DEF 14A 1 lgis2017_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
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
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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

 

Dear Fellow Shareholder:

 

Fiscal 2017 was a year of significant change for General Mills and the consumer environment in which we do business. As we continue to pursue our Consumer First strategy, we pride ourselves on knowing our consumers and changing with them as their lives and interests change. And we have seen a lot of change in our consumers in recent years, including a continued increase in the snacking trend, a balanced approach to consumption that includes organic foods, foods with fewer and simpler ingredients, convenient and ready to prepare foods, and indulgent food offerings and a rapid acceleration of the use of e-commerce as a global channel for food. We responded to these consumer changes by implementing a new global organizational structure to enhance our agility and ability to react quickly to consumer trends. We have many examples of how our Consumer First strategy has driven growth across our product portfolio, and we see more opportunities for future growth.

 

This year we also pursued a business plan that aggressively shifted resources to our best growth opportunities and eliminated low-return investments and volume. We are making strategic choices about our level of investments and expectations for growth across our businesses. We continue to manage three quarters of our company as a Growth portfolio, where we are focusing the majority of our investments for long-term growth. Our Foundation portfolio represents the remaining quarter of our company and provides strong, consistent profit and cash generation that helps fund topline growth initiatives. We are making selective investments in our Foundation brands, focusing on strong returns.

 

With our Consumer First strategy and our Growth and Foundation designations firmly in place, we are focused on the following key priorities for fiscal 2018:

 

Grow cereal globally, including our joint venture Cereal Partners Worldwide;
Innovate to improve our yogurt performance;
Invest in high-performing worldwide brands, like Häagen-Dazs, Old El Paso and Nature Valley;
Drive continued growth on our Natural & Organic portfolio;
Manage Foundation businesses, including Progresso soup and Pillsbury dough, with the appropriate investment; and
Build an agile organization and new capabilities to support our company in the future.

 

In fiscal 2018, our newly appointed Chief Executive Officer, Jeffrey L. Harmening, will focus on delivering improved performance and building on our track record of strong value creation for our shareholders over the long term. The skill sets of our recently refreshed board of directors ensure the board is well-positioned to provide direction and oversight of our strategies. Additionally, our compensation program is designed around financial metrics tied to achieving our strategic goals and strongly links executive pay to business performance.

 

We are committed to delivering on our performance goals on your behalf and appreciate your investment in our company and confidence in our plans for future growth.

 

August 14, 2017

 

Sincerely,

 

 

Kendall J. Powell

Chairman of the Board

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    i

 

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NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS

 

Dear Fellow Shareholder:

 

The Annual Meeting of Shareholders of General Mills, Inc. will be held on Tuesday, September 26, 2017, 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. Approve the 2017 Stock Compensation Plan;
3. Cast an advisory vote on executive compensation;
4. Cast an advisory vote on the frequency of holding the advisory vote on executive compensation;
5. Ratify the appointment of KPMG LLP as General Mills’ independent registered public accounting firm for our fiscal year ending May 27, 2018; and
6. Transact any other business that properly comes before the meeting.

 

The record date for the Annual Meeting is July 28, 2017. If you held General Mills stock at the close of business on that date, you are entitled to vote at the Annual Meeting.

 

To attend the 2017 Annual Meeting, you will need to bring an admission ticket and may be required to provide valid photo identification. You can print an admission ticket by following the instructions at www.proxyvote.com.

 

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

 

August 14, 2017

 

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 2017 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 26, 2017

Our Notice of 2017 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 2017 Annual Meeting of Shareholders and Proxy Statement    iii

 

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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 11.

                       
                      Committee Memberships
Name   Age   Director
Since
    Primary Occupation   Independent   AC   CC   CGC   FC   PRC
Bradbury H. Anderson   68   2007     Retired Chief Executive Officer and Vice Chairman of Best Buy Co., Inc.                        
Alicia Boler Davis   48   2016     Executive Vice President of Global Manufacturing at General Motors                        
R. Kerry Clark   65   2009     Retired Chairman and Chief Executive Officer of Cardinal Health, Inc.                        
David M. Cordani   51   2014     President and Chief Executive Officer of Cigna Corporation                      
Roger W. Ferguson Jr.   65   2015     President and Chief Executive Officer of TIAA                        
Henrietta H. Fore   68   2014     Chairman and Chief Executive Officer of Holsman International                        
Jeffrey L. Harmening   50   2017     Chief Executive Officer of General Mills, Inc.                        
Maria G. Henry   51   2016     Senior Vice President and Chief Financial Officer of Kimberly-Clark Corporation                    
Heidi G. Miller   64   1999     Retired President of JPMorgan International, J.P. Morgan Chase & Co.                    
Steve Odland   58   2004     President and Chief Executive Officer of the Committee for Economic Development                      
Kendall J. Powell   63   2006     Chairman of General Mills, Inc.                        
Eric D. Sprunk   53   2015     Chief Operating Officer of NIKE, Inc.                    
Jorge A. Uribe   60   2016     Retired Global Productivity and Organization Transformation Officer at The 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 2017 Annual Meeting of Shareholders and Proxy Statement    v

 
2 Proposal Number 2:
Approval of the 2017 Stock Compensation Plan

 The board of directors unanimously recommends a vote FOR approval of the plan.
  Additional information about the 2017 Stock Compensation Plan may be found beginning on page 31.
   
   
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 37.
   
   
4

 

Proposal Number 4:
Advisory Vote on the Frequency of Holding the Advisory Vote on Executive Compensation


 The board of directors unanimously recommends a vote FOR holding the advisory vote to approve executive compensation EVERY YEAR.

  Additional information about the frequency of holding the advisory vote on executive compensation may be found beginning on page 62.
   
   
5 Proposal Number 5:
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 63.
   

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    vi

 

Table of Contents

 

PROXY STATEMENT SUMMARY   1
       
PROPOSAL NUMBER 1    ELECTION OF DIRECTORS   6
       
CORPORATE GOVERNANCE   18
       
Our Board’s Key Responsibilities   18
Board Leadership Structure   20
Board Committees and Their Functions   21
Board Independence and Related Person Transactions   23
Codes of Conduct for Directors and Employees   24
Shareholder Director Nominations   24
Communications with the Board   25
       
DIRECTOR COMPENSATION   26
       
Director Compensation for Fiscal 2017   27
       
OWNERSHIP OF GENERAL MILLS COMMON STOCK BY DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS   29
       
Section 16(a) Beneficial Ownership Reporting Compliance   30
       
PROPOSAL NUMBER 2 APPROVAL OF THE 2017 STOCK COMPENSATION PLAN   31
       
Equity Compensation Plan Information   36
       
PROPOSAL NUMBER 3 ADVISORY VOTE ON EXECUTIVE COMPENSATION   37
       
EXECUTIVE COMPENSATION   38
       
Compensation Discussion and Analysis   38
Compensation Committee Report   49
Summary Compensation Table   50
Grants of Plan-Based Awards for Fiscal 2017   52
Outstanding Equity Awards at 2017 Fiscal Year-End   53
Option Exercises and Stock Vested for Fiscal 2017   55
Pension Benefits   56
Other Retirement Savings Plans   57
Nonqualified Deferred Compensation   58
Potential Payments Upon Termination or Change in Control   59
       
PROPOSAL NUMBER 4 ADVISORY VOTE ON THE FREQUENCY OF HOLDING THE ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION   62
       
PROPOSAL NUMBER 5 RATIFY APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   63
       
Independent Registered Public Accounting Firm Fees   63
Audit Committee Report   64
       
GENERAL INFORMATION   65
Other Business   65
Questions and Answers About the 2017 Annual Meeting and Voting   65
Solicitation of Proxies   68
Delivery and Viewing of Proxy Materials   68
Annual Reports   68
Your Vote is Important!   69
       
APPENDIX A      NON-GAAP FINANCIAL MEASURES   A-1
       
APPENDIX B      2017 STOCK COMPENSATION PLAN   B-1
2017 ANNUAL MEETING INFORMATION   BACK COVER

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    vii

 

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PROXY STATEMENT SUMMARY

 

This summary highlights information contained in the Proxy Statement. This summary does not contain all of the information you should consider, and you should read the entire Proxy Statement before voting. For more complete information regarding the company’s fiscal 2017 performance, please review the company’s Annual Report on Form 10-K for the year ended May 28, 2017.

 

Business and Strategic Overview

 

General Mills is a global consumer foods company. We develop distinctive, value-added food products and market them under unique brand names. We work continuously to improve our core products and to create new products that meet consumers’ evolving needs and preferences. In addition, we build the equity of our brands over time with strong consumer-directed marketing, innovative new products, and effective merchandising. We are committed to our Consumer First strategy and are focused on five global product platforms – cereal, snacks, yogurt, convenient meals and super-premium ice cream – to drive growth. We believe that a balance between topline growth and margin expansion, while maintaining discipline on cash management, is the best way to deliver on our goal of top-tier returns to shareholders over the long term.

 

GENERAL MILLS STRATEGIC FRAMEWORK

 

 

OUR PURPOSE

 

We serve the world by making food people love

 

OUR GOAL

 

Create market-leading growth to deliver top-tier shareholder returns

 

OUR STRATEGY

 

Consumer First = Deeply understand the needs and lives of our consumers and respond quickly to give them what they want

 

Long-Term Growth Model

 

Our long-term growth model is designed to achieve our goal of market-leading performance. We believe our businesses can generate low single-digit organic net sales growth, mid single-digit total segment operating profit growth on a constant-currency basis and high single-digit growth in adjusted diluted earnings per share on a constant-currency basis. 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 working to expand 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.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    1

 
LONG-TERM GROWTH MODEL
 
Growth Factor   Compound Growth Rate
Organic Net Sales   Low single-digit
Total Segment Operating Profit (on a constant-currency basis)   Mid single-digit
Adjusted Diluted Earnings per Share (on a constant-currency basis)   High single-digit
Dividend Yield   2 to 3 percent
Total Shareholder Return   Double-digit

 

Performance Highlights for Fiscal 2017

 

In fiscal 2017, we continued to take strategic actions to adapt to the changing marketplace and improve our profitability. While execution against our priorities in fiscal 2017 was challenging and our results fell short of our plan, we took important steps to increase our efficiency and position ourselves for long-term growth. We also reorganized our reporting segments to align with our new global organization structure, and made significant changes to our leadership team.

 

Diluted earnings per share of $2.77 matched fiscal 2016 levels. Adjusted diluted earnings per share, which excludes certain items affecting comparability of results, rose 5 percent to $3.08. Excluding the impact of foreign exchange, adjusted diluted earnings per share increased 6 percent.*
In fiscal 2017, we returned $2.7 billion to shareholders through net share repurchases and dividends. We repurchased approximately 25 million shares of common stock, reducing our average number of diluted shares outstanding by 2 percent, which is in line with our longer-term goal. In June 2017, we increased our quarterly dividend rate by 2 percent to an annualized rate of $1.96 per share.
In the third quarter of fiscal 2017, we reorganized our reporting segments to align with our new global organization structure. We combined our U.S. Retail operating units and Canada region into a North America Retail segment, due to their similar product portfolio and go-to-market structure. We divided our International segment into two segments: Europe & Australia and Asia & Latin America. Our fourth reporting segment, Convenience Stores & Foodservice, remained unchanged from our previous structure.
The new structure we implemented in fiscal 2017 has increased our organizational agility to operate as a truly global food company. We accelerated the global restructuring of our supply chain, organized under new operating segments and streamlined our support functions, allowing for more efficient use of resources and enhanced idea sharing around the world.

 

*Adjusted diluted earnings per share is a non-GAAP measure. For more information on the use of non-GAAP measures in the Proxy Statement, and a reconciliation of non-GAAP measurers to the most directly comparable GAAP measures, see Appendix A.

 

Board Composition and Leadership

 

Leadership Transition

 

In May 2017, the board appointed Jeffrey L. Harmening to succeed Kendall J. Powell as Chief Executive Officer and become a member of the board effective June 1, 2017. Mr. Powell will continue as Chairman and R. Kerry Clark will continue to serve as our Independent Lead Director. As part of the CEO transition, the board determined that it would be in the best interest of the company and its shareholders for Mr. Powell to retain the role of Chairman to provide for continuity of board leadership and strategic oversight. During this time of transition, Mr. Powell will serve as a resource to Mr. Harmening, continue to be fully engaged on board matters and represent the company as appropriate with external groups and stakeholders.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    2

 

Board Composition

 

Our board is focused on building and maintaining a board with skills and experiences that are aligned with our strategic priorities (see page 9 for additional detail on director skills) and takes an active and thoughtful approach to board refreshment (more information about our board refreshment process can be found on page 8). Since 2014, we have appointed seven new independent directors. Most recently, Alicia Boler Davis was appointed to the board in December 2016. Ms. Boler Davis brings significant operating, marketing, brand building and innovation experience to the board from her background as Executive Vice President of Global Manufacturing at General Motors and other previous roles.

 

As set forth below, our director nominees exhibit a balanced mix of tenure, age, independence, diversity and skills:

 

 

Skills and Experiences Support Long-term Strategy
Senior Executive Leadership Industry Focus Accounting & Financial Expertise
Government / Public Policy Global Experience Governance
Innovation Marketing / E-Commerce Health & Wellness

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    3

 

Executive Compensation Highlights

 

Our compensation program is designed to incent our Named Executive Officers (“NEOs”) to pursue strategies and execute priorities that promote growth and deliver strong returns to shareholders. The core elements of our NEOs’ Total Direct Compensation (“TDC”) consist of base salary, annual incentive and long-term incentive. Target TDC for each NEO is benchmarked to the median of our peers. Each element of annual and long-term incentive compensation is tied to performance and closely linked to our strategy, long-term growth model, financial objectives, and ultimately to Total Shareholder Return (“TSR”) and continued value creation for our shareholders.

