of receiving paper copies by mail by following the instructions set forth on your proxy card.

Who is paying for the cost of this proxy solicitation?
We will bear the expense of preparing, printing and mailing this proxy material, as well as the cost of any required solicitation. Our directors, officers or employees may solicit proxies on our behalf. We have engaged Morrow & Co., LLC to assist us in the solicitation of proxies. We expect to pay Morrow approximately $11,000 for these services plus expenses. In addition, we will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable expenses incurred in forwarding proxy materials to beneficial owners of our stock and obtaining their proxies.

What if I participate in the Monsanto Savings and Investment Plan?
If you participate in a Monsanto stock fund under our Savings and Investment Plan and had shares of our common stock associated with your account on the record date of December 3, 2012, you will receive an electronic notice unless you opted to receive paper copies of the proxy materials. The electronic notice will contain voting instructions with respect to all shares registered in the same name, whether inside or outside of the plan. If your accounts inside and outside of the plan are not registered in the same name, you will receive a separate electronic notice with respect to the shares associated with your Savings and Investment Plan account.

Shares of common stock in our Savings and Investment Plan will be voted by Northern as trustee of the plan. Plan participants in a Monsanto stock fund should indicate their voting instructions to Northern by using the toll-free telephone number, indicating their instructions over the Internet or submitting an executed proxy card.

Voting instructions regarding plan shares must be received by 5:00 p.m. Eastern Standard Time on January 25, 2013, and all telephone and Internet voting facilities with respect to plan shares will close at that time. You can revoke your voting instructions with respect to shares held in our Savings and Investment Plan prior to such time by timely delivery of a properly executed, later-dated voting instruction card (or an Internet or telephone vote), or by delivering a written revocation of your voting instructions to Northern.

All voting instructions from plan participants will be kept confidential. If a participant does not timely submit voting instructions, the shares allocated to such participant, together with unallocated shares, will be voted in accordance with the pro-rata vote of the participants who did provide instructions.

4 MONSANTO COMPANY 2012 PROXY STATEMENT  



Caution Regarding Forward-Looking Statements

In this proxy statement, and from time to time throughout the year, we share certain expectations for our company’s future performance. These forward-looking statements include statements about our business plans; the potential development, regulatory approval, and public acceptance of our products; our expected financial performance, including sales performance, and the anticipated effect of our strategic actions; the anticipated benefits of recent acquisitions; the outcome of contingencies, such as litigation and the previously announced SEC investigation; domestic or international economic, political and market conditions; and other factors that could affect our future results of operations or financial position, including, without limitation, statements under the caption “Executive Compensation — Compensation Discussion and Analysis.” Any statements we make that are not matters of current reportage or historical fact should be considered forward-looking. Such statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “will,” and similar expressions. By their nature, these types of statements are uncertain and are not guarantees of our future performance.

Our forward-looking statements represent our estimates and expectations at the time that we make them. However, circumstances change constantly, often unpredictably, and investors should not place undue reliance on these statements. Many events beyond our control will determine whether our expectations will be realized. We disclaim any current intention or obligation to revise or update any forward-looking statements, or the factors that may affect their realization, whether in light of new information, future events or otherwise, and investors should not rely on us to do so. In the interests of our investors, and in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Part I. Item 1A. Risk Factors in our most recent Form 10-K report filed with the SEC explains some of the important reasons that actual results may be materially different from those that we anticipate.

  2012 PROXY STATEMENT MONSANTO COMPANY 5



Corporate Governance and Ethics
 

Our company is committed to the values of effective corporate governance and high ethical standards. Our board believes that these values are conducive to long-term performance and reevaluates our policies on an ongoing basis to ensure they sufficiently meet our company’s needs. Listed below are some of the significant corporate governance practices and policies we have adopted.

  • Majority voting in director elections. Each of our director-nominees has submitted an irrevocable contingent resignation that becomes effective if he or she is not elected by a majority of the votes cast by shareowners and our board of directors accepts the resignation. If a director-nominee is not elected by a majority of the votes cast, our nominating and corporate governance committee will consider the director’s resignation and recommend to our board of directors whether to accept or reject the resignation. Our board of directors will then publicly disclose its decision and the rationale behind its decision as soon as practicable, but no later than 90 days, after the election results are certified.
  • Lead Director. Our bylaws establish the role of an independent lead director who is elected by the independent directors. More information about the role of the lead director and our board structure may be found below in this section.
  • Related Person Transactions Policy. Our nominating and corporate governance committee is responsible for approving or ratifying transactions involving our company and related persons and determining if the transaction is in, or not inconsistent with, the best interests of our company and our shareowners. More information about our Related Person Transactions Policy may be found below in this section.
  • Executive Sessions. Our board meets regularly in executive sessions without the presence of management, including our Chairman. These sessions are led by our lead director, as described further below in this section.
  • Shareowner Rights Policy. We do not have a shareowner rights plan and are not currently considering adopting one. Our board’s policy is that it will only adopt a shareowner rights plan if either (1) the shareowners approve it or (2) the board makes a determination that it is in the best interests of the shareowners to adopt a shareowner rights plan without the delay that would be required in order to seek shareowner approval.

Additional information is provided below regarding these and certain other key corporate governance and ethics policies that we believe enable us to manage our business in accordance with the highest standards of business practices and in the best interest of our shareowners. Our corporate website includes additional information and copies of these policies, as noted below. Most policies may be found at http://www.monsanto.com/whoweare/Pages/corporate-governance.aspx, along with copies of our certificate of incorporation and bylaws. Note that information on our website does not constitute part of this proxy statement. Hard copies of these documents may be obtained without charge by any shareowner upon request by contacting the Corporate Secretary, Monsanto Company, 800 North Lindbergh Boulevard, St. Louis, Missouri 63167.

Board of Directors’ Charter and Committee Charters

Our board of directors has adopted clear corporate governance policies to assist the board and its committees in the exercise of their responsibilities, several of which are described below. Each of the board committees has a written charter that sets forth the purposes, goals and responsibilities of the committee as well as qualification for committee membership, procedures for committee membership, appointment and removal, committee structure and operations and committee reporting to the full board. The board and committee charters provide our shareowners a transparent view of how our board functions. The charters are found on our website at http://www.monsanto.com/whoweare/Pages/corporate-governance.aspx.

6 MONSANTO COMPANY 2012 PROXY STATEMENT  



Composition of the Board of Directors

The number of directors on our board will not be less than five nor more than 20 and is fixed, and may be increased or decreased from time to time by resolution of our board of directors. Currently, the board has fixed the number of directors at eleven members. Our board of directors is divided into three classes, with terms expiring at successive annual meetings. In the case of an appointment of a director or if there is a change in the number of directors, the number of directors in each class will be apportioned as nearly equally as possible. However, we are proposing an amendment to declassify our board of directors as described in Proposal 4: Proposal to Amend the Amended and Restated Certificate of Incorporation of the Company to Declassify the Board.

Nomination of Directors

Our board is responsible for nominating members and filling vacancies on the board that may occur between annual meetings of shareowners, in each case based upon the recommendation of the nominating and corporate governance committee. The committee seeks input from other board members and senior management to identify and evaluate nominees for director. The committee may hire a search firm or other consultant, and has hired a search firm to assist in identifying and evaluating potential candidates for our board. The committee will consider nominees recommended by shareowners for election provided the names of such nominees, accompanied by relevant biographical information, and relevant information about the shareowner submitting the nominee, are provided in writing to our Secretary in accordance with the requirements of our bylaws described below under Other Matters — Shareowner Proposals for 2014 Annual Meeting.

When evaluating potential director candidates, our nominating and corporate governance committee takes into consideration the Desirable Characteristics of Directors in our board charter (see Appendix B), which includes consideration of diversity. The board recognizes the value of diversity and considers how a candidate may contribute to the board in a way that can enhance perspective and judgment through diversity in gender, age, ethnic background, geographic origin, and professional experience. The board reviews its effectiveness in balancing these considerations through ongoing consideration of directors and nominees, as well as the board’s annual self-evaluation process. The nominating and corporate governance committee also considers whether potential director candidates will likely satisfy the independence standards for service on the board, the audit and finance committee, the people and compensation committee and the nominating and corporate governance committee, as set forth in the board charter (see Appendix A).

Director Orientation and Continuing Education

Upon joining the board, directors are provided with an initial orientation about our company, including our business operations, strategy and governance. New directors without previous experience as a director of a public company are expected to enroll in a director education program on corporate governance and director professionalism offered by a nationally-recognized sponsoring organization, or to participate in a comparable director education program offered at another board on which the director serves. The director may satisfy this requirement if he or she participated in a comparable program within two years prior to being elected to our board. We provide our directors with resources and ongoing education opportunities to assist them to remain abreast of developments in corporate governance and critical issues relating to the operation of public company boards. The board also conducts periodic visits to company facilities as part of its regularly scheduled board meetings.

Board Self-Assessments

The board conducts annual self-evaluations to determine whether it and its committees are functioning effectively. As part of the board self-evaluation process, each director also conducts a self-evaluation. The process is designed and overseen by the nominating and corporate governance committee, and the results of the evaluations are reported to the full board.

  2012 PROXY STATEMENT MONSANTO COMPANY 7



Each committee, other than the executive committee, reviews and reassesses the adequacy of its charter annually and recommends any proposed changes. Each committee also annually reviews its own performance and reports the results to the board. The nominating and corporate governance committee oversees and reports annually to the board its assessment of each committee’s performance evaluation process.

Director Independence

Our board charter provides that no more than two board members may be non-independent under the independence criteria set by the NYSE. Under the NYSE listing standards, for a director to be considered independent, the board must affirmatively determine that the director has no direct or indirect material relationship with Monsanto. The board has established independence standards for determining director independence, which conform to the NYSE’s independence criteria. The standards are found in Appendix A.

In determining director independence, the board considered the independence standards and relevant facts and circumstances, including any direct or indirect transactions, relationships and arrangements between a director and Monsanto. Our board considered the following, each of which is within the NYSE’s standards and our independence standards. Our board determined that the directors did not have a material interest in the transactions and that they would not impair each such director’s independent judgment.

  • Dr. Chicoine is president of a university to which Monsanto made payments for services and which made payments to Monsanto for products and services in the ordinary course of business and the amount of those payments was below two percent of the annual revenues of each of the university and Monsanto. In addition, the Board also considered grants and gifts, including a gift for a graduate fellowship, to the university which were below two percent of the annual revenues of the university and the fact that Monsanto and the university are both members of certain industry associations.
  • Dr. Poste is a director of a company to which Monsanto made payments for certain intellectual property licenses in the ordinary course of business and the amount of those payments was below two percent of the annual revenues of such company.

Based upon these considerations, the board has determined that the following directors are independent: David L. Chicoine, Janice L. Fields, Arthur H. Harper, Laura K. Ipsen, Gwendolyn S. King, C. Steven McMillan, Jon R. Moeller, William U. Parfet, George H. Poste, and Robert J. Stevens. Accordingly, ten of our eleven directors are independent, and each of the following committees of the board is composed solely of independent directors:

  • the audit and finance committee;
  • the nominating and corporate governance committee;
  • the people and compensation committee;
  • the science and technology committee; and
  • the sustainability and corporate responsibility committee.
Charitable Contributions

Our board is committed to maintaining the independence of our independent directors. In support of this goal, our board implemented a Charitable Contributions Policy. The policy requires that any request by a director that the company make a charitable contribution must be reviewed by the chair of the nominating and corporate governance committee (or the full committee if the committee chair makes such a request) to determine whether the donation would impair the director’s independence.

8 MONSANTO COMPANY 2012 PROXY STATEMENT  



Board Leadership Structure

Our board believes that its current leadership structure, in which the roles of chairman and chief executive officer are held by one person, is best for Monsanto and its shareowners at this time. In his dual role, Mr. Grant is able to utilize the in-depth focus and perspective gained in running the company to effectively and efficiently guide our board. He fulfills his responsibilities in chairing the board through close interaction with our lead director, Robert Stevens, who was elected by the independent directors of our board.

The board has structured the role of our independent lead director to strike an appropriate balance to the combined chairman and chief executive officer role and to fulfill the important requirements of independent leadership on the board. As lead director, Mr. Stevens:

  • presides at all meetings of the board at which the chairman is not present;
  • presides at executive sessions of the independent directors;
  • has the authority to call meetings of the board or meetings of the independent directors;
  • approves information sent to the board, meeting agendas for the board and meeting schedules to assure that there is sufficient time for discussion of all agenda items;
  • serves as the liaison between the chairman and the independent directors;
  • is a member of the board’s executive committee;
  • is available to consult with the chairman and chief executive officer about the concerns of the board; and
  • is available to consult with any of our senior executives as to any concerns that executives might have.

While serving as lead director, Mr. Stevens has overseen the development and implementation of governance practices that support high levels of performance by members of the board. His leadership fosters a board culture of open discussion and deliberation, with a thoughtful evaluation of risk, to support sound decision-making. He encourages communication among the directors, and between management and the board, to facilitate productive working relationships. Working with our chairman and other members of the board, Mr. Stevens also ensures there is an appropriate balance and focus among key board responsibilities such as strategy development, review of operations, risk oversight, and management succession planning.

Further information about board leadership roles, including a comparison of the duties of our chairman and lead director, is available at http://www.monsanto.com/whoweare/Pages/board-of-directors-leadership-roles.aspx.

Shareowners and other interested persons may contact Mr. Stevens directly by mail at the Office of the Lead Director, Monsanto Company, 800 North Lindbergh Boulevard, Mail Stop A3NA, St. Louis, Missouri 63167.

We will continue to reexamine our corporate governance policies and leadership structures on an ongoing basis to ensure that they continue to meet the company’s needs.

Board Role in Risk Oversight and Assessment

Our company has an enterprise risk management program overseen by senior management. Enterprise risks are identified and prioritized by management, and each prioritized risk is assigned to a board committee or the full board for oversight. For example, strategic risks are overseen by the full board; financial and business conduct risks are overseen by the audit and finance committee; risks related to the company’s governance structure and from related person transactions are overseen by the nominating and corporate governance committee; scientific risks are overseen by the science and technology committee; reputational and environmental risks are overseen by the sustainability and corporate responsibility committee; and, as further described in the following section, compensation risks are overseen by our people and compensation committee. Management regularly reports on enterprise risks to the relevant committee or the board. Additional review or reporting on enterprise risks is conducted as needed or as requested by the board or relevant committee. We believe that these processes are consistent with, and provide additional support for, the current board leadership structure.

  2012 PROXY STATEMENT MONSANTO COMPANY 9



Compensation-Related Risk

Our company regularly assesses risks related to our compensation programs, including our executive compensation programs, and does not believe that the risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on our company. At the people and compensation committee’s direction, management and the committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“Cook & Co.”), provide ongoing information to the committee regarding compensation factors that could mitigate or encourage excessive risk-taking.

In addition, in August 2012, management provided a risk assessment of the company’s compensation programs to the people and compensation committee for its review and consideration, and the committee again solicited input from Cook & Co. In its review, the committee considered the attributes of our compensation programs, including:

  • the balance between annual and longer-term performance opportunities, which can reduce the incentive to accelerate or delay performance;
  • performance measures tied to key, auditable measures of short-term and long-term performance that motivate sustained performance;
  • performance goals set at levels that are sufficiently high to encourage strong performance and support the resulting compensation expense, but within reasonably attainable parameters to discourage pursuit of excessively risky business strategies;
  • our people and compensation committee’s ability to consider qualitative performance factors in determining actual compensation payouts;
  • reasonable stock ownership guidelines that align executives’ interests with those of our shareowners; and
  • our policy on recoupment of performance-based compensation as discussed on page 48.
Related Person Transactions Policy

The board has adopted a written policy regarding the review, approval or ratification of transactions involving certain persons that SEC regulations require to be disclosed in proxy statements, which are commonly referred to as “related person transactions.” A “related person” is defined under the applicable SEC regulation and includes our directors, executive officers, 5% or more beneficial owners of our common stock, and each of their immediate family members. Under the written policy, our nominating and corporate governance committee is responsible for reviewing, approving or ratifying any related person transactions. It will approve a transaction only if it determines that the transaction is in, or not inconsistent with, the best interests of the company and its shareowners. Following is a description of matters reviewed by the nominating and corporate governance committee under this policy.

In June 2008, the board elected Kerry Preete as an executive officer of the company. William Sherk, Mr. Preete’s brother-in-law, has worked in Former Monsanto’s and our Canadian business since 1999 in various positions. From September 2010 to December 2010 he was the national account manager, from December 2010 to June 2012 he was the crop protection sales manager and since June 2012 has been the crop protection business lead. Mr. Sherk’s compensation has been established in accordance with our ordinary employment and compensation practices applicable to employees with equivalent qualifications, experience and responsibilities, and he is eligible to participate in our employee benefit programs on the same basis as other similarly situated employees. Further, a procedure has been put in place under which Mr. Begemann, our president and chief commercial officer, has been involved in approving any special pay actions and awards for Mr. Sherk. During fiscal 2012, Mr. Sherk received annual base pay of approximately $133,638. He also received an annual incentive award with respect to the fiscal 2012 performance period of approximately $39,891. These amounts are based on a September 1, 2012 exchange rate. In October 2012, Mr. Sherk was granted 300 stock options and 78 RSUs under our 2005 Long-Term Incentive Plan, as amended and restated as of January 24, 2012, as the long-term incentive component of his compensation.

10 MONSANTO COMPANY 2012 PROXY STATEMENT  



Other Policies and Practices That Guide and Govern Our Actions

In addition to our board of directors’ Charter and Related Person Transactions Policy, we have adopted several other policies and practices that guide and govern the manner in which we act, which are described below.

Our Pledge

The Monsanto Pledge is our commitment to how we do business. It is a declaration that compels us to listen more, to consider our actions and their impact broadly, and to lead responsibly. It helps us to convert our values into actions, and to make clear who we are and what we champion. Our Pledge is available on our website at http://www.monsanto.com/whoweare/Pages/monsanto-pledge.aspx. Our annual Corporate Social Responsibility and Sustainability Report, which describes many of the ways in which we have implemented the Pledge, is available on our website at http://www.monsanto.com/whoweare/Pages/corporate-sustainability-report.aspx.

Code of Business Conduct

At Monsanto, we are committed to building relationships based on integrity. Integrity, in alignment with our Pledge, helps us earn and retain the trust of people with whom we do business. Our board has adopted a Code of Business Conduct that applies to our directors, officers and employees. In addition, the Code of Business Conduct applies to all actions taken on our behalf by persons representing our company in matters that may be subject to risk behaviors such as consultants, agents, sales representatives, distributors and independent contractors, who agree not to act inconsistently with these commitments when performing services on our behalf. Our Code of Business Conduct is available on our website at http://www.monsanto.com/whoweare/Pages/business-conduct.aspx.

The Code of Business Conduct is designed to provide guidance on and articulate our commitment to several key matters such as safety and health, protecting the environment, fair dealing, proper stewardship of our products, use of company resources, and accurate communication about our finances and products. It also addresses the many legal and ethical facets of integrity in business dealings with customers, suppliers, investors, the public, governments that regulate us and the communities where we do business. Our Code of Business Conduct has been translated into more than 31 languages and is distributed to our employees, who affirm their commitment to the Code on an annual basis.

Through a board chartered global business conduct office, we implement compliance and ethics initiatives through working groups and dedicated facilitators in each of our global business regions. Employees have access to a guidance line and website operated by an independent service provider that is available worldwide for the receipt of complaints regarding accounting, internal controls and auditing matters, and have in place procedures for the anonymous submission of employee concerns regarding accounting or auditing matters and a policy prohibiting retaliation for good-faith reporting. Employees may submit a complaint or question via a private post office box, an internal toll-free telephone number or a special e-mail mailbox dedicated to business conduct matters.

Financial Governance

We have adopted a code of ethics that applies to our chief executive officer and the senior leadership of our finance department, including our chief financial officer and our controller. As a public company, it is important that our filings with the SEC be accurate and timely. Our Code of Ethics for Chief Executives and Senior Financial Officers is available on our website at http://www.monsanto.com/whoweare/Pages/code-of-ethics.aspx. Our internal audit function maintains important oversight over the key areas of our business and financial processes and controls, and reports regularly to our audit and finance committee.

  2012 PROXY STATEMENT MONSANTO COMPANY 11



Sustainable Yield Commitments

Sustainable agriculture is at the core of our company. We are committed to focus our own efforts and work with others to develop the technologies that enable farmers to produce more crops while conserving more of the natural resources that are essential to their success and the sustainability of the earth. Our long-term goals are to partner with farmers to produce more, conserve more and improve lives. More information regarding our sustainable yield commitments is available on our website at http://www.monsanto.com/whoweare/Pages/our-commitment-to-sustainable-agriculture.aspx.

Human Rights Policy

Our Human Rights Policy was adopted by the board in April 2006. The policy is an important expression of our values as described in the Monsanto Pledge. The policy is one of the ways we hold ourselves accountable and demonstrate our commitment to protect and respect human rights as we conduct our business globally. Monsanto will work to identify and do business with partners who aspire in the conduct of their businesses to ethical standards that are consistent with this policy and will work with those business partners in the spirit of continuous improvement. In the development of our policy there was recognition by both Monsanto business leaders and external stakeholders that the continuous improvement approach to protect, respect and remedy human rights violations would be the most effective and honest model to address these complex and multifaceted issues. Our Human Rights Policy is available on our website at http://www.monsanto.com/whoweare/Pages/human-rights.aspx.

Political Contributions

We are committed to participating constructively in the political process, as we believe participation is essential to our company’s long-term success. Our participation in the political process includes contributions to political candidates in a manner that is compliant with all applicable laws and reporting requirements. We have established effective governance processes including oversight by our sustainability and corporate responsibility committee regarding political contributions made by our company. Please see our website at http://www.monsanto.com/whoweare/Pages/political-disclosures.aspx for more information about the ways in which we participate in the political process.

Shareowner Communication with our Board of Directors

Our board of directors has adopted a policy that provides a process for shareowners to send communications to the board. Shareowners may contact our board or the independent directors of our board through our website at http://www.monsanto.com/whoweare/Pages/ContactOurDirectors.aspx or they may send correspondence to 800 North Lindbergh Boulevard, Mail Stop A3NA, St. Louis, Missouri 63167, c/o David F. Snively, our Corporate Secretary.

