UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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| ☐ | Preliminary Proxy Statement | |
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| ☑ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under §240.14a-12 | |
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|
Announced a 10% increase in our annualized dividend per
share, 51st consecutive annual increase, effective with the expected |
 |
Dear Fellow PepsiCo Shareholders:
Ramon L. Laguarta
Chairman of the Board of Directors and
Chief Executive Officer
I am pleased to invite you to our 2023 Annual Meeting of Shareholders on Wednesday, May 3, 2023 at 9:00 a.m. Eastern Daylight Time. This year’s event will be held virtually and can be accessed at www.virtualshareholdermeeting.com/PEP2023.
Our strategic framework continued to prove to be powerful in 2022 as we delivered strong operational performance during a dynamic year
Despite another dynamic year that featured difficult and unpredictable circumstances, such as highly elevated geopolitical tensions and significant inflationary pressures, our business remained resilient and delivered another strong year of performance. It is a testament to the agenda we set out in 2019 to accelerate growth and deliver durable, sustainable results by becoming Faster, Stronger and Better. This year’s fantastic results demonstrate that the investments we have made in our business and putting PepsiCo Positive (pep+), our strategic end-to-end business transformation designed to drive long-term sustainable performance and value throughout our organization, at the center of everything we do are helping us win in the marketplace and create value for our shareholders as well as our associates and communities.
Winning with pep+ enabled us to become an even Faster, even Stronger and even Better company
PepsiCo became an even Faster company by increasing critical investments to fortify our brands and businesses, which enabled us to deliver another year of strong results. In 2022, PepsiCo delivered more than $86 billion in revenue with 8.7% and 14.4% reported and organic revenue growth, respectively, and 17% and 11% reported and core constant currency earnings per share growth, respectively. We announced total expected cash returns to shareholders of approximately $7.7 billion in 2023, comprised of $6.7 billion in dividends and $1 billion in share repurchases. We are making progress in our geographical acceleration strategy, holding or gaining share across many of our markets, and reshaping our portfolio, which included the divestiture of Tropicana, Naked and other select juice brands and entering into a new distribution agreement to distribute Celsius energy drinks in the U.S.
PepsiCo became an even Stronger company by advancing our holistic cost management initiatives – such as expanding the size and scope of our Global Business Services—a program that helps reduce redundancies across functions—to help accelerate productivity, standardization, and process improvement across the company. We also continued to transform our capabilities and culture, especially through digitization and innovation. We added digital capabilities, such as Artificial Intelligence and machine learning and automation. And we continued to evolve our culture and talent by reorganizing with more empowered local structures, de-layering to enable connectivity and speed-to-market and advancing our diversity, equity, and inclusion agenda by taking steps to support gender parity and increase diverse representation at the managerial level.
And, PepsiCo became an even Better company by continuing to anchor and elevate pep+, including by:
| ■ | Positive Agriculture | |
| – | Continuing to make progress on our goal of spreading regenerative agriculture across 7 million acres by 2030 and launching a partnership with Archer Daniels Midland Company to scale these practices across our shared North American supply chains; | |
| – | Creating our first Positive Agriculture Supplier Playbook, guiding our partners across multiple continents through the steps to implement and measure the impact of regenerative farming; | |
| ■ | Positive Value Chain | |
| – | Establishing a new global packaging goal for 20% of beverage servings to be delivered through reusable models by 2030; | |
| – | Achieving zero freshwater consumption in certain facilities in Latin America and advancing toward our target of improving operational water-use efficiency by 25% in high water-risk areas by 2025; | |
| – | Issuing our second Green Bond in the amount of $1.25 billion in July 2022 that will focus on investments in regenerative agriculture, decarbonization and climate resilience within our operations and value chain, circular economy and virgin plastic waste reduction, and net positive water impact; and | |
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PEPSICO 2023 PROXY STATEMENT | 1 |
| ■ | Positive Choices | |
| – | Continuing to expand portfolio offerings with less added sugar, sodium, and saturated fat, whilst driving new packaging solutions across beverages and convenient foods. | |
The last few years were a testament to what we already know—that we have the right strategy and right people in place to continue thriving. And 2022 presented an opportunity for PepsiCo to show the world that it is possible for a large global company to perform and transform at the same time. This was all possible because of the ownership demonstrated by our leaders and our associates and I am very proud of the way they made courageous decisions, adapted quickly in every local market, shown compassion and generosity to our colleagues in areas that were adversely impacted by geopolitical and natural disasters—a strong testament of our PepsiCo values and what makes us unique.
Our Board of Directors is actively engaged in our strategy
As stewards of our Company, our Board plays an essential role in guiding our overall long-term strategy. Our Board has deep experience in the area of strategy development and risk oversight and offers insights into the most important issues facing the Company. Throughout yet another year of uncertainty and challenges, our Board has continued to be an invaluable resource, offering their expertise and providing tireless support. I am grateful to each member for their availability and their counsel throughout this extraordinary time.
We value diversity of thought, experience and background in our Boardroom
As our Company’s long-term strategy evolves, so do the skills, qualifications, attributes and experiences that the Board seeks in its director nominees. We are proud of the ongoing evolution of our Board and its track record on refreshment. We believe our director nominees bring diverse opinions and perspectives and a well-rounded range of attributes, viewpoints and experiences that are reflective of our global businesses.
This year we have two new director nominees, Jennifer Bailey and Susan M. Diamond. Ms. Bailey brings an extensive knowledge of the information technology field and significant business and technological innovation expertise, while Ms. Diamond brings deep knowledge of financial, accounting, strategy and risk matters, as well as valuable insights on growth and innovation. I have no doubt that both Ms. Bailey and Ms. Diamond will be a tremendous asset to our Board.
Your feedback is important to us
The feedback we receive from our shareholders and other stakeholders is critical to PepsiCo’s success. We have a longstanding practice of engaging regularly with our shareholders and other stakeholders on all aspects of our business. These important external viewpoints help inform our decisions and our strategy. Through ongoing dialogue, we hope to continue broadening our perspective and strengthening our corporate governance framework. Doing so will ensure we have the right strategy in place to meet the evolving needs of our rapidly changing business environment and remain responsive to the priorities and long-term interests of our shareholders and other stakeholders.
Looking ahead
While the future is difficult to predict and each year can carry its own set of unique opportunities and challenges, we will focus on the right priorities that position us to deliver another year of strong results in 2023, whilst creating smiles that make a big difference for our consumers, our customers, our communities, our shareholders, our planet and each other. I remain as confident as ever in our Winning with pep+ strategy and in our ability to be a truly great company in every sense of the word.
Your vote is important
Whether or not you plan to attend the Annual Meeting virtually, we encourage you to vote promptly. You may vote by telephone or online, or, if you requested to receive printed proxy materials, by completing, signing, dating and returning the enclosed proxy card or voting instruction form.
On behalf of our Board of Directors and all PepsiCo associates, thank you for your support and the faith and confidence you place in us with your investment.
Sincerely,
Ramon L. Laguarta
Chairman of the Board of Directors and
Chief Executive Officer
March 21, 2023
| 2 | PEPSICO 2023 PROXY STATEMENT | |
700 Anderson Hill Road
Purchase, New York 10577
Notice of 2023 Annual Meeting of Shareholders
Date and Time
Wednesday, May 3, 2023
9:00 a.m. Eastern Daylight Time
Place*
This year’s meeting will be a virtual shareholder meeting at
www.virtualshareholdermeeting.com/PEP2023.
Items to be Voted On
| 1 | Elect as directors the 15 nominees named in the attached Proxy Statement. |
| 2 | Ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2023. |
| 3 | Provide advisory approval of executive compensation. |
| 4 | Provide advisory vote on frequency of future shareholder advisory approval of executive compensation. |
| 5-8 | Act upon four shareholder proposals described in the attached Proxy Statement, if properly presented. |
Record Date
Holders of record of our Common Stock as of the close of business on March 1, 2023 will be entitled to notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors,
David Flavell
Corporate Secretary
March 21, 2023
Proxy Voting
Your vote is very important. Whether or not you plan to attend the Annual Meeting, please promptly vote by telephone or over the Internet, or by completing, signing, dating and returning your proxy card or voting instruction form so that your shares will be represented at the Annual Meeting.
Voting Methods
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Via the Internet in Advance Visit www.proxyvote.com. |
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By Telephone Call the phone number located on your proxy card or voting instruction form. |
You will need the 16-digit number included in your proxy card, voting instruction form or notice |
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By Mail Complete, sign, date and return your proxy card or voting instruction form in the envelope provided. | |
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At the Meeting Attend the Annual Meeting virtually. See page 102 for additional details on how to vote during the meeting. | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 3, 2023.
Our Notice of Annual Meeting, Proxy Statement and Annual Report for the fiscal year ended December 31, 2022 (“2022 Annual Report”) are available at www.pepsico.com/proxy23.
We are making the Proxy Statement and the form of proxy first available on or about March 21, 2023.
| * | Upon consideration of various factors, including the cost savings and efficiency gains related to annual meetings conducted solely by means of remote communications, the increased accessibility for shareholders and other stakeholders afforded by a virtual meeting as compared to a physical meeting, and the reduction of the annual meeting’s carbon footprint that results from not having a physical meeting, we have planned for this year’s annual meeting to be a virtual-only meeting. Whether or not you plan to attend the Annual Meeting, we encourage you to vote promptly. |
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PEPSICO 2023 PROXY STATEMENT | 3 |
Table of Contents
This Proxy Statement of PepsiCo, Inc. (“PepsiCo,” the “Company,” “we,” “us” or “our”) contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “aim,” “anticipate,” “believe,” “drive,” “estimate,” “expect,” “expressed confidence,” “forecast,” “future,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “position,” “potential,” “project,” “seek,” “should,” “strategy,” “target,” “will” or similar statements or variations of such words and other similar expressions. Forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statement. Such risks and uncertainties include, but are not limited to: the risks associated with the deadly conflict in Ukraine; future demand for PepsiCo’s products; damage to PepsiCo’s reputation or brand image; product recalls or other issues or concerns with respect to product quality and safety; PepsiCo’s ability to compete effectively; PepsiCo’s ability to attract, develop and maintain a highly skilled and diverse workforce or effectively manage changes in our workforce; water scarcity; changes in the retail landscape or in sales to any key customer; disruption of PepsiCo’s manufacturing operations or supply chain, including continued increased commodity, packaging, transportation, labor and other input costs; political or social conditions in the markets where PepsiCo’s products are made, manufactured, distributed or sold; PepsiCo’s ability to grow its business in developing and emerging markets; changes in economic conditions in the countries in which PepsiCo operates; future cyber incidents and other disruptions to our information systems; failure to successfully complete or manage strategic transactions; PepsiCo’s reliance on third-party service providers and enterprise-wide systems; climate change or measures to address climate change; strikes or work stoppages; failure to realize benefits from PepsiCo’s productivity initiatives; deterioration in estimates and underlying assumptions regarding future performance that can result in an impairment charge; fluctuations or other changes in exchange rates; any downgrade or potential downgrade of PepsiCo’s credit ratings; imposition or proposed imposition of new or increased taxes aimed at PepsiCo’s products; imposition of limitations on the marketing or sale of PepsiCo’s products; changes in laws and regulations related to the use or disposal of plastics or other packaging materials; failure to comply with personal data protection and privacy laws; increase in income tax rates, changes in income tax laws or disagreements with tax authorities; failure to adequately protect PepsiCo’s intellectual property rights or infringement on intellectual property rights of others; failure to comply with applicable laws and regulations; and potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations. For additional information on these and other factors that could cause PepsiCo’s actual results to materially differ from those set forth herein, please see PepsiCo’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
| 4 | PEPSICO 2023 PROXY STATEMENT | |
| Proxy
Statement Summary |
This summary highlights certain information contained in this Proxy Statement. You should read the entire Proxy Statement and 2022 Annual Report carefully before you vote. |
PepsiCo Positive (pep+)
In 2021, PepsiCo introduced PepsiCo Positive (pep+), a strategic end-to-end transformation with sustainability and human capital at the center of how PepsiCo plans to create growth and shared value over the long-term. We are continuing to transform our business to drive positive action for the planet and people, delivering progress against our goals under each of the pep+ pillars.
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 |
 | ||||
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Positive Agriculture | Positive Value Chain | Positive Choices | |||
| Work to source our crops and ingredients in ways that help restore the earth and strengthen farming communities | Make products in a way that helps build a circular and inclusive value chain | Inspire people through our brands to make choices that create more smiles for them and the planet | ||||
| Sustainable Sourcing; Regenerative Practices; Improved Livelihoods | Net Zero Emissions;
Net Water Positive; Sustainable Packaging; Meaningful Growth Opportunities; Diversity, Equity and Inclusion |
Expanded Offerings;
Innovative Packaging Solutions; Planet + People Brands |
For more information, please visit www.pepsico.com/PepsiCoPositive.[1]
Matters to Be Voted on at Our 2023 Annual Meeting of Shareholders
Shareholders will be asked to vote on the following matters at the Annual Meeting of Shareholders:
| Proxy Item | Board Recommendation | More Information | ||||||
| Beginning on page | ||||||||
| 1 | Election of 15 director nominees |  |
FOR each director nominee | 11 | ||||
| 2 | Ratification of appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2023 | |
FOR | 46 | ||||
| 3 | Advisory approval of executive compensation | |
FOR | 49 | ||||
| 4 | Advisory vote on frequency of future shareholder advisory approval of executive compensation | |
FOR “ONE YEAR” | 87 | ||||
| 5-8 | Shareholder proposals |  |
AGAINST | 88 | ||||
| [1] | The information on any website mentioned in this proxy statement is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated herein or into any of our other filings with the Securities and Exchange Commission (the “SEC”). |
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PEPSICO 2023 PROXY STATEMENT | 5 |
Proxy Statement Summary
Director Nominees
Our Nominating and Corporate Governance Committee and our Board have determined that the director nominees possess a broad range of attributes, viewpoints and experiences to effectively oversee PepsiCo’s long-term business strategy. The following table provides summary information about each director nominee. For more detailed information about our directors, please see “Election of Directors (Proxy Item No. 1)” beginning on page 11 of this Proxy Statement.
| Director Since |
Committee Membership | |||||||||
| Name | Primary Occupation | Age* | Independent | AC | CC | NCG | SDPP | |||
| Segun Agbaje | Group Chief Executive Officer, Guaranty Trust Holding Company Plc (GTCO Plc) | 2020 | 58 |  |
E | |||||
| Jennifer Bailey | Vice President, Internet Services, Apple Pay, Apple, Inc. | NN | 60 | |
PM | |||||
| Cesar Conde | Chairman, NBCUniversal News Group | 2016 | 49 | |
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 |
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| Ian Cook (Presiding Director) |
Former Chairman, President and Chief Executive Officer, Colgate-Palmolive Company | 2008 | 70 | |
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| Edith W. Cooper | Former Executive Vice President and Global Head, Human Capital Management, The Goldman Sachs Group, Inc. | 2021 | 61 | |
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| Susan M. Diamond | Chief Financial Officer, Humana, Inc. | NN | 49 | |
PM E | |||||
| Dina Dublon | Former Executive Vice President and Chief Financial Officer, JPMorgan Chase & Co. | 2005 | 69 | |
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|
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| Michelle Gass | President, Levi Strauss & Co. | 2019 | 55 | |
E | |||||
| Ramon L. Laguarta | Chairman of the Board and Chief Executive Officer, PepsiCo | 2018 | 59 | |||||||
| Sir Dave J. Lewis | Former Group Chief Executive Officer, Tesco PLC; Chair, Haleon plc; Chairman, Xlinks | 2020 | 58 | |
E | |||||
| David C. Page, MD | Professor, Massachusetts Institute of Technology; Former Director and President, Whitehead Institute for Biomedical Research | 2014 | 66 | |
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| Robert C. Pohlad | President of various family-owned entities; Former Chairman and Chief Executive Officer, PepsiAmericas, Inc. | 2015 | 68 | |
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 |
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| Daniel Vasella, MD | Former Chairman and Chief Executive Officer, Novartis AG | 2002 | 69 | |
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| Darren Walker | President, Ford Foundation | 2016 | 63 | |
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| Alberto Weisser | Former Chairman and Chief Executive Officer, Bunge Limited | 2011 | 67 | |
E |
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| * | Ages are as of March 21, 2023 |  |
= | Committee Chair | AC | = | Audit Committee |
| ** | Effective after the 2023 Annual Meeting of Shareholders | E | = | Audit Committee Financial Expert | CC NCG |
= = |
Compensation Committee Nominating and Corporate Governance Committee |
| NN | = | New Nominee | SDPP | = | Sustainability, Diversity and Public Policy Committee | ||
| PM | = | Prospective Member |
| 6 | PEPSICO 2023 PROXY STATEMENT | |
Proxy Statement Summary
Director Nominee Highlights
Director succession planning is a robust, ongoing process at PepsiCo. Our Board regularly evaluates desired attributes in light of the Company’s strategy and evolving needs. We believe our 15 director nominees, which includes 13 incumbent directors and two new nominees, bring a diverse and well-rounded range of attributes, viewpoints and experiences, and represent an effective mix of deep company knowledge and fresh perspectives.
| Strong Board Diversity |
|||||
| Diverse Representation | Diversity Highlights | ||||
 female and/or racially/ethnically diverse |
5 female director nominees 3 Hispanic/Latinx director nominees 3 African American/Black director nominees
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2 of 4 Standing Board Committees Cesar
Conde (Compensation Committee 1
new female, racially diverse director Added two new female director nominees: Jennifer Bailey andSusan M. Diamond |
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Range of Tenures* |
Mix of Ages* |
Independent Oversight |
|||||||||||
 Average Tenure: |
 Average Age: 61.4 |
14 of 15 independent director nominees All 4 Board Committees |
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| * | Tenure and age are as of March 21, 2023. |
| Diverse Mix of Attributes and Experiences | Global Perspective | |||||||
 |
 11 of 15
director |
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For further information on these attributes and experiences, see page 21.
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PEPSICO 2023 PROXY STATEMENT | 7 |
Proxy Statement Summary
Executive Compensation At-a-Glance
2022 PepsiCo Performance Highlights
PepsiCo exceeded the majority of its operating performance goals in 2022 despite ongoing supply chain and inflationary pressures, as well as continued volatility and uncertainty in the global economy. We continued our progress on accelerating growth, while improving our revenue management capabilities. Highlights of our 2022 performance include:
| Organic Revenue Growth[2] | Core Constant Currency Earnings Per Share (“EPS”) Growth[2] |
Free Cash Flow Excluding Certain Items[2] |
Total Shareholder Return (“TSR”) |
Cash Returned to Shareholders | ||||||||||||||
| 14.4% | 11% | $6.9 Billion | 6.8% | $7.7 Billion | ||||||||||||||
Noteworthy accomplishments in 2022 that continue to create shareholder value over the long-term include:
| ■ | Progress on initiatives related to pep+, a strategic end-to-end transformation agenda with sustainability and human capital at the center of how we plan to create growth and shared value over the long-term |
| ■ | Active management of parts of our business portfolio to shift towards fast growing, highly profitable areas |
| ■ | Delivery of a comprehensive holistic cost management program throughout our organization to drive greater efficiencies and stronger returns for our businesses |
| ■ | TSR of 6.8% at the 83rd percentile of our proxy peer group and the 77th percentile of the S&P 500 Index |
| We continued to deliver on our Faster, Stronger and Better aspirations to Be the Global Leader in Beverages and Convenient Foods by Winning with pep+. | |
| FASTER | STRONGER | BETTER | ||
| Execution: Delivered sustained accelerated growth in 2022, despite difficulties posed by our external operating environment, enabled by continued business investments and our ability to quickly adapt to ongoing challenges | Digital
Transformation: Continued building data
and digital foundations and advancing priority capabilities that are central to our digital ambition and strategy Productivity: Maintained our investment to modernize and harmonize our information technology systems across certain businesses and countries as well as expanded the size and scope of our Global Business Services model to help deliver more than $1 billion of productivity savings in 2022 |
pep+: Successfully progressed across all pillars of our agenda, including advancing regenerative agriculture efforts, improving water-use efficiency, and making meaningful strides on our portfolio transformation journey | ||
| Market Share: Continued to prioritize investments to drive marketplace competitiveness across our diversified portfolio, reinforced by growth across key categories and geographies | “One Smile at a Time” Platform: Provided our associates opportunities to volunteer in local communities, elevate their engagement, and ultimately position PepsiCo as a significant player in the equity development of the communities we serve |
The Principles of Our Executive Compensation Program
Our executive compensation program is designed to align the interests of PepsiCo’s executive officers with those of our shareholders. The Compensation Committee oversees and evaluates the program against competitive practices, regulatory developments, and corporate governance trends.
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The Compensation Committee has incorporated market-leading governance features into our programs that include a stringent clawback policy, rigorous stock ownership requirements, and challenging targets for incentive awards set at the beginning of the performance period taking into consideration our business strategy, operating goals, and external guidance. |
 |
Our executive compensation program avoids shareholder-unfriendly features. For our executive officers, we do not have employment agreements or supplemental retirement plans, and we prohibit hedging or pledging of Company stock. |
| [2] | To evaluate performance in a manner consistent with how management evaluates our operating results and trends, the Compensation Committee applies certain Business Performance metrics that are not in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) as compensation performance measures to both long-term and annual incentive awards. Please refer to Appendix A to this Proxy Statement for a description and reconciliation of these non-GAAP financial measures relative to reported GAAP financial measures, and to pages 44-49 and 52 of PepsiCo’s 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a more detailed description of the items excluded from these measures. |
| 8 | PEPSICO 2023 PROXY STATEMENT | |
Proxy Statement Summary
2022 Target Pay Mix for Named Executive Officers
To align pay levels for Named Executive Officers (“NEOs”) with the Company’s performance, our pay mix places the greatest emphasis on performance-based incentives.
| CHAIRMAN AND CEO TARGET PAY MIX | NEO
AVERAGE TARGET PAY MIX (EXCLUDING CHAIRMAN AND CEO) | |
| Performance-Based Compensation 92% | Performance-Based Compensation 86% | |
 |
 |
Compensation Highlights
Reflecting our pay-for-performance compensation philosophy and based on performance summarized above and presented in detail below, our strong results delivered to shareholders translated into above-target payouts of annual incentive awards, Performance Stock Units, and Long-Term Cash awards.
| Annual Incentive |
 |
1-year performance period |
2022 Annual Incentive Overall, PepsiCo achieved strong
|
Payout (% of target) 173% Average for all NEOs | ||
| Long-Term Incentives |  |
3-year performance period |
| Performance Stock Units | Long-Term Cash Awards | ||||
3-Yr
Average of Annual Core Constant Currency EPS Growth[3] |
3-Yr Relative TSR Percentile vs. Proxy Peer Group
 | ||||
 |
|||||
3-Yr Average of Annual Organic Revenue Growth[3] | |||||
 |
|
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| Payout (% of target) |
200% |
Payout (% of target) |
148% | ||
| [3] | For further information on PepsiCo’s three-year average Core Constant Currency EPS Growth and Organic Revenue Growth compensation performance measures, which are non-GAAP financial measures, please refer to Appendix A to this Proxy Statement. In calculating these compensation performance measures, PepsiCo’s 2020 Core Constant Currency EPS Growth and Organic Revenue Growth were adjusted to exclude certain charges taken as a result of COVID-19 in 2020. |
|
PEPSICO 2023 PROXY STATEMENT | 9 |
Proxy Statement Summary
Corporate Governance Highlights
Our Corporate Governance Policies Reflect Best Practices
Many of our corporate governance practices are a result of valuable feedback and collaboration with our shareholders and other stakeholders who have provided important external viewpoints that inform our decisions and our strategy.
