DEF 14A 1 lgis2016_def14a.htm GENERAL MILLS, INC. - DEF 14A GENERAL MILLS, INC. - DEF 14A

UNITED STATES

 

Securities and Exchange Commission

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. __ )

 

  Filed by the Registrant Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to §240.14a-12

GENERAL MILLS, INC.

 

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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A LETTER FROM
OUR CHAIRMAN AND CEO

 

Dear Fellow Shareholder:

 

We will hold the General Mills 2016 Annual Meeting of Shareholders at the Radisson Blu Hotel in downtown Minneapolis at 35 South Seventh Street, Minneapolis, Minnesota, on Tuesday, September 27, 2016, at 8:30 a.m. Central Daylight Time. During the meeting, we will discuss each item of business described in this Proxy Statement, and we will give a brief report on developments in our business.

 

Fiscal 2016 was a milestone year for us at General Mills as we celebrated our 150th anniversary. During our history, we have introduced some of the most iconic food brands around the world. We’ve grown globally and now compete in more than 100 markets worldwide. And we’ve consistently delivered solid shareholder value. Our operating performance this year slightly exceeded our plan and we generated double-digit returns for our shareholders. And as our history shows, we are adaptable and are positioning ourselves for future growth.

 

In fiscal 2016, we took strategic actions to adapt to the changing marketplace. We continued to put the consumer first as we renovated existing brands and developed new products. We made strong progress on initiatives to improve organizational effectiveness and generate cost savings. And we completed actions to focus our portfolio on categories and markets with higher growth potential. Our businesses continued to generate strong cash flow, and our board of directors approved a record level of dividends to shareholders.

 

As we enter fiscal 2017, we will build on our successes while maintaining our focus on our Consumer First strategy, working to gain a deeper understanding of consumer needs and responding quickly to give them what they want. We’re also sharpening the way we think about our portfolio to make more strategic choices about our level of investments and expectations for growth across our businesses. Keeping consumer needs top of mind, we are centering our efforts on four priorities: driving more growth from our core businesses, as our well-established brands tend to generate the best returns for investors; funding our future with a continuous focus on increasing our productivity and reducing expenses; reshaping our portfolio to ensure we’re competing in the most attractive food categories, channels and geographies; and building an advantaged and agile organization to respond to a rapidly changing operating environment.

 

Thank you for your investment in our company. Whether or not you expect to attend the Annual Meeting, please vote your proxy so your shares will be represented at the meeting.

 

August 15, 2016

 

Sincerely,

 

 

Kendall J. Powell

Chairman and Chief Executive Officer

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement i
 

 

NOTICE OF 2016 ANNUAL MEETING OF SHAREHOLDERS

 

Dear Fellow Shareholder:

 

The Annual Meeting of Shareholders of General Mills, Inc. will be held on Tuesday, September 27, 2016, at 8:30 a.m., Central Daylight Time, at the Radisson Blu Hotel in downtown Minneapolis at 35 South Seventh Street, Minneapolis, Minnesota. Shareholders will be asked to:

 

1. Elect as directors the 13 nominees named in the attached Proxy Statement;
2. Adopt the 2016 Compensation Plan for Non-Employee Directors;
3. Cast an advisory vote on executive compensation;
4. Ratify the appointment of KPMG LLP as General Mills’ independent registered public accounting firm for our fiscal year ending May 28, 2017; and
5. Transact any other business that properly comes before the meeting.

 

The record date for the Annual Meeting is July 29, 2016. If you held General Mills stock at the close of business on that date, you are entitled to vote at the Annual Meeting.

 

Your vote is important. We encourage you to vote by proxy, even if you plan to attend the meeting.

 

August 15, 2016

 

Voting Methods  
By Internet
using your
computer
  On the internet at www.proxyvote.com and then follow the instructions.
     
By Internet
using your
tablet or
smartphone
  On your mobile device by scanning the QR Barcode on your proxy card, Notice of Internet Availability of Proxy Materials, or voting instruction form.
     
By telephone   Calling toll-free (U.S. and Canada) 800-690-6903.
     
By mailing
your proxy
card
  Mailing in your signed proxy card or voting instruction form (if you received one).
     
By casting
your vote in
person
  In person at the 2016 Annual Meeting.

 

Sincerely,

 

 

Richard C. Allendorf

Secretary

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 27, 2016

Our Notice of 2016 Annual Meeting of Shareholders, Proxy Statement and Annual Report to Shareholders are available on the General Mills website at www.generalmills.com in the Investors section.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement ii
 

Agenda and Voting Recommendations

 

1

 

Proposal Number 1: Election of Directors

 

The board of directors unanimously recommends a vote FOR each director nominee.

 

The 13 director nominees presented in this proposal are recommended for election to the board of directors.

Additional information about each director and his or her qualifications may be found beginning on page 4.

        Director           Committee Memberships
Name   Age   Since     Primary Occupation   Independent   AC   CC   CGC   FC   PRC
Bradbury H. Anderson   67   2007     Retired Chief Executive Officer and Vice Chairman of Best Buy Co., Inc.                  
R. Kerry Clark    64   2009     Retired Chairman and Chief Executive Officer of Cardinal Health, Inc.                  
David M. Cordani   50   2014     President and Chief Executive Officer of Cigna Corporation                  
Roger W. Ferguson Jr.   64   2015     President and Chief Executive Officer of TIAA                    
Henrietta H. Fore   67   2014     Chairman and Chief Executive Officer of Holsman International                  
Maria G. Henry   50   2016     Senior Vice President and Chief Financial Officer of Kimberly-Clark Corporation                      
Heidi G. Miller   63   1999     Retired President of J.P. Morgan International, J.P. Morgan Chase & Co.                      
Steve Odland   57   2004     President and Chief Executive Officer of the Committee for Economic Development                  
Kendall J. Powell   62   2006     Chairman and Chief Executive Officer of General Mills, Inc.                        
Robert L. Ryan   73   2005     Retired Senior Vice President and Chief Financial Officer of Medtronic, Inc.                    
Eric D. Sprunk   52   2015     Chief Operating Officer of NIKE, Inc.                  
Dorothy A. Terrell   71   1994     Managing Partner of FirstCap Advisors                    
Jorge A. Uribe   59   2016     Retired Global Productivity and Organization Transformation Officer at Procter & Gamble Company                      

 

 Independent Lead Director    AC: Audit Committee    CC: Compensation Committee

CGC: Corporate Governance Committee    FC: Finance Committee    PRC: Public Responsibility Committee

 

 Committee Chairperson     Committee Member    Financial Expert


 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement iii
 
2 Proposal Number 2:
Adoption of the 2016 Compensation Plan for Non-Employee Directors

The board of directors unanimously recommends a vote FOR the resolution.
  Additional information about the 2016 Compensation Plan for Non-Employee Directors may be found beginning on page 25.
   
   
3 Proposal Number 3:
Advisory Vote on Executive Compensation

The board of directors unanimously recommends a vote FOR the resolution.
  Additional information about executive compensation may be found beginning on page 28.
   
   
4 Proposal Number 4:
Ratify Appointment of the Independent Registered Public Accounting Firm

The board of directors unanimously recommends a vote FOR the resolution.
  Additional information about the independent registered public accounting firm may be found beginning on page 57.
   

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement iv
 

Table of Contents

 

PROPOSAL NUMBER 1    ELECTION OF DIRECTORS   1
       
CORPORATE GOVERNANCE   11
       
Board Independence and Accountability   11
Board Leadership   12
Our Board’s Key Responsibilities   12
Board Committees and Their Functions   15
Certain Relationships and Related Transactions   17
Codes of Conduct for Directors and Employees   18
Director Nominations   18
Communications with the Board   19
       
DIRECTOR COMPENSATION   20
       
Director Compensation for Fiscal 2016   21
       
OWNERSHIP OF GENERAL MILLS COMMON STOCK BY DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS   23
       
Section 16(a) Beneficial Ownership Reporting Compliance   24
       
PROPOSAL NUMBER 2 ADOPTION OF THE 2016 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS   25
       
Equity Compensation Plan Information   28
       
PROPOSAL NUMBER 3 ADVISORY VOTE ON EXECUTIVE COMPENSATION   28
       
EXECUTIVE COMPENSATION   29
       
Compensation Discussion and Analysis   29
Compensation Committee Report   44
Summary Compensation Table   45
Grants of Plan-Based Awards for Fiscal 2016   47
Outstanding Equity Awards at 2016 Fiscal Year-End 48
Option Exercises and Stock Vested for Fiscal 2016   50
Pension Benefits   51
Other Retirement Savings Plans   52
Nonqualified Deferred Compensation   53
Potential Payments Upon Termination or Change in Controll   53
       
PROPOSAL NUMBER 4 RATIFY APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   57
       
Independent Registered Public Accounting Firm Fees   58
Audit Committee Report   58
       
GENERAL INFORMATION   60
       
Other Business   60
Questions and Answers About the 2016 Annual Meeting and Voting   60
Solicitation of Proxies   63
Delivery and Viewing of Proxy Materials   63
Annual Reports   64
Your Vote is Important!   64
       
APPENDIX A      NON-GAAP FINANCIAL MEASURES   A-1
       
APPENDIX B      2016 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS   B-1
     
2016 ANNUAL MEETING INFORMATION   Back Cover

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement v
 

The board of directors of General Mills, Inc. (referred to as “General Mills,” “we,” “our,” “us” or the “company”) is soliciting proxies for use at the Annual Meeting of Shareholders to be held on September 27, 2016. This Proxy Statement summarizes the information you need to know to vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares. We first mailed or made available the proxy materials on or about August 15, 2016. Certain sections of this Proxy Statement reference or refer you to materials posted on our website, www.generalmills.com. These materials and our website are not incorporated by reference in, and are not part of, this Proxy Statement.

 

PROPOSAL NUMBER 1   ELECTION OF DIRECTORS

 

The board of directors unanimously recommends a vote FOR each of the 13 director nominees presented in this proposal.

 

Incumbents Paul Danos and Michael D. Rose will be retiring from the board effective as of the Annual Meeting, so they are not standing for re-election. Roger W. Ferguson Jr., Maria G. Henry, Eric D. Sprunk and Jorge A. Uribe were appointed to the board in fiscal 2016, and they appear on the ballot for the first time.

 

We consider the depth and diversity of experience on our board a key strength. We cultivate a balanced board of directors with the appropriate skill sets to discharge its responsibilities effectively. While each director comes from a unique background, the composition of the board encompasses skills and experience in a number of important areas, including:

 

Senior Executive
Leadership
  Consumer
Orientation
  Financial
Expertise
  Public Policy
Experience
  Global
Perspective
                 

We believe that directors who have served as CEOs or senior executives are in a position to challenge management and contribute practical insight into business strategy and operations.

 

Our directors also have access to important sources of market intelligence, analysis and relationships that benefit the company.

 

All of our directors have CEO or senior executive experience. 

 

As a company that relies on the strengths of our branded products, we seek directors who are familiar with the consumer packaged goods industry, have global marketing and retail experience and have brand-building expertise.

 

These directors help guide the company in assessing emerging trends and external forces.

 

A majority of our directors have consumer packaged goods, retail or consumer marketing experience. 

 

We believe that a strong understanding of finance and financial reporting processes is important for our directors.

 

Our directors have significant capital markets experience, corporate finance expertise and financial reporting backgrounds.

 

All of our audit committee members qualify as audit committee financial experts.

 

Directors with governmental and policymaking experience play an increasingly important role on our board as our business becomes more heavily regulated and as our engagement with stakeholders continues to expand.

 

Our directors bring significant experience from a variety of public policy, governance and regulated industry positions. 

 

A significant portion of the company’s future growth depends on its success in markets outside of the United States.

 

Directors with a global perspective help us make decisions on our strategic expansion into international markets.

 

A majority of our directors have experience managing foreign operations or leading organizations with significant international business. 

 

Each non-employee director is required to demonstrate independence; integrity; experience and sound judgment in areas relevant to our businesses; a proven record of accomplishment; willingness to speak one’s mind and commit sufficient time to the board; appreciation for the long-term interests of shareholders; the ability to challenge and stimulate management; and the ability to work well with fellow directors.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 1
 

Bringing together informed directors with different perspectives, in a well-managed and constructive environment, fosters thoughtful and innovative decision making. We have a policy of encouraging diversity of gender, ethnicity, age and background, as well as a range of tenures on the board to ensure both continuity and fresh perspectives among our director nominees. Our director nominee slate exhibits a balanced mix of tenures and age, and independent and diverse leadership:

 

 

We plan thoughtfully for director succession and board refreshment. In the past year, we appointed four new directors to succeed retiring board members, and over the next two years, we expect to appoint additional directors to succeed board members who will be retiring in accordance with our director tenure policy. Director succession presents an opportunity to:

 

Evaluate the depth and diversity of experience of our board;
  
Expand and replace key skills and experience;
  
Build on our record of board diversity; and
  
Maintain a balanced mix of tenures.

 

To that end, our corporate governance committee has developed a long-range succession plan to identify, recruit and appoint new directors who reflect our board composition guidelines and director selection criteria. The committee also plans for the orderly succession of the lead director and of chairs for the board’s five committees, providing for their identification, development and transition of responsibilities.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 2
 

Our board follows an annual director nomination process that promotes thoughtful and in-depth review of overall board composition and director nominees throughout the year. At the beginning of the process, the corporate governance committee reviews the current board composition, using a skills matrix to articulate search priorities for new director candidates. The committee identifies potential candidates using a search firm and referrals, and interviews them to confirm their qualifications, interest and availability for board service. The committee also reviews incumbent candidates and evaluates any changes in circumstances that may impact their candidacy. Upon a recommendation from the corporate governance committee, the board of directors approves the nomination of director candidates for election at the annual shareholders’ meeting.

 

This year the board lowered the director retirement age from 74 to 72. The change applies to all current directors under the age of 62 and all future directors.

 

ANNUAL DIRECTOR NOMINATION PROCESS

 

 

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 3
 

Our director nominees are presented below. If unforeseen circumstances (such as death or disability) make it necessary for the board to substitute another person for any of the nominees, the proxies have the authority to vote your shares for that other person.

 

    Bradbury H. Anderson    
       
  Age: 67 Committees: Compensation (Chair); Public Responsibility
  Independent Director Since: 2007 Other Public Directorships: Best Buy Co., Inc.
Waste Management, Inc.



 

Background:

 

Bradbury H. Anderson served as Chief Executive Officer and Vice Chairman of Best Buy Co., Inc., an electronics retailer, from 2002 until his retirement as Chief Executive Officer in 2009, and as Vice Chairman in 2010. Mr. Anderson joined Best Buy in 1973. Prior to becoming Chief Executive Officer, he served as Executive Vice President from 1986 to 1991 and President and Chief Operating Officer from 1991 to 2002.

 

Contributions to the Board:

 

Mr. Anderson brings to the board over 30 years of valuable retail expertise, unique consumer insights and brand-building experience.
   
During his tenure at Best Buy, Mr. Anderson helped to build the company from a local electronics retailer into a Fortune 100 company with a very strong branded identity.
   
He also adds strong leadership capabilities, strategic planning experience and operating expertise.
   
Mr. Anderson serves as the chair of our compensation committee.

 

    R. Kerry Clark, Independent Lead Director    
       
  Age: 64 Committees: Corporate Governance; Finance
  Independent Director Since: 2009 Other Public Directorships:  Avnet, Inc.
Anthem, Inc.
(formerly Wellpoint, Inc.)
Textron, Inc.

 

Background:

 

R. Kerry Clark served as Chairman and Chief Executive Officer of Cardinal Health, Inc., a provider of health care products and services, until his retirement in 2009. Mr. Clark joined Cardinal Health in 2006 as President and Chief Executive Officer and became Chairman in 2007. Prior to that, Mr. Clark had been with The Procter & Gamble Company, a consumer products company, since 1974. There, he held various positions including President of P&G Asia; President, Global Market Development and Business Operations; and from 2004 to 2006, Vice Chairman of the Board.

 

Contributions to the Board:

 

As our independent lead director, Mr. Clark draws on his business leadership, corporate strategy and operating expertise, and a strong background in consumer packaged goods, to foster active discussion and collaboration among the non-employee directors and to serve as an effective liaison with management.
   
In particular, he brings to the board extensive experience in launching new products, brand-building, innovation, marketing, and partnering with customers across sales channels.
   
Mr. Clark also lends a global business perspective, developed through his leadership of global business operations at Procter & Gamble.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 4
 
    David M. Cordani    
       
  Age: 50 Committees: Audit; Compensation
  Independent Director Since: 2014 Other Public Directorships: Cigna Corporation



 

Background:

 

David M. Cordani is President and Chief Executive Officer of Cigna Corporation, a global health insurance and health services company. Mr. Cordani joined Cigna in 1991 and has held a variety of finance and operating positions, including Chief Financial Officer for Cigna HealthCare and President and Chief Operating Officer for Cigna Corporation. He was named Chief Executive Officer of Cigna Corporation in 2009. Prior to joining Cigna, he held several senior staff positions at Coopers & Lybrand, an accounting firm.

 

Contributions to the Board:

 

Based on his tenure as Chief Executive Officer of Cigna Corporation, Mr. Cordani is attuned to the challenges of operating and growing a consumer-facing, S&P 500 company in a highly regulated industry, and he brings current insights on business leadership, strategic planning and corporate governance.
   
His career-long experience in the health services industry enables him to contribute insights on health and wellness trends and their impact on businesses.
   
Mr. Cordani’s background as a former certified public accountant and chief financial officer provides significant risk management and financial expertise to the audit committee. He is one of our audit committee financial experts.