 

Total Direct
Compensation
Element
  Pay Element   Performance Measure   Strategy & Performance Alignment
Base Salary   Cash     Individual performance and competency reflected in position of salary within range and in relation to external market     Reflects base salaries positioned within a reasonable range of market median based on individual performance and contributions
Annual Incentive   Cash-based
award
 

Corporate Performance (80%)

  Organic net sales growth

  Total segment operating profit growth

  Adjusted diluted EPS growth

  Adjusted return on average total capital improvement

 

Individual Performance (20%)

 

  Rewards and recognizes annual accomplishment of key financial objectives

  Corporate performance measures aligned with Long-Term Growth Model

  Corporate Performance Modifier (+/- 20%) may be used by the board to adjust for performance relative to peers

Long-Term Incentive Performance
Share Units (1/3)
 

Three-year measurement period

  Average organic net sales growth

  Cumulative free cash flow

 

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

         
  4-year cliff-vesting
for RSUs and Stock
     
  Options   Stock Options
(1/3)
        Ultimate value tied to stock price appreciation
  3-year cliff-vesting
for PSUs
       
  (4-year cliff-vesting
for PSUs awarded to
CEO)
  Restricted Stock
Units (1/3)
        Ultimate value tied to TSR
               
               

 

A significant portion of NEO pay is at risk and dependent on future company performance. Achievement of “target” compensation from these awards requires sustained competitive performance on rigorous annual and three-year corporate performance measures established in the annual corporate operating plan and approved by the board at the beginning of each fiscal year.

 

CEO PAY MIX AT TARGET   OTHER NAMED EXECUTIVE OFFICER PAY MIX AT TARGET
     
 

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    4

 

2017 Compensation Decisions and Alignment of Pay and Performance

 

Fiscal 2017 was a challenging year for General Mills. We did not execute up to our standards in certain areas and our results fell short of our plan. Our performance is reflected in our executive management team’s TDC with cash incentives paid below target and a reduction in the value of outstanding long-term incentive awards.

 

Annual Incentive Award Payout: The annual incentive award for our CEO was 41% of his annual incentive award target. The other NEOs received annual incentive awards ranging from 41% to 56% of their annual incentive award targets.
Performance Share Unit Three-Year Performance Achievement: The performance period for fiscal 2015 – fiscal 2017 PSUs was completed this year. The award achievement percentage for this tranche of PSUs was 27% of the PSU award target.
   
ANNUAL INCENTIVE ALIGNMENT WITH PERFORMANCE   LONG-TERM INCENTIVE ALIGNMENT WITH PERFORMANCE
     
 

 

Corporate Governance and Compensation Practices

 

At General Mills, we are committed to following corporate governance and compensation practices that promote the long-term interest of our shareholders, facilitate strong oversight of our corporate strategy and performance, and reinforce board and management accountability to our shareholders.

 

We engage in ongoing, open dialogue with our shareholders, and the board considers investor feedback as it reviews our governance and compensation practices. In fiscal 2017, our management team reached out to holders of more than 47% of our outstanding shares, and members of our management and the board met with holders of approximately 35% of our outstanding shares to discuss various matters, including company strategy, compensation, governance practices, sustainability and board refreshment and diversity.

 

We are proud of our long-standing history of shareholder engagement and commitment to maintaining strong corporate governance and compensation practices.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    5

 
Corporate Governance Practices   Compensation Practices

  Independent and diverse board of directors

  CEO and management succession planning

  Active shareholder engagement program with regular board updates

  Comprehensive director nomination process and substantive annual board evaluations

  Proxy access By-law

  Strong Independent Lead Director with authority to approve board meeting agendas

  Executive sessions for independent directors after each board meeting

  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

 

  Significant alignment between pay and performance

  PSUs granted to all NEOs and other company officers

  Quantitative company performance measures

  Clawback policy

  Rigorous stock ownership requirements

  Tally sheets reviewed in connection with compensation decisions

  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

  No employment contracts for NEOs

  No officer hedging or pledging of company stock

  No excise tax gross-ups

  No payment of dividend equivalents on unvested shares or options

 

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 26, 2017. 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 14, 2017. 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

 

Director Nomination Process

 

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 current board composition and any search priorities for new director candidates. The board’s skills and experience are reviewed annually to confirm that the traits, attributes and qualifications of our directors are well-aligned with the long-term strategy of the company and continue to promote effective board performance. The corporate governance committee reviews incumbent director candidates, evaluates any changes in circumstances that may impact their candidacy, and considers information from the board evaluation process. 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. The corporate governance committee also identifies potential new director candidates using a search firm that is paid a fee for its services, together with referrals and suggestions from board members and shareholders. The committee interviews potential director candidates to confirm their qualifications, interest and availability for board service.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    6

 

ANNUAL DIRECTOR NOMINATION PROCESS

 

 

Annual Board Evaluation Process

 

The board recognizes that a robust and constructive evaluation process is an essential part of good corporate governance and board effectiveness. The evaluation processes utilized by the board are designed to assess board and committee effectiveness as well as individual director performance and contribution levels. The corporate governance committee considers the results of the annual evaluations in connection with its review of director nominees to ensure the board continues to operate effectively.

 

Our evaluation process consists of the following components:

 

BOARD EVALUATIONS
Performed By   All Directors   Senior Management   Independent Lead Director   Independent Consultant
Frequency   Annual   Annual   Annual
(except if independent
consultant is used)
  Every 3-4 years
Process   Board members complete written board self-evaluations which: (a) provide for quantitative ratings of key board priorities and the operation of the board and (b) seek subjective feedback on areas for improvement.   Members of senior management who regularly interact with the board and/or its committees complete a written evaluation to solicit their input and perspective on the operation of the board.   The Independent Lead Director interviews each board member to elicit additional in-depth feedback on board and individual director performance that is not always available through the written evaluations.   A third-party governance expert conducts in-depth interviews with each board member. The use of a third-party facilitator provides an outside perspective on board culture and individual director performance.
   

  The Chairman, Independent Lead Director and Corporate Governance Committee Chair review and discuss the results.

   

  The Independent Lead Director reviews a summary of the results with the full board, and changes are implemented as appropriate.

Results  

  For third-party reviews, the Chairman, Independent Lead Director and Corporate Governance Committee chair review and discuss the results with the third-party reviewer to identify feedback to the board on how it can enhance its effectiveness.

   

  The Corporate Governance Committee reviews any concerns or issues regarding individual director performance and takes appropriate action if necessary.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    7

 
COMMITTEE EVALUATIONS
Performed By   All Members of the respective Committees
Frequency   Annual
Process   Committee members complete committee self-evaluations which: (a) provide for quantitative ratings of each board committee and (b) seek subjective feedback on areas for Committee improvement.
Results  

  The Chairman, Independent Lead Director and Corporate Governance Committee chair review and discuss the results and take appropriate action if necessary.

 

  Each Committee discusses the survey results and the Committee chairs present the results to the full board for its consideration and discussion.

 

Board Refreshment and Director Succession Planning

 

We plan thoughtfully for director succession and board refreshment. By developing and following a long-range succession plan, the board has an ongoing opportunity to:

 

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

 

Over the course of the last three years, we have added seven new independent directors who reflect these priorities.

 

The corporate governance committee also plans for the orderly succession of the Independent Lead Director and of chairs for the board’s five committees, providing for their identification, development and transition of responsibilities.

 

Board Composition and Diversity

 

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:

 

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    8

 

Board Skills, Qualifications, and Experience

 

We consider the depth and diversity of experience on our board a key strength. We cultivate a balanced board 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
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 provide sources of market intelligence, analysis and relationships that benefit the company.
Industry Focus As a company that relies on the strengths of our branded products, we seek directors who are familiar with the consumer packaged goods and retail industries. These directors help guide the company in assessing trends and external forces in these industries.
Accounting and
Financial Expertise
A strong understanding of accounting and finance is important for ensuring the integrity of our financial reporting and critically evaluating our performance. Our directors have significant accounting experience, corporate finance expertise and financial reporting backgrounds.
Global Experience A significant portion of the company’s growth depends on its success in markets outside the U.S. Directors with a global perspective help us make decisions on our strategic expansion into international markets.
Governance Expertise A deep understanding of the board’s duties and responsibilities enhances board effectiveness and ensures independent oversight that is aligned with shareholder interests.
Marketing/E-Commerce
Experience
Organic sales growth is one of our key financial metrics and directors with marketing expertise provide important perspectives on developing new markets and growing current markets. Sales and marketing expertise in e-commerce and mobile platforms is also vital to our growth and success in these channels.
Innovation Innovation is a core focus for the company and is critical in helping us continue to develop and deploy successful products to meet the demands and preferences of our consumers.
Health and Wellness A thorough understanding of the health and wellness trends among our consumers provides management and the board with insights into potential product enhancements and offerings.
Government/Public
Policy Expertise
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.

 

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; ability to 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.

 

2017 Director Nominees

 

Our By-Laws provide that the number of directors shall be determined by the board, which has set the number of directors at 13. Upon the recommendation of the Corporate Governance Committee, the board has nominated all of the current directors to stand for re-election, except for Robert L. Ryan and Dorothy A. Terrell who will retire from the board at the end of their terms. All of the nominees are independent under New York Stock Exchange (“NYSE”) corporate governance rules, except Chairman Kendall J. Powell and CEO Jeffrey L. Harmening. See Board Independence and Related Person Transactions beginning on page 23.

 

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 2017 Annual Meeting of Shareholders and Proxy Statement    9

 

Each of the Director nominees currently serves on the board and was elected by the shareholders at the 2016 Annual Meeting of Shareholders, except for Alicia Boler Davis who was recommended to the corporate governance committee as a director candidate by its search firm, and Jeffrey L. Harmening, who was named Chief Executive Officer and appointed to the board on June 1, 2017. If elected, each director will hold office until the 2018 Annual Meeting of Shareholders and until his or her successor is elected and qualified. We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the board, or the board may reduce the number of directors.

 

Included in each director nominee’s biography below is a description of select key qualifications and experiences of such nominee based on the skills and qualifications described above. The board and the corporate governance committee believe that the combination of the various qualifications and experiences of the director nominees will contribute to an effective and well-functioning board and that, individually and as a whole, the director nominees possess the necessary qualifications to provide effective oversight of the business and counsel to the company’s management.

 

The board of directors unanimously recommends a vote FOR the election of each of the director nominees.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    10

 
  Bradbury H. Anderson    
       
  Age: 68   Committees: Compensation (Chair); Public Responsibility
  Independent Director Since: 2007   Other Public Directorships:  Waste Management, Inc.
        Best Buy Co., Inc.
        (June 2013 – June 2016)
         
   Senior Executive Leadership     Industry Focus     Accounting and Financial Expertise
   
     Marketing/E-Commerce Experience      Innovation
           

 

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 played a key role in the innovative transformation and expansion of Best Buy from a small electronics retailer into a Fortune 100 company with a very strong branded identity. He continues to use these experiences and skills to help the company’s long-term strategies.
   
He also adds strong leadership capabilities, strategic planning experience, and financial expertise from his years as a senior executive officer and public company director.

 

  Alicia Boler Davis    
       
  Age: 48   Committees: Finance; Public Responsibility
  Independent Director Since: December 2016      
         
         
         
   Senior Executive Leadership     Industry Focus     Global Experience
   
     Marketing/E-Commerce Experience      Innovation
           

 

Alicia Boler Davis is Executive Vice President of Global Manufacturing at General Motors Company, a global automotive company. Ms. Boler Davis joined General Motors in 1994 as a manufacturing engineer and has held a variety of positions of increasing responsibility during her career including Vice President, Customer Experience and Senior Vice President, Global Quality and Customer Experience. Prior to joining General Motors, Ms. Boler Davis held engineering positions at The Upjohn Company and PepsiCo, Inc.

 

Contributions to the Board:

 

As the current Executive Vice President of Global Manufacturing and the former Senior Vice President of Global Quality and Customer Experience at a global, consumer-facing automotive company, Ms. Boler Davis brings significant operating, marketing, and brand-building experience to the board.
   
Her global and regional management experiences overseeing major manufacturing facilities and improving customer experiences are a source of valuable insight for enhancing consumer-focused innovation and enhancing supply chain operations.
   
As the head of Global Manufacturing, Ms. Boler Davis also provides real time global perspectives on manufacturing and operational advances and innovations that enhance the board’s perspective on these issues.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    11

 
  R. Kerry Clark, Independent Lead Director
       
  Age: 65   Committees: Corporate Governance; Finance
  Independent Director Since: 2009   Other Public Directorships:  Avnet, Inc.;
        Anthem, Inc.
        (formerly Wellpoint, Inc.);
Textron, Inc.
         
   Senior Executive Leadership     Industry Focus     Global Experience
   
     Governance Expertise      Health and Wellness
           

 

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 governance expertise to provide strong, independent board leadership and to ensure board effectiveness by fostering active discussion and collaboration among the non-employee directors and serving as an effective liaison with management.
   
With a strong background in consumer packaged goods and health care products, he brings to the board extensive experience in launching new products, brand-building, 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.

 

  David M. Cordani    
       
  Age: 51   Committees: Audit; Compensation
  Independent Director Since: 2014   Other Public Directorships: Cigna Corporation
         
         
         
   Senior Executive Leadership     Accounting and Financial Expertise     Governance Expertise
   
     Health and Wellness      Government/Public Policy Expertise
           

 

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:

 

From 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. Mr. Cordani 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 emerging health and wellness trends and their potential impact on businesses and consumers.
   
Mr. Cordani’s background as a 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.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    12

 
  Roger W. Ferguson Jr.
       
  Age: 65   Committees: Corporate Governance; Finance
  Independent Director Since: 2015   Other Public Directorships:  Alphabet Inc.;
        International Flavors &
        Fragrances, Inc.
         
   Senior Executive Leadership     Industry Focus     Accounting and Financial Expertise
   
     Governance Expertise      Government/Public Policy Expertise
           

 

Roger W. Ferguson Jr., has served as President and 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 valuable insights and investor perspective on matters of company strategy, performance and corporate 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.

 

  Henrietta H. Fore
       
  Age: 68   Committees: Corporate Governance; Public Responsibility (Chair)
  Independent Director Since: 2014   Other Public Directorships:  ExxonMobil Corporation;
        Theravance Biopharma, Inc.;
        Theravance, Inc. (2010 - 2014)
         
   Senior Executive Leadership     Global Experience     Governance Expertise
   
     Health and Wellness      Government/Public Policy Expertise
           

 

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. 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, finance and investment, strategic planning and governance.
   
Through her leadership experiences at the USAID and service on other company boards, Ms. Fore is well-positioned to provide insight and perspective on consumer-related health and wellness trends and issues of global nutrition.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    13

 
  Jeffrey L. Harmening
       
  Age: 50    
  Director Since: June 2017      
         
         
         
   Senior Executive Leadership     Industry Focus     Global Experience
   
     Marketing/E-Commerce Experience      Health and Wellness
           

 

Jeffrey L. Harmening has been Chief Executive Officer of General Mills, Inc. since June 1, 2017. Mr. Harmening joined General Mills in 1994 and has served in a variety of positions before becoming Vice President of Marketing for Cereal Partners Worldwide (“CPW”), the company’s joint venture with Nestlé based in Switzerland, in 2003. He served as Vice President and Senior Vice President of the Big G cereal division from 2007 to 2012, and Senior Vice President, Chief Executive Officer of CPW from 2012 to 2014. From 2014 to 2016, Mr. Harmening served as Executive Vice President, Chief Operating Officer, U.S. Retail. From July 1, 2016 to May 31, 2017, he served as the company’s President and Chief Operating Officer.