For example:
| ■ | The Board established a Sustainability, Diversity and Public Policy Committee in 2017. The Committee assists the Board in providing more focused oversight over PepsiCo’s policies and programs and related risks that concern key sustainability, diversity, equity and inclusion and public policy matters. |
| ■ | We published a global workforce demographics data report and our 2021 U.S. Consolidated EEO-1 Report as submitted to the U.S. Equal Employment Opportunity Commission, available at www.pepsico.com/our-impact/esg-topics-a-z/employee-demographics. |
| ■ | The Board amended our Corporate Governance Guidelines: |
| – | in 2021 to specifically mention food safety and cybersecurity as areas of Board oversight to reflect existing practices; | |
| – | in 2019 to decrease the total number of public company boards that a non-executive director can serve on from 5 to 4 and establish a limit of 2 total public company boards for directors who are public company executive officers; and | |
| – | in 2018 to underscore the Board’s focus on diversity, by explicitly stating its commitment to actively seeking out highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experiences, to include in the pool from which Board nominees are chosen. |
| Independent Oversight | ■ 14 of 15 director nominees are independent (all except for the CEO) ■ Independent Presiding Director with clearly defined and robust responsibilities ■ Regular executive sessions of independent directors at Board meetings (chaired by independent Presiding Director) and Committee meetings (chaired by independent Committee Chairs) ■ 100% independent Board Committees ■ Active Board oversight of the Company’s strategy and risk management, including sustainability, cybersecurity, food safety, human capital management, including diversity, equity and inclusion and talent development, and supply chain and commodity inflation | |
| Board Refreshment | ■ Comprehensive, ongoing Board succession planning process ■ Focus on diversity (2 new female director nominees; 1 new female, racially diverse director elected in 2021; 60% of director nominees are female and/or racially/ethnically diverse) ■ Regular Board refreshment and mix of tenure of directors (5 director nominees joined in the last five years and 2 director nominees are new candidates for election to the Board) ■ Annual Board and Committee assessments, including periodic individual director assessments facilitated by a third party ■ Mandatory retirement age of 75 ■ Comprehensive director orientation and ongoing director education | |
| Shareholder Rights | ■ Annual election of all directors ■ Proxy access right for shareholders ■ Majority-vote and director resignation policy for directors in uncontested elections ■ 20% of shareholders are able to call special meeting ■ One class of outstanding shares with each share entitled to one vote | |
| Good Governance Practices | ■ Prohibition on hedging or pledging Company stock ■ Stringent clawback policy applicable to directors and executives ■ Rigorous director and executive stock ownership requirements ■ Active and ongoing shareholder engagement program ■ Global Code of Conduct applicable to directors and all employees with annual compliance certification ■ Extensive management of sustainability risks and opportunities throughout our value chain as part of PepsiCo’s ambition to help build a more sustainable food system ■ Robust political activities disclosures on our website |
| 10 | PEPSICO 2023 PROXY STATEMENT | |
Election of Directors (Proxy Item No. 1)
Upon the recommendation of the Nominating and Corporate Governance Committee, our Board of Directors has nominated the 15 persons identified on the following pages for election at the 2023 Annual Meeting. If elected, the nominees will hold office as directors from election until the next Annual Meeting of Shareholders and until their successors are elected and qualified or until their death, resignation or removal. All of the nominees are currently PepsiCo directors who were elected by shareholders at the 2022 Annual Meeting, except for Jennifer Bailey and Susan M. Diamond, who are nominated for election to the Board for the first time and were recommended for consideration by the Nominating and Corporate Governance Committee by an independent third-party consulting firm that helps identify, evaluate and conduct due diligence on potential director candidates. Our Board thanks Shona Brown, who is not standing for re-election at the 2023 Annual Meeting, for her exemplary service as a director since 2009.
Our Board has a comprehensive, ongoing director succession planning process designed to provide for a highly independent, well-qualified Board, with the diversity, experience and background to be effective and to provide strong oversight. Our Board regularly evaluates the needs of the Company and adds new attributes, viewpoints and experiences to the Board as necessary to best position the Company to navigate through a constantly changing global landscape.
Our Nominating and Corporate Governance Committee and our Board have determined that the director nominees possess a diverse and balanced mix of attributes, viewpoints and experiences to effectively oversee PepsiCo’s long-term business strategy. Biographical information about each nominee, as well as highlights of certain notable skills, qualifications, attributes and experiences that contributed to the nominee’s selection for election at our 2023 Annual Meeting, are included on the following pages.
Our Nominating and Corporate Governance Committee and our Board are keenly focused on ensuring that a wide range of backgrounds, attributes, viewpoints and experiences are represented on our Board. The chart below summarizes certain notable attributes and experiences of each director nominee and highlights the diverse and balanced mix of attributes and experiences of the Board as a whole. These are the same attributes that the Board considers as part of its ongoing director succession planning process and align with the needs of PepsiCo’s long-term business strategy. This high-level summary is not intended to be an exhaustive list of each director nominee’s contributions to the Board.
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Our Nasdaq Board Diversity Matrix is posted on our website at www.pepsico.com/our-impact/esg-topics-a-z/employee-demographics#nasdaq-matrix.
| Diverse Board Representation | Range of Tenures* | Mix of Ages* | |||||||||||
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Average Age: 61.4 |
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| * | Tenure and age are as of March 21, 2023. |
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PEPSICO 2023 PROXY STATEMENT | 11 |
Election of Directors (Proxy Item No. 1)
Additionally, all directors are expected to possess personal traits such as candor, integrity and professionalism and must be able to commit significant time to the Company’s oversight. For additional information on the Board selection process, including the Board’s consideration of diversity, see “Board Composition and Refreshment” on pages 20-23 of this Proxy Statement.
Although our Board does not anticipate that any of the nominees will be unable to stand for election as a director at our Annual Meeting, if this occurs, proxies will be voted in favor of such other person or persons as may be designated by our Nominating and Corporate Governance Committee and our Board.
Director Election Requirements and Majority-Vote Policy
All members of the Board are elected annually by our shareholders by a majority of the votes cast in an uncontested election (i.e., an election where the number of nominees is not greater than the number of directors to be elected), meaning that the number of votes cast “for” a director must exceed the number of votes cast “against” that director in order to elect the director to the Board. In a contested election, where the number of director nominees exceeds the number of directors to be elected, directors would be elected by a plurality vote. Under our Director Resignation Policy set forth in our Corporate Governance Guidelines, if a director nominee in an uncontested election who is an incumbent director receives more votes “against” than votes “for” election, he or she must offer to resign from the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board on the resignation offer. Within 90 days following certification of the shareholder vote, the independent directors will determine, considering the best interests of the Company and its shareholders, whether to accept the director’s resignation, and the Company will promptly publicly disclose such determination. A director who offers to resign pursuant to this Policy may not be present during the deliberations or voting by the Nominating and Corporate Governance Committee or the Board as to whether to accept the resignation offer.
Director Nominees
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Our Board of Directors recommends that shareholders vote “FOR” the election of each of the following director nominees: |
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Segun Agbaje Director Since: 2020 Age: 58 |
Independent Committee Memberships: ■ Audit |
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Segun Agbaje has served since 2021 as Group Chief Executive Officer of Guaranty Trust Holding Company Plc (GTCO Plc), a Nigerian multinational financial institution. He previously served as Managing Director and Chief Executive Officer of Guaranty Trust Bank plc from 2011 to 2021. Mr. Agbaje joined Guaranty Trust Bank as a pioneer staff member in 1991 and held positions of increasing responsibility, including as Executive Director from 2000 to 2002, Deputy Managing Director from 2002 to 2011 and as Acting Managing Director in 2011. Prior to joining Guaranty Trust Bank, Mr. Agbaje served as an auditor at Ernst & Young LLP from 1988 to 1990. Other Public Company Directorships: ■ Current: Guaranty Trust Holding Company Plc (GTCO Plc) ■ Previous (During Past 5 Years): Guaranty Trust Bank plc (until 2021) |
Skills and Qualifications Mr. Agbaje brings to our Board of Directors deep knowledge of financial and banking matters and financial expertise gained from his over 30 years of experience in the financial services industry. He also contributes a valuable understanding of complex businesses and fast-growing markets, particularly Sub-Saharan Africa where PepsiCo recently acquired Pioneer Foods as part of its strategy to expand in the region. His knowledge and experience of embracing and scaling new technologies and critical capabilities are valuable as PepsiCo continues to invest in opportunities that create shareholder value. | ||
| 12 | PEPSICO 2023 PROXY STATEMENT | |
Election of Directors (Proxy Item No. 1)
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Jennifer Bailey Director Nominee Age: 60 |
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Jennifer Bailey has served as Vice President, Internet Services, Apple Pay at Apple Inc., an American multinational technology company, since 2014. Ms. Bailey oversaw the launches of: Apple Pay, Apple’s transformative category of mobile payments services which is available in more than 70 countries; Apple Wallet, which now enables millions of customers to securely store and access transit cards, loyalty cards, contactless tickets and more on their iPhones or Apple Watch; and Apple Card, which was designed to help customers lead healthier financial lives through a digital-first, no fee, credit card. She leads global teams across Apple’s payment and commerce services, including Apple Pay, Apple Wallet, Apple Card, Apple Cash, Tap to Pay on iPhone, and Apple Gift Cards, and oversees the expansion of such services. Ms. Bailey previously served as Vice President, WW Online Stores at Apple from 2003 to 2014. Prior to Apple, Ms. Bailey was Senior Vice President, Online Services and Operations at myCFO, a financial services firm from 1999 to 2001. She also served as Senior Vice President, Netcenter at Netscape Communications Inc. from 1995 to 1999. Ms. Bailey current serves on the board of governors for the American Red Cross. Other Public Company Directorships: ■ Current: None ■ Previous (During Past 5 Years): None |
Skills and Qualifications Ms. Bailey brings to our Board of Directors extensive knowledge of the information technology field, including digital and payments expertise, and consumer marketing gained from her nearly twenty years of experience leading various functions at Apple Inc. PepsiCo will benefit from Ms. Bailey’s experience and deep interest in contributing to environmental, social, and governance initiatives for Apple and significant business and technological innovation expertise that will help the Company successfully navigate the rapidly changing digital landscape. In addition, Ms. Bailey possesses a strong international management and consumer business background, as well as board oversight experience as a result of her role as a director at one of the largest, U.S.-based non-profit organizations. |
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Cesar Conde Director Since: 2016 Age: 49 |
Independent Committee Memberships: ■ Compensation CHAIR-ELECT ■ Nominating and Corporate Governance |
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Cesar Conde has served as Chairman of the NBCUniversal News Group, part of a global media and entertainment company, since 2020. In this role, Mr. Conde has oversight of NBC News, MSNBC and CNBC, including editorial and business operations for the television and digital properties. From 2015 to 2020, Mr. Conde served as Chairman of NBCUniversal International Group and NBCUniversal Telemundo Enterprises. From 2013 to 2015, he served as Executive Vice President at NBCUniversal, where he oversaw NBCUniversal International and NBCUniversal Digital Enterprises. From 2009 to 2013, Mr. Conde served as President of Univision Networks, a leading American media company with a portfolio of Spanish language television networks, radio stations and digital platforms. From 2003 to 2009, Mr. Conde served in a variety of senior executive capacities at Univision Networks and is credited with transforming it into a leading global, multi-platform media brand. Prior to Univision, Mr. Conde served as the White House Fellow for Secretary of State Colin L. Powell from 2002 to 2003. Mr. Conde also currently serves on the boards of several non-profit organizations, including the Paley Center for Media and The Aspen Institute. Other Public Company Directorships: ■ Current: Walmart Inc. ■ Previous (During Past 5 Years): Owens Corning (until 2019) |
Skills and Qualifications Mr. Conde is an experienced global executive with a strong track record in business, finance and media. He provides our Board of Directors with diverse and actionable perspectives on today’s consumer and media landscapes, and his unique insights are particularly valuable as PepsiCo continues to build new omnichannel marketing capabilities and adapt to changing demographics around the world. Mr. Conde also brings his market and consumer insights developed through his experience at national and global media companies and his leadership of social and corporate responsibility initiatives worldwide. | ||
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PEPSICO 2023 PROXY STATEMENT | 13 |
Election of Directors (Proxy Item No. 1)
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Ian Cook PRESIDING DIRECTOR Director Since: 2008 Age: 70 |
Independent Committee Memberships: ■ Nominating and Corporate Governance |
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Ian Cook served as a director of Colgate-Palmolive Company, a multinational consumer products company, from 2007 to 2020, as its Chairman from 2009 to 2019 and as its Executive Chairman from 2019 until his retirement in 2020. Mr. Cook joined Colgate-Palmolive in the United Kingdom in 1976 and progressed through a series of senior management roles around the world. In 2002, he became Executive Vice President, North America and Europe. In 2004, he became Chief Operating Officer, with responsibility for operations in North America, Europe, Asia and Africa, and in 2005, he became responsible for all Colgate-Palmolive operations worldwide, serving as President and Chief Operating Officer from 2005 to 2007. He served most recently as Colgate- Palmolive’s President and Chief Executive Officer from 2007 to 2018 and as Chief Executive Officer from 2018 to 2019. Mr. Cook also serves on the boards of several non-profit organizations, including Memorial Sloan Kettering Cancer Center, New Visions for Public Schools and Caramoor Center for Music and the Arts. Other Public Company Directorships: ■ Current: None ■ Previous (During Past 5 Years): Colgate-Palmolive Company (until 2020) |
Skills and Qualifications Mr. Cook brings to our Board of Directors deep knowledge of the consumer products industry and operational leadership experience gained through his 40-plus year career at Colgate-Palmolive, including his 12 years as CEO and his direct involvement in both risk management and risk oversight. His extensive understanding of our business and his experience leading a multinational consumer products company make him uniquely positioned as PepsiCo’s Presiding Director to work collaboratively with our Chairman and CEO. He also contributes a broad understanding of industry trends and his extensive global leadership experience gained from holding a variety of senior management roles at Colgate- Palmolive in numerous countries throughout the world. Mr. Cook’s qualifications also include expertise in finance, brand-building, corporate governance, human capital management and talent development and succession planning. | ||
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Edith W. Cooper Director Since: 2021 Age: 61 |
Independent Committee Memberships: ■ Audit |
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Edith W. Cooper spent over two decades of her career with The Goldman Sachs Group, Inc., most recently serving as Executive Vice President and Global Head, Human Capital Management from 2011 to 2017 and Managing Director and Global Head, Human Capital Management from 2008 to 2011. Ms. Cooper began her career in derivative sales at Morgan Stanley from 1991 to 1996 and Bankers Trust Company from 1986 to 1991. Ms. Cooper co-founded Medley, a membership- based community for personal and professional growth, in 2020. Ms. Cooper also serves on the board of directors of several non-profit organizations, including the Museum of Modern Art, the Smithsonian National Museum of African American History and Culture and Mount Sinai Hospital. Other Public Company Directorships: ■ Current: Amazon.com, Inc.; MSD Acquisition Corp ■ Previous (During Past 5 Years): EQT AB (until 2022), Slack Technologies, Inc. (until 2021); Etsy, Inc. (until 2021) |
Skills and Qualifications Ms. Cooper brings to our Board of Directors extensive knowledge of the human resources field, including recruiting and talent development, gained from almost a decade of experience leading the human capital management function at Goldman Sachs. PepsiCo benefits from her significant talent management expertise in attracting and developing high-quality talent and advancing its commitment to diversity, equity and inclusion. In addition, she possesses a strong financial background through over 30 years of experience in management and sales leadership at leading organizations across the financial services industry. Ms. Cooper also has significant corporate governance and executive compensation experience across multiple industries as a result of her board service at other public companies. | ||
| 14 | PEPSICO 2023 PROXY STATEMENT | |
Election of Directors (Proxy Item No. 1)
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Susan M. Diamond Director Nominee Age: 49 |
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Susan M. Diamond has been serving as Chief Financial Officer of Humana Inc., an integrated health and wellness company, since 2021. Ms. Diamond previously served as President, Home Solutions of Humana from 2019 to 2021 and Senior Vice President, Medicare of Humana from 2017 to 2019. Ms. Diamond joined Humana in 2006 and has spent the majority of her career in various financial and operational leadership roles in the Medicare and Home businesses of Humana. Prior to Humana, Ms. Diamond spent six years working in various financial leadership roles for early stage, venture backed technology companies, and five years as the Chief Financial Officer for a Louisville based venture capital firm, working with early stage companies across a variety of industries. She currently serves on the boards of several private entities in which Humana has an ownership interest. Other Public Company Directorships: ■ Current: None ■ Previous (During Past 5 Years): None |
Skills and Qualifications Ms. Diamond brings to our Board of Directors deep knowledge of financial, accounting, strategic, and healthcare matters gained from her over 15-year career in the healthcare industry, particularly through her roles as Chief Financial Officer and President of the Home Solutions business of Humana Inc. She also contributes valuable insights on growth and innovation including consumer segmentation strategies, data analytics, and cutting-edge consumer focused technologies, as well as sustainability and diversity, equity and inclusion obtained through her experience with advancing healthcare equity at Humana. In addition, through her experiences serving as a Chief Financial Officer and President of an operating unit of a large public company, Ms. Diamond also offers operational leadership experience and extensive experience with strategic, financial, risk, and compliance issues, as well as risk management. |
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Dina Dublon Director Since: 2005 Age: 69 |
Independent Committee Memberships: ■ Compensation ■ Sustainability, Diversity and Public Policy |
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Dina Dublon served as Executive Vice President and Chief Financial Officer at JPMorgan Chase & Co., a leading global financial services company, from 1998 until her retirement in 2004. In this role, she was responsible for global financial management, corporate treasury, tax and investor relations. Ms. Dublon previously held numerous positions at JPMorgan Chase and its predecessor companies, including corporate treasurer, managing director of the financial institutions division and head of asset liability management. Ms. Dublon also previously served on the boards of Microsoft, Accenture, and Deutsche Bank AG and on the faculty of Harvard Business School. She has served on the boards of several non-profit organizations, and currently chairs the board of advisors of the Columbia University Mailman School of Public Health, and serves on the independent audit quality committee of Ernst & Young LLP and the board of directors of The Hastings Center and the Westchester Land Trust. Other Public Company Directorships: ■ Current: Motive Capital Corp II; T. Rowe Price Group, Inc. ■ Previous (During Past 5 Years): Motive Capital Corp (until 2022); Deutsche Bank AG (supervisory board until 2018) |
Skills and Qualifications Ms. Dublon brings to our Board of Directors deep expertise in financial, accounting, strategic and banking matters and capital markets operations gained from her distinguished career in the financial services industry, particularly through her role as Executive Vice President and Chief Financial Officer of JPMorgan Chase. She also contributes valuable risk management insights obtained through her experience at JPMorgan Chase, as well as from her service on the boards of several other public companies, including T. Rowe Price Group, Inc. In addition, Ms. Dublon offers unique perspectives on emerging markets, public policy and sustainability-related matters gained while working with global non-profit organizations focusing on public health and women’s issues and initiatives. | ||
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PEPSICO 2023 PROXY STATEMENT | 15 |
Election of Directors (Proxy Item No. 1)
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Michelle Gass Director Since: 2019 Age: 55 |
Independent Committee Memberships: ■ Audit |
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Michelle Gass has served as President of Levi Strauss & Co. since 2023. Ms. Gass previously served as Chief Executive Officer and a director of Kohl’s Corporation, a leading omnichannel retailer, from 2018 to 2022 and as its Chief Executive Officer elect and Chief Merchandising & Customer Officer from 2017 to 2018, Chief Merchandising & Customer Officer from 2015 to 2017, and Chief Customer Officer from 2013 to 2015. Prior to joining Kohl’s, Ms. Gass served in a variety of management positions with Starbucks Corporation from 1996 to 2013, including most recently as President, Starbucks EMEA (Europe, Middle East and Africa) from 2011 to 2013; President, Seattle’s Best Coffee; Executive Vice President, Global Marketing and Category; and various leadership roles in other brand, marketing, product management and strategy functions. Prior to Starbucks, Ms. Gass was with The Procter & Gamble Company. Ms. Gass currently serves on the boards of the Retail Industry Leaders Association and the National Retail Federation. Other Public Company Directorships: ■ Current: Levi Strauss & Co. ■ Previous (During Past 5 Years): Kohl’s Corporation (until 2022) |
Skills and Qualifications Ms. Gass brings to our Board of Directors deep knowledge of the omnichannel retail and consumer products industries gained from over 30 years of experience in retail and consumer goods industries, both domestically and internationally. PepsiCo benefits from her extensive understanding of marketing, product innovation and consumer branding from her various roles at Levi’s, Kohl’s, Starbucks and Procter & Gamble. Her insights in transforming the way Kohl’s does business to adapt and embrace technology and e-commerce opportunities during her time at Kohl’s are particularly valuable as we continue to strengthen our omnichannel capabilities to address similar issues in an environment of evolving consumer preferences. In addition, through her experiences leading a large retail public company, Kohl’s, and operating businesses at Levi’s and Starbucks, Ms. Gass also offers operational leadership experience, leading and developing strong management teams, as well as creating and implementing strategic plans. | ||
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Ramon L. Laguarta Director Since: 2018 Age: 59 |
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Ramon L. Laguarta has served as PepsiCo’s Chief Executive Officer and a director on the Board since 2018, and assumed the role of Chairman of the Board in 2019. Mr. Laguarta previously served as President of PepsiCo from 2017 to 2018. Prior to serving as President, Mr. Laguarta held a variety of positions of increasing responsibility in Europe, including as Commercial Vice President of PepsiCo Europe from 2006 to 2008, PepsiCo Eastern Europe Region from 2008 to 2012, President, Developing & Emerging Markets, PepsiCo Europe from 2012 to 2015, Chief Executive Officer, PepsiCo Europe in 2015, and Chief Executive Officer, Europe Sub-Saharan Africa from 2015 until 2017. From 2002 to 2006, he was General Manager for Iberia Snacks and Juices, and from 1999 to 2001, a General Manager for Greece Snacks. Prior to joining PepsiCo in 1996 as a marketing vice president for Spain Snacks, Mr. Laguarta worked for Chupa Chups, S.A., where he worked in several international assignments in Asia, Europe, the Middle East and the United States. He also currently serves as the Co-Chair of the World Economic Forum’s Board of Stewards for the Food Systems Initiative. Other Public Company Directorships: ■ Current: Visa Inc. ■ Previous (During Past 5 Years): None |
Skills and Qualifications Mr. Laguarta brings to our Board of Directors strong leadership skills and extensive consumer packaged goods experience gained from the 20-plus years he spent in a variety of senior operational and executive roles at PepsiCo. Mr. Laguarta also contributes invaluable perspectives on the global marketplace and sustainability gained from his numerous international senior management positions, including living in Europe and leading the Europe Sub-Saharan Africa division, which has operations that span three continents and is comprised of developed, developing and emerging markets. A native of Barcelona, he speaks multiple languages including English, Spanish, French, German and Greek. Through his leadership of the Europe Sub-Saharan Africa division and then as President of PepsiCo, he offers deep experience in strategic planning, operations, marketing, brand development and logistics. His role as Chairman and CEO of PepsiCo creates a critical link between management and the Board of Directors, enabling the Board to perform its oversight function with the benefit of management’s perspective on the business. |
| 16 | PEPSICO 2023 PROXY STATEMENT | |
Election of Directors (Proxy Item No. 1)
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Sir Dave J. Lewis Director Since: 2020 Age: 58 |
Independent Committee Memberships:
■ Audit |
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Sir Dave J. Lewis served as Group Chief Executive Officer of Tesco PLC, a multinational grocery and general merchandise retailer, from 2014 until 2020. Prior to joining Tesco, he served in a variety of management positions with Unilever PLC, a global consumer products company, from 1987 to 2014, including a variety of leadership roles in Europe, Asia and the Americas, including as President, Personal Care from 2011 to 2014; President, Americas from 2010 to 2011; and Chairman, UK and Ireland from 2007 to 2010. Sir Dave currently serves as Chair of Haleon plc, a UK-based multinational consumer healthcare company, and Chairman of Xlinks and also serves on the boards of several non-profit and charitable organizations, including as Chair of World Wildlife Fund – UK and as a trustee of Leverhulme Trust, a UK charitable foundation. He was also chair of Champions 12.3, a UN program seeking to add momentum to the achievement of the UN Sustainable Development Target 12.3 by 2030, and co-chair of the Consumer, Retail and Life Sciences Business Council, which was established to advise the Prime Minister of the UK. In addition, he served as co-chair of the Supply Chain Advisory Group for the UK government during 2021. In recognition of his contribution to business and the food industry in the UK, Sir Dave was knighted by Her Majesty Queen Elizabeth II in the 2021 New Year’s Honours List. Other Public Company Directorships: ■ Current: Haleon plc ■ Previous (During Past 5 Years): Tesco PLC (until 2020) |