 

    Roger W. Ferguson Jr.    
       
  Age: 64 Committees: Corporate Governance; Finance
  Independent Director Since: December 2015 Other Public Directorships: International Flavors & Fragrances, Inc.



 

Background:

 

Roger W. Ferguson Jr., has served as Chief Executive Officer of TIAA (formerly TIAA-CREF), a financial services firm, since 2008. Prior to joining TIAA, Mr. Ferguson served as the Chairman of Swiss Re America Holding Corporation, a global reinsurance company, from 2006 to 2008. Mr. Ferguson has also served in various policy-making positions, including as Vice Chairman of the Board of Governors of the U.S. Federal Reserve System from 1999 to 2006. From 1984 to 1997, Mr. Ferguson was an associate and partner at the Consulting firm McKinsey & Company.

 

Contributions to the Board:

 

As the Chief Executive Officer of TIAA, a major financial services company and institutional investor, Mr. Ferguson provides invaluable insights and perspective into how investors view matters of company strategy, performance and governance.
   
Mr. Ferguson also brings significant financial and capital markets expertise to the board and finance committee.
   
With a career that includes management consulting, significant public policy roles, executive leadership and board service, he is well-positioned to enhance the board’s strategic discussions and strong governance.

  

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 5
 
    Henrietta H. Fore    
       
  Age: 67 Committees: Corporate Governance; Public Responsibility (Chair)
  Independent Director Since: 2014 Other Public Directorships: ExxonMobil Corporation
Theravance Biopharma, Inc.
Theravance, Inc.
(2010-June 2014)

 

Background:

 

Henrietta H. Fore has been the Chairman and Chief Executive Officer of Holsman International, a manufacturing and investment company operating in the U.S. and international markets, since 2009. Ms. Fore also has held leadership positions in a number of U.S. government agencies, including Administrator of the United States Agency for International Development (“USAID”) and Director of U.S. Foreign Assistance at the Department of State from 2007 to 2009, the Under Secretary of State for Management from 2005 to 2007, and the 37th Director of the U.S. Mint from 2001 to 2005. She was President of Stockton Products, a manufacturer and distributor of steel and wire products, from 1986 to 1989, and again from 1993 to 2001, and she currently serves as Chairman. Ms. Fore also serves as Global Co-Chair of the Asia Society and the Middle East Investment Initiative.

 

Contributions to the Board:

 

Ms. Fore contributes a valuable perspective on public policy and public-private collaboration, based on her tenure at USAID, where she oversaw partnerships and alliances with over 3,500 companies and 200 U.S.-based private volunteer organizations, and at the Department of State, where she was the Secretary’s principal advisor on both foreign assistance and management issues. She serves as the chair of our public responsibility committee.
   
These experiences, along with her service at the Asia Society, inform her global perspective on markets around the world.
   
As an active chairman and chief executive officer who manages domestic and international operations, Ms. Fore offers current insights on leadership, strategic planning and governance.

 

    Maria G. Henry    
       
  Age: 50 Committees: Audit, Compensation
  Independent Director Since: June 2016



   

  

Background:

 

Maria Henry has been Senior Vice President and Chief Financial Officer of Kimberly-Clark Corporation since April 2015. Prior to that, she was Executive Vice President and Chief Financial Officer of Hillshire Brands, formerly known as Sara Lee Corporation, from 2012 to 2014. Ms. Henry was the Chief Financial Officer of Sara Lee’s North American Retail and Foodservice business from 2011 to 2012. Prior to Sara Lee, she held various senior leadership positions in finance and strategy in three portfolio companies of Clayton, Dubilier, and Rice, most recently as Executive Vice President and Chief Financial Officer of Culligan International from 2005 to 2011. Ms. Henry also held senior finance roles in several technology companies, and she began her career at General Electric.

 

Contributions to the Board:

 

Ms. Henry brings significant accounting, auditing and financial reporting expertise to the board and audit committee. She is one of our audit committee financial experts.
   
As an active Chief Financial Officer who is directly responsible for finance, accounting, real estate and investor relations, Ms. Henry offers capital markets expertise and current insights on public company financial, governance and leadership matters.
   
Ms. Henry’s consumer products background and experience make her well-positioned to critically and thoughtfully review and guide company strategy.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 6
 
    Heidi G. Miller    
       
  Age: 63 Committees: Audit (Chair); Finance
  Independent Director Since: 1999 Other Public Directorships: HSBC Holdings plc
The Progressive Corporation
(2011-September 2014)

  

Background:

 

Heidi G. Miller served as President of JPMorgan International, a division of global financial services firm J.P. Morgan Chase & Co., from 2010 until her retirement in 2012. She served as Executive Vice President, ceo, Treasury & Security Services, of J.P. Morgan Chase & Co. from 2004 to 2010. From 2002 to 2004, Ms. Miller served as Executive Vice President and Chief Financial Officer of Bank One Corporation. Previously, she had been Chief Financial Officer of Citigroup Inc.

 

Contributions to the Board:

 

Ms. Miller’s financial expertise, risk management skills and international business background are valuable assets to the board, the audit committee and the finance committee.
   
Ms. Miller possesses extensive experience in banking and finance in emerging markets. She spent 13 years with the Latin America Division of Chemical Bank, serving most recently as managing director and head of the emerging markets structured finance group. As head of Treasury & Security Services at JPMorgan Chase, she led the successful launch of a variety of new products and the group’s global expansion, particularly in Asia. As President of JPMorgan International, she focused on growth in emerging markets and expanding the bank’s global corporate bank.
   
She is one of our audit committee financial experts and serves as the chair of our audit committee.

  

    Steve Odland    
       
  Age: 57 Committees: Compensation; Corporate Governance (Chair)
  Independent Director Since: 2004 Other Public Directorships: Analogic Corporation



  

Background:

 

Steve Odland has been President and Chief Executive Officer of the Committee for Economic Development of the Conference Board, a non-profit, public policy organization, since 2013. From 2011 to 2012, he was an Adjunct Professor in the graduate school of business at Lynn University and at Florida Atlantic University. Mr. Odland served as Chairman and Chief Executive Officer of Office Depot, Inc., an office merchandise retailer, from 2005 until 2010. From 2001 to 2005, he was Chairman and Chief Executive Officer of AutoZone, Inc., an auto parts retailer. Prior to that, he served as President and Chief Executive Officer of Tops Markets, Inc., a U.S. food retailer, from 1998 to 2000, and as President of the Foodservice Division of Sara Lee Bakery from 1997 to 1998. He was employed by The Quaker Oats Company from 1981 to 1996.

 

Contributions to the Board:

 

As the former Chairman and Chief Executive Officer at Office Depot and AutoZone and past President and Chief Executive Officer of Tops Markets, Mr. Odland brings business leadership and strategic planning skills, retail expertise and an operating background to the board.
   
He provides valuable insights into consumer products marketing, brand-building, Internet marketing and sales, food service and international management from his executive roles in the food industry at Tops Markets, Quaker Oats and Sara Lee.
   
Mr. Odland also lends expertise on corporate financial planning and corporate governance, and he serves as chair of our corporate governance committee.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 7
 
    Kendall J. Powell    
       
  Age: 62 Other Public Directorships: Medtronic, Inc.
  Director Since: 2006



   

  

Background:

 

Kendall J. Powell is Chairman and Chief Executive Officer of General Mills. Mr. Powell joined General Mills in 1979 and served in a variety of positions before becoming a Vice President in 1990. He became President of the Yoplait division in 1996, President of the Big G cereal division in 1997, and Senior Vice President of General Mills in 1998. From 1999 to 2004, he served as Chief Executive Officer of Cereal Partners Worldwide (“CPW”), our joint venture with Nestlé. He returned from CPW in 2004 and was appointed Executive Vice President. Mr. Powell was appointed President and Chief Operating Officer of General Mills with overall global operating responsibility for the company in 2006, Chief Executive Officer in 2007 and Chairman in 2008. Mr. Powell also serves as a director of the Federal Reserve Bank of Minneapolis.

 

Contributions to the Board:

 

Mr. Powell’s career-long dedication to the company, wide-ranging familiarity with the business, experience with the strategies that drive growth, both in the U.S. and internationally, and his collaborative working style have positioned him well to serve as our Chairman and Chief Executive Officer.
   
Prior to his current role, Mr. Powell served in a number of key marketing and operational roles in the company’s U.S. Retail divisions.
   
He also spent eleven years abroad focusing on our international operations, including five years as Chief Executive Officer of CPW.

  

    Robert L. Ryan    
       
  Age: 73 Committees: Audit; Finance (Chair)
  Independent Director Since: 2005 Other Public Directorships: Stanley Black & Decker, Inc.
Citigroup Inc. (2007-April 2015)
Hewlett-Packard Company
(2004-2011)

 

Background:

 

Robert L. Ryan served as Senior Vice President and Chief Financial Officer of Medtronic, Inc., a medical technology company, from 1993 until his retirement in 2005. Mr. Ryan was Vice President, Finance, and Chief Financial Officer of Union Texas Petroleum Corp. from 1984 to 1993, Controller from 1983 to 1984 and Treasurer from 1982 to 1983. Prior to 1982, Mr. Ryan was Vice President at Citibank and was a management consultant for McKinsey & Company.

 

Contributions to the Board:

 

As former Chief Financial Officer at Medtronic and Union Texas Petroleum, Mr. Ryan brings significant audit, financial reporting, corporate finance and risk management experience to the board, including experience overseeing the controller, global audit, tax and treasury functions at these public companies.
   
He has a well-developed understanding of the board’s role and responsibilities based on his service on other public company boards.
   
He is one of our audit committee financial experts, and he serves as the chair of our finance committee.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 8
 
    Eric D. Sprunk    
       
  Age: 52 Committees: Audit; Public Responsibility
  Independent Director Since: December 2015





   

  

Background:

 

Eric D. Sprunk has served as the Chief Operating Officer of NIKE, Inc., an athletic footwear and apparel business, since 2013. Mr. Sprunk joined NIKE in 1993, and has held a variety of positions, including Regional General Manager of NIKE Europe Footwear from 1998 to 2000, Vice President & General Manager of the Americas from 2000 to 2001, Vice President of Global Footwear from 2001 to 2009, and Vice President of Merchandising and Product from 2009 to 2013. Prior to joining NIKE, Mr. Sprunk was a certified public accountant with the accounting firm Price-Waterhouse from 1987 to 1993.

 

Contributions to the Board:

 

As the current Chief Operating Officer and former Vice President of Merchandising and Product at a global, brand-based consumer products company, Mr. Sprunk brings relevant marketing experience to the board, as well as operating experience in key functions including manufacturing, sourcing, IT, sales, and procurement.
   
Mr. Sprunk is a certified public accountant who has worked in senior financial roles at NIKE and Price-Waterhouse, which provides valuable financial and accounting expertise. Mr. Sprunk is one of the audit committee’s financial experts.
   
His global and regional international management experiences at NIKE provide the board with a unique perspective on international consumer markets.

  

    Dorothy A. Terrell    
       
  Age: 71 Committees: Corporate Governance; Public Responsibility
  Independent Director Since: 1994 Other Public Directorships: Herman Miller, Inc.




  

Background:

 

Dorothy A. Terrell is the Managing Partner of FirstCap Advisors, a venture capital and advisory services firm that she founded in 2010. She was a limited partner of First Light Capital, a venture capital firm, from 2003 until 2010. Ms. Terrell served as President and Chief Executive Officer of the Initiative for a Competitive Inner City, a non-profit organization focused on inner city business development, from 2005 until 2007, and as Senior Vice President, Worldwide Sales, and President, Platform & Services Group, of NMS Communications, a producer of hardware and software component products for telecommunications applications, from 1998 until 2002. She served in various executive management capacities at Sun Microsystems, Inc. from 1991 to 1997 and Digital Equipment Corporation from 1976 to 1991.

 

Contributions to the Board:

 

During her leadership roles at FirstCap Advisors, First Light and at three premier technology companies, Ms. Terrell helped businesses reach profitability, and she brings a breadth of experience in e-commerce, international marketing, plant management, manufacturing and enterprise risk assessment to the board’s strategic discussions.
   
Ms. Terrell’s commitment to inner city business development and healthcare causes has positioned her to be an informed and effective member of our public responsibility committee.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 9
 
    Jorge A. Uribe    
       
  Age: 59 Committees: Compensation; Public Responsibility
  Independent Director Since: June 2016 Other Public Directorships: Ingredion Incorporated
Grupo Argoso SA



  

Background:

 

Mr. Jorge A. Uribe served as Global Productivity and Organization Transformation Officer at The Procter & Gamble Company, a consumer products company, from 2012 until his retirement in 2015. Prior to 2012, Mr. Uribe served as Group President of Latin America at Procter & Gamble from 2004 to 2012, as Vice President, Marketing and Customer Business Development, Latin America from 2001 to 2004 and as Vice President, Venezuela and Andean Region from 1999 to 2001.

 

Contributions to the Board:

 

Mr. Uribe’s international management background, including multi-regional and multi-country responsibility for operations throughout Latin America, together with his personal experience living and working outside the U.S., provides valuable perspective on the company’s international markets and operations.
   
As the former Global Productivity and Organization Transformation Officer of Procter & Gamble, Mr. Uribe brings first-hand experience in managing organizational change, efficiency improvement and cost management.
   
The experiences developed throughout his career at Procter & Gamble deepen the board’s overall consumer products expertise.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 10
 

CORPORATE GOVERNANCE

 

Our corporate governance program provides an important framework within which our board of directors and management pursue the strategic objectives of General Mills and ensure the company’s long-term vitality for the benefit of shareholders.

 

      Independent and diverse board of directors possessing skill sets critical to our company’s success
      Thoughtful management development and succession plans for the CEO and his direct reports
      Active shareholder engagement program with regular updates to the board
      Comprehensive director nomination process
      Proxy access By-law
Corporate     Long-range succession plan to identify, recruit and appoint qualified directors
Governance     All directors elected annually by majority of votes cast
Highlights     Strong independent lead director with authority to approve board meeting agendas
      Board and committee agendas developed annually to address core responsibilities
      Enterprise risk management processes at board and committee levels
      Standing public responsibility committee to oversee public policy issues impacting our business
      Executive sessions for independent directors after each board meeting
      Substantive annual board evaluations

 

For more information, our corporate governance principles are posted on our website at www.generalmills.com in the Investors section.

 

Board Independence and Accountability

 

Thorough Director Independence Determination

 

The cornerstone of our corporate governance program is an independent and qualified board of directors. The board has established guidelines consistent with the current listing standards of the New York Stock Exchange (“NYSE”) for determining director independence. You can find these guidelines in our corporate governance principles, which are posted on our website at www.generalmills.com in the Investors section.

 

Director affiliations are regularly reviewed to ensure there are no relationships that might impair a director’s independence. Transactions reviewed but deemed not to impair independence include: premiums for health insurance products and services paid by the company to Cigna Corporation, where Mr. Cordani serves as President and CEO; company debt securities and commercial paper held by Cigna; and company debt securities held by TIAA, where Mr. Ferguson serves as Chief Executive Officer. The board determined that these transactions were conducted in the ordinary course of our business, were not disclosable under NYSE listing standards, and given the nature and amount of payments involved, did not create a material relationship that would impair either director’s independence.

 

Based on this review, the board has affirmatively determined that all non-employee directors are independent under our guidelines and as defined by NYSE listing standards.

 

Annual Election by Majority of Votes Cast

 

Our directors are elected annually by a majority of votes cast, to enhance their accountability to shareholders. If an incumbent director is not re-elected, the director must promptly offer his or her resignation to the board. The corporate governance committee will recommend to the board whether to accept or reject the resignation, and the board will disclose its decision and the rationale behind it within 90 days from the certification of the election results. If ever there are more director nominees than the number of directors to be elected, the directors will be elected by a plurality of the votes cast.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 11
 

Robust Board Evaluations

 

The board and each committee annually conduct evaluations covering their operations and performance. From time to time, the board has engaged an outside governance expert to interview each director separately, facilitate a discussion of the aggregated results and assist the board in formulating subsequent action items.

 

Board Leadership

 

Our independent directors appoint the board’s leadership based on their judgment as to the structure that best serves the interests of the company and contributes to the effective operation of the board. The independent directors periodically evaluate whether the role of the Chairman and the CEO should be separated or combined.

 

Chairman and CEO Responsibilities

 

The independent directors believe that the positions of Chairman and CEO currently should be held by the same person, as this combination has served the company well by providing unified leadership and direction for the board. Under this structure, Mr. Powell leads the board and oversees board meetings and the delivery of information necessary for the board’s informed decision making. Mr. Powell also serves as the principal liaison between the board and our management.

 

Independent Lead Director Responsibilities

 

When there is a combined Chairman and CEO, the board also appoints an independent lead director who:

 

Presides at all board meetings at which the Chairman is not present, including executive sessions of the non-employee directors, which are held after each board meeting;
   
Serves as a liaison between the Chairman and the non-employee directors;
   
Approves board meeting agendas and consults with the Chairman on information provided to the board;
   
Approves meeting schedules to assure that there is sufficient time for discussions;
   
Calls meetings of the non-employee directors and sets agendas for executive sessions; and
   
Serves as a board representative for consultation and direct communication with major shareholders.

 

R. Kerry Clark has served as the independent lead director since December 2015. He draws on his leadership, strategic planning and governance expertise to foster active discussion and collaboration among the non-employee directors on the board and to serve as an effective liaison with management.