 

Contributions to the Board:

 

With over 20 years of service at General Mills in a variety of senior leadership roles across several business categories, Mr. Harmening’s deep knowledge of the company’s business and the markets in which we operate position him well to serve on the board.
   
During Mr. Harmening’s service in a number of key management and operational roles in the company’s North America Retail division, he led an expansion of the company’s position in the natural and organic segment. This experience has enhanced Mr. Harmening’s understanding of how health and wellness issues impact our consumers.
   
He also spent six years abroad focusing on our international operations, including two years as Chief Executive Officer of CPW.

 

  Maria G. Henry
       
  Age: 51   Committees: Audit, Compensation
  Independent Director Since: 2016      
         
         
         
   Senior Executive Leadership     Industry Focus     Accounting and Financial Expertise
   
     Global Experience      Governance Expertise
           

 

Maria G. 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 of a global company 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 2017 Annual Meeting of Shareholders and Proxy Statement    14

 
  Heidi G. Miller
       
  Age: 64   Committees: Audit (Chair); Finance
  Independent Director Since: 1999   Other Public Directorships: First Data Corporation;
        HSBC Holdings plc;
        The Progressive Corporation
(2011 - 2014)
         
   Senior Executive Leadership     Accounting and Financial Expertise     Global Experience
   
     Governance Expertise      Government/Public Policy Expertise
           

 

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, chief executive officer — 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 extensive senior executive experience in the banking and financial industry, together with her public company board service, provide strong, independent leadership, experience leading complex organizations and critical evaluation of strategic priorities and investments.
   
Ms. Miller possesses significant 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.
   
Ms. Miller’s financial expertise and risk management skills are valuable assets to the board, the audit committee and the finance committee. She is one of our audit committee financial experts and serves as the chair of our audit committee.

 

  Steve Odland
       
  Age: 58   Committees: Compensation; Corporate Governance (Chair)
  Independent Director Since: 2004   Other Public Directorships: Analogic Corporation
         
         
         
   Senior Executive Leadership     Industry Focus     Global Experience
   
     Governance Expertise      Marketing/E-Commerce Experience
           

 

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 public policy and corporate governance from his experience as Chief Executive Officer of the Committee for Economic Development of the Conference Board.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    15

 
  Kendall J. Powell
       
  Age: 63   Other Public Directorships: Medtronic PLC
  Director Since: 2006      
         
         
         
   Senior Executive Leadership     Industry Focus     Global Experience
   
     Governance Expertise      Marketing/E-Commerce Experience
           

 

Kendall J. Powell is Chairman of General Mills, Inc. 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 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. In June of 2017, Mr. Powell retired from his position as Chief Executive Officer, but remains our Chairman. Mr. Powell also serves as a director of the Federal Reserve Bank of Minneapolis and a regent of the University of Minnesota’s Board of Regents.

 

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.
   
Prior to his current role, Mr. Powell served as Chief Executive Officer of the company and in a number of key marketing and operational roles in the U.S. Retail divisions.
   
Mr. Powell’s experience as our Chairman, and as a board member at Medtronic, including service as lead independent director and chair of the compensation committee, provide the board with significant corporate governance expertise.

 

  Eric D. Sprunk
       
  Age: 53   Committees: Audit; Public Responsibility
  Independent Director Since: 2015      
         
         
         
   Senior Executive Leadership     Accounting and Financial Expertise     Global Experience
   
     Marketing/E-Commerce Experience      Innovation
           

 

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 at a global, brand-based consumer products company, Mr. Sprunk brings relevant marketing experience to the board, as well as operating expertise in key functions including manufacturing, sourcing, sales and procurement. His experience as Vice President of Merchandising and Product also provides the board with valuable perspectives on product innovation and development.
   
His global and regional international management experiences at NIKE provide the board with a unique perspective on developing and marketing innovative products in consumer markets around the world.
   
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.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    16

 
  Jorge A. Uribe
       
  Age: 60   Committees: Compensation; Public Responsibility
  Independent Director Since: June 2016   Other Public Directorships: Ingredion Incorporated
         
         
         
   Senior Executive Leadership     Industry Focus     Global Experience
   
     Marketing/E-Commerce Experience      Innovation
           

 

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 leading innovative organizational changes through efficiency improvement and cost management.
   
The experiences developed throughout his career at Procter & Gamble deepen the board’s overall consumer products, innovation and marketing expertise.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    17

 

CORPORATE GOVERNANCE

 

    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
Corporate   Comprehensive director nomination process and substantive annual board evaluations
Governance   Proxy access By-law
Highlights   Strong Independent Lead Director with authority to approve board meeting agendas
    Executive sessions for independent directors after each board meeting
    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

Our Board’s Key Responsibilities

Our board is elected by the shareholders to oversee their interests in the long-term health and overall success of the company’s business. In exercising their fiduciary duties, the board represents and acts on behalf of our shareholders and is committed to strong corporate governance, as reflected in our corporate governance principles (available on our website at www.generalmills.com in the Investors section). The board is deeply involved in the company’s strategic planning process, leadership development, succession planning, and oversight of risk management.

 

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 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 board also regularly reviews our performance compared to our competitive peer companies.
The board reviews and approves merger and acquisition activity, significant capital investments and cash returns to shareholders through share repurchase plans and dividend payments.

Leadership Development and Management Succession Planning

 

Leadership development and management succession planning are two of the most critical functions of the board. Annually, the board formally reviews and discusses management development and succession plans for the CEO and his direct reports. 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.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    18

 

Overseeing Risk Management

 

Inherent in the board’s responsibilities is an understanding and oversight of the various risks facing the company. Effective risk management is an integral part of board and committee deliberations throughout the year. Set forth below are some of the procedures and processes utilized by the Board and its committees to oversee risk management.

 

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.
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 public responsibility committee oversees public policy issues impacting our business and reviews and monitors risks related to the company’s sustainability programs. The public responsibility committee discusses any risks with the full board.
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 beginning on page 21, 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.

 

While the board and its committees oversee risk management, company management is charged with managing risk. The company has robust internal processes and an effective internal control environment that facilitate the identification and management of risks and regular communication with the board. These include an enterprise risk management program, regular internal risk management meetings, codes of conduct, a strong legal department and ethics and compliance office, and a comprehensive internal and external audit process.

 

We also conduct an annual 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.

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 governance, 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 2017, our management team reached out to holders of more than 47% of our outstanding shares, and members of our management and the board met with holders of approximately 35% of our outstanding shares to discuss various matters including company strategy, compensation, governance practices, sustainability and board refreshment and diversity.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    19

 

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 (available on our website at www.generalmills.com under the Responsibility section).

 

Our sustainability goal is to protect the resources upon which our business depends. Our company’s size, scale and global scope enable us to have a material impact on environmental issues, and we have taken bold actions to advance sustainability, a few of which are set forth below.

 

Climate Change: We have set a goal to reduce absolute greenhouse gas emissions across our full value chain by 28 percent by 2025 from 2010 levels and to achieve sustainable emission levels in-line with scientific consensus by 2050;
Water Stewardship: We will develop water stewardship plans for the most material and at-risk watersheds in our global value chain by 2025;
Pollinators and Biodiversity: We are partners with the U.S. Department of Agriculture and The Xerces Society on a project to establish and protect more than 100,000 acres of pollinator habitat in the U.S. by the end of 2021; and
Sustainable Sourcing: We remain committed to sustainably sourcing 100 percent of our 10 priority ingredients by 2020, which represents more than 40 percent of our annual raw material purchases globally.

Board Leadership Structure

Our independent directors appoint the board’s leadership based on their evaluation and judgment as to the structure that best serves the interests of the company and its shareholders and contributes to the effective operation of the board. Having the flexibility to select the appropriate board leadership structure based on the specific needs of the board and the business is critical.

 

Independent Lead Director

 

At any time when the board determines that the same individual should hold the positions of CEO and Chairman, or at any time when the Chairman is not independent, the independent directors elect an Independent Lead Director. The board recognizes the importance of appointing an Independent Lead Director to maintain a strong independent board leadership structure that functions collaboratively with management, while maintaining independent oversight. The primary responsibilities of the Independent Lead Director are set forth below:

 

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.

 

Our Independent Lead Director is elected to serve for a three-year term, with the appointment ratified annually. 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.

 

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Current Leadership Structure

 

The board appointed Jeffrey L. Harmening to succeed Kendall J. Powell as CEO and to become a member of the board effective June 1, 2017. Mr. Powell will continue as Chairman and R. Kerry Clark will continue to serve as our Independent Lead Director. As part of the CEO transition, the board determined that it would be in the best interest of the company and its shareholders for Mr. Powell to retain the role of Chairman to provide for continuity of board leadership and strategic oversight. During this time of transition, Mr. Powell will serve as a resource to Mr. Harmening, continue to be fully engaged on board matters and represent the company as appropriate with external groups and stakeholders. The board will continue to actively consider and discuss the appropriate longer-term board leadership structure for the company.

 

BOARD LEADERSHIP ROLES AND RESPONSIBILITIES DURING TRANSITION

 

Chief Executive Officer Chairman Independent Lead Director

 Serve as the visible leader of the company, and represent the company to external groups

 In consultation with the Chairman, develop the Board agenda and meeting materials

 Report to the board on the company’s business

 Serve as principal liaison between the board and management

 Develop and recommend to the board an effective management team below the level of CEO and develop an orderly management team succession plan

 Serve as the leader of the board and represent the company as appropriate with external groups and stakeholders

 Organize and lead the work of the board, including working with the CEO to develop the board agendas

 Convene and chair all regular and special sessions of the board and shareholders

 Serve as resource to the incoming CEO

 Serve as the lead representative of independent directors and principal liaison between the board and CEO

 Represent the board with major shareholders where appropriate

 Act as principle board contact and lead in a crisis or significant event

 Approve board meeting agendas and approve meeting schedules

 Preside at all board meetings at which the Chairman is not present, including convening and chairing all executive sessions

 Call meetings of the non-employee directors

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.

 

   Audit
Committee
  Compensation
Committee
  Corporate
Governance
Committee
  Finance
Committee
  Public
Responsibility
Committee
 
Bradbury H. Anderson              
Alicia Boler Davis              
R. Kerry Clark               
David M. Cordani               
Roger W. Ferguson Jr.               
Henrietta H. Fore              
Maria G. Henry               
Heidi G. Miller               
Steve Odland               
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

 

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Audit Committee

 

Number of meetings in fiscal 2017: 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 met the independence standards for audit committee membership under the rules of the SEC during fiscal 2017.

Compensation Committee

 

Number of meetings in fiscal 2017: Eight

 

Functions:

 

Reviews compensation policies for executive officers and employees to ensure they align with our compensation philosophy and provide appropriate motivation for company 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 met the independence standards for compensation committee membership under the listing standards of the NYSE during fiscal 2017.

Corporate Governance Committee

 

Number of meetings in fiscal 2017: Six

 

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.

 

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Finance Committee

 

Number of meetings in fiscal 2017: 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 2017: 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 2016 Annual Meeting of Shareholders. During fiscal 2017, the board of directors met 10 times and various committees of the board met a total of 27 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 2017.

 

Board Independence and Related Person Transactions

 

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 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 and company debt securities and commercial paper held by Cigna Corporation, where Mr. Cordani serves as President and CEO; and company debt securities held by TIAA, where Mr. Ferguson serves as President and CEO. The board determined that these transactions were conducted in the ordinary course of our business, were not required to be disclosed 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. In addition, prior to their retirements in September 2016, former directors Paul Danos and Michael D. Rose were each independent under our guidelines and as defined by NYSE listing standards.

 

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Related Person Transaction Policy and Process

 

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.

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.

Shareholder 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 beginning on page 6.

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 2017, 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

 

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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 2018 Annual Meeting, shareholders should submit the required information to the Corporate Secretary by the close of business on April 16, 2018.

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 2018 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 29, 2018, and no later than the close of business on June 28, 2018. Director nominees submitted through this process will be eligible for election at the 2018 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 2018 Annual Meeting, proxy access nomination notices must be received by the Corporate Secretary no earlier than the close of business on March 16, 2018 and no later than the close of business on April 16, 2018. 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 Independent 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.

 

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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. Each component of director compensation is described in this section.

Annual Retainers

 

Non-employee directors each receive an annual retainer of $75,000.
The Independent Lead Director receives an additional $30,000. The Independent Lead Director does not receive any additional fees for chairing a committee in addition to serving as the Independent 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. 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 Independent Lead Director, chairing a committee, or serving on the audit committee. As of July 28, 2017, all non-employee directors had met or exceeded these stock ownership requirements, except for Alicia Boler Davis, Roger Ferguson Jr., Maria G. Henry, Eric D. Sprunk and Jorge A. Uribe, who all have served less than two years on our board.

 

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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 fiscal 2017 compensation of our non-employee directors is shown in the following table. Pro rata compensation is shown for Paul Danos and Michael D. Rose who retired during fiscal 2017 and for Alicia Boler Davis who was elected to the board mid-fiscal year.

Director Compensation for Fiscal 2017

 

Name  Fees Earned
or Paid in Cash(3)
($)
  Stock
Awards(4)
($)
  All Other
Compensation(5)
($)
  Total
($)
 
Bradbury H. Anderson   95,000    179,999        274,999 
Alicia Boler Davis(1)   37,500    179,986        217,486 
R. Kerry Clark   105,000    179,999    7,500    292,499 
David M. Cordani   80,000    179,999    10,000    269,999 
Paul Danos(2)   18,750        8,433    27,183 
Roger W. Ferguson Jr.   75,000    179,999        254,999 
Henrietta H. Fore   90,000    179,999        269,999 
Maria G. Henry   80,000    359,983        439,983 
Heidi G. Miller   95,000    179,999    4,072    279,071 
Steve Odland   90,000    179,999    13,644    283,643 
Michael D. Rose(2)   18,750        15,933    34,683 
Robert L. Ryan   95,000    179,999    15,778    290,777 
Eric D. Sprunk   80,000    179,999    10,000    269,999 
Dorothy A. Terrell   75,000    179,999    8,213    263,212 
Jorge A. Uribe   75,000    359,983        434,983 

 

(1) Ms. Boler Davis attended her first board meeting on December 13, 2016.
(2) Mr. Danos and Mr. Rose retired from the board effective September 27, 2016.
(3) Includes the annual retainer and additional fees for directors who serve as the Independent Lead Director, chair a committee or who serve on the audit committee. Retainers were paid in cash, except Mr. Cordani and Ms. Henry each received their entire retainer in common stock (1,281 shares valued at the closing sales price of our common stock on the NYSE on the quarterly retainer payment dates).