Skills and Qualifications Sir Dave brings to our Board of Directors a wealth of international consumer experience and expertise in business strategy, brand management and customer development through his significant experience over three decades in both retail and consumer-packaged goods industries. He contributes a unique, global perspective on consumer centricity, retail strategy, operations, and supply chain management for consumer-facing brands. Through his experience leading Champions 12.3 and working with non-profit and charitable organizations, he also provides valuable knowledge of sustainability-related matters and the role of business in society as PepsiCo continues to focus on its sustainability goals and pursue strategies to drive sustainable long-term growth. | ||
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David C. Page, MD Director Since: 2014 Age: 66 |
Independent Committee Memberships: ■ Compensation ■ Sustainability, Diversity and Public Policy |
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David C. Page, MD, is a professor of biology at Massachusetts Institute of Technology (“MIT”) and the Whitehead Institute for Biomedical Research, an independent non-profit research and educational institute affiliated with MIT and an investigator at the Howard Hughes Medical Institute. His research focuses on the genetic and molecular differences between males and females, and the roles that these differences play in health and disease. He served as Director and President of the Whitehead Institute from 2005 to 2020. In this role, he led a group of scientists focused on cancer research, genetics, genomics, developmental biology, stem cell research, regenerative medicine, parasitic disease and plant biology. His honors include a MacArthur Prize Fellowship, Science magazine’s Top Ten Scientific Advances of the Year (in 1992 and again in 2003) and the 2011 March of Dimes Prize in Developmental Biology. He is a member of the National Academy of Sciences, the National Academy of Medicine and the American Academy of Arts and Sciences. Dr. Page serves as chair of the Visiting Committee for Harvard Medical School and Harvard School of Dental Medicine. Other Public Company Directorships: ■ Current: None ■ Previous (During Past 5 Years): None |
Skills and Qualifications Dr. Page brings to our Board of Directors his scientific and medical expertise, gained from over 30 years of experience in those fields, and a unique perspective on the intersection of academic and commercial scientific research of interest to companies in the food and beverage industry. His perspectives are particularly valuable in light of PepsiCo’s strategic focus on the areas of nutrition and health and wellness and in informing PepsiCo’s response to the COVID-19 pandemic. Dr. Page’s experience with producing significant scientific discoveries and innovative breakthroughs is highly relevant to PepsiCo’s research and development initiatives, innovation pipeline and sustainability goals in an environment of shifting consumer preferences and regulatory initiatives. | ||
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PEPSICO 2023 PROXY STATEMENT | 17 |
Election of Directors (Proxy Item No. 1)
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Robert C. Pohlad Director Since: 2015 Age: 68 |
Independent Committee Memberships: ■ Compensation ■ Nominating and Corporate Governance CHAIR |
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Robert C. Pohlad has served since 1987 as President of Pohlad Holdings, a company of various family-owned entities which operate multiple businesses across a number of industries, including commercial real estate, automotive sales, automation and robotic engineering, and sports and entertainment. From 2002 until its acquisition by PepsiCo in 2010, Mr. Pohlad was Chairman and Chief Executive Officer of PepsiAmericas, Inc., an independent publicly traded company. PepsiAmericas, Inc. was formed from several independent bottlers in 1998, and, under Mr. Pohlad’s tenure, it grew to become the second-largest bottler of PepsiCo products at the time of its acquisition. Previously, Mr. Pohlad held several other executive positions at bottling companies. Mr. Pohlad is a member and chair of the Board of Trustees of the University of Puget Sound and a member and chair of the Board of Visitors of the University of Minnesota Medical School. Other Public Company Directorships: ■ Current: None ■ Previous (During Past 5 Years): None |
Skills and Qualifications Mr. Pohlad brings to our Board of Directors extensive beverage and finance experience gained from the 20- plus years he spent in a variety of senior operational and executive roles at PepsiAmericas, Inc. and its predecessors. Mr. Pohlad has a deep understanding of leveraging large-scale distribution systems and global brands, specifically with respect to beverage and bottling operations, which is invaluable to PepsiCo. In addition, through his experience operating businesses and investments in myriad fields, Mr. Pohlad has gained expertise leading and developing strong management teams, creating and implementing effective strategic plans, addressing succession planning needs and brand-building. | ||
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Daniel Vasella, MD Director Since: 2002 Age: 69 |
Independent Committee Memberships: ■ Compensation ■ Nominating and Corporate Governance |
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Daniel Vasella, MD, served as Chairman of Novartis AG, a global innovative healthcare solutions company, from 1999 to 2013 and as Chief Executive Officer of Novartis AG from 1996 to 2010. From 1992 to 1996, Dr. Vasella held the positions of Chief Executive Officer, Chief Operating Officer, Senior Vice President and Head of Worldwide Development and Head of Corporate Marketing at Sandoz Pharma Ltd. He also served at Sandoz Pharmaceuticals Corporation from 1988 to 1992. Dr. Vasella is currently working as a coach to senior executives. He also serves on the boards of several private companies. Other Public Company Directorships: ■ Current: American Express Company; SciClone Pharmaceuticals (Holdings) Limited ■ Previous (During Past 5 Years): XBiotech Inc. (until 2018) |
Skills and Qualifications Dr. Vasella brings to our Board of Directors his expertise in the areas of nutrition and health and wellness, topics of importance to PepsiCo especially in light of the COVID-19 pandemic, as well as his leadership experience and global perspectives, which he obtained through his former role as Chairman and Chief Executive Officer of Novartis. Through his leadership of Novartis and his public company director experience, he also offers to PepsiCo extensive business, corporate governance, operations, management and marketing skills, as well as human capital management and talent development, succession planning and experience developing corporate strategy. In addition, he contributes his knowledge of and experience with regulatory matters developed through his role leading a highly regulated, global business in rapidly changing markets. | ||
| 18 | PEPSICO 2023 PROXY STATEMENT | |
Election of Directors (Proxy Item No. 1)
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Darren Walker Director Since: 2016 Age: 63 |
Independent Committee Memberships: ■ Nominating and Corporate Governance ■ Sustainability, Diversity |
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Darren Walker has served since 2013 as President of the Ford Foundation, a philanthropic organization, and as its Vice President for Education, Creativity and Free Expression from 2010 to 2013. Prior to the Ford Foundation, Mr. Walker joined the Rockefeller Foundation, a philanthropic organization, in 2002 and served as a Vice President responsible for foundation initiatives from 2005 to 2010. From 1995 to 2002, he was the Chief Operating Officer of Abyssinian Development Corporation, a community development organization in Harlem in New York City. Prior to that, Mr. Walker held various positions in finance and banking at UBS AG. Mr. Walker currently serves on the boards of several non-profit organizations, including the National Gallery of Art, Lincoln Center for the Performing Arts, Friends of the High Line and Carnegie Hall. Mr. Walker also currently chairs the U.S. Impact Investing Alliance Advisory Board and is a member of the Council on Foreign Relations and the American Academy of Arts and Sciences. Other Public Company Directorships: ■ Current: Ralph Lauren Corporation; Block, Inc. (formerly Square, Inc.) ■ Previous (During Past 5 Years): None |
Skills and Qualifications Mr. Walker brings to our Board of Directors his insight into the role of business in society gained through his role as President of the Ford Foundation and his leadership at other non-profit and philanthropic organizations. Through his experience with various social and community initiatives, he provides the Board with unique perspectives on human capital management, talent development and diversity and inclusion and insights on public policy and sustainability-related matters that are particularly valuable as PepsiCo continues to focus on its sustainability goals and pursue strategies to drive long-term growth. In addition, he offers a unique understanding of emerging markets and communities gained through his experience and oversight of the Ford Foundation’s operations. | ||
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Alberto Weisser Director Since: 2011 Age: 67 |
Independent Committee Memberships: ■ Audit CHAIR |
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Alberto Weisser served as Chairman and Chief Executive Officer of Bunge Limited, a global food, commodity and agribusiness company, from 1999 until mid-2013 and as Executive Chairman until late-2013. Mr. Weisser previously served as Bunge’s Chief Financial Officer from 1993 to 1999. Previously, Mr. Weisser worked at BASF Group, a chemical company, in various finance-related positions. He also served as a Senior Advisor at Lazard Ltd. from 2015 until 2018. He currently serves on the Americas Advisory Panel of Temasek International Pte. Ltd., a Singapore-based investment company. Other Public Company Directorships: Other Public Company Directorships: ■ Current: Bayer AG; Linde Plc ■ Previous (During Past 5 Years): None |
Skills and Qualifications Mr. Weisser brings to our Board of Directors his extensive experience with and keen understanding of commodities, gained from his role as Chairman and Chief Executive Officer of Bunge Limited. These skills are particularly valuable to PepsiCo in today’s volatile global economic environment. Mr. Weisser has deep knowledge of the strategic, financial, risk and compliance issues facing a large, diversified, publicly traded company, and significant international experience, particularly with respect to emerging markets. Mr. Weisser also contributes strong financial acumen and expertise resulting from his six years of experience serving as Bunge Limited’s Chief Financial Officer and other senior finance-related positions. | ||
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PEPSICO 2023 PROXY STATEMENT | 19 |
Board Composition and Refreshment
We believe the Board benefits from a mix of new directors who bring fresh perspectives and longer-serving directors who bring valuable experience, continuity and a deep understanding of the Company. The Board strives to maintain an appropriate balance of tenure, turnover, diversity, attributes, viewpoints and experiences. To promote thoughtful Board refreshment, we have:
| ■ | Developed a comprehensive, ongoing Board succession planning process; |
| ■ | Implemented an annual Board and Committee assessment process; |
| ■ | Adopted a policy in which no director may stand for election to the Board after reaching the age of 75 and a director’s tenure is considered as a factor in the nomination process. |
5 of the director nominees joined the Board since the beginning of 2018 and 2 director nominees are new candidates for election to the Board. The average age of our director nominees and our independent director nominees is 61.4 years and 61.6 years, respectively. The average tenure of all our director nominees and our independent director nominees is 7.1 years and 7.3 years, respectively.
Comprehensive, Ongoing Process for Board Succession Planning and Selection and Nomination of Directors
The Board regularly evaluates its composition, assessing individual director’s skills, qualifications, attributes and experiences to ensure the overall Board composition is aligned with the needs of PepsiCo’s long-term business strategy. Each year, the Board assesses the directors to be nominated at the annual meeting. The Board reviews potential director vacancies in light of its ongoing evaluation and regularly reviews potential candidates at Board meetings. The Nominating and Corporate Governance Committee assists this process by considering prospective candidates and identifying appropriate individuals for the Board’s further consideration. From time to time, the Nominating and Corporate Governance Committee engages independent third-party consulting firms to help identify, evaluate and conduct due diligence on potential director candidates who meet the current needs of the Board.
The Nominating and Corporate Governance Committee also assists the Board in considering succession planning for Board positions such as the Presiding Director and Chairs of the Committees.
| ■ | The Presiding Director is appointed for a term of three years. The Board evaluates the Presiding Director’s performance annually under the guidance of the Nominating and Corporate Governance Committee. Based on the recommendation of the Nominating and Corporate Governance Committee, the independent members of the Board re-elected Ian Cook as the Presiding Director of the Board in 2021 for another three-year term beginning in 2022. For more information on the robust responsibilities of our independent Presiding Director, please see “Board Leadership Structure” beginning on page 25 of this Proxy Statement. |
| ■ | Except as the Board may otherwise determine, the Chair of each Committee is appointed for a term of three years and no more than three consecutive three-year terms. The Board re-elected the Audit Committee Chair for a third term beginning in 2022, the Compensation Committee Chair for a second term beginning in 2020, and elected a new Committee Chair beginning in 2021 for each of the Nominating and Corporate Governance Committee and the Sustainability, Diversity and Public Policy Committee. Earlier in 2023, the Board elected a new Compensation Committee Chair, whose term will be effective following the 2023 Annual Meeting. |
| 20 | PEPSICO 2023 PROXY STATEMENT | |
Board Composition and Refreshment
Directors’ Attributes and Experiences
The Board looks for its current and potential directors to have a broad range of attributes, viewpoints and experiences that can be leveraged in order to benefit PepsiCo and its shareholders and align with the evolving needs of PepsiCo’s long-term business strategy. Currently, the Board is particularly interested in maintaining a mix of attributes and experiences that include the following:
■ Public Company CEO including deep operational, CEO experience at a large global public company ■ Financial Expertise / Financial Community including senior financial leadership experience at a large global public company or senior leadership experience at a financial institution ■ Consumer Products including senior leadership experience with respect to a large consumer products business ■ Risk Management including experience handling major risk-related challenges ■ Public Policy including senior governmental, regulatory, philanthropic or public policy leadership experience, or policy-making role in areas relevant to our business ■ Science / Medical / Research / Innovation including senior leadership experience or scientific/research role driving technical, engineering, medical or other research innovation |
■ Technology / Data Analytics / e-commerce / Digital Marketing / Cyber including senior leadership experience at a digital company or expertise in areas including e-commerce, data analytics, cloud engineered systems, digital marketing or cybersecurity ■ Diversity including understanding the importance of diversity to a global enterprise with a diverse consumer base, informed by experience of gender, race, ethnicity and/or nationality ■ Developing and Emerging Markets / International Residence including global business experience with a focus on developing and emerging markets, or residence or extensive time spent living outside of the United States |
Attributes of Individual Nominees
All directors are also expected to possess certain personal traits and, in fulfilling its responsibility to identify qualified candidates for membership on the Board, the Nominating and Corporate Governance Committee considers the following attributes of candidates:
| ■ | Relevant knowledge, diversity of background, perspectives and experience in areas including business, finance, accounting, technology and cybersecurity, marketing, international business, government, human capital management and talent development; |
| ■ | Personal qualities of leadership, character, judgment and whether the candidate possesses a reputation in the community at large of integrity, trust, respect, competence and adherence to the highest ethical standards; |
| ■ | Roles and contributions valuable to the business community; and |
| ■ | Whether the candidate is free of conflicts and has the time required for preparation, participation and attendance at meetings. |
In addition, the Nominating and Corporate Governance Committee regularly considers each incumbent director’s length of service on the Board and contributions, as well as the overall mix of tenures on the Board and the average tenure of all independent directors, in connection with determining whether an incumbent director should be renominated.
Consideration of Board Diversity
 |
The Nominating and Corporate Governance Committee and the Board are keenly focused on ensuring that a wide range of backgrounds and experience is represented on our Board. 60% of our director nominees are women and/or racially/ethnically diverse individuals. |
Throughout the director selection and nomination process, the Nominating and Corporate Governance Committee and the Board seek to achieve diversity within the Board with a broad array of viewpoints and perspectives that are representative of our global business. The Nominating and Corporate Governance Committee adheres to the Company’s philosophy of maintaining an environment free from discrimination on the basis of race, color, religion, sex, sexual orientation, gender identity, age, national origin, disability, veteran status or any other protected category under applicable law. This process is designed to provide that the Board includes members with diverse backgrounds, perspectives and experience, including appropriate financial and other expertise relevant to the business of the Company.
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PEPSICO 2023 PROXY STATEMENT | 21 |
Board Composition and Refreshment
While not a formal policy, PepsiCo’s director nomination processes call for the consideration of a range of types of diversity, including race, gender, ethnicity, culture, nationality and geography. In fact, diversity is one of the enumerated criteria that the Board has identified as critical in maintaining among its current and potential directors. Accordingly, the Nominating and Corporate Governance Committee is committed to actively seeking out highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experience, to include in the pool from which Board nominees are chosen. The Board also annually assesses the diversity of its members as part of its assessment process.
Director Orientation and Continuing Education
We have a comprehensive orientation program for all new directors with respect to their role as directors and as members of the particular Board committees on which they will serve. This orientation program includes one-on-one meetings with senior management, visits to PepsiCo’s operations when possible and extensive written materials to familiarize new directors with PepsiCo’s business, financial performance, strategic plans, executive compensation program, and corporate governance policies and practices. Additional training is also provided when a director assumes a leadership role, such as becoming a Committee Chair.
We also offer continuing education programs to assist directors in enhancing their skills and knowledge to better perform their duties and to recognize, and deal appropriately with, issues that may arise. These programs may be part of regular Board and Committee meetings or provided by qualified third parties on various topics. In addition, the Company pays for all reasonable expenses for any director who wishes to attend an external director continuing education program.
Board and Committee Assessments
Our Board continually seeks to improve its performance. A formal evaluation is conducted on an annual basis, and directors share perspectives, feedback and suggestions year-round, both during and outside of Board and Committee meetings. Pursuant to PepsiCo’s Corporate Governance Guidelines and the Charters of each of the Board’s Committees, the Board and each of its Committees conduct an evaluation at least annually.
Our processes enable directors to provide anonymous and confidential feedback on topics including:
| ■ | Board/Committee information and materials; |
| ■ | Board/Committee meeting mechanics; |
| ■ | Board/Committee composition and structure (including the mix of experience, skills, qualifications, viewpoints, backgrounds and demographic diversity); |
| ■ | Board/Committee responsibilities and accountability (including with respect to strategy, risk management, operating performance, CEO and management succession planning, senior management development, corporate governance, sustainability and corporate culture); |
| ■ | Board meeting conduct and culture; and |
| ■ | Overall performance of Board members. |
To promote effectiveness of the Board and each Committee, the results of the assessment are reviewed, and addressed by the Nominating and Corporate Governance Committee, the members of each Committee and the independent directors both alone in an executive session led by the independent Presiding Director and with members of management.
This process of actively engaging in thoughtful discussions, including on topics ranging from Board and Committee composition to overall performance of Board members, has had a meaningful impact on Board refreshment and succession planning. As a testament to the effectiveness of this assessment process, five of the director nominees joined the Board since the beginning of 2018 and two director nominees are new candidates for election to the Board. This refreshment demonstrates the Board’s focus on maintaining an appropriate balance of attributes, viewpoints and experiences that align with the evolving needs of PepsiCo’s long-term business strategy.
The Nominating and Corporate Governance Committee annually reviews the format of the evaluation process, including periodically conducting individual director assessments facilitated by a third party. As a result of the evaluation process, which helps identify opportunities to continue to improve the performance of the Board and the Committees, the Board and Committees continue to enhance practices and procedures as appropriate. The Board also reviews the Nominating and Corporate Governance Committee’s periodic recommendations concerning the performance of the Board, each of its Committees and the Presiding Director.
| 22 | PEPSICO 2023 PROXY STATEMENT | |
Board Composition and Refreshment
Shareholder Recommendations and Nominations of Director Candidates
The Nominating and Corporate Governance Committee will consider recommendations for director nominees made by shareholders and evaluate them using the same criteria as for other candidates. Recommendations received from shareholders are reviewed by the Chair of the Nominating and Corporate Governance Committee to determine whether each candidate meets the minimum criteria set forth in the Corporate Governance Guidelines, and if so, whether the candidate’s expertise and particular set of skills and background fit the current needs of the Board. Any shareholder recommendation must be sent to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577, and must include detailed background information regarding the suggested candidate that demonstrates how the individual meets the Board membership criteria.
Our By-Laws permit proxy access for shareholders. Shareholders who wish to nominate directors for inclusion in our Proxy Statement or directly at an Annual Meeting in accordance with the procedures in our By-Laws and Rule 14a-19 under the Exchange Act should see “2024 Shareholder Proposals and Director Nominations” on page 106 of this Proxy Statement for further information.
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PEPSICO 2023 PROXY STATEMENT | 23 |
Corporate Governance at PepsiCo
Our Governance Philosophy
| We believe strong corporate governance and an ethical culture are the foundation for financial integrity, investor confidence and sustainable performance. |
Strong corporate governance and a steadfast commitment to doing business the right way are and have been longstanding priorities at PepsiCo. Our strong tone at the top begins with our Board of Directors, which has demonstrated its focus on advancing openness, honesty, fairness and integrity in the Boardroom and across the Company through such actions as:
| ■ | Adopting Corporate Governance Guidelines for the Company that establish a common set of expectations to assist the Board and its Committees in performing their duties, reviewing these Guidelines at least annually, and updating the Guidelines as appropriate to reflect changing regulatory requirements, evolving best practices and input from our shareholders and other stakeholders; |
| ■ | Adopting the Company’s Global Code of Conduct and overseeing compliance, including ensuring corporate culture is on the Board agenda; |
| ■ | Holding regular executive sessions between the Audit Committee and our Global Chief Compliance & Ethics Officer; |
| ■ | Establishing a means for employees to raise issues to the Board and encouraging a culture of trust so that employees at every level feel comfortable speaking up about concerns; and |
| ■ | Fostering a corporate culture of integrity and risk awareness through the Board’s oversight over PepsiCo’s integrated risk management framework, which includes the Board’s review of specific high-priority risks on a regular basis throughout the year. |
Key Corporate Governance Documents. The following key corporate documents are available at www.pepsico.com under “Who We Are”—“Corporate Governance” and are also available in print upon written request to the Corporate Secretary of PepsiCo at 700 Anderson Hill Road, Purchase, New York 10577: Corporate Governance Guidelines; the Global Code of Conduct; and the Charters of our Audit, Compensation, Nominating and Corporate Governance, and Sustainability, Diversity and Public Policy Committees of the Board.
Our Global Code of Conduct
| PepsiCo is proud of its commitment to deliver sustained growth through empowered people acting with responsibility and building trust. |
This commitment is evidenced in part by our robust Global Code of Conduct, which is designed to provide our directors and employees with guidance on how to act legally and ethically while performing work for PepsiCo. PepsiCo works hard to communicate its values clearly and regularly throughout its operations, including by conducting an annual Global Code of Conduct training program for employees. Annually, all of PepsiCo’s directors and executives, including all of our executive officers, certify their compliance with our Global Code of Conduct. Through these efforts, we are focused on developing a culture of empowering people across the Company to act with responsibility and to build trust by embracing the principles of our Global Code of Conduct and our core values: respect in the workplace; trust in the marketplace; fairness in our business relationships, honesty in business conduct; and purpose in our world.
Prohibition on Hedging and Pledging. To further align the interests of PepsiCo’s directors, officers and employees with those of our shareholders, under PepsiCo’s Global Code of Conduct and Insider Trading Policy, the Company prohibits all directors, officers and employees from engaging in activities that are designed to hedge or offset any decrease in the market value of PepsiCo stock (including purchasing financial instruments such as prepaid variable forward contracts, collars, exchange funds or equity swaps or engaging in short sales). In addition, directors, officers and employees may not hold PepsiCo securities in a margin account or pledge PepsiCo stock or PepsiCo stock options as collateral for a loan or otherwise.
| 24 | PEPSICO 2023 PROXY STATEMENT | |
Corporate Governance at PepsiCo
Our Board of Directors
Our Board of Directors represents the interests of our shareholders and oversees the Company’s business and affairs pursuant to the North Carolina Business Corporation Act and our governing documents. Members of the Board, all of whom are elected annually, oversee the Company’s business and affairs by, among other things, participating in Board and Committee meetings, reviewing materials provided to them, engaging with the Chairman and CEO and with key members of management and associates, bringing in outside experts, and discussing feedback from shareholders and other stakeholders.
Outstanding Board Member Attendance. Regular attendance at Board meetings and the Annual Meeting of Shareholders is expected of each director. In fiscal year 2022, our Board of Directors held five meetings and our Committees held 23 meetings in the aggregate. In fiscal year 2022, no incumbent director attended fewer than 75% of the total number of Board and applicable Committee meetings (in each case held during the period that such director served). All of our fourteen directors then serving attended the 2022 Annual Meeting of Shareholders.