 

Our Board’s Key Responsibilities

 

The board is committed to the long-term growth of our business, and to achieving it in a manner that is responsible to the global communities in which we operate and sell our products:

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 12
 

Management Succession Planning

 

Succession planning is one of the board’s most critical functions - to develop and secure leaders who will successfully build the company’s business. Annually, the board formally reviews and discusses management development and succession plans for the CEO and his direct reports, and the board also discusses individual executive transitions as the need arises over the course of the year. This review includes an assessment of senior executives and their potential as successor to the CEO. The board has also adopted procedures to elect a successor in the event of the CEO’s sudden departure.

 

Overseeing Business Strategy

 

Our directors are an important resource for seasoned, candid and ongoing insights into strategic issues facing the company, including product portfolio development and innovation, strategic investments, margin improvement and global expansion.

 

Each year, the board formally reviews our annual and longer-term strategic business plans, financial targets and plans for achieving those targets.
   
Focused discussions of individual businesses and key issues are held throughout the year, and extended off-site sessions are held periodically for in-depth reviews of key strategic matters.
   
The board also regularly reviews our performance compared to our competitive peer companies.
   
The board reviews and approves significant capital investments and cash returns to shareholders through share repurchase plans and dividend payments.

 

Monitoring Performance and Ensuring the Integrity of Financial Results

 

The board is focused on monitoring performance against the company’s strategic objectives and financial targets. At each meeting throughout the year, the board reviews and discusses with management a set of detailed operating reports, including current financial performance versus plan. The audit committee reviews quarterly financial results with management before the results are publicly reported. The audit committee monitors the company’s internal controls and disclosure controls throughout the year to ensure the accuracy and integrity of the company’s financial reports.

 

Managing Risk

 

Enterprise Risk Management

 

Effective enterprise risk management is an integral part of board and committee deliberations throughout the year.

 

The audit committee annually reviews the company’s enterprise risk management process and the comprehensive assessment of key financial, operational and regulatory risks identified by management, as well as risk mitigating practices. The audit committee then discusses the process and results with the full board.
   
The board discusses risks related to the company’s annual financial plan at the beginning of each fiscal year, and risks related to business strategy at the annual strategic planning meeting. It continues to address these risks in follow-up discussions as the year progresses.
   
Each committee conducts its own risk assessment and risk management activities throughout the year, some of which are highlighted under Board Committees and Their Functions on page 15, and reports its conclusions and recommendations to the board.
   
The board also encourages management to promote a corporate culture that integrates risk management into the company’s corporate strategy and day-to-day business operations in a way that is consistent with the company’s targeted risk profile.

 

Through these processes, the board oversees a system to identify, assess and address material risks to the company on a timely basis.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 13
 

Compensation Risk Assessment

 

We periodically conduct a risk assessment of the company’s employee compensation policies and practices, including those that apply to our executive officers, to ensure that the policies and practices do not encourage excessive risk-taking in order to maximize compensation. The compensation committee oversees the process, and Frederic W. Cook & Co., Inc., the independent compensation consultant, participates in identifying and assessing risk.

 

 

Based on the most recent assessment, we have concluded that our compensation policies and practices are aligned with the interests of shareholders, appropriately reward pay for performance and do not create risks that are reasonably likely to have a material adverse effect on the company.

 

Representing Shareholders

 

The board makes it a priority to remain attuned to shareholder sentiment. To that end, the board has worked with management to develop a thoughtful shareholder engagement process.

 

Directors are available to meet directly with shareholders as appropriate. In most circumstances, our independent lead director will serve as the board’s representative for any meeting or engagement with investors.
   
Our investor relations team, together with senior management, meets regularly with shareholders and responds to their requests throughout the year.
   
The corporate secretary team reaches out to shareholders to discuss proxy season trends and issues, as well as a variety of business, social and environmental issues.

 

The board receives regular reports on engagement efforts and investor feedback and sentiment. The reports are also separately reviewed by the corporate governance and compensation committees. In fiscal 2016, we reached out to shareholders representing approximately 40 percent of our common stock outstanding, and of those shareholders among our top 50 who actively manage their investments, we engaged with holders of approximately 83 percent of the shares.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 14
 

Inspiring Corporate Citizenship

 

As a global food company, General Mills is positioned not only to create economic value in the countries where we operate, but to create social and environmental value as well, and the board plays an important role in fulfilling that mission. It has a standing public responsibility committee composed entirely of independent directors, many of whom possess extensive public policy experience. The committee works with management to guide the company’s corporate citizenship and sustainability programs, and it analyzes public policy issues that are important to internal and external stakeholders, including but not limited to, policy issues concerning food safety, nutrition and advertising. An overview of the company’s initiatives may be found in our Global Responsibility Report, which is available on our website at www.generalmills.com under the Responsibility section.

 

Board Committees and Their Functions

 

The board has five standing committees that are each composed entirely of independent directors. A copy of each committee’s charter may be found on our website at www.generalmills.com in the Investors section under “Corporate Governance.” Assignments are rotated periodically to ensure that each committee has an appropriate mix of tenure and experience.

 

            Corporate       Public  
    Audit   Compensation   Governance   Finance   Responsibility  
    Committee   Committee   Committee   Committee   Committee  
Bradbury H. Anderson                      
R. Kerry Clark                      
David M. Cordani                    
Paul Danos                      
Roger W. Ferguson Jr.                      
Henrietta H. Fore                      
Maria G. Henry                    
Heidi G. Miller                    
Steve Odland                      
Michael D. Rose                      
Robert L. Ryan                    
Eric D. Sprunk                    
Dorothy A. Terrell                      
Jorge A. Uribe                      

 

 Independent Lead Director     Chairperson     Member     Financial Expert     Retiring as of the Annual Meeting

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 15
 

Audit Committee

 

Number of meetings in fiscal 2016: Seven

 

Functions:

 

Oversees integrity, adequacy and effectiveness of internal control, audit and financial reporting processes;
   
Assesses and ensures the independence, qualifications and performance of our independent registered public accounting firm, selects the independent registered public accounting firm for the annual audit and approves the independent registered public accounting firm’s services and fees;
   
Meets with the independent registered public accounting firm, without management present, to consult with it and review the scope of its audit;
   
Oversees the company’s ethics and compliance program to ensure compliance with applicable laws, corporate policies and the company’s Employee Code of Conduct;
   
Reviews and discusses with management the company’s annual risk assessment and the enterprise risk management processes, policies and guidelines for identifying, assessing and managing key financial and operational risks;
   
Reviews and approves our annual audited financial statements before issuance, subject to the board of directors’ approval; and
   
Reviews the performance of the internal audit function.

 

Financial Experts:

 

The board of directors has unanimously determined that (i) all audit committee members are financially literate under the NYSE listing standards and (ii) all audit committee members qualify as “audit committee financial experts” within the meaning of SEC regulations and have accounting or related financial management expertise as required by the NYSE listing standards. Each member also meets the independence standards for audit committee membership under the rules of the SEC.

 

Compensation Committee

 

Number of meetings in fiscal 2016: Five

 

Functions:

 

Reviews compensation policies for executive officers and employees to ensure they align with our compensation philosophy and provide appropriate motivation for corporate performance and increased shareholder value;
   
Conducts performance reviews of the CEO;
   
Recommends compensation and equity awards for the CEO and approves them for other senior executives;
   
Recommends the compensation and equity awards for the non-employee directors;
   
Reviews and discusses with management an annual risk assessment of the compensation policies for executive officers and employees; and
   
Reviews and discusses with management the Compensation Discussion and Analysis and recommends its inclusion in the proxy statement.

 

Each member meets the independence standards for compensation committee membership under the listing standards of the NYSE.

 

Corporate Governance Committee

 

Number of meetings in fiscal 2016: Five

 

Functions:

 

Monitors and recommends changes in the organization and procedures of the board, including committee appointments and corporate governance policies;
   
Develops policy on composition, participation and size of the board as well as tenure and retirement of directors;
   
Recommends candidates for election to the board and evaluates continuing service of incumbent directors;
   
Oversees the annual board self-evaluation process; and
   
Reviews and approves transactions between General Mills and related persons.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 16
 

Finance Committee

 

Number of meetings in fiscal 2016: Four

 

Functions:

 

Reviews financial policies and objectives, including capital allocation and dividend policy;
   
Reviews changes in our capital structure, including debt issuances, common stock sales, share repurchases and stock splits;
   
Reviews significant capital investments, acquisitions and divestitures;
   
Reviews the annual business plan and related financing implications; and
   
Reviews financial risk management strategies, including the use of derivatives.

 

Public Responsibility Committee

 

Number of meetings in fiscal 2016: Three

 

Functions:

 

Reviews public policy issues and social trends affecting General Mills;
   
Monitors our corporate citizenship activities, including sustainability programs;
   
Evaluates our policies in the context of emerging corporate social responsibility issues; and
   
Reviews our policies governing political contributions and our record of contributions.

 

Director Attendance

 

Directors are expected to attend all board and committee meetings, as well as the annual meetings of shareholders, absent exigent circumstances. All of our directors in office at the time attended the 2015 Annual Meeting of Shareholders. During fiscal 2016, the board of directors met eight times and various committees of the board met a total of 24 times. All directors attended at least 75 percent of the aggregate total meetings of the board and board committees on which they served during fiscal 2016.

 

Certain Relationships and Related Transactions

 

Our board of directors has adopted a written policy for reviewing and approving transactions between the company and its related persons, including directors, director nominees, executive officers, 5 percent shareholders and their immediate family members or affiliates. The policy applies to:
   
  All financial transactions, arrangements or relationships involving more than $100,000;
     
  Transactions in which the company, or one of its affiliates, is a participant; and
     
  Transactions in which a related person could have a direct or indirect interest.
     
The policy does not apply to certain compensation payments that have been approved by the compensation committee or disclosed in the Proxy Statement, transactions that are available to all other shareholders or employees on the same terms, or transactions with an entity where the related person’s interest is only as a director or a less than 10 percent owner.
   
The board has delegated to our corporate governance committee the authority to review potential or existing related person transactions. The corporate governance committee will only approve or ratify those transactions that are determined to be consistent with the best interests of the company and its shareholders, and that comply with applicable policies, codes of conduct and legal restrictions.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 17
 

Codes of Conduct for Directors and Employees

 

We have adopted a code of conduct applicable to all employees, including our principal executive officer, principal financial officer and principal accounting officer, and a code of conduct applicable to our directors. The codes of conduct promote a company culture based on ethical behavior, integrity and responsibility. They are available on our website at www.generalmills.com in the Responsibility section under “Ethics and Integrity” and the Investor section under “Corporate Governance.”

 

The audit committee of the board of directors has established procedures for employees, shareholders, vendors and others to communicate concerns about our ethical conduct or business practices, including accounting, internal controls or financial reporting issues, to the audit committee, which has responsibility for these matters.

 

Director Nominations

 

The corporate governance committee is responsible for recommending candidates for election to our board of directors. For more information on overall board composition guidelines and selection criteria for individual directors, see Proposal Number 1 — Election of Directors on page 1. Director nominees recommended by the corporate governance committee are subject to full board approval and election by shareholders at the annual meeting of shareholders.

 

From time to time, the corporate governance committee retains a search firm to assist in identifying, evaluating and recruiting director candidates, and pays the firm a fee for these services. Suggestions also are received from board members and shareholders. Of the 13 directors recommended for election at the 2016 Annual Meeting, all nominees other than Roger Ferguson Jr., Maria G. Henry, Eric D. Sprunk and Jorge A. Uribe were elected as directors at our 2015 Annual Meeting. Mr. Ferguson, Ms. Henry, Mr. Sprunk and Mr. Uribe were recommended to the committee as director candidates by its search firm.

 

Shareholder Recommendations

 

The corporate governance committee will consider and evaluate shareholder-recommended candidates by applying the same criteria used to evaluate director-recommended candidates. If the corporate governance committee decides the candidate is suitable for board membership, the corporate governance committee will make a recommendation to the board of directors for its approval to include the candidate in the slate of directors nominated for election by shareholders in the Proxy Statement. During fiscal 2016, we received no director recommendations from our shareholders.

 

Shareholders who wish to suggest a candidate for our board of directors may submit a written recommendation to the Corporate Secretary, General Mills, Inc., P.O. Box 1113, Minneapolis, Minnesota 55440, along with the shareholder’s name, address and the number of General Mills shares beneficially owned; the name of the candidate being recommended and the number of General Mills shares beneficially owned by the candidate; the candidate’s biographical information describing experience and qualifications; a description of all agreements, arrangements or understandings between the shareholder and candidate being recommended; and the candidate’s consent to serve as a director, if elected. The corporate governance committee may request that the shareholder provide certain additional information. For the board to consider a candidate for nomination at the 2017 Annual Meeting, shareholders should submit the required information to the Corporate Secretary by the close of business on April 17, 2017.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 18
 

Shareholder Nominations – Advance Notice

 

Under our By-laws, shareholders may also nominate a candidate for election at an annual meeting of shareholders. Our annual meeting typically will be held on the fourth Tuesday in September. Shareholders who intend to present a nomination at our 2017 Annual Meeting are required to notify the Corporate Secretary in writing and provide the information described in our By-laws no earlier than the close of business on May 30, 2017, and no later than the close of business on June 29, 2017. Director nominees submitted through this process will be eligible for election at the 2017 Annual Meeting, but will not be included in proxy materials sent to shareholders prior to the meeting.

 

Shareholder Nominations – Proxy Access

 

Under our By-laws, a shareholder, or a group of up to 20 shareholders, that has continuously owned for three years at least three percent of our outstanding common stock generally may nominate and include in our proxy materials up to the greater of two directors or 20 percent of the number of directors in office as of the deadline for proxy access nominations. Shareholder(s) and nominee(s) must satisfy the requirements specified in the By-laws. For eligible shareholders to include in our proxy materials nominees for the 2017 Annual Meeting, proxy access nomination notices must be received by the Corporate Secretary no earlier than the close of business on March 17, 2017 and no later than the close of business on April 17, 2017. The notice must contain the information required by the By-laws. Our By-laws may be found on our website located at www.generalmills.com in the “Investors” section under “Corporate Governance.”

 

Communications with the Board

 

The board of directors welcomes comments and questions. Interested parties may directly contact any of our directors, any committee of the board, the board’s non-employee directors as a group, the lead director or the board generally, by writing to them at General Mills, Inc., P.O. Box 1113, Minneapolis, Minnesota 55440 or via e-mail at boardofdirectors@genmills.com. The board of directors has instructed the Corporate Secretary to distribute communications to the director or directors, after ascertaining whether the communications are appropriate to duties and responsibilities of the board. The board has requested that the Corporate Secretary not forward the following types of communications: general surveys and mailings to solicit business or advertise products; job applications or resumes; product inquiries or complaints; new product suggestions; or any material that is threatening, illegal or that does not relate to the responsibilities of the board.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 19
 

DIRECTOR COMPENSATION

 

We structure director compensation to attract and retain qualified non-employee directors and to further align the interests of directors with the interests of shareholders. The compensation committee annually reviews surveys of non-employee director compensation trends and a competitive analysis of peer company practices prepared by the independent compensation consultant. The committee makes recommendations to the board of directors on compensation for our non-employee directors, including their retainers and annual equity awards. In June 2015, the board of directors approved changes to our non-employee director compensation as recommended by the independent compensation consultant in order to improve competitive positioning relative to peer companies. Each component of director compensation is described in this section.

 

Annual Retainers

 

Non-employee directors each receive an annual retainer of $75,000.
   
The lead director receives an additional $30,000. The lead director does not receive any additional fees for chairing a committee in addition to serving as the lead director.
   
The chair of the audit committee and the chair of the compensation committee receive an additional $20,000, chairs of the other committees receive an additional $15,000 and other audit committee members receive an additional $5,000.
   
We do not pay any additional fees for attending or chairing a meeting.
   
We pay annual retainers in quarterly installments. Directors can elect to have their retainers paid in cash or common stock.

 

Restricted Stock Units

 

Each non-employee director receives approximately $180,000 in restricted stock units (“RSUs”) upon attending his or her first board meeting and upon each re-election.
   
The number of RSUs is determined based on the closing price of our common stock on the NYSE on the date of the grant.
   
The RSUs generally vest at the next annual meeting of shareholders. Directors who leave the board prior to vesting forfeit their RSUs. In the event an active director dies, his or her RSUs fully vest.
   
RSUs earn amounts equivalent to the regular dividend payments on our common stock. These amounts can be reinvested in additional stock units or paid to the director. Dividend equivalents will be paid only to the extent the underlying RSUs vest.

 

Stock Ownership Policy

 

A substantial portion of non-employee director compensation is linked to our stock performance, and directors can elect to receive their entire board remuneration in stock and stock-related compensation. Our policy requires that non-employee directors keep all of the shares that they receive as compensation until they own shares equal in market value to at least five times their annual retainer, excluding any fees for serving as lead director, chairing a committee, or serving on the audit committee. As of July 29, 2016, all non-employee directors had met or exceeded these stock ownership requirements, except for Roger Ferguson Jr., Maria G. Henry, Eric D. Sprunk and Jorge A. Uribe, who were recently elected to our board.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 20
 

Deferred Compensation

 

Non-employee directors may defer their retainers and restricted stock units.
   
Their deferred cash accounts earn a monthly rate of return that tracks the investment return achieved under their selected investment funds, most of which are offered to participants in our 401(k) Plan. One of these funds tracks the return on our common stock, which further aligns directors’ interests with those of our shareholders. The value of deferred retainers paid in shares of our common stock and deferred restricted stock units also tracks our common stock performance.
   