 

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(4) Includes the grant date fair value for 2,816 RSUs granted to each director, other than Ms. Boler Davis, upon re-election in fiscal 2017, 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 $63.92 per share, the closing price of our common stock on the NYSE on the grant date, September 27, 2016.
  For Ms. Boler Davis, includes the grant date fair value for 2,818 RSUs granted to her upon attendance at her first board meeting on December 12, 2016. The grant date fair value is based on $63.87 per share, the closing price of our common stock on the NYSE on that date.
  At fiscal year-end, each non-employee director had 2,816 unvested RSUs, except for Ms. Boler Davis who had 2,818 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 71,686; Ms. Miller 51,686; Mr. Odland 51,686; Mr. Rose 51,686; Mr. Ryan 51,686; and Ms. Terrell 16,452.
(5) All Other Compensation includes:

 

ALL OTHER COMPENSATION

 

Name Planned Gift
Program(6)
($)
Charitable
Matching Gifts(7)
($)
  Total
($)
 
B. H. Anderson       
A. Boler Davis       
R. K. Clark   7,500    7,500  
D. M. Cordani   10,000    10,000  
P. Danos 5,933   2,500    8,433  
R. W. Ferguson Jr.       
H. H. Fore       
M. G. Henry       
H. G. Miller 4,072      4,072  
S. Odland 3,660   9,984    13,644  
M. D. Rose 5,933   10,000    15,933  
R. L. Ryan 5,778   10,000    15,778  
E. D. Sprunk   10,000    10,000  
D. A. Terrell 5,213   3,000    8,213  
J. A. Uribe       

 

(6) The Planned Gift Program was discontinued for all directors elected after fiscal 2006 and was terminated for all participating directors in fiscal 2017. Includes expense recognized in fiscal 2017 in connection with the Planned Gift Program for partial year accrual of benefits. Liability calculations assume a 3.81 percent liability discount rate on the date of termination; benefit payment immediately upon death; and mortality rates based on the RP-2014 Mortality Table, projected with the MP-2015 improvement scale. In addition, the fiscal expense calculation assumes a 3.04 percent interest cost rate.
(7) Includes matches made by the General Mills Foundation on eligible charitable contributions made by active, non-employee directors. The matching program was terminated on December 31, 2016.

 

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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 28, 2017, 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
R. C. Allendorf  33,965   53,066   * 
B. H. Anderson  37,958(3)   71,686   * 
A. Boler Davis  2,818      * 
J. R. Church  43,603(4)   143,683   * 
R. K. Clark  30,434   55,642   * 
D. M. Cordani  13,233      * 
R. W. Ferguson Jr.  5,935      * 
H. H. Fore  12,979      * 
J. L. Harmening  74,272(5)   291,299   * 
M. G. Henry  6,829      * 
H. G. Miller  64,195(6)   51,686   * 
D. L. Mulligan  167,613(7)   624,601   * 
S. Odland  86,690   51,686   * 
C. D. O’Leary  264,198   662,855   * 
K. J. Powell  527,595   2,450,440   * 
R. L. Ryan  34,676   51,686   * 
E. D. Sprunk  5,891      * 
D. A. Terrell  67,168   16,452   * 
J. A. Uribe  4,907      * 
All directors, nominees and executive officers as a group (28 persons)  1,981,739(8)   6,109,976   1.4 
The Vanguard Group, Inc.  44,307,674(9)      7.7 
BlackRock, Inc.  41,125,659(10)      7.2 
State Street Corporation  36,629,931(11)      6.4 
* 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 28, 2017, as to which the beneficial owner currently has no voting or investment power: 2,818 RSUs for Ms. Boler Davis, and 2,816 RSUs for each remaining non-employee director; and 36,610 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: 26,110 units for Mr. Anderson; 20,266 units for Mr. Clark; 3,119 units for Mr. Ferguson Jr.; 10,163 units for Ms. Fore; 48,449 units for Mr. Harmening; 34,997 units for Ms. Miller; 40,709 units for Mr. Odland; 91,246 units for Mr. O’Leary; 30,810 units for Mr. Ryan; 3,075 units for Mr. Sprunk; 57,872 units for Ms. Terrell; and 609,559 units for all directors, nominees and executive officers as a group.
(2) Includes options that were exercisable on July 28, 2017 and options that become exercisable within 60 days of July 28, 2017.

 

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(3) Includes 9,032 shares held in individual trusts by either Mr. Anderson or his spouse, for which they serve as trustees.
(4) Includes 40,160 shares held in individual trusts by either Mr. Church or his spouse, for which they serve as trustees, and 3,443 shares owned by Mr. Church’s spouse.
(5) Includes 25,823 shares held in individual trusts by Mr. Harmening or his spouse, for which they serve as trustees.
(6) Includes 26,382 shares owned jointly by Ms. Miller and her spouse.
(7) Includes 163,333 shares owned jointly by Mr. Mulligan and his spouse.
(8) Includes 295,977 shares held solely by, jointly by, or in trust for the benefit of family members.
(9) Based on information contained in a Schedule 13G/A filed with the SEC on February 13, 2017 by The Vanguard Group and its subsidiaries (“Vanguard”), at 100 Vanguard Blvd., Malvern, Pennsylvania 19355. The filing indicated that as of December 31, 2016, Vanguard had sole investment power over 43,227,254 of these shares and shared investment power over 1,080,420 of these shares. The filing also indicated that as of December 31, 2016, Vanguard had sole voting power over 926,262 of these shares.
(10) Based on information contained in a Schedule 13G/A filed with the SEC on January 24, 2017 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, 2016, BlackRock had sole investment power over all of these shares, and sole voting power over 35,215,815 of these shares.
(11) Based on information contained in a Schedule 13G filed with the SEC on February 6, 2017 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, 2016, 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 2017 except that Form 3 filings for Olivier Faujour, Christina Law and Bethany Quam were filed after the required filing date due to unanticipated delays in obtaining filing codes, and a Form 4 filing for Kimberly Nelson was filed after the required filing date due to delayed receipt of information.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    30

 
PROPOSAL NUMBER 2 APPROVAL OF THE 2017 STOCK COMPENSATION PLAN

 

The Board of Directors unanimously recommends a vote FOR approval of the General Mills, Inc. 2017 Stock Compensation Plan.

 

Overview

 

Shareholders are asked to vote to approve the General Mills, Inc. 2017 Stock Compensation Plan (the “2017 Plan”).

 

The purpose of the 2017 Plan is to provide a compensation program that:

 

Attracts and retains (a) management talent capable of achieving superior business results, and (b) qualified individuals to serve on the company’s board; and
Aligns the interests of company managers and non-employee directors with those of shareholders by linking a portion of their compensation directly to increases in shareholder value.

 

This year, the board is recommending consolidating the company’s stock plans under an omnibus plan that incorporates best equity compensation and corporate governance practices. As a result, the 2017 Plan would replace both the General Mills, Inc. 2011 Stock Compensation Plan (the “2011 Plan”), which was approved by shareholders at the annual meeting held on September 26, 2011, and the General Mills, Inc. 2016 Compensation Plan for Non-Employee Directors (the “2016 Plan”), which was approved by shareholders at the annual meeting held on September 27, 2016. If shareholders approve the 2017 Plan, we will issue no additional shares under the 2011 Plan or the 2016 Plan. Except as specifically set forth in the 2017 Plan, shares which are forfeited, cancelled or terminated under the 2011 Plan and the 2016 Plan will not be available for future grant.

 

The 2017 Plan requests 35 million shares of company common stock (“Common Stock”) (or approximately 6% of our outstanding shares as of July 28, 2017). If the 2017 Plan is approved by shareholders, 15,358,708 shares of Common Stock available for issuance under the 2011 Plan and 461,390 shares of Common Stock available for issuance under the 2016 Plan will be forfeited.

 

The 2017 Plan is intended to enable us to grant awards that satisfy the requirements of a performance-based compensation program under Section 162(m) of the Internal Revenue Code, including the requirement that the compensation must be paid solely on account of the attainment of pre-established, objective performance goals. In order for compensation granted pursuant to the 2017 Plan to qualify for the performance-based exemption from the applicability of Section 162(m) of the Internal Revenue Code, the material terms under which the compensation is to be paid must be disclosed to and approved by shareholders in a separate vote prior to payment. Accordingly, we are asking our shareholders to approve the 2017 Plan.

 

The company has long had an ownership culture in which its officers and non-employee directors are required to build and hold significant amounts of General Mills stock over the course of their careers, thereby aligning their interests with shareholders. We require senior vice presidents and above to own more than five-times their base salary in company stock, and the stock ownership target for the Chief Executive Officer is double this amount (ten-times base salary); actual stock ownership by senior executives on average is double these ownership expectations. Additionally, we require that non-employee directors keep all of the shares 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 Independent Lead Director, chairing a committee, or serving on the audit committee.

 

General Mills currently has the longest vesting period for stock options and restricted stock units granted to managers in the consumer packaged goods industry (four-year cliff vesting versus the three-year ratable vesting which is the most common industry practice). On average, our stock options are held for eight years out of the ten-year term, and we have an unusually high percentage of stock options not exercised until well into the final year.

 

Our equity compensation program aligns the interests of our management-level employees, officers and directors with those of our shareholders. In furtherance of this objective, our Compensation Committee considers two key metrics when approving equity grants: “historical run rate” and “overhang.”

 

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Historical Run Rate. Our historical run rate is equal to the number of shares subject to equity awards granted during a period, assuming the target payout for performance shares, in proportion to our outstanding shares. Our run rate for fiscal year 2017 was 0.7%, for fiscal 2016 it was 0.5%, for fiscal 2015 it was 0.7% and our three-year average run rate for fiscal years 2015 through 2017 was 0.6%.
Fully Diluted Overhang. Our fully diluted overhang is the number of shares subject to equity awards outstanding at fiscal year-end plus the number of shares available for future grants in proportion to shares subject to equity awards outstanding at fiscal year-end plus the number of shares available for future grants plus our shares outstanding at fiscal year-end. Our fully diluted overhang for fiscal year 2017 was 8.5%, for fiscal 2016 it was 9.4%, for fiscal 2015 it was 10.8% and our three-year average fully diluted overhang for fiscal years 2015 through 2017 was 9.6%.

 

The company provides its stock compensation program to approximately 2,150 employees worldwide who are at a senior manager, director or officer level, which is approximately 5% of all employees.

 

Best Practices

 

The 2017 Plan reflects best practices in equity compensation and corporate governance. Highlights from the 2017 Plan are as follows:

 

The 2017 Plan will maintain our prudent annual share usage over an extended term. The 2017 Plan requests the authorization of 35 million shares (or approximately 6% of outstanding shares as of July 28, 2017). Based on the approximately 15.8 million shares currently available under the 2011 and 2016 Plans, the 2017 Plan reflects only a moderate increase to our current shares available for issuance to employees and non-employee directors. The company expects the shares requested under the 2017 Plan to fund stock grants for at least the next 5 years. The number of shares requested reflects the company’s intent to maintain its judicious use of equity compensation share usage throughout the term of the 2017 Plan.
The 2017 Plan limits the issuance of full value awards (Performance Share Units, Performance Units, Restricted Stock, Restricted Stock Units and Unrestricted Stock settled in shares of Common Stock) to 33% of the requested pool of shares. Any full value award settled in stock above this limit decreases the number of authorized shares by 6 shares for each share granted.
The 2017 Plan provides for performance awards. The compensation committee may issue performance awards that vest upon the accomplishment of performance goals over one year or multiple years. Applicable performance goals and performance periods will be established by the compensation committee. Performance awards may be denominated in shares of Common Stock or notionally represented by a monetary value.
Except under limited circumstances, the 2017 Plan does not allow for the reusing of shares that are cancelled, forfeited or terminated under prior plans.
The 2017 Plan has a double-trigger requirement for change of control vesting. The change of control must have been consummated, and the employee participant must have been involuntarily terminated other than for cause, death or disability, or must have voluntarily terminated with good reason within two years of the change of control. For non-employee director participants, a change of control must have been consummated, and the non-employee director participant must have resigned at the company or shareholders’ request or otherwise been replaced, removed, or dismissed from the board.
Awards issued to officers of the company under the 2017 Plan are subject to the company’s clawback policy. If the company must restate its financial results, and an officer’s actions or omissions are a significant contributing factor to the cause of the restatement, then the compensation committee may use its discretion to adjust the officer’s future compensation, cancel outstanding awards or require repayment of gains realized during a period when inaccurate financial results were publicly reported without correction.
The 2017 Plan incorporates a broad range of other compensation and governance practices to protect shareholders’ interests, such as no discounted options or stock appreciation rights; prohibition on repricing; no cash buyouts of stock options or stock appreciation rights with exercise prices below fair market value; no reload options or loans to pay for awards; dividends on restricted stock and restricted stock units payable only at vesting; no dividend rights on options or stock appreciation rights; no transfer of awards for consideration to third parties; and restrictive share counting provisions that prohibit counting of shares on a net basis for issuance of stock options and stock appreciation rights.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    32

 

Summary of Material Features of the 2017 Plan

 

The summary of the material features of the 2017 Plan that follows is subject to the full text of the 2017 Plan that is contained in Appendix B to this Proxy Statement.