12 MONSANTO COMPANY 2012 PROXY STATEMENT  



Information Regarding Board of Directors
 

The ages, principal occupations, directorships held and any other information with respect to our nominees and directors, and the classes into which they have been divided, are shown below as of December 1, 2012.

Nominees for Director Whose Terms Would Expire at the 2016 Annual Meeting

The board has nominated four directors to be elected at the 2013 annual meeting to serve for a three-year term ending with the 2016 annual meeting, or until a successor is elected and has qualified, or his or her earlier death, resignation or removal. Each nominee is currently a director of our company and has agreed to serve if elected.

       

David L. Chicoine, Ph.D.

Principal Occupation: Professor of Economics and President, South Dakota State University
First Became Director: April 2009
Age: 65

President, South Dakota State University, a land grant research institution, and professor of economics, since 2007; Vice President for Technology and Economic Development, University of Illinois, 2001-2006.

Qualifications: Dr. Chicoine is an economist and an educator whose career has included key roles at public universities. As an expert in agricultural economics, he has a deep understanding of the economic factors that shape our industry on a national and global basis. As president of a large university, his responsibilities include executive management, public policy development and research support, including technology commercialization. This experience has supported his ability to provide financial and strategic planning perspectives in his board service, and enhanced his contributions on our science and technology committee and our sustainability and corporate responsibility committee.

     
 
 

Arthur H. Harper

Principal Occupation: Managing Partner, GenNx360 Capital Partners
First Became Director: October 2006
Age: 56

Managing Partner, GenNx360 Capital Partners, a private equity firm focused on business to business companies, since 2006; President and Chief Executive Officer, Equipment Services Division, General Electric Corporation, 2002-2005; Executive Vice President, GE Capital Services, General Electric Corporation, 2001-2002. Public Company Directorships in the Last Five Years: Gannett Co., Inc.

Qualifications: Mr. Harper has had significant experience in the operation and finance of manufacturing companies during his career. Through his experience as an executive at a complex, multi-national company and managing start-up companies, he has a deep understanding of manufacturing and supply dynamics, risk management, technology development and financing for capital projects. This knowledge enables him to provide key insights on strategic, operational, and financial matters related to our global business, which supports our audit and finance committee. His service on the public responsibility and executive compensation committees of another public company have also provided him governance, business conduct and compensation-related experience, which provides additional perspectives to our board of directors when exercising its oversight role and to our people and compensation committee when formulating compensation policies.


  2012 PROXY STATEMENT MONSANTO COMPANY 13



     

Gwendolyn S. King

Principal Occupation: President, Podium Prose, LLC
First Became Director: February 2001
Age: 72

President, Podium Prose, a speaker’s bureau and speechwriting service founded in 2000; Founding Partner, The Directors’ Council, a corporate board search firm, October 2003-May 2005; Senior Vice President, Corporate and Public Affairs, PECO Energy Company (now Exelon), a diversified utility company, 1992-1998; Commissioner, Social Security Administration, 1989-1992. Public Company Directorships in the Last Five Years: Lockheed Martin Corporation; Marsh & McLennan Companies, Inc. (former).

Qualifications: Ms. King is an expert in external communications and has extensive experience related to public policy, government relations and governance and has had significant experience in stakeholder engagement. Ms. King’s senior advisory roles in two previous White House administrations and her service as a senior corporate affairs officer for a public utility have provided her expertise in matters relating to public policy, regulatory oversight and government relations. This experience and knowledge enables her to provide valuable perspectives to our management and as chair of our sustainability and corporate responsibility committee. In addition, Ms. King’s service on the board of the National Association of Corporate Directors, an advisory group of nominating and governance committee chairs, and the ethics, governance and executive committees of public companies on whose boards she has served, have provided her with significant corporate governance expertise and compliance experience which have enhanced her ability to provide valuable contributions as a director of our board.

   
 

Jon R. Moeller

Principal Occupation: Chief Financial Officer, The Procter & Gamble Company
First Became Director: August 2011
Age: 48

Chief Financial Officer, The Procter & Gamble Company, one of the world’s leading consumer products companies, since January 2009; Vice President and Treasurer, The Procter & Gamble Company, July 2007-January 2009; Vice President, Finance and Accounting, Global Beauty and Global Health Care, The Procter & Gamble Company, July 2005-July 2007.

Qualifications: Mr. Moeller has substantial finance and management expertise developed through his 24 years of experience with a large, multi-national corporation. His current responsibilities as chief financial officer, and prior roles as treasurer and division vice president for finance and accounting, have given him a broad understanding of the finance and accounting issues facing a global manufacturing company. In addition to his substantial financial experience, he has expertise related to risk management and compliance matters, which enable him to make valuable contributions to the oversight role of our audit and finance committee. As the senior financial executive at his company, Mr. Moeller has experience in developing and executing global strategy and serving as a key member of management at a complex, worldwide organization. This broad international business experience enables him to provide his fellow directors and our senior management a valuable perspective with respect to our global strategy and the management of our domestic and international businesses based on sound financial goals.


14 MONSANTO COMPANY 2012 PROXY STATEMENT  



Directors Whose Terms Expire at the 2014 Annual Meeting

       

Laura K. Ipsen

Principal Occupation: Corporate Vice President, Worldwide Public Sector, Microsoft Corp.
First Became Director: December 2010
Age: 48

Corporate Vice President, Worldwide Public Sector of Microsoft Corp. since February 2012; Prior to Microsoft, Senior Vice President and General Manager, Connected Energy Networks, Cisco Systems, Inc., a manufacturer of Internet Protocol based networking products, October 2009-February 2012; Senior Vice President, Global Policy and Government Affairs, Cisco, September 2007-September 2009; Vice President, Global Policy and Government Affairs, Cisco, October 2001-August 2007.

Qualifications: Ms. Ipsen has global expertise in energy, environmental issues, public policy, international trade and sales and marketing developed through her career in consulting and the high tech industry. In her senior leadership roles with global information technology companies, Ms. Ipsen has led multiple strategic business, sustainability, policy and regulatory efforts both internally and externally with government leaders worldwide, and has risk management experience. She has significant experience directing a comprehensive corporate sustainability strategy, including the development of global partnerships and an extensive technology portfolio. In light of the increasing importance information technology will play in our business success, Ms. Ipsen’s experience provides vital insight to our board and our science and technology and sustainability and corporate responsibility committees on a variety of matters including information technology and key legislative and regulatory issues facing our global technology business, as well as strategic oversight of our management and sustainability efforts.

 
   
 

William U. Parfet

Principal Occupation: Chairman, Chief Executive Officer and President, MPI Research, Inc.
First Became Director: June 2000
Age: 66

Chairman, Chief Executive Officer and President of MPI Research, Inc., a pre-clinical toxicology research laboratory, since October 2012; Chairman and Chief Executive Officer of MPI Research, Inc., 1999-2012; Co-Chairman of MPI Research, LLC, 1995-1999. Public Company Directorships in the Last Five Years: Stryker Corporation; Taubman Centers, Inc.

Qualifications: Mr. Parfet has served as an executive or director for multiple companies during his career, with broad experience in global business management and finance. As president of a major pharmaceutical company, he gained expertise in the areas of strategic planning, technology, marketing, and global business management, and he is knowledgeable about the chemical, pharmaceutical, food and agricultural industries. In particular, Mr. Parfet’s past roles as CFO, controller, and treasurer of a multi-national corporation, service on the audit committees for other public companies, and past service as a trustee of the Financial Accounting Foundation (which oversees FASB and GASB) and Chairman of Financial Executive International, enable him to provide expert guidance and oversight of our management in his role as chair of our audit and finance committee. In addition, his service on the governance committees of other public companies, including serving as lead independent director, enables Mr. Parfet to provide insight and value to our governance and compliance processes.


  2012 PROXY STATEMENT MONSANTO COMPANY 15



     

George H. Poste, Ph.D., D.V.M.

Principal Occupation: Chief Executive, Health Technology Networks and Chief Scientist, Complex Adaptive Systems Initiative, Arizona State University
First Became Director: February 2003
Age: 68

Chief Executive of Health Technology Networks, a consulting group specializing in the application of genomics technologies and computing in healthcare, since 1999; Chief Scientist, Complex Adaptive Systems Initiative, since March 2009; Director of the Biodesign Institute, a combination of research groups at Arizona State University, May 2003-March 2009; Chief Science and Technology Officer and Director, SmithKline Beecham, 1992-1999. Public Company Directorships in the Last Five Years: Exelixis, Inc.; Orchid Cellmark, Inc. (former).

Qualifications: Dr. Poste is a scientist who has had extensive experience advising and leading research teams in both corporate and academic settings. He is a leader in synthetic biology and healthcare informatics, linking university research projects and collaborations. His roles as chief scientist leading research at a large university, and formerly as chief technology officer of a multi-national company, provide him valuable insight into the biotechnology industry and enable him to provide expert guidance, as chair of our science and technology committee, to our management and board as we develop and implement our technology strategies and research collaborations. In addition, his former roles on scientific advisory boards to the Federal government have also given him extensive experience related to risk management and regulatory and policy matters. His service as a director of other public companies, and as a member of the governance committee and chair of the research committees of other public companies, also bring valuable perspectives to our board.


Directors Whose Terms Expire at the 2015 Annual Meeting

     

Janice L. Fields

Principal Occupation: Former President, McDonald’s USA, LLC
First Became Director: April 2008
Age: 57

President of McDonald’s USA, LLC, a subsidiary of McDonald’s Corporation, the world’s leading global foodservice retailer, January 2010-November 2012; Executive Vice President and Chief Operating Officer, McDonald’s USA, LLC, 2006-2010; President of McDonald’s Central Division, 2003-2006.

Qualifications: Ms. Fields has gained broad operational and financial experience in her career in the food industry. She has developed expertise related to marketing, strategic planning, risk management, production, and human resources, which provides her with valuable insights on operational and strategic matters reviewed by our board. As a senior leader at a major public company in the food industry, Ms. Fields also gained experience in public policy matters and governance and financial oversight, which is valuable in connection with her service on our nominating and corporate governance committee. In addition, her insights about the food industry are important as we consider strategic goals for the development of products to grow our business.

   

16 MONSANTO COMPANY 2012 PROXY STATEMENT  



       

Hugh Grant

Principal Occupation: Chairman of the Board and Chief Executive Officer, Monsanto Company
First Became Director: May 2003
Age: 54

Chairman of the Board and Chief Executive Officer of Monsanto Company, since August 2012; Chairman of the Board, President and Chief Executive Officer of Monsanto Company, October 2003-August 2012; President and Chief Executive Officer, Monsanto Company, May 2003-October 2003; Executive Vice President and Chief Operating Officer, Monsanto Company, 2000-2003; Co-President, Agricultural Sector, Former Monsanto Company, 1998-2000. Public Company Directorships in the Last Five Years: PPG Industries, Inc.

Qualifications: Mr. Grant is our Chairman and CEO. In his long career with our company and Former Monsanto, he has worked broadly in many areas of the business, enabling him to gain an extensive personal knowledge of our operations, which is essential in formulating business strategies. He has extensive experience in strategic planning, sales, financial oversight and planning. His operational experience in leading our multi-national corporation includes governance and risk management responsibilities, which assists our board in understanding our business and fulfilling its oversight role. Mr. Grant’s service on the board of another public company and its nominating and corporate governance and officers-directors compensation committees provides Mr. Grant additional insights about service as our board Chairman.

   
 

C. Steven McMillan

Principal Occupation: Retired Chairman and Chief Executive Officer, Sara Lee Corporation
First Became Director: June 2000
Age: 66

Chairman of the Board of Sara Lee Corporation, a global consumer packaged goods company, October 2001-October 2005; Chief Executive Officer, Sara Lee Corporation, July 2000-February 2005; President and Chief Operating Officer, Sara Lee Corporation, 2000-2004; President, Sara Lee Corporation, 1997-2000.

Qualifications: Mr. McMillan has had significant operational experience leading a major international consumer products company, where he has gained expertise in finance, strategy, marketing, manufacturing, mergers and acquisitions, and human resources, and has had primary responsibility for risk management. These skills assist him in providing oversight of our executive team in their management of our multi-national company. His understanding of the food industry enables him to provide valuable insights in our strategic planning and evaluation of our products. In addition, he is experienced in governance matters due to his past service on five other public company boards, which is important in his service on our board, our audit and finance committee and our nominating and corporate governance committee and as chair of our people and compensation committee.


  2012 PROXY STATEMENT MONSANTO COMPANY 17



     

Robert J. Stevens

Principal Occupation: Chairman of the Board and Chief Executive Officer, Lockheed Martin Corporation; effective January 1, 2013, Executive Chairman, Lockheed Martin Corporation
First Became Director: August 2002
Age: 61

Chairman of the Board and Chief Executive Officer of Lockheed Martin Corporation, a high technology aerospace and defense company, January 2010-December 2012; Chairman of the Board, President and Chief Executive Officer, Lockheed Martin Corporation, April 2005-January 2010; President and Chief Executive Officer, Lockheed Martin Corporation, August 2004-April 2005; President and Chief Operating Officer, Lockheed Martin Corporation, October 2000-August 2004; Chief Financial Officer, Lockheed Martin Corporation, 1999-2001; Vice President Strategic Development, Lockheed Martin Corporation, 1998-1999; President and Chief Operating Officer of the former Lockheed Martin Energy and Environmental Sector, 1998-1999. Public Company Directorships in the Last Five Years: Lockheed Martin Corporation.

Qualifications: Mr. Stevens has attained substantial experience in executive and operational roles during his career. He has expertise in areas such as finance, information technology, technology development, manufacturing, marketing, and human resources, and he has broad international business management experience. Mr. Stevens’ roles as CEO, president, COO and vice president of strategic development of a leading company in the defense industry have given him a deep understanding of the complexities of operating a global business, strategic planning, regulatory, legislative and public policy matters, all of which are valuable to us as a technology-driven company subject to significant regulatory and public policy oversight. In addition, his leadership as CEO and Chairman has also afforded him the opportunity to develop corporate governance expertise that has enabled him to serve with distinction as our lead director and chair of our nominating and corporate governance committee. Having formerly served as a Fortune 50 CFO, he also has significant expertise in financial, risk management and compliance matters, which supports his service on the audit and finance committee.

 

Board Meetings and Committees
 

During fiscal 2012, our board of directors met seven times and acted once by written consent. All directors attended 75% or more of the aggregate meetings of the board and of the board committees on which they served during fiscal 2012. The following chart shows the attendance of each director at committee meetings.

Our board charter formally encourages directors to attend the annual meeting of shareowners. Last year all of the directors then in office attended the meeting.

Our board of directors has the following six committees: (1) executive; (2) audit and finance; (3) nominating and corporate governance; (4) people and compensation; (5) science and technology; and (6) sustainability and corporate responsibility. The written charter for each committee is available on our website at http://www.monsanto.com/whoweare/Pages/ContactOurDirectors.aspx.

18 MONSANTO COMPANY 2012 PROXY STATEMENT  



Board Committee Membership

The following chart shows the membership and chairpersons of our board committees, committee meetings held and actions by written consent taken, and committee member attendance.

Nominating Sustainability
& Corporate People & Science & & Corporate
         Executive       Audit & Finance       Governance       Compensation       Technology       Responsibility   
Number of Meetings Held            
in Fiscal 2012 0 13   5     7 5   5
Actions by written consent 0   0 0 0 0 0
David L. Chicoine 5 5
  Janice L. Fields 5 5 5
Hugh Grant 0 *
Arthur H. Harper 13 6
Laura K. Ipsen 4 4
Gwendolyn S. King 5 7 5 *
C. Steven McMillan 13 5 7 *
Jon R. Moeller 13 5
William U. Parfet 0 11 * 6
George H. Poste 4 * 4
Robert J. Stevens 0 13 5 *

* Chairperson

Executive Committee

Members: Messrs. Grant (Chair), Parfet and Stevens
Our executive committee has the powers of our board of directors in directing the management of our business and affairs in the intervals between meetings of our board of directors (except for certain matters specifically retained by our board of directors or which are reserved for our entire board of directors by statute, our certificate of incorporation or our bylaws). Actions of the executive committee are reported at the next regular meeting of our board of directors.

Audit and Finance Committee

Members: Messrs. Parfet (Chair), Harper, McMillan, Moeller and Stevens
The audit and finance committee assists our board of directors in fulfilling its responsibility to oversee:

  • the integrity of our financial statements;
  • the qualifications and independence of our independent registered public accounting firm;
  • the performance of our independent registered public accounting firm and internal audit staff;
  • our compliance with legal and regulatory requirements; and
  • our policies and practices with respect to major financial risk exposures.

As noted in the Report of the Audit and Finance Committee, our board of directors believes that all members of the audit and finance committee meet the independence and experience requirements of the listing standards of the NYSE. In addition, our board of directors has determined that each of the members of the audit and finance committee is financially literate and that Messrs. Parfet, McMillan, Moeller and Stevens are “audit committee financial experts” for purposes of the rules of the SEC.

  2012 PROXY STATEMENT MONSANTO COMPANY 19



 

For additional information regarding the audit and finance committee, please see Proxy Item No. 2: Ratification of Independent Registered Public Accounting Firm on page 28 and Report of the Audit and Finance Committee on page 26.


Nominating and Corporate Governance Committee

Members: Messrs. Stevens (Chair) and McMillan, Ms. Fields and Ms. King
Our nominating and corporate governance committee provides oversight of the corporate governance affairs of our board and company, including consideration of risk oversight responsibilities of our full board and its committees. Our nominating and corporate governance committee also identifies and recommends individuals to our board of directors for nomination as members of the board and its committees, and leads our board of directors in its annual review of the board’s performance.

Pursuant to its charter, all members of the nominating and corporate governance committee must meet the independence requirements contained in the listing standards of the NYSE. We believe all members of the nominating and corporate governance committee meet the current listing standards of the NYSE pertaining to independence.

People and Compensation Committee

Members: Messrs. McMillan (Chair), Harper and Parfet, and Ms. King
Our people and compensation committee is responsible for:

  • establishing and reviewing our executive compensation program and policies and ensuring that our senior management is compensated in a manner consistent with the program and policies;
  • establishing and reviewing our overall compensation program for all our employees and employees of our subsidiaries, other than senior management;
  • considering the impact of our compensation policies and practices in relation to our risk management objectives;
  • monitoring the company’s implementation of our management succession strategies and plans for our chief executive officer and other members of senior management;
  • reviewing and monitoring our performance as it affects our employees and overall compensation programs for employees other than senior management;
  • reviewing our compensation program for non-employee directors and recommending appropriate changes to our board of directors;
  • performing or delegating the company’s responsibilities with respect to our retirement and welfare benefit plans; and
  • recommending to our board of directors that the Compensation Discussion and Analysis be included in our proxy statement.

Pursuant to its charter, our people and compensation committee must be comprised of at least three members of our board of directors who, in the opinion of our board of directors, meet the independence requirements of the NYSE, are “non-employee directors” pursuant to Rule 16b-3 of the Exchange Act and are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Our board of directors has determined that all members of the people and compensation committee meet these requirements.

20 MONSANTO COMPANY 2012 PROXY STATEMENT  




Compensation Committee Interlocks and Insider Participation

No member of our people and compensation committee is or has been an officer or employee of our company or any of our subsidiaries. In addition, no member of our people and compensation committee has had any related person transactions that require disclosure under the SEC’s proxy rules and regulations.

Science and Technology Committee

Members: Dr. Poste (Chair), Dr. Chicoine, Ms. Fields, Ms. Ipsen and Mr. Moeller
Our science and technology committee reviews and monitors our science and technology initiatives in areas such as technological programs, research, agricultural biotechnology and information technology. Our science and technology committee also identifies and investigates significant emerging science and technology issues and oversees the management of risks related to our technology portfolio and information technology platforms.

Sustainability and Corporate Responsibility Committee

Members: Ms. King (Chair), Dr. Chicoine, Ms. Fields, Ms. Ipsen and Dr. Poste
Our sustainability and corporate responsibility committee reviews and monitors our performance as it affects matters relating to sustainability, the environment, communities, customers and other key stakeholders, including related risks and risks related to reputation. This committee also reviews issues affecting company products in the marketplace, including issues of agricultural biotechnology, and identifies and investigates significant emerging issues. It also receives periodic reports on the company’s business conduct program, progress related to the company’s Human Rights Policy, and the company’s charitable and political contributions and reports to the full board as to the status of our company’s programs and initiatives on sustainability, environmental matters and social responsibility.

Compensation of Directors
 

The objectives for our non-employee director compensation program are to attract highly-qualified individuals to serve on our board and to align their interests with those of our shareowners. Our non-employee directors are paid pursuant to our Non-Employee Director Equity Incentive Compensation Plan (the “Directors’ Plan”). Mr. Grant is our sole employee director and does not participate in the Directors’ Plan or otherwise receive compensation for his services as a director. Our people and compensation committee reviews our director compensation program at least annually to determine whether the program remains appropriate and competitive, and recommends any changes to our full board of directors for consideration and approval.

Prior to the beginning of our fiscal 2012, our people and compensation committee considered the design of our director compensation program and reviewed information and recommendations from management; data from the same comparator group of companies it uses for determining compensation for our executives, as described on page 45, provided by Towers Watson & Co.; and other market data and analyses provided by the committee’s independent executive compensation consultant, Cook & Co. After reviewing the information, the committee determined that the plan design continued to align with market trends, yet the amount of our directors’ annual base retainer and certain retainers related to committee service were below the median range of our comparator group, considering our relative revenue at the time. The committee considered and recommended to our board of directors that it amend the Directors’ Plan, effective for fiscal 2012, to increase the annual base retainer from

2012 PROXY STATEMENT MONSANTO COMPANY 21




$195,000 to $215,000 and provide the following changes for annual additional retainer amounts for committee memberships or chairs: (i) $25,000 for service as our lead director (a new annual additional retainer); (ii) $35,000 for service as the chair of the audit and finance committee (increased from $25,000); (iii) $20,000 for service as the chair of the science and technology or sustainability and corporate responsibility committees (increased from $15,000); and (iv) $15,000 for service as a member of the audit and finance, people and compensation, and/or nominating and corporate governance committees, other than as the chair of any of those committees (increased from $10,000 for members of the audit and finance committee and a new annual additional retainer for members of the people and compensation and nominating and corporate governance committees). The board of directors approved the recommended increases, effective September 1, 2011. The increases positioned our program within our comparator group’s median range of director pay, considering our relative revenue.