Earnings credited are not above-market or preferential.

 

Other Benefits

 

The General Mills Foundation matches eligible charitable contributions made by active, non-employee directors of up to $15,000 in each calendar year to eligible colleges, secondary and elementary schools, and approved funds, and up to $15,000 to eligible art and cultural organizations. These matching charitable contributions are included in footnote 5, All Other Compensation, in the table in this section.
   
We have a Planned Gift Program for Directors that has been discontinued for all directors elected after fiscal 2006. Upon the death of a participating director, the company will donate $1 million to a qualifying charity recommended by the director. We have calculated the change in the accrued liability for the benefit in fiscal 2016 and included it under footnote 5, All Other Compensation, in the table in this section.

 

The fiscal 2016 compensation of our non-employee directors is shown in the following table. Pro rata compensation is shown for Raymond V. Gilmartin, Judith Richards Hope and Hilda Ochoa-Brillembourg who retired during fiscal 2016 and for Roger Ferguson Jr. and Eric D. Sprunk who were elected to the board mid-fiscal year.

 

Director Compensation for Fiscal 2016

 

   Fees Earned  Stock  All Other   
   or Paid in Cash(3)  Awards(4)  Compensation(5)  Total
Name   ($)    ($)   ($)   ($) 
Bradbury H. Anderson   92,500    180,014        272,514 
R. Kerry Clark   96,250    180,014    7,500    283,764 
David M. Cordani   80,000    180,014    5,000    265,014 
Paul Danos   81,250    180,014    22,790    284,054 
Roger W. Ferguson Jr.(1)   37,500    180,030        217,530 
Henrietta H. Fore   87,500    180,014    17,500    285,014 
Raymond V. Gilmartin(2)   20,000        22,943    42,943 
Judith Richards Hope(2)   18,750        22,390    41,140 
Heidi G. Miller   93,750    180,014    14,666    288,430 
Hilda Ochoa-Brillembourg(2)   20,000        19,833    39,833 
Steve Odland   82,500    180,014    13,167    275,681 
Michael D. Rose   82,500    180,014    42,290    304,804 
Robert L. Ryan   93,750    180,014    51,641    325,405 
Eric D. Sprunk(1)   40,000    180,041        220,041 
Dorothy A. Terrell   75,000    180,014    35,713    290,727 

 

(1) Mr. Ferguson Jr. attended his first board meeting on March 8, 2016, and Mr. Sprunk attended his first board meeting on December 15, 2015.
(2) Mr. Gilmartin, Ms. Hope and Ms. Ochoa-Brillembourg retired from the board effective September 29, 2015.
(3) Includes the annual retainer and additional fees for directors who serve as the lead director, chair a committee or who serve on the audit committee. Retainers were paid in cash, except Mr. Cordani received his entire retainer in common stock (1,361 shares valued at the closing sales price of our common stock on the NYSE on the quarterly retainer payment dates).

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 21
 
(4) Includes the grant date fair value for 3,240 RSUs granted to each director, other than Mr. Ferguson Jr. and Mr. Sprunk, upon re-election in fiscal 2016, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718). The grant date fair value is based on $55.56 per share, the closing price of our common stock on the NYSE on the grant date, September 29, 2015.
  For Mr. Ferguson Jr., includes the grant date fair value for 3,003 RSUs granted to him upon attendance at his first board meeting on March 8, 2016. The grant date fair value is based on $59.95 per share, the closing price of our common stock on the NYSE on that date.
  For Mr. Sprunk, includes the grant date fair value for 3,075 RSUs granted to him upon attendance at his first board meeting on December 15, 2015. The grant date fair value is based on $58.55 per share, the closing price of our common stock on the NYSE on that date.
  At fiscal year-end, each non-employee director had 3,240 unvested RSUs, except for Mr. Ferguson Jr. who had 3,025 RSUs including his reinvested dividend equivalents, Mr. Sprunk who had 3,075 RSUs and Mr. Anderson, Mr. Danos, Ms. Miller and Mr. Odland who each reinvested their dividend equivalents and had 3,314 RSUs.
  The non-employee directors’ equity awards are now delivered entirely in RSUs, though they continue to hold previously awarded stock options.
  At fiscal year end, the total number of stock options held by each non-employee director was as follows: Mr. Anderson 71,686; Mr. Clark 55,642; Mr. Danos 91,686; Mr. Gilmartin 91,686; Ms. Hope 71,686; Ms. Miller 71,686; Ms. Ochoa-Brillembourg 51,686; Mr. Odland 71,686; Mr. Rose 91,686; Mr. Ryan 71,686; and Ms. Terrell 30,008.
(5) All Other Compensation includes:

 

ALL OTHER COMPENSATION

 

  Planned Gift Charitable    
  Program(6) Matching Gifts   Total  
Name ($) ($)   ($)  
B. H. Anderson        
R. K. Clark   7,500     7,500  
D. M. Cordani   5,000     5,000  
P. Danos 22,290   500     22,790  
R. W. Ferguson Jr.        
H. H. Fore   17,500     17,500  
R. V. Gilmartin 22,943       22,943  
J. R. Hope 22,390       22,390  
H. G. Miller 14,666       14,666  
H. Ochoa-Brillembourg 19,833       19,833  
S. Odland 13,167       13,167  
M. D. Rose 22,290   20,000     42,290  
R. L. Ryan 21,641   30,000     51,641  
E. D. Sprunk        
D. A. Terrell 19,213   16,500     35,713  

 

(6) Includes expense recognized in fiscal 2016 in connection with the Planned Gift Program. Calculations assume a 4.15 percent discount rate at the end of fiscal 2016; benefit payment immediately upon death; and mortality rates based on the 2014 IRS Statistic Annuitant Mortality Table.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 22
 

OWNERSHIP OF GENERAL MILLS COMMON STOCK BY DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS

 

The following table shows the amount of General Mills common stock beneficially owned by (a) each director and director nominee, (b) each named executive officer listed in the Summary Compensation Table, (c) all directors, director nominees and executive officers as a group and (d) each person or group owning more than 5 percent of our outstanding shares. Unless otherwise noted, all amounts are as of July 29, 2016, and the shareholders listed in the table have sole voting and investment power with respect to the shares owned by them.

 

   Amount and Nature of Beneficial Ownership
Name of Beneficial Owner  Shares(1)  Exercisable Options(2)   Percent of Class
B. H. Anderson  34,353(3)  71,686   * 
J. R. Church  70,152(4)  167,675   * 
R. K. Clark  27,460   55,642   * 
D. M. Cordani  9,136      * 
P. Danos  23,799(5)  71,686   * 
R. W. Ferguson Jr.  3,025      * 
H. H. Fore  10,163      * 
J. L. Harmening  57,516(6)  286,554   * 
M. G. Henry  2,732      * 
H. G. Miller  50,406(7)  71,686   * 
D. L. Mulligan  159,500(8)  543,130   * 
S. Odland  62,645   71,686   * 
C. D. O’Leary  168,809   776,384   * 
K. J. Powell  420,172   2,480,514   * 
M. D. Rose  69,915   81,686   * 
R. L. Ryan  31,860   71,686   * 
E. D. Sprunk  3,075      * 
D. A. Terrell  63,542   16,452   * 
J. A. Uribe  2,732      * 
All directors, nominees and executive officers as a group (25 persons)  1,736,910(9)  6,019,989   1.3 
The Vanguard Group, Inc.  34,809,666(10)     5.8 
BlackRock, Inc.  40,115,552(11)     6.7 
State Street Corporation  35,766,243(12)     6.0 
* Indicates ownership of less than 1 percent of the total outstanding shares.
(1) Includes:
  Shares of our common stock directly owned;
  Shares of our common stock allocated to participant accounts under our 401(k) Plan;
  Restricted stock units that vest within 60 days of July 29, 2016, as to which the beneficial owner currently has no voting or investment power: 2,732 RSUs for Ms. Henry and Mr. Uribe, 3,025 RSUs for Mr. Ferguson Jr., 3,075 RSUs for Mr. Sprunk, and 3,240 RSUs for each remaining non-employee director, except for Mr. Anderson, Mr. Danos, Ms. Miller and Mr. Odland, who each reinvested their dividend equivalents and held 3,314 RSUs; and 44,261 RSUs for all directors, nominees and executive officers as a group; and
  Stock units that have vested and been deferred, as to which the beneficial owner currently has no voting or investment power: 22,007 units for Mr. Anderson; 21,646 units for Mr. Clark; 18,359 units for Mr. Danos; 6,923 units for Ms. Fore; 24,076 units for Mr. Harmening; 30,626 units for Ms. Miller; 36,165 units for Mr. Odland; 43,127 units for Mr. O’Leary; 9,520 units for Mr. Rose; 27,570 units for Mr. Ryan; 53,822 units for Ms. Terrell; and 504,853 units for all directors, nominees and executive officers as a group.
(2) Includes options that were exercisable on July 29, 2016 and options that become exercisable within 60 days of July 29, 2016.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 23
 
(3) Includes 9,032 shares held in individual trusts by either Mr. Anderson or his spouse, for which they serve as trustees.
(4) Includes 51,832 shares held in individual trusts by either Mr. Church or his spouse, for which they serve as trustees, and 3,333 shares owned by Mr. Church’s spouse.
(5) Includes 2,126 shares owned jointly by Mr. Danos and his spouse.
(6) Includes 27,390 shares held in individual trusts by Mr. Harmening or his spouse, for which they serve as trustees.
(7) Includes 16,446 shares owned jointly by Ms. Miller and her spouse.
(8) Includes 155,356 shares owned jointly by Mr. Mulligan and his spouse.
(9) Includes 336,051 shares held solely by, jointly by, or in trust for the benefit of family members.
(10) Based on information contained in a Schedule 13G/A filed with the SEC on February 10, 2016 by The Vanguard Group and its subsidiaries (“Vanguard”), at 100 Vanguard Blvd., Malvern, Pennsylvania 19355. The filing indicated that as of December 31, 2015, Vanguard had sole investment power over 33,618,392 of these shares and shared investment power over 1,191,274 of these shares. The filing also indicated that as of December 31, 2015, Vanguard had sole voting power over 1,116,901 of these shares.
(11) Based on information contained in a Schedule 13G/A filed with the SEC on February 10, 2016 by BlackRock, Inc. and its subsidiaries (“BlackRock”), at 55 East 52nd Street, New York, New York 10055. The filing indicated that as of December 31, 2015, BlackRock had sole investment power over all of these shares, and sole voting power over 33,846,147 of these shares.
(12) Based on information contained in a Schedule 13G filed with the SEC on February 12, 2016 by State Street Corporation and its subsidiaries (“State Street”), at State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111. The filing indicated that as of December 31, 2015, State Street had shared investment power and shared voting power over all of these shares.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Based on a review of reports filed with the SEC by our directors and executive officers regarding their ownership and transactions in our common stock and written representations from those directors and officers, we believe that each director and executive officer has filed timely reports under Section 16(a) of the Securities Exchange Act of 1934 during fiscal 2016.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 24
 
PROPOSAL NUMBER 2 ADOPTION OF THE 2016 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

 

The Board of Directors unanimously recommends a vote FOR adoption of the General Mills, Inc. 2016 Compensation Plan for Non-Employee Directors.

 

Introduction

 

The General Mills, Inc. 2016 Compensation Plan for Non-Employee Directors (the “2016 Directors’ Plan”) is intended to replace the General Mills, Inc. 2011 Compensation Plan for Non-Employee Directors (the “2011 Directors’ Plan”), which terminates on September 30, 2016.

 

The purpose of the 2016 Directors’ Plan is to provide a compensation program that:

 

Attracts and retains qualified individuals to serve on the company’s board of directors; and
   
Grants awards payable in General Mills common stock in order to align the interests of non-employee directors with those of shareholders by providing that a portion of their compensation is linked directly to increases in shareholder value.

 

Highlights from the recommended 2016 Directors’ Plan are as follows:

 

The 2016 Directors’ Plan authorizes up to 500,000 shares of common stock for awards, a 64 percent reduction from the 1,400,000 shares authorized under the 2011 Directors’ Plan.
   
The 2016 Directors’ Plan reflects compensation and governance best practices, such as meaningful limits on annual total compensation for non-employee directors, no stock option repricing, no discounted options, no reload options, double-trigger vesting following a change of control and no dividends on options.
   
Upon shareholder approval of the 2016 Directors’ Plan, no further grants will be made under the 2011 Directors’ Plan. Approximately 1,035,546 unissued shares under the 2011 Directors’ Plan will be cancelled. All new awards will be made under the 2016 Directors’ Plan.

 

Summary of Material Features of the 2016 Directors’ Plan

 

The summary of the material features of the 2016 Directors’ Plan that follows is subject to the full text of the 2016 Directors’ Plan that is contained in Appendix B to this Proxy Statement.

 

Plan Term:   September 27, 2016 through September 30, 2026
Eligible Participants:   Members of the board of directors who are not employees of the company or any of its subsidiaries
Shares Authorized:   500,000 shares of General Mills common stock
Shares Authorized as a Percentage of Outstanding Common Stock:   Approximately 0.1 percent of shares outstanding on July 29, 2016
Recent Market Value per Share:   $71.89 closing sales price on the NYSE on July 29, 2016
Award Types:   (1) Restricted stock units, (2) non-qualified stock options and (3) cash retainers On the effective date of the 2016 Directors’ Plan (or, on the date a non-employee director is first elected after the effective date of the plan) and on each successive annual shareholders’ meeting date when he or she is re-elected, each non-employee director shall receive an award of restricted stock units.
 
Each non-employee director will receive an annual retainer for serving on the board. Each non-employee director may elect to receive all or a portion of the retainer in the form of cash, deferred cash or common stock.
 
Non-qualified stock options are not currently part of the compensation package for non-employee directors, but the 2016 Directors’ Plan permits non-qualified stock option awards if the board elects to issue them in the future.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 25
 
Compensation Limits:   The fair market value of all compensation granted to any non-employee director during any year of service may not exceed $800,000. The foregoing limit does not apply to any non-employee director who is designated as chair of the board.
Share Counting:   Shares subject to stock options and restricted stock units will reduce the shares available for awards by one share for every one share granted.
Shares tendered or withheld to pay taxes or an option’s exercise price are not available for re-issuance and count against the pool of available shares.
Forfeited awards are not counted against the maximum.
Cancelled, terminated, forfeited and expired shares under prior plans cannot be reissued under the 2016 Directors’ Plan.
Exercise of Stock Options:   The exercise price of stock options may not be less than the fair market value of our common stock on the date of grant, and the term may not be longer than 10 years.
Vesting:   Awards vest on the date specified by the board. Restricted stock units earn dividend equivalents equal to regular dividends paid on our common stock, which are distributed only to the extent the underlying restricted stock units vest.
Adjustments:   All stock awards will be subject to adjustment for corporate transactions that may otherwise cause a dilution or enlargement of the rights of participants.
Transferability:   Restricted stock units may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of until the applicable restrictions lapse. Stock options are transferable only as provided by the rules of the compensation committee, by the participant’s last will and testament or by the applicable laws of descent and distribution.
Change of Control:   Vesting of outstanding awards accelerates upon the consummation of a change of control and one of the following double-trigger vesting requirements: (1) the non-employee director, at the request of the company or its shareholders following a change of control, resigns or is otherwise replaced, removed or dismissed from the board or (2) there is no comparable replacement award or the awards are not assumed.
Termination, Death and Retirement:   All stock awards will be forfeited to the company if the non-employee director ceases to serve on the board prior to vesting. If a non-employee director dies prior to the vesting of any awards, those awards shall fully vest as of the date of his or her death.
Administration:   The compensation committee will administer the 2016 Directors’ Plan. The committee will have the full power to interpret its terms and formulate additional details and regulations to carry out the provisions of the Plan.
Amendments:   The compensation committee may amend, modify or terminate the 2016 Directors’ Plan at any time; however, no action may be taken by the compensation committee or the board of directors (except for “Adjustments” as referenced above) without the approval of the shareholders to: (1) increase the number of shares that may be issued under the Plan; (2) permit granting of stock options at less than fair market value; (3) permit the repricing of outstanding stock options; or (4) increase the “Compensation Limits” described above.

 

U.S. Federal Income Tax Consequences

 

The following is a summary of certain U.S. federal income tax consequences arising from and relating to participation in the 2016 Directors’ Plan. This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential tax consequences that may apply with respect to participation in the 2016 Directors’ Plan.

 

Cash Retainers. Cash retainers result in ordinary income to the non-employee director, and a corresponding deduction to the company, when paid. If a non-employee director elects pursuant to the terms of the 2016 Directors’ Plan to defer payment of cash retainers, the director will recognize taxable ordinary income, and the company will receive a corresponding deduction, at the time when the deferred payment is made.

 

Restricted Stock Units. The grant of restricted stock units will not result in taxable income to the non-employee director or a tax deduction for the company. At the time the shares underlying restricted stock units are paid, a non-employee director will recognize taxable ordinary income and the company will receive a corresponding deduction, equal to the fair market value of those shares on the date payment is made. If a non-employee director elects pursuant to the terms of the 2016 Directors’ Plan to defer payment of restricted stock units beyond the vesting date, the director will recognize taxable ordinary income, and the company will receive a corresponding deduction, at the time when the deferred payment is made in an amount equal to the fair market value of the shares received as of that time.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 26
 

Stock Options. Stock options granted under the 2016 Directors’ Plan will be non-qualified options governed by Section 83 of the Internal Revenue Code. The grant of options will not result in taxable income to the non-employee director or a tax deduction for the company. Under current tax law, the exercise of an option will result in taxable ordinary income to the non-employee director and a corresponding deduction to the company, equal to the difference between the exercise price per share and the fair market value of a share on the date the option was exercised.

