DEF 14A 1 lsyy2016_def14a.htm SYSCO CORPORATION - DEF 14A SYSCO CORPORATION DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

 

   Filed by the Registrant  Filed by a Party other than the Registrant

 

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SYSCO CORPORATION

 

(Name of Registrant as Specified In Its Charter)

 

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

 

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Sysco Corporation
2016 Proxy Statement
 
Table of Contents  
   
INVITATION FROM OUR LEADERSHIP 4
   
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS 5
   
PROXY SUMMARY 6
   
PROXY STATEMENT 10
   
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING 10
   
CORPORATE GOVERNANCE 15
Board Refreshment 15
Stockholder Engagement 16
Enhancing Stockholder Rights 16
Board Leadership Structure 16
Board Meetings and Committees 17
Annual Board Self-Evaluation 18
Director Independence 19
Certain Relationships and Related Person Transactions 20
Risk Oversight 21
Codes of Conduct 22
Compensation Consultants 22
   
BOARD OF DIRECTORS MATTERS 23
Election of Directors at 2016 Annual Meeting (Item 1) 23
Board Composition 26
   
DIRECTOR COMPENSATION 32
Overview of Non-Employee Director Compensation 32
Directors Deferred Compensation Plan 32
Directors Stock Plans 32
2009 Non-Employee Directors Stock Plan 33
   
EXECUTIVE OFFICERS 35
Management Development and Succession Planning 36
   
STOCK OWNERSHIP 37
Security Ownership of Officers and Directors 37
Security Ownership of Certain Beneficial Owners 38
Stock Ownership Guidelines 38
Stock Trading Restrictions 39
   
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 39
   
EQUITY COMPENSATION PLAN INFORMATION 39
 
COMPENSATION DISCUSSION AND ANALYSIS 40
Executive Summary 40
Philosophy of Executive Compensation Program 44
How Executive Pay Is Established 46
What We Paid and Why – Compensation for NEOs 48
Executive Compensation Governance and Other Information 57
   
REPORT OF THE COMPENSATION COMMITTEE 58
   
EXECUTIVE COMPENSATION 59
Summary Compensation Table 59
Grants of Plan-Based Awards 61
Annual Incentive Awards 62
Cash Performance Units 64
Outstanding Equity Awards at Fiscal Year-End 66
Option Exercises and Stock Vested 68
Fiscal 2016 Nonqualified Deferred Compensation 69
Pension Benefits 71
Quantification of Termination/Change in Control Payments 74
Compensation Risk Analysis 78
   
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (ITEM 2) 79
   
REPORT OF THE AUDIT COMMITTEE 79
   
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 80
   
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 3) 81
   
STOCKHOLDER PROPOSAL (ITEM 4) 82
   
BOARD OF DIRECTORS’ STATEMENT IN OPPOSITION OF THE PROPOSAL 82
   
STOCKHOLDER PROPOSALS 84
Presenting Business/Nominating Directors for Election 84
Meeting Date Changes 84
   
ANNEX I – NON-GAAP RECONCILIATIONS 85
 

INVITATION FROM OUR LEADERSHIP

 

 

 

Dear Fellow Stockholder,

 

It is our pleasure to invite you to join us, our Board of Directors, senior leadership and other associates at Sysco Corporation’s 2016 Annual Meeting of Stockholders, to be held on Wednesday, November 16, 2016, at 10:00 a.m. at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024.

 

Please vote right away

 

Our stockholder meeting is an opportunity for our senior management and Board of Directors to present Sysco’s performance and strategy, and to respond to your questions. By participating in our stockholder meeting, you play an active role in the future of your company. Please vote right away over the internet, by telephone or by signing and mailing the attached proxy card.

 

Enhanced stockholder communications

 

We are committed to ensuring that our proxy statement and associated materials are clear and easy to read. Our 2016 proxy statement displays our ongoing commitment to clearly explain the matters to be addressed at our Annual Meeting of Stockholders. We encourage you to begin your review of this year’s document with our proxy summary, which provides highlights of the detailed information included elsewhere in the proxy statement.

 

If you wish to receive future E-Proxy Notices electronically, which helps to reduce Sysco’s printing costs and aligns with our sustainability principles, please visit http://enroll.icsdelivery.com/syy for additional information.

 

Board leadership & oversight

 

We continuously strive for the most effective Board and Leadership Structure to promote Sysco’s vision to be our customer’s most valued and trusted business partner and to represent the long-term interests of Sysco’s stockholders. We have active participation by all members of our Board of Directors. We believe that the structure of our Board, as well as the deep, relevant expertise that our directors collectively provide, cultivate strong oversight and guidance as we execute on our long-term strategy. You will find detailed information about the qualifications of all of our Directors beginning on page 24 and information about our Board refreshment and tenure policy on page 15.