At the same time, the people and compensation committee recommended, and the board of directors approved, that effective for fiscal 2012, each of our non-employee directors is required to attain ownership of 12,000 shares of Monsanto common stock, increased from 10,000 shares. Other than the increased stock ownership requirement, no other changes were made to our non-employee director stock ownership policy, which is described below in this section.

Following is a summary of the Directors’ Plan for fiscal 2012:

  Compensation Type Amount Form of Payment
Annual Retainer
(Components)

Base retainer $215,000   
  • 50% – Deferred stock:
  • 50% – Director’s election of:
    – deferred stock,
    – restricted stock,
    – deferred cash, or
    – current cash

See below for a description of these forms of payment and method for determining the number of shares of deferred and/or restricted stock

Additional retainer amount for service as lead director $25,000   
Additional retainer amount for chair of the audit and finance committee $35,000   
Additional retainer amount for chair of the people and compensation and nominating and corporate governance committees $25,000   
Additional retainer amount for chairs of the science and technology and sustainability and corporate responsibility committees $20,000   
Additional retainer amount for each member of the audit and finance committee, people and compensation committee, and nominating and corporate governance committee (other than the chair) $15,000   
Initial Equity
Grant
One-time equity grant for new directors; value determined by dividing the current base retainer amount by the closing stock price on service commencement date $215,000    Restricted stock that vests three years from grant date

  • Deferred Stock. Deferred stock means shares of our common stock that are delivered at a specified time in the future. Earned shares of deferred common stock are credited in the form of hypothetical shares to a stock unit account at the beginning of each plan year and vest in installments as of the last day of each calendar month during the plan year, but only if a director remains a member of our board of directors on that day. All hypothetical shares in each director’s account are credited with dividend equivalents, also in the form of hypothetical shares. No director has voting or investment power over any deferred shares until distributed in accordance with the terms of the Directors’ Plan, generally upon termination of service.
  • Restricted Stock. Restricted stock means shares of our common stock that vest and are delivered over the course of the year in accordance with specified terms. Restricted stock vests in installments on the last day of each calendar month during a plan year, but only if the director remains a member of our board of directors on that day. Any restricted stock granted to a non-employee director entitles the director to all rights of a shareowner with respect to common stock for all such shares issued in his or her name,
22 MONSANTO COMPANY 2012 PROXY STATEMENT  




including the right to vote the shares and to receive dividends or other distributions paid or made with respect to such shares. Dividends and other distributions are withheld and delivered with the restricted stock as it vests.

  • Cash/Deferred Cash. Any portion of a non-employee director’s aggregate annual retainer not paid in the form of deferred stock or restricted stock will be paid in cash, either in monthly installments on the last day of each calendar month during the fiscal year or on a deferred basis, as elected by the director. Any deferred cash is credited to a cash account that accrues interest at the average Moody’s Baa Bond Index Rate, as in effect from time to time.

In addition to the compensation described above, our non-employee directors are reimbursed for expenses incurred in connection with their attendance at board, committee and shareowners meetings, including expenses related to travel, lodging and food and related expenses. Non-employee directors are also reimbursed for reasonable expenses associated with other business activities related to service on our board of directors, such as participation in director education programs, and are insured under our travel accident policy while traveling on company business. Non-employee directors may use corporate aircraft, when available, for transportation to and from meetings and functions related to service as a director. Travel by any guests of directors traveling on the aircraft for business purposes is considered a perquisite to the director, although the company incurs minimal incremental costs for these guests. Personal use of our aircraft by our directors has been limited and is considered a perquisite.

Directors may participate in a matching gift program under which we will match donations made to eligible educational, arts, cultural or other charitable institutions. Gifts will be matched in any calendar year up to a maximum of $5,000. While our directors participate in the program on the same basis as our employees, SEC rules require that the amount of a director’s participation in a charitable matching program be disclosed.

Our fiscal 2012 non-employee director compensation program required each of our non-employee directors to own 12,000 shares of Monsanto common stock. Shares may be counted toward these ownership requirements whether held directly or through a spouse, a retirement plan or a retirement account; provided, however, that shares pledged as security for a loan, stock options and restricted stock will not be counted toward ownership requirements. Until a director has met his or her stock ownership requirement, he or she must retain 25% of the pre-tax number of shares received upon an exercise of a stock option, vesting of restricted stock or settlement of other equity-based award granted under our long-term incentive plans (through the Directors’ Plan). The people and compensation committee reviews progress toward meeting the ownership requirements at least annually. As of the date of this proxy statement, all but three of our directors (each of whom only recently joined our board of directors) met his or her stock ownership requirements.

No changes have been made to our director compensation program for fiscal 2013.

  2012 PROXY STATEMENT MONSANTO COMPANY 23



Director Compensation Table

The following presents compensation to our non-employee directors for their services in fiscal 2012.

Fees Earned or Stock All Other
Paid in Cash Awards Compensation Total
Name ($)1 ($)2 ($) ($)
David L. Chicoine, Ph.D. 107,500 107,531 5,0003 220,031
Janice L. Fields 115,010 115,010   230,020
Arthur H. Harper 122,489 122,489 244,978
Laura K. Ipsen 107,518 107,531   215,049
Gwendolyn S. King 132,500 132,483 264,983
C. Steven McMillan 135,000 135,034 5,0003 275,034
Jon R. Moeller 115,000 114,975 229,975
William U. Parfet 132,500 132,483   264,983
George H. Poste, Ph.D., D.V.M. 117,526 117,526 235,052
Robert J. Stevens 139,997 139,997   279,994

1 The amounts shown in this column represent the elective half of the aggregate annual retainer payable to each director under the Directors’ Plan. The elective half of the retainer is payable, at the election of each director, in the form of deferred stock, restricted stock, current cash or deferred cash. For fiscal 2012, the following directors elected to receive deferred stock: Ms. Fields, 1,668.5 shares and Mr. Stevens, 2,031 shares. The following directors elected to receive restricted stock: Mr. Harper, 1,777 shares; Ms. Ipsen, 936 shares; and Dr. Poste, 1,705 shares. The following directors elected to receive current cash: Dr. Chicoine, Ms. Ipsen, Ms. King, Mr. McMillan, Mr. Moeller and Mr. Parfet. Each amount constitutes the aggregate grant date fair value of the equity awards for fiscal 2012 calculated in accordance with FASB ASC Topic 718, and because the awards were granted on the first day of the fiscal year and were fully vested at the end of the fiscal year, there is no unrecognized compensation expense for financial statement reporting purposes for fiscal 2012.

2 The amounts shown in this column represent the non-elective half of the aggregate annual retainer payable in deferred stock. The number of deferred shares granted to each director related to the non-elective half of the aggregate annual retainer was: Dr. Chicoine, 1,560; Ms. Fields, 1,668.5; Mr. Harper, 1,777; Ms. Ipsen, 1,560; Ms. King, 1,922; Mr. McMillan, 1,959; Mr. Moeller, 1,668; Mr. Parfet, 1,922; Dr. Poste, 1,705; and Mr. Stevens, 2,031. Each amount constitutes the aggregate grant date fair value of the equity awards for fiscal 2012 calculated in accordance with FASB ASC Topic 718, and because the awards were granted on the first day of the fiscal year and were fully vested at the end of the fiscal year, there is no unrecognized compensation expense for financial statement reporting purposes in fiscal 2012. The aggregate number of shares of deferred common stock credited to the account of each director as of Aug. 31, 2012 was: Dr. Chicoine, 5,199; Ms. Fields, 12,066; Mr. Harper, 8,787; Ms. Ipsen, 2,662; Ms. King, 36,817; Mr. McMillan, 45,990; Mr. Moeller, 1,819; Mr. Parfet, 46,098; Dr. Poste, 27,547; and Mr. Stevens, 46,640. The aggregate number of shares of restricted stock held by directors as of Aug. 31, 2012 was: Ms. Ipsen, 3,120 shares; and Mr. Moeller, 2,745 shares.

3 Represents a contribution by the company pursuant to its charitable matching program described above.

24 MONSANTO COMPANY 2012 PROXY STATEMENT  



Stock Ownership of Management and Certain Beneficial Owners
 

Information is set forth below regarding beneficial ownership of our common stock, to the extent known to us, by:

  • each person who is a director or nominee;
  • each proxy officer; and
  • all directors and executive officers as a group.

No person is known to us to be the beneficial owner of 5% or more of our common stock. Except as otherwise noted, each person has sole voting and investment power as to his or her shares. All information is provided as of November 1, 2012, except as otherwise noted.

Shares of Common Shares Underlying
Stock Owned Options
Directly or Exercisable Within Total
   Name Indirectly (#) 1 2, 3       60 Days (#) 4       (#) 5
   Hugh Grant 584,835 926,972 1,511,807
   David L. Chicoine, Ph.D. 8,030 8,030
   Janice L. Fields 14,264 14,264
   Arthur H. Harper 24,346   24,346
   Laura K. Ipsen 8,517 8,517
   Gwendolyn S. King 40,843 40,843
   C. Steven McMillan 49,714 49,714
   Jon R. Moeller 5,018 5,018
   William U. Parfet 421,531 421,531
   George H. Poste, Ph.D., D.V.M. 31,774 31,774
   Robert J. Stevens 57,928 57,928
   Pierre C. Courduroux 8,424 50,228 58,652
   Brett D. Begemann 78,904 213,866 292,770
   Robert T. Fraley, Ph.D. 64,301   237,274   301,575
   David F. Snively 30,874 106,366 137,240
   All directors and executive officers as a group (22 persons) 1,598,528 2,015,737 3,614,265

1 Includes the following shares of deferred stock deliverable within 60 days after Nov. 1, 2012 to each non-employee director as compensation under the Directors’ Plan as described beginning on page 21: Dr. Chicoine, 5,639; Ms. Fields, 13,010; Mr. Harper, 9,301; Ms. Ipsen, 3,091; Ms. King, 37,491; Mr. McMillan, 46,714; Mr. Moeller, 2,273; Mr. Parfet, 46,813; Dr. Poste, 28,124; Mr. Stevens, 47,928; and directors as a group, 240,384.

2 Includes 68,640 shares underlying Financial Goal RSUs (34,320 pre-split shares) awarded to Mr. Grant as part of his fiscal 2004 long-term incentive compensation. Mr. Grant elected to defer receipt of the shares until his retirement.

3 Includes the indicated number of shares of our common stock beneficially owned by the following individuals under our Savings and Investment Plan: Mr. Grant, 6,693; Mr. Courduroux, 1,096; Mr. Begemann, 6,445; Dr. Fraley, 3,855; Mr. Snively, 19,719; and executive officers as a group, 71,545. Excludes the indicated number of:

             hypothetical shares of our common stock credited to a bookkeeping account as deferred compensation in the name of the following individuals under our Savings and Investment Parity Plan: Mr. Grant, 41,535; Mr. Begemann, 7,853; Dr. Fraley, 17,399; Mr. Snively, 4,344; and executive officers as a group, 100,725; and
 
hypothetical shares of our common stock credited to a bookkeeping account as deferred compensation in the name of the following individuals under our Deferred Payment Plan: Mr. Begemann, 9,972; and executive officers as a group, 11,898.

4 The SEC deems a person to have beneficial ownership of all shares that he or she has the right to acquire within 60 days. For purposes of this table, we have used Dec. 31, 2012 as the cut-off date, which is 60 days after Nov. 1, 2012. The shares indicated represent shares underlying stock options granted under the 2000 Long-Term Incentive Plan or the 2005 Long-Term Incentive Plan. The shares underlying options cannot be voted.

  2012 PROXY STATEMENT MONSANTO COMPANY 25




5 The percentage of shares of our outstanding common stock, including options exercisable within 60 days after Nov. 1, 2012, beneficially owned by any director or executive officer does not exceed 1%. The percentage of shares of our outstanding common stock, including options exercisable within 60 days after Nov. 1, 2012, beneficially owned by all directors and executive officers as a group is approximately 0.7%.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires all company executive officers and directors and persons owning more than 10% of any registered class of our capital stock to file reports of ownership and changes in ownership with the SEC. Based solely on the reports received by us or filed with the SEC and on written representations from reporting persons, we believe that all such persons complied with all applicable filing requirements during fiscal 2012, with the exception of Tom Hartley, who filed one Form 4 reporting one transaction late.
 
Proxy Item No. 1: Election of Directors
 

The shareowners are being asked to elect each of Dr. Chicoine, Mr. Harper, Ms. King and Mr. Moeller to terms ending with the annual meeting to be held in 2016, until a successor is elected and qualified or until his or her earlier death, resignation or removal. The board nominated Dr. Chicoine, Mr. Harper, Ms. King and Mr. Moeller, for election at the 2013 meeting of shareowners upon the recommendation of the nominating and corporate governance committee. Each nominee is currently a director of our company. For more information regarding the nominees for director, see Information Regarding Board of Directors beginning on page 13 and Board Meetings and Committees beginning on page 18.

The board does not contemplate that any of the nominees will be unable to stand for election, but should any nominee become unable to serve or for good cause will not serve, all proxies (except proxies marked to the contrary) will be voted for the election of a substitute nominee nominated by the board.

OUR BOARD OF DIRECTORS RECOMMENDS
A VOTE “FOR”
ALL OF THE NOMINEES FOR DIRECTOR

Report of the Audit and Finance Committee
 

The audit and finance committee operates pursuant to a charter adopted and amended from time to time by our company’s board of directors. The audit and finance committee has numerous oversight responsibilities beyond those related to the audited financial statements and the retention and oversight of the company’s independent registered public accounting firm. One of the requirements contained in the audit and finance committee charter is that all committee members meet the independence and experience requirements of the listing standards of the NYSE. Our board of directors believes that all members of the audit and finance committee meet these requirements and are “independent,” as that term is used in relevant SEC rules. In addition, under the audit and finance committee’s charter, no director may serve as a member of the audit and

26 MONSANTO COMPANY 2012 PROXY STATEMENT  




finance committee if he or she serves on the audit committee of more than two other public companies unless our board of directors determines that such simultaneous service would not impair his or her ability to serve effectively on the audit and finance committee. Please see the audit and finance committee’s charter for a description of requirements for its members and its responsibilities.

In reliance on the reviews and discussions referred to below, and exercising our business judgment, the audit and finance committee has recommended to our board of directors (and our board of directors has approved) that the audited financial statements be included in the company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2012, for filing with the SEC. In fulfilling our responsibilities, the audit and finance committee, among other things, has reviewed and discussed the audited financial statements contained in the 2012 Form 10-K with the company’s management and its independent registered public accounting firm.

Management, which is responsible for the financial statements and the reporting process, including the system of internal control over financial reporting, has advised the audit and finance committee that all financial statements were prepared in accordance with accounting principles generally accepted in the United States. Further, the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, has opined to the shareowners that the audited financial statements conform with such accounting principles. In addition, the audit and finance committee discussed with the independent registered public accounting firm the matters required to be discussed by: Statement on Auditing Standards, AU Section 380 (SAS No. 61), Communication with Audit Committees, as amended; Statement on Auditing Standards, AU Section 722 (SAS 100), Interim Financial Information; and Rule 2-07 of Regulation S-X, Communication with Audit Committees; as well as the auditor’s independence from the company and its management, including the matters in the written disclosures and letter received by the audit and finance committee, as required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the audit and finance committee concerning independence.

Members of the audit and finance committee rely, without independent verification, on the information and representations provided to them by management and on the representations made to them by the independent registered public accounting firm. Accordingly, the oversight provided by the audit and finance committee should not be considered as providing an independent basis for determining that management has established and maintained appropriate internal control over financial reporting, that the financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or that the audit of the company’s financial statements by the independent registered public accounting firm has been carried out in accordance with auditing standards generally accepted in the United States.

For a detailed listing of the fees billed to the company by its independent registered public accounting firm, Deloitte and Touche LLP for fiscal years 2011 and 2012, see Proxy Item No. 2: Ratification of Independent Registered Public Accounting Firm below.

AUDIT AND FINANCE COMMITTEE
William U. Parfet, Chair
Arthur H. Harper
C. Steven McMillan
Jon R. Moeller
Robert J. Stevens
October 16, 2012

In accordance with the rules of the SEC, the information contained in the Report of the Audit and Finance Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s Regulation 14A or to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically request that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.

  2012 PROXY STATEMENT MONSANTO COMPANY 27



Proxy Item No. 2: Ratification of Independent Registered Public Accounting Firm
 

Our audit and finance committee, pursuant to its charter, has appointed Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2013.

While the audit and finance committee is responsible for the appointment, compensation, retention, termination and oversight of the independent registered public accounting firm, the audit and finance committee and our board are requesting, as a matter of policy, that the shareowners ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm. The audit and finance committee is not required to take any action as a result of the outcome of the vote on this proposal. However, if the shareowners do not ratify the appointment, the audit and finance committee may investigate the reasons for shareowner rejection and may consider whether to retain Deloitte & Touche LLP or to appoint another independent registered public accounting firm. Furthermore, even if the appointment is ratified, the audit and finance committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of our shareowners or our company.

A formal statement by representatives of Deloitte & Touche LLP is not planned for the annual meeting. However, Deloitte & Touche LLP representatives are expected to be present at the meeting and available to respond to appropriate questions.

During and in connection with fiscal 2012, we engaged Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (which we collectively refer to as “Deloitte”) as our independent registered public accounting firm and to provide other professional services. The table below sets forth an estimate of the fees that we expect to be billed for audit services for fiscal 2012, as well as the fees expected to be billed by Deloitte with respect to audit-related, tax and all other services rendered during that period. In addition, the table sets forth the fees billed by Deloitte for audit, audit-related, tax and all other services during or in connection with fiscal 2011.

Amount Billed
2012 Fiscal Year 2011 Fiscal Year
Description of Professional Service ($) ($)

Audit Fees — professional services rendered for the integrated audit of our annual consolidated financial statements and internal control over financial reporting, reviews of the consolidated financial statements included in Form 10-Qs, accounting consultation, consents related to other filings with the SEC, and statutory and regulatory audits required for foreign jurisdictions

9.7 million

10.5 million

Audit-Related Fees — assurance and related services that are reasonably related to the performance of the audit or review of financial statements, including employee benefit plan audits, due diligence services in connection with mergers and acquisitions, and attest or audit services that are not required

0.5 million

0.5 million

Tax Fees — professional services for U.S. and foreign tax compliance, such as preparation of tax returns and claims for refund and tax payment and assistance with tax audits and appeals; tax planning, such as assistance with transfer pricing matters; expatriate tax services; and tax advice, such as advice related to mergers and acquisitions and employee benefit plans and requests for rulings or technical advice from taxing authorities

2.9 million

3.3 million

All Other Fees — expatriate assignment services (non-tax related)

0.1 million

0.3 million


The audit and finance committee reviews, considers and ultimately pre-approves, where appropriate, all audit and non-audit engagement services to be performed by our independent registered public accounting firm. The audit and finance committee has a policy providing for the pre-approval of certain “audit services,” “audit-related services,” “tax services” and “all other services” to be provided by the independent registered public accounting firm and audit services to be provided by any other firm. Please see the above chart for a description of these types of services.

28 MONSANTO COMPANY 2012 PROXY STATEMENT  




Each year in connection with the audit and finance committee’s approval of the audit engagement plan for the following year, management submits to the audit and finance committee a list of services expected to be provided during that period, as well as related estimated fees. As appropriate, and after obtaining an understanding of the services, the audit and finance committee then pre-approves under its policy the services, and the related estimated fees, to be provided during the next audit engagement period or other period as is approved by the audit and finance committee. If, following the annual pre-approval, it becomes necessary to engage our independent registered public accounting firm for additional services or fees not pre-approved with the annual proposal, or if we need to engage another firm to provide audit services, the audit and finance committee must specifically pre-approve the additional services and related fees. The chair of the audit and finance committee has the delegated authority to pre-approve the provision of additional services and fees not contemplated by these annual pre-approvals and will communicate any such approvals to the full audit and finance committee. In connection with any pre-approval, the audit and finance committee will consider whether such services are consistent with the rules of the SEC and the Public Company Accounting Oversight Board on auditor independence.

All of the “audit services,” “audit-related services,” “tax services” and “all other services” provided by Deloitte during or in connection with fiscal 2012 were pre-approved by the audit and finance committee in accordance with the audit and finance committee’s policy.

OUR BOARD OF DIRECTORS RECOMMENDS
A VOTE “FOR”
THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR OUR 2013 FISCAL YEAR
 
Report of the People and Compensation Committee
 

The people and compensation committee of our board of directors has reviewed and discussed with management the following Compensation Discussion and Analysis. Based on that review and discussion, the people and compensation committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

PEOPLE AND COMPENSATION COMMITTEE
C. Steven McMillan, Chair
Arthur H. Harper
Gwendolyn S. King
William U. Parfet
November 20, 2012

  2012 PROXY STATEMENT MONSANTO COMPANY 29



Executive Compensation
 
Compensation Discussion and Analysis

The Compensation Discussion and Analysis, or “CD&A,” describes our overall executive compensation policies and practices, and focuses on fiscal 2012 compensation for the following individuals whom we refer to as our “proxy officers”: Hugh Grant, chairman and CEO; Pierre Courduroux, senior vice president and CFO; Brett Begemann, who assumed the role of our president and chief commercial officer on August 28, 2012; Robb Fraley, executive vice president and chief technology officer; and David Snively, executive vice president, general counsel and secretary.

These five individuals and six other officers make up our executive team. Our executive team is responsible for developing and implementing our strategic plans and initiatives and overseeing the day-to-day operations of the company. We refer to the 11 members of our executive team as our “executives.”

The CD&A is divided into the following sections:

  • Executive Summary (page 30)
  • Overview of Our Executive Compensation Program (page 34)
  • Detailed Information About Our Executive Compensation Program (page 37)
  • Our Fiscal 2013 Executive Compensation Program (page 44)
  • Setting Executive Compensation (page 44)
  • Other Arrangements and Policies Related to Our Executive Compensation Program (page 47)
Executive Summary

Performance Overview
Exceptional Company Performance in Fiscal 2012

Building upon the strategy adopted in fiscal 2010 and momentum begun in fiscal 2011, our company achieved significantly improved financial results for fiscal 2012, attributable to excellent operational performance and substantial growth across our global business.