 

Application of Section 16. Special rules may apply to individuals, including non-employee directors, subject to Section 16 of the Securities Exchange Act of 1934 if they purchase shares of our stock in a transaction that is not exempt under Section 16 within six months of an option exercise or the vesting or deferred payment date of restricted stock units. In that case, unless a special election is made pursuant to the Internal Revenue Code, shares received through exercise of a stock option and vesting or deferred payment of restricted stock units may be treated as restricted as to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of exercise, vesting or deferred payment. Accordingly, the amount of any ordinary income recognized, and the amount of the company’s deduction, are determined based on the fair market value of the shares as of the end of that period.

 

Income Tax Deduction. The company’s ability to take a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the 2016 Directors’ Plan is subject to the usual rules concerning reasonable compensation.

 

Non-employee directors are responsible for the payment of all federal, state and local taxes, including those of any jurisdiction outside the United States, in respect of awards under the 2016 Directors’ Plan.

 

The 2016 Directors’ Plan is intended to comply with Section 409A of the Internal Revenue Code.

 

New Plan Benefits

 

If our shareholders approve the 2016 Directors’ Plan, we will use the plan to pay retainers and make awards of restricted stock units to our non-employee directors as of the date of the 2016 Annual Meeting. The compensation committee has discretion to determine the amount, number and types of awards that will be granted under the 2016 Directors’ Plan. The current terms of these awards and payments are described under Director Compensation.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 27
 

Equity Compensation Plan Information

 

The following table provides certain information as of May 29, 2016 with respect to our equity compensation plans:

 

   Number of     Number of Securities
   Securities to     Remaining Available for
   be Issued upon  Weighted-Average  Future Issuance Under
   Exercise of  Exercise Price  Equity Compensation
   Outstanding  of Outstanding  Plans (Excluding
   Options, Warrants  Options, Warrants  Securities Reflected
   and Rights  and Rights  in Column (1))
Plan Category  (1)  (2)(a)  (3)
Equity compensation plans approved by security holders  40,199,600(b)  $37.09  24,263,964(d)
Equity compensation plans not approved by security holders  147,304(c)  $     —   
Total  40,346,904   $37.09  24,263,964 
          

 

(a) Only includes the weighted-average exercise price of outstanding options, whose weighted-average term is 4.35 years.
(b) Includes 32,400,285 stock options, 5,212,133 restricted stock units, 99,900 performance share units (assuming pay out for target performance) and 2,487,282 restricted stock units that have vested and been deferred.
(c) Includes 147,304 restricted stock units that have vested and been deferred. These awards were made in lieu of salary increases and certain other compensation and benefits. We granted these awards under our 1998 Employee Stock Plan, which provided for the issuance of stock options, restricted stock and restricted stock units to attract and retain employees and to align their interests with those of shareholders. We discontinued the 1998 Employee Stock Plan in September 2003, and no future awards may be granted under that plan.
(d) Includes stock options, restricted stock, restricted stock units, shares of unrestricted stock, stock appreciation rights and performance awards that we may award under our 2011 Stock Compensation Plan, which had 23,222,954 shares available for grant at May 29, 2016. Also includes stock options and restricted stock units that we may award under our 2011 Compensation Plan for Non-Employee Directors, which had 1,041,010 shares available for grant at May 29, 2016. These shares would be cancelled if shareholders approve the 2016 Directors’ Plan under Proposal 2.

 

PROPOSAL NUMBER 3 ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

The board of directors unanimously recommends a vote FOR the resolution approving, on an advisory basis, the compensation of our named executive officers.

 

We provide our shareholders with an annual advisory vote on the compensation of our named executive officers. At the 2015 Annual Meeting, approximately 94 percent of the votes cast supported our executive compensation program.

 

Our compensation committee reviewed the results of the advisory vote and also considered feedback from some of our largest shareholders on our executive compensation program. The compensation committee recognizes that effective practices evolve, and the committee will continue to consider changes as needed to keep our executive compensation program competitive and tightly linked to performance.

 

Consistent with our shareholders’ preference and prevailing demand, we expect to hold an advisory vote on executive compensation every year. This year, we are asking shareholders to approve the following resolution:

 

RESOLVED, that the shareholders approve the compensation paid to the company’s named executive officers, as disclosed in the Compensation Discussion and Analysis section, and the compensation tables and related narrative in the Executive Compensation section, of the Proxy Statement for the 2016 Annual Meeting of Shareholders.

 

The advisory vote will not be binding on the compensation committee or the board of directors. However, they will carefully consider the outcome of the vote and take into consideration any specific concerns raised by investors when determining future compensation arrangements.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 28
 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

This section provides an overview of our compensation philosophy, the key elements of our executive compensation program, and the compensation actions for our named executive officers (“NEOs”) in the context of our company strategy and our fiscal 2016 performance.

 

Fiscal 2016 Named Executive Officers
Kendall J. Powell, Chairman and Chief Executive Officer
Donal L. Mulligan, Executive Vice President, Chief Financial Officer
Jeffrey L. Harmening, President, Chief Operating Officer
Christopher D. O’Leary, Executive Vice President, Chief Operating Officer, International
John R. Church, Executive Vice President, Supply Chain

 

Executive Summary

 

Our Business Strategies and Priorities

 

At General Mills, our performance goal is to create market-leading growth over the long-term and deliver top-tier returns to shareholders. We strive to deliver growth by following our Consumer First strategy, which means we leverage a deep understanding of our consumers to develop and market products that they want. Keeping consumer needs top of mind, we are executing against four priorities: driving more growth from our core businesses, as our well-established brands tend to generate the best returns for investors; funding our future with a continuous focus on increasing our productivity and reducing expenses; reshaping our portfolio to ensure we’re competing in the most attractive food categories, channels and geographies; and building an advantaged and agile organization to respond to a rapidly changing operating environment.

 

Our long-term growth model is designed to achieve our goal of market-leading performance. We believe our businesses can generate low single-digit net sales growth, mid single-digit total segment operating profit growth and high single-digit growth in adjusted diluted earnings per share. Combined with a dividend yield between 2 and 3 percent, this performance should deliver double-digit returns to shareholders over the long term. We are strategically managing our topline growth with our focus on our Consumer First strategy while also expanding our operating margin. We believe the combination of consumer-led sales growth and margin-enhanced earnings per share growth will drive top-tier performance for our shareholders.

 

LONG-TERM GROWTH MODEL

 

Growth Factor  Compound Growth Rate
Organic Net Sales  Low single-digit
Total Segment Operating Profit  Mid single-digit
Adjusted Diluted Earnings per Share  High single-digit
Dividend Yield  2 to 3 percent
Total Shareholder Return  Double-digit

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 29
 

Performance Highlights for Fiscal 2016

 

We made important progress strengthening our business model and bringing our Consumer First strategy to life in our brands in fiscal 2016. We returned the business to organic net sales and operating profit growth, while continuing to drive improvement in free cash flow. Our renovation and innovation efforts helped improve topline momentum on many businesses, and our productivity and cost-savings initiatives drove strong margin expansion, delivering profit and earnings per share ahead of our expectations. We also took important strategic actions to reshape our portfolio for growth, including the divestiture of the Green Giant vegetable business in North America, the expansion of our recently acquired Annie’s organic brand into new categories, the launch of Yoplait yogurt in China, and the acquisitions of EPIC Provisions meat snacks in the U.S. and Carolina yogurt in Brazil.

 

General Mills net sales for the fiscal year ended May 29, 2016, declined 6 percent to $16.6 billion, reflecting the sale of the Green Giant vegetable business in North America, foreign currency headwinds and a comparison to a 53-week fiscal year in 2015. Excluding the impact of these factors, our organic net sales grew 0.2 percent in fiscal 2016. Operating profit increased 30 percent to $2.7 billion. Total segment operating profit decreased 1 percent to $3.0 billion. On a constant-currency basis, total segment operating profit increased 1 percent. Diluted earnings per share increased 41 percent to $2.77 in fiscal 2016. Adjusted diluted earnings per share, which excludes certain items affecting comparability of results, rose 2 percent to $2.92. Excluding the impact of foreign exchange, adjusted diluted earnings per share increased 5 percent. (These and other measures used in this Proxy Statement are non-GAAP financial measures – see Appendix A to this Proxy Statement for reconciliations of these measures.)

 

In fiscal 2016, we returned $1.5 billion to shareholders through share repurchases and dividends. We repurchased approximately 11 million shares of common stock, reducing our average number of shares outstanding by 1 percent. We also increased our annual dividend by 7 percent. In June 2016, the board approved an increase to our quarterly dividend rate. The new annualized rate of $1.92 per share represents a yield between 2.5 and 3 percent at recent prices for General Mills stock.

 

Fiscal 2016 Performance Against Annual Performance Goals

 

At the beginning of the fiscal year, the compensation committee established performance targets for four equally weighted financial measures. These performance measures and annual targets were based on the annual operating plan approved by the full board and were aligned with our long-term growth model and the performance expectations we communicated to investors. At the start of the year, our plans called for:

 

Organic net sales to essentially match fiscal 2015 levels in constant currency, reflecting the impact of one less week of business versus a 53-week year in fiscal 2015;
   
Total segment operating profit to increase at a low-single-digit rate in constant currency;
   
Adjusted diluted earnings per share to increase at a mid-single-digit rate in constant currency; and
   
Improvement in adjusted return on average total capital driven by higher earnings.
   

While challenging retail conditions in the U.S., and slowing growth in China and Brazil, prevented the company from accelerating sales growth as fast as planned, successful execution of key organizational and cost-savings initiatives helped the company exceed its targets on all three of the profit-based annual corporate performance measures. During fiscal 2016, we completed a number of strategic acquisitions and dispositions, including the sale of the North American Green Giant vegetable business, the sale of businesses in Venezuela and Argentina, and the acquisition of EPIC Provisions meat-based snacks and Carolina yogurt that were not contemplated by the annual operating plan or annual corporate performance measures established at the beginning of fiscal 2016. Accordingly, performance for incentive purposes was measured on a basis to be comparable with the annual operating plan, and excluded the impact of those actions. As a result of the company’s performance against the annual corporate performance targets for organic net sales, total segment operating profit, adjusted diluted earnings per share and adjusted return on average total capital, the Annual Incentive Payout Percentage for Corporate Performance Achievement for fiscal 2016 was 121 percent.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 30
 
Annual Corporate Performance Measure and Weighting  Target  Fiscal 2016
Incentive
Performance(1)
  Fiscal 2016
Performance
Ratings
Organic Net Sales Growth (25%)  1.0%   0.2%   90%
Total Segment Operating Profit Growth (25%)  2.7%   3.5%   111%
Adjusted Diluted Earnings Per Share Growth (25%)  4.9%   7.4%   136%
Adjusted Return on Average Total Capital Improvement (25%)  +14bps   +47bps   147%
Annual Incentive Payout Percentage for Corporate Performance Achievement          121%
(1) Incentive performance is measured on a comparable basis and excludes the impact of changes in foreign currency exchange rates and acquisitions and divestitures completed during fiscal 2016, as these items were not included in the annual operating plan or the performance targets approved by the board of directors and compensation committee at the beginning of the year. Organic net sales growth also excludes the impact of a 53rd week in fiscal 2015.

 

In addition to our annual financial results, we continued to take strategic actions to adapt to the changing marketplace and improve our profitability. Execution against our four key priorities in fiscal 2016 drove improved operating results and positioned us for long-term growth. Through their individual performance evaluations, we hold each of our executives accountable to advance these strategic priorities.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 31
 
Strategic Priorities   Fiscal 2016 Accomplishments
           
      We accelerated Consumer First product renovation and innovation to drive sales growth across our operating segments.
      U.S. Retail
        Drove growth on many of our cereal brands with the introduction of gluten-free Cheerios varieties and the removal of artificial flavors and colors from many of our most popular cereal brands.
Drive More     Made consumer-driven improvements to our Nature Valley snacks and brought gluten-free messaging to 20 percent of the Nature Valley portfolio.
from Our
Core
    Grew natural and organic businesses at a double-digit pace, driven by the expansion of our Annie’s business and accelerated growth for Lärabar throughout the year.
      International
        Fueled growth on Old El Paso Mexican products with innovative new taco shells and kits.
        Drove growth on Häagen-Dazs ice cream with the introduction of super-premium ice cream bars in Europe.
      Convenience Stores and Foodservice
        Continued our focus on six key product platforms: cereal, snacks, yogurt, mixes, biscuits and frozen meals. Net sales for these focus platforms combined grew 5 percent.
           
      We made progress on our cost savings and organizational initiatives.
Fund Our Future   Ongoing cost savings and organizational initiatives drove margin expansion in fiscal 2016. Operating profit margin improved 450 basis points, or 90 basis points on an adjusted basis.
    Announced further efforts to prioritize investments, reduce complexity and further streamline operations to increase and accelerate margin expansion, with an adjusted operating profit margin target of 20 percent by fiscal 2018.
      Organizational, manufacturing and administrative cost initiatives are expected to deliver $600 million of annual cost savings by fiscal 2018.
           
      We continued to reorient our portfolio toward products with high-growth potential.
Reshape
the Portfolio
for Growth
  Divested our North American Green Giant vegetable business.
Expanded our Annie’s portfolio to include cereal, yogurt, and soup. We are targeting $1 billion in natural and organic net sales by fiscal 2019.
Launched Yoplait yogurt in China.
    Acquired EPIC Provisions, a U.S.-based meat snack business, and Carolina, a Brazilian yogurt company.
           
Build an
Advantaged and
Agile Organization
 

 

Restructured our business to create a leaner, more agile organization, and we redesigned our pay-for-performance programs to drive increased accountability and results, as more fully described on page 36.

         

 

STRONG FREE CASH FLOW AND RETURN TO SHAREHOLDERS

 

  Returned $1.5 billion to shareholders, including a 7 percent increase in dividends per share and net share repurchases totaling $435 million.

 

    Converted more than 100 percent of adjusted after-tax earnings into free cash flow in the most recent three-year period.
    Total shareholder return for fiscal 2016 was 15 percent.

 

Dividends Per Share   Total Shareholder Return (“TSR”)  
    (Fiscal years, stock price appreciation plus reinvested dividends, compound annual growth)  

     
    Source: Bloomberg  


 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 32
 

Fiscal 2016 CEO Compensation Actions

 

Total direct compensation for our CEO includes base salary, annual incentive and long-term incentives in the form of equity awards, including stock options, performance share units (“PSUs”) and restricted stock units (“RSUs”). For fiscal 2016, Mr. Powell’s target opportunity for total direct compensation essentially matched his prior year’s target opportunity and remained at approximately the median value for CEOs at our peer group companies. Actual fiscal 2016 total direct compensation consisted of the base salary, long-term incentive awards granted at the beginning of the fiscal year, and the annual incentive award for fiscal 2016 performance, paid after the end of fiscal 2016. At the beginning of the fiscal year, the board kept Mr. Powell’s base salary and target long-term incentive award value at the same level as the prior year, based on prior year corporate performance and a competitive analysis of CEO compensation at our peer group companies. In the Summary Compensation Table, fiscal 2016 base salary earned does not include a fiscal 2016 merit increase, but it is slightly higher than fiscal 2015 base salary earned, which only includes the fiscal 2015 merit increase on a pro rata basis. The grant date fair value of the fiscal 2016 long-term incentive was $5,220,014, or 14 percent below his long-term incentive target, reflecting a downward adjustment based on fiscal 2015 performance. At the end of fiscal 2016, Mr. Powell received an annual incentive award of $2,258,568, which was 17 percent above his annual incentive award target based on fiscal 2016 corporate performance. The following graph illustrates the components of Mr. Powell’s total direct compensation for fiscal 2016.

 

 

 

For more information on these awards, please refer to the Summary Compensation table on page 45 and the description of Mr. Powell’s annual and long-term incentive awards on pages 38 through 40.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 33
 

Compensation Philosophy

 

Our compensation program is designed to attract, motivate, reward and retain superior leaders who consistently pursue initiatives that contribute to strong corporate performance and total return to shareholders that are in the top tier of our industry. The compensation committee bases its compensation decisions on the following core principles:

 

Compensation design supports our strategy: Our compensation program is closely aligned with our long-term growth model and strategic priorities. Incentive performance measures mirror our externally communicated financial objectives, and long-term incentives create significant alignment between the interests of our executives and those of our shareholders.
  
Pay is performance-based: Eighty to ninety percent of our NEOs’ compensation is at risk and variable based on the annual and long-term performance of the company.
  
Compensation opportunities are competitive: Given that the competition for talent in the consumer packaged goods industry is intense, the compensation opportunities for each NEO have been designed to ensure that they are competitive with our industry peer group.

 

Compensation Design Supports our Financial Performance Goals

 

The core elements of our NEOs’ compensation package consist of base salary, annual incentive and long-term incentive, which we refer to as total direct compensation. The target pay opportunity for our NEOs is set so that performance targets and target total direct compensation are aligned with the median of our industry peer group. Incentive awards are composed of a mix of cash, PSUs, stock options and RSUs. Each element of annual and long-term incentive compensation is tied to performance and closely linked to the goals from our long-term growth model, financial objectives and TSR.