 

Plan Term:   September 26, 2017 through September 30, 2027, or such earlier date as determined by the board or the compensation committee (the “Committee”), whichever occurs first.
Eligible Participants:   Only employees of General Mills and its subsidiaries and affiliates (“Employee Participants”) and non-employee directors of General Mills (“Non-Employee Director Participants”) are eligible to receive awards under the 2017 Plan. The Committee determines which employees are eligible to participate. The primary recipients of awards under the 2017 Plan will be our non-employee directors, officers, other key employees and managers. As of May 28, 2017, there were approximately 38,000 full and part-time employees of General Mills and its subsidiaries, of which approximately 2,150 were officers, other key employees, and managers.
Shares Authorized:   35,000,000 shares of Common Stock
Shares Authorized as a Percentage of Outstanding Common Stock:   Approximately 6% of shares outstanding at July 28, 2017
Recent Market Value per Share:   $55.33 closing sales price on the New York Stock Exchange at July 28, 2017
Award Types:   Stock Options. The Committee may award Employee Participants stock options (“Stock Options”) to purchase a fixed number of shares of Common Stock. The grant of a Stock Option entitles the Employee Participant to purchase shares of Common Stock at an “Exercise Price” established by the Committee which shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant, and may exceed the Fair Market Value on the grant date, at the Committee’s discretion. “Fair Market Value” shall equal the closing price on the New York Stock Exchange of the Common Stock on the applicable date.

Stock Appreciation Rights. The Committee may award Employee Participants Stock Appreciation Rights (“Stock Appreciation Rights”). A Stock Appreciation Right is a right to receive, upon exercise of that right, an amount, which may be paid in cash, shares of Common Stock, or a combination thereof in the complete discretion of the Committee, equal to or less than the difference between the Fair Market Value of one share of Common Stock as of the date of exercise and the Fair Market Value of one share of Common Stock on the date of grant.

Restricted Stock and Restricted Stock Units. The Committee may grant Employee Participants and Non-Employee Director Participants, subject to certain restrictions, shares of Common Stock (“Restricted Stock”) or the right to receive shares of Common Stock or a monetary amount, which could be settled in such shares or in cash or a combination thereof (“Restricted Stock Units”).

Performance Share Units and Performance Units. The Committee may grant to Employee Participants a right to receive either a number of shares of Common Stock (“Performance Share Units”) or a monetary amount, which could be settled in such shares or in cash or a combination thereof (“Performance Units”), determined based on the extent to which applicable performance goals are achieved.

Common Stock. Non-Employee Director Participants may affirmatively elect to receive all or a specified percentage of any cash retainer or fees received in shares of Common Stock (“Unrestricted Stock”). Awards granted to Employee Participants under the 2017 Plan will be either performance-based and designed to comply with Section 162(m) of the Code or discretionary. Subject to the 2017 Plan limits, the Committee has the discretionary authority to determine the size of an award, if it will be tied to meeting performance-based requirements and if any performance awards, stock appreciation rights or restricted stock units will be settled in common stock or cash. In order for any participant to be awarded performance awards, restricted stock or restricted stock units based on performance in a fiscal year, the company’s net earnings from continuing operations, excluding items identified and disclosed by the company as non-recurring or special costs for that fiscal year, must be greater than zero.
Award Limits:   Performance Share Units, Performance Units, Restricted Stock and Restricted Stock Units settled in shares of common stock are limited to 33% of the total number of shares available, subject to the share counting provisions below.

Awards in excess of 2 million shares or units in the aggregate may not be issued to any single Employee Participant per fiscal year.

The total value of performance awards payable in cash to any single Employee Participant for a fiscal year may not exceed $20 million.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    33

 
    In no event will the total value of a performance award granted to any Employee Participant for any one performance period exceed the lesser of 0.5% of the company’s net earnings for that period or the limits stated above.

The fair market value of all compensation granted to any Non-Employee Director Participant during any year of service may not exceed $800,000. This limit does not apply to any non-employee director who is designated as chair of the board who is subject to a higher limit.
Share Counting:   Shares subject to Stock Options and Stock Appreciation Rights will reduce the shares available for awards by one share for every one share granted.

Performance Share Units, Performance Units, Restricted Stock, Restricted Stock Units and Unrestricted Stock settled in shares of Common Stock reduce the shares available for awards by one share for every one share awarded, up to 33% of the total number of shares available; beyond that, they reduce the number of shares available for awards by 6 shares for every one share awarded.

Awards settled in cash do not count against the pool of available shares.

Shares tendered or withheld to pay taxes for any award or tendered to satisfy the exercise price of an option or SAR are not available for re-issuance and count against the pool of available shares.

Forfeited awards are not counted against the maximum number of shares issuable under the 2017 Plan.

Except as specifically provided for in the 2017 Plan, cancelled, terminated, forfeited or expired shares under prior plans cannot be reissued under the 2017 Plan.
Exercise of Stock Options and Stock Appreciation Rights:   The exercise price of Stock Options and Stock Appreciation Rights granted under the 2017 Plan 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 and one month.
Vesting:   As determined by the Board for the CEO and Committee for officers, but generally for Employee Participants not less than three years for Stock Options, Stock Appreciation Rights, Restricted Stock and Restricted Stock Units to fully vest.

Determined by the board for Non-Employee Directors, but subject to a minimum vesting period of at least one year.

Up to 5% of authorized shares may be granted with vesting periods shorter than three years for Employee Participants, and one year for Non-Employee Director Participants.

Performance awards vest upon the accomplishment of performance goals over one year or multiple years. Applicable performance goals and performance periods will be established by the Committee. The Committee may adjust the value of awards based on performance criteria or as it otherwise determines in its discretion to be appropriate. It may also require forfeiture of all or part of the performance award in the event that additional conditions are not met, for example, if the employee award is terminated prior to the expiration of any service conditions.
Dividends and Dividend Equivalents:   Dividends may not be paid on any awards before they vest. Restricted Stock Units and Performance Share Units may earn dividend equivalents equal to regular dividends paid on our Common Stock, which are distributed only to the extent the underlying units vest.
Adjustments:   In the event of certain corporate transactions, including a special dividend, recapitalization, stock split, reverse stock split, combination of shares, reorganization, merger, consolidation, spin-off, repurchase or exchange of our common stock or similar event affecting our Common Stock, the number and kind of shares granted under the 2017 Plan will be adjusted appropriately.
Transferability:   Stock Options and Stock Appreciation Rights granted under the 2017 Plan are transferable only by the Employee Participant’s last will and testament, or by the applicable laws of descent and distribution. Restricted Stock, Restricted Stock Units and performance awards may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of until the applicable restrictions lapse. Any permitted transfer will be without consideration.
Change of Control:   Vesting of Employee Participant outstanding awards accelerates upon the consummation of a change of control and one of the following double-trigger vesting requirements: (1) involuntary termination other than for cause within 24 months of the change of control, (2) voluntary termination for good reason within 24 months of the change of control for certain senior executives, or (3) there is no adequate replacement award and/or the awards are not assumed. In addition, Committee may cancel and settle Stock Options and Stock Appreciation Rights for cash.

Vesting of Non-Employee Director Participant 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 Participant, 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 adequate replacement award and/or the awards are not assumed.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    34

 
Administration:   The 2017 Plan will be administered by the Committee. The Committee may interpret the 2017 Plan and establish, amend and rescind any rules relating to the 2017 Plan. The Committee may delegate all or part of its responsibilities.
Amendments:   Subject to approval of the board, where required, the Committee may terminate, amend or suspend the 2017 Plan, provided that no action may be taken by the Committee or the board (except those described earlier in the Adjustments section) without the approval of the shareholders to: (1) increase the number of shares that may be issued; (2) permit granting of Stock Options or Stock Appreciation Rights having an exercise price less than Fair Market Value; (3) permit the repricing of outstanding Stock Options or Stock Appreciation Rights; or (4) amend individual limits on awards.

 

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 2017 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 2017 Plan.

 

Stock Options and Stock Appreciation Rights. Generally, no federal income tax is payable by a participant upon the grant of a Stock Option or Stock Appreciation Right and we are not entitled to claim a tax deduction upon the grant. Under current tax laws, if a participant exercises a Stock Option or Stock Appreciation Right he or she will be taxed at ordinary income rates on the difference between the fair market value of the Common Stock on the exercise date and the option price or, in the case of a Stock Appreciation Right, the fair market value of the stock on the date of grant. The company will be entitled to a corresponding deduction at the time the participant recognizes ordinary income, to the extent that the amount of income satisfies the general rules regarding deductibility of compensation, including those in Section 162(m) of the Internal Revenue Code.

 

Performance Awards, Restricted Stock and Restricted Stock Units. Performance awards and awards of Restricted Stock and Restricted Stock Units under the 2017 Plan generally are not subject to federal income tax when awarded and the company is not entitled to claim a tax deduction at the time of the award. Restricted Stock is generally subject to ordinary income tax at the time the restrictions lapse, unless the participant properly files an election with the Internal Revenue Service to accelerate tax recognition to the date of the award. Performance awards and Restricted Stock Units are generally subject to ordinary income tax at the time of payment. Any dividends or dividend equivalents received with respect to Restricted Stock, Restricted Stock Units, or performance awards will be taxable as ordinary income at the time of payment. In these cases, the company is entitled to a corresponding deduction at the time the participant recognizes ordinary income, to the extent that the amount of income satisfies the general rules regarding deductibility of compensation, including those in Section 162(m) of the Internal Revenue Code.

 

Application of Section 16. Special rules may apply in the case of participants subject to Section 16(b) of the Securities Exchange Act of 1934. Unless a special election with the Internal Revenue Service to accelerate tax recognition to the time of exercise is made under the tax laws, shares of stock acquired pursuant to an award may be treated as restricted for a period of up to six months after the date of exercise. Accordingly, the amount of ordinary income recognized, and the amount of the company’s deduction, may be determined based on the fair market value of the stock as of the end of that period.

 

Taxable ordinary income recognized by a participant upon exercise of a Stock Option or Stock Appreciation Right; lapse of restrictions on Restricted Stock or Restricted Stock Units; and payment of a performance award, dividend or dividend equivalent will be treated as wages subject to income and employment tax withholding. With respect to stock awards other than Stock Options or Stock Appreciation Rights, employment taxes (e.g., FICA) are generally payable upon lapse of applicable forfeiture restrictions, even if payment of underlying shares occurs at a later date.

 

The 2017 Plan is intended to comply with Section 409A of the Internal Revenue Code.

 

New Plan Benefits

 

No benefits or amounts have been granted, awarded or received under the 2017 Plan. In addition, the Committee will determine the number and types of awards that will be granted under the 2017 Plan. Therefore, it is not possible to determine the benefits that will be received by the eligible participants if the 2017 Plan is approved by our shareholders.

 

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Equity Compensation Plan Information

 

The following table provides certain information as of May 28, 2017 with respect to our equity compensation plans:

 

Plan Category  Number of
Securities to
be Issued upon
Exercise of
Outstanding
Options, Warrants
and Rights
(1)
  Weighted-Average
Exercise Price
of Outstanding
Options, Warrants
and Rights
(2)(a)
 Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (1))
(3)
Equity compensation plans approved by security holders  36,988,530(b)   $40.47   20,257,017(d)(e) 
Equity compensation plans not approved by security holders  139,141(c)   $    
Total  37,127,671   $40.47   20,257,017 
(a) Only includes the weighted-average exercise price of outstanding options, whose weighted-average term is 4.22 years.
(b) Includes 29,834,351 stock options, 4,329,043 restricted stock units, 285,628 performance share units (assuming pay out for target performance) and 2,539,508 restricted stock units that have vested and been deferred.
(c) Includes 139,141 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 19,795,627 shares available for grant at May 28, 2017. Also includes stock options and restricted stock units that we may award under our 2016 Compensation Plan for Non-Employee Directors, which had 461,390 shares available for grant at May 28, 2017. These shares would be cancelled if shareholders approve the 2017 Plan.
(e) The table above shows our outstanding equity awards as of fiscal year end. After fiscal year end, the company issued equity awards to its employees based on fiscal 2017 performance. A total of 2,816,747 options and 1,160,224 restricted stock units were issued under the 2011 Stock Compensation Plan to approximately 2,150 employees. Both the options and the restricted stock units had a four-year cliff vesting schedule. The awards reduced the number of shares currently available under the 2011 Stock Compensation Plan. Additionally, since our fiscal year end, we have had a number of option exercises and there have been prior year grants of restricted stock and restricted stock units vest. As of July 25, 2017, our outstanding equity awards and shares currently available were as follows:
15,358,708 shares remain available for issuance under the 2011 Stock Compensation Plan, and 461,390 shares remain available for issuance under the 2016 Compensation Plan for Non-Employee Directors;
  There are 31,089,796 options outstanding with a weighted average price of $42.35 and a remaining term of 4.8 years; and
  There are 4,920,732 full value shares (restricted stock, restricted stock units, and performance shares) which are unvested and outstanding.

 

No additional shares will be issued under the 2011 Stock Compensation Plan or the 2016 Compensation Plan for Non-Employee Directors after the 2017 Annual Meeting if the 2017 Plan is approved.

 

Our common shares outstanding as of July 28, 2017, the record date for the 2017 Annual Meeting, was approximately 573,314,712 shares. The number of common shares outstanding as of the record date reflects reductions as a result of share repurchases from May through July.

 

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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 2016 Annual Meeting, approximately 96 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 2017 Annual Meeting of Shareholders.

 

The advisory vote will not be binding on the compensation committee or the board. 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.

 

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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 2017 performance.

 

On May 2, 2017, the board elected Jeffrey L. Harmening Chief Executive Officer of the company to succeed Kendall J. Powell effective June 1, 2017. The board also elected Mr. Harmening to the company’s Board of Directors effective June 1, 2017. Mr. Powell will continue to serve as the company’s Chairman for a transition period until his retirement, expected within the next year. Additionally, on October 12, 2016, the company announced the departure of Christopher D. O’Leary, Executive Vice President and Chief Operating Officer, International. Mr. O’Leary remained in his role until December 31, 2016.

 

Fiscal 2017 Named Executive Officers

 

Kendall J. Powell, Chairman

Jeffrey L. Harmening, Chief Executive Officer (as of June 1, 2017)

Donal L. Mulligan, Executive Vice President, Chief Financial Officer

John R. Church, Executive Vice President, Chief Supply Chain Officer and Global Business Solutions

Richard C. Allendorf, Senior Vice President, General Counsel and Secretary

Christopher D. O’Leary, Former Executive Vice President, Chief Operating Officer, International

 

Existing
Policies and
Practices
   

What we do:

    Significant alignment between pay and performance

    PSUs granted to all NEOs and other company officers

    Quantitative company performance measures

    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

   

What we don’t do:

     No employment contracts for NEOs

     No officer hedging or pledging of company stock

     No corporate aircraft

     No first-class air travel for flights less than 5 hours

     No excise tax gross up

     No payment of dividend equivalents on unvested shares or options

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    38

 

Executive Summary

 

Our Business Strategies and Priorities

 

At General Mills, we develop distinctive, value-added food products and market them under unique brand names. We work continuously to improve our core products and to create new products that meet consumers’ evolving needs and preferences. In addition, we build the equity of our brands over time with strong consumer-directed marketing, innovative new products, and effective merchandising. We are committed to our Consumer First strategy and are focused on five global product platforms – cereal, snacks, yogurt, convenient meals and super-premium ice cream – to drive growth. We believe that a balance between topline growth and margin expansion, while maintaining discipline on cash management, is the best way to deliver on our goal of top-tier returns to shareholders over the long term.