Our CEO and his executive team led the implementation of our disciplined growth strategy, focusing on bringing more product choices to our farmer customers to enable them to maximize yield on their lands to support a growing world population. Execution of this strategy enabled us to achieve financial, business and organizational results that include the following highlights:

  • Financial Results. Net sales for fiscal 2012 were $13.5 billion, an increase of 14% from fiscal 2011; ongoing earnings per share reached $3.70, an increase of 25%; and free cash flow was a source of $2 billion (See definitions below.)
                –  In fiscal 2012, we announced a new $1 billion stock repurchase program and increased our dividend by 25%. Over the last three years, we have returned approximately $3.3 billion in cash to shareowners through dividends and stock repurchases.

  • Commercial Operations. Our strong results were primarily based on increased sales of corn seed and traits in the U.S., Latin America and Europe, reported in our seeds and genomics segment, as well as an increase in net sales due to increased volume in our agricultural productivity segment.
                –  We introduced new products which enabled us to improve our product mix to achieve sales growth and share gains, supporting our solid earnings growth.
 
Our Genuity® reduced refuge family of corn products were planted on more than 27 million acres and our Genuity® Roundup Ready 2 Yield® soybean products were planted on 32 million acres.
 
We stabilized our glyphosate operations in our agricultural productivity segment, addressing the significant challenges arising from the commoditization of the global glyphosate business.

30 MONSANTO COMPANY 2012 PROXY STATEMENT  




 
  • Research and Development Pipeline. We delivered record progress in our research and development pipeline with 14 projects advancing phases, launching or entering our product pipeline in fiscal 2012 to support our long-term growth opportunities.
  • Long-Range Plan Including New Business Platforms. Our long-range plan is intended to support the development of our business to achieve sustainable earnings growth. In addition to our operational strategies and pipeline advancements, we focused on the development of new business platforms supported by strategic acquisitions, including:
                –   The BioDirectTM biologicals platform, and the acquisition of Beeologics; and
–   The Integrated Farming SystemsTM platform, and the acquisition of Precision Planting.
  • Sustainable Agriculture. We continued to report on our efforts in sustainable agriculture and issued our annual Corporate Social Responsibility and Sustainability Report, announcing we had joined the Global Reporting Initiative, a sustainability reporting framework that can assist us on a continuous and transparent journey of improvement in our business.
  • Organizational Effectiveness. We focused on the importance of maintaining a talented and diverse workforce as a key driver of long-term growth, as evidenced by the following:

                –   Succession planning and development programs; retention of top talent; organizational surveys; and
–   External recognition including being ranked as one of Forbes 2012 World’s Most Innovative Companies and among the 2012 Great Place to Work® World’s Best Multinational Workplaces.
  • Intellectual Property. We continued our support for innovation through development of a leading patent portfolio for agricultural biotechnology products, including successful recognition of value through licensing and related activities.

Key Performance Measures Included in Officer Compensation Program. Our growth was reflected in our fiscal 2012 performance against key measures that are important to our shareowners and which are included in our officer compensation program: ongoing earnings per share (“EPS”), free cash flow, net sales and return on capital (“ROC”)1.The following table illustrates the company’s performance with respect to these metrics over a three year period.

See Appendix C for a reconciliation of our ongoing EPS, free cash flow and ROC results reported in accordance with generally accepted accounting principles.
____________________

1 Ongoing EPS excludes certain after-tax items that Monsanto does not consider part of ongoing operations. Free cash flow is the sum of net cash provided by operating activities and net cash required by investing activities, as reported in our Statement of Consolidated Cash Flows. ROC is expressed as a percentage, which represents the result of dividing operating profit after-tax (excluding certain items) by average capital.

   When evaluating performance in determining compensation, our people and compensation committee considers EPS, as adjusted by the committee for certain items, either positive or negative, that it deems to be extraordinary. These adjustments are generally the same or similar to the after-tax items excluded for ongoing EPS. At the end of fiscal years 2010-2012, the adjusted EPS considered by the people and compensation committee was the same as ongoing EPS.

  2012 PROXY STATEMENT MONSANTO COMPANY 31




Executive Compensation continued
 

Pay-for-Performance Approach to Executive Compensation
Our people and compensation committee (“Committee”) believes in a pay-for-performance approach to executive compensation and designs our program to focus our executives on achieving key financial and strategic business objectives and reward them when objectives are achieved.

  • A significant portion of our executives’ compensation is tied to company annual and longer term performance. For example, for fiscal 2012, 86% of Mr. Grant’s total direct compensation — which we define as base pay, target fiscal 2012 Annual Incentive Plan (“AIP”) opportunity and long-term incentive (“LTI”) opportunity — is contingent upon company performance over fiscal 2012 and the longer term.
  • The LTI component of executives’ compensation is delivered in two forms of equity grants:
                –   stock options, to align a significant portion of pay to value created for our shareowners; and
–   multi-year, financial goal-based restricted stock units, which we call “Financial Goal RSUs,” to link an element of pay to company longer-term performance against goals for key financial performance measures.
  • The Committee considers our fiscal year budget and long-range plan when establishing AIP and Financial Goal RSU performance measures and goals. This directly ties AIP payouts and value realized from a portion of LTI equity awards to achievement of goals established against key financial and strategic objectives.
  • Amounts our executives may receive from AIP awards and Financial Goal RSUs are directly related to company performance against a combination of financial measures including EPS, free cash flow, net sales, and ROC and, with respect to AIP awards, individual performance related to strategic and operational objectives.

Summary of Committee Actions for Fiscal 2012 Proxy Officer Compensation
The Committee took the following actions with respect to our proxy officers’ fiscal 2012 compensation:

  • Provided base pay increases to reflect competitive market positioning and promotions
  • Established AIP goals for the key performance measures of EPS, free cash flow and net sales (“AIP Performance Measures”) to support an environment of continued improvement of our financial and operational results, but within reasonably attainable parameters to discourage pursuit of excessively risky business strategies
  • Awarded AIP cash payments recognizing the combination of our exceptional financial, business and organizational results, exceeding outstanding performance against each of the AIP Performance Measures by a substantial amount
  • Delivered LTI award values through a mix of 75% stock options and 25% Financial Goal RSUs
  • Determined that 200% of the target number of Financial Goal RSUs awarded to each proxy officer as part of his fiscal 2011 compensation will be eligible for vesting if he meets the award’s three-year service requirement
  • Determined that none of the performance-based restricted stock units with strategic goal metrics, which we call “Strategic Goal RSUs,” granted to certain proxy officers and other executives in fiscal 2010 will be eligible for vesting since the company failed to achieve the threshold-level of performance with respect to the award’s performance measures

Our Compensation Practices
The Committee continues to implement and maintain leading practices in our executive compensation program and related areas. These practices include the following:

  • The Committee retains an independent consultant, Frederic W. Cook & Co., Inc. (“Cook & Co.”), to advise the Committee on executive compensation matters. Cook & Co. provides no services to our company other than those provided directly to or on behalf of the Committee (described on page 44).

32 MONSANTO COMPANY 2012 PROXY STATEMENT  




 
  • The Committee, with the assistance of management and input from Cook & Co., regularly analyzes risks related to our compensation program and conducts a full risk assessment on an annual basis (described on page 10).
  • Executives are required to meet stock ownership requirements (described on page 47).
  • Executives and directors are prohibited from hedging, pledging or engaging in any derivatives trading with respect to company stock (described on page 48).
  • Our recoupment policy allows the company to recover performance-based cash and equity incentive compensation paid to executives in various circumstances (described on page 48).
  • Our company provides no tax “gross-ups” for perquisites or excise tax gross-ups in the event of a change-of-control related termination.
  • Our annual equity awards reward for future performance and provide for vesting over a three-year period, except in limited circumstances involving certain terminations of employment.
  • Long-term incentive awards provide for double-trigger vesting in the event of a change of control.
  • The Committee reviews tally sheets and wealth accumulation analyses for each executive on an annual basis (described on page 46).

Committee Consideration of the Company’s 2012 Shareowner Vote on Executive Compensation
Our company has continued its practice of engaging in dialogue with our major shareowners throughout the year about various corporate governance topics, including executive compensation. The Committee values insights gained from these discussions and finds them to be helpful as the members consider and adopt compensation policies affecting our employees, including our proxy officers.

At our January 2012 annual meeting, a significant majority of our shareowners, or 87% of votes cast, supported our proposal to approve our fiscal 2011 executive compensation program. In our investor outreach throughout the year, our largest shareowners did not express concerns regarding our program. However, following the annual meeting, we sought to identify which of our top 50 shareowners did not vote in favor of our fiscal 2011 executive compensation program, in order to seek an opportunity to understand the reasons for their vote. The smallest holdings in this group of investors represented voting authority for approximately 0.2% of our outstanding shares. Due to the overall high level of support for the proposal, we did not identify a large number of investors from among this group that cast negative votes. However, of those investors from which we sought feedback, we found that most were unwilling or unavailable to comment and several indicated that their firms had policies prohibiting them from providing us specific information about their vote. One investor indicated the firm had not supported our vote on executive compensation because it generally does not support the use of stock options in executive compensation programs. Another investor stated that the firm had voted against our executive compensation proposal in accordance with an advisory firm recommendation but that the investor had no issues with our program. We will continue to seek opportunities for dialogue with our investors on this subject.

Committee Action to Adjust Compensation Program for Fiscal 2013. Despite limited specific investor feedback regarding the 2012 shareowner vote on executive compensation, when designing our executive compensation programs, the Committee does consider investor views and comments we receive throughout the year. Based on extensive discussion of these views, and taking into consideration evolving best practices, the Committee determined to make certain changes to the design of the LTI component of the fiscal 2013 executive compensation program. Specifically, for fiscal 2013, the Committee

  • adjusted the mix of executives’ LTI awards by decreasing the stock option component from 75% to 60% and increasing the Financial Goal RSU component from 25% to 40%; and
  • extended the Financial Goal RSU performance period from two years to three years, while retaining the three year vesting period.

The Committee will continue to consider shareowner sentiments about our core principles and objectives when determining executive compensation.

  2012 PROXY STATEMENT MONSANTO COMPANY 33



Executive Compensation continued
 
Overview of Our Executive Compensation Program

Program Objectives
The Committee designs our executive compensation program to reflect its pay-for-performance philosophy and core principles of:

  • aligning management’s interests with the long-term interests of shareowners;
  • providing compensation on the basis of performance that supports key financial and strategic business outcomes;
  • attracting, motivating and retaining top talent to lead our business;
  • reinforcing a culture of integrity to support sustainable business growth;
  • assessing and appropriately managing compensation risk in the context of our business strategies;
  • limiting perquisites and other non-performance-based entitlements.

The Committee believes that our fiscal 2012 program successfully incorporates these principles and reflects best practices in executive compensation.

Pay For Performance Compensation Mix
For fiscal 2012, a significant portion of our proxy officers’ compensation is again at risk and the actual amounts realized depend upon company annual and longer-term performance and our stock price. The Committee provides more than half of their target total direct compensation through LTI award value in recognition of their accountability for delivering results and to ensure that their realized compensation is aligned with longer-term company operational performance and shareowner experience. The Committee also believes that this approach motivates our proxy officers to consider the impact of their decisions on achieving and sustaining key financial results expected to lead to increased shareowner value.

The mix of total direct compensation is illustrated in the charts below. At risk compensation includes the target AIP opportunity and LTI opportunity (delivered in the form of stock options and Financial Goal RSUs).

34 MONSANTO COMPANY 2012 PROXY STATEMENT  




 

Measuring Performance
For fiscal 2012, the Committee again chose to use EPS, free cash flow and net sales performance measures for our AIP Performance Measures and EPS, free cash flow and ROC performance measures (“Financial Goal RSU Performance Measures”) for our Financial Goal RSUs, as follows:

Performance     Financial
Measure Rationale AIP Goal RSUs
EPS EPS sets the growth expectation for our shareowners; we use EPS as the key accounting measure and evaluation of how our company is performing 50%
weighting
1/3
weighting
Free Cash Flow We believe free cash flow measures the true value of our business. Our ability to translate earnings to cash indicates the health of our business and allows our company to invest for the future as well as return value to shareowners 40%
weighting
1/3
weighting
Net Sales Net sales measures the growth of the business, both organically and through acquisitions, and provides an indication of future success 10%
weighting
N/A
ROC ROC is another key measure of our ability to return value to our shareowners by ensuring capital investments, acquisitions and other uses of our capital are focused on profitable growth N/A 1/3
weighting

The Committee believes that these performance measures, which have been incorporated into the company’s annual budget and long-term planning, best represent the measures used by our shareowners to assess our company’s value. Additionally, the consistent use of these performance measures enables the Committee to evaluate our proxy officers’ performance in generating sustainable growth. The Committee also believes that the overlap of EPS and free cash flow performance measures between the AIP and Financial Goal RSUs focuses our proxy officers on these measures and highlights the importance of their leading the organization to achieve both short-term and long-term financial and strategic goals.

The standards for determining company performance against these performance measures are derived from our financial statements, which follow generally accepted accounting principles. However, in evaluating performance, the Committee may exercise discretion in determining whether pre-established goals with respect to EPS and free cash flow have been attained. The Committee believes that retaining discretion to adjust the calculation of performance results to exclude items it considers extraordinary encourages management’s willingness to take actions that may limit short-term company performance, yet support long-term growth in the best interests of our shareowners. See Annual Incentive Plan on pages 52-53 for additional information on the items the Committee may, in its discretion, exclude as extraordinary for purposes of the EPS and free cash flow calculations and Appendix C for a reconciliation of adjusted performance results to results calculated under generally accepted accounting principles.

  2012 PROXY STATEMENT MONSANTO COMPANY 35



Executive Compensation continued
 

Summary of Elements of Fiscal 2012 Compensation
The information in the following chart summarizes the elements of fiscal 2012 proxy officer compensation included in the Summary Compensation Table on page 49, in addition to benefits under broad-based benefit plans in which proxy officers participate. The narratives to the compensation tables provide more information about the design of each element of the total direct compensation.

Total Direct Compensation  
Compensation Key Features Objectives

Base Pay

  • Fixed annual cash amount, paid at regular payroll intervals
  • Provide a regular source of income

Annual
Incentive
Plan (“AIP”)

  • Performance-based cash compensation: Committee determines payout based on company performance against goals with respect to AIP Performance Measures and individual proxy officer contributions
  • Proxy officers participate in the same AIP with our other officers and all regular employees
  • Focus the organization on achieving key financial results and reward for successful performance
  • Align officers and organizations they lead with annual goals and objectives

Long-Term
Incentive (“LTI”)

  • Equity-based equity compensation: amount realized, if any, dependent upon company achieving long-range financial goals and sustained or increased stock price
  • LTI opportunity delivered through:

Stock options (75%):

– Exercise price equal to the fair market value of a share of company stock on the grant date

– Ratable vesting over a three-year service period

– Double-trigger vesting in the event of a change of control

Financial Goal RSUs (25%):

– Shares eligible for vesting based on company performance against two-year cumulative EPS and free cash flow and two-year average ROC goals

– Vest at end of three-year service period

– Double-trigger vesting in the event of a change of control

– Award settled in shares of company stock

– No dividends paid prior to vesting date

  • Focus officers on achieving and sustaining longer-term business results and reward performance
  • Stock options reward for stock price appreciation and provide a direct link to shareowner value
  • Financial Goal RSUs motivate officers to achieve longer-term financial goals that are expected to lead to increased shareowner value; extended service requirement focuses officers on sustained performance and serves as an additional retention tool; year-over-year grants reward sustained performance of key financial measures
  • Size of stock option grant and target number of Financial Goal RSUs awarded represent a forward-looking incentive opportunity; not a reward for past performance
   
   

36 MONSANTO COMPANY 2012 PROXY STATEMENT  




 

Other Compensation    
Compensation Key Features Objectives

Benefits

  • Standard range of medical, dental, life insurance, disability and retirement plans available to other employees
  • Cost of health and welfare benefits partially borne by employee, including each proxy officer
  • Provide our workforce with a market-competitive level of financial support in the event of injury, illness and retirement

Perquisites

  • Limited perquisites or personal benefits including:

Executive Health Management Program (comprehensive annual physical exam and associated diagnostic/laboratory testing)

Airplane usage

Increased coverage under our travel accident plan

  • No tax gross-ups on perquisites
  • Executive Health Management Program — facilitate early intervention and health risk modification thereby decreasing the likelihood of sudden illness and possible negative impact on company performance
  • Airplane usage — our board requires that our CEO travel on the company’s aircraft for security reasons; limited personal use by other proxy officers with the prior approval of our CEO

Detailed Information about Our Executive Compensation Program

The Committee targets each element of a proxy officer’s annual total direct compensation to the median range for comparable positions in comparator group, which it considers generally to be 90%-110% of the median. The members of our comparator group are described on pages 45-46. The Committee may use its discretion to adjust a component of a proxy officer’s pay above or below the median range to acknowledge the experience and value he brings to the role, sustained high-level performance, internal value and the amount of his pay relative to the pay of his peers within our company. The differences in compensation levels among our proxy officers are primarily attributable to the differences in the median range of compensation for similar positions in our comparator group data and the Committee’s assessment of each position’s internal value.

Base Pay
The Committee generally implements any base pay increases on a calendar year basis, with mid-year increases for a recently-promoted proxy officer. The table below includes each proxy officer’s base pay as of August 31, 2012 in comparison to his base pay as of August 31, 2011. This information is different than the base pay information provided in the Summary Compensation Table on page 49, which reflects base pay received on a fiscal year basis, including increases effective in January or at other times during the fiscal year.

Fiscal Year-End Base Pay
  Base Pay ($)    
  August 31, August 31, %  
Name 2011 2012 Increase Reason for Increase
Hugh Grant 1,403,780 1,431,856   2% Maintain alignment with comparator group; consistent with
Company-wide percentage increase for U.S. employees
Pierre C. Courduroux 475,000 550,000 16% Promotion to CFO in 2011; better align with
        comparator group
Brett D. Begemann 551,000 675,000 23% Promotion to President in August 2012; better align with
comparator group
Robert T. Fraley, Ph.D. 612,000 624,240 2% Maintain alignment with comparator group; consistent with
        Company-wide percentage increase for U.S. employees
David F. Snively 520,000 530,400   2% Maintain alignment with comparator group; consistent with
Company-wide percentage increase for U.S. employees

  2012 PROXY STATEMENT MONSANTO COMPANY 37



Executive Compensation continued
 

Annual Incentive Plan
The design of our fiscal 2012 AIP is described in the section Annual Incentive Plan at pages 52-53. The Committee regularly evaluates the design of our AIP and performance measures to assure that the plan continues to focus the organization on achieving key financial results. The Committee determines the amount of each proxy officer’s cash award under the AIP using the following process.

Target AIP
Opportunity
x
Award Pool
Funding Factor
+/-
Individual
Performance
=
Cash Award

Target AIP Opportunity Expressed as a Percentage of Base Pay. In October 2011, the Committee determined each proxy officer’s target AIP opportunity for the fiscal 2012 performance period. Each proxy officer’s fiscal 2012 target AIP opportunity is included in the table entitled Summary of Proxy Officer 2012 AIP Target Opportunities and Cash Payouts on page 40.

AIP Award Pool Funding Determined by Company Fiscal 2012 Performance Against Goals

     Goals Reflect Fiscal 2012 Business Expectations. In August 2011, the Committee set fiscal 2012 threshold, target and outstanding–level goals with respect to each of the AIP Performance Measures. The Committee’s deliberations focused on setting goals at levels sufficiently high to motivate the organization to achieve the year’s financial objectives, including mid-teens growth in EPS over fiscal 2011 performance, but within reasonably attainable parameters to discourage pursuit of excessively risky business strategies.

The Committee set the target-level goal for each of the AIP Performance Measures to correspond to the fiscal 2012 budget. Achievement of the EPS target-level goal would require mid-teens growth, consistent with the results of a growth company. The Committee set the threshold-level EPS and net sales goals to correspond to our fiscal 2011 performance, thus requiring improvement over prior year performance. Given the volatility in company cash flow over the past several years, the Committee broadened the performance ranges as compared to previous years in consideration of the challenges in predicting future cash flow.

In October 2011, after the company had determined to adjust portions of its financial statements due to a misapplication of complex accounting principles with respect to certain customer incentive programs for glyphosate products implemented during the period from the fourth quarter of fiscal 2009 through the third quarter of fiscal 2011 (“the Restatement”), the Committee reconsidered and increased the EPS goals to reflect the effect of the Restatement on fiscal 2011 EPS actual performance and the corresponding impact on our fiscal 2012 budget as revised by our board of directors. Specifically, the Committee increased the EPS threshold-level goal to correspond to fiscal 2011 EPS actual performance and the EPS target-level goal to correspond to the revised fiscal 2012 budget and require mid-teens growth. The Committee set the EPS outstanding-level goal to require 19% growth over fiscal 2011 EPS actual performance.

38 MONSANTO COMPANY 2012 PROXY STATEMENT  




 

     Exceptional Performance Against Goals. The Committee engaged in extensive discussions when determining funding of the AIP award pool, and considered a number of factors, including:

  • Our fiscal 2012 results and company performance measured against the AIP goals set for the AIP Performance Measures, as follows:
Fiscal 2012 AIP Summary of Goals        
  Threshold Target Outstanding  
  Level Goals Level Goals Level Goals  
AIP Performance Measure (35% Funding) (100% Funding) (200% Funding) Actual Results
EPS    $2.96    $3.35    $3.52    $3.70
Free Cash flow (Millions)  $1,120  $1,400  $1,680  $2,017
Net sales (Millions) $11,661 $12,572 $12,900 $13,516

  • The terms of the AIP providing for a cap of 200% of target-level funding, subject to the Committee’s exercise of discretion to fund above 200%
  • The fact that the company outperformed the outstanding-level goal set for each of the AIP Performance Measures by a substantial amount
  • The combination of exceptional financial, business and organizational results during fiscal 2012 described earlier in this section
  • Management’s recommendation that because of the extraordinary performance by teams and individuals across the organization, the Committee consider funding the award pool above 200% of target-level funding.

After careful deliberation, the Committee exercised its discretion under the plan and funded the AIP award pool at 211% of target-level funding: 200% of target-level funding for allocation among all AIP participants, plus an additional $15.3 million to reward exceptional team and individual performance at all levels of the organization.