 

Our compensation program is designed to incent our NEOs to pursue strategies and execute priorities that promote growth and strong return to shareholders. Annual Corporate Performance Measures correspond to the three key measures in our long-term growth model: organic net sales growth, total segment operating profit growth, and adjusted diluted earnings per share growth. In addition, we include a measure of improvement in adjusted return on average total capital to ensure that leaders are focused on making thoughtful capital investments. The three-year corporate performance measures used for our PSUs are average organic net sales growth and cumulative free cash flow, which is cash from operating activities less capital expenditures. Free cash flow directly supports total shareholder return by enabling business investment, dividend growth and return of cash to shareholders through share repurchases. Within our industry peer group, companies with consistently superior performance against the financial performance measures used in our annual and long-term incentive awards have historically delivered top tier TSR.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 34
 

Elements of Incentive Compensation and Alignment With Performance Measures

 

    Incentive Pay Element   Performance Measure   Strategy and Performance Alignment
Annual Incentive   Annual Incentive Award  

  Organic Net Sales Growth

  Total Segment Operating Profit Growth

  Adjusted Diluted Earnings per Share Growth

  Adjusted Return on Average Total Capital Improvement

 

  Annual performance measures aligned with long-term growth model

  Rewards and recognizes annual accomplishment of key financial objectives

  Adjusted for performance relative to peer companies using the Corporate Performance Modifier

  Directly supports strategies for delivering strong TSR

             
Long-Term
Incentive
  Performance Share Units  

  Average Organic Net Sales Growth (performance metric)

  Cumulative Free Cash Flow (performance metric)

  Total Shareholder Return (ultimate value)

 

  Three-year performance measures focused on long-term performance

  Performance metrics aligned with key elements for delivering growth and strong TSR

  Payout directly linked to performance

  Four-year cliff vesting places value of award at risk for a significant period, serves as a retention tool and creates alignment with shareholder interests

  Ultimate value created through TSR

           
  Stock Options  

  Share Price Appreciation (ultimate value)

 

  Four-year cliff vesting maintains focus on long-term growth, places value of award at risk for a significant period, serves as a retention tool and creates alignment with shareholder interests

  Ultimate value created through stock price appreciation creates strong alignment with shareholder interests and direct link to company performance

           
  Restricted Stock Units  

  Total Shareholder Return (ultimate value)

 

  Four-year cliff vesting places value of award at risk for a significant period, serves as a retention tool and creates alignment with shareholder interests

  Ultimate value created through TSR

 

Significant Percentage of Executive Pay Is At Risk

 

Since executive compensation is paid principally in the form of annual and long-term incentive awards, a significant portion of executive pay is at risk and dependent on future company performance. The majority of the long-term incentive awards derive value directly from the company’s common stock price appreciation, which is, in most respects, a reflection of company performance and directly linked to shareholder returns. Stock option awards may be worthless if the company’s common stock price does not appreciate prior to expiration of the stock options. PSUs can be rendered worthless if performance for any three-year period is below threshold. The value of RSUs can decline significantly from the grant date if the company performs poorly and its common stock price falls. For the NEOs to earn the intended “target” compensation from these awards, the company must show sustained competitive performance on annual and three-year corporate performance measures.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 35
 
CEO PAY MIX AT TARGET OTHER NAMED EXECUTIVE OFFICER PAY MIX AT TARGET
     
 Performance-Based (At Risk) Compensation: 88%    Performance-Based (At Risk) Compensation: 78%
     
     

 

The pay mix represented above assumes total direct compensation equal to target pay opportunity.

 

Program Enhancements to Strengthen Pay-For-Performance Alignment

 

Keeping in mind our core principles of ensuring that compensation design supports our business strategy, pay is performance-based, and compensation opportunities are competitive, in fiscal 2015 the compensation committee and management completed an extensive review of our executive compensation program. The review included consideration of feedback from our shareholders seeking greater clarity on annual incentives and increased performance based vesting for long-term incentive awards. As a result of that review, we updated and enhanced our incentive programs as described below. These changes became effective at the beginning of fiscal 2016 for all NEOs.

 

Incentive Program Design Change   Rationale and Benefits
 Simplified annual incentive award formula and increased alignment between incentive payouts and company performance. Shifted to all-cash annual incentive awards and mix of stock options, RSUs and PSUs for long-term incentives.  

 Clear and transparent disclosure for our investors of annual performance targets and annual incentive award payouts.

 Simple and understandable communication to officers regarding annual performance targets and annual incentive awards. 

 Adjusted for performance relative to peer companies using the Corporate Performance Modifier. 

 Increased alignment between company performance and annual incentive awards.

 Increased the weighting of company financial performance for annual incentive awards. For NEOs, the weighting of company performance against financial targets increased from 50 percent to 80 percent.  

 Increased pay-for-performance emphasis. 

 Greater accountability for company performance for NEOs and other executive officers. 

 Alignment on a single set of financial objectives. 

 Broadened the range of potential payouts, with higher maximum and lower minimum. Established threshold, target and maximum performance targets and payout percentages for annual incentive awards ranging from 0 percent to 200 percent.     The minimum, threshold, target and maximum payout percentages produce a wider range of possible annual incentive awards with greater performance required for maximum payouts.
 Introduced PSUs as part of long-term incentive for all NEOs. We began issuing three-year performance vested PSUs to our CEO at the beginning of fiscal 2015 and extended that practice to all NEOs at the beginning of fiscal 2016 and to all corporate officers at the beginning of fiscal 2017.  

 Portion of long-term incentive requires achievement of specific financial objectives measured over a three-year performance period. 

 Long-term performance period aligns the interest of executives with the long-term success of the company and the interests of our shareholders. 

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 36
 

Elements of Total Direct Compensation

 

CEO PAY MIX AT TARGET   OTHER NAMED EXECUTIVE OFFICER PAY MIX AT TARGET
     
Performance-Based (At Risk) Compensation: 88%   Performance-Based (At Risk) Compensation: 78%
     
 

 

The pay mix represented above assumes total direct compensation equal to target pay opportunity.

 

    Base Salary   Annual Incentive   Long-Term Incentive
Primary Purpose  

  Provides fixed income based on size, scope and complexity of the individual’s role

  Reflects each individual’s current and historical performance

 

  Rewards achievement of annual corporate and individual performance objectives

 

  Rewards delivery of long-term shareholder value

  Designed to retain key talent

 

Competitive Analysis     Annually     Annually     Annually
Approval/Grant Date     June board meeting     June board meeting     June board meeting
Cash/Equity     Cash     Cash     PSUs/Stock Options/RSUs
Performance Period and Impact     Fixed income  

  1 Year

  Payouts range from 0 percent to 200 percent of target depending on performance

 

 

  Three-year performance period and additional year of vesting for PSUs - PSUs payouts range from 0 percent to 150 percent of target depending on performance

  Four-year cliff vesting for stock options, PSUs and RSUs places value of awards at risk for a significant period, serves as a retention tool and creates alignment with shareholder interests

Approximate Market Positioning  

  Base salary midpoints (targets) set at median – actual base salaries above or below market median based on performance

 

  Target annual incentive awards set at median – actual annual incentive awards above or below market median based on performance

 

  Target long-term incentives set at median – actual value determined by three year corporate performance and longer-term share appreciation and TSR

 

Base Salary

 

Base salaries provide fixed income based on the duration, size, scope and complexity of each individual’s role, and reflects current and historical performance. Base salary is the only fixed element of total direct compensation, and accordingly, is set at median levels for similarly situated officers within the industry peer group to reinforce the importance of incentive compensation. With the guidance of the independent consultant, the compensation committee annually reviews potential adjustments to base salary for merit increases to align with market and for changes in responsibilities.

 

CEO Base Salary

 

Mr. Powell did not receive an increase in base salary in fiscal 2016, keeping his base salary at a competitive and approximately median level versus other CEOs within the industry peer group.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 37
 

Performance Measurements for Incentive Compensation

 

Corporate Performance Measurement

 

At the beginning of each fiscal year, corporate performance goals are established for one- and three-year periods, with the intention of being rigorous yet achievable.

 

Annual Corporate Performance Measures – annual incentive awards are earned based on our performance against four equally-weighted measures: organic net sales growth; total segment operating profit growth; adjusted diluted earnings per share growth; and adjusted return on average total capital improvement.
   
Three-year Corporate Performance Measures – PSUs are earned based on our future achievement of three-year goals, consistent with our internal plan, for average organic net sales growth and cumulative free cash flow.

 

Rigorous Corporate Performance Goals

 

For the Annual Corporate Performance Measures, the assessment of corporate performance for each year is based on goals set forth in the annual corporate operating plan that is approved by the board. The annual corporate operating plan aligns with our corporate strategy, long-term commitment to shareholders, and expected performance in the industry. As a result, the goals established for our Annual Corporate Performance Measures are closely aligned with our operating plans and the financial objectives we communicate to investors.

 

For the Three-Year Corporate Performance Measures, the committee establishes goals that are consistent with our long-range plan for the same period, comparing and adjusting them against actual five-year historical results within our industry peer group. Goals for the entire three-year performance period are set at the beginning of the period rather than at the start of each fiscal year.

 

Our annual and three-year performance results may differ from our reported results due to adjustments for designated items significantly affecting comparability of reported rates of growth (for example, significant acquisitions or divestitures, 53-week fiscal years and foreign currency exchange rates). Please see page 30 and Appendix A for additional detail on these adjustments to our fiscal 2016 results.

 

Individual Performance Measurement

 

NEO Individual Performance Ratings may range from Exceptional to Unsatisfactory. The ratings are based on the achievement of specific annual priorities, which include quantitative business performance measures and qualitative goals such as completion of strategic initiatives, quality of business plans, organizational development progress in important areas such as diversity and employee development, and fulfillment of leadership expectations. The board approves the rating for the CEO and the compensation committee approves the ratings for all other NEOs. The CEO establishes annual priorities for each of the NEOs, and the compensation committee approves the annual priorities for the CEO.

 

Annual Incentive Award

 

The annual incentive award rewards the achievement of annual corporate and individual performance objectives. Each NEO’s target opportunity for an annual incentive award is a percentage of base salary, which is expressed as a Target Incentive Percentage. Annual incentive awards can vary greatly from year to year based on achievement of the Annual Corporate Performance Measures, the NEO’s Individual Performance Rating, and corporate performance relative to peer companies. In establishing the target incentive compensation opportunity for the NEOs referenced on page 37, our compensation committee and the board consider a number of factors, including the NEO’s level of responsibility, duration with the company and in a specific role, and other factors related to the scope of the NEO’s responsibilities.

 

Following board approval of the corporate annual operating plan at the beginning of fiscal 2016, the compensation committee approved the performance goals associated with the range of potential annual incentive award payouts using a robust methodology based on competitive practice, probability of achievement, affordability, and expected relative performance versus our performance peer group. Annual incentive awards range from 0 percent to 200 percent, with a 100 percent award for on target performance.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 38
 

While the target for each of these measures called for growth versus prior year results, the target for organic net sales growth reflected continued top-line challenges in the consumer packaged food industry. The targets for the remaining measures reflected the company’s continued focus on improving profitability through initiatives to drive cost savings and improve organizational effectiveness.

 

The company showed improvement on each Annual Corporate Performance Measure in fiscal 2016. While the company’s organic net sales returned to growth, that growth did not meet target. However, in terms of total segment operating profit growth, adjusted diluted earnings per share growth and adjusted return on average total capital improvement, performance exceeded the corporate annual operating plan and the guidance we provided to investors at the beginning of the fiscal year. The compensation committee reviewed actual corporate performance versus annual performance goals, as well actual corporate performance relative to our peer companies, prior to approving the annual incentive award calculation. In its assessment, the compensation committee determined that no corporate performance modifier was necessary as peer performance was as expected when goals for each of the four Annual Corporate Performance Measures were approved. The following table summarizes our corporate performance against the Annual Corporate Performance Measures.

 

FISCAL 2016 PERFORMANCE AGAINST ANNUAL PERFORMANCE GOALS

 

Annual Corporate Performance Measure and Weighting  Target  Fiscal 2016
Incentive
Performance(1)
  Fiscal 2016
Performance
Ratings
Organic Net Sales Growth (25%)  1.0%   0.2%   90%
Total Segment Operating Profit Growth (25%)  2.7%   3.5%   111%
Adjusted Diluted Earnings Per Share Growth (25%)  4.9%   7.4%   136%
Adjusted Return on Average Total Capital Improvement (25%)  +14bps   +47bps   147%
Annual Incentive Award Payout Percentage for Corporate Performance Achievement          121%

 

(1) Incentive performance is measured on a comparable basis and excludes the impact of changes in foreign currency exchange rates and acquisitions and divestitures completed during fiscal 2016, as these items were not included in the annual operating plan or the performance targets approved by the board of directors and compensation committee at the beginning of the year. Organic net sales growth also excludes the impact of a 53rd week in fiscal 2015.

 

The annual incentive award is subject to the terms of our Executive Incentive Plan and calculated according to the formula below for all NEOs.

 

 

(1) The Corporate Performance Modifier is a mechanism for the compensation committee to ensure annual performance is also assessed relative to peer company performance.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 39
 

CEO Annual Incentive Award

 

The annual incentive award granted to our CEO for fiscal 2016 performance is calculated below:

 

 

 

Long-term Incentive

 

The long-term incentive program rewards delivery of long-term shareholder value, and is designed to retain key talent. A significant portion of a NEO’s pay opportunity is provided through these awards, which consist of a balance of PSUs, stock options and RSUs. All awards are granted under the 2011 Stock Compensation Plan. All awards granted in fiscal 2016 have a four-year cliff vesting period from the grant date and are subject to our clawback policy. PSUs and RSUs earn dividend equivalents equal to regular dividends paid on our common stock, which are distributed only to the extent the underlying units vest.

 

Performance Share Units

 

PSUs are earned based on our future achievement of three-year corporate performance goals. Payouts can vary from zero to 150 percent of the target number of PSUs, based on results against the goals, a 25 percent payout representing threshold performance, a 100 percent payout representing target performance, and a 150 percent payout representing maximum performance. PSUs are designed to focus executives on equally weighted top-line and bottom-line operating metrics that drive shareholder value: average organic net sales growth and cumulative free cash flow, which is cash from operating activities less capital expenditures. As PSUs were first granted in fiscal 2015, there has not yet been a completion of a three-year performance period for which results may be reported.

 

Each PSU earned is settled with a share of the company’s common stock one year following the completion of the three-year performance period so that awards remain subject to a four-year cliff vesting period from the grant date.

 

Stock Options and Restricted Stock Units

 

Stock options and RSUs are subject to a four-year cliff vesting period from the grant date. The exercise price per share for stock options equals the closing price of our common stock on the NYSE on the grant date. The stock options generally expire 10 years and one month from the grant date.

 

The long-term incentive is granted according to the formula below for all NEOs.

 

 

CEO Long-term Incentive

 

Our long-term incentive is forward-looking and emphasizes future pay opportunity and retention. The long-term incentive award granted to our CEO at the beginning of fiscal 2016 is summarized below:

 

 

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 40
 

Other Elements of Compensation

 

Retirement and Health Benefits

 

We provide competitive retirement security and health benefits. Our executives participate in the same benefit plans made available to U.S.-based salaried employees, including medical benefits, disability and life insurance, Pension Plan and Supplemental Retirement Plan (designed to restore contributions that otherwise would be lost because of limits in the Pension Plan), 401(k) Plan and Supplemental Savings Plan. See page 51 for further details.

 

Perquisites

 

We provide our executives with limited perquisites in the form of a company automobile and a limited financial counseling benefit. See Perquisites and Other Personal Benefits on page 46.

 

Severance

 

We provide a Separation Pay and Benefits Program to attract and retain executives and to promote orderly succession for key roles. We do not have any employment contracts with our NEOs. See page 55 for further details.

 

The Compensation Process

 

Determining Executive Compensation

 

The compensation committee regularly assesses the effectiveness of the executive compensation program in driving performance, and it uses shareholder feedback, regulatory requirements and external trends to inform its decision making. Any changes are typically approved in June for the new fiscal year. For the CEO, the board reviews and approves the committee’s recommendations.

 

Each June, the compensation committee approves compensation for the CEO and his direct reports based on performance from the most recently completed fiscal year and establishes goals for the upcoming one- and three-year performance periods. In approving compensation for the most recently completed fiscal year, the committee and the board primarily examine:

 

Corporate performance as measured by our Annual Corporate Performance Measures;
   
Competitive market data prepared by the independent compensation consultant;
   
Each director’s written evaluation of the CEO’s performance against his objectives, which were approved by the committee at the beginning of the fiscal year;
   
The recommendations of the CEO for the other executive officers;
   
Feedback from shareholders and the most recent say-on-pay vote;
   
Tally sheets of cumulative earnings and stock awards to provide context for annual actions.

 

The process for establishing and tracking performance goals for the upcoming one- and three-year performance periods are discussed in greater detail under Rigorous Corporate Performance Goals on page 38.

 

Frederic W. Cook & Co., Inc., the committee’s independent compensation consultant, advises the compensation committee on director and executive compensation, but performed no other services for General Mills in fiscal 2016. The compensation committee actively works with the independent compensation consultant to formulate compensation recommendations for our CEO to be brought forth for approval by the entire board. Management makes recommendations to the committee for the other executive officers, and the independent compensation consultant advises the committee on those recommendations.

 

The compensation committee has sole authority to retain or replace the independent compensation consultant, and the committee annually evaluates the engagement and assesses the consultant’s independence in accordance with the listing standards of the NYSE. Most recently, the committee determined that the engagement did not raise any conflict of interest. In reaching this conclusion, the compensation committee considered factors relevant to the consultant’s independence from management, including the six factors set forth in the NYSE listing standards.