 

Our long-term growth model is designed to achieve our goal of market-leading performance. We believe our businesses can generate low single-digit organic net sales growth, mid single-digit total segment operating profit growth on a constant-currency basis and high single-digit growth in adjusted diluted earnings per share on a constant-currency basis. 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.

 

Performance Highlights for Fiscal 2017

 

Fiscal 2017 was a year of significant change for General Mills. We implemented a new global organizational structure to enhance our agility in a rapidly changing consumer environment. We also implemented a business plan that aggressively shifted resources to our best growth opportunities and eliminated low-return investments and volume.

 

Our consolidated net sales for the fiscal year ended May 28, 2017, declined 6 percent to $15.6 billion. Organic net sales declined 4 percent. Total segment operating profit decreased 2 percent to $2.95 billion. On a constant-currency basis, total segment operating profit declined 1 percent. Diluted earnings per share were comparable to last year at $2.77. Adjusted diluted earnings per share, which excludes certain items affecting comparability of results, rose 5 percent to $3.08. Excluding the impact of foreign exchange, adjusted diluted earnings per share increased 6 percent. Our total shareholder return, which is a combination of stock price appreciation and dividends, declined 6 percent, reflecting our challenging topline performance during the year. (Organic net sales, total segment operating profit, and adjusted diluted earnings per share are non-GAAP measures. For more information on the use of these and other non-GAAP measures in this Proxy Statement, and a reconciliation of non-GAAP measurers to the most directly comparable GAAP measures, see Appendix A.)

 

While execution against our key priorities in fiscal 2017 was challenging and our results fell short of our plan, we took important steps to increase our efficiency and position ourselves for long-term growth. In addition to our annual financial results, we took strategic actions to adapt to the changing marketplace and improve our profitability. In fiscal 2017, we also introduced a new global organizational structure to support our strategy and leverage our skills and capabilities around the world. In the third quarter of fiscal 2017, we reorganized our reporting segments to align with our new global organization structure. We combined our U.S. Retail operating units and Canada region into a North America Retail segment, due to their similar product portfolio and go-to-market structure. We divided our International segment into two segments: Europe & Australia and Asia & Latin America. Our fourth segment, Convenience Stores & Foodservice, remained unchanged from our previous structure. The new structure we implemented in fiscal 2017 has increased our organizational agility to operate as a truly global food company. We also accelerated the global restructuring of our supply chain and streamlined our support functions, allowing for more efficient use of resources and enhanced idea sharing around the world.

 

In fiscal 2017, we returned $2.7 billion to shareholders through net share repurchases and dividends. We repurchased approximately 25 million shares of common

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    39

 

stock, reducing our average number of diluted shares outstanding by 2 percent, which is in line with our longer-term goal. In June 2017, we increased our quarterly dividend by 2 percent to an annualized rate of $1.96 per share. We also converted more than 97 percent of adjusted after-tax earnings into free cash flow in the most recent three-year period. Free cash flow conversion is a non-GAAP measure. For more information on the use of this and other non-GAAP measures in this Proxy Statement, and a reconciliation of non-GAAP measures to the most directly comparable GAAP measures, see Appendix A.

 

 

Fiscal 2017 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 2017, 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 2017 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 2017 performance, paid after the end of fiscal 2017.

 

Base Salary: At the beginning of the fiscal year, the board increased Mr. Powell’s base salary by 3%; he did not receive a base salary increase in fiscal 2016.
Annual Incentive: Mr. Powell’s annual incentive target of 160% of base salary remained the same as the prior year. Mr. Powell’s annual incentive payout is based 80% on company performance and 20% on individual performance. At the end of fiscal 2017, Mr. Powell received an annual incentive award of $811,253, which was equal to 41% of his annual incentive award target, in line with fiscal 2017 company performance.
Long-Term Incentive: At the beginning of the fiscal year, Mr. Powell’s target long-term incentive award value was modestly increased based on a competitive analysis of CEO compensation versus our peer group companies. The grant date fair value of the fiscal 2017 long-term incentive was $6,789,680.
Performance Share Unit Three- Year Performance Achievement: The performance period for Mr. Powell’s fiscal 2015 – fiscal 2017 PSUs was completed this year. The award achievement percentage for this tranche of PSUs was 27% of his PSU award target.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    40

 

Compensation Philosophy

 

Our compensation program is designed to attract, motivate, reward and retain superior leaders who consistently pursue initiatives and execute strategies that contribute to strong company 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 closely track 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: Approximately 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.

 

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 have no value 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 company performance measures.

 

CEO PAY MIX AT TARGET

 

OTHER NAMED EXECUTIVE OFFICER PAY MIX AT TARGET

     
 

 

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

 

Elements of Total Direct Compensation and Alignment With Performance Measures

 

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 (“TDC”). The target pay opportunity for our NEOs is set so that performance targets and TDC 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.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    41

 
Total Direct        
Compensation        
Element   Pay Element Performance Measure Strategy & Performance Alignment
Base Salary   Cash     Individual performance and competency reflected in position of salary within range and in relation to external market     Reflects base salaries positioned within a reasonable range of market median based on individual performance and contributions
Annual Incentive   Cash-based
award

Corporate Performance (80%)

    Organic net sales growth

    Total segment operating profit growth

    Adjusted diluted EPS growth

    Adjusted return on average total capital improvement

 

Individual Performance (20%)

    Rewards and recognizes annual accomplishment of key financial objectives

    Corporate performance measures aligned with Long-Term Growth Model

    Corporate Performance Modifier (+/- 20%) may be used by the board to adjust for performance relative to peers

 

Long-Term Incentive   Performance
Share Units (1/3)

Three-year measurement period

    Average organic net sales growth

    Cumulative free cash flow

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

4-year cliff-vesting
for RSUs and Stock
Options

3-year cliff-vesting
for PSUs

(4-year cliff-vesting
for PSUs awarded to
CEO)

 
  Stock Options
(1/3)
      Ultimate value tied to stock price appreciation
  Restricted Stock
Units (1/3)
      Ultimate value tied to TSR
       
           

 

Base Salary

 

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

 

CEO Base Salary

 

Mr. Powell received a 3% increase in base salary in fiscal 2017 to keep his base salary competitive at a median level versus other CEOs within the industry peer group. He did not receive an increase in base salary in fiscal 2016.

 

Annual Incentive Award

 

The annual incentive plan rewards the achievement of annual company 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 Company Performance Measures, the NEO’s Individual Performance Rating, and company performance relative to peer companies. Annual incentive awards range from 0 percent to 200 percent of target, with a 100 percent award for on target performance.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    42

 

Individual Target Incentive Percentage

 

In establishing the Target Incentive Percentage opportunities for the NEOs, 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.

 

Annual Company Performance Measures

 

For the Annual Company Performance Measures, the assessment of company 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 Company Performance Measures are closely aligned with our operating plans and the financial objectives we communicate to investors. Annual Company Performance Measures for fiscal 2017 consisted of four equally-weighted measures: organic net sales growth; total segment operating profit growth (on a constant-currency basis); adjusted diluted earnings per share growth (on a constant-currency basis); and adjusted return on average total capital improvement (on a constant-currency basis).

 

Our fiscal 2017 business plans called for an increased focus on cost reduction and margin expansion to drive higher profit growth. To achieve these plans, we undertook further efforts to prioritize growth investments, reduce complexity and streamline our operations to drive profitable sales growth. We directed growth investments to the brands and platforms with the strongest profitable growth potential, while in our “foundation” businesses, we focused on reducing SKU complexity, optimizing commercial investments and prioritizing profitable volume while making selective growth investments.

 

The compensation committee approved incentive targets based on the annual operating plan and then established performance goals around the targets for threshold and maximum annual incentive payout. In line with our annual operating plan and growth priorities, the company’s fiscal 2017 Annual Performance Measures included higher targets for total segment operating profit growth, adjusted earnings per share growth, and adjusted return on average total capital improvement versus our fiscal 2016 targets. However, our focus on profitable growth investments resulted in a corresponding reduction in our target for organic net sales growth. The company’s performance against the annual company performance targets was lower than expected, resulting in an annual incentive company performance achievement percentage for fiscal 2017 of 32 percent, meaningfully reducing the annual incentives paid to NEOs.

 

The annual incentive awards paid out to NEOs in fiscal 2017 ranged from 41% to 56% of their annual incentive award targets. The annual incentive company performance achievement percentage accounts for 80% of our NEOs Annual Incentive Award payout.

 

FISCAL 2017 PERFORMANCE AGAINST ANNUAL PERFORMANCE GOALS

 

Annual Company Performance Measure and Weighting Target Fiscal 2017
Incentive
Performance(1)
Fiscal 2017
Performance
Achievement
Organic Net Sales Growth (25%) Flat -4.1% 0%
Total Segment Operating Profit Growth on a constant-currency basis (25%) 7.6% -1.0% 0%
Adjusted Diluted Earnings Per Share Growth on a constant-currency basis (25%) 7.9% 5.8% 74%
Adjusted Return on Average Total Capital Improvement on a constant-currency basis (25%) +89bps +35bps 55%
Annual Incentive Company Performance Achievement Percentage     32%
(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 2017, 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.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    43

 

Individual Performance Ratings

 

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 CEO establishes annual priorities for each of the NEOs, and the compensation committee approves the annual priorities for the CEO.

 

While quantitative business performance measures were generally lower in fiscal 2017, we achieved several qualitative goals, including the introduction of a new global organizational structure and supply chain, which have increased our organizational agility to operate as a truly global food company.

 

Individual Performance Ratings for our NEOs account for 20% of our NEOs Annual Incentive Award payout. The board approves the rating for the CEO and the compensation committee approves the ratings for all other NEOs.

 

Company Performance Modifier

 

The Committee is provided with the discretion at the end of each fiscal year to determine whether a company performance modifier to the annual incentive payout is warranted based on relative performance versus our peers. Based on this assessment, the committee may increase or decrease each NEOs annual incentive payout by 20%. The primary purpose of the company performance modifier is to ensure that annual performance is assessed relative to peer company performance. No company performance modifier was applied for fiscal 2017.

 

Annual Incentive Award Calculation

 

The annual incentive award is subject to the terms of our Executive Incentive Plan and calculated according to the formula below for all NEOs. For fiscal 2017, our NEOs received annual incentive awards ranging from 41% to 56% of their annual incentive award targets.

 

 

(1) The Individual Achievement and Business Achievement percentages can range from 0 – 200%.

 

CEO Annual Incentive Award

 

The annual incentive award granted to our CEO for fiscal 2017 performance is calculated below:

 

 

2017 Annual Incentive earned was 41% of the targeted annual incentive award

 

Long-Term Incentive Award

 

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.

 

Stock options and RSUs granted in fiscal 2017 have a four-year cliff vesting period from the grant date. PSUs granted in fiscal 2017 have three-year cliff vesting except for the CEO’s award which has four-year cliff vesting. All long-term awards are subject to our clawback

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    44

 

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. All long-term incentive awards granted in fiscal year 2017 were granted under the 2011 Stock Compensation Plan.

 

The long-term incentive award 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 2017 is summarized below:

 

 

Performance Share Units

 

PSUs are earned based on our future achievement of three-year company performance goals. The compensation committee sets these goals so that they 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. The PSUs awarded in fiscal 2017 are earned based on the company’s future achievement of three-year goals for average organic net sales growth and cumulative free cash flow.

 

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.

 

Each PSU earned is settled with a share of the company’s common stock following the completion of the three-year performance period, except for the CEO’s PSUs which are settled one year following the completion of the three-year performance period.

 

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 to Mr. Powell, we have now completed our first three-year performance period. The following table summarizes our company performance against the performance measures for the fiscal 2015 – fiscal 2017 PSUs.

 

Fiscal 2015 – Fiscal 2017 PSU Measures and Weightings ($ in millions) Target Actual
Performance(3)
Award
Achievement %
Average Organic Net Sales Growth (50%)(1) 3.0% -1.4% 0%
Cumulative Free Cash Flow (50%)(2) $6,350 $5,749 54%
Fiscal 2015 – Fiscal 2017 PSU Performance Achievement     27%
(1) Organic Net Sales Growth: defined as growth in sales for the company excluding any impacts from acquisitions, divestitures, and foreign currency exchange.
(2) Cumulative Free Cash Flow: cash generation performance measured by cash flow from operations, less capital expenditures.
(3) Actual Performance: cumulative free cash flow has been adjusted for restructuring projects, acquisitions and divestitures activity not included in original targets.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    45

 

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.

 

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 (designed to restore contributions that otherwise would be lost because of limits in the 401(k) Plan). See pages 56-58 for further details.

 

In May 2017, we announced changes to our U.S. and Canadian pension plans. The company will freeze the Pension Plan and Supplemental Retirement Plan for active, non-union employees who are participating in those plans as of December 31, 2027. Beginning January 1, 2028, active employees in the U.S. and Canada will not accrue additional benefits under the Pension Plan or the Supplemental Retirement Plan, but will instead participate in an enhanced defined contribution plan with both a company match and an automatic company contribution. See page 57 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 51.

 

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 60 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 board and compensation committee approve compensation for the CEO and the committee approves compensation for 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:

 

Company performance as measured by our Annual Company 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.

 

Frederic W. Cook & Co., Inc., the committee’s independent compensation consultant, advises the compensation committee on executive and director compensation, but performed no other services for General Mills in fiscal 2017. The compensation committee actively works with

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    46

 

the independent compensation consultant to formulate compensation recommendations for our CEO to be approved 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, often with the participation of the independent compensation consultant.

 

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. We did not have any changes to our industry peer group for fiscal 2017.

 

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 2017 Annual Meeting of Shareholders and Proxy Statement    47

 

Key Policies – Supplemental Information

 

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, five times salary for executive vice presidents (“EVPs”) and senior vice presidents (“SVPs”), and three times salary for all other corporate officers. In fact, the Chairman holds company stock worth 40 times his base salary, and the other NEOs hold company stock worth, on average, 9 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. Given Mr. Harmening’s recent appointment to CEO, he currently is below the CEO ownership requirement.