Individual Proxy Officer Awards Recognize Leadership and Exceptional Performance

     AIP Award for Our CEO. During its October 2012 meeting, the Committee met in private session to evaluate our CEO’s individual performance and determine his AIP award. Committee discussion focused on Mr. Grant having led his executive team and the entire organization to achieve exceptional fiscal 2012 financial results that surpassed targets in all areas, successfully executing our growth strategy and capturing the momentum in our business. The Committee agreed that Mr. Grant’s exemplary performance should be recognized and reflective of the company’s overall fiscal 2012 performance.

     AIP Awards for Our Other Proxy Officers. In determining the amount of each other proxy officer’s AIP award, the Committee considered a number of factors, including the individual’s contributions to our exceptional fiscal 2012 results:

  • Mr. Courduroux – Led the finance organization to deliver strong financial results, including increased return on capital achieved with balance sheet discipline and a focus on working capital elements; implemented improved processes with respect to long-range strategic planning, financial compliance and global procurement
  • Mr. Begemann – Led the commercial and manufacturing organizations to deliver exceptional results in worldwide unit volume sales, contributing to our growth in revenue and earnings per share
  • Dr. Fraley – Led the technology and regulatory organizations to deliver record progress in our research and development pipeline with 14 projects advancing phases, launching or entering our product pipeline to support our long-term growth opportunities
  • Mr. Snively – Led the legal organization in the successful management of significant legal proceedings and negotiation of strategic acquisitions and technology agreements; supported innovation through the development of our intellectual property portfolio
  2012 PROXY STATEMENT MONSANTO COMPANY 39



Executive Compensation continued
 

The Committee also considered the overall funding of the award pool, the CEO’s evaluation of the proxy officer’s performance and the performance of the executive team as a whole, especially in light of their collective opportunities and responsibilities for managing the company.

Amount of Proxy Officer 2012 AIP Awards

   Summary of Proxy Officer 2012 AIP Target Opportunities and Cash Payouts
      At Target Performance                         
(100% Funding) Actual Cash Award Funding Factor
Name % of Base Pay             Dollar Amount       Amount       % of Target
Hugh Grant       132%          $1,890,050         $5,000,000      265%
  Pierre C. Courduroux     70%         $385,000         $975,000         253%    
Brett D. Begemann 80% $540,000 $1,300,000 241%
  Robert T. Fraley, Ph.D.     80%         $499,392         $1,200,000         240%    
David F. Snively 70% $371,280 $975,000 263%

Long-Term Incentives
The Committee regularly evaluates the design of the LTI component of our proxy officers’ annual total direct compensation to assure that the overall structure and equity awards continue to meet the Committee’s core principles and objectives. For fiscal 2012, the Committee maintained the same design as in previous years and delivered each proxy officer’s LTI opportunity to him through stock options and Financial Goal RSUs.

LTI Opportunities Delivered in Form of Equity Grants

     Amount of LTI Opportunity. The Committee determined the dollar amount of each proxy officer’s fiscal 2012 LTI opportunity taking into consideration the median range of long-term opportunities for a comparable position in the comparator group and the internal value the company places on his position. The Committee did not take into account any proxy officer’s past performance when determining the dollar amount of his fiscal 2012 LTI opportunity.

     LTI Opportunities Converted to Grants of Stock Options and Financial Goal RSUs. The dollar amount of each proxy officer’s fiscal 2012 LTI opportunity was delivered as follows:

  • Stock Options. 75% was converted to a number of stock options by dividing the dollar amount by the estimated Black-Scholes value of our stock on the October 24, 2011 grant date (40% of the fair market value of a share of our stock on the grant date). The stock options will vest ratably over a three-year period. The value a proxy officer may eventually realize, if any, is contingent upon his completing the required service period and our stock price at the time he determines to exercise any in-the-money options. The section Stock Options at page 53 describes the terms and conditions of the stock options.
  • Financial Goal RSUs. 25% was converted to a target number of Financial Goal RSUs by dividing the dollar amount by the fair market value of a share of our stock on the October 24, 2011 grant date. The number of Financial Goal RSUs eligible for vesting will range from 0%-200% of the target number awarded, and will be determined by the Committee based upon the company’s fiscal 2012-2013 performance against two-year cumulative EPS and free cash flow goals and two-year average ROC goals. Any Financial Goal RSUs eligible for vesting will be settled in shares of company stock on August 31, 2014 only if the proxy officer meets the award’s three-year service period. The value a proxy officer may eventually realize, if any, is contingent upon the number of Financial Goal RSUs eligible for vesting and our stock price on August 31, 2014. The design of the Financial Goal RSUs is described later in this section and the specific terms and conditions of the awards are described in the section Financial Goal RSUs at page 54.
40 MONSANTO COMPANY 2012 PROXY STATEMENT  



 
 

The Committee believed that providing a mix of stock options (to closely align a significant portion of proxy officers’ pay to value created for our shareowners) and Financial Goal RSUs (to focus our proxy officers on leading the entire organization to achieve sustainable longer-term performance results related to goals for key financial performance measures and to link an element of their pay to the value of our stock) helps to align our proxy officers with shareowners’ interests.

     Size of Fiscal 2012 LTI Opportunities and Equity Grants. The dollar amount of each proxy officer’s fiscal 2012 LTI opportunity is included in his fiscal 2012 total compensation in the Summary Compensation Table on page 49 as the grant value of the stock options and estimated probable value of the Financial Goal RSU awards on the grant date. The number of stock options and target number of Financial Goal RSUs granted to each proxy officer as delivery of his 2012 LTI opportunity is set forth in the following table.

   Fiscal 2012 Proxy Officer LTI Opportunities, Stock Option Grants, and Target Number of Financial Goal RSUs   
      2012 Long-Term Opportunities and Awards
                          Target Number of
Name LTI Opportunity Number of Stock Options Financial Goal RSUs  
Hugh Grant $7,500,000 188,030 25,071
Pierre C. Courduroux $1,500,000 37,610 5,015
Brett D. Begemann $1,900,000 47,640 6,352
Robert T. Fraley, Ph.D. $2,500,000 62,680 8,357
David F. Snively $1,500,000 37,610 5,015

Detailed Information About Financial Goal RSUs

     Design and Award Process. The following information highlights the Committee’s process in designing and awarding fiscal 2012 Financial Goal RSUs to our proxy officers.

August 2011
Committee established
fiscal 2012-2013 cumulative
goals with respect to
EPS, free cash flow
and average ROC
Performance
Measures

October 2011
Committee increased
EPS goals to reflect
Restatement and
awards proxy officers
a target number of
Financial Goal RSUs

October 2013
Committee will
determine number of
Financial Goal RSUs
eligible for vesting
(based upon the
company’s fiscal
2012-2013
performance against
two-year goals)

August 31, 2014
Number of Financial
Goal RSUs eligible for
vesting, if any, will be
settled in shares of
company stock if the
proxy officer meets
the three-year service
requirement

When structuring the fiscal 2012 Financial Goal RSUs to include two-year cumulative goals, the Committee focused on aligning the length of the performance period with available information for it to consider in setting challenging, yet attainable forward-looking targets, given our evolving business strategy. The one-year additional service requirement following performance determination continues to tie the realizable value of the award to the value of our stock, reinforcing sustained company performance.

Fiscal 2012 Financial Goal RSU Performance Goals. In August 2011, the Committee established performance goals for each of the Financial Goal RSU Performance Measures for achievement over the fiscal 2012-2013 performance period. The Committee set target-level performance goals for each performance measure in line with our fiscal 2012 budget and our fiscal 2013 long-range business plan approved by our board, anticipating that it would be challenging for the company to achieve these levels of performance. The Committee set threshold-level performance goals at 85% and outstanding-level performance goals at 110% of the target-level goal for each performance measure. The Committee sets the threshold-level performance goals at a level that is viewed as reasonably achievable to support both performance motivation and retention objectives. The Committee believes that achievement of the outstanding-level performance goals requires significant stretch in performance

  2012 PROXY STATEMENT MONSANTO COMPANY 41



Executive Compensation continued
 

and represents what the Committee believes is company performance worthy of outstanding-level awards to our proxy officers. At its October 2011 meeting, the Committee reconsidered and increased the EPS goals to reflect the impact of the Restatement on our fiscal 2012 budget as revised by our board of directors.

RSUs Granted in Fiscal 2010 and 2011: Performance Determinations
Fiscal 2011 Financial Goal RSUs. Twenty-five percent (25%) of the dollar amount of each proxy officer’s 2011 LTI opportunity was delivered to him in the form of Financial Goal RSUs. The performance measures and terms and conditions of the fiscal 2011 Financial Goal RSUs were the same as the fiscal 2012 Financial Goal RSUs as described earlier in this section and in the section Financial Goal RSUs at page 54.

In October 2012, the Committee reviewed the company's financial results and the information in the chart below to determine the size of each proxy officer’s award and number of Financial Goal RSUs eligible for vesting.

   Fiscal 2011 Financial Goal RSU Grant Summary of Goals   
Financial Goals
   Threshold     Target     Outstanding    
Performance Performance Performance
2011 Fiscal Year Grant (50% of Units (100% of Units (200% of Units
for fiscal 2011 and 2012 Performance eligible for vesting) eligible for vesting) eligible for vesting) Actual Results
Cumulative EPS (1/3 of Units)         $5.31                 $5.89                 $6.48              $6.66     
Cumulative free cash flow (Millions) (1/3 of Units) $1,669 $1,854 $2,039 $3,856
Average ROC (1/3 of Units) 13.0% 14.4% 15.8% 16.7%

Since the company exceeded the outstanding performance level with respect to each of the Financial Goal RSU Performance Measures, the Committee determined that 200% of the target-number of Financial Goal RSUs awarded to each proxy officer as delivery of part of his fiscal 2011 LTI opportunity (the maximum) is eligible for vesting, based on the following formula:

200% of Target
Performance for
EPS (1/3 weighting)
_______
Result: 200%
+ 200% of Target
Performance for Free
Cash Flow
(1/3 weighting)
_______
Result: 200%
+ 200% of Target
Performance for
Average ROC
(1/3 weighting)
_______
Result: 200%
=  
200%
of Target-Number of Fiscal 2011
Financial Goal RSUs
Eligible for Vesting, subject to
employment on August 31, 2013
_______
 

The number of Financial Goal RSUs eligible for vesting will be settled in shares of company stock on August 31, 2013 only if the proxy officer meets the award’s required three-year service period. Therefore, the value the proxy officer may realize, if any, is dependent upon the number of his fiscal 2011 Financial Goal RSUs eligible for vesting and the value of our stock on August 31, 2013. The target number of fiscal 2011 Financial Goal RSUs granted to each proxy officer as delivery of 25% of his fiscal 2011 LTI opportunity and the number of Financial Goal RSUs eligible for vesting on August 31, 2013 is as follows:

   Proxy Officer Fiscal 2011 Financial Goal RSUs Eligible for Vesting   
      Target Number of Financial Goal             Number of RSUs Eligible for
Name RSUs Awarded Vesting on August 31, 2013
Hugh Grant                 31,940                              63,880             
Pierre C. Courduroux* 1,950 3,900
Brett D. Begemann 6,820 13,640
Robert T. Fraley, Ph.D. 10,650 21,300
David F. Snively 5,540 11,080

* Mr. Courduroux‘s award was pro-rated as of the date he became our CFO and member of our executive team.

42 MONSANTO COMPANY 2012 PROXY STATEMENT  



 
 

No Fiscal 2010 Strategic Goal RSUs Awarded to Proxy Officers. In October 2009, the Committee awarded Strategic Goal RSUs to Mr. Grant, Mr. Begemann, Dr. Fraley, Mr. Snively and certain other executives, in addition to their traditional fiscal year equity grants (Financial Goal RSUs and stock options) to focus them on leading the company to accomplish certain strategic priorities at the time. The section Strategic Goal RSUs at page 56 describes the design of the awards. In October 2012, the Committee considered the information in the chart below, concluded that the company failed to achieve the threshold-level of performance with respect to all of the performance measures and determined that no Strategic Goal RSUs had been earned by any of our proxy officers.

   Fiscal 2010 Strategic Goal RSU Grant Summary of Goals   
Goals
Threshold Target Outstanding
  Performance Performance Performance
2010 Fiscal Year Grant (50% of Units (100% of Units (200% of Units
for fiscal 2010, 2011 and 2012 Performance eligible for vesting) eligible for vesting) eligible for vesting) Actual Results
SmartStax® Corn Gross Profit (Millions) (50%)        $2,743.0               $2,965.4                $3,187.8              $706.6     
Roundup Ready 2 Yield® Gross Profit (Millions) (40%) $1,441.2 $1,558.1 $1,675.0 $967.3
Drought Corn Commercialization (Units Sold) (10%) 20,000 0

Retirement and Welfare Benefits
The company provides each of our proxy officers with the same employee benefits as all our U.S. regular employees under our broad-based plans. These benefits include tax-qualified and non-qualified pension and savings plans, health benefits, life insurance, and other welfare benefits. Base salary and AIP cash awards (but not LTI opportunities or the value of perquisites) are included in retirement plan calculations. In the U.S., the company sponsors tax-qualified pension and savings plans, as well as non-qualified “parity” pension and savings plans providing benefits to all employees whose benefits under the tax-qualified plans are limited by the Internal Revenue Code. No service credit is provided for years not worked. The company does not provide our proxy officers with any special retirement or welfare plan benefits that are not provided to other employees, other than increased coverage under our travel accident insurance plan and the executive medical plan, which we consider to be perquisites and are discussed below and on pages 50-51. The Committee adopted the executive medical plan to encourage our proxy officers and other officers to maintain or improve their health and productivity.

Mr. Grant is eligible for a disability benefit under the terms of our Third Country National (“TCN”) Retirement Plan, which from January 1, 1983 to October 31, 2002 was Former Monsanto’s and then our regular, non-qualified pension plan designed to protect retirement benefits for employees who were transferred from their home country to another country at the company’s request. The provisions of the disability benefit are described in footnote 3 to our Potential Effect on Compensation Upon Termination or Change of Control Table on pages 68-69. Since September 1, 2006, Mr. Courduroux has participated in our International Supplemental Retirement Account Plan (“IRP”), which, since October 31, 2002, has been our regular, non-qualified deferred compensation plan intended to provide certain supplemental retirement benefits to employees who experience permanent cross-border transfers. The provisions of IRP are described in the section International Supplemental Retirement Account Plan on page 62.

Perquisites
The company provides our proxy officers with limited perquisites, the most significant of which is access to the company’s aircraft for personal flights. Most of these personal flights result from our board’s requirement that our CEO travel on the company’s aircraft for security reasons. Personal use of the company’s aircraft by other proxy officers is allowed on a limited basis with the prior approval of our CEO. The company provides no tax gross-ups on any perquisites. Perquisite values are not considered for purposes of determining any AIP opportunity, retirement or severance benefit or any other benefit payment. Further discussion of the perquisites provided to our proxy officers is included on pages 50-51 in the footnotes to the Summary Compensation Table.

  2012 PROXY STATEMENT MONSANTO COMPANY 43



Executive Compensation continued
 

Our Fiscal 2013 Executive Compensation Program

For fiscal 2013, the Committee again tied a significant portion of our CEO’s and other proxy officers’ compensation to company performance over fiscal 2013 and the longer term by providing total direct compensation through base pay, a target AIP opportunity and a LTI opportunity (delivered through grants of stock options and Financial Goal RSUs). After careful deliberations, the Committee again chose to use EPS, free cash flow and net sales performance measures for our AIP and EPS, free cash flow and ROC performance measures for Financial Goal RSU awards. The Committee did, however, change the mix of LTI awards from 75% stock options and 25% Financial Goal RSUs to 60% stock options and 40% Financial Goal RSUs and extended the Financial Goal RSU performance period from two to three years to enhance focus on longer-term operating performance.

Setting Executive Compensation

The Committee considers a broad range of factors and tools when structuring our officer compensation program and making individual proxy officer pay decisions.

Committee Processes
The following information summarizes responsibilities and sources of data associated with the Committee’s determinations of our executive compensation program.

Committee
(comprised of
four independent
directors)
  • Determines program principles and philosophies
  • Approves AIP design, performance measures and goals
  • Determines the structure for delivering LTI opportunities, terms and conditions of equity grants and Financial Goal RSU performance measures and goals
  • Determines all compensation for all of our executives, including our CEO and other proxy officers
  • Reviews other officer compensation such as perquisites and benefits under broad-based benefit programs
  • Considers all other arrangements, policies and practices related to our officer compensation program such as change of control agreements, stock ownership requirements and recoupment policy
Cook & Co.
(independent
Committee
consultant)
  • Provides no services to our company other than those provided directly to or on behalf of the Committee; the Committee has reviewed the independence of Cook & Co. and has determined that the firm has no conflict of interest
  • Performs work at the direction and under the supervision of the Committee
  • Provides advice, research and analytical services on subjects such as trends in executive compensation, officer compensation program design, officer compensation levels, and non-employee director compensation
  • Reviews and reports on all Committee materials, participates in all Committee meetings and communicates with the Committee Chair between meetings

44 MONSANTO COMPANY 2012 PROXY STATEMENT  



 
 

Management Committee of executive team members appointed by our CEO
  • Provides input to the Committee (through our CEO and Executive Vice President of Human Resources who are members of the committee) on the strategy, design and funding of our broad-based AIP in which our proxy officers also participate
  • Makes plan design decisions for broad-based benefit programs in which our proxy officers participate, to the extent the annual cost-impact does not exceed $10,000,000
  • Determines no compensation for any proxy officer or other executive team member
   
  CEO and EVP-HR
 
  • Recommend base pay, target AIP opportunities and actual AIP awards to proxy officers (other than themselves)
  • Provide information on performance goals for Committee consideration in structuring the AIP and Financial Goal RSU programs
  • Recommend retention of specific, critical talent (other than themselves) and various retention vehicles for Committee consideration
  • CEO provides the Committee a performance assessment of each proxy officer (other than himself)
Towers Watson
& Co.
(consultant
retained by
management)
  • Works with our EVP-HR and his staff to provide various calculations, comparator group data and general market data used by the Committee in its decision-making processes
  • At the request of the Committee, periodically provides input through our EVP-HR and his staff, with respect to a specific practice, program or arrangement under consideration by the Committee
  • Provides consulting, actuarial and other compensation and employee benefits-related services to our company; the Committee has reviewed its work with Towers and believes that it raises no conflicts of interest

Competitive Analyses
Our Comparator Group of Companies. To ensure an understanding of compensation levels, practices and trends in the market in which we compete for talent, the Committee compares our proxy officers’ compensation to executive compensation at a group of companies we call our “comparator group.” The companies in our comparator group have one or more of the following characteristics, which the Committee considers essential to our success:

  • science-based, research-focused, organization from the biotechnology, pharmaceutical or related industry;
  • specialty or diversified chemical company having a line of business requiring ongoing introduction of new products; or
  • brand-focused general industry leader.
  2012 PROXY STATEMENT MONSANTO COMPANY 45



Executive Compensation continued
 

The Committee reviews the composition of our comparator group annually. The companies listed below constitute our comparator group for fiscal 2012 proxy officer compensation. The companies are the same as the companies in our fiscal 2011 comparator group except for Genzyme which was acquired by Sanofi-Aventis in April 2011.

  • 3M Co.
  • Abbott Laboratories*
  • Allergan Inc.*
  • Amgen Inc.*
  • Ashland Inc.
  • Baxter International Inc.*
  • Becton, Dickinson and Co.
  • Biogen Idec Inc.
  • Boston Scientific Corp.*
  • Bristol-Myers Squibb Co.*
  • Colgate-Palmolive Co.
  • Dow Chemical Co.
  • E.I. du Pont de Nemours
    and Co.
  • Ecolab Inc.
  • Eli Lilly and Co.*
  • Forest Laboratories Inc.*
  • General Mills Inc.
  • Gilead Sciences Inc.*
  • Kellogg Co.
  • Medtronic Inc.*
  • PPG Industries Inc.
  • St. Jude Medical Inc.

The Committee considers a subset of our comparator group representing technology-based companies when evaluating Dr. Fraley’s compensation (indicated with an asterisk (*) in the group of companies listed above). The Committee believes that the group of noted companies better represents his role within our organization, technology’s impact on our business and the market in which our company competes for scientific talent.

The Committee reviews compensation data for our comparator group to compare our size and performance to the comparator group with respect to key publicly available financial metrics. At the time the Committee determined our proxy officers’ fiscal 2012 compensation, our revenue was in the median range of the comparator group, and our one-year EPS growth and market capitalization each were slightly above the median range of our comparator group.

Use of Tally Sheets and Wealth Accumulation Analyses

The Committee reviews tally sheets and wealth accumulation analyses for each proxy officer to understand the realized and potential value of overall compensation and individual elements of compensation payable to our proxy officers (including the value of vested and unvested equity grants) under various scenarios including: voluntary termination, involuntary termination with and without cause, retirement, death, disability and following a change of control. This enables the Committee to evaluate whether:

  • the program or accumulation of wealth reflects company operating performance and a correlation to changes in shareowner value;
  • the individual proxy officer’s total compensation and accumulated wealth reflect his performance; and
  • the overall program and its individual elements are working, or whether adjustments to the program or an individual proxy officer’s compensation would be appropriate.

Equity Grants
When determining the aggregate LTI opportunities and equity grants to our proxy officers and all other employees, the Committee considers the:

  • projected impact on our company’s earnings for the anticipated fiscal year grants;
  • proportion of our total shares outstanding (our “run rate”) used for annual employee long-term compensation programs in relation to the median proportions of other companies in our comparator group; and
  • potential voting power dilution to our shareowners (our “overhang”) in relation to the median practice of companies in our comparator group.

Our run rate and overhang levels for equity grants to our proxy officers and other employees are significantly below the median levels of our comparator group.

46 MONSANTO COMPANY 2012 PROXY STATEMENT  



 
 

In fiscal 2012, the company made equity grants to our proxy officers under our shareowner-approved Monsanto Company 2005 Long-Term Incentive Plan, which we refer to as our “2005 LTIP.” The grant date is always the date the Committee or its delegate approves the grant. The grant price is the “fair market value” of a share of our common stock on the grant date, which we define as the closing price on the New York Stock Exchange on the grant date.

The Committee, with input from its independent consultant, regularly reviews our equity grant practices to assure alignment with what it believes constitute best practice guidelines.