Board Leadership Structure
PepsiCo’s governing documents enable the Board to determine the appropriate Board leadership structure for the Company and allow the roles of Chairman of the Board and CEO to be filled by the same or different individuals. This approach allows the Board the opportunity to determine whether the two roles should be separate or combined based upon the Company’s needs in light of the dynamic environment in which we operate and the Board’s assessment of the Company’s leadership from time to time.
The Board regularly considers and is open to different structures as circumstances may warrant. During its most recent evaluation of its leadership structure, the Board determined that the current combined Chairman and CEO structure, together with a strong independent Presiding Director with clearly defined and robust responsibilities as set forth on page 26, strikes the right balance between effective independent oversight of PepsiCo’s business and Board activities and strong and consistent corporate leadership, and provides the best leadership structure for the Company at this time. This structure enables a clear and unified strategic vision and is beneficial at this time given the complex and dynamic consumer and retail landscape. This leadership structure, along with having independent directors chair each of the Company’s four Committees, also enhances the Board’s oversight of material risks because the Chairman and CEO is uniquely positioned to identify emerging risks while the Presiding Director and Committee Chairs provide independent oversight of the Company’s risk management programs.
In making the leadership structure determination, the Board gave thorough consideration to a number of factors, including: (i) the strategic goals of the Company, (ii) the unique opportunities and challenges PepsiCo is facing, (iii) the breadth and complexity of PepsiCo’s business and global footprint, (iv) the various capabilities of our directors, (v) the dynamics of our Board, (vi) best practices in the market, (vii) PepsiCo’s shareholder base and investor feedback, (viii) the current industry environment and (ix) the status of PepsiCo’s progress with respect to key strategic initiatives. The Board also reflected upon the Company’s strong, independent oversight function exercised by our actively engaged Board, which consists entirely of independent directors other than our Chairman and CEO, as well as the independent leadership provided by our independent Presiding Director and each of the four standing Board Committees, which consist solely of, and are chaired by, independent directors.
The Board recognizes the importance of the Company’s leadership structure to our shareholders and will continue to regularly assess the Board leadership structure with careful consideration of the input obtained through engagement with our shareholders.
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PEPSICO 2023 PROXY STATEMENT | 25 |
Corporate Governance at PepsiCo
| Ramon
L. Laguarta CHAIRMAN AND CEO |
 |
Ian
Cook PRESIDING DIRECTOR Former Chairman, President and Chief Executive Officer, Colgate-Palmolive Company |
 | |
| The independent directors believe that our current Chairman of the Board and CEO, Ramon L. Laguarta, as an experienced leader with deep operational experience, particularly in international markets, and extensive knowledge of the Company, food and beverage industry and risk management practices that Mr. Laguarta gained from working over 20 years at PepsiCo in a variety of executive and general management roles, serves as a highly effective bridge between the Board and management. In his role as Chairman and CEO, Mr. Laguarta is in the best position to be aware of key issues facing the Company, and to effectively communicate with various internal and external constituencies about critical business matters. During this period of significant change for PepsiCo as we implement key strategic and ongoing transformation initiatives and navigate the rapidly evolving business environment, the independent directors believe that the Company is best served by having one clear leader in both the Chairman and CEO roles who has the vision and leadership to execute on the Company’s strategy and create shareholder value. | As a result of his extensive experience leading a multinational consumer products company during his 40-plus year career at Colgate-Palmolive, including his 12 years as CEO and his direct involvement in both risk management and risk oversight, and his deep understanding of PepsiCo and its business acquired from his years of service on our Board, Mr. Cook is uniquely positioned to work collaboratively with our Chairman and CEO, while providing strong independent oversight of management. In addition to his core responsibilities as Presiding Director as described further below, Mr. Cook is an actively engaged director who regularly communicates with the Chairman and CEO and other members of the senior management on various topics of importance to the Company, including business strategy and the Company’s approach to identifying and mitigating key risks. In recognition of Mr. Cook’s strong leadership stemming from his industry-relevant knowledge, operational, risk oversight and governance experience and exceptional interpersonal and communication skills, the independent members of the Board of Directors re-elected Mr. Cook as the Presiding Director for another three-year term beginning in 2022. | |||
Role of Presiding Director. Our Corporate Governance Guidelines provide that if the Chairman of the Board is not an independent director, an independent director shall be designated as the Presiding Director by the independent members of the Board based on the recommendation of the Nominating and Corporate Governance Committee. The Presiding Director is appointed for a term of three years.
The Board evaluates the Presiding Director’s performance annually under the guidance of the Nominating and Corporate Governance Committee. The duties of our independent Presiding Director are robust and consistent with the responsibilities generally held by independent “lead directors” at other public companies.
| Presiding Director Duties: | |
| ■ | Presides at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors |
| ■ | Serves as a liaison between the Chairman of the Board and the independent directors |
| ■ | Has authority to approve information sent to the Board |
| ■ | Approves meeting agendas for the Board, including Board consideration of any matters as he or she deems appropriate, including risk-related matters |
| ■ | Approves meeting schedules to assure that there is sufficient time for discussion of all agenda items |
| ■ | Works with the Board Committee Chairs to oversee the annual assessment of the Board and Committees, including assessment of the effectiveness and appropriateness of the process by which the Board identifies, assesses, addresses and monitors the Company’s enterprise risks |
| ■ | Has the authority to call meetings of the independent directors |
| ■ | If requested by major shareholders, ensures that he or she is available for consultation and direct communication |
| 26 | PEPSICO 2023 PROXY STATEMENT | |
Corporate Governance at PepsiCo
In addition to these responsibilities and assisting the Board in the fulfillment of its responsibilities in general, Mr. Cook, as the Presiding Director, has over the past few years performed additional duties including:
| ■ | meeting with the Chairman and CEO after the executive sessions of independent directors held at each regularly scheduled Board meeting to provide feedback on the independent directors’ deliberations; |
| ■ | regularly speaking with the Chairman and CEO between Board meetings to discuss any matters of concern, often following consultation with other independent directors; |
| ■ | working with the Nominating and Corporate Governance Committee to guide the Board’s governance processes, including developing recommendations for Board and Committee structure, size and composition, including Board succession planning, and for the Board’s approach to performing its duties; |
| ■ | meeting regularly with members of senior management other than the Chairman and CEO; and |
| ■ | representing the Board in communications with shareholders, including on sustainability matters. |
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PEPSICO 2023 PROXY STATEMENT | 27 |
Corporate Governance at PepsiCo
Director Independence
Independence Determination
The Company’s Corporate Governance Guidelines provide that an independent director is a director who meets the Nasdaq definition of independence, as determined by the Board. This definition is included in the Corporate Governance Guidelines, which are available at www.pepsico.com under “Who We Are”—“Corporate Governance.” In making a determination of whether a director has any relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, the Board of Directors considers all relevant facts and circumstances, including but not limited to the director’s commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships.
Consistent with these considerations, the Board of Directors has affirmatively determined that all of our non-management director nominees, who are listed below, are independent within the meaning of the SEC and Nasdaq rules. The Board had also previously determined that Shona L. Brown, who currently serves on the Board, is independent.
| Independent Director Nominees | ||
| Segun Agbaje | Susan M. Diamond | Robert C. Pohlad |
| Jennifer Bailey | Dina Dublon | Daniel Vasella |
| Cesar Conde | Michelle Gass | Darren Walker |
| Ian Cook | Dave J. Lewis | Alberto Weisser |
| Edith W. Cooper | David C. Page |
In arriving at the foregoing independence determination, the Board of Directors thoroughly considered the relationships described under “Transactions with Related Persons” on page 29 of this Proxy Statement and determined that they do not impair Mr. Pohlad’s independence or his ability to exercise independent judgment in carrying out the responsibilities of a director.
Executive Sessions of Independent Directors
The independent directors hold regularly scheduled executive sessions of the Board and its Committees without Company management present. These executive sessions are chaired by the independent Presiding Director (at Board meetings) or by the independent Committee Chairs (at Committee meetings). The independent directors met in executive session at all of the regularly scheduled Board meetings held in 2022. Regular executive sessions are also held by each Committee.
Related Person Transactions
The Board of Directors has adopted written Related Person Transaction Policies and Procedures that generally apply to any transaction or series of transactions:
| ■ | in which the Company or a subsidiary was or is a participant; |
| ■ | where the amount involved exceeds or is expected to exceed $120,000 since the beginning of the Company’s last completed fiscal year; and |
| ■ | in which the related person (i.e., a director, director nominee, executive officer, greater than five percent beneficial owner of the Company’s Common Stock, or any immediate family member of any of the foregoing) has or will have a direct or indirect material interest. |
The transactions described above are submitted to the Audit Committee for review and approval or ratification.
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Corporate Governance at PepsiCo
Review and Approval of Transactions with Related Persons
In determining whether to approve, ratify or disapprove of the entry into a related person transaction, the Audit Committee considers all relevant facts and circumstances and takes into account, among other factors:
| ■ | whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; |
| ■ | whether the transaction would impair the independence of an outside director; and |
| ■ | whether the transaction would present an improper conflict of interest for any director or executive officer of the Company. |
The Audit Committee has considered and adopted standing pre-approvals under the policy for limited transactions with related persons. The Company’s General Counsel maintains a list of transactions deemed pre-approved under the policy for review by any Board member.
Transactions with Related Persons
The Board thoroughly considered the following relationships involving Robert C. Pohlad and determined that they do not impair Mr. Pohlad’s independence or his ability to exercise independent judgment in carrying out the responsibilities of a director of the Company:
| ■ | Mr. Pohlad indirectly owns one-third of the voting interests in the Minnesota Twins, a Major League Baseball team, and the remaining voting interests are indirectly owned by his brothers, William Pohlad and James Pohlad. The non-voting interests in the Minnesota Twins are owned indirectly by Mr. Pohlad and members of his immediate family and through trusts for the benefit of Mr. Pohlad’s descendants and descendants of members of his family. Members of Mr. Pohlad’s immediate family are employed by the Minnesota Twins, including James Pohlad, who serves as Chairman of the Board. In addition, Mr. Pohlad’s son is a current executive officer of the Minnesota Twins, serving as Executive Chair. In fiscal year 2022, PepsiCo made payments to the Minnesota Twins of approximately $770,000 in connection with a sponsorship agreement, and PepsiCo received payments of approximately $860,000 from the Minnesota Twins and an independent third party in connection with the sale of PepsiCo products at the Minnesota Twins’ stadium. Transactions between the Minnesota Twins and PepsiCo, individually and in the aggregate, represented less than 1% of the annual revenues of the Minnesota Twins and PepsiCo for each of fiscal years 2022, 2021 and 2020. |
| ■ | Mr. Pohlad and his brothers indirectly own an equity interest of approximately 13% in Minnesota United, a Major League Soccer Team. In fiscal year 2022, PepsiCo made payments to Minnesota United of approximately $220,000 in connection with a sponsorship agreement, and PepsiCo received payments of approximately $180,000 from Minnesota United and an independent third party in connection with the sale of PepsiCo products at Minnesota United’s stadium. Transactions between Minnesota United and PepsiCo, individually and in the aggregate, represented less than 1% of the annual revenues of Minnesota United and PepsiCo for each of fiscal years 2022, 2021 and 2020. |
| ■ | Mr. Pohlad and his immediate family members indirectly own an equity interest of approximately 13% of ESXL LLC, a New York-based esports organization, which is the parent company of CDXL, LLC, an online e-gaming league franchise operator. In fiscal year 2022, PepsiCo made or agreed to make payments to CDXL, LLC of approximately $665,000 in connection with a sponsorship agreement pursuant to which PepsiCo became the exclusive beverage sponsor of a professional video game competition. In fiscal year 2023, PepsiCo expects to indirectly pay ESXL LLC approximately $450,000 in connection with the launch of a promotional event for the Doritos brand scheduled to take place in fiscal year 2023. |
The sponsorship agreements and sale of PepsiCo products for the Minnesota Twins and the Minnesota United are ongoing, the sponsorship agreement with CDXL, LLC expired in December 2022, and the transaction with ESXL LLC is a one-time arrangement for fiscal year 2023. Mr. Pohlad is and was not involved in negotiating these arm’s-length transactions. The Board thoroughly considered these relationships and determined that they do not impair Mr. Pohlad’s independence or his ability to exercise independent judgment in carrying out the responsibilities as a director of the Company.
In addition, Meaghan Spillane is a Key Account Manager, PepsiCo Beverages North America (PBNA) at PepsiCo and daughter of Marie T. Gallagher, who serves as Senior Vice President and Controller of PepsiCo. Ms. Spillane received total compensation of approximately $152,000 in fiscal year 2022, and participates in the general welfare and benefit plans of PepsiCo. Ms. Spillane’s compensation was established in accordance with PepsiCo’s employment and compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. Ms. Gallagher does not have a material interest in her daughter’s employment, nor does she share a household with her.
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PEPSICO 2023 PROXY STATEMENT | 29 |
Corporate Governance at PepsiCo
Committees of the Board of Directors
The Board of Directors has four standing Committees: Audit, Compensation, Nominating and Corporate Governance, and Sustainability, Diversity and Public Policy. Fifty percent of the Committees are chaired by diverse Directors. The table below indicates the current members of each Board Committee:
| Audit* | Compensation* | Nominating
and Corporate Governance |
Sustainability, Diversity and Public Policy | |
| Segun Agbaje | E | |||
| Shona L. Brown |  |
 | ||
| Cesar Conde | |
|
||
| Ian Cook (Presiding Director) | |
|||
| Edith W. Cooper | |
|||
| Dina Dublon | |
| ||
| Michelle Gass | E | |||
| Dave J. Lewis | E | |||
| Ramon L. Laguarta | ||||
| David C. Page | |
| ||
| Robert C. Pohlad | |
|
||
| Daniel Vasella | |
|
||
| Darren Walker | |
| ||
| Alberto Weisser | E |
| = |
Committee Chair |
| E = | Audit Committee Financial Expert |
| * | Shona L. Brown will not stand for re-election at the 2023 Annual Meeting and Cesar Conde will chair the Compensation Committee following the 2023 Annual Meeting. If elected to the Board by our shareholders at the 2023 Annual Meeting, Jennifer Bailey and Susan M. Diamond will join the Audit Committee. |
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Corporate Governance at PepsiCo
| Audit Committee | Primary Responsibilities | |
Met eight times in 2022 Current Committee Members Alberto Weisser CHAIR Segun Agbaje |
■ Engaging and overseeing the Company’s independent registered public accounting firm (taking into account the vote on shareholder ratification) and considering the independence, qualifications and performance of the independent registered public accounting firm ■ Approving all audit and permissible non-audit services to be performed by the independent registered public accounting firm ■ Reviewing and evaluating the performance of the lead audit partner of the independent registered public accounting firm and periodically considering whether there should be a rotation of the independent registered public accounting firm ■ Overseeing the quality and integrity of PepsiCo’s financial statements and its related accounting and financial reporting processes and internal control over financial reporting, and the audits of PepsiCo’s financial statements, including reviewing with management and the independent registered public accounting firm PepsiCo’s annual audited and quarterly financial statements and other financial disclosures, including earnings releases ■ Reviewing and approving the internal audit department’s audit plan, staffing, budget and responsibilities ■ Reviewing PepsiCo’s compliance with legal and regulatory requirements, including by reviewing and discussing the implementation and effectiveness of PepsiCo’s compliance program ■ Establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding (a) accounting, internal accounting controls or auditing matters and other federal securities law matters and (b) confidential, anonymous submissions by employees of concerns regarding accounting or auditing matters or other federal securities law matters ■ Reviewing and assessing the guidelines and policies governing PepsiCo’s risk management and oversight processes, and assisting the Board’s oversight of PepsiCo’s financial, compliance and employee safety risks ■ Reviewing and providing oversight of all related person transactions ■ During 2022, the Audit Committee continued to review and consider how the deadly conflict in Ukraine and COVID-19 impacted each of its areas of responsibility Financial Expertise and Independence The Board of Directors has determined that Segun Agbaje, Michelle Gass, Dave J. Lewis and Alberto Weisser satisfy the criteria adopted by the SEC to serve as “audit committee financial experts” and that all of the members of the Committee are independent directors pursuant to the applicable requirements under the SEC and Nasdaq rules. No Audit Committee member concurrently serves on the audit committee of more than two other public companies. Report The Audit Committee Report is set forth beginning on page 46 of this Proxy Statement. |
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PEPSICO 2023 PROXY STATEMENT | 31 |
Corporate Governance at PepsiCo
Compensation Committee Met five times in 2022 Current Committee Members Shona L. Brown CHAIR Cesar Conde |
Primary Responsibilities ■ Overseeing policies relating to compensation of the Company’s executives and making recommendations to the Board with respect to such policies ■ Overseeing engagement with shareholders on executive compensation matters ■ Overseeing the design of all material employee benefit plans and programs of the Company, its subsidiaries and divisions ■ Meeting at least annually with the CEO to discuss the CEO’s self-assessment in achieving individual and corporate performance goals and objectives ■ Evaluating and discussing with the independent directors the performance of the CEO and recommending the CEO’s compensation to the independent directors based on the CEO’s performance ■ Overseeing the evaluation of the executive officers and other key executives deemed to be under the Compensation Committee’s purview, and evaluating and determining the individual elements of total compensation for such officers ■ Evaluating its relationship with any compensation consultant for any conflicts of interest and assessing the independence of any compensation consultant, legal counsel or other advisors ■ Reviewing and reporting to the Board with respect to director compensation and stock ownership guidelines Additional information on the roles and responsibilities of the Compensation Committee is provided in the Compensation Discussion and Analysis beginning on page 50 of this Proxy Statement. Independence The Compensation Committee is comprised entirely of directors who are independent under the SEC and Nasdaq rules for directors and compensation committee members. Report The Compensation Committee Report is set forth on page 81 of this Proxy Statement. |
Compensation Advisor
The Compensation Committee has engaged FW Cook as its independent external advisor. The Compensation Committee reviewed its relationship with FW Cook, considered FW Cook’s independence and the existence of potential conflicts of interest, and determined that the engagement of FW Cook did not raise any conflict of interest or other issues that would adversely impact FW Cook’s independence. In reaching this conclusion, the Compensation Committee considered various factors, including the six factors set forth in the SEC and Nasdaq rules regarding compensation advisor conflicts of interest and independence.
Compensation Committee Interlocks and Insider Participation
Shona L. Brown, Cesar Conde, Dina Dublon, David C. Page, Robert C. Pohlad and Daniel Vasella served on the Company’s Compensation Committee during fiscal year 2022. No member of the Compensation Committee is now, or has been, an officer or employee of the Company. No member of the Compensation Committee had any relationship with the Company or any of its subsidiaries during 2022 pursuant to which disclosure would be required under applicable SEC rules pertaining to the disclosure of transactions with related persons, other than Mr. Pohlad, as described on page 29 of this Proxy Statement. None of the executive officers of the Company currently serves or served during 2022 on the board of directors or compensation committee of another company at any time during which an executive officer of such other company served on PepsiCo’s Board of Directors or Compensation Committee.
| 32 | PEPSICO 2023 PROXY STATEMENT | |
Corporate Governance at PepsiCo
Nominating and Corporate
Met six times in 2022 Current Committee Members Robert C. Pohlad CHAIR Cesar Conde |
Primary Responsibilities ■ Developing criteria and qualifications, including criteria to assess independence, for selecting director candidates and identifying qualified candidates for membership on the Board and its Committees ■ Developing and recommending to the Board corporate governance guidelines and other corporate policies and otherwise performing a leadership role in shaping the Company’s corporate governance policies and practices ■ Reviewing Board succession plans and overseeing the development of the process and protocols regarding succession plans for the Company’s CEO ■ Making recommendations to the Board concerning the composition, size, structure and activities of the Board and its Committees ■ Overseeing the process for evaluating the Board and its Committees, including assessing and reporting to the Board on the performance of the Board and its Committees Independence The Nominating and Corporate Governance Committee is comprised entirely of directors who meet the independence requirements under the Nasdaq rules. |
Sustainability, Met four times in 2022 Current Committee Members Darren Walker CHAIR Shona L. Brown |
Primary Responsibilities ■ Assisting in the Board’s oversight of risks related to matters overseen by the Committee ■ Reviewing the Company’s sustainability initiatives and engagement ■ Review the Company’s key sustainability programs and related goals it may establish from time to time and monitor the Company’s progress toward achieving those goals ■ Reviewing the Company’s diversity, equity and inclusion policies, programs and initiatives ■ Reviewing and monitoring key public policy trends, issues and regulatory matters and the Company’s engagement in the public policy process ■ Overseeing the Company’s Political Contributions Policy and reviewing the Company’s political activities and expenditures Independence The Sustainability, Diversity and Public Policy Committee is comprised entirely of directors who meet the independence requirements under the Nasdaq rules. |
The Board’s Role in Strategy Oversight
One of the Board’s key responsibilities is overseeing the Company’s strategy, and the Board has deep experience and expertise in the area of strategy development and insights into the most important issues facing the Company. Setting the strategic course of the Company involves a high level of constructive engagement between management and the Board. Our entire Board acts as a strategy committee and regularly discusses the key priorities of our Company, taking into consideration and adjusting the Company’s long-term strategy with global economic, consumer and other significant trends, as well as changes in the food and beverage industries and regulatory initiatives.
| ■ | Annually, the Board conducts an extensive review of the Company’s long-term strategic plans, its annual operating plan and capital structure. |
| ■ | Throughout the year and at almost every Board meeting, the Board receives information and updates from management and actively engages with senior leaders with respect to the Company’s strategy, including the strategic plans for our divisions, the competitive environment, sustainability initiatives and human capital management strategies, including matters related to diversity, equity and inclusion. |
| ■ | PepsiCo’s independent directors also hold regularly scheduled executive sessions without Company management present, at which strategy is discussed. |
| ■ | The Board also regularly discusses and reviews feedback on strategy from our shareholders and stakeholders. |
The Board also receives regular updates, formally and informally, and participates in discussions with management about any key global events that may impact the Company as they arise. For example, during 2022, the Board was actively engaged in monitoring the potential impact of the deadly conflict in Ukraine and the COVID-19 pandemic on the Company’s strategy.
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Corporate Governance at PepsiCo
The Board’s Oversight of Risk Management
The Board recognizes that the achievement of our strategic and operating objectives involves risks, many of which evolve over time. The Board has oversight responsibility for PepsiCo’s integrated risk management framework, which is designed to identify, assess, prioritize, address, manage, monitor and communicate these risks across the Company’s operations, and foster a corporate culture of integrity and risk awareness. Consistent with this approach, one of the Board’s primary responsibilities is overseeing and interacting with senior management with respect to key aspects of the Company’s business, including risk assessment and risk mitigation of the Company’s top risks.
The Board receives and provides feedback on regular updates from management regarding the Company’s top risks, including updates from members of management responsible for overseeing impacted areas, governance processes associated with managing these risks, the status of projects to strengthen the Company’s risk mitigation efforts and recent incidents impacting the industry and threat landscape. In evaluating top risks, the Board and management consider short-, medium-, and long-term potential impacts on the Company’s business, financial condition, and results of operations, including looking at the internal and external environment when evaluating risks, risk amplifiers and emerging trends, and considers the risk horizon as part of prioritizing the Company’s risk mitigation efforts. The Board receives updates through presentations, memos and other written materials, teleconferences, and other appropriate means of communication, with numerous opportunities for discussion and feedback, and continuously evaluates its approach in addressing top risks as circumstances evolve. PepsiCo’s risk oversight processes and disclosure controls and procedures are designed to appropriately escalate key risks to the Board as well as to analyze potential risks for disclosure.
The Board also receives periodic updates from external experts and advisers on global macroeconomic trends and conditions that may impact the Company’s strategy and financial performance, including geopolitical conflicts, economic instability, labor market trends, changing consumer behavior, retail disruption, and digitalization.