 

STOCK OWNERSHIP FOR ACTIVE NAMED EXECUTIVE OFFICERS
 
  Required Base   Actual Base Salary
Name Salary Multiple Shares Owned Multiple
K. J. Powell      
Chairman 10x 686,720 40x
J. L. Harmening      
Chief Executive Officer 10x 135,142 6x
D. L. Mulligan      
EVP, Chief Financial Officer 5x 228,178 17x
J. R. Church      
EVP, Chief Supply Chain Officer and Global Business Solutions 5x 67,753 6x
R. C. Allendorf      
SVP, General Counsel and Secretary 5x 53,584 5x

 

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.

 

GENERAL MILLS, INC. Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    48

 

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 28, 2017.

 

SUBMITTED BY THE COMPENSATION COMMITTEE

 

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

 

GENERAL MILLS, INC. Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    49

 

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 2017 and for a former executive officer Christopher D. O’Leary.

 

Summary Compensation Table

 

Name and
Principal Position
  Year   Salary
($)
  Stock
Awards(1)

($)
  Option
Awards(2)
($)
  Non-Equity
Incentive Plan
Compensation(3)
($)
  Change in
Pension
Value(4)
($)
  All Other
Compensation(5)
($)
  Total
($)
Kendall J. Powell
Chairman and CEO
    2017       1,236,667       4,086,646       2,703,034       811,253       161,814       165,110       9,164,524  
    2016       1,206,500       3,423,719       1,796,295       2,258,568       2,124,905       187,903       10,997,890  
    2015       1,200,650       3,416,985       1,858,710       1,681,054       5,124,882       147,780       13,430,061  
Jeffrey L. Harmening
President, COO
    2017       775,000       1,500,029       992,182       317,750       969,256       73,888       4,628,105  
    2016       650,000       844,800       419,044       760,500       822,309       78,873       3,575,526  
    2015       577,500       741,973       433,604       570,755       589,008       42,322       2,955,162  
Donal L. Mulligan
EVP, CFO 
    2017       736,050       1,520,157       1,005,409       301,781       924,174       80,761       4,568,332  
    2016       712,300       870,375       419,044       904,621       927,619       97,792       3,931,751  
    2015       673,017       1,564,066       433,604       669,840       1,281,765       85,287       4,707,580  
John R. Church
EVP, Chief Supply Chain Officer and Global Business Solutions
    2017       577,767       660,146       436,559       212,618       705,548       57,987       2,650,625  
    2016       559,100       521,146       251,423       568,046       738,290       69,955       2,707,960  
    2015       513,583       479,165       257,898       397,274       974,814       49,451       2,672,185  
Richard C. Allendorf
SVP, General Counsel and Secretary
    2017       542,500       660,146       436,559       243,040       610,155       46,729       2,539,129  
Christopher D. O’Leary
Former EVP, COO, International
    2017       730,133       950,063       628,382       335,861       851,915       80,687       3,577,041  
    2016       712,300       871,601       419,044       833,391       972,781       97,493       3,906,610  
    2015       673,017       1,815,220       433,604       674,524       1,391,320       83,302       5,070,987  

 

Footnotes to the Summary Compensation Table:

 

(1) 2017 amounts reported for stock awards represent the aggregate grant date fair value of RSUs and PSUs awarded to the NEOs in fiscal 2017. RSUs awarded to the NEOs have four-year cliff vesting, and PSUs awarded to the NEOs have a three-year performance period (fiscal 2017-2019) and an additional fourth year of vesting for the CEO. 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 ($66.52 for RSUs and $72.02 for PSUs in fiscal 2017, $55.72 for RSUs and $56.96 for PSUs in fiscal 2016, and $53.70 for RSUs and $53.70 for PSUs in fiscal 2015). 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 following table reflects the value at grant date of the 2017 PSU awards at minimum, threshold, target, and maximum performance levels

 

GRANT DATE VALUE OF 2017 PERFORMANCE SHARE UNITS

 

Name   At Minimum
0%
($)
  At Threshold
25%
($)
  At Target
100%
($)
  At Maximum
150%
($)
K. J. Powell   0   510,838     2,043,351      3,065,027   
J. L. Harmening   0   187,504     750,016   1,125,024   
D. L. Mulligan   0   190,025     760,099   1,140,149   
J. R. Church   0   82,535   330,139   495,209
R. C. Allendorf   0   82,536   330,145   495,218
C. D. O’Leary   0   118,761     475,044   712,566
(2) 2017 amounts reported for option awards represent the grant date fair value of options awarded to the NEOs in fiscal 2017. Stock options awarded to the NEOs in fiscal 2017 have four-year cliff vesting. The grant date fair value of options calculated in accordance with FASB ASC Topic 718 equals $8.80 per share (fiscal 2017), $7.24 per share (fiscal 2016), and $7.22 per share (fiscal 2015), based on our Black-Scholes option pricing model. The following assumptions were used in the fiscal 2017 calculation: expected term of 8.5 years; dividend yield of 2.9 percent annually; dividend growth rate of 7.00 percent annually; a risk-free interest rate of 1.7 percent; and expected price volatility of 17.8 percent. Fiscal 2016 and 2015 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.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    50

 
(3) As described in the “Annual Incentive Award” section of the Compensation Discussion and Analysis on pages 42-44, the amounts reported reflect annual incentive awards earned for performance under the Executive Incentive Plan for fiscal 2017, 2016 and 2015.
   
(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 2017 includes the following amounts:
   
Name   Contributions
to Retirement
Savings Plans(6)
($)
  Perquisites and
Other Personal
Benefits(7)
($)
  Total
($)
K. J. Powell   130,078     35,033   165,111  
J. L. Harmening   50,407   23,482   73,889
D. L. Mulligan   58,857   21,904   80,761
J. R. Church   40,259   17,728   57,987
R. C. Allendorf   30,254   16,475   46,729
C .D. O’Leary   56,738   23,949   80,687
(6) Includes the company’s fixed and variable contributions during fiscal 2017 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

 

Name Matching Contributions to
Deferred Compensation
($)
Matching Contributions
to 401(k) Plan
($)
Contributions to
Supplemental Savings Plan
($)
Total
($)
K. J. Powell 8,100 121,978   130,078  
J. L. Harmening 8,100 42,307 50,407
D. L. Mulligan 8,100 50,757 58,857
J. R. Church 9,395 30,864 40,259
R. C. Allendorf 9,638 20,616 30,254
C. D. O’Leary 8,975     4,586 43,177 56,738
(7) Includes the following perquisites and other personal benefits for fiscal 2017:

 

PERQUISITES AND OTHER PERSONAL BENEFITS

 

Name   Personal Use of
Executive Car(8)
($)
  Financial
Counseling
($)
  Total
($)
K. J. Powell   20,033   15,000     35,033
J. L. Harmening   12,182   11,300     23,482
D. L. Mulligan   14,904   7,000   21,904
J. R. Church   15,708   2,020   17,728
R. C. Allendorf   12,675   3,800   16,475
C. D. O’Leary   15,949   8,000   23,949
(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 2017 Annual Meeting of Shareholders and Proxy Statement    51

 

Grants of Plan-Based Awards for Fiscal 2017

 

        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) 494,667 1,978,667 3,957,334  
6/21/2016 (2)  RSU   30,717 2,043,295
7/15/2016 (3)  PSU   7,093 28,372 42,558   2,043,351
6/21/2016 (4)  Options   307,163 66.52 2,703,034
J. L. Harmening   Cash(1) 193,750 775,000 1,550,000  
6/21/2016 (2)  RSU   11,275 750,013
7/15/2016 (3)  PSU   2,604 10,414 15,621 750,016
6/21/2016 (4)  Options   112,748 66.52 992,182
D. L. Mulligan   Cash(1) 184,013 736,050 1,472,100  
6/21/2016 (2)  RSU   11,426 760,058
7/15/2016 (3)  PSU   2,639 10,554 15,831 760,099
6/21/2016 (4)  Options   114,251 66.52 1,005,409
J. R. Church   Cash(1) 115,553 462,214 924,428  
6/21/2016 (2)  RSU   4,961 330,006
7/15/2016 (3)  PSU   1,146 4,584 6,876 330,140
6/21/2016 (4)  Options   46,609 66.52 436,559
R. C. Allendorf   Cash(1) 108,500 434,000 868,000  
6/21/2016 (2)  RSU   4,961 330,006
7/15/2016 (3)  PSU   1,146 4,584 6,876 330,140
6/21/2016 (4)  Options   49,609 66.52 436,559
C. D. O’Leary   Cash(1) 182,533 730,133 1,460,266  
6/21/2016 (2)  RSU   7,141 475,019
7/15/2016 (3)  PSU   1,649 6,596 9,894 475,044
6/21/2016 (4)  Options   71,407 66.52 628,382
                                 
(1) Annual Incentive Awards for Fiscal 2017 Performance: Cash. Includes the potential range of 2017 annual incentive awards as described in the Compensation Discussion and Analysis. The actual amount earned for fiscal 2017 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 2017 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 2017-2019 performance period and an additional fourth year of vesting for the CEO under the 2011 Stock Compensation Plan as described in the Compensation Discussion & Analysis.
   
(4) Long-Term Incentive Awards: Options. Includes options granted in fiscal 2017 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 2017 Annual Meeting of Shareholders and Proxy Statement    52

 

The following table summarizes the outstanding equity awards as of May 28, 2017 for each of the NEOs.

 

Outstanding Equity Awards at 2017 Fiscal Year-End

 

      Option Awards   Stock Awards
      Number of Securities
Underlying Unexercised Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
  Number
of Shares
or Units
of Stock
That
Have Not
Market
Value of
Shares or
Units of
Stock That
Have Not
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Name Vesting
Date(1)
  Exercisable Unexercisable   Vested
(#)
Vested(2)
($)
Vested(3)
(#)
Vested(2)
($)
K. J. Powell 6/25/2017     58,986 3,381,078
  6/25/2017     14,212 814,632
  6/24/2018     25,744 1,475,646
  6/24/2018     7,953 455,866
  6/24/2018     8,082 463,260
  6/30/2019     32,595 1,868,346
  6/30/2019     28,222 1,617,685
  6/21/2020     30,717 1,760,698
  7/15/2020     28,372 1,626,283
  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 7/30/2025  
  6/21/2020   307,163 66.52 7/21/2026  
J. L. 7/16/2017 *   15,000 859,800
Harmening 6/25/2017     7,580 434,486
  6/25/2017     1,013 58,065
  6/24/2018     12,012 688,528
  6/24/2018     1,805 103,463
  6/30/2019     8,760 502,123
  6/30/2019     6,584 377,395
  7/15/2019     10,414 596,930
  6/21/2020     11,275 646,283
  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 7/30/2025        
  6/21/2020   112,748 66.52 7/21/2026    

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    53

 
      Option Awards   Stock Awards
      Number of Securities
Underlying Unexercised Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
  Number
of Shares
or Units
of Stock
That
Have Not
Market
Value of
Shares or
Units of
Stock That
Have Not
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Name Vesting
Date(1)
  Exercisable Unexercisable   Vested
(#)
Vested(2)
($)
Vested(3)
(#)
Vested(2)
($)
D. L. Mulligan 6/25/2017     16,295 934,029
6/25/2017     5,778 331,195
6/24/2019 *   13,967 800,588
6/24/2018     12,012 688,528
6/24/2018     3,147 180,386
6/30/2019     8,890 509,575
6/30/2019     6,584 377,395
7/15/2019     10,554 604,955
6/21/2020     11,426 654,938
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 7/30/2025  
6/21/2020   114,251 66.52 7/21/2026  
J. R. Church 6/25/2017     8,714 499,486
6/25/2017     2,737 156,885
6/24/2018     7,144 409,494
6/24/2018     1,779 101,972
6/30/2019     5,313 304,541
6/30/2019     3,952 226,529
7/15/2019     4,584 262,755
6/21/2020     4,961 284,365
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 7/30/2025  
6/21/2020   49,609 66.52 7/21/2016  
R. C. Allendorf 6/25/2017     2,751 157,688
6/24/2018     2,359 135,218
6/30/2019     4,104 235,241
6/30/2019     3,522 201,881
7/15/2019     4,584 262,755
6/21/2020     4,961 284,365
6/25/2011   8,710 29.40 7/25/2017  
6/23/2012   4,558 31.70 7/23/2018  
6/29/2013   5,054 27.92 7/29/2019  
6/28/2014   13,897 37.40 7/28/2020  
6/28/2015   10,864 37.21 7/28/2021  
6/26/2016   9,731 38.15 7/26/2022  
6/25/2017   8,962 48.33 7/25/2023  
6/24/2018   8,408 53.70 7/24/2024  
6/30/2019   30,950 55.72 7/30/2025  
6/21/2020   49,609 66.52 7/21/2026  

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    54

 
      Option Awards   Stock Awards
      Number of Securities
Underlying Unexercised Options
(#)
Option
Exercise
Option   Number
of Shares
or Units
of Stock
That
Have Not
Market
Value of
Shares or
Units of
Stock That
Have Not
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Name Vesting
Date(1)
  Exercisable Unexercisable Price
($)
Expiration
Date
  Vested
(#)
Vested(2)
($)
Vested(3)
(#)
Vested(2)
($)
C. D. 6/25/2017     16,295 934,029
O’Leary 6/25/2017     5,701 326,781
  6/24/2019 *   18,622 1,067,413
  6/24/2018     12,012 688,528
  6/24/2018     3,169 181,647
  6/30/2019     8,912 510,836
  6/30/2019     6,584 377,395
  7/15/2019     6,596 378,083
  6/21/2020     7,141 409,322
  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 7/30/2025  
  6/21/2020   71,407 66.52 7/21/2026  
(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 three years after the grant date, to the extent they are earned based on a three-year performance period. PSUs for the CEO 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 ($57.32) multiplied by the number of units.
   
(3) Includes PSUs for the fiscal 2016-2018 performance period and fiscal 2017-2019 performance period for all NEOs. All PSUs are valued at the target award level.

 

The following table summarizes the option awards exercised and RSUs vested during fiscal 2017 for each of the NEOs.