 

Thank you for your interest

 

We trust that enhanced communication about our annual stockholder meeting will reinforce our dialogue with stockholders, and encourage you to cast your vote right away. Thank you for your continued trust and confidence in Sysco.

 

Bill DeLaney, Chief Executive Officer

 

Jackie Ward, Chairman of the Board

 

SYSCO CORPORATION - 2016 Proxy Statement    4

 

 

1390 Enclave Parkway

Houston, Texas 77077-2099

 

Notice of Annual Meeting of Stockholders

 

November 16, 2016

10:00 a.m.

The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024

 

The Annual Meeting of Stockholders of Sysco Corporation, a Delaware corporation, will be held on Wednesday, November 16, 2016 at 10:00 a.m. at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024, for the following purposes:

 

1.To elect as directors the fourteen nominees named in the attached proxy statement to serve until the Annual Meeting of Stockholders in 2017;  
 2.To hold an advisory vote to approve the compensation paid to Sysco’s named executive officers, as disclosed in this proxy statement;  
 3.To ratify the appointment of Ernst & Young LLP as Sysco’s independent registered public accounting firm for fiscal 2017;  
 4.To consider a stockholder proposal, if properly presented at the meeting, regarding a policy limiting accelerated vesting of equity awards upon a change in control; and  
 5.To transact any other business as may properly be brought before the meeting or any adjournment thereof.  

 

Only stockholders of record at the close of business on September 19, 2016, will be entitled to receive notice of and to vote at the Annual Meeting. For instructions on voting, please refer to the notice you received in the mail or, if you requested a hard copy of the proxy statement, on your enclosed proxy card. You may inspect a list of stockholders of record at the company’s headquarters during regular business hours during the 10-day period before the Annual Meeting. You may also inspect this list at the Annual Meeting.

 

October 5, 2016

Houston, Texas

 

By Order of the Board of Directors

Russell T. Libby

Executive Vice President, Administration
and Corporate Secretary

 

SYSCO CORPORATION - 2016 Proxy Statement    5

 

Proxy Summary

 

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references (“XX”) are supplied to help you find further information in this proxy statement.

 

2016 Annual Meeting of Stockholders

 

Date and Time: Wednesday, November 16, 2016 at 10:00 a.m.
   
Location: The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024
   
Record Date: September 19, 2016

 

Voting Matters and Board Recommendations

 

    Our Board Vote Recommendation
Election of Fourteen Director Nominees (page 23)   FOR each Director Nominee
Advisory Vote on Executive Compensation (page 79)   FOR
Ratification of Independent Registered Public Accounting Firm (page 81)   FOR
Stockholder Proposal (Page 82)   AGAINST

 

Business Highlights

 

(For more detail please see our Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”). Our discussion below of our results includes certain non-GAAP financial measures that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures and exclude the impact from restructuring charges, consisting of (1) severance charges, (2) facility closing costs, (3) professional fees incurred related to our three-year strategic plan and (4) expenses associated with the revised business technology strategy announced in fiscal 2016. It will also exclude acquisition-related expense resulting from (1) merger and integration planning, litigation costs and termination costs in connection with the merger that had been proposed with US Foods, Inc. and (2) transaction costs in connection with the acquisition of the parent holding company for the Brakes Group, as well as the financing costs related to these acquisitions. More information on the rationale for the use of these measures can be found in our Form 10-K on pages 29-33 and reconciliations to GAAP numbers can be found in Annex I - Non-GAAP Reconciliations.)

 

The general foodservice market environment since the beginning of fiscal 2016 has been uneven, with a combination of both favorable and unfavorable trends reflected in the relevant data. As compared to a few years ago, consumer confidence and unemployment data points were favorable through fiscal 2016 and the beginning of fiscal 2017, while consumer spending on meals away from home has trended slightly downward towards the end of the fiscal year (following gains throughout most of fiscal 2016). Spending at restaurants was generally improved, but customer traffic levels were generally unchanged during fiscal 2016 and are beginning to decline, together with an overall moderation in spend. Amid these conditions, throughout fiscal 2016 we provided our customers with excellent service, growing our business with locally managed customers, improving our gross margins and managing expenses. These are all important steps towards achieving our three-year plan financial objectives.