Risk Management Framework
| BOARD OVERSIGHT | |
Board of Directors The Board has oversight responsibility for PepsiCo’s integrated risk management framework. Throughout the year, the Board and the relevant Committees receive updates from management with respect to various enterprise risk management issues and dedicate a portion of their meetings to reviewing and discussing specific risk topics in greater detail, including risks related to cybersecurity, food safety, sustainability, human capital management, including diversity, equity and inclusion, and supply chain and commodity inflation. | |
The Board has tasked designated Committees of the Board with oversight of certain categories of risk management, and the Committees report to the Board regularly on these matters. | |
Audit Committee Reviews and assesses the guidelines and policies governing the Company’s risk management and oversight processes, and assists with the Board’s oversight of financial, compliance and employee safety risks facing the Company. The Audit Committee also assists the Board’s oversight of the Company’s compliance with legal and regulatory requirements, and the General Counsel and the Chief Compliance & Ethics Officer, who reports to the General Counsel, each meets regularly with the Audit Committee, including in executive session without management present. Compensation Committee Reviews the Company’s employee compensation policies and practices to assess whether such policies and practices could lead to unnecessary risk-taking behavior. |
Nominating and Corporate Governance Committee Assists the Board in its oversight of the Company’s governance structure and other corporate governance matters, including succession planning. Sustainability, Diversity and Public Policy Committee Assists the Board in its oversight of the Company’s policies, programs and related risks that concern key sustainability, diversity, equity and inclusion and public policy matters, including climate change. |
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Corporate Governance at PepsiCo
| Sources of Risk Identification & Mitigation | ||
PepsiCo Risk Committee (PRC) ■ Comprised of a cross-functional, geographically diverse, senior management group, including PepsiCo’s Chairman of the Board of Directors and Chief Executive Officer, Chief Financial Officer, General Counsel, Sector Chief Executive Officers and the heads of Corporate Affairs, Human Resources, Research & Development, Information Technology, Sustainability, Strategy, Transformation, International Beverages, Commercial, Global Operations, Marketing, and Financial Planning & Analysis ■ Meets regularly to identify, assess, prioritize and address top strategic, financial, operating, compliance, safety, reputational, and other risks ■ Responsible for reporting progress on risk mitigation efforts to the Board | ||
Division/Key Country Risk Committees ■ Comprised of cross-functional senior management teams ■ Meet regularly to identify, assess, prioritize and address division and country-specific business risks |
Risk Management Office (RMO) ■ Manages the overall risk management process ■ Provides ongoing guidance, tools and analytical support to the PRC and division and key country risk committees ■ Identifies and assesses potential risks and facilitates ongoing communication between the parties, as well as the Board and Committees of the Board | ||
| Internal Audit Department | Disclosure Committee | |
■ Evaluates the ongoing effectiveness of key internal controls through periodic audit and review procedures |
■ Comprised of the General Counsel, Controller and heads of Internal Audit, Financial Planning & Analysis and Investor Relations ■ Evaluates information from PepsiCo’s integrated risk management framework as part of the Disclosure Committee’s monitoring of the integrity and effectiveness of the Company’s disclosure controls and procedures | |
Law and Compliance & Ethics ■ Lead and coordinate compliance policies and practices |
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| Oversight of Certain Key Risks | ||
| Oversight
of Supply Chain and Commodity Inflation Risks  |
During 2022, the Board received information from, and actively engaged with, management on the impact of external factors on our transportation, labor and commodity availability and costs as well as our manufacturing operations and supply chain, including geopolitical events such as the deadly conflict in Ukraine, the COVID-19 pandemic, the inflationary cost environment, supply chain disruptions (including raw material shortages) and labor shortages, and the Company’s efforts to mitigate the potential impact of such factors. | |
Oversight
of Cybersecurity Related Risks |
Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, the Board believes it is useful and effective for the full Board to maintain direct oversight over cybersecurity matters. The Board receives and provides feedback on regular updates from management, including from the Company’s Global Chief Information Officer and Chief Information Security Officer, regarding cybersecurity governance processes, the status of projects to strengthen internal cybersecurity and also discusses any significant cyber incidents, including recent incidents throughout the industry and the emerging threat landscape. | |
Oversight
of Climate Change Related Risks |
The Sustainability, Diversity and Public Policy Committee assists the Board in overseeing the management of long-term risks posed by climate change, including specific actions performed in order to protect the Company from the negative effects of climate change. In addition, the Committee reviews PepsiCo’s sustainability programs and goals related to reducing our climate impact in our operations throughout our value chain and monitors our progress toward achieving such goals. | |
Oversight
of Human Capital Management Related Risks |
The Board is actively engaged in overseeing senior management development and succession as well as PepsiCo’s key human capital management strategies. The Compensation Committee oversees the design of all material employee benefit plans and programs, the Nominating and Corporate Governance Committee oversees CEO and director succession plans, and the Sustainability, Diversity and Public Policy Committee oversees initiatives and progress related to diversity, equity and inclusion. Each of the Committees provide reports and feedback to the full Board for its collective review and discussion. For more information, please see “The Board’s Role in Human Capital Management and Talent Development” beginning on page 36 of this Proxy Statement. | |
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Corporate Governance at PepsiCo
At its February 2023 meeting, the Compensation Committee reviewed the results of the 2022 annual compensation risk assessment and concluded that the risks arising from the Company’s overall compensation programs are not reasonably likely to have a material adverse effect on the Company.
The Company believes that the Board’s leadership structure, discussed in detail under “Board Leadership Structure” on pages 25-27 of this Proxy Statement, supports the risk oversight function of the Board, with the Chairman and CEO uniquely positioned to identify emerging risks while the independent Presiding Director and Chairs of the Board’s four Committees provide independent oversight of the Company’s risk management programs.
The Board’s Role in Human Capital Management and Talent Development
The Board believes that human capital management and talent development are vital to PepsiCo’s continued success. They are integral elements of our strategic framework and we strive to create a diverse and inclusive workplace with meaningful opportunities that will attract and retain the best and brightest in a competitive talent landscape.
Our Board’s involvement in leadership development and succession planning is systematic and ongoing, and the Board provides input on important decisions in each of these areas. The Board has primary responsibility for succession planning for the CEO and oversight of other executive officer positions. The Nominating and Corporate Governance Committee oversees the development of the process and protocols regarding succession plans for the CEO, and annually reviews these protocols. To assist the Board, the CEO annually provides the Board with an assessment of senior managers and their potential to succeed to the position of CEO, developed in consultation with the Presiding Director and the Chair of the Nominating and Corporate Governance Committee. The Board meets regularly with high-potential executives, both in small group and one-on-one settings. The Board has overseen appointments of current direct reports of the CEO, who include seven executives globally who are racially/ethnically diverse and/or female, demonstrating our focus on building a highly skilled and diverse executive team that brings a broad array of opinions and perspectives that are reflective of our global businesses.
With respect to the broader organization, our Board is actively engaged in the oversight of our corporate culture and is continuously focused on developing a culture that is aligned with our long-term strategy. This includes reinforcing a set of behaviors throughout the Company that we think are critical to empower performance, which we call The PepsiCo Way, including voicing opinions fearlessly, raising the bar on talent and diversity and acting with integrity.
| PepsiCo is focused on developing a culture that is aligned with our long-term strategy, including reinforcing a set of behaviors throughout the Company that we think are critical to empower performance, which we call The PepsiCo Way: | |||||||||||||||
| THE PEPSICO WAY |  |
BE CONSUMER CENTRIC |  |
ACT AS OWNERS |  |
FOCUS & GET THINGS DONE FAST |  |
VOICE OPINIONS FEARLESSLY |  |
RAISE THE BAR ON TALENT & DIVERSITY |  |
CELEBRATE SUCCESS |  |
ACT WITH INTEGRITY | |
In addition, the Board and its applicable Committees regularly engage with employees at all levels of the organization to provide oversight on a broad range of other human capital management topics, including talent attraction and retention, diversity, equity and inclusion, pay equity, health and safety, training and development and compensation and benefits. Employee feedback is considered in designing and evaluating employee programs and benefits and in monitoring current practices for potential areas of improvement.
| The Board’s Sustainability, Diversity and Public Policy Committee, established in 2017, assists the Board in providing more focused oversight over PepsiCo’s policies and programs and related risks that concern key sustainability, diversity, equity and inclusion and public policy matters and to ensure that such topics remain central to the success of our business strategy. |
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Corporate Governance at PepsiCo
Human Capital Management Highlights
PepsiCo, under the Board’s oversight and guidance, has taken significant actions to enhance our diverse and inclusive culture, protect and train our associates and maintain our reputation as a great place to work.
| APPROACH | RECENT ACTIONS AND HIGHLIGHTS | ADDITIONAL INFORMATION | ||||
Diversity, Equity and Inclusion |
We believe that our culture of diversity, equity and inclusion is a competitive advantage that fuels innovation, enhances our ability to attract and retain talent and strengthens our reputation. We continually strive to improve the attraction, retention, and advancement of diverse associates to ensure we sustain a high-caliber pipeline of talent that also represents the communities we serve. | In 2020, PepsiCo launched our more than $570 million Racial Equality Journey in the U.S., an effort to break down systemic barriers to opportunity, starting with a set of initiatives in the United States focused on increasing Black and Hispanic representation at PepsiCo to mirror workforce availability in the U.S., supporting Black- and Hispanic-owned businesses and lifting up Black and Hispanic American communities over five years. This commitment includes specific goals to increase Black and Hispanic managerial representation at PepsiCo by 2025. We are also continuing our efforts to recruit, develop and retain women through intentional efforts like our Transformational Leadership Program, Million Women Mentors and our Women’s Inclusion Network and Women of Color Employee Resource Groups. We are committed to being transparent about our actions and provide a workforce demographics report on our website, which is updated every six months, to show how we are progressing against our goals. |
More information on our Racial Equality Journey and initiatives to advance diversity, as well as our U.S. 2021 Consolidated EEO-1 Report as submitted to the U.S. Equal Employment Opportunity Commission, can be found on our website at www.pepsico.com/our-impact/esg-topics-a-z/employee-demographics. | |||
Training and Development |
PepsiCo supports and develops its associates through a variety of global training and development programs that build and strengthen employees’ leadership and professional skills, including career development plans, mentoring programs and in-house learning opportunities, such as PEP U Degreed, our internal global online learning resource. | Through PEP U Degreed, we offer learning solutions, such as industry magazines, TED talks and podcasts. PEP U Degreed also leverages artificial intelligence and machine learning to suggest personalized learning resources. In 2022, PepsiCo associates completed over one million hours of training, including on PEP U Degreed. In 2022, PepsiCo increased its investment in upskilling and reskilling by offering eligible U.S. associates—both frontline and professional— access to more than 100 degrees, certificates and trades programs, all tuition-free. PepsiCo also continued to offer tuition reimbursement annually up to $5,250 for an undergraduate course or $8,000 for a graduate course. In addition, PepsiCo launched SMILES, a global employee recognition program, in 2020 to provide an opportunity for managers and peers to celebrate their team members for The PepsiCo Way behaviors or a milestone. Since launch, more than one million SMILES have been generated on the platform. |
More information on how we are supporting the growth and development of our associates can be found on our website at www.pepsico.com/our-impact/esg-topics-a-z/employee-learning-and-development. |
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PEPSICO 2023 PROXY STATEMENT | 37 |
Corporate Governance at PepsiCo
| APPROACH | RECENT ACTIONS AND HIGHLIGHTS | ADDITIONAL INFORMATION | ||||
Health and Safety |
Protecting the safety, health, and well-being of our associates around the world is PepsiCo’s top priority. We strive to achieve an injury-free work environment. In addition, we offer a variety of programs, both in the U.S. and outside the U.S., designed to help employees and their families improve their physical, financial and emotional health. |
We provide training on how to mitigate potential safety risks and continue to invest in emerging technologies to protect our employees from injuries, including leveraging fleet telematics and distracted driving prevention technology, resulting in reductions in road traffic accidents, and deploying wearable ergonomic risk reduction devices. PepsiCo offers our employees comprehensive and competitive health and wellness benefits. Medical benefits that PepsiCo provides include support for complex and chronic medical conditions, including consultation services and care management programs. For example, PepsiCo’s self-funded medical plans provide access to Health ACE, a confidential health advocate to help employees navigate their health benefits, including questions regarding plan coverage, resolving issues with claims and connecting employees to resources and programs that help meet their medical needs. In the U.S., PepsiCo’s benefits programs help foster inclusion through flexible benefits and policies, including offering on-site childcare facilities in certain locations and market competitive parental leave policies that extend beyond federal guidelines, as well as piloting new programs, such as job sharing and part-time work arrangements. |
More information on our commitment to the health and safety of our associates can be found on our website at www.pepsico.com/our-impact/esg-topics-a-z/environment-health-and-safety. |
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Corporate Governance at PepsiCo
Shareholder and Stakeholder Engagement
| We believe that regular, transparent communication with our shareholders and other stakeholders is essential to PepsiCo’s long-term success. |
We value the views of our shareholders and other stakeholders, and the input that we receive from them is a cornerstone of our corporate governance practices. Through these engagements, we seek to ensure that corporate governance at PepsiCo is a dynamic framework that can both accommodate the demands of a rapidly changing business environment and remain responsive to the priorities of our shareholders and other stakeholders.
We engage with our shareholders and other stakeholders year-round in a variety of ways:
| ■ | Our investor relations team regularly meets with shareholders, prospective shareholders and investment analysts. As appropriate, these meetings include our Chairman of the Board and CEO and Vice Chairman and Chief Financial Officer. These meetings are generally focused on our portfolio strategy, financial and operating performance, and capital allocation. |
| ■ | Members of our management team also regularly engage with shareholders and other stakeholders to discuss our sustainability strategy and initiatives, human capital management, Company culture, diversity, equity and inclusion, corporate governance and executive compensation practices and to solicit feedback on these and a variety of other topics of interest. |
| ■ | We frequently seek feedback from stakeholders in developing key sustainability programs and goals. For example, we engaged more than 50 stakeholders across several geographic areas during the development of the PepsiCo Positive (pep+) framework, including multilateral organizations, non-profit organizations and members of the academia. |
| ■ | Every year, during the two-month period before the Annual Meeting of Shareholders, we generally contact our 75 largest shareholders, who in 2022 represented approximately 48% of our outstanding shares of Common Stock, offering to discuss a broad range of topics. |
| ■ | Subsequent to the Annual Meeting of Shareholders, we continue our outreach efforts to develop a better understanding of the feedback received from shareholders and issues important to our shareholders. |
As reflected in our Corporate Governance Guidelines, our Presiding Director is available for consultation and direct communication, if requested by major shareholders. Our engagement program also involves directors, as well as senior executives and associates from many different parts of the Company, including from PepsiCo’s communications, investor relations, executive compensation, compliance and ethics, legal, public policy and government affairs, and sustainability teams.
In addition, we have had an ongoing dialogue with various other shareholders and stakeholders and regularly meet with diverse stakeholders often in collaboration with leading non-profit groups that bring together investors, non-governmental organizations and businesses in support of sustainability. During these meetings, our shareholders and other stakeholders engage with us on such topics as climate change, packaging, nutrition, water scarcity, public health, human capital management, diversity, equity and inclusion, racial equality, gender pay parity, human rights and environmental matters related to PepsiCo’s supply chain, sustainable agriculture, sustainability reporting, and various other issues. We are also engaged with other key stakeholders through our active participation in leading corporate governance organizations, such as the Harvard Law School Program on Corporate Governance, the Council of Institutional Investors, Society for Corporate Governance and the Stanford Institutional Investors’ Forum.
Feedback Informs Our Board’s Decisions. The Board and its Committees regularly receive updates on our engagement and a summary of communications is sent to the Board with each regularly scheduled Board meeting to provide insights into feedback from shareholders and other stakeholders and the scope of topics important to them. During Board meetings, PepsiCo’s directors are also provided with the opportunity to discuss and ask questions on shareholder feedback. Our engagement activities have resulted in our receiving valuable feedback from our shareholders and other stakeholders who have provided important external viewpoints that inform our decisions and our strategy.
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PEPSICO 2023 PROXY STATEMENT | 39 |
Corporate Governance at PepsiCo
For example, as a result of the dialogue and collaboration with our shareholders and other stakeholders in recent years:
| Governance | ■ The Board refined the roles of its Committees by establishing a Sustainability, Diversity and Public Policy Committee in 2017. The Committee assists the Board in providing more focused oversight over PepsiCo’s policies and programs and related risks that concern key sustainability, diversity, equity and inclusion and public policy matters. ■ We published a global workforce demographics data report and our U.S. 2021 Consolidated EEO-1 Report as submitted to the U.S. Equal Employment Opportunity Commission, available at www.pepsico.com/our-impact/esg-topics-a-z/employee-demographics. ■ We amended our Articles of Incorporation in 2019 to eliminate supermajority voting standards, as approved by our shareholders. ■ The Board amended our Corporate Governance Guidelines over the last several years to: – specifically mention food safety and cybersecurity as areas of Board oversight to reflect current practices; – decrease the total number of public company boards that a non-executive director can serve on from 5 to 4 and establish a limit of 2 total public company boards for directors who are public company executive officers; – highlight the Board’s focus on diversity, by explicitly stating its commitment to actively seeking out highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experiences, to include in the pool from which Board nominees are chosen; – underscore the Board’s involvement in human capital management and talent development, by adding those experiences to the list of attributes sought for individual directors; and – specify the Board’s oversight role with respect to sustainability, an integral part of the Company’s business strategy. ■ The Board implemented a proxy access right for shareholders in 2016. | |
| Sustainability | ■ We ensure that the regular engagement team includes a member with sustainability or public policy expertise, who is available for a dialogue with shareholders about sustainability matters. ■ We continue to integrate purpose into our business strategy and brands with the launch of PepsiCo Positive (pep+), which drives action and progress across three key pillars — Positive Agriculture, Positive Value Chain and Positive Choices — bringing together a number of industry-leading goals under a comprehensive framework as we continue to implement a set of focused initiatives around next generation agriculture, water stewardship, sustainable packaging, products, climate change, and people, to help build a more sustainable food system. More information on pep+ can be accessed on www.pepsico.com/pepsicopositive. ■ We also continue to enhance the Company’s sustainability reporting suite and in 2021, evolved our annual sustainability report into a streamlined ESG Summary, available at www.pepsico.com/our-impact/sustainability/2021-esg-summary, which links seamlessly with more detailed and evergreen reporting in our ESG Topics A-Z platform available at www.pepsico.com/our-impact/esg-topics-a-z. In addition, we continue to publish annual ESG performance metrics and align our public disclosures with key reporting frameworks including the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosures (TCFD). ■ We published our first Human Rights Report in 2020, which provides comprehensive information on our efforts to advance human rights throughout our full value chain, and an update on our salient human rights issues in 2022, which are available at www.pepsico.com/our-impact/esg-topics-a-z/human-rights. ■ In 2023, we also published a report of the PepsiCo Foundation’s charitable contributions for the prior fiscal year, which is available at www.pepsico.com/our-impact/esg-topics-a-z/philanthropy, to provide information that will be provided in its U.S. tax returns in a reader-friendly format. | |
| Compensation | ■ We perform comprehensive reviews of feedback from shareholders. In 2023, the Compensation Committee updated the compensation peer group to ensure it remains appropriate in light of changes in business profile and relative size. We will maintain the current compensation program established in 2020 as it aligns to our business strategy, as well as our core principles, and will continue to take shareholder feedback into consideration. |
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Corporate Governance at PepsiCo
Our Commitment to Sustainable Business Practices
| We are focused on making our Company Faster, Stronger and Better at meeting the needs of our shareholders, customers, consumers, partners and communities, while caring for our planet and inspiring our associates around the world. |
Our long-term sustainability goals have been woven into our business since we first articulated our purpose agenda over fifteen years ago, and we continue to believe our strong sustainability agenda will enable PepsiCo to run a successful global company that creates long-term value for society and our shareholders.
Throughout the year, the Board and the relevant Committees receive updates from and discuss with management sustainability, human capital management, including diversity, equity and inclusion, and public policy matters, including the Company’s key programs and related goals on these topics and progress toward achieving those goals.
To assist our Board in its oversight and to align with our sustainability agenda, the Board also refined the roles of its Committees by establishing a Sustainability, Diversity and Public Policy Committee in 2017. This Committee, which is comprised entirely of independent directors, assists the Board in providing more focused oversight over the Company’s policies, programs and related risks that concern key sustainability, diversity, equity and inclusion and public policy matters.
pep+ Progress
PepsiCo is pleased to share the progress we are making in our sustainability journey. In 2021, we introduced PepsiCo Positive (pep+), a strategic end-to-end transformation with sustainability and human capital at the center of how the company will create growth and value by operating within planetary boundaries and inspiring positive change for the planet and people. pep+ will guide how PepsiCo will transform its business operations: from sourcing ingredients and making and selling its products in a more sustainable way, to leveraging its more than one billion connections with consumers each day to take sustainability mainstream and engage people to make choices that are better for themselves and the planet. pep+ drives action and progress across three key pillars — Positive Agriculture, Positive Value Chain and Positive Choices — bringing together our numerous industry-leading goals for 2030 and beyond under a comprehensive framework as we continue to implement a set of focused initiatives around next generation agriculture, water stewardship, sustainable packaging, products, climate change and people to help build a more sustainable food system. Our sustainability performance goals broaden our efforts in a way that responds to changing consumer and societal needs and focus on building a healthier future for all of our stakeholders.
| PEP+ HIGHLIGHTS | ||||||
Positive Agriculture We’re working to source our crops & ingredients in ways that help restore the earth and strengthen farming communities |
SUSTAINABLY SOURCED INGREDIENTS |
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|
100% of our grower-sourced crops (potatoes, whole corn and oats) are sustainably sourced in 30 countries, and more than 90% of these crops are sustainably sourced globally as of 2022(1) |
We maintained 100% Roundtable on Sustainable Palm Oil (RSPO) physically certified palm oil(2) We maintained 100% Bonsucro certified sustainable cane sugar globally(3) |
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Positive Choices We’re inspiring people through our brands to make choices that create more smiles for them and the planet |
EXPANDED PORTFOLIO OFFERINGS We are almost 80% of the way toward our 2025 targets in reducing added sugars, sodium, and saturated fat across our beverage and convenient foods portfolio(4)
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Corporate Governance at PepsiCo
Positive Value Chain We’re helping build a circular and inclusive value chain |
CLIMATE In 2022, we continued to work toward our goal of 100% renewable electricity in our direct operations, and approximately 65% of our global electricity needs were met by renewable sources(5) |
PACKAGING In December 2022, we set a new packaging goal for 20% of beverage servings to be delivered through reusable models by 2030 |
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WATER As of 2022, our operational water-use efficiency improved by 22% in high water-risk areas vs. 2015 baseline, approaching our goal of 25% improvement by 2025(6) |
PEOPLE As of 2022, we increased our Black and Hispanic managerial populations in the U.S. to 9.0% and 10.1%, respectively, of our workforce Women hold 44% of our global manager positions and continue to be paid within 1% of men(7) |
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GREEN BOND |
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In July 2022, we issued a new $1.25 billion 10-year Green Bond, which will focus on investments to advance key environmental sustainability initiatives under two pillars of our pep+ agenda: Positive Agriculture and Positive Value Chain |
In October 2022, we published our third and final annual Green Bond Report on our 2019 Green Bond, describing our use of proceeds. As of December 31, 2021, we have fully allocated the $974 million in net proceeds from the issuance in 2019 of our first Green Bond to Eligible Green Projects |
For more information, please visit www.pepsico.com/PepsiCoPositive.
| (1) | For grower-sourced crops, sustainable sourcing refers to meeting the independently verified environmental, social and economic principles of PepsiCo’s Sustainable Farming Program (SFP). For more information on PepsiCo’s SFP and the applicable standards, please see www.pepsico.com/esg-topics-a-z/agriculture. |
| (2) | We maintained our sourcing through the RSPO Mass Balance physically certified supply chain model and procured de minimis Independent Smallholder Credits to achieve 100% RSPO certification in 2022. |
| (3) | Results reflect exclusion of SodaStream portfolio. Results include a combined approach of procuring Bonsucro credits and verifying our supply chain. |
| (4) | Based on 2021 data in our Top 26 Beverage markets, which represent 79% of our global beverage volume, and our Top 23 Convenient Foods markets, which represent 86% of our global convenient foods volume. Results reflect exclusion of Hangzhou Haomusi Food Co., Ltd. (“Be & Cheery”) portfolio. |
| (5) | The goal is being accomplished using a diversified portfolio of solutions, including renewable energy certificates. Results reflect exclusion of Be & Cheery portfolio. Decrease from prior year is primarily due to the unavailability of renewable energy certificates in Russia. |
| (6) | High water-risk locations defined by World Resources Institute’s Aqueduct tool. Results reflect the exclusion of third-party facilities. Between 2006–2015, water-use efficiency improved by 26% in global operations at the date of target setting. |
| (7) | Based on pay equity program implemented in 72 countries that collectively make up more than 99% of our salaried employee population, after controlling for legitimate drivers of pay such as job level, geographic location, and performance ratings; based on base compensation. |
Unless otherwise noted, information with respect to our acquisitions of Be & Cheery, BFY Brands, Inc., Pioneer Food Group Ltd. (“Pioneer Foods”), Rockstar Energy Beverages and SodaStream is included herein. Organizational changes (e.g., acquisitions, mergers and divestitures) are evaluated to determine if they have a significant impact on our sustainability performance and, as data becomes available, all reported years for metrics impacted by an organizational change are recast to consistently reflect the impact of the organizational change.