 

Option Exercises and Stock Vested for Fiscal 2017

 

  Option Awards   Stock Awards
Name Number of Shares
Acquired on Exercise
(#)
Value Realized
on Exercise(1)
($)
  Number of Shares
Acquired on Vesting
(#)
Value Realized
on Vesting(2)
($)
K. J. Powell 481,250 17,204,500   75,652 5,003,623
J. L. Harmening 33,150 1,381,195   11,459 757,898
D. L. Mulligan   22,127 1,463,480
J. R. Church 67,557 2,281,400   11,633 769,407
R. C. Allendorf 8,376 387,893   2,725 180,232
C. D. O’Leary   22,217 1,469,432
(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 2017 Annual Meeting of Shareholders and Proxy Statement    55

 

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.

 

      Number of Years  Present Value of  Payments During
      Credited Service(1)  Accumulated Benefit(2)  Last Fiscal Year(3)
Name  Plan Name  (#)  ($)  ($)
K. J. Powell(4)  Pension Plan   37.7823    1,724,993     
   Supplemental Retirement Plan   37.7823    27,793,157     
J. L. Harmening(5)  Pension Plan   22.8710    870,373     
   Supplemental Retirement Plan   22.8710    3,136,938     
D. L. Mulligan(4)  Pension Plan   18.7500    900,102     
   Supplemental Retirement Plan   18.7500    5,732,824     
J. R. Church(5)  Pension Plan   28.8334    1,117,880     
   Supplemental Retirement Plan   28.8334    4,024,033     
R. C. Allendorf(4)  Pension Plan   18.4785    892,554     
   Supplemental Retirement Plan   18.4785    1,312,328     
C. D. O’Leary(4)  Pension Plan   19.5000    983,822     
   Supplemental Retirement Plan   19.5000    6,277,477     
(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 4.11 percent as of the end of fiscal 2017;
  Mortality rates based on the RP2014 Mortality Table with White Collar adjustment and MP2016 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, “specified 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.

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    56

 

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 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 hired prior to January 1, 2005 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. 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.

 

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.

 

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. This enhanced plan will also be provided to all non-union employees effective January 1, 2028, after the pension freeze has become effective. This program is made up of two parts – company match and an annual company contribution. The company match is

 

GENERAL MILLS, INC. - Notice of 2017 Annual Meeting of Shareholders and Proxy Statement    57

 

100 percent on the first 4 percent of pay and 50 percent on the next four percent of pay. This program does not have a discretionary variable match. In addition to the company match, there is an annual company contribution up to 5 percent of pay based on age plus service points.

 

The contributions to the 401(k) Plan and Supplemental Savings Plan for the NEOs for fiscal 2017 are reported in the Summary Compensation Table and reflect 50 percent of the maximum annual contribution available. This contribution was granted to eligible 401(k) Plan participants in light of the company’s fiscal 2017 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.

 

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 2017: Stable Value Fund (1.6%); Core Bond Fund (1.5%); Diversified U.S. Equity Fund (18.3%); Growth Equity Fund (18.8%); S&P 500 Index Fund (17.3%); Small & Midcap Fund (19.6%); Value Equity Fund (18.5%); Company Stock Fund (-7.0%); International Developed Markets Fund (14.3%); International Emerging Markets Fund (26.0%); and Multi-Asset Class Fund (12.7%).

 

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 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.

 

   Executive  Registrant     Aggregate   
   Contributions  Contributions  Aggregate  Withdrawals/  Aggregate Balance
   in Last FY(1)  in Last FY(2)  Earnings in Last FY  Distributions(3)  at Last FYE
Name  ($)  ($)  ($)  ($)  ($)
K. J. Powell   424,031        302,933        2,776,336 
J. L. Harmening   380,250        87,049        3,045,930 
D. L. Mulligan   884,677    4,932    1,204,153    1,792,633    8,008,797 
J. R. Church                    
R. C. Allendorf           2,419        158,805 
C. D. O’Leary   2,357,053    13,904    399,138    1,847,014    6,633,991 
(1) Non-equity incentive plan awards reported in the Summary Compensation Table are deferred after fiscal year end and do not appear in this column until the following year.
(2) All of the company’s fixed contributions for the NEOs are included in their fiscal 2017 compensation in the Summary Compensation Table.
(3) Includes dividends distributed on deferred stock units, in addition to any other withdrawals and distributions.

 

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Potential Payments Upon Termination or Change in Control

 

Payments and benefits received by the NEOs upon termination are governed by the arrangements described below and quantified at the end of this section. We have estimated the amounts involved assuming that the termination became effective as of the last business day of fiscal 2017. The actual amounts to be paid out can only be determined at the time of the NEO’s departure from the company.

 

Pension Plan and Supplemental Retirement Plan

 

NEOs who are terminated for any reason receive their vested benefits under the Pension Plan and Supplemental Retirement Plan as outlined in the Pension Benefits section.

 

Deferred Compensation Plan

 

NEOs who are terminated for any reason receive contributions and accumulated earnings as outlined in the Nonqualified Deferred Compensation section. Amounts are paid in accordance with the distribution date and form of distribution elected by the NEO at time of deferral.

 

Executive Survivor Income Plan

 

In the event that an NEO dies, his or her surviving spouse, or dependents if there is no surviving spouse, receive a monthly benefit equal to a percentage of the NEO’s final average earnings under the Pension Plan (1/12 of 25% for spouses or 1/12 of 12.5% divided equally among dependents) less benefits that are payable from the company’s retirement plans. Benefits continue until the spouse’s death or until the dependents no longer satisfy certain eligibility requirements. The benefit valuation at the end of this section assumes the NEO dies at the end of the fiscal year and payments are made to a surviving spouse. No new participants have been accepted into the Executive Survivor Income Plan since September 1, 2000.

 

Stock Compensation Plans

 

Unvested equity awards granted to the NEOs are generally treated as follows:

 

Nature of Termination  RSUs  PSUs  Stock Options
Voluntary  Forfeit  Forfeit  Forfeit
Involuntary for Cause  Forfeit  Forfeit  Forfeit
Involuntary without Cause where Age + Years of Service < 70 years  Fully vest  Within 12 months of grant: pro rata vest. After 12 months: fully vest  Fully vest, exercisable for shorter of remainder of option term or one year
Involuntary without Cause where Age + Years of Service ≥ 70 years  Fully vest  Within 12 months of grant: pro rata vest. After 12 months: fully vest  Normal vesting continues, exercisable for remainder of option term
Retirement — Normal and Early  Fully vest  Within 12 months of grant: pro rata vest. After 12 months: fully vest  Normal vesting continues, exercisable for remainder of option term
Death  Fully vest  Fully vest  Fully vest, exercisable for remainder of option term
Change in Control  Double-trigger vesting  Double-trigger vesting  Subject to double-trigger vesting and then exercisable for shorter of remainder of option term or one year

 

For double-trigger vesting: (1) the change in control must be consummated and (2) the participant must be involuntarily terminated other than for cause, or must voluntarily terminate with good reason, within two years of the change in control.

 

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Health Benefits

 

The NEOs qualify for retiree medical benefits available to the rest of our salaried employees in the United States. If an NEO is involuntarily terminated or terminated in connection with a change in control, he or she can receive medical coverage for up to two years under the Severance Plan described below. This coverage is the same as all other salaried employees would receive if involuntarily terminated.

 

Executive Separation Pay and Benefits Program

 

The General Mills Separation Pay and Benefits Program for Officers (“Severance Plan”) establishes the severance payments and benefits for all corporate executives, including the NEOs. The Severance Plan is intended to attract and retain NEOs and to promote orderly succession for key roles, particularly during the critical period surrounding a change in control when they are needed to minimize disruption to the business and to reassure shareholders and other stakeholders. This Plan is in lieu of employment contracts, which we do not have with any NEO.

 

For the NEOs, the Severance Plan provides a two-year continuation of base salary, average bonus, health benefits, life insurance and outplacement assistance following an involuntary termination other than for cause, death or disability. The Severance Plan also provides for a pro-rated bonus in the year of termination based on actual results for the year. Base salary and bonus continuation payments are made monthly over two years. Medical and dental benefits are maintained by the company for two years.

 

In the event of a change in control and either (i) an involuntary termination other than for cause, death or disability or (ii) voluntary termination for good reason within two years after a change in control, select senior executives, including each NEO, will receive a lump sum payment equal to two years of base salary and average bonus payable within 30 days of termination, in addition to the other benefits described above. Average bonus includes bonus paid for each of the last three full fiscal years, or for such lesser number of years of employment.

 

Executives who are eligible for change in control payments will not receive excise tax gross-ups on those payments to the extent they are subject to excise taxes under Internal Revenue Code Section 4999. Instead, change in control payments will be subject to a “net best” provision, whereby the NEOs will receive either the original amount of the payment or a reduced amount, depending on which will provide them a greater after-tax benefit.

 

As a condition of receiving benefits under the Severance Plan, the NEOs are required to sign a separation agreement containing a general release and confidentiality, cooperation with litigation, non-disparagement, non-competition and non-solicitation provisions.

 

For the purposes of the Severance Plan, “change in control” includes:

 

Certain acquisitions of 20 percent or more of the voting power of securities entitled to vote in the election of directors;
Changes in a majority of the incumbent directors (incumbent directors include directors approved by a majority of the incumbents);
Certain reorganizations, mergers, asset sales or other transactions that result in existing shareholders owning less than 60 percent of the company’s outstanding voting securities; or
A complete liquidation of the company.
   
“Cause” includes:
   
Conviction of, or plea of guilty or no contest with respect to, a felony;
Improper disclosure of proprietary information or trade secrets of the company and its affiliates;
Willful failure to perform, or negligent performance of, employment duties;
Falsification of any records or documents of the company and its affiliates;
Willful misconduct, misappropriation, breach of fiduciary duty, fraud, or embezzlement with regard to the company and its affiliates;
Violation of any employment rules, policies or procedures of the company and its affiliates; or
Intentional or gross misconduct that injures the business or reputation of the company and its affiliates.
   
“Good reason” includes:
   
Material diminishment of the executive’s position, authority, duties or responsibilities;
Decrease in base salary, annual bonus or long-term incentive opportunity;
Certain required relocations; or
Failure to bind successors to the Severance Plan.

 

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Payments and Benefits as of the Last Business Day of Fiscal 2017

 

The payments and benefits for the NEOs under each termination scenario are outlined below. Perquisites and other personal benefits are valued on the basis of their aggregate incremental cost to the company.

 

TERMINATION AND CHANGE IN CONTROL PAYMENTS AND BENEFITS

 

      Involuntary Not For      
Benefit or Payment  Retirement  Cause Termination  Death  Change in Control
Prorated Bonus  Yes  Yes  Yes  Yes
Accrued Vacation Pay  Yes  Yes  Yes  Yes
Deferred Compensation Plan Contributions and Earnings  Yes  Yes  Yes  Yes
Vested Benefits in the Pension Plan and Supplemental Retirement Plan(1)  Yes  Yes  Yes  Yes
Vesting of Unvested RSUs(2)  Immediate  Immediate  Immediate  Double Trigger
Vesting of Unvested PSUs(3)  Performance
Period (+ 1 year for CEO)
  Performance
Period (+ 1 year for CEO)
  Immediate  Double Trigger
Vesting of Unvested Stock Options(4)  Continued  Continued  Immediate  Double Trigger
Medical and Life Insurance Benefits(5)  General Plan  Continued 2 yrs  No  Continued 2 yrs
Spouse/Dependent Medical Benefits(5)  General Plan  Continued 2 yrs  No  Continued 2 yrs
Pay Continuance(5)  No  2 Years’ Salary &
Bonus
  No  2 Years’ Salary &
Bonus
Additional Pension Benefit(6)  No  Rule of 75/Age 55+  No  Rule of 75/Age 55+
Outplacement Assistance  No  Yes  No  Yes
Financial Counseling(7)  Yes  No  Yes  No
Company Car Purchase Option  Yes  Yes  No  No
Executive Survivor Income Plan(8)  No  No  Yes  No
(1) Messrs Powell, Mulligan, Allendorf and O’Leary were eligible for early retirement as of the last business day of fiscal 2017.
(2) For vesting of unvested RSUs, the values included in the table at the end of this section are based on the number of RSUs that would have vested if termination occurred on the last business day of fiscal 2017, multiplied by the closing price of our common stock on the NYSE as of that date ($57.32).
(3) For vesting of unvested PSUs, the values included in the table at the end of this section are based on the number of PSUs that would have vested if termination occurred on the last business day of fiscal 2017, assuming target performance, multiplied by the closing price of our common stock on the NYSE as of that date ($57.32).
(4) For vesting of unvested stock options, the values included in the table at the end of this section are based on the number of options that would have vested if termination occurred on the last business day of fiscal 2017, multiplied by the difference between the exercise price and the closing price of our common stock on the NYSE as of that date ($57.32).
(5) The NEOs qualify for retiree medical benefits available to the rest of our salaried employees in the United States. Executives receive up to two years continued pay and medical and life insurance benefits if they are involuntarily terminated or terminated in connection with a change in control.
(6) Under the Rule of 75, if the sum of an NEO’s age and years of service is equal to or exceeds 75 and the officer is involuntarily terminated before early retirement eligibility, he or she receives a supplemental retirement benefit equal to the difference between the officer’s vested deferred pension benefit and a benefit determined under the early retirement provisions of the Pension Plan. Mr. Church was eligible for this benefit.
(7) One year of financial counseling is available if the NEO is retirement eligible. Messrs Powell, Mulligan, Allendorf and O’Leary qualified as of the last business day of fiscal 2017. One year of financial counseling is also available to a NEO’s spouse upon the officer’s death, whether or not the officer was retirement eligible.
(8) No new participants have been accepted into the Executive Survivor Income Plan since September 1, 2000. Mr. Powell and Mr. O’Leary participate in the Plan, but because the executives are early retirement eligible with long service, they have de minimis benefits under this Plan.

 

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The following table outlines the value of payments and benefits that the NEOs would receive under various termination scenarios as of the last business day of fiscal 2017, excluding any prorated bonus, accrued vacation pay, Deferred Compensation Plan contributions and earnings, and vested benefits in the Pension Plan and Supplemental Retirement Plan:

 

       Involuntary Not For      Change
   Retirement  Cause Termination  Death  in Control
Name  ($)  ($)  ($)  ($)
K. J. Powell   10,638,326    16,931,681    19,872,001    26,165,356 
J. L. Harmening       6,250,776    5,268,588    7,920,246 
D. L. Mulligan   4,217,380    7,281,353    6,287,051    9,342,797 
J. R. Church       4,898,897    3,006,371    5,984,184 
R. C. Allendorf   825,934    2,168,617    1,520,169    2,811,860