 

In order to promote independent decision making on executive compensation matters, the compensation committee meets in executive session without management present after each meeting, periodically with the participation of the independent compensation consultant.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 41
 

The Industry Peer Group

 

The compensation committee, with the assistance of management and the independent compensation consultant annually evaluates our executive compensation program against similar programs within the consumer packaged goods industry peer group. The compensation committee also annually conducts a comprehensive industry peer group review, with assistance from the independent compensation consultant. Effective for fiscal 2016, the committee added Dr. Pepper Snapple, J.M. Smucker and Reckitt Benckiser Group plc to the peer group. The Kraft Heinz Company replaced Kraft Foods Group, Inc.

 

The compensation committee used the following selection criteria in determining our industry peer group:

 

Global, publicly traded consumer packaged goods companies within our sub-industries, as identified by the S&P Global Industry Classification System
   
Comparable scale and complexity of operations, as measured primarily by sales, market capitalization, total assets and total employees
   
Direct competitors for business, capital or industry talent
   
Continuous and transparent disclosure of business results and executive compensation
   
Continuity from year to year

 

  OUR INDUSTRY PEER GROUP  
Campbell Soup Co. Dr. Pepper Snapple Group Inc. Mondelēz International, Inc.
Clorox Co. The Hershey Co. Nestlé SA*
The Coca-Cola Co. The J. M. Smucker Company PepsiCo, Inc.
Colgate-Palmolive Co. Kellogg Co. The Procter & Gamble Co.
ConAgra Foods, Inc. Kimberly-Clark Corp. Reckitt Benckiser Group plc*
Danone Inc.* The Kraft Heinz Company Unilever NV*
   
* Excluded from compensation comparisons due to lack of publicly available pay information.

 

How We Use Our Industry Peer Group

 

To assess pay levels and pay mix for executive officers
   
To evaluate total direct compensation for executive officers in comparable positions
   
To gauge relative financial performance and TSR
   
To evaluate annual and long-term incentive structure
   
To review governance and terms of incentive awards, including vesting and clawback provisions
   
To compare benefits, perquisites and severance
   
To review overall share usage and run rate

 

The compensation committee annually compares General Mills’ compensation under various performance scenarios versus industry peer group practices to ensure that our programs are competitive and that pay is commensurate with performance relative to the industry.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 42
 

Key Policies – Supplemental Information

 

Policies and Practices

 

The compensation committee continually evaluates our executive compensation policies and practices to ensure that they drive performance and that they are well-governed.

 

Existing
Policies and
Practices
    What we do:   What we don’t do:
      Significant alignment between pay and     No employment contracts for NEOs
      performance   No officer hedging or pledging of company stock
    PSUs granted to CEO and his direct   No corporate aircraft
      reports, including NEOs   No first class air travel for flights less than 5 hours
    Quantitative corporate performance   No excise tax gross up
      measures   No payment of dividend equivalents on unvested shares or options
    Clawback policy    
    Rigorous stock ownership requirements    
    Tally sheets reviewed in connection with    
      compensation decision making      
    Annual risk assessment of pay programs      
    Annual say-on-pay vote      
    Direct engagement with shareholders      
    Double-trigger change in control vesting      
      provisions      
      Fully independent compensation consultant      
    Executive session after each      
      compensation committee meeting      

 

Significant Executive Investment in Company Stock

 

Long-term stock ownership is deeply engrained in our executive culture, and it reflects our executives’ strong commitment to the company’s success. Minimum ownership requirements are ten times salary for the CEO, which is a more aggressive requirement compared to our industry peer group, five times salary for EVPs and SVPs, and three times salary for all other corporate officers. In fact, the CEO holds company stock worth 35 times his base salary, and the other NEOs hold company stock worth, on average, 18 times their base salaries. Executives must hold 50 percent of net, after-tax shares that they receive pursuant to stock awards until they meet the ownership requirements. Stock ownership includes direct and indirect ownership, deferred stock units, unvested RSUs, and stock held in the 401(k) Plan.

 

STOCK OWNERSHIP FOR ACTIVE NAMED EXECUTIVE OFFICERS

 

Name Required Base
Salary Multiple
Shares Owned Actual Base Salary
Multiple
K. J. Powell
Chairman and CEO
10x 590,378 35x
D. L. Mulligan
EVP, CFO
5x 231,014 23x
C. D. O’Leary
EVP, COO, International
5x 240,660 24x
J. L. Harmening
President, COO
5x 114,960 13x
J. R. Church
EVP, Supply Chain
5x 100,799 13x

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 43
 

Robust Clawback Policy

 

In the event the company is required to restate financial results due to fraud, intentional misconduct, gross negligence or otherwise, the compensation committee may adjust the future compensation, cancel outstanding stock or performance-based awards, or seek recoupment of previous awards from company officers whose conduct contributed significantly to such financial restatement. Also, the compensation committee may take these actions where it reasonably believes the company’s Employee Code of Conduct or the terms of a separation agreement have been violated.

 

Restrictions on Hedging or Pledging Company Stock

 

Executive officers and directors of the company are not permitted to use options, contracts or other arrangements to hedge their holdings of company stock. They are also prohibited from pledging company stock as security for loans.

 

Compensation that is Tax Deductible by the Company

 

The Executive Incentive Plan and the 2011 Stock Compensation Plan have been structured so that incentive awards can typically qualify as performance-based compensation, which is tax-deductible by the company under Section 162(m) of the Internal Revenue Code. However, the compensation committee reserves the right to grant awards that are not subject to performance vesting and that are not fully tax-deductible when the committee deems it is in the best interest of the company.

 

Compensation Committee Report

 

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the compensation committee recommended to the board that the Compensation Discussion and Analysis be included in this Proxy Statement and in our Annual Report on Form 10-K for the fiscal year ended May 29, 2016.

 

SUBMITTED BY THE COMPENSATION COMMITTEE

 

Bradbury H. Anderson, Chair
David M. Cordani
Maria G. Henry
Steve Odland
Michael D. Rose
Jorge A. Uribe

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 44
 

The following tables and accompanying narrative should be read in conjunction with the Compensation Discussion and Analysis. They present compensation for our CEO and CFO and each of the other three most highly-compensated executive officers active at the end of fiscal 2016.

 

Summary Compensation Table

 

                     Non-Equity  Change in        
             Stock  Option  Incentive Plan  Pension  All Other    
Name and        Salary  Awards(1)  Awards(2)  Compensation(3)  Value(4)  Compensation(5)  Total
Principal Position    Year   ($)  ($)  ($)  ($)  ($)  ($)  ($)
Kendall J. Powell   2016    1,206,500    3,423,719    1,796,295    2,258,568    2,124,905    187,903    10,997,890 
Chairman and CEO   2015    1,200,650    3,416,985    1,858,710    1,681,054    5,124,882    147,780    13,430,061 
    2014    1,165,717    3,537,659    1,778,404    1,655,132    3,273,596    193,976    11,604,484 
Donal L. Mulligan   2016    712,300    870,375    419,044    904,621    927,619    97,792    3,931,751 
EVP, CFO   2015    673,017    1,564,066    433,604    669,840    1,281,765    85,288    4,707,580 
    2014    653,417    1,066,788    491,270    654,880    752,857    78,322    3,697,534 
Christopher D. O’Leary   2016    712,300    871,601    419,044    833,391    972,781    97,492    3,906,609 
EVP, COO, International   2015    673,017    1,815,220    433,604    674,524    1,391,320    83,302    5,070,987 
    2014    653,417    1,063,067    491,270    659,428    781,576    88,898    3,737,656 
Jeffrey L. Harmening   2016    650,000    844,800    419,044    760,500    822,309    78,873    3,575,526 
President, COO   2015    577,500    741,973    433,604    570,755    589,008    42,322    2,955,162 
John R. Church   2016    559,100    521,146    251,423    568,046    738,290    69,955    2,707,960 
EVP, Supply Chain   2015    513,583    479,165    257,898    397,274    974,814    49,451    2,672,185 

 

Footnotes to the Summary Compensation Table:

 

(1) 2016 amounts reported for stock awards represent the aggregate grant date fair value of RSUs and PSUs awarded to the NEOs in fiscal 2016. RSUs awarded to the NEOs have four-year cliff vesting, and PSUs awarded to the NEOs have a three-year performance period (fiscal 2016-2018) and an additional fourth year of vesting. Grant date fair value is calculated in accordance with FASB ASC Topic 718. The grant date fair value of each stock award equals the closing price of our common stock on the NYSE on the grant date ($55.72 for RSUs and $56.96 for PSUs in fiscal 2016, $53.70 for RSUs and $53.70 for PSUs in fiscal 2015, and $48.33 for RSUs in fiscal 2014). The values shown have not been adjusted to reflect that these units are subject to forfeiture. The PSU value assumes target performance over the performance period, and is consistent with the estimate of aggregate compensation cost to be recognized over the performance period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. The value of the stock awards granted at the beginning of fiscal 2016 reflects a 14 percent reduction from target pay opportunities based on fiscal 2015 performance.
   
  The following table reflects the value at grant date of the 2016 PSU awards at minimum, threshold, target, and maximum performance levels

 

VALUE OF 2016 PERFORMANCE SHARE UNITS

 

Name At Minimum
0%
($)
At Threshold
25%
($)
At Target
100%
($)
At Maximum
150%
($)
K. J. Powell 0 401,882   1,607,526   2,411,289  
D. L. Mulligan 0 93,756 375,025 562,537
C. D. O’Leary 0 93,756 375,025 562,537
J. L. Harmening 0 93,756 375,025 562,537
J. R. Church 0 56,277 225,106 337,659

 

(2) 2016 amounts reported for option awards represent the grant date fair value of options awarded to the NEOs in fiscal 2016. Stock options awarded to the NEOs in fiscal 2016 have four-year cliff vesting. The grant date fair value of options calculated in accordance with FASB ASC Topic 718 equals $7.24 per share (fiscal 2016), $7.22 per share (fiscal 2015) and $6.03 per share (fiscal 2014), based on our Black-Scholes option pricing model. The following assumptions were used in the fiscal 2016 calculation: expected term of 8.5 years; dividend yield of 3.16 percent annually; dividend growth rate of 7.00 percent annually; a risk-free interest rate of 2.38 percent; and expected price volatility of 17.63 percent. Fiscal 2015 and 2014 assumptions are listed in our proxy statements for those years. The values shown have not been adjusted to reflect that these options are subject to forfeiture. The value of the stock options granted at the beginning of fiscal 2016 reflects a 14 percent reduction from target pay opportunities based on fiscal 2015 performance.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 45
 
(3) As described in the “Annual Incentive Award” section of the Compensation Discussion and Analysis on pages 38 – 40, the amounts reported reflect annual incentive awards earned for performance under the Executive Incentive Plan for fiscal 2016.
   
(4) Includes the annual increase in the actuarial present value of accumulated benefits under our Pension Plan and Supplemental Retirement Plan.
   
  There have been no enhanced pension benefits delivered to our NEOs via a change in plan design over the last three fiscal years. Reasons for the increases relate to additional service, aging and increases in “Final Average Earnings” as defined in the Pension Benefits section.
   
(5) All Other Compensation for fiscal 2016 includes the following amounts:

 

  Contributions Perquisites and  
  to Retirement Other Personal  
  Savings Plans(6) Benefits(7) Total
Name ($) ($) ($)
K. J. Powell 167,725 20,178 187,903
D. L. Mulligan   76,140 21,652   97,792
C. D. O’Leary   76,343 21,149   97,492
J. L. Harmening   59,747 19,126   78,873
J. R. Church   49,510 20,445   69,955

 

(6) Includes the company’s fixed and variable contributions during fiscal 2016 to the 401(k) Plan, the Supplemental Savings Plan and the Deferred Compensation Plan. Contributions to the Deferred Compensation Plan are made as if these amounts had been contributed to the 401(k) Plan and the Supplemental Savings Plan. For more information on the terms of the contributions, see Other Retirement Savings Plans.

 

CONTRIBUTIONS TO RETIREMENT SAVINGS PLANS

 

  Matching Contributions to Matching Contributions Contributions to  
  Deferred Compensation to 401(k) Plan Supplemental Savings Plan Total
Name ($) ($) ($) ($)
K. J. Powell   19,002   11,925 136,798 167,725
D. L. Mulligan   42,997   12,437   20,706   76,140
C. D. O’Leary   39,974   11,925   24,444   76,343
J. L. Harmening     11,925   47,822   59,747
J. R. Church     12,594   36,916   49,510

 

(7) Includes the following perquisites and other personal benefits for fiscal 2016:

 

PERQUISITES AND OTHER PERSONAL BENEFITS

 

  Personal Use of Financial  
  Executive Car(8) Counseling Total
Name ($) ($) ($)
K. J. Powell 20,178     20,178
D. L. Mulligan 14,850   6,802   21,652
C. D. O’Leary 13,149   8,000   21,149
J. L. Harmening 13,126   6,000   19,126
J. R. Church 13,665   6,780   20,445

 

(8) Includes the annual taxable value of the vehicle according to Internal Revenue Service regulations plus the applicable Internal Revenue Service rate per mile to cover fuel and maintenance charges.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 46
 

Grants of Plan-Based Awards for Fiscal 2016

 

         Estimated Possible
Payouts Under Non-Equity
Incentive Plan Awards
  Estimated Future
Payouts Under Equity
Incentive Plan Awards
  All Other
Stock
Awards:
  All Other
Option
Awards:
  Exercise  Grant
Date Fair
Name  Grant
Date
  Award
Type
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
  Number
of Shares
of Stock
or Units
(#)
  Number of
Securities
Underlying
Options
(#)
  or Base
Price of
Option
Awards
($/Sh)
  Value of
Stock and
Option
Awards
($)
K. J. Powell  —      Cash(1)   482,600    1,930,400    3,860,800                             
   6/30/2015(2)  RSU                           32,595            1,816,193 
   8/27/2015(3)  PSU               7,056    28,222    42,333                1,607,526 
   6/30/2015(4)  Options                               248,107    55.72    1,796,295 
D. L.  —      Cash(1)   178,075    712,300    1,424,600                             
Mulligan  6/30/2015(2)  RSU                           8,890            495,350 
   8/27/2015(3)  PSU               1,646    6,584    9,876                375,025 
   6/30/2015(4)  Options                               57,879    55.72    419,044 
C. D.  —      Cash(1)   178,075    712,300    1,424,600                             
O’Leary  6/30/2015(2)  RSU                           8,912            496,576 
   8/27/2015(3)  PSU               1,646    6,584    9,876                375,025 
   6/30/2015(4)  Options                               57,879    55.72    419,044 
J. H.  —      Cash(1)   162,500    650,000    1,300,000                             
Harmening  6/30/2015(2)  RSU                           8,431            469,775 
   8/27/2015(3)  PSU               1,646    6,584    9,876                375,025 
   6/30/2015(4)  Options                               57,879    55.72    419,044 
J. R. Church  —      Cash(1)   111,820    447,280    894,560                             
   6/30/2015(2)  RSU                           5,313            296,041 
   8/27/2015(3)  PSU               988    3,952    5,928                225,106 
   6/30/2015(4)  Options                               34,727    55.72    251,423 

 

(1) Annual Incentive Awards for Fiscal 2016 Performance: Cash. Includes the potential range of 2016 annual incentive awards as described in the Compensation Discussion and Analysis. The actual amount earned for fiscal 2016 performance is reported under the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table.
   
(2) Long-Term Incentive Awards: Restricted Stock Units. Includes RSUs granted in fiscal 2016 under the 2011 Stock Compensation Plan.
   
(3) Long-Term Incentive Awards: Performance Share Units. Includes PSUs that will be paid out based on a fiscal 2016-2018 performance period and an additional fourth year of vesting under the 2011 Stock Compensation Plan as described in the Compensation Discussion & Analysis.
   
(4) Long-Term Incentive Awards: Options. Includes options granted in fiscal 2016 under the 2011 Stock Compensation Plan.

 

Information on the terms of these awards are described under “Elements of Total Direct Compensation” in the Compensation Discussion and Analysis. See Potential Payments Upon Termination or Change in Control for a discussion of how equity awards are treated under various termination scenarios.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 47
 

The following table summarizes the outstanding equity awards as of May 29, 2016 for each of the NEOs.