Our annual sustainability report—the ESG Summary—and web-based environmental, social and governance (“ESG”) Topics A-Z on the Company’s website at www.pepsico.com under “Our Impact”—“Sustainability” presents our sustainability goals and provides data, as well as examples of our efforts to achieve these goals.
| 42 | PEPSICO 2023 PROXY STATEMENT | |
Corporate Governance at PepsiCo
Political Contributions Policy
In 2005, the Board of Directors adopted a Political Contributions Policy for the Company, which is amended from time to time. The Political Contributions Policy states, among other things, that details on PepsiCo’s political contributions are posted on our website on an annual basis, and that while the Company generally does not provide contributions from corporate funds to candidates outside the U.S., that it will appropriately post any such contribution along with other political contributions on our website.
The Political Contributions Policy, together with other policies and procedures of the Company, guide PepsiCo’s approach to political contributions. As specified in its Charter, the Sustainability, Diversity and Public Policy Committee oversees this policy and is responsible for reviewing the Company’s key public policy trends, issues and regulatory matters, its engagement in the public policy process and the Company’s political activities and expenditures. In addition, our Board receives information regarding the Company’s public policy initiatives and developments as necessary.
| In keeping with our goal of transparency, our Political Contributions Policy and our annual U.S. political contributions are posted at www.pepsico.com under “Our Impact”—“ESG Topics A-Z”—“Ethics & Governance”—“Public Policy Engagement, Political Activities and Contributions Guidelines.” Additionally, over the years, we have significantly enhanced our website disclosure of political spending and lobbying activities by including the following information: | |
| ■ | a link to PepsiCo’s quarterly federal lobbying reports; |
| ■ | the total annual amount of PepsiCo’s federal lobbying-related expenditures in the United States; |
| ■ | information about our key lobbying priorities and our Board’s oversight of political spending and lobbying activities; |
| ■ | criteria to be used in connection with all contributions, including the candidate’s overall character, integrity, personal conduct, record of public service and commitment to supporting diversity, equity and inclusion; |
| ■ | a global list of key trade associations and policy groups that lobby on behalf of PepsiCo to which PepsiCo contributes over $25,000 annually; and |
| ■ | the names of the lobbyists with which we directly contract. |
Communications with the Board
The PepsiCo Corporate Law Department reviews all communications sent to the Board of Directors and regularly provides to the Board a summary of communications that relate to the functions of the Board or a Board Committee or that otherwise warrant Board attention. Copies of such communications are also made available to the Board. Directors may at any time discuss the Board communications received by the Company. In addition, the Corporate Law Department may forward certain communications only to the Presiding Director, the Chair of the relevant Committee or the individual Board member to whom a communication is directed. Concerns relating to PepsiCo’s accounting, internal accounting controls or auditing matters are referred directly to members of the Audit Committee. Those items that are unrelated to the duties and responsibilities of the Board or its Committees may not be provided to the Board by the Corporate Law Department, including, without limitation, business solicitations, advertisements and surveys; requests for donations and sponsorships; job referral materials such as resumes; product-related communications; unsolicited ideas and business proposals; and material that is determined to be illegal or otherwise inappropriate.
Shareholders and other interested parties may send communications directed to the Board, a Committee of the Board, Presiding Director, independent directors as a group or an individual director by any of the following means:
By Phone  |
By Mail  |
Online  | ||
| 1-866-626-0633 | PepsiCo Board of Directors ATTN: Corporate Secretary PepsiCo, Inc. 700 Anderson Hill Road Purchase, New York 10577 |
Submit a communication through our website www.pepsico.com under “Who We Are”—“Corporate Governance”— “Contacting the Board of Directors” |
|
PEPSICO 2023 PROXY STATEMENT | 43 |
2022 Director Compensation
Non-employee directors are compensated for their service on the Board as described below. Directors who are employees of the Company receive no additional compensation for serving as directors.
Annual Compensation
Every year, our Board of Directors reviews the competitiveness of our compensation program for non-employee directors. Based on the results of a competitive analysis, supported by the Board’s independent compensation consultant, FW Cook, and upon the recommendation of the Compensation Committee, in 2022, the Board decided to maintain the current annual cash retainer of $120,000 and approved an increase in the annual equity retainer from $190,000 to $200,000 effective October 1, 2022. This adjustment was made to maintain the competitiveness of our director compensation program relative to PepsiCo’s peer group and to further align the directors’ interests with our shareholders.
ANNUAL DIRECTOR COMPENSATION |
ADDITIONAL COMPENSATION An additional $30,000 annual cash retainer ■ Nominating and Corporate Governance Committee Chair ■ Sustainability, Diversity and Public Policy Committee Chair An additional $40,000 annual cash retainer ■ Audit Committee Chair ■ Compensation Committee Chair An additional $50,000 annual cash retainer ■ Presiding Director |
The $200,000 annual equity retainer is provided in phantom units of PepsiCo Common Stock that are immediately vested and are payable on the first day of the calendar quarter following the first anniversary of the director’s retirement or resignation from PepsiCo’s Board of Directors, or as of a later date selected by the director. The number of phantom units of PepsiCo Common Stock granted to each director on October 1, 2022 was determined by dividing the $200,000 equity retainer value by the closing price of PepsiCo Common Stock on the next business day following the grant date, which was $165.25. As such, each director was granted 1,210 phantom units, each representing the right to receive one share of PepsiCo Common Stock and dividend equivalents. Dividend equivalents are reinvested in additional phantom units. Directors may also elect to defer their cash compensation into phantom units payable at the end of the deferral period selected by the directors.
Directors are reimbursed for expenses incurred to attend Board and Committee meetings and receive business travel and accident insurance coverage. Directors do not receive any meeting fees and do not have a retirement plan or receive any benefits such as life or medical insurance. Directors are eligible for matching of charitable contributions through the PepsiCo Foundation, which is generally available to all PepsiCo employees.
Initial Share Grant
Each newly appointed non-employee director receives a one-time grant of 1,000 shares of PepsiCo Common Stock when they join the Board. These shares are immediately vested, but must be held until the director leaves the Board.
Governance Features
Our compensation program for non-employee directors operates with the following market-leading governance features:
Shareholder-Approved Cap on Pay. In 2016, our shareholders approved a cap on non-employee director pay as part of the renewal of the PepsiCo, Inc. Long-Term Incentive (“LTI”) Plan. The cap imposes a limit on the awards that may be granted to any non-employee director in a single calendar year in the following amounts: $500,000 for annual equity awards, $500,000 for annual cash retainers, and $250,000 for one-time initial awards to any newly appointed or elected non-employee director. Our current compensation program for non-employee directors is well within these limits.
Stock Ownership Requirements. To reinforce our ownership philosophy, non-employee directors are required to own shares of PepsiCo Common Stock equal to at least $600,000 (five times the annual cash retainer). Shares or phantom units of PepsiCo Common Stock held either directly by the non-employee director (or immediate family members), in the director’s deferred compensation account, or in a trust for the benefit of immediate family members, count towards satisfying the requirement.
| 44 | PEPSICO 2023 PROXY STATEMENT | |
2022 Director Compensation
Non-employee directors have five years from their appointment to meet their stock ownership requirement. All of our non-employee directors have met or are on track to meet their ownership requirements within the five-year period.
Clawback Provision. Under the terms of our long-term incentive plans, non-employee directors who violate PepsiCo’s Global Code of Conduct, who violate applicable non-compete provisions, or who engage in gross misconduct may be subject to financial consequences. Our long-term incentive plans permit PepsiCo to cancel a non-employee director’s outstanding equity awards if PepsiCo determines that the non-employee director has committed any such violation. The long-term incentive plans also permit PepsiCo to clawback all gains from exercised stock options received within the 12 months preceding the violation.
Prohibition on Hedging and Pledging. Our Insider Trading Policy prohibits all directors (including non-employee directors) from using any strategies or products (such as derivative securities or short-selling techniques) to hedge against the potential changes in the value of PepsiCo Common Stock. In addition, directors may not hold PepsiCo securities in a margin account or pledge PepsiCo stock or PepsiCo stock options as collateral for a loan.
Limited Trading Windows. Our directors (including non-employee directors) can only transact in PepsiCo securities during approved trading windows after satisfying mandatory clearance requirements.
2022 Non-Employee Director Compensation
The following table summarizes the compensation of the non-employee directors for the fiscal year ended December 31, 2022.
| Name | Fees Earned or Paid in Cash ($)(1) |
Stock Awards ($)(2) |
All
Other Compensation ($)(3) |
Total ($) | ||||
| Segun Agbaje | 120,000 | 200,000 | — | 320,000 | ||||
| Shona L. Brown | 160,000 | 200,000 | — | 360,000 | ||||
| Cesar Conde | 120,000 | 200,000 | — | 320,000 | ||||
| Ian Cook | 170,000 | 200,000 | — | 370,000 | ||||
| Edith W. Cooper | 120,000 | 200,000 | — | 320,000 | ||||
| Dina Dublon | 120,000 | 200,000 | 10,222 | 330,222 | ||||
| Michelle Gass | 120,000 | 200,000 | 10,222 | 330,222 | ||||
| Dave J. Lewis | 120,000 | 200,000 | — | 320,000 | ||||
| David C. Page | 120,000 | 200,000 | 10,222 | 330,222 | ||||
| Robert C. Pohlad | 150,000 | 200,000 | — | 350,000 | ||||
| Daniel Vasella | 120,000 | 200,000 | 10,222 | 330,222 | ||||
| Darren Walker | 150,000 | 200,000 | — | 350,000 | ||||
| Alberto Weisser | 160,000 | 200,000 | — | 360,000 |
| (1) | The retainer fee reflects a payment of $60,000 made in arrears in June 2022 for service during the period December 1, 2021 through May 31, 2022 and a payment of $60,000 made in arrears in December 2022 for service during the period June 1, 2022 through November 30, 2022. The following directors elected to defer all of their 2021-2022 cash compensation into PepsiCo’s director deferral program: Mr. Agbaje deferred his $120,000 retainer fees into 683 phantom stock units and Dr. Vasella deferred his $120,000 retainer fees into 683 phantom stock units. The number of phantom units of PepsiCo Common Stock Mr. Agbaje and Dr. Vasella deferred on June 1, 2022 and December 1, 2022 was determined by dividing the deferred cash compensation by the closing price of PepsiCo Common Stock on the grant date (or the next trading day), which was $166.49 and $185.90, respectively. |
| (2) | The amounts reported for stock awards represent the full grant date fair value of the phantom stock units granted in 2022 calculated in accordance with the accounting guidance on share-based payments. |
| (3) | The amounts reported in this column represent PepsiCo Foundation matching gifts, personal use of Company aircraft, other charitable contributions or commitments and the value of gifts. Infrequently, a director’s spouse or other family member may fly on Company aircraft. Directors are fully responsible for all personal income taxes associated with any personal use of Company aircraft. Under the matching gift program, the PepsiCo Foundation matches cash or stock donations to recognized tax-exempt organizations. The PepsiCo Foundation annual contributions are generally capped at a total of $10,000, which was increased to $20,000 in October 2022 during our annual corporate-wide giving campaign that encourages associates to give back. PepsiCo Foundation matching gift contributions are available to all PepsiCo employees and PepsiCo non-employee directors. With respect to Mmes. Dublon and Gass and Drs. Page and Vasella, the PepsiCo Foundation made matching contributions of $10,000, respectively. |
|
PEPSICO 2023 PROXY STATEMENT | 45 |
Ratification of Appointment of Independent Registered Public Accounting Firm (Proxy Item No. 2)
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm (taking into account the vote on shareholder ratification). The Audit Committee has appointed KPMG LLP (“KPMG”) as PepsiCo’s independent registered public accounting firm for fiscal year 2023. KPMG has served as PepsiCo’s independent registered public accounting firm since 1990. While we are not required by our By-Laws or otherwise to seek shareholder ratification of the appointment of KPMG as our independent registered public accounting firm, we are doing so as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Audit Committee will take the vote into consideration when determining whether or not to retain KPMG. The Audit Committee believes that the continued retention of KPMG as our independent registered public accounting firm is in the best interests of our shareholders. Even if the selection of KPMG is ratified by shareholders, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.
Representatives of KPMG are expected to be present and available to answer appropriate questions at the 2023 Annual Meeting and will have an opportunity to make statements during the meeting if they desire to do so.
 |
Our Board of Directors recommends that shareholders vote “FOR” the ratification of the appointment of KPMG as PepsiCo’s independent registered public accounting firm for fiscal year 2023. |
Audit Committee Report
PepsiCo’s Audit Committee reports to, and acts on behalf of, the Board. The Audit Committee is comprised solely of directors who satisfy applicable independence and other requirements of Nasdaq and applicable securities laws. A majority of the members of the Audit Committee are “audit committee financial experts” as defined by SEC rules and regulations.
The Audit Committee’s purpose and responsibilities are set forth in its charter, which is approved and adopted by the Board and is available on PepsiCo’s website at www.pepsico.com under “Who We Are”—“Corporate Governance.” The Audit Committee’s Charter is reviewed at least annually and updated, as appropriate, to address changes in regulatory requirements, authoritative guidance, evolving oversight practices and investor feedback.
During 2022, the Audit Committee met eight times and fulfilled each of its duties and responsibilities as outlined in its charter, including reviewing and assessing the guidelines and policies governing PepsiCo’s risk management and oversight processes, overseeing PepsiCo’s compliance with legal and regulatory requirements (including meeting with the Global Chief Compliance & Ethics Officer to discuss PepsiCo’s compliance program), receiving an update on PepsiCo’s Law Department’s compliance with Part 205 of Section 307 of the Sarbanes-Oxley Act of 2002 regarding standards of professional conduct for attorneys and regularly meeting separately with PepsiCo’s General Counsel, Global Chief Compliance & Ethics Officer, General Auditor, Chief Financial Officer and representatives of the independent registered public accounting firm (see page 31 of this Proxy Statement for additional information regarding the Audit Committee’s responsibilities). During 2022, the Audit Committee also reviewed and considered how the deadly conflict in Ukraine and the COVID-19 pandemic impacted each of its areas of responsibility, including its oversight of PepsiCo’s independent registered public accounting firm, the quality and integrity of PepsiCo’s financial statements and internal control over financial reporting, PepsiCo’s internal audit function, and enterprise risk management processes.
Selection and Oversight of the Independent Registered Public Accounting Firm. The Audit Committee assists the Board with its oversight of PepsiCo’s independent registered public accounting firm’s qualifications and independence. The Audit Committee is responsible for appointing, compensating, retaining and overseeing the work of PepsiCo’s independent registered public accounting firm, including approving any services provided by the firm, periodically reviewing and evaluating the performance of the lead audit partner, as well as overseeing the required rotation of KPMG’s lead audit partner and, through the Audit Committee Chair as its representative, reviewing and considering the selection of the lead audit partner. KPMG has served as PepsiCo’s independent registered public accounting firm since 1990. KPMG’s lead audit partner rotated after completion of the 2022 audit and the current lead audit partner is required to rotate after completion of the fiscal year 2027 audit.
| 46 | PEPSICO 2023 PROXY STATEMENT | |
Ratification of Appointment of Independent Registered Public Accounting Firm (Proxy Item No. 2)
The Audit Committee recognizes the importance of maintaining the independence of PepsiCo’s auditor, both in fact and in appearance. In 2022, the Audit Committee received and reviewed the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) regarding KPMG’s communications with the Audit Committee concerning independence, and discussed with KPMG the firm’s independence from PepsiCo and management. These discussions included, among other things, a review of the nature of, and fees paid to, KPMG for non-audit services and the compatibility of such services with maintaining KPMG’s independence (see page 48 of this Proxy Statement for additional information). The Audit Committee concurred with KPMG’s conclusion that they are independent from PepsiCo and its management.
The Audit Committee also periodically considers whether there should be a rotation of PepsiCo’s independent registered public accounting firm. In addition to KPMG’s independence from PepsiCo and management, the Audit Committee also considers several other factors in deciding whether to re-engage KPMG, including: the quality of KPMG’s staff, work and quality control; KPMG’s policies related to independence; KPMG’s global reach; and KPMG’s capability and expertise to perform an audit of PepsiCo’s financial statements and internal control over financial reporting, given the breadth and complexity of PepsiCo’s business and global footprint. The Audit Committee also discussed with KPMG the status or results of the PCAOB’s reports on its inspections of KPMG and discussed with KPMG certain legal and regulatory proceedings, both pending and resolved, against KPMG.
Based on the foregoing, the Audit Committee has retained KPMG as PepsiCo’s independent registered public accounting firm for the fiscal year 2023 and recommends that shareholders ratify this appointment (see page 46 of this Proxy Statement for additional information regarding the shareholder vote).
Review and Recommendation Regarding Financial Statements. PepsiCo’s management is responsible for preparing PepsiCo’s financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. KPMG is responsible for expressing an opinion on PepsiCo’s financial statements and an opinion on PepsiCo’s internal control over financial reporting based on its audits. The Audit Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of PepsiCo’s financial statements.
In the performance of its oversight function, the Audit Committee met with management and KPMG to review and discuss PepsiCo’s audited financial statements and internal control over financial reporting, asked management and KPMG questions relating to such matters and discussed with KPMG the matters required to be discussed by applicable PCAOB auditing standards. These meetings and discussions included a review of the critical accounting policies applied by PepsiCo in the preparation of its financial statements and the quality (and not just the acceptability) of the accounting principles utilized, the reasonableness of significant accounting estimates and judgments, the critical audit matters identified by KPMG during the audit, and the disclosures in PepsiCo’s consolidated financial statements. Based on the reviews and discussions described in this report, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, for filing with the SEC.
| The Audit Committee | |
| Alberto Weisser, Chair | Michelle Gass |
| Segun Agbaje | Dave J. Lewis |
| Edith W. Cooper |
The information contained in the above report will not be deemed to be “soliciting material” or “filed” with the SEC, nor will this information be incorporated into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (“Exchange Act”), except to the extent the Company specifically incorporates such report by reference.
|
PEPSICO 2023 PROXY STATEMENT | 47 |
Ratification of Appointment of Independent Registered Public Accounting Firm (Proxy Item No. 2)
Audit and Other Fees
The following table presents fees incurred for professional audit services rendered by KPMG, the Company’s independent registered public accounting firm, for the audit of the Company’s annual consolidated financial statements for fiscal years 2022 and 2021, and fees billed for other services rendered by KPMG in fiscal years 2022 and 2021.
| 2022 | 2021 | |||||||
| Audit fees(1) | $ | 26,938,000 | $ | 29,526,000 | ||||
| Audit-related fees(2) | $ | 1,656,000 | $ | 1,476,000 | ||||
| Tax fees(3) | $ | 188,000 | $ | 166,000 | ||||
| All other fees(4) | $ | — | $ | — | ||||
| (1) | Audit fees for fiscal years 2022 and 2021 consisted of fees for the audits of the Company’s annual consolidated financial statements, and the audit of the effectiveness of the Company’s internal control over financial reporting, the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q and services related to statutory filings or engagements. |
| (2) | Audit-related fees for fiscal years 2022 and 2021 consisted primarily of the audits of certain employee benefit plans, the issuance of comfort letters, agreed upon procedures and other attestation reports. |
| (3) | Tax fees for fiscal years 2022 and 2021 consisted primarily of international tax compliance services. |
| (4) | KPMG was not engaged in fiscal years 2022 or 2021 for any services other than those described above. |
Pre-Approval Policy and Procedures
We understand the need for the independent registered public accounting firm to maintain its objectivity and independence, both in appearance and in fact, in its audit of PepsiCo’s consolidated financial statements. Accordingly, the Audit Committee has adopted the PepsiCo Policy for Pre-Approval of Audit, Audit-Related and Non-Audit Services. The policy provides that the Audit Committee will engage the independent registered public accounting firm for the audit of PepsiCo’s consolidated financial statements and audit-related, tax and other non-audit services in accordance with the terms of the policy. The policy provides that on an annual basis the independent registered public accounting firm’s global lead audit partner will review with the Audit Committee the services the independent registered public accounting firm expects to provide in the coming year and the related fee estimates, and that the Audit Committee will consider for pre-approval a schedule of such services. The policy further provides that the Audit Committee will specifically pre-approve engagements of the independent registered public accounting firm for services that are not pre-approved through the annual process. The Audit Committee Chair is authorized under the policy to pre-approve any audit, audit-related, tax or other non-audit services between Audit Committee meetings, provided such interim pre-approvals are reviewed with the full Audit Committee at its next meeting. In addition, the Audit Committee receives a status report at each of its regularly scheduled meetings regarding audit, audit-related, tax and other non-audit services that the independent registered public accounting firm has been pre-approved to perform, has been asked to provide or may be expected to provide during the balance of the year. The Audit Committee pre-approved all services provided by KPMG during fiscal 2022 and 2021 in accordance with the Policy for Pre-Approval of Audit, Audit-Related and Non-Audit Services.
| 48 | PEPSICO 2023 PROXY STATEMENT | |
Advisory Approval of Executive Compensation (Proxy Item No. 3)
Pursuant to Section 14A of the Exchange Act, the Company asks shareholders to cast an advisory vote to approve the compensation of our Named Executive Officers disclosed in the “Executive Compensation” section beginning on page 50 of this Proxy Statement. While this vote is non-binding, PepsiCo values the opinions of its shareholders and, consistent with our record of shareholder engagement, will consider the outcome of the vote when making future compensation decisions.
In considering your vote, we invite you to review the Compensation Discussion and Analysis beginning on page 50 of this Proxy Statement. As described in the Compensation Discussion and Analysis, we believe that PepsiCo’s executive compensation programs effectively align the interests of our executive officers with those of our shareholders by linking a significant portion of their compensation to PepsiCo’s performance and by providing a competitive level of compensation designed to recruit, retain, and motivate talented executives critical to PepsiCo’s long-term success.
We are asking our shareholders to vote FOR, in an advisory vote, the following resolution:
“Resolved, the shareholders of PepsiCo approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the 2022 Summary Compensation Table, the other compensation tables and the related notes and narratives on pages 50-86 of this Proxy Statement for the 2023 Annual Meeting of Shareholders.”