Other Arrangements and Policies Related to Our Executive Compensation Program

Deductibility of Performance-Based Compensation
The Committee structures and administers our annual and long-term incentive compensation plans and arrangements for our proxy officers with the goal of maximizing the tax deductibility of the payments as “performance-based” compensation under Code Section 162(m), to the extent practical and deemed appropriate, consistent with maintaining competitive compensation. For example, we maintain our Code Section 162(m) Annual Incentive Plan for Covered Executives, which we refer to as our “Code Section 162(m) Plan.” The shareowner-approved plan provides that a proxy officer who is subject to Code Section 162(m) is eligible for an AIP award only if the Committee certifies that the company attained the pre-established corporate adjusted net income performance goal for the fiscal year performance period. Under our Code Section 162(m) Plan, the maximum AIP award the officer may receive is .75% of corporate adjusted net income for the performance year; however, the Committee determines the actual amount of the award under the terms of the AIP through the exercise of negative discretion. Similarly, the terms and conditions of the Financial Goal RSUs granted to our proxy officers provide that units are eligible for vesting only if the Committee certifies that the company attained the pre-established Code Section 162(m) performance goal of positive net income for the two-year performance period. If the corporate net income performance goal has been attained, the Committee determines the actual number of units that will vest (which may range from zero to 200%) under the terms and conditions of the Financial Goal RSUs. While the Committee believes that tax deductibility of compensation is an important consideration, with the goal of providing compensation that is in the best interest of the company and its shareowners, the Committee reserves the flexibility to approve compensation arrangements that are not fully tax deductible.

Change-of-Control Employment Agreements
Our company has entered into employment agreements with our proxy officers that become effective upon a change of control of our company, as described in the section Change of Control Employment Security Agreements beginning on page 65. The Committee believes that the agreements serve the interests of our company and its shareowners by ensuring that if a hostile or friendly change of control is under consideration, our proxy officers will be able to advise our board about the potential transaction in the best interests of shareowners, without being unduly influenced by personal considerations of losing their jobs. At least annually, the Committee reviews the potential cost and the terms of the agreements, in addition to the list of other officers and executives eligible for the agreements.

Stock Ownership Requirements
We have stock ownership requirements for our proxy officers and other key executives to align their interests with those of our shareowners. The stock ownership requirement for each proxy officer and other executives subject to the policy is expressed as a fixed number of shares calculated based on an assigned multiple (which, for our CEO is five and our other proxy officers is three), of annual base pay as of a fixed date, and the stock price on that fixed date. The ownership requirement remains at the fixed number of shares until the Committee determines that a re-calibration is appropriate. For example, our CEO’s current fixed-share stock ownership requirement is valued at more than eight times his current base pay.

  2012 PROXY STATEMENT MONSANTO COMPANY 47



Executive Compensation continued
 

Shares may be counted toward the policy’s ownership requirements whether held directly or through a spouse, retirement plan or retirement account; provided that shares pledged as security for a loan, stock options, restricted stock and restricted stock units issued after September 1, 2008 which have not yet vested, and performance-RSUs for which performance has not yet been determined will not be counted toward the policy’s ownership requirements.

The information in the chart below sets forth, with respect to our CEO and the average of the other proxy officers: (1) the fixed number of shares ownership requirement, as determined on June 27, 2006, the last time the Committee re-calibrated ownership for all executives, or based on the proxy officer’s base pay and our stock price on the date such officer became subject to the ownership requirement, if later; (2) required ownership as a multiple of August 31, 2012 base pay; (3) actual ownership as of August 31, 2012; and (4) actual ownership as a multiple of his August 31, 2012 base pay.

   Required Ownership as a Actual Actual as a Multiple   
      Required             Multiple of Base Pay             Ownership             of Base Pay
Ownership (8/31/12) (8/31/12) (8/31/12)
Chief Executive Officer   143,509   8.7   507,377             30.9          
Other Proxy Officers (average) 29,719 4.4 47,417 6.9

Until an executive has met the stock ownership requirement, he or she must retain 25% of the pre-tax number of shares received upon exercise of a stock option, vesting of restricted stock or settlement of RSUs or other equity-based award granted under our long-term incentive plans. Each proxy officer has met his stock ownership requirement other than Mr. Courduroux who first became subject to a requirement in January 2011, when he took over as our chief financial officer.

Recoupment Policy
In order to further align management’s interests with the interests of shareowners and support good governance practices, our board originally adopted a recoupment policy in October 2006, as amended and restated in October 2009, applicable to AIP awards, Financial Goal RSUs and other performance-based compensation to our proxy officers and other members of our executive team. The amended and restated policy generally provides that in the event our company is required to prepare an accounting restatement due to our company’s material noncompliance with any financial reporting requirement under the securities laws as a result of misconduct or an error (as determined by the members of our board who are considered independent for purposes of the listing standards of the NYSE), our company may, in the exercise of its discretion (as determined by such board members) take action to recoup the amount by which such award exceeded the payment that would have been made based on the restated financial results. Our company’s right of recoupment expires unless demand is made within three years following payment of the award, and does not apply to stock options, restricted stock or other securities that do not have performance-vesting criteria. A copy of our current policy was filed as Exhibit 10.27 to our annual report on Form 10-K for the fiscal year ended August 31, 2009.

Prohibition on Derivative Trading
Our company prohibits derivative transactions in our company stock by officers, directors and their families. Specifically, they may not, at any time:

  • trade in any puts, calls, covered calls or other derivative products involving company securities;
  • engage in any hedging or monetization transactions with respect to company securities; or
  • hold company securities in a margin account or pledge company securities as collateral for a loan, provided, however, that our officers may pledge company securities as collateral for a loan obtained in connection with the exercise of stock options granted by our company. Any such loans must be made independent of any arrangements facilitated by us.
48 MONSANTO COMPANY 2012 PROXY STATEMENT  




 
Summary Compensation Table

The table and footnotes below describe the total compensation paid to each of our proxy officers for fiscal years 2012, 2011 and 2010. The components of the total compensation are described below and in more detail in the tables following. For information on the role of each component within the total compensation package, see the description under Compensation Discussion and Analysis.

Change in
Pension Value and
Nonqualified
Non-Equity Deferred
Stock Option Incentive Plan Compensation All Other
Salary Awards Awards Compensation Earnings Compensation Total
   Name and Principal Position Year ($) ($)1,2 ($)1 ($)3 ($)4 ($)5 ($)
   Hugh Grant    2012    1,432,936 1,875,060 4,121,618 5,000,000 1,247,920 548,072    14,225,606   
   Chairman of the Board 2011 1,409,179 1,875,197 4,682,812 3,070,769 330,547 200,166 11,568,670
       and Chief Executive Officer 2010 1,409,179 7,032,241   3,583,784 0 775,941 371,196 13,172,341
   Pierre C. Courduroux 2012 517,500 375,072 824,411 975,000 178,215 76,061 2,946,259
   Senior Vice President and 2011 382,500 135,798   493,379 571,000   34,940 19,095 1,636,712
       Chief Financial Officer
   Brett D. Begemann 2012 590,162 475,066 1,044,269 1,300,000 559,371 86,371 4,055,239
   President 2011   549,185 3,181,573 999,005 800,000 123,577 26,744   5,680,084
       and Chief Commercial Officer 2010 542,077 1,406,731 716,757 0 342,729 45,344 3,053,638
   Robert T. Fraley, Ph.D. 2012 624,711 625,020   1,373,946   1,200,000   675,540 118,435 4,617,652
   Executive Vice President and 2011 610,062     3,714,128 1,561,068   865,000 262,683   31,510 7,044,451
       Chief Technology Officer 2010 602,308 2,344,787 1,194,755 0 543,612 92,771 4,778,233
   David F. Snively 2012 530,800 375,072 824,411 975,000 359,743   83,708 3,148,734
   Executive Vice President, 2011 506,538 2,711,700 811,716 640,000 108,926 25,945 4,804,825
       Secretary and General Counsel 2010 481,846 1,219,403 621,397 0 253,140 42,855 2,618,641

1   The amounts in these columns reflect grant date fair value at target in accordance with accounting guidance. These amounts do not factor in an estimate of forfeitures related to service-based vesting conditions and may not represent the amounts the proxy officers will actually receive for performance-based awards. The assumptions used in determining the fair value of the awards are set forth in Note 21 to our financial statements contained in our Annual Report on Form 10-K for the fiscal year ended Aug. 31, 2012. Additional information regarding the awards is set forth below under the Grants of Plan-Based Awards Table, Additional Information Explaining Summary Compensation and Grants of Plan-Based Awards Tables and the Outstanding Equity Awards at Fiscal Year-End Table.
 
2 Stock award values shown reflect grant date fair value assuming achievement of target-level performance. If achievement of outstanding-level performance were assumed, the grant date fair value of stock awards for the proxy officers for fiscal years 2012, 2011 and 2010, respectively, would be: Mr. Grant, $3,750,120, $3,750,394 and $14,064,482; Mr. Courduroux, $750,144 and $271,596 (for fiscal 2011); Mr. Begemann, $950,132, $3,581,975 and $2,813,462; Dr. Fraley, $1,250,040, $4,339,390 and $4,689,574; Mr. Snively, $750,144, $3,036,952, and $2,438,806.
 
With respect to performance-based awards, accounting guidance requires the company to evaluate the likelihood of the achievement of the different possible levels of performance in terms of the goals specified in the awards each quarter and incur expense based on the most probable outcome. Actual amounts that will be received by the proxy officers for performance-based RSUs will be determined at the end of the performance period based upon actual performance, which may differ from the amounts reported above.

  2012 PROXY STATEMENT MONSANTO COMPANY 49



Executive Compensation continued
 

  Based on our evaluation at the end of our fiscal 2012, we incurred expense at 200% of the number of fiscal 2012 Financial Goal RSUs granted to our proxy officers in October 2011. Performance will be evaluated at each reporting period, and changes in expected performance could cause this expense to be reversed in future periods. In October 2012, after evaluating our performance with respect to the fiscal 2011 Financial Goal RSUs, the people and compensation committee determined that 200% of each proxy officer's target-level award would be made available for vesting, subject to the additional service requirement. In October 2011, after evaluating our performance with respect to fiscal 2010 Financial Goal RSUs, the people and compensation committee determined that 62.4% of each Mr. Grant’s, Mr. Begemann’s, Dr. Fraley’s and Mr. Snively’s target-level award would be made available for vesting. On August 31, 2012, the additional service requirement of these awards was satisfied and the awards vested. Mr. Courduroux did not participate in the award of fiscal 2010 Financial Goal RSUs.
 
Stock award values for fiscal 2010 reflect a special grant of Strategic Goal RSUs, which were granted in addition to an annual award of Financial Goal RSUs as part of each proxy officer’s fiscal 2010 compensation (other than Mr. Courduroux, who was not an officer during fiscal 2010). At the same time, the award value of the 2010 Financial Goal RSUs granted to each proxy officer was reduced compared to the fiscal 2011 award values. In October 2012, after evaluating our performance with respect to the Strategic Goal RSUs, the people and compensation committee determined that the company failed to achieve the threshold-level of performance with respect to the award’s performance measures and that no Strategic Goal RSUs had been earned by any of our proxy officers.
 
  Stock awards for fiscal 2011 for Messrs. Begemann and Snively and Dr. Fraley include an additional grant of restricted stock units designed for retention purposes.
 
3 This column represents cash awards earned by our proxy officers during the respective fiscal year under the applicable AIP, which were paid in November of the subsequent fiscal year. Our AIP is discussed in further detail on pages 52-53 and in the Compensation Discussion and Analysis section beginning on page 30.
 
4 This column represents the aggregate actuarial increase in the present value of benefits under all of our pension plans during the respective fiscal years for each proxy officer. The amounts were determined by using interest rate and mortality rate assumptions consistent with those used in our financial statements, as is set forth in the Pension Benefits Table beginning on page 60. For Messrs. Grant, Courduroux and Snively, the amounts in this column consist solely of the aggregate change in pension value. For Mr. Begemann and Dr. Fraley, in addition to the aggregate change in pension value, this column includes interest earned under the company’s Deferred Payment Plan (which is set at the average Moody’s Baa Bond Index Rate in effect during the prior calendar year), to the extent that it exceeds 120% of the applicable federal long-term rate, in 2012, 2011 and 2010 and as follows: Mr. Begemann, $1,492, $907 and $1,032; and Dr. Fraley, $10,586, $8,011 and $11,482. The Deferred Payment Plan is discussed in further detail under Deferred Payment Plan beginning on page 64.
 
5 Following is additional information on the amounts reported in the All Other Compensation column for fiscal 2012.

    Company Contributions to SIP A            
    Non-Qualified            
  Qualified Plan Parity Plan Perquisites B Total
  Name ($) ($) ($) ($)
Hugh Grant 17,850 305,043   225,179 548,072  
Pierre C. Courduroux 17,850 58,211   76,061
Brett D. Begemann 15,645   70,726     86,371
Robert T. Fraley, Ph.D. 17,850 88,797   11,788 118,435
David F. Snively 17,850 65,858 83,708

    A   Represents matching contributions made by the company during fiscal 2012 for compensation deferred by participants under our Savings and Investment Plan, which we refer to as our “SIP,” and our ERISA Parity Savings and Investment Plan, which we refer to as our “SIP Parity Plan.” Our SIP is a tax-qualified defined contribution plan and our SIP Parity Plan is a non-qualified defined contribution plan under the Code. Information regarding the company matching contribution levels is provided under SIP Parity Plan on page 64.
 
B Amounts represent the aggregate incremental cost to the company of perquisites provided to our proxy officers, except for Messrs. Courduroux, Begemann and Snively, for whom such amounts are less than $10,000. The amounts shown for Mr. Grant include personal use of corporate aircraft of $218,741, home security expenses, and de minimis gifts and entertainment expenses. The amounts shown for Dr. Fraley include personal use of corporate aircraft of $8,308, personal use of a car and driver, and de minimis gifts and entertainment expenses.

50 MONSANTO COMPANY 2012 PROXY STATEMENT  




 

For security, our board of directors requires our CEO, Mr. Grant, to use company aircraft for both business and personal flights. Other proxy officers are permitted to use the aircraft on a limited basis for personal flights. Personal travel by a guest of a proxy officer, even on a business trip, is considered a perquisite to the proxy officer. The incremental cost of company aircraft used for a non-business flight is calculated by multiplying the aircraft’s hourly variable operating cost by a trip’s flight time, which includes any flight time of an empty return or deadhead flight, and varies considerably based on the type of aircraft. Fixed costs that do not vary based on usage are not included in the calculation of direct operating costs. The company incurs minimal incremental costs for passengers who travel as the guest of executives traveling on the aircraft for business purposes.

When our board of directors holds a multi-day meeting to visit a company facility outside of the St. Louis area, the company invites our proxy officers’ spouses; any incidentals provided at the meetings to the proxy officers or their spouses, such as leisure activities or a gift, are considered perquisites. We also provide our proxy officers increased coverage under our travel accident insurance plan, pursuant to an industry standard policy that requires no incremental cost to the company. In addition, when otherwise unused for business purposes, our proxy officers may occasionally request tickets to entertainment or sporting events for personal use.


Grants of Plan-Based Awards Table
 

The following table provides additional information about plan-based awards granted to our proxy officers during fiscal 2012. See Additional Information Explaining Summary Compensation and Grants of Plan-Based Awards Tables for more information about the terms of the awards.

All Other
Option
Estimated Possible Estimated Future Payouts Awards; Exercise Grant Date
Grant Payouts Under Non-Equity Under Equity Incentive Number of or Base Fair Value
Date for Incentive Plan Awards 1 Plan Awards 2 Securities Price of of Stock
Equity- Underlying Option   and Option
Award Based Threshold      Target      Maximum Threshold      Target      Maximum Options      Awards      Awards
Name Type Awards ($) ($) ($) 1 (#) (#) (#) (#) 3 ($/Sh) 4 ($) 5
Hugh Grant Annual
Incentive
661,517 1,890,050
Stock
Options
10/24/11 188,030 74.79 4,121,618
Financial Goal     10/24/11 12,536 25,071 50,142 1,875,060
RSUs
Pierre C.
Courduroux
Annual 134,750 385,000
Incentive
Stock 10/24/11 37,610 74.79     824,411
Options    
Financial Goal 10/24/11 2,508 5,015 10,030 375,072
RSUs    
Brett D.
Begemann
Annual 189,000   540,000
Incentive  
Stock 10/24/11   47,640 74.79 1,044,269
Options
Financial Goal 10/24/11   3,176   6,352 12,704   475,066
RSUs      
Robert T.
Fraley, Ph.D.
Annual 174,787 499,392  
Incentive      
Stock 10/24/11     62,680 74.79 1,373,946
Options
Financial Goal 10/24/11   4,179 8,357 16,714   625,020
RSUs
David F. Snively Annual 129,948 371,280
Incentive
Stock 10/24/11 37,610 74.79 824,411
Options
Financial Goal 10/24/11 2,508 5,015 10,030 375,072
RSUs

  2012 PROXY STATEMENT MONSANTO COMPANY 51



Executive Compensation continued
 

1   Amounts in this column represent the threshold, target and maximum payouts under the company’s AIP with respect to our attainment of specified performance criteria. Threshold payout is 35% of the target award and the maximum payout is set by our Code Section 162(m) Annual Incentive Plan for Covered Executives, which was designed to maximize the tax-deductibility of AIP awards to our proxy officers who are subject to Code Section 162(m). Under this plan, the maximum AIP award a covered proxy officer may receive is three-quarters of one percent (.75%) of corporate adjusted net income for the applicable performance year, or $14.97 million for fiscal 2012. The people and compensation committee has discretion to award less than the maximum amount and historically has determined the amount of all AIP awards based on company and individual performance measured against pre-established goals under our AIP as described below. The AIP awards have been substantially lower than the maximum amount for Code Section 162(m) purposes. See Deductibility of Performance-Based Compensation on page 47 for more information about Code Section 162(m) Annual Incentive Plan for Covered Executives, and the information under Annual Incentive Plan beginning on page 38 for a more detailed description of awards made under our AIP. The actual amounts earned are reported in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table on page 49.
 
2 Amounts in this column represent the threshold, target and maximum payout for Financial Goal RSUs granted under our 2005 LTIP as part of our proxy officers’ fiscal 2012 long-term incentive compensation. We describe the terms of the Financial Goal RSUs in more detail beginning on page 54.
 
3 Amounts in this column represent stock options granted under our 2005 LTIP to our proxy officers on Oct. 24, 2011 (which will vest ratably on each of Nov. 15, 2012, Nov. 15, 2013 and Nov. 15, 2014) as part of their fiscal 2012 long-term incentive compensation. See Stock Options on pages 53-54 for additional information regarding vesting and other terms of these options.
 
4 Exercise prices are equal to the closing prices of our stock on the respective dates of grant.
 
5 The grant date fair value of options was $21.92 per option for options awarded on Oct. 24, 2011. In accordance with SEC rules, amounts reported in this column for Financial Goal RSUs disclose the fair value at the date of grant based on the probable outcome, regardless of when or whether these amounts are ultimately realized by the proxy officer. The grant date fair value of the fiscal 2012 Financial Goal RSUs awarded on Oct. 24, 2011 was $74.79 per unit. Fair value is calculated as the target number of Financial Goal RSUs multiplied by the closing price of our common stock on the date of grant, in accordance with the requirements of the Compensation-Stock Compensation topic of the ASC. The actual amounts that will be received by the proxy officer for Financial Goal RSUs will be determined at the end of the performance period based upon our actual performance, which may differ from the performance that was probable at the date of grant. The assumptions used in determining the fair value of the awards are set forth in Note 21 to our financial statements contained in our Annual Report on Form 10-K for the fiscal year ended Aug. 31, 2012.

Additional Information Explaining Summary Compensation and Grants of Plan-Based Awards Tables

The following provides information about the terms of our fiscal 2012 AIP and our long-term incentive awards, pursuant to which our proxy officers were awarded non-equity incentive compensation, stock option awards and Financial Goal RSU awards for fiscal 2012, as detailed in the tables above. For additional information regarding the application of these plans and awards to our proxy officers in fiscal 2012, see Compensation Discussion and Analysis.


Annual Incentive Plan

Our fiscal 2012 AIP is designed to reward financial and operational performance that drives shareowner value. Awards under the AIP are paid in cash. Our proxy officers participate in the same AIP in which most of our other employees participate. The AIP focuses the organization on achieving financial goals as shown below, all of which affect shareowner value.

The people and compensation committee establishes threshold, target and outstanding-level goals for the fiscal year performance period for the following financial metrics: net sales (weighted 10%), EPS (weighted 50%) and free cash flow (weighted 40%). Each AIP participant also has individual goals, and our proxy officers are evaluated against key business priorities and performance of their respective business units. In addition, each participant is provided a target award opportunity, communicated as a percentage of base pay. The fiscal 2012 target opportunity for our proxy officers is shown on page 40.

52 MONSANTO COMPANY 2012 PROXY STATEMENT  



After the end of the performance period, the people and compensation committee evaluates the company’s performance against the pre-established financial goals and other subjective factors to determine the funding factor for the award pool. The award pool is calculated by multiplying the funding factor by the target award pool (which is the sum of all participants’ base salaries on August 31, 2012, multiplied by their respective target AIP opportunities).

The AIP provides that in the event the company paid dividends with respect to each of its financial quarters ending during the fiscal year, the award pool will fund at no less than 20% of target-level funding. However, if the company does not attain at least the threshold-level of performance with respect to the AIP’s EPS goal, the AIP may not fund above the 20% funding level. The AIP also provides that the overall funding of the award pool is capped at 200% unless the people and compensation committee, in its sole discretion, determines to fund above 200%.

Under the terms of the AIP, the people and compensation committee may exercise discretion in determining plan funding. In particular, although the metrics for determining our company’s performance against the EPS and free cash flow goals are derived from our financial statements, which follow generally accepted accounting principles, the people and compensation committee may make the following adjustments when determining company performance against goals.

  • The people and compensation committee may consider the following items (either positive or negative) as extraordinary and excluded for purposes of EPS (but not free cash flow) calculations:
             

  

restructuring charges and reversals;

 

the impact of lawsuit outcomes;

 

  in-process R&D write-offs on acquisitions;
 

  the impact of liabilities, expenses, settlements or agreements associated with Solutia, Inc.’s reorganization plan;
 

  the impact of unbudgeted business sales/divestitures; or
 

 

the impact of changes in accounting rules.