 

Comparison of results from fiscal 2016 to fiscal 2015:

 

Sales increased 3.5%, or $1.7 billion, to $50.4 billion; on a comparable 52-week basis, adjusted sales improved 1.5%;
   
Operating income increased 50.5%, or $621.1 million, to $1.9 billion;
   
Adjusted operating income increased 12.1%, or $217 million, to $2 billion; on a comparable 52-week basis, adjusted operating income increased 9.6%;
   
Net earnings increased 38.3%, or $262.8 million, to $949.6 million;
   
Adjusted net earnings increased 10.4%, or $114 million, to $1.2 billion; on a comparable 52-week basis, adjusted net earnings increased 8.0%;
   
Basic earnings per share and diluted earnings per share in fiscal 2016 were $1.66 and $1.64, respectively, a 43.1% and 42.6% increase from the comparable prior year amount of $1.16 and $1.15 per share; and
   
Adjusted diluted earnings per share were $2.10 in fiscal 2016, a 14.1% increase from the comparable prior year amount of $1.84 per share; on a comparable 52-week basis, adjusted diluted earnings per share were $2.06 in fiscal 2016, a 12.0% increase.

 

* See Annex I - “Non-GAAP Reconciliations” for an explanation of these non-GAAP financial measures.

 

Governance Highlights (page 15)

 

BOARD REFRESHMENT

 

In 2016, our Board adopted a Board refreshment plan, under which the Board has:

 

established a 15-year limit on director tenure, subject to a 2-year transition period that expires immediately following the Company’s 2018 annual meeting of stockholders;
   
elected to the Board three new independent directors – Mr. Daniel J. Brutto, Mr. Bradley M. Halverson and Mr. Edward D. Shirley; and
   
determined to elect one additional independent director in each of 2017 and 2018, subject to the availability of qualified director candidates.

 

In accordance with the director tenure policy, we expect two incumbent non-employee directors to retire from the Board in each of 2017 and 2018. In addition, Mr. Joseph A. Hafner has decided not to stand for re-election at the Annual Meeting.

 

SYSCO CORPORATION - 2016 Proxy Statement    6

 
Stockholder Engagement – In 2015, we initiated a more formal engagement process with our stockholders regarding matters of corporate governance. During 2016, we expanded this process, inviting many of our top institutional stockholders to meet with Ms. Ward, our Chairman of the Board, and Mr. Glasscock, the Chair of our Corporate Governance and Nominating Committee.
   
Proxy Access – In August 2016, our Board adopted amendments to the Company’s bylaws to establish “proxy access” rights permitting holders who have beneficially owned 3% or more of Sysco’s outstanding common stock continuously for at least three years (as of the time of submission of the nomination) the right to nominate a number of director nominees equal to the greater of 2 or 20% (rounded down) of the total number of directors constituting our Board, subject to applicable limitations and procedural requirements.
   
Stockholder Right to Call Special Meeting – In November 2015, our Board adopted the right for holders of at least 25% of Sysco’s outstanding common stock to call a special meeting, subject to applicable limitations and procedural requirements.
   
Board Leadership Structure – Jackie M. Ward is our independent Chairman of the Board. Ms. Ward, a Sysco director since September 2001, was previously the Board’s lead director and chaired the Corporate Governance and Nominating Committee. We have active participation by all directors, including our independent directors. We believe that the structure of our Board, relying on leadership from both independent and non-independent directors, positions Sysco to benefit from the respective strengths of our CEO and Chairman of the Board.
   
Director Independence – Our Corporate Governance Guidelines require that at least a majority of our directors meet the criteria for independence that the New York Stock Exchange has established for continued listing, as well as the additional criteria set forth in the Guidelines. Additionally, we require that all members of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee be independent and that all members of the Audit Committee and Compensation Committee satisfy the additional requirements of the New York Stock Exchange and applicable rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
   
Declassified Board – Each of Sysco’s current directors, other than Mr. Hafner, who is not standing for re-election, has been nominated by the Board for election as director to serve a one-year term or until his or her successor is elected and qualified.

 

Important Dates for 2017 Annual Meeting of Stockholders (page 84)

 

If you would like to present a proposal under Rule 14a-8 of the Exchange Act at our 2017 Annual Meeting of Stockholders, send the proposal in time for us to receive it no later than June 7, 2017. If the date of our 2017 Annual Meeting is subsequently changed by more than 30 days from the date of this year’s Annual Meeting, we will inform you of the change and the date by which we must receive proposals.
   
If you want to present business at our 2017 Annual Meeting outside of the stockholder proposal rules of Rule 14a-8 of the Exchange Act and instead pursuant to Article I, Section 8 of the Company’s