The Board has adopted a policy of providing annual advisory approvals of the compensation of our NEOs. The next advisory approval of executive compensation will occur at the 2024 Annual Meeting of Shareholders unless the Board of Directors modifies its policy on the frequency of holding such advisory approvals based on the outcome of Proxy Item Number 4 on page 87 of this Proxy Statement to be voted on by our shareholders.
|
Our Board of Directors recommends that shareholders vote “FOR” the compensation of our Named Executive Officers. |
|
PEPSICO 2023 PROXY STATEMENT | 49 |
Executive Compensation
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides a description of PepsiCo’s executive compensation philosophy and programs, and more specifically, discusses the process in determining the compensation of our NEOs.
 |
 |
 |
 |
 | ||||
| Ramon L. Laguarta | Hugh F. Johnston | Silviu Popovici | Steven Williams | Kirk Tanner | ||||
| Chairman of the Board and CEO, PepsiCo |
Vice Chairman, Executive Vice President (“EVP”) and Chief Financial Officer (“CFO”), PepsiCo |
CEO, Europe | CEO, PepsiCo Foods North America (“PFNA”) |
CEO, PepsiCo Beverages North America (“PBNA”) |
PepsiCo Strategy and Vision
Our relentless drive to Be the Global Leader in Beverages and Convenient Foods by Winning with pep+ has enabled us to deliver strong performance and financial results in 2022 while placing sustainability and human capital at the center of how we create value and growth.
Under the steadfast leadership of our Chairman and CEO, this vision has been guided by our strategic aspiration to be an even Faster, Stronger and Better organization.
| FASTER | STRONGER | BETTER | ||
| Winning in the marketplace, being (even) more consumer-centric and expanding our investments | Transforming our capabilities and costs and using new technologies to our advantage | Integrating a sense of purpose into our business strategy for our planet and communities |
Since our strategic vision was rolled out in 2019, our businesses have remained committed to leveraging the substantial investments made in our people, brands, supply chain, go-to-market systems, manufacturing capacity, and digital capabilities to build competitive advantages and to enable us to deliver on our aspirations, resulting in strong marketplace performance and positive returns for our shareholders.
| 50 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
2022 PepsiCo Performance Highlights
PepsiCo exceeded the majority of its operating performance goals in 2022 despite ongoing supply chain and inflationary pressures, as well as continued volatility and uncertainty in the global economy. Our strong results highlight the strength of our diversified portfolio and the growth momentum from our Faster, Stronger and Better business aspirations, as we continued to demonstrate resiliency.
To incentivize executive officers to deliver sustainable long-term value to shareholders, compensation is measured against key metrics which are critical for the execution of the Company’s strategy. Highlights of our 2022 performance include:
| Organic Revenue Growth[4] |
Core Constant Currency EPS Growth[4] |
Free Cash Flow Excluding Certain Items[4] |
TSR | Cash Returned to Shareholders | ||||||||||||||
| 14.4% | 11% | $6.9 Billion | 6.8% | $7.7 Billion | ||||||||||||||
PepsiCo Compensation Principles
Our executive compensation programs are designed to align the interests of our executive officers with our shareholders, underpinned by the following core principles.
| Pay for Performance |  |
■ Put the majority of executive officer pay at-risk, where both short-term and long-term incentives are dependent on performance relative to predetermined goals ■ Awards granted to executive officers never vest exclusively on continued employment ■ Payout at target only when PepsiCo achieves its internal performance targets |
| Alignment with Business Strategy |  |
■ Tie performance objectives directly to each Faster, Stronger and Better aspiration to drive forward our vision ■ Top-line and market share metrics reinforce our need to be Faster, bottom-line and capital management metrics provide a balance to help us be Stronger, and integrating purpose into strategic business imperatives allows us to be Better |
| Shareholder Value Creation |  |
■ Directly link pay to the achievement of performance goals designed to foster the creation of sustainable long-term shareholder value ■ Maintain stock ownership requirements for senior leadership which extend beyond employment |
| Market Pay Competitiveness |  |
■ Provide market-competitive programs that enable PepsiCo to attract and retain highly talented individuals ■ Reward overachievement allowing for differentiation in talent |
| Delivering Individual and ESG Objectives |  |
■ Recognize the achievement of individual and ESG goals that advance PepsiCo’s strategic business imperatives, tailored to each executive officer’s role and responsibilities ■ Embed goals into individual objectives which are tied to one or more of agriculture, climate, water, packaging, people, expanded portfolio offerings, and/or innovative packaging solutions |
| [4] | To evaluate performance in a manner consistent with how management evaluates our operating results and trends, the Compensation Committee applies certain Business Performance metrics that are measured on a non-GAAP basis as compensation performance measures to both long-term and annual incentive awards. Please refer to Appendix A to this Proxy Statement for a description and reconciliation of these non-GAAP financial measures relative to reported GAAP financial measures, and to pages 44-49 and 52 of PepsiCo’s 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a more detailed description of the items excluded from these measures. |
|
PEPSICO 2023 PROXY STATEMENT | 51 |
Executive Compensation
Impact of 2022 PepsiCo Performance on CEO Pay
Chairman and CEO Performance Summary
The Board of Directors evaluates the performance of Mr. Laguarta through a rigorous assessment of achievements relative to predetermined operational measures established by the Compensation Committee, with adjustments for individual performance. The annual incentive is fully at-risk based on performance and can range from 0% to 200% of target.
For 2022, Mr. Laguarta’s annual incentive was determined by reference to the Business Performance metrics and Business Results under the “2022 Annual Incentive Award” section beginning on page 56 of this Proxy Statement, with primary focus on achievement of predetermined goals for each of the following measures:
| ■ | Organic Revenue Growth[5] |
| ■ | Free Cash Flow Excluding Certain Items[5] |
| ■ | Relative Competitive Performance |
| ■ | Core Constant Currency Net Income Growth[5][6] |
In addition to the Business Performance metrics, the Compensation Committee considered Mr. Laguarta’s individual performance by assessing his progress relative to PepsiCo’s short- and long-term business strategy with an emphasis on the delivery of our aspirations to be Faster, Stronger and Better for our associates, communities, consumers, customers, planet, and shareholders.
In 2022, Mr. Laguarta provided strong strategic leadership in an ongoing challenging environment to drive PepsiCo to exceed the majority of its financial goals, while remaining focused on long-term value creation for its shareholders and navigating a dynamic operating environment. Financial, operational, and individual performance highlights under Mr. Laguarta’s leadership in 2022 include:
| Faster |
■ Delivered Organic Revenue Growth[5] of 14.4% in 2022, emphasized by five consecutive quarters of double-digit Organic Revenue Growth[5] |
 |
■ Generated Organic Revenue Growth[5] of 14% for the North America divisions, 16% for the International divisions, 10% for the Global Beverages business, and 18% for the Global Convenient Foods business, reflecting the geographical and category diversity of our portfolio ■ Grew Core Constant Currency EPS[5] by 11%, exceeding external guidance and delivering value to shareholders ■ Gained savory market share in the U.S., Brazil, China, the U.K., India, Pakistan, Saudi Arabia, Spain, Turkey, Netherlands, Australia, and Chile ■ Gained beverages market share in Mexico, Brazil, Australia, China, India, Egypt, Pakistan, Saudi Arabia, Vietnam, and Nigeria, reinforcing our strategy to win in the marketplace |
| [5] | To evaluate performance in a manner consistent with how management evaluates our operating results and trends, the Compensation Committee applies certain Business Performance metrics that are measured on a non-GAAP basis as compensation performance measures to both long-term and annual incentive awards. Please refer to Appendix A to this Proxy Statement for a description and reconciliation of these non-GAAP financial measures relative to reported GAAP financial measures, and to pages 44-49 and 52 of PepsiCo’s 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a more detailed description of the items excluded from these measures. |
| [6] | Refers to Core Constant Currency Net Income attributable to PepsiCo growth. |
| 52 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
| Stronger |
■ Automated and digitized our supply chain to support our innovation pipeline with greater agility and speed-to-market, launching key digital platforms in large markets, including the U.S., Turkey, the U.K., and Mexico |
 |
■ Continued to take significant steps to unlock capital for further investment, including the successful execution of the divestiture of Tropicana, Naked, and select other juice brands with minimal ongoing business impact ■ Advanced packaging and flavor innovation across our product portfolio to address evolving consumer and societal preferences while expanding positive product choices with more nutritious convenient foods and zero-sugar beverages ■ Promoted smarter, data-driven decision making across the organization with the embedding of analytics and self-reporting where they are needed for associates to procure, plan, report, make, move, and sell our products ■ Created a new International Beverages organization which will accelerate the transformation of our bottling network with a focus on stronger capabilities to execute our pep+ agenda ■ Elevated external strategic partnerships focused on sustainability, supply chain efficiencies, and digital transformation, including engagements with the Massachusetts Institute of Technology and Corteva Agriscience |
| Better |
■ Led our pep+ sustainability strategy in 2022, to strengthen and embed purpose into PepsiCo by driving changes in our operations, our culture, our workforce, across our value chain, and in our communities, transforming PepsiCo to be an industry leader in the ESG space and delivering progress in our three strategic areas: Positive Agriculture, Positive Value Chain, and Positive Choices |
 |
■ Ensured integration of the pep+ agenda into many of PepsiCo’s business processes, while ensuring capital is invested in initiatives to continue to advance pep+ goals ■ Took meaningful action to strengthen agricultural systems through regenerative practices that have the potential to deliver improved soil health, decreased greenhouse gas emissions, and a more efficient use of water on farms. For example, through a groundbreaking partnership with Archer Daniels Midland Company, we have a goal to scale regenerative agriculture across 2 million acres within our shared North American supply chains, which comes with the potential to eliminate 1.4 million metric tons of greenhouse gases by 2030 ■ Focused on water stewardship as we believe that water is core to growth and prosperity, tackling the root causes of local water scarcity, reinforced by the achievement of circular water systems within four facilities in Latin America, where facilities operate without the use of any water from the municipal water supply. We have also been active in replenishment projects in high-water-risk areas and entered into a partnership with World Wildlife Fund in South Africa to improve freshwater availability ■ Defined clear roadmaps for our global packaging transformation, taking important actions in our journey to deliver more sustainable packaging and drive a more circular economy for plastics, including committing to further use of recycled content in our packaging, with all of our geographic sectors with a beverage portfolio having launched 100% recycled polyethylene terephthalate (rPET) carbonated soft drinks, and 22 markets with at least one product with 100% rPET packaging ■ Took further action on climate in our journey to achieve net zero emissions by 2040. In 2022, we announced pep+ REnew, a collaboration with Schneider Electric, aimed at educating PepsiCo’s value chain partners about renewable electricity choices and quickening the transition to renewable electricity through aggregate power purchase agreements and other renewable electricity procurement options ■ Advanced our people agenda by continuing our legacy of leading with diversity, equity, and inclusion as we rely on the diversity of our teams to innovate and build our brands, reinforced by increased representation across all key demographics, including the increase of Black and Hispanic representation at the managerial level, at 9.0% and 10.1%, respectively, as we remain on track to meet our goal of improving managerial representation in the U.S. to 10% by 2025 ■ Made important progress toward our goal of investing $50 million over five years to strengthen Black-owned businesses. To date, the Pepsi Dig In program, inclusive of the PepsiCo Foundation’s Black Restaurant Accelerator, has invested $22.3 million in funding for Black-owned restaurants |
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PEPSICO 2023 PROXY STATEMENT | 53 |
Executive Compensation
Chairman and CEO Pay Decisions
As disclosed in the 2022 Proxy Statement, in recognition of Mr. Laguarta’s 2021 achievements and to ensure appropriate market pay competitiveness, the Board of Directors approved a 4.8% increase to his base salary effective February 2022. To further recognize Mr. Laguarta’s sustained performance and leadership since becoming CEO in 2018 while continuing to reinforce a strong pay-for-performance philosophy by ensuring the majority of compensation remains performance-based, the Board approved an annual salary of $1.7 million for 2023, a 4.6% increase over 2022, a 2022 annual cash incentive of $6.32 million, and a 2023 LTI award with a grant date value of $15.5 million. The actual payout Mr. Laguarta will realize on his 2023 LTI award will depend upon achievement of Core Constant Currency EPS Growth, Organic Revenue Growth, and Relative TSR Performance targets established by the Compensation Committee for the 2023-2025 performance period.
Strong Compensation Governance
The Compensation Committee oversees the executive compensation programs and evaluates the programs against competitive practices, legal and regulatory developments, and corporate governance trends. The Compensation Committee has incorporated the following market-leading governance features into our programs.
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What We Do
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What We Don’t Do
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Stringent clawback provisions:
No employment agreements: None of our executive officers
have an employment agreement, separation, or change in control agreement| 54 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
Engagement with Our Shareholders
PepsiCo has a longstanding practice of regularly engaging with shareholders year-round. Every year, during the two-month period before the Annual Meeting of Shareholders, we generally contact our 75 largest shareholders, who represented approximately 48% of our outstanding shares of Common Stock in 2022, offering to discuss a broad range of topics, including executive compensation. Subsequent to the Annual Meeting of Shareholders, we continue our outreach efforts to develop a better understanding of the feedback received from shareholders and issues important to our shareholders.
Our Compensation Committee considered shareholder feedback in its annual review of program components, targets, and payouts to maintain awareness of emerging executive compensation practices, ensure the continued strength of our pay-for-performance alignment, and sustain strong shareholder support.
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At our 2022 Annual Meeting, shareholders again showed strong support for our executive compensation programs with 93% of the votes cast approving our advisory resolution. |
To strengthen the link between PepsiCo’s business strategy and incentives, the Compensation Committee implemented several changes to the overall executive compensation program effective with the 2020 performance year. The Compensation Committee decided to maintain the current construct of the program for 2022. |
Components of Our Executive Compensation Program
Primary components of our executive compensation programs, summarized below, ensure that pay is directly linked to the creation of sustainable long-term shareholder value.
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PEPSICO 2023 PROXY STATEMENT | 55 |
Executive Compensation
2022 Target Pay Mix for Named Executive Officers
To align pay levels for NEOs with the Company’s performance, our pay mix places the greatest emphasis on performance-based incentives.
| CHAIRMAN AND CEO TARGET PAY MIX | NEO AVERAGE TARGET PAY MIX (EXCLUDING CHAIRMAN AND CEO) | |
 |
 |
Base Salary
The Compensation Committee annually reviews the salaries of our NEOs, as annual salary increases are not automatic or guaranteed.
The base salaries paid to our NEOs in fiscal year 2022 are presented in the 2022 Summary Compensation Table on page 69 of this Proxy Statement.
| Name | Base
Salary as of 2021 Fiscal Year-End ($000) |
Base
Salary as of 2022 Fiscal Year-End ($000) |
Percentage Increase | |||
| Ramon L. Laguarta | 1,550 | 1,625 | 5% | |||
| Hugh F. Johnston | 1,000 | 1,000 | 0% | |||
| Silviu Popovici | 750 | 750 | 0% | |||
| Steven Williams | 800 | 800 | 0% | |||
| Kirk Tanner | 800 | 800 | 0% |
In the first quarter of 2023, Messrs. Williams and Tanner’s base salaries were increased to $850,000 and Mr. Popovici’s base salary was increased to $800,000 to maintain competitiveness with external peers.
2022 Annual Incentive Award
We provide annual cash incentive opportunities to our NEOs under the PepsiCo, Inc. Executive Incentive Compensation Plan (“EICP”). Awards granted under the EICP are designed to drive Company, business unit, and individual performance.
When determining the actual annual incentive award payable to each executive officer, the Compensation Committee considers both business and individual performance. The graphic below illustrates the calculation of the annual incentive award for each NEO, apart from the Chairman and CEO, whose compensation is discussed earlier.
| 56 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
Business Performance Metrics. Our annual incentive program applies metrics that executives directly influence to ensure a link between annual performance and actual incentive payments. Compensation performance measures are selected taking our business strategy into consideration to drive effective execution and delivery of our operating goals. The Compensation Committee may make adjustments from time to time to facilitate year-over-year comparability of historical business performance and trends, which is consistent with how management evaluates operating results. The 2022 performance metrics which make up the Business Performance component of the annual incentive award are listed in the table below for each NEO:
| Ramon L. Laguarta | Hugh F. Johnston | Silviu Popovici | Steven Williams | Kirk Tanner | ||||||
| PepsiCo | PepsiCo | Europe | PFNA(1) | PBNA | ||||||
| Organic Revenue Growth | ● | ● | ● | ● | ● | |||||
| Free Cash Flow Excluding Certain Items | ● | ● | ● | ● | ● | |||||
| Core Constant Currency EPS Growth | ● | |||||||||
| Relative Competitive Performance | ● | ● | ● | ● | ● | |||||
| Core Constant Currency Net Income Growth[7] | ● | ● | ||||||||
| Core Constant Currency Operating Profit Growth | ● | ● | ● |
| (1) | Annual incentive award for Mr. Williams is based on Frito-Lay North America (“FLNA”) and Quaker Foods North America (“QFNA”) compensation performance measures. |
To determine Mr. Laguarta’s annual incentive, the Board of Directors reviews the above Business Performance metrics against predetermined targets as previously discussed in the “Chairman and CEO Performance Summary” section of this Proxy Statement. Business Performance for all other NEOs is calculated using a weighting established at the beginning of the performance period of 30% Organic Revenue Growth, 30% Core Constant Currency Net Income Growth[7]/Core Constant Currency Operating Profit Growth, 30% Relative Competitive Performance, and 10% Free Cash Flow Excluding Certain Items, with bonus scores capped at target if certain performance targets are not achieved.
Business Results. In determining annual incentive awards for 2022, the Compensation Committee assessed actual Company performance against the pre-established performance targets noted in the table below. Performance targets are set taking external guidance into consideration and are designed to be rigorous, requiring commitment from our NEOs to ensure they deliver on our financial goals communicated to shareholders.
| Performance Metrics[8] | Performance Targets | Actual Results | ||
| Organic Revenue Growth | 5.7% | 14.4% | ||
| Free Cash Flow Excluding Certain Items | $7.3 billion | $6.9 billion | ||
| Core Constant Currency EPS Growth | 8% | 11% | ||
| Core Constant Currency Net Income Growth[7] | 8% | 11% |
Business unit performance targets and Relative Competitive Performance expectations, which were intended to be challenging, are not disclosed because such disclosure would result in competitive harm to the Company. These targets were set at levels necessary to deliver our consolidated financial goals and generate value for shareholders.
In determining final annual incentive award payouts, the Compensation Committee considers actual business results relative to the performance targets outlined in the previous table, in addition to other quantitative and qualitative factors. The Compensation Committee engages in a robust and rigorous review of any exclusions made from results of operations for compensation purposes. If exercised, these adjustments may be positive or negative to ensure that executives are neither rewarded nor penalized for extraordinary factors outside of their control.
Relative Competitive Performance (“RCP”). In addition to the financial performance measures outlined above, RCP is a measure that assesses year-over-year market share change in applicable food and beverage categories such as savory, liquid refreshment beverages, cereals, and/or modern dairy, based on market share data reported by independent market research leaders and our analysis of other relevant factors, including data availability, data quality, strategic importance to a category, consumer perception, and brand equity.
| [7] | Refers to Core Constant Currency Net Income attributable to PepsiCo growth. |
| [8] | Please refer to Appendix A to this Proxy Statement for a description and reconciliation of these non-GAAP financial measures relative to reported GAAP financial measures, and to pages 44-49 and 52 of PepsiCo’s 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a more detailed description of the items excluded from these measures. |
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PEPSICO 2023 PROXY STATEMENT | 57 |
Executive Compensation
Individual Performance Metrics. The Compensation Committee evaluates individual performance based on objectives related to an individual’s contribution to PepsiCo’s strategic business imperatives, such as improving operating efficiencies, driving innovation, increasing customer satisfaction, enhancing environmental sustainability, and managing and developing a diverse and talented workforce. The strategic business imperatives are intended to be challenging. They can be both quantitative and qualitative and vary for each executive officer.
As pep+ is integrated into our core business strategy, executive officers are held accountable for strategic imperatives which drive action and progress towards our long-term sustainability goals. As such, all executive officers have ESG goals incorporated into their individual performance objectives, generally tailored to the scope of their respective responsibilities.
The Compensation Committee thoroughly reviews all accomplishments for the performance year, evaluating each executive officer’s progress towards the achievement of our broader sustainability goals as described in PepsiCo’s digital ESG Summary, available at www.pepsico.com/our-impact/sustainability/2021-esg-summary. Holistic accomplishments pertaining to each stage of our value chain are considered including, but not limited to: agriculture, climate, water, packaging, people, expanded portfolio offerings, and/or innovative packaging solutions.
These outcomes are taken into consideration by the Compensation Committee, in conjunction with the executive officer’s broader contributions to PepsiCo’s business imperatives, translating into their Individual Performance Multiplier, which ranges from 0% to 150% to allow for enhanced differentiation in payouts.
| 58 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
NEO Performance Summary. In determining annual incentive awards for 2022, the Compensation Committee considered the following accomplishments by NEOs, other than the Chairman and CEO, who is discussed earlier.
| NEO Performance | 2022 Compensation ($000) | |||
| Hugh F. Johnston Vice Chairman, EVP and CFO, PepsiCo |
FASTER: ■ Enabled PepsiCo to increase its dividend for the 50th consecutive year in 2022, returning $7.7 billion in cash to shareholders through $6.2 billion of dividends and $1.5 billion in share repurchases, prioritizing investor returns ■ Supported the successful execution of the divestiture of certain juice brands in North America and Europe, ensuring the business remained positioned for future success STRONGER: ■ Delivered on major enterprise transformation initiatives, generating at least $1 billion in productivity savings for the fiscal year, reinvesting in modernizing and harmonizing information technology systems ■ Provided thought-leadership for the Company’s digital transformation journey by advancing artificial intelligence-enabled analytics to fortify businesses and build competitive advantages over the long-term BETTER: ■ Issued PepsiCo’s second Green Bond since 2019 with a $1.25 billion senior notes offering with ten-year maturity that will focus on investments to deliver key environmental sustainability initiatives in virgin plastic waste reduction, decarbonization, water-use efficiency, and regenerative agriculture |
Mr. Johnston’s 2022 Annual Incentive Award was determined in accordance with the performance measures previously disclosed and the accomplishments highlighted to the left. Mr. Johnston’s 2022 LTI Award was granted in March 2022 in the form of 66% PSUs and 34% LTC. |
| NEO Performance | 2022 Compensation ($000) | |||
| Silviu
Popovici CEO, Europe |
FASTER: ■ Continued to deliver Organic Revenue Growth, remaining resilient amidst unprecedented geopolitical and macroeconomic uncertainty ■ Gained savory snack share in the U.K., Spain, Turkey, and Netherlands STRONGER: ■ Entered into a strategic agreement with premium Romanian spring water AQUA Carpatica under which PepsiCo will own a 20% stake in AQUA Carpatica and will have rights to distribute AQUA Carpatica’s products in Romania and Poland with opportunities to expand into other countries ■ Invested in breakthrough start-up companies and digital solutions aimed at enhancing sustainability for the business’ supply chain BETTER: ■ Launched lower sodium and lower saturated fat offerings for Walkers and Doritos brands in the U.K. to provide smarter snacking choices without compromising taste that consumers know and love ■ Announced goals to eliminate virgin fossil-based plastic in all European crisp and chip bags by 2030 ■ Deployed resources to aid those facing the ongoing conflict and humanitarian crisis in Ukraine, in addition to supporting Ukrainian communities |
Mr. Popovici’s 2022 Annual Incentive Award was determined in accordance with the performance measures previously disclosed and the accomplishments highlighted to the left. Mr. Popovici’s 2022 LTI Award was granted in March 2022 in the form of 66% PSUs and 34% LTC. |
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PEPSICO 2023 PROXY STATEMENT | 59 |
Executive Compensation
| NEO Performance | 2022 Compensation ($000) | |||
| Steven
Williams CEO, PFNA |
FASTER: ■ Delivered Organic Revenue Growth[9] of 17% and 13% for FLNA and QFNA, respectively, and Core Constant Currency Operating Profit Growth[9] of 11% and 6% for FLNA and QFNA, respectively ■ Achieved double-digit Net Revenue growth of popular, trusted brands including Doritos, Cheetos, Lay’s, Ruffles, Tostitos, and Fritos, as well as emerging brands geared towards more nutritious snacking such as PopCorners, Smartfood, and SunChips ■ Gained market share in the macro and savory snacks categories STRONGER: ■ Invested in consumer-centric innovation to generate growth across product portfolio including expanding the flavor profile of the Doritos brand and debuting Frito-Lay Minis ■ Extended variety pack combinations to unlock incremental occasions in smaller pack sizes to meet the changing needs and preferences of consumers BETTER: ■ Focused on positive choices with the launch of Quaker On-The-Go Snack Multipack, Quaker Puffed Granola, and Quaker Oat Flour ■ Announced a new electric fleet to support the achievement of net-zero emissions across the business’ value chain by 2040 |
Mr. Williams’ 2022 Annual Incentive Award was determined in accordance with the performance measures previously disclosed and the accomplishments highlighted to the left. Mr. Williams’ 2022 LTI Award was granted in March 2022 in the form of 66% PSUs and 34% LTC. |
| NEO Performance | 2022 Compensation ($000) | |||
| Kirk
Tanner CEO, PBNA |
FASTER: ■ Delivered Organic Revenue Growth[9] of 11% for PBNA ■ Accelerated growth across several trademark brands, including double-digit Net Revenue growth for Gatorade, Pepsi, Mountain Dew, and Aquafina ■ Directed investments towards faster growing, highly profitable categories as PBNA looked to expand its margins, reinforced by Core Constant Currency Operating Profit Growth[9] of 9% STRONGER: ■ Entered into a long-term strategic distribution arrangement with Celsius Holdings, Inc. to drive growth and innovation in the energy beverage category ■ Expanded distribution presence in the low-alcohol category in the U.S. by extending distribution of Hard Mtn Dew, a product of the Boston Beer Company, to eleven states BETTER: ■ Invested in zero sugar offerings across our iconic brands such as Pepsi, Mountain Dew, and Gatorade and refreshed our lineup of ready-to-drink teas, sparkling and enhanced waters, and energy drinks to offer more positive product choices to consumers ■ Elevated PBNA’s position in the sports nutrition category with Fast Twitch, a multifaceted energy and sports drink formulated specifically for athletes |
Mr. Tanner’s 2022 Annual Incentive Award was determined in accordance with the performance measures previously disclosed and the accomplishments highlighted to the left. Mr. Tanner’s 2022 LTI Award was granted in March 2022 in the form of 66% PSUs and 34% LTC. |
| [9] | Please refer to Appendix A to this Proxy Statement for a description and reconciliation of these non-GAAP financial measures relative to reported GAAP financial measures, and to pages 44-49 and 52 of PepsiCo’s 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a more detailed description of the items excluded from these measures. |
| 60 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
Long-Term Incentive Awards
PepsiCo’s LTI program is 100% performance-based. The design helps ensure an appropriate level of focus on successfully attaining critical operating goals and sustained appreciation in shareholder value relative to our peers.