  • The people and compensation committee may consider the following items as extraordinary and excluded for purposes of free cash flow calculations:
             

  

the impact of acquisitions; or

 

the impact of agreements associated with Solutia Inc.’s bankruptcy.


    For information regarding the fiscal 2012 AIP awards to our proxy officers, please see Annual Incentive Plan beginning on page 38. Our annual incentive plans for fiscal 2011 and 2010 were substantially the same as the AIP for fiscal 2012.

    Long-Term Incentive Awards

    In fiscal 2012, we granted equity awards to our proxy officers under the 2005 Long-Term Incentive Plan (the “2005 LTIP”). Under the 2005 LTIP, we may grant stock options, performance-based RSUs, RSUs, restricted stock, stock appreciation rights, stock or cash to our employees and directors. The forms of awards granted to our proxy officers in fiscal 2012, 2011 and 2010 are described in more detail below.

    Stock Options
    We generally award stock options with ten year terms that vest ratably over three years, except in certain circumstances. In the event of death, disability, involuntary termination without cause or retirement, options held for at least one year become fully vested. “Retirement” is a termination of employment (other than for cause) after attaining age 55 with five years of service.

      2012 PROXY STATEMENT MONSANTO COMPANY 53



    Executive Compensation continued
     

    Upon a change of control of the company (as defined on page 65), stock options granted for fiscal 2011 or later are subject to double-trigger vesting and stock options granted for years prior to fiscal 2011 are subject to single-trigger vesting, in each case even if the stock options have been held less than one year.

    Financial Goal RSUs
    In addition to stock options, we have awarded our proxy officers Financial Goal RSUs, which vest over a three-year period, except in certain circumstances, and are settled in shares of our common stock. Dividend equivalents are accrued during the designated service period and are paid upon vesting based on the number of units that vest.

    Except as described below, vesting of the Financial Goal RSUs is subject to

    • the company’s attainment of a Code Section 162(m) performance goal, as described below; 
    • the company’s attainment of threshold, target or outstanding-level goals relating to cumulative EPS (weighted 1/3), free cash flow (weighted 1/3) and return on capital (weighted 1/3) performance measures during the specified performance period (for fiscal 2012 grants, the September 1, 2011 through August 31, 2013 performance period); and 
    • the proxy officer’s continued employment during the specified service period (for fiscal 2012 grants, September 1, 2011 through August 31, 2014).

    After the end of the two-year performance period, the people and compensation committee determines performance against the goal the committee established for purposes of Code Section 162(m).

    • If the Code Section 162(m) performance goal is met, all units vested would be fully deductible by the company.
    • If the Code Section 162(m) performance goal is not met, all units are forfeited.

    For the fiscal 2012 grant, the people and compensation committee established a Code Section 162(m) performance goal of positive net income for the September 1, 2011 through August 31, 2013 performance period. “Net income” is defined as gross profit (i) minus (a) sales, general and administrative expenses, (b) research and development expense, (c) amortization, (d) net interest expense, and (e) income taxes and (ii) plus or minus other income and expense, all as reported in the company’s financial statements, but excluding positive or negative effects of (1) restructuring charges and reversals, (2) the outcome of lawsuits, (3) research and development write-offs on acquisitions, (4) impact of liabilities, expenses or settlements related to Solutia, Inc. or agreements associated with a Solutia, Inc. plan of reorganization, (5) unbudgeted business sales and divestitures and (6) the cumulative effects of changes in accounting methodology made after August 31, 2011.

    If the Code Section 162(m) performance goal is met, the people and compensation committee considers a corresponding portion of the units initially awarded to each proxy officer, from zero to 200%, as eligible for vesting based on the company’s attainment of the pre-established goals during the performance period.

    • If the company achieves between the threshold and target level performance for a goal, up to 50% of the units will be forfeited; the remainder will be eligible for vesting upon completion of the specified service period.
    • If the company achieves target level performance for each goal, 100% of the units will be eligible for vesting upon completion of the specified service period.
    • If the company exceeds target level performance for one or more goals, up to 200% of the units will be eligible for vesting upon completion of the specified service period.
    54 MONSANTO COMPANY 2012 PROXY STATEMENT




     

    Financial Goal RSUs are eligible for modified vesting under the following circumstances:

    • In the case of involuntary termination of employment without cause, retirement, death or disability, the participant would vest at the normal vesting date as follows: (1) if the termination occurs during the performance period, a pro-rata portion of units based upon actual performance over the performance period; or (2) if the termination occurs following the end of the performance period, the number of units earned based on the performance goals.
    • Upon a change of control of the company, Financial Goal RSUs granted for fiscal 2011 or later are subject to double-trigger vesting and would vest only if no comparable replacement units are provided or in the event of the participant’s retirement, involuntary termination of employment without cause, or death or disability.
                 

      

    In the case of a termination following a change of control during the first year of the performance period, vesting would be based on the target number of units.

     

    In the case of a termination following a change of control during the second year of the performance period, vesting would be based on: (i) 50% of the target number of units, plus (ii) 50% of the units based on performance.

     

      In the case of a termination following a change of control following the performance periods, the number of units earned.

    The following chart shows Financial Goal RSU grants outstanding at August 31 and vesting on or after August 31, 2012:

    Financial Goal RSUs Grant Vesting Table    
    For Fiscal Year Grant Date Performance Period Performance Determination Date Vesting Date
    2011 10/25/2010 Fiscal Years 2011-2012 October 2012 8/31/2013
    2011 1/1/2011 Fiscal Years 2011-2012 October 2012 8/31/2013
    2012 10/24/11 Fiscal Years 2012-2013 October 2013 8/31/2014

    Retention RSUs
    Restricted stock units (“RSUs”) were granted to proxy officers Begemann, Fraley and Snively in fiscal 2011 for retention purposes. These awards represent the right to receive a specified number of shares of our common stock upon vesting, subject to certain conditions described below. A participant to whom retention RSUs are awarded has no rights as a shareowner with respect to the shares represented by the RSUs unless and until shares are actually delivered to the participant in settlement of the award. Dividend equivalents accrue on the RSUs and will be paid to the participant upon vesting of the award.

    The retention RSUs include a Code Section 162(m) performance goal of positive net income for the September 1, 2011 through August 31, 2014 performance period. “Net income” is defined as on page 54, except that it includes the cumulative effects of changes in accounting methodology made after August 31, 2011.

    If the people and compensation committee determines that the Code Section 162(m) performance goal has been met, the retention RSUs will vest in 2015, subject to the participant’s continued employment. Vesting may be modified for certain termination events.

    • In the case of termination of employment without cause, death or disability, the participant would vest at the normal vesting date in a pro-rata portion of units earned, if the Code Section 162(m) performance goal is met.
    • In the case of a change of control, the units would vest only if no comparable replacement units are provided or in the event of the participant’s termination of employment without cause or voluntary termination for good reason, in which case the full number of units would vest.
      2012 PROXY STATEMENT MONSANTO COMPANY 55



    Executive Compensation continued
     

    Strategic Goal RSUs
    Strategic goal performance-RSUs (“Strategic Goal RSUs”) were granted to proxy officers other than Mr. Courduroux in fiscal 2010. These awards represented the right to receive a specified number of shares of our common stock if the Strategic Goal RSUs had vested. Vesting of the Strategic Goal RSUs was subject to:

    • the company’s attainment of threshold, target or outstanding-level goals relating to cumulative gross profit goals for SmartStax® corn (weighted 50%), cumulative gross profit goals for Roundup Ready 2 Yield® soybeans (weighted 40%) and the commercialization of Drought 1 corn by the end of the performance period (weighted 10%) during the September 1, 2009 through August 31, 2012 performance period; and
    • the proxy officer’s continued employment during the September 1, 2009 through August 31, 2013 service period.

    In October 2012, the committee determined that the company failed to achieve the threshold level of performance with respect to each of the goals and that no Strategic Goal RSUs are eligible for vesting.

    56 MONSANTO COMPANY 2012 PROXY STATEMENT  




     
    Outstanding Equity Awards at Fiscal Year-End Table

    The table below provides information regarding outstanding equity awards as of August 31, 2012 for each proxy officer. The equity awards in this table consist of stock options, retention RSUs, Financial Goal RSUs, and Strategic Goal RSUs.

                          Stock Awards 1
            Option Awards 1 Restricted Stock Units Performance-RSUs
                                  Equity Incentive   Equity Incentive
                                  Plan Awards;   Plan Awards;
          Number of Number of             Number of   Market or Payout
          Securities Securities           Market Value Unearned   Value of Unearned
          Underlying Underlying     Number of of Units of Shares, Units   Shares, Units or
      Grant Date or Unexercised Unexercised Option Option Units of Stock Stock That or Other Rights   Other Rights That
      Performance Options (#) Options (#) Exercise Expiration That Have Not Have Not That Have Not   Have Not Vested
    Name Period Exercisable Unexercisable Price ($) Date Vested (#) Vested ($) 2 Vested (#)   ($) 2
    Hugh Grant 10/24/2011 188,030 74.79 10/24/2021  
    10/25/2010 79,843 159,687 58.71 10/25/2020
    10/26/2009 99,466 49,734 70.69 10/26/2019
    10/20/2008 157,220 89.45 10/20/2018
    10/22/2007 149,230 87.14 10/22/2017
    10/26/2006 248,960   44.06 10/26/2016
    9/1/11-8/31/13 3 50,142 4,367,870
    9/1/10-8/31/12 4 63,880 5,564,587
    9/1/09-8/31/12 5 0 0
    Pierre C. 10/24/2011 37,610 74.79 10/24/2021
    Courduroux 1/1/2011 4,863 9,727 69.64 1/1/2021
    10/25/2010 2,663 5,327 58.71 10/25/2020  
    10/26/2009 4,160 2,080 70.69 10/26/2019
    5/15/2009 520 89.95 5/15/2019    
    10/20/2008 3,360 89.45 10/20/2018
    10/22/2007 4,320 87.14 10/22/2017  
    10/26/2006 8,200 44.06 10/26/2016  
    9/1/11-8/31/13   10,030   873,713
    9/1/10-8/31/12 3 3,900 339,729
    Brett D. Begemann 10/24/2011 47,640 74.79 10/24/2021  
    10/25/2010 17,033 34,067 58.71 10/25/2020
    10/26/2009 19,893 9,947 70.69 10/26/2019
    10/20/2008 31,450 89.45 10/20/2018
    10/22/2007 27,980 87.14 10/22/2017
    10/26/2006 42,560 44.06 10/26/2016
    10/28/2005 32,090 29.2175 10/28/2015
    3/2/2011 39,680 3,456,525
    9/1/11-8/31/13 3 12,704 1,106,645
    9/1/10-8/31/12 4 13,640 1,188,180
    9/1/09-8/31/12 5 0 0

      2012 PROXY STATEMENT MONSANTO COMPANY 57



    Executive Compensation continued
     

                Stock Awards 1
        Option Awards 1 Restricted Stock Units Performance-RSUs
    Name Grant Date or
    Performance
    Period
    Number of
    Securities
    Underlying
    Unexercised
    Options (#)
    Exercisable
    Number of
    Securities
    Underlying
    Unexercised
    Options (#)
    Unexercisable
    Option
    Exercise
    Price ($)
    Option
    Expiration
    Date
    Number of
    Units of Stock
    That Have Not
    Vested (#)
    Market Value
    of Units of
    Stock That
    Have Not
    Vested ($) 2
    Equity Incentive
    Plan Awards;
    Number of
    Unearned
    Shares, Units
    or Other Rights
    That Have Not
    Vested (#)
    Equity Incentive
    Plan Awards;
    Market or Payout
    Value of Unearned
    Shares, Units or
    Other Rights That
    Have Not Vested
    ($) 2
    Robert T. Fraley,   10/24/2011 62,680 74.79 10/24/2021    
    Ph.D. 10/25/2010 26,616 53,234 58.71 10/25/2020
    10/26/2009 33,160 16,580 70.69 10/26/2019
    10/20/2008 52,410 89.45 10/20/2018
    10/22/2007 53,800 87.14 10/22/2017
    10/26/2006 86,390 44.06 10/26/2016
    3/2/2011 44,070 3,838,938
    9/1/11-8/31/13 3 16,714 1,455,957
    9/1/10-8/31/12 4 21,300 1,855,443
    9/1/09-8/31/12 5 0 0
    David F. Snively 10/24/2011 37,610 74.79 10/24/2021
    10/25/2010 13,840 27,680 58.71 10/25/2020
    10/26/2009 17,246  8,624 70.69 10/26/2019
    10/20/2008 23,060 89.45 10/20/2018
    10/22/2007 17,220 87.14 10/22/2017
    6/7/2011 35,360 3,080,210
    9/1/11-8/31/13 3 10,030 873,713
    9/1/10-8/31/12 4 11,080     965,179
      9/1/09-8/31/12 5 0 0

    Stock options, restricted stock units and Financial Goal RSUs and Strategic Goal RSUs become exercisable or vested in accordance with the vesting schedules below, subject to performance conditions and accelerated vesting under certain circumstances described under Long-Term Incentive Awards beginning on page 53.
     
    2 Amounts in these columns are based on the closing stock price of $87.11 for our common stock on Aug. 31, 2012.
     
    3 Financial Goal RSUs, which were granted in October 2011. As required by the SEC’s disclosure rules, the number of units shown assumes that outstanding levels of performance (200%) will be achieved. In October 2013, the people and compensation committee will determine the actual levels of performance achieved for these awards.
     
    4 Financial Goal RSUs, which were granted in October 2010. The table reports the actual number of units eligible for vesting. In October 2012, after evaluating our performance with respect to these Financial Goal RSUs, the people and compensation committee determined that the company exceeded the outstanding levels of performance and 200% of the target number of units are eligible for vesting, subject to the additional one-year service requirement.
     
    5 Strategic Goal RSUs, which were granted in October 2009. The table reports the actual number of units eligible for vesting. In October 2012, the people and compensation committee determined that the company failed to achieve the threshold level of performance with respect to each of the award’s performance goals and that no Strategic Goal RSUs are eligible for vesting.

    58 MONSANTO COMPANY 2012 PROXY STATEMENT  




       
    Equity Award Vesting Summary

    Stock Options
    Grant Date One-third vests on each of:
    10/24/2011 Nov. 15, 2012, Nov. 15, 2013 and Nov. 15, 2014
    1/1/2011 Jan. 1, 2012, Nov. 15, 2012 and Nov. 15, 2013
    10/25/2010 Nov. 15, 2011, Nov. 15, 2012 and Nov. 15, 2013
    10/26/2009 Nov. 15, 2010, Nov. 15, 2011 and Nov. 15, 2012
     
    Restricted Stock Units
    Grant Date Vesting
    6/7/2011 Fully vest on Jun. 1, 2015
    3/2/2011 Fully vest on Jan. 30, 2015
    Financial Goal RSUs
    Performance Period Vesting
    9/1/11 - 8/31/13 Eligible for vesting on Aug. 31, 2014
    9/1/10 - 8/31/12 Eligible for vesting on Aug. 31, 2013


    Option Exercises and Stock Vested Table

    The following table provides information about the value realized by our proxy officers on the exercise of stock options and vesting of stock awards during fiscal 2012.

      Option Awards Stock Awards 1      
    Name Number of
    Shares Acquired
    on Exercise
    (#)
    Value Realized
    on Exercise
    ($) 2
    Number of
    Shares Acquired
    on Vesting
    (#)
    Value Realized
    on Vesting
    ($) 3
      Total Value
    Realized on
    Exercise and Vesting
    ($)
     
    Hugh Grant     336,920         17,758,514         12,418         1,081,732         18,840,246    
    Pierre C. Courduroux 15,220   750,520 0 0 750,520
    Brett D. Begemann 32,090 1,731,830 2,484 216,381 1,948,211
    Robert T. Fraley, Ph.D. 40,110 2,005,881 4,144 360,984 2,366,865
    David F. Snively 0 0 2,153 187,548 187,548

    Amounts in these columns reflect the vesting of Financial Goal RSUs that were granted on Oct. 26, 2009. The units were subject to a two-year performance period (Sept. 2009 – Aug. 2011) upon which a performance determination was made and stock vested on Aug. 31, 2012.
     
    2 Amounts represent the difference between the market price upon exercise and the exercise price.
     
    3 Amounts in this column are based on the fair market value of $87.11 for common stock vesting on Aug. 31, 2012.

    Pension Benefits

    Our proxy officers currently participate in the same defined benefit retirement plans as our other eligible U.S. employees: the company Pension Plan and the Parity Pension Plan. As a result of their prior positions outside the United States, Mr. Grant and Mr. Courduroux have also accrued benefits under defined benefit retirement plans available to our ex-U.S. employees, as described below.

      2012 PROXY STATEMENT MONSANTO COMPANY 59



    Executive Compensation continued
      
    Pension Benefits Table

    The following table reports the present value of accumulated benefits payable to each of our proxy officers under our defined benefit retirement plans as of August 31, 2012. For the Pension Plan, the present value of the accumulated benefit has been calculated assuming, for valuation purposes only, that the proxy officer will remain in service until age 65, that the discount rate is 3.45%, and that 80% of the benefit is payable as a lump sum and the remainder as a single life annuity. For the Parity Pension Plan, the present value of the accumulated benefit has been calculated assuming, for valuation purposes only, that the proxy officer will remain in service until age 65, that the discount rate is 3.05%, and the benefit is payable as a lump sum. The post-retirement mortality assumption for all of the retirement plans is based on the RP-2000 Healthy Annuitants table without collar or adjustments, projected to 2019 using scale AA.

    Name Plan Name Number of Years
    Credited Service
    (#)
    Present Value of
    Accumulated
    Benefits
    ($)
    Payments During
    Last Fiscal Year
    ($)
    Hugh Grant Pension Plan (US) 1      16.67           472,507               
    Parity Pension Plan (US) 2 16.67 4,440,082
    Pension Plan (United Kingdom) 3 15.04 372,471
    Total   31.71 5,285,060
    Pierre C. Courduroux Pension Plan 1 4.92 158,385
    Parity Pension Plan 2 4.92 143,111
    International Supplemental Retirement Account Plan 4 6.00 27,787
    Total 6.00 329,283
    Brett D. Begemann Pension Plan 1 29.63 871,278
    Parity Pension Plan 2 29.63 1,316,424
    Total 29.63 2,187,702
    Robert T. Fraley, Ph.D. Pension Plan 1 31.67 1,282,042
    Parity Pension Plan 2 31.67 3,190,665
    Total 31.67 4,472,707
    David F. Snively Pension Plan 1 28.94 1,068,728
    Parity Pension Plan 2 28.94 759,766
    Total 28.94 1,828,494

    1   The estimated Aug. 31, 2012 notional account balances under our Pension Plan (as opposed to the present value of accumulated benefits shown in the table) are as follows: Mr. Grant, $394,086; Mr. Courduroux, $115,057; Mr. Begemann, $778,322; Dr. Fraley, $1,290,651; and Mr. Snively, $1,061,210.
     
    2 The estimated Aug. 31, 2012 notional account balances under our Parity Pension Plan (as opposed to the present value of accumulated benefits shown in the table) are as follows: Mr. Grant, $3,648,823; Mr. Courduroux, $102,764; Mr. Begemann, $1,025,286; Dr. Fraley, $3,066,107; and Mr. Snively, $679,238.
     
    3 In addition to the retirement benefits for Mr. Grant based on his years of service as our employee in the U.S., Mr. Grant also is eligible for regular retirement benefits based on his years of service as our employee in the U.K. The U.K. plan is closed to new entrants. Mr. Grant ceased accruing benefits in the U.K. plan in 1996 when he moved to the U.S. The U.K. plan is calculated as follows: (i) 18% times final plan salary, times (ii) pre-Jan. 1, 1995 service, plus (iii) 20%, times (iv) final plan salary, times (v) post-Jan. 1, 1995 plan service. Benefits for service prior to 1993 must be no less than the amounts offered under a prior U.K. pension plan. Benefits increase in accordance with cost of living indices.
     
    4 In addition to the pension plan benefits for Mr. Courduroux based on his years of service as our employee in the U.S., Mr. Courduroux also is eligible for regular pension plan benefits under the company’s International Supplemental Retirement Account Plan, described on page 62, based on his years of service as our employee on assignment from France to Switzerland in 2006 and 2007. Mr. Courduroux’s notational account balance under the International Supplemental Retirement Account Plan accrues interest credits at 8% per annum posted over the course of his employment. Mr. Courduroux’s account balance as of Aug. 31, 2012 is $13,682.

    60 MONSANTO COMPANY 2012 PROXY STATEMENT  



        
     

    Pension Plan

    We maintain the Monsanto Company Pension Plan for the benefit of our U.S. employees. The Pension Plan is a form of pension plan known as a cash balance plan, and is a tax-qualified defined benefit plan under the Code. Under the cash balance plan design, there are two types of participant accounts: a “prior plan account” and a “cash balance account.” Cash balance plan participants who were employed by Former Monsanto and then by us in the U.S. before and after 1997, including Messrs. Grant, Begemann, Snively and Dr. Fraley, have both a prior plan account and a cash balance account. Mr. Courduroux became a participant in the Pension Plan as of October 1, 2007, at the time he transferred employment to the U.S. and has only a cash balance account under the Pension Plan.

    The prior plan account generally preserves (and grows) benefits earned under the pension plan maintained by Former Monsanto through December 31, 1996. The opening balance of the prior plan account was (at a minimum) the actuarial equivalent lump sum value of the participant’s old defined benefit plan monthly retirement benefit accrued prior to January 1, 1997. Each month, the prior plan account is increased by (1) “interest credits” at an annual rate of 8.5% until the earlier of the participant reaching age 55 or when benefits begin; and (2) “pay credits” at an annual rate of 4%, until the participant retires or terminates employment.

    The cash balance account is credited for all service earned on or after January 1, 1997. The cash balance account grows by the addition of various compensation-based and interest-based credits posted over the course of participants’ employment. We credit annual contributions, expressed as a percentage of eligible compensation, to the cash balance account in amounts depending upon a participant’s age as follows: 3% before age 30, 4% for ages 30 to 39, 5% for ages 40 to 44, 6% for ages 45 to 49 and 7% for age 50 and over. Participants also receive contribution credits equal to 3% of eligible compensation in excess of the social security wage base. Participants who were covered under the prior traditional defined benefit plan on December 31, 1996 also received transition credits while employed based on the number of years of benefit service earned as of that date (up to a maximum of ten years). The applicable percentages and age ranges were 2% before age 30, 3% for ages 30 to 39, 4% for ages 40 to 44, 5% for ages 45 to 49, and 6% for age 50 and over. In addition, each participant’s cash balance account accrues monthly interest credits, based on the average interest rate for 30-year Treasury Bonds for October of the prior calendar year, with a minimum rate of 5% and a maximum rate of 10%.

    A pension plan participant may elect to receive his or her vested plan benefit on the first day of any month following the date upon which the participant’s employment with our company and affiliated companies is terminated or the participant becomes disabled (but no later than the April 1 following the calendar year in which the participant attains age 70½). Pension plan benefits are normally paid in either a single life annuity for unmarried participants or a 50% joint and survivor annuity for married participants, with additional optional forms of benefit available, including a lump sum distribution. All available forms of distribution are actuarially equivalent to the single life annuity.

    Parity Pension Plan

    Our Parity Pension Plan provides pension benefits to certain of our U.S. management-level employees, including the proxy officers, who cannot receive full benefits from our Pension Plan because of limitations and restrictions imposed by federal law and regulations. The amount of a participant’s Parity Pension Plan benefit is the excess of the amount of benefit that he or she would have received under our Pension Plan but for the imposition of these limitations and/or the deferral of the annual incentive award over the amount payable in the Pension Plan.

    Parity Pension Plan benefits are vested only to the extent a participant’s Pension Plan benefits are vested, but are forfeited in the event of a termination for cause. Effective December 31, 2008, the provisions of the Parity Pension Plan relating to the timing of distributions were amended to comply with the final regulations under Code Section 409A, and certain payment options were eliminated from the grandfathered portion of the plan.

      2012 PROXY STATEMENT MONSANTO COMPANY 61



    Executive Compensation continued
      

    Pre-2005 benefits (grandfathered) under the Parity Pension Plan are those benefits that were earned and vested prior to December 31, 2004. There are two payment options under the Parity Pension Plan for pre-2005 benefits. Benefits may be paid as:

    • an automatic lump-sum on the first January 1 or July 1 that is six months following termination of employment; or
    • deferred at least three years following the first January 1 or July 1 that is six months following termination of employment and paid in a lump-sum or term certain option that provides monthly payments over a term of one to ten years, with residual payments to a beneficiary if applicable.

    Post-2004 benefits under the Parity Pension Plan are those benefits that were earned and vested after December 31, 2004. There are two payment options under Parity Pension Plan for post 2004 benefits. Benefits may be paid as:

    • an automatic lump-sum in the 13th month following termination of employment; or
    • deferred at least five years following the 13th month from termination of employment and paid in a lump-sum or term certain annuity, which provides monthly payments over a term of one to ten years, with residual payments to a beneficiary if applicable.

    During any waiting or deferral period, we credit participants’ Parity Pension Plan benefits with interest, currently based on the prior year’s average of the monthly averages of the Moody’s Baa Bond Index, which was 6.04% in calendar year 2011 and 5.66% in calendar year 2012. A Parity Pension Plan participant who has elected to defer receipt of benefits may request an emergency benefit distribution during the waiting period, deferral period or after benefit payments have begun if he or she incurs a severe, unforeseeable financial hardship.

    International Supplemental Retirement Account Plan

    Our International Supplemental Retirement Account Plan IRP is a non-qualified defined benefit plan maintained to provide certain benefits to employees who have met certain age and service requirements and who experience a permanent international transfer and meet the eligibility requirements of the plan.

    The IRP provides benefits that are a function of a notational account maintained on behalf of plan participants. The IRP account grows by the addition of various compensation-based and interest-based credits posted over the course of the participant’s employment. We credit annual contributions in amounts depending upon the participant’s age and a set comparison of company-provided retirement benefits in his home country and country of assignment, in amounts ranging from 2% to 13% of eligible compensation (which the plan defines as base pay plus any bonus or AIP award). In addition, each participant’s IRP account accrues interest credits at 8% per annum.

    IRP benefits are vested only to the extent a participant’s home country pension plan benefit would be vested or, if there is no home country pension plan, upon completion of five years of continuous service, death or disability. Currently, vested benefits may be paid as follows:

    • an automatic lump-sum in the 13th month following termination of employment; or
    • deferred at least five years following the 13th month from termination of employment and paid in a lump-sum or term certain annuity, which provides monthly payments over a term of one to ten years, with residual payments to a beneficiary if applicable.
    62 MONSANTO COMPANY 2012 PROXY STATEMENT  




     
    Non-Qualified Deferred Compensation

    Our proxy officers are eligible to participate in the two non-qualified deferred compensation plans we maintain for certain of our management-level U.S. employees: our SIP Parity Plan and our Deferred Payment Plan. Additionally, in fiscal 2004, Mr. Grant deferred receipt of Financial Goal RSUs awarded that year, to be paid out following his retirement.

    Non-Qualified Deferred Compensation Table


    The following table provides information for each proxy officer regarding fiscal 2012 aggregate individual and company contributions, aggregate earnings and year-end account balances under our deferred compensation plans:

    Name and
    Non-Qualified Plan
      Executive
    Contributions
    in Last FY
    ($) 1
        Monsanto
    Contributions
    in Last FY
    ($) 2
        Aggregate
    Earnings
    in Last FY
    ($)
        Aggregate
    Withdrawals/
    Distributions
    ($)
        Aggregate
    Balance at
    Last FYE
    ($) 4
     
    Hugh Grant
         SIP Parity Plan 466,601 305,043 1,533,913 0 10,151,384
         Deferred Payment Plan 0 0 0 0 0
         Deferred RSUs 3 0 0 1,330,243 0 6,402,911
    Pierre C. Courduroux
         SIP Parity Plan 88,023 58,211 7,433 0 173,873
         Deferred Payment Plan 0 0 0 0 0
    Brett D. Begemann
         SIP Parity Plan 79,181 70,726 216,262 0 1,618,948
         Deferred Payment Plan 0 0 197,187 0 945,229
    Robert T. Fraley, Ph.D.
         SIP Parity Plan 123,453 88,797 434,652 0 3,865,376
         Deferred Payment Plan 0 0 28,212 0 502,537
    David F. Snively
         SIP Parity Plan 91,640 65,858 185,241 0 1,195,046
         Deferred Payment Plan 0 0 0 0 0

    Amounts in this column reflect the proxy officers’ deferral of base pay and fiscal 2011 AIP award, paid during fiscal 2012. Proxy officer deferrals of base pay for the 2012, 2011, and 2010 fiscal years into the SIP Parity Plan are also included in the Salary column of the Summary Compensation Table and for 2012 are as follows: for Mr. Grant, $128,816; Mr. Courduroux, $30,923; Mr. Begemann, $23,181; Dr. Fraley, $36,953; and Mr. Snively, $27,640.
     
    2 Amounts in this column reflect company matching allocations. These amounts are also included in the All Other Compensation column of the Summary Compensation Table.
     
    3 In fiscal 2004, Mr. Grant deferred receipt of 68,640 shares of common stock underlying Financial Goal RSUs (34,320 pre-split shares) awarded that year, to be paid out following his retirement. The Aggregate Earnings in Last FY column reflects the change in value of these deferred shares and all cash dividends paid in fiscal 2012. The Aggregate Balance at Last FYE reflects the total value of these shares based on the August 31, 2012 stock price of $87.11 and all cash dividends paid since the shares were deferred.
     
    4 Includes, among other things, proxy officer contributions from salary or incentive compensation reported in the Summary Compensation Table of our previous proxy statements for the year earned to the extent the proxy officer was a proxy officer for that period.

      2012 PROXY STATEMENT MONSANTO COMPANY 63



    Executive Compensation continued
     
    SIP Parity Plan

    All eligible U.S. employees may contribute up to 25% of eligible pay to our Savings and Investment Plan (“SIP”), which is a tax-qualified defined contribution plan. During fiscal 2012, the company made matching contributions to SIP equal to 60% of up to the first 7% of eligible compensation contributed by the participant, and may make an annual discretionary matching contribution on up to 10% of eligible compensation contributed by the participant.

    Once contributions to the SIP reach a Code limit on compensation or contributions, hypothetical amounts are allocated to notional accounts under the SIP Parity Plan. Employee deferrals under the SIP Parity Plan are fully vested; however, matching amounts vest 20% per year over five years. The company credits both participant contributions and its matching amounts to the SIP Parity Plan with earnings or losses matching the performance of one or more investment options available under the SIP, as determined by the participant. The plan currently offers 16 investment options, one of which is a book account based on our company stock, which provided a return of 25.7% for fiscal 2012. The other 15 investment options provided returns ranging from 0.6% to 17.9% for fiscal 2012. A participant may change his or her investment elections at any time, except that reallocations involving our common stock funds must be made in compliance with our policies on trading of our stock. After termination of employment, the plan credits accounts with interest, currently based on the prior year’s average of the monthly averages of the Moody’s Baa Bond Index Rate, as in effect from time to time, which was 6.04% in calendar year 2011 and 5.66% in calendar year 2012.

    There are two payment options under the SIP Parity Plan for contributions that were credited and vested prior to 2005. Such benefits may be paid as:

    • an automatic lump-sum on the first January 1 or July 1 that is six months following termination of employment; or
    • deferred at least three years following the first January 1 or July 1 that is six months following termination of employment (but not later than age 70-1/2) and paid in a lump-sum or term certain option that provides monthly payments over a term of one to ten years, with residual payments to a beneficiary if applicable.

    There are also two payment options for benefits under the SIP Parity Plan attributable to contributions that were credited and vested after December 31, 2004. Such benefits may be paid as:

    • an automatic lump-sum in the 13th month following termination of employment; or
    • deferred at least five years following the 13th month from termination of employment (but not later than age 70-1/2) and paid in a lump-sum or term certain annuity, which provides monthly payments over a term of one to ten years, with residual payments to a beneficiary if applicable.

    Deferred Payment Plan

    Until such time as our Deferred Payment Plan was frozen with respect to new deferrals, the plan provided certain management-level employees the opportunity to defer, until a specific date in the future or until termination of employment or beyond, the receipt of all or a portion of their annual incentive plan cash awards. Our Deferred Payment Plan was amended to provide that our proxy officers and certain other members of senior management may not make any new deferral elections under the plan after August 31, 2009 (effective for our fiscal 2010 annual incentive plan), and that other participants may not make any new deferral elections after August 31, 2010 (effective for our fiscal 2011 annual incentive plan).

    With respect to amounts deferred under the Deferred Payment Plan prior to its amendment, the plan permits participants to elect among two investments: (1) the cash election, under which earnings on deferred amounts accrue at a rate equal to the average yield of the Moody’s Baa Bond Index for the prior calendar year; and (2) the stock election, under which earnings accrue at a rate that tracks the performance of our common stock (including reinvestment of dividends), with deferred amounts converted into hypothetical stock units based on

    64 MONSANTO COMPANY 2012 PROXY STATEMENT  




     

    the average trading price during the preceding ten trading days. Participants may transfer between funds subject to certain rules and procedures. Amounts are distributed on either the date specified by the participant at the time of the deferral election or in a lump sum or monthly installments for up to ten years following termination of employment. Amounts attributable to the cash election are paid in cash, and amounts attributable to the stock election are paid in shares of our common stock unless the participant otherwise elects to receive cash. If approved by the plan’s administrative committee, at its discretion, a participant may receive an early distribution of benefits if he or she incurs a severe, unforeseeable financial hardship.

    Potential Payments Upon Termination or Change of Control

    Change of Control Employment Security Agreements

    We have entered into change of control employment security agreements with each of the proxy officers and other executives that may require us to make payments to these individuals in the event of the termination of their employment following a change of control. Under the terms of the agreements, we will provide certain protections to the proxy officers for a period of two years following a change of control (the “protected period”). If a proxy officer incurs an involuntary termination of employment or a voluntary termination of employment for “good reason” during such period, he would be provided with severance benefits under the terms of the agreement.

    A “change of control” generally means:

    • any other person or entity acquires beneficial ownership of 30% or more of our outstanding common stock or the combined voting power over our outstanding voting securities;
    • the incumbent directors, as defined in the agreements, cease to constitute at least a majority of the board;
    • the completion of certain corporate transactions including a reorganization, merger, statutory share exchange, consolidation or similar transaction, a sale or other disposition of all or substantially all of our assets, or the acquisition of assets or stock of another entity, subject to certain exceptions; or
    • our shareowners approve a complete liquidation or dissolution.

    The same definition is used with respect to the equity awards included in the tables below.

    During the protected period, the agreements generally provide that the proxy officer’s position, job location and travel requirements will not materially change following the change of control. In addition, during the protected period, the proxy officers will receive compensation and benefits, for which the opportunity or terms, respectively, shall be no less favorable than those in effect prior to the change of control.

    Termination Other Than for Cause or Disability; Voluntary Termination for Good Reason
    If the proxy officer is terminated other than for cause or disability, or the proxy officer terminates employment for “good reason” (as described below) during the protected period and executes a timely release, he would be entitled to a lump sum payment within 60 days after the termination date equal to the following:

    • base salary through the termination date, plus accrued pay in lieu of unused vacation;
    • a pro-rata portion of the proxy officer’s “average bonus;” and
    • the product of three times the sum of (i) annual base salary and (ii) “average bonus.”

    Upon such a termination, all benefits accrued through the termination date under our Pension Plan and supplemental pension or retirement plans will be vested and paid in accordance with their terms.

      2012 PROXY STATEMENT MONSANTO COMPANY 65



    Executive Compensation continued
     

    Following a severance-qualifying termination, the applicable proxy officer is eligible for outplacement benefits, in accordance with our normal practice for our most senior executives, and will receive specified welfare benefits (i.e., medical, prescription drug, dental, vision, disability and life insurance), through the end of the severance period; provided, if the proxy officer becomes eligible to receive specified welfare benefits under another employer provided plan, our company’s benefits will cease. Further, for purposes of eligibility for retiree welfare benefits, if the proxy officer is age 50 on the termination date, has provided at least 10 years of service, and has a combined age and years of service of 65, the proxy officer will be entitled to receive retiree medical benefits.

    “Good reason” generally means:

    • a material diminution in authority, duties or responsibilities of the executive;
    • a material failure by the company to comply with provisions in the agreement regarding the executive’s position, location, duties, responsibilities or compensation;
    • any purported termination by the company of his or her employment except as expressly permitted under the agreement; or
    • any failure by the company to require a successor to expressly assume the agreement;

    provided that the proxy officer has given us notice of the existence of, and an opportunity to cure, an event or condition constituting good reason, in accordance with the agreement.

    Termination for Death or Disability
    If the proxy officer is terminated on account of death or disability during the protected period, the company will pay the proxy officer (or his estate or beneficiaries):

    • a lump sum cash payment of all base salary accrued through the termination date, plus accrued pay in lieu of unused vacation;
    • a pro-rata portion of the proxy officer’s “average bonus;”
    • in the case of death, death benefits to the proxy officer’s estate or beneficiaries that are at least as favorable as death benefits provided to peer executives of our company; and
    • in the case of disability, disability benefits to the proxy officer and/or his family that are at least as favorable as disability benefits provided to peer executives of our company.

    Termination for Cause or Voluntary Termination Other Than for Good Reason
    If the proxy officer is terminated for “cause” during the protected period, no severance payments are due. “Cause” is defined as a proxy officer’s:

    • willful and continued failure to perform substantially his or her duties, subject to certain exceptions for incapacity and good reason terminations; or
    • willful and illegal conduct or gross misconduct that materially and demonstrably injures our company.

    If the proxy officer voluntarily terminates, other than for good reason, during the protected period, the company must pay the proxy officer in a lump sum in cash within 30 days of the date of termination:

    • a lump sum cash payment of all base salary accrued through the termination date, plus accrued pay in lieu of unused vacation; and
    • a pro-rata portion of the proxy officer’s “average bonus.”

    Treatment of Golden Parachute Excise Tax
    If a change of control occurs, and a proxy officer is subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, we will reduce payments to the proxy officer such that the aggregate amount equals the maximum amount that can be paid without triggering imposition of the excise tax, if the net amount received by the proxy officer after tax would be greater than it would be absent such a reduction.

    66 MONSANTO COMPANY 2012 PROXY STATEMENT  



         
     
    Other Arrangements

    In addition, many of our executive compensation, benefit and deferred compensation plans provide our proxy officers with certain rights or the right to receive payments in the event of the termination of their employment, as described in more detail in the section Long-Term Incentive Awards beginning at page 53. Our proxy officers participate in our company’s broad-based Employees’ Separation Pay Plan covering our full-time U.S. employees. Under the terms of the plan, a proxy officer would receive severance benefits in the event of his involuntary termination without cause, absent a change of control. The amount of the severance benefits would be paid as a lump sum equal to the product of: (a) 15, times (b) the sum of: (i) the proxy officer’s monthly base salary in effect at the time of the termination, plus (ii) the average of his annual incentive plan awards paid to him under our annual incentive plan for the three prior years, divided by 12. Their severance benefit calculation follows the same formula used in determining all other U.S. employees’ severance pay upon an involuntary termination without cause under the Separation Pay Plan.

    Potential Effect on Compensation Upon Termination or Change of Control Table

    The table and footnotes following show potential incremental payments, incremental benefits, equity award accelerations and equity award forfeitures upon termination of our proxy officers or a change of control. The amounts have been estimated under existing agreements and plans under various termination scenarios on August 31, 2012. However, because the compensation impact upon termination or a change of control depends on several factors, the actual impact can only be determined at the time of the event. Material assumptions used in calculating the estimated compensation and benefits under each triggering event are noted below. All amounts included in the table are stated in the aggregate, even if the payments will be made on a monthly basis. The table does not reflect amounts attributable to vested, non-forfeited equity-based awards or accrued compensation; retirement and other benefits; and deferred compensation. For information about these previously earned and accrued amounts, see the Summary Compensation Table, Outstanding Equity Awards at Fiscal Year End Table, Pension Benefits Table and Non-Qualified Deferred Compensation Table located elsewhere in this proxy statement.

      2012 PROXY STATEMENT MONSANTO COMPANY 67



    Executive Compensation continued
     

    Potential Effect on Compensation Upon Termination or Change of Control Table
        Termination Event  
                      Change of
                      Control
          Involuntary         Change of Without
        Voluntary Not for Cause For Cause Death Disability   Control Termination
    Name   ($) ($) 1 ($) ($) ($)   ($) 2 ($) 2
    Hugh Grant Cash Severance Payment 0 3,515,300 0 0 0

    3

    12,366,337 0
                                  Stock Options 4 0 5,351,743 0 5,351,743 5,351,743 7,668,273 0
    Performance-RSUs 5 0 7,751,570 0 7,751,570 7,751,570 6,357,375 6,932,214
    Total 0 16,618,613 0 13,103,313 13,103,313 26,391,985 6,932,214
    Enhanced Health & Welfare Benefits 6 0 104,203 0 0 0 127,580 0
    Forfeited Equity Value
    Stock Options (7,668,273) (2,316,530) (22,286,774) (2,316,530) (2,316,530) 0 0
    Performance-RSUs (9,932,456) (2,180,886) (9,932,456) (2,180,886) (2,180,886) 0 0
    Total (17,600,729) (4,497,416) (32,219,230) (4,497,416) (4,497,416) 0 0
    Pierre C. Courduroux Cash Severance Payment 0 958,958 0 0 0   3,212,000 0
      Stock Options 4 0 355,371 0 355,371 355,371   818,726 0
      Performance-RSUs 5 0 777,195 0 777,195 777,195   691,653 0
      Total 0 2,091,524 0 1,132,566 1,132,566   4,722,379 0
      Enhanced Health & Welfare Benefits 6 0 0 0 0 0   36,307 0
      Forfeited Equity Value
      Stock Options (818,726) (463,355) (1,400,629) (463,355) (463,355)   0 0
      Performance-RSUs (1,213,442) (436,247) (1,213,442) (436,247) (436,247)   0 0
      Total (2,032,168) (899,602) (2,614,071) (899,602) (899,602)   0 0
    Brett D. Begemann Cash Severance Payment 0 1,287,500 0 0 0 4,125,000 0
    Stock Options 4 0 1,130,833 0 1,130,833 1,130,833 1,717,757 0
    Performance-RSUs 5 0 1,742,374 0 1,742,374 1,742,374   1,444,458 1,386,791
    Restricted Stock Units 7 0 1,324,682 0 1,324,682 1,324,682 3,456,525 0
    Total 0 5,485,389 0 4,197,889 4,197,889 10,743,740 1,386,791
    Enhanced Health & Welfare Benefits 6 0 125,605 0 0 0 130,049 0
    Forfeited Equity Value
    Stock Options (1,717,757) (586,925) (6,218,116) (586,925) (586,925) 0 0
    Performance-RSUs (2,294,826) (552,452) (2,294,826) (552,452) (552,452) 0 0
    Restricted Stock Units (3,456,525) (2,131,843) (3,456,525) (2,131,843) (2,131,843) 0 0
    Total (7,469,108) (3,271,220) (11,969,467) (3,271,220) (3,271,220) 0 0
    Robert T. Fraley, Ph.D. Cash Severance Payment 0 1,265,717 0 0 0   3,937,720 0
      Stock Options 4 1,784,089 1,784,089 0 1,784,089 1,784,089   772,218 0
      Performance-RSUs 5 2,584,554 2,584,554 0 2,584,554 2,584,554   2,119,561 2,311,028
      Restricted Stock Units 7 0 1,471,201 0 1,471,201 1,471,201   3,838,938 0
      Total 4,368,643 7,105,561 0 5,839,844 5,839,844   10,668,437 2,311,028
      Enhanced Health & Welfare Benefits 6 0 0 0 0 0   19,403 0
      Forfeited Equity Value
      Stock Options (772,218) (772,218) (7,575,778) (772,218) (772,218)   0 0
      Performance-RSUs (726,846) (726,846) (3,311,400) (726,846) (726,846)   0 0
      Restricted Stock Units (3,838,938) (2,367,737) (3,838,938) (2,367,737) (2,367,737)   0 0
      Total (5,338,002) (3,866,801) (14,726,116) (3,866,801) (3,866,801)   0 0

    68 MONSANTO COMPANY 2012 PROXY STATEMENT  



     
     
        
    Potential Effect on Compensation Upon Termination or Change of Control Table
    Termination Event