 

Outstanding Equity Awards at 2016 Fiscal Year End

 

      Option Awards   Stock Awards
                                   Equity
                               Equity  Incentive
                               Incentive  Plan Awards:
                               Plan Awards:  Market or
                       Number  Market  Number of  Payout Value
                       of Shares  Value of  Unearned  of Unearned
                       or Units  Shares or  Shares, Units  Shares, Units
      Number of Securities           of Stock  Units of  or Other  or Other
      Underlying Unexercised Options  Option       That  Stock That  Rights That  Rights That
      (#)  Exercise  Option   Have Not  Have Not  Have Not  Have Not
   Vesting          Price  Expiration   Vested  Vested(2)  Vested(3)  Vested(2)
Name  Date(1)  Exercisable  Unexercisable  ($)  Date   (#)  ($)  (#)  ($)
K. J. Powell  6/26/2016                   64,050    4,026,824         
   6/26/2016                   11,602    729,418         
   6/25/2017                   58,986    3,708,450         
   6/25/2017                   14,212    893,508         
   6/24/2018                   25,744    1,618,525         
   6/24/2018                   7,953    500,005         
   6/24/2018                           29,934    1,881,951 
   6/30/2019                   32,595    2,049,248         
   6/30/2019                           28,222    1,774,317 
   6/26/2010   156,250        25.63   7/26/2016                  
   6/25/2011   325,000        29.40   7/25/2017                  
   6/23/2012   483,788        31.70   7/23/2018                  
   6/29/2013   536,612        27.92   7/29/2019                  
   6/28/2014   457,340        37.40   7/28/2020                  
   6/28/2015   357,525        37.21   7/28/2021                  
   6/26/2016       320,249    38.15   7/26/2022                  
   6/25/2017       294,926    48.33   7/25/2023                  
   6/24/2018       257,439    53.70   7/24/2024                  
   6/30/2019       248,107    55.72   7/31/2025                  
D. L. Mulligan  6/26/2016                   17,694    1,112,422         
   6/26/2016                   4,433    278,703         
   6/25/2017                   16,295    1,024,467         
   6/25/2017                   5,778    363,263         
   6/24/2019*                   13,967    878,105         
   6/24/2018                   12,012    755,194         
   6/24/2018                   3,147    197,852         
   6/30/2019                   8,890    558,915         
   6/30/2019                           6,584    413,936 
   6/23/2012   108,840        31.70   7/23/2018                  
   6/29/2013   120,722        27.92   7/29/2019                  
   6/28/2014   126,337        37.40   7/28/2020                  
   6/28/2015   98,764        37.21   7/28/2021                  
   6/26/2016       88,467    38.15   7/26/2022                  
   6/25/2017       81,471    48.33   7/25/2023                  
   6/24/2018       60,056    53.70   7/24/2024                  
   6/30/2019       57,879    55.72   7/31/2025                  

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 48
 
      Option Awards   Stock Awards
                                   Equity
                               Equity  Incentive
                               Incentive  Plan Awards:
                               Plan Awards:  Market or
                       Number  Market  Number of  Payout Value
                       of Shares  Value of  Unearned  of Unearned
                       or Units  Shares or  Shares, Units  Shares, Units
      Number of Securities           of Stock  Units of  or Other  or Other
      Underlying Unexercised Options  Options      That  Stock That  Rights That  Rights That
      (#)  Exercise  Option   Have Not  Have Not  Have Not  Have Not
   Vesting          Price  Expiration   Vested  Vested(2)  Vested(3)  Vested(2)
Name  Date(1)  Exercisable  Unexercisable  ($)  Date   (#)  ($)  (#)  ($)
C. D. O’Leary  6/26/2016                   17,694    1,112,422         
   6/26/2016                   4,523    284,361         
   6/25/2017                   16,295    1,024,467         
   6/25/2017                   5,701    358,422         
    6/24/2019*                   18,622    1,170,765         
   6/24/2018                   12,012    755,194         
   6/24/2018                   3,169    199,235         
   6/30/2019                   8,912    560,298         
   6/30/2019                           6,584    413,936 
   6/25/2011   195,000        29.40   7/25/2017                  
   6/23/2012   126,976        31.70   7/23/2018                  
   6/29/2013   140,840        27.92   7/29/2019                  
   6/28/2014   126,337        37.40   7/28/2020                  
   6/28/2015   98,764        37.21   7/28/2021                  
   6/26/2016       88,467    38.15   7/26/2022                  
   6/25/2017       81,471    48.33   7/25/2023                  
   6/24/2018       60,056    53.70   7/24/2024                  
   6/30/2019       57,879    55.72   7/31/2025                  
J. L. Harmening  6/26/2016                   9,462    594,876         
   6/26/2016                   1,997    125,551         
    7/16/2017*                   15,000    943,050         
   6/25/2017                   7,580    476,555         
   6/25/2017                   1,013    63,687         
   6/24/2018                   12,012    755,194         
   6/24/2018                   1,805    113,480         
   6/30/2019                   8,760    550,742         
   6/30/2019                            6,584    413,936 
   6/25/2011   33,150        29.40   7/25/2017                   
   6/23/2012   55,260        31.70   7/23/2018                   
   6/29/2013   61,294        27.92   7/29/2019                   
   6/28/2014   45,397        37.40   7/28/2020                   
   6/28/2015   44,147        37.21   7/28/2021                   
   6/26/2016       47,306    38.15   7/26/2022                   
   6/25/2017       37,895    48.33   7/25/2023                   
   6/24/2018       60,056    53.70   7/24/2024                   
   6/30/2019       57,879    55.72   7/31/2025                     

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 49
 
      Option Awards   Stock Awards
                                   Equity
                               Equity  Incentive
                               Incentive  Plan Awards:
                               Plan Awards:  Market or
                       Number  Market  Number of  Payout Value
                       of Shares  Value of  Unearned  of Unearned
                       or Units  Shares or  Shares, Units  Shares, Units
      Number of Securities           of Stock  Units of  or Other  or Other
      Underlying Unexercised Options  Option       That  Stock That  Rights That  Rights That
      (#)  Exercise  Option   Have Not  Have Not  Have Not  Have Not
   Vesting          Price  Expiration   Vested  Vested(2)  Vested(3)  Vested(2)
Name  Date(1)  Exercisable  Unexercisable  ($)  Date   (#)  ($)  (#)  ($)
J. R. Church   6/26/2016                   9,462    594,876         
   6/26/2016                   2,171    136,491         
   6/25/2017                   8,714    547,849         
   6/25/2017                   2,737    172,075         
   6/24/2018                   7,144    449,143         
   6/24/2018                   1,779    111,846         
   6/30/2019                   5,313    334,029         
   6/30/2019                           3,952    248,462 
   6/28/2014   67,557        37.40   7/28/2020                  
   6/28/2015   52,812        37.21   7/28/2021                  
   6/26/2016       47,306    38.15   7/26/2022                  
   6/25/2017       43,565    48.33   7/25/2023                  
   6/24/2018       35,720    53.70   7/24/2024                  
   6/30/2019       34,727    55.72   7/31/2025                  

 

(1) Options and RSUs vest 100 percent four years after the grant date, except that the asterisked awards (*) vest 100 percent five years after the grant date, subject to a three-year minimum active service requirement. PSUs vest four years after the grant date, to the extent they are earned based on a three-year performance period.
   
(2) Market value of unvested RSUs and PSUs equals the closing price of our common stock on the NYSE at fiscal year-end ($62.87) multiplied by the number of units.
   
(3) Includes PSUs for the fiscal 2015-2017 performance period and fiscal 2016-2018 performance period for Mr. Powell and PSUs for the fiscal 2016-2018 performance period for the other NEOs. All PSUs are valued at the target award level.

 

The following table summarizes the option awards exercised and RSUs vested during fiscal 2016 for each of the NEOs.

 

Option Exercises and Stock Vested for Fiscal 2016

 

   Option Awards   Stock Awards
   Number of Shares  Value Realized  Number of Shares  Value Realized
   Acquired on Exercise  on Exercise(1)  Acquired on Vesting  on Vesting(2)
Name  (#)  ($)  (#)  ($)
K. J. Powell   156,250    5,540,625    89,445    5,109,288 
D. L. Mulligan   62,400    2,204,280    29,242    1,681,931 
C. D. O’Leary   187,500    5,985,000    29,239    1,681,760 
J. L. Harmening           15,346    912,272 
J. R. Church   76,248    2,854,725    17,451    1,010,669 

 

(1) Value realized equals the closing price of our common stock on the NYSE at exercise, less the exercise price, multiplied by the number of shares exercised.
   
(2) Value realized equals the closing price of our common stock on the NYSE on the vesting date multiplied by the number of shares vested.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 50
 

Pension Benefits

 

The company maintains two defined benefit pension plans that include NEOs:

 

The General Mills Pension Plan (“Pension Plan”) is a tax-qualified plan available generally to non-union employees in the United States that provides benefits based on a formula that yields an annual amount payable over the participant’s life.
   
The Supplemental Retirement Plan of General Mills, Inc. (“Supplemental Retirement Plan”) provides benefits based on the Pension Plan formula in excess of the Internal Revenue Code limits placed on annual benefit amounts and annual compensation under the Pension Plan. The Supplemental Retirement Plan also provides benefits based on the Pension Plan formula that is attributable to deferred compensation.

 

The following table shows present value of accumulated benefits that NEOs are entitled to under the Pension Plan and Supplemental Retirement Plan.

 

Name  Plan Name  Number of Years
Credited Service(1)
(#)
  Present Value of
Accumulated Benefit(2)
($)
  Payments During
Last Fiscal Year(3)
($)
K. J. Powell(4)  Pension Plan   36.7823    1,764,694     
   Supplemental Retirement Plan   36.7823    27,591,642     
D. L. Mulligan(4)  Pension Plan   17.7500    809,486     
   Supplemental Retirement Plan   17.7500    4,899,266     
C. D. O’Leary(4)  Pension Plan   18.5000    897,614     
   Supplemental Retirement Plan   18.5000    5,511,770     
J. L. Harmening(5)  Pension Plan   21.8710    785,383     
   Supplemental Retirement Plan   21.8710    2,252,672     
J. R. Church(5)  Pension Plan   27.8334    1,018,995     
   Supplemental Retirement Plan   27.8334    3,417,370     

 

(1) Number of years of credited service equals number of years of actual service.
(2) Actuarial present value is based on assumptions and methods used to calculate the benefit obligation under standards established by the Financial Accounting Standards Board, including:
  Discount rate equal to a weighted average of 4.21 percent as of the end of fiscal 2016;
  Mortality rates based on the RP2014 Mortality Table with White Collar adjustment and MP2015 generational projection;
  Single life annuity payments;
  Age 62 (unreduced benefit retirement age), discounted to current age; and
  No pre-retirement decrements or future increases in pay, service or legislated limits.
(3) In accordance with Section 409A of the Internal Revenue Code, “key employees,” including the NEOs, must wait six months from their termination date to begin payment of any Supplemental Retirement Plan benefit accrued after December 31, 2004 and to receive a distribution of their Supplemental Savings Plan account.
(4) NEO is eligible for early retirement under both the Pension Plan and the Supplemental Retirement Plan.
(5) NEO is not eligible for early retirement but currently qualifies for enhanced early retirement reductions under the “Rule of 70,” as described in this section, under both the Pension Plan and the Supplemental Retirement Plan.
     

The Pension Plan and Supplemental Retirement Plan formulas provide an annual benefit amount equal to 50 percent of Final Average Earnings less 50 percent of the Social Security benefit, prorated for benefit service of less than 30 years, as discussed in this section. Final Average Earnings are the greater of (a) average of the highest five full calendar years of compensation recognized under the Plans, and (b) amount in (a) increased by compensation in the partial year of termination and decreased by the same ratio of compensation for lowest year in average. The Supplemental Retirement Plan formula replaces (b) with the final 60 months of compensation. Final Average Earnings generally approximate the salary and non-equity incentive plan compensation reported in the Summary Compensation Table.

 

Early retirement benefits are available after attaining age 55 and five years of eligibility service. The Final Average Earnings portion of the benefit calculation is reduced by 2 percent per year for the first three years and by 4 percent per year for each year thereafter by which commencement precedes age 62. The Social Security offset portion of the benefit calculation is reduced by 5/9 of a percent for

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 51
 

each of the first 36 months by which commencement precedes age 65. In addition, a temporary early retirement supplement equal to the reduced social security benefit is payable to age 62. This social security supplement is not available to those hired after January 1, 2005 or to those under the age of 50 as of June 1, 2012.

 

Employees that terminate prior to early retirement eligibility and whose age plus years of eligibility service is greater than or equal to 70 at termination (“Rule of 70”), can commence retirement benefits as early as age 55 with early commencement reductions that are somewhat less favorable than those eligible for early retirement. Other terminations that occur prior to early retirement or Rule of 70 eligibility are eligible to commence benefits as early as age 55 with reductions that are closer to actuarial equivalence.

 

The Supplemental Retirement Plan provides additional supplemental pension benefits to involuntarily terminated participants in the Executive Incentive Plan if the sum of their current age and years of service equals or exceeds 75 and they are not retirement eligible. They receive a supplemental retirement benefit equal to the difference between their vested deferred pension benefit and a benefit determined under the early retirement provisions of the Pension Plan.

 

All distributions under the Pension Plan and Supplemental Retirement Plan are payable in cash. There are no provisions in either Plan that allow for additional years of service above the service actually earned by a participant.

 

The normal form of payment under the Pension Plan for unmarried participants is a “Single Life Pension,” which provides for monthly payments for the participant’s lifetime, and for married participants, a “Joint and 50 percent to Survivor Pension,” which provide for monthly payments for the participant’s lifetime and, after the participant’s death, to the participant’s designated joint pensioner for his or her lifetime in 50 percent of the amount. Additional forms of payment are a “Joint and 75 percent to Survivor Pension” and a “Joint and 100% to Survivor Pension,” which provide for monthly payments for the participant’s lifetime and, after the participant’s death, to the participant’s designated joint pensioner for his or her lifetime in 75 percent or 100 percent of the same amount, respectively, and a “Life Annuity with Ten Year Certain,” which provides for a pension payable for the participant’s lifetime, provided that if the participant dies before 120 monthly pension payments have been made, monthly payments will continue to the participant’s beneficiary until a total of 120 payments have been made.

 

The normal form of payment under the Supplemental Retirement Plan for unmarried participants is a “Single Life Pension,” and for married participants, a “Joint and 100% to Survivor Pension.” A “Joint and 50% to Survivor Pension” is also available.

 

Other Retirement Savings Plans

 

In addition to the Pension Plan and Supplemental Retirement Plan (both defined benefit plans), the company also offers the General Mills 401(k) Plan (401(k) Plan), a qualified plan available generally to employees in the United States, and the Supplemental Savings Plan of General Mills, Inc. (“Supplemental Savings Plan”), a non-qualified plan. The 401(k) Plan provides for participant contributions, together with a company match. For the NEOs and other U.S. salaried employees hired before June 1, 2013, participant contributions to the 401(k) Plan can be matched up to 6 percent of earnable compensation subject to Internal Revenue Code limits. The company match has fixed and variable components. The fixed match is 50 percent on the first 6 percent of pay. In addition, the company at its discretion may add up to another 50 percent on the first 6 percent of pay after the close of each fiscal year, as an annual variable match. Company contributions that cannot be deposited in the 401(k) Plan due to deferred compensation or federal limitations on contributions to qualified plans are credited to the Supplemental Savings Plan for eligible participants. U.S. salaried employees hired on or after June 1, 2013 receive enhanced retirement benefits through the 401(k) Plan and the Supplemental Savings Plan, instead of participating in the Pension Plan and Supplemental Retirement Plan.

 

The contributions to the 401(k) Plan and Supplemental Savings Plan for the NEOs for fiscal 2016 are reported in the Summary Compensation Table and reflect 75 percent of the maximum annual contribution available. This contribution was granted to eligible 401(k) Plan participants in light of the company’s fiscal 2016 performance. Distributions from the 401(k) Plan are permitted upon the earlier of termination or age 59.5. Distributions from the Supplemental Savings Plan are made in the calendar year following termination.

 

GENERAL MILLS, INC. - Notice of 2016 Annual Meeting of Shareholders and Proxy Statement 52
 

Nonqualified Deferred Compensation

 

Our Deferred Compensation Plan is a non-qualified plan that provides most of our executives, including the NEOs, with the opportunity to defer up to 50 percent of base salary, 90 percent of annual incentive awards and 100 percent of RSUs. The CEO can defer up to 100 percent of his base salary, less tax withholding.

 

Participants’ deferred cash accounts earn a daily rate of return that tracks the investment return achieved under participant-selected investment funds, all of which are offered to participants in our 401(k) Plan. Here are the investment funds that were available for the full fiscal year and their rates of return for fiscal 2016: Stable Value Fund (1.4%); Core Bond Fund (3.0%); Diversified U.S. Equity Fund (-1.3%); Growth Equity Fund (-4.5%); S&P 500 Index Fund (1.8%); Small & Midcap Fund (-3.6%); Value Equity Fund (-1.0%); Company Stock Fund (14.9%); International Developed Markets Fund (-8.9%); International Emerging Markets Fund (-13.5%); and Multi-Asset Class Fund (-1.0%).

 

Participants are able to change their investment mix on a daily basis. RSUs in participants’ deferred stock accounts earn dividend equivalents equal to regular dividends paid on our common stock. These dividend equivalents are credited to the accounts or paid to the participants. Dividend equivalents credited to each account are used to “purchase” additional stock units for the account at a price equal to the closing price of our common stock on the NYSE on the dividend payment date.

 

We credit deferred accounts with additional stock units, as applicable, equal to the value of the contributions that we would have otherwise made to the participants’ 401(k) Plan and Supplemental Savings Plan accounts if the participants had not deferred compensation.

 

At the time of the deferral election, participants must also select a distribution date and form of distribution. Participants must start receiving distributions from deferred accounts no later than age 70. Furthermore, in the case of deferred cash, participants may not receive distributions for at least one year following the date on which the cash otherwise would have been paid out. In the case of deferred equity awards, participants may not receive shares of common stock in place of stock units for at least one year following the vesting date of the award. Participants may elect to receive distributions in a single payment or up to ten annual installments.

 

Name  Executive
Contributions
in Last FY(1)
($)
  Registrant
Contributions
in Last FY(2)
($)
  Aggregate
Earnings in Last FY
($)
  Aggregate
Withdrawals/
Distributions(3)
($)
  Aggregate Balance
at Last FYE
($)
K. J. Powell   422,275        (20,438)       2,049,372 
D. L. Mulligan   2,080,029    8,442    76,403    44,223    7,707,667 
C. D. O’Leary   2,012,844    8,437    381,588        5,710,910 
J. L. Harmening   312,458        152,282        2,578,632 
J. R. Church