The vesting of LTI awards is 100% performance-based, subject to the achievement of ambitious three-year financial targets aligned with the terms and conditions of PepsiCo’s LTI program. The three-year cliff vesting provision also serves as a critical retention tool in an environment of competition for key talent.
| Awards granted include two distinct components: PSUs and LTC awards. Each executive’s target grant value is based on their role. |  |
Performance Stock Units
The PSUs incentivize our executive officers to focus on critical operating performance objectives that we believe translate to sustainable shareholder returns over the long term. The PSUs pay out in PepsiCo shares, plus dividends accrued over the vesting period on earned shares.
| 50% weighting | Earnings Per Share Growth 3-year average of annual Core Constant Currency EPS Growth rates A metric followed by shareholders that incorporates key elements of financial success, including top-line growth in revenue, expense control, the effectiveness of investments made in the business over time, and bottom-line profitability. | |
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| 50% weighting | Organic Revenue Growth 3-year average of annual Organic Revenue Growth rates A metric followed by shareholders that focuses on accelerated top-line growth and enhanced shareholder returns. | |
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| Payout | 0 - 200% of Target |
Long-Term Cash Award
The LTC award focuses on relative TSR performance, strengthening alignment with long-term shareholder value creation. The LTC award is denominated and pays out in cash, reflecting PepsiCo’s responsible use of shares under our LTI program.
| 100% weighting | Relative TSR Performance TSR performance relative to our proxy peer group set at the time of grant over a 3-year performance period. | |
Target payout requires us to deliver positive 3-year TSR. Linear interpolation is used when ranking falls between percentages shown. | ||
| Payout | 0 - 200% of Target |
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PEPSICO 2023 PROXY STATEMENT | 61 |
Executive Compensation
Long-Term Incentive Award Payouts
2020 PSU Payout
As a result of strong three-year operating performance, the 2020 PSUs paid out at 200% of target.
| 3-YEAR
AVERAGE OF ANNUAL CORE CONSTANT CURRENCY EPS GROWTH[10] |
3-YEAR
AVERAGE OF ANNUAL ORGANIC REVENUE GROWTH[10] | |
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■ PepsiCo’s three-year (2020-2022) average Core Constant Currency EPS Growth[10] compensation performance measure of 10.8% was above the maximum of 10.3% set by the Compensation Committee in 2020 ■ In calculating this compensation performance measure, PepsiCo’s 2020 Core Constant Currency EPS Growth was adjusted to exclude certain charges taken as a result of the COVID-19 pandemic in 2020, as described in PepsiCo’s 2020 Annual Report on Form 10-K for the fiscal year ended December 26, 2020 |
■ PepsiCo’s three-year (2020-2022) average Organic Revenue Growth[10] compensation performance measure of 9.4% was above the maximum of 5.5% set by the Compensation Committee in 2020 ■ In calculating this compensation performance measure, PepsiCo’s 2020 Organic Revenue Growth was adjusted to exclude reserves for product returns taken as a result of the COVID-19 pandemic in 2020, as described in PepsiCo’s 2020 Annual Report on Form 10-K for the fiscal year ended December 26, 2020 |
| Name | PSUs Granted |
PSUs Earned |
Payout of Target | |||
| Ramon L. Laguarta | 61,600 | 123,200 | 200% | |||
| Hugh F. Johnston | 35,200 | 70,400 | 200% | |||
| Silviu Popovici | 22,629 | 45,258 | 200% | |||
| Steven Williams | 17,600 | 35,200 | 200% | |||
| Kirk Tanner | 22,629 | 45,258 | 200% |
2020 Long-Term Cash Award Payout
The 2020 LTC award paid out at 148% of target in light of our total return to shareholders, including dividends, outperforming the median of our proxy peer group over the three-year performance period.
3-YEAR RELATIVE TSR PERCENTILE VS. PROXY PEER GROUP
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■ Based on PepsiCo’s TSR of 43.8% for the three-year performance period ended on December 31, 2022, PepsiCo ranked at the 74th percentile relative to our proxy peer group |
| Name | LTC Granted ($000) |
LTC Earned ($000) |
Payout of Target | |||
| Ramon L. Laguarta | 4,165 | 6,164 | 148% | |||
| Hugh F. Johnston | 2,380 | 3,522 | 148% | |||
| Silviu Popovici | 1,530 | 2,264 | 148% | |||
| Steven Williams | 1,190 | 1,761 | 148% | |||
| Kirk Tanner | 1,530 | 2,264 | 148% |
Special Long-Term Incentive Awards
Special PSU Award Grants
No special PSU awards were granted to NEOs in 2022, and no special PSU awards remain outstanding for our NEOs.
| [10] | Please refer to Appendix A to this Proxy Statement for a description and reconciliation of these non-GAAP compensation performance measures relative to reported GAAP financial measures, and to pages 44-49 and 52 of PepsiCo’s 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a more detailed description of the items excluded from these measures. |
| 62 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
Retirement and Benefit Programs
Retirement and Post-Retiree Medical ■ Our NEOs participate in the same retirement programs as other similarly situated employees and receive no enhancements in determining their benefits versus other employees ■ PepsiCo maintains defined benefit pension plans for the majority of U.S. salaried employees hired before January 1, 2011 and defined contribution plans for U.S. salaried employees hired in 2011 or later ■ A separate retirement plan is also maintained for certain employees working outside the U.S. who are unable to participate in their home country plans ■ Effective December 31, 2025, accruals for salaried employees under the defined benefit pension plans in which NEOs participate will be frozen and employees will participate in the defined contribution plans going forward with details described in the “2022 Retirement Benefits” section beginning on page 74 ■ Our NEOs are also eligible for retiree medical coverage on the same terms as other similarly situated employees ■ No NEOs were provided enhanced coverage, such as executive life insurance |
Health and Mobility Benefits ■ Executive officers receive the same healthcare benefits as other similarly situated employees ■ U.S.-based medical benefits are generally the same for all participants in the Company’s healthcare program; however, our executive officers are required to pay two to three times as much as non-executive employees for their coverage ■ International medical benefit plans vary, but executives typically receive the benefits offered in the relevant broad-based program ■ PepsiCo’s global mobility program facilitates the assignment of global talent to positions in other countries by minimizing any financial detriment or gain to the employee from an international assignment ■ Executive officers who relocate are supported under the mobility program available to all PepsiCo salaried employees, eligible for reimbursement of relocation expenses, such as household goods shipment and applicable taxes associated with moving |
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Perquisites ■ Consistent with our pay-for-performance philosophy, we limit executive perquisites to a Company car allowance, an annual physical, and personal use of Company aircraft ■ Certain executive officers may also be required to use Company ground transportation ■ Based on an independent security study, the Compensation Committee generally requires the CEO to use Company aircraft to enhance personal safety and to increase time available for business purposes ■ Certain exceptions allow the use of commercial aviation provided that the PepsiCo Global Security Team has assessed the risk and trip itinerary in advance, establishing a travel security protocol ■ Executives are fully responsible for their personal income tax liability associated with personal use of Company aircraft ■ A select few executive officers who are permitted to use Company aircraft, other than the CEO, must reimburse PepsiCo for the full variable operating cost of personal flights in excess of a limited number of hours per year as established by the Compensation Committee ■ Personal use of Company aircraft above a predetermined hour threshold for executive officers other than the CEO must be approved by the CEO on a case-by-case basis |
Executive Income Deferral ■ Under the PepsiCo Executive Income Deferral Program (the “EIDP”), eligible U.S.-based executives can elect to defer up to 75% of their base salary and up to 100% of their annual cash incentive awards into phantom investment funds on a tax-deferred basis ■ Executives may elect to have their deferral accounts notionally invested in market-based funds, including the PepsiCo Common Stock Fund ■ The EIDP does not guarantee a rate of return, does not match deferrals and none of the funds provide “above market” earnings ■ The EIDP is a non-qualified and unfunded program in which account balances are unsecured and at-risk, with its material features described in the “2022 Non-Qualified Deferred Compensation” section beginning on page 78 |
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PEPSICO 2023 PROXY STATEMENT | 63 |
Executive Compensation
Peer Group
The Compensation Committee assesses the composition of the proxy peer group annually.
| How the Compensation Peer Group is Selected | ■ Comparable size (based on revenue and market capitalization) ■ Strong consumer brands ■ Innovative culture ■ PepsiCo’s competitors for executive talent ■ Primary focus on business-to-consumer model ■ Significant international operations | |
| How Compensation Peer Group is Used | ■ To evaluate whether executive officer pay levels are aligned with Company performance on a relative basis ■ To calculate our relative TSR performance over a three-year performance period and determine payout of the LTC award ■ To assess competitiveness of executive compensation plan design and benefit prevalence |
PEPSICO COMPENSATION PEER GROUP
There were no changes to our peer group during the 2022 performance year. Effective for the 2023 performance year, the Compensation Committee made updates to ensure that the peer group continues to remain appropriate in light of changes in business profile and relative size. Apple Inc., General Electric Company, International Business Machines Corp., and Microsoft Corporation were removed based on deviations in business models or changes in size from recent transactions. FedEx Corporation and Verizon Communications Inc. were added to the peer group based on their size, workforce demographic, strong branding, and consumer-based focus.
| 2022 Proxy Peers | ||||||
| 2023 Proxy Peers | ||||||
Apple Inc. General Electric Company International Business Machines Corp. Microsoft Corporation |
3M Company Anheuser-Busch InBev SA/NV The Coca-Cola Company Colgate-Palmolive Company Danone S.A. General Mills, Inc. Johnson & Johnson The Kraft Heinz Company McDonald’s Corporation Mondelēz International, Inc. |
Nestlé S.A. NIKE, Inc. Pfizer Inc. The Procter & Gamble Company Starbucks Corporation Unilever PLC United Parcel Service, Inc. Walmart Inc. The Walt Disney Company |
FedEx Corporation Verizon Communication Inc. | |||
PEPSICO VS. 2022 PEER GROUP
| * | Based on the four fiscal quarters ended prior to December 31, 2022 and publicly available as of March 1, 2023 |
| ** | Based on 2022 year-end |
| 64 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
Governance Features of Our Executive Compensation Programs
We believe that PepsiCo’s compensation programs should ensure that our executives remain accountable for business results and take responsibility for the assets of the business and its employees. Consistent with this objective, our Board has incorporated strong governance features into our executive compensation programs.
Risk Mitigation
PepsiCo’s executive compensation programs include features intended to discourage employees from taking unnecessary and excessive risks that could threaten the financial health and viability of the Company.
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Balanced
The annual incentive program utilizes balanced financial metrics consisting of top-line metrics (such as organic revenue), bottom-line metrics (such as operating profit), and metrics designed to enhance capital management (such as cash flow). |
Accountability
for Prior All or a portion of the annual incentive award for any executive officer who assumes a new leadership position in a different business unit is generally determined based on the prior business unit’s results to hold the executive officer accountable for sustained performance. |
Emphasis
on Long-Term LTI awards are the most significant element of executive officer pay and focus executives on creating long-term shareholder value, measured in terms of delivering exceptional long-term operating results and stock price performance relative to a peer group. |
Stringent
Under PepsiCo’s annual incentive, LTI, and executive deferral programs, the Company has the right to cancel and recoup awards and gains from an executive in certain circumstances, such as an act of gross misconduct. |
Stock Ownership Requirements
Under PepsiCo’s stock ownership guidelines, executive officers are required to own shares of PepsiCo Common Stock equal in value to a specified multiple of their annual base salary, as set forth below:
Shares of PepsiCo Common Stock or equivalents held by the executive officer (or immediate family members) in a 401(k) plan, in a deferred compensation account, or in a trust for the benefit of immediate family members count towards satisfying the requirement. Unexercised stock options and unvested PSUs and Restricted Stock Units (“RSUs”) granted under the LTI Plan do not count towards satisfying the applicable stock ownership requirement.
Executive officers have five years from the date they first become subject to a particular level of stock ownership to meet the stock ownership requirement. All of PepsiCo’s executive officers have met or are on track to meet their ownership requirements within the five-year period.
Executive officers who terminate or retire from PepsiCo are required to continue to hold 100% of the shares needed to meet the applicable level of stock ownership until at least six months after termination or retirement and to continue to hold at least 50% of the shares needed to meet the applicable level of stock ownership until at least twelve months after termination or retirement.
Share Retention Policy
To ensure that our executive officers exhibit a strong commitment to PepsiCo stock ownership, the Board has adopted a Share Retention Policy. The policy limits the proceeds that an executive officer may receive in cash upon exercise of stock options during each calendar year to 20% of the aggregate value of all of the executive officer’s in-the-money vested stock options.
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PEPSICO 2023 PROXY STATEMENT | 65 |
Executive Compensation
Any proceeds in excess of this 20% limit must be held in shares of PepsiCo Common Stock for at least one year after the date of exercise. In addition, executive officers are required to hold at least 50% of the shares, net of applicable tax withholding, received upon the vesting and payout of PSUs in furtherance of PepsiCo’s stock ownership guidelines.
Executive officers who maintain the required level of stock ownership are exempt from the Share Retention Policy.
No Employment Contracts
None of our NEOs have an employment contract or separation agreement, and we do not maintain formal programs or policies that guarantee cash severance or continued access to health and welfare benefits in the event of an involuntary termination of employment. Consistent with our approach of rewarding performance, employment is not guaranteed, and either the Company or the NEO may terminate the employment relationship at any time. In some cases, the Compensation Committee or the Board may agree to provide separation payments and benefits to departing executives upon their termination. Such terminations are addressed on a case-by-case basis, taking into consideration the nature of the termination and a variety of other factors.
Clawback Provisions
Compliance with our Global Code of Conduct, as well as Acting with Integrity, one of the seven guiding behaviors of The PepsiCo Way, are fundamental to doing business the right way. To reinforce the importance of this, PepsiCo’s executive compensation programs have stringent clawback provisions which allow the Company to cancel outstanding awards from the EICP and LTI Plan, to enforce the repayment of gains from the exercise of any stock options granted under the terms of the LTI Plan and to recoup the value of any equity awards, regardless of whether they are performance- or time-based, that have vested and/or paid out from the EICP and LTI Plan.
Clawback provisions are triggered in the event an executive engages in behavior that may be detrimental to the Company, such as the breaching of non-competition, non-solicitation or non-disclosure clauses, or an act of gross misconduct which includes but is not limited to negligence that causes or contributes to the need for an accounting adjustment to the Company’s financial results.
Change in Control Provisions
PepsiCo does not maintain formal policies for our NEOs that provide for predetermined cash severance, continued health and welfare benefits, pension service credit, tax gross-ups, or any other change in control benefits other than change in control protections under the shareholder-approved LTI Plan.
The LTI Plan provides non-employee directors and all employees, including executive officers, change in control protection for their LTI awards. Outstanding unvested awards vest and performance-based awards are payable in accordance with their terms as if performance metrics have been achieved at the target performance level in the event that the participant is terminated without cause or resigns for good reason within two years following a change in control of PepsiCo (i.e., “double trigger” vesting) or if the acquiring entity fails to assume or replace the awards. We utilize “double trigger” vesting to ensure management talent will be available to assist in the successful integration following a change in control and to align with prevailing governance practices.
Prohibition on Hedging and Pledging
Our Insider Trading Policy prohibits employees, including executive officers, from engaging in activities that are designed to hedge or offset any decrease in the market value of PepsiCo stock (including purchasing financial instruments such as prepaid variable forward contracts, collars, exchange funds or equity swaps, or engaging in short sales). In addition, employees, including executive officers, may not hold PepsiCo securities in a margin account or pledge PepsiCo stock or PepsiCo stock options as collateral for a loan or otherwise.
Limited Trading Windows
Executive officers can only transact in PepsiCo securities during approved trading windows after satisfying mandatory clearance requirements.
Responsible Equity Grant Practices
PepsiCo’s equity grant practices ensure all grants are made on fixed pre-established grant dates and at exercise prices or grant prices equal to the “fair market value” of PepsiCo Common Stock on such dates.
| 66 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
| ■ | Stock option, PSU, and RSU grants are awarded under our shareholder-approved LTI Plan at “fair market value,” defined as the average of the high and low stock prices rounded up to the nearest quarter on the date of grant. These formulas mitigate the impact of our stock price’s intra-day volatility when setting the grant price of equity awards. |
| ■ | PepsiCo does not backdate, reprice, or grant stock options retroactively. Our shareholder-approved LTI Plan prohibits repricing of awards or exchanges of underwater options for cash or other securities without shareholder approval. |
| ■ | Under our shareholder-approved LTI Plan, stock options, RSUs, PSUs, and LTC awards generally require a three-year minimum vesting period. Aggregate awards covering up to 5% of the total shares available under the LTI Plan may be issued with a vesting period of less than three years, but never less than one year. |
| ■ | PepsiCo is responsible in the use of shares under our LTI Plan, with share utilization below our peer group median. |
| ■ | Equity award grants to executive officers are approved by a subcommittee of the Compensation Committee consisting entirely of non-employee directors, as that term is defined in Rule 16b-3 of the Exchange Act. |
Tax Considerations
Historically, the Compensation Committee has considered the impact of Section 162(m) of the Internal Revenue Code in establishing compensation for our executive officers, with a primary objective of supporting PepsiCo’s business needs and workforce strategy.
Effective with the January 1, 2018 taxation year, the Section 162(m) performance-based exception is no longer applicable and the $1 million deduction limit applies to the CEO, CFO, and the top three other highest compensated executive officers in the year. The deduction limit also applies to all those who were subject to the limit in any prior year after 2016, and it continues to apply to compensation paid at any time, including after termination or retirement and after death.
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PEPSICO 2023 PROXY STATEMENT | 67 |
Executive Compensation
Our Decision-Making Process
Compensation Committee
| The Compensation Committee oversees and evaluates PepsiCo’s executive compensation programs against competitive practices, regulatory developments, and corporate governance trends. |
| JAN | FEB | MAR | APR | MAY | JUN | JUL | AUG | SEP | OCT | NOV | DEC | ||||||||||||||||||
February Meeting ■ Certifies performance-based incentive payouts ■ Recommends CEO compensation to independent members of the Board without management input ■ Approves performance goals and other objectives of the Chairman and CEO ■ Approves executive officer compensation based on Company performance, market data, responsibilities, and other factors |
March Meeting ■ Sets specific performance targets for executive officer incentive awards ■ Reviews compensation-related disclosures for Proxy Statement |
September Meeting ■ Reports to the Board regarding director compensation and stock ownership guidelines ■ Establishes peer group companies used to benchmark Company performance and executive officer compensation ■ Reviews trends and best practices in executive compensation |
November Meeting ■ Reviews Committee Charter, Committee’s assessment results and work plan for the following year ■ Reviews and approves executive compensation policies, such as stock ownership and clawback provisions, as needed |
Compensation Committee meetings may occur on a more frequent basis in the event of ad hoc matters for discussion or approval.
| Independent Advisor | PepsiCo Management | |||||
| The Compensation Committee has engaged FW Cook as its independent external advisor, and considers analysis and advice from FW Cook when making compensation decisions | PepsiCo’s management team is responsible for providing input to the Compensation Committee with respect to compensation decisions for PepsiCo’s executive officers (other than the Chairman and CEO) | |||||
■ Provides recommendations on Chairman and CEO compensation directly to the Compensation Committee ■ Regularly reviews the Company’s executive compensation programs, in cooperation with management, and advises the Committee of changes that may be made to better reflect evolving best practices and improve effectiveness ■ Regularly reviews the Company’s compensation philosophy, peer group, and target competitive positioning for reasonableness and appropriateness ■ All services performed by FW Cook have been limited to executive and director compensation consulting ■ FW Cook is prohibited from undertaking any other work with PepsiCo management or employees and has direct access to Compensation Committee members without management involvement ■ The Compensation Committee assessed FW Cook’s independence under SEC regulations and Nasdaq listing standards, and concluded that there is no conflict of interest |
■ Provides input regarding PepsiCo’s business strategy and performance ■ Regularly reviews shareholder feedback which is taken into consideration when reevaluating and/or designing the Company’s executive compensation programs ■ The Chairman and CEO provides the Compensation Committee with a self-assessment based on achievement of the agreed-upon objectives and other leadership accomplishments ■ The Chairman and CEO provides the Compensation Committee with performance evaluations and pay recommendations for other executive officers |
| 68 | PEPSICO 2023 PROXY STATEMENT | |
Executive Compensation
2022 Summary Compensation Table
The following table summarizes the compensation of the NEOs for the fiscal year ended December 31, 2022 in accordance with SEC rules. We encourage you to also review a summary of the Chairman and CEO’s performance and pay decisions beginning on page 52 for a description of how compensation is viewed by PepsiCo’s Board.
| Non-Equity
Incentive Plan Compensation ($) | Change in Pension | ||||||||||||||||||||||||||||||||||||||
| Name
and Principal Position | Year(1) | Salary ($)(2) | Bonus ($) | Stock
Awards ($)(3) | Subtotal for Annual Payouts ($)(4) | Subtotal for Long- Term Payouts ($)(5) | Total for Annual and Long- Term Payouts ($)(6) | Value
and Non-Qualified Deferred Compensation Earnings ($)(7) | All
Other Compensation ($)(8) | Total ($) | |||||||||||||||||||||||||||||
| Ramon
L. Laguarta Chairman of the Board and Chief Executive Officer | 2022 | ||||||||||||||||||||||||||||||||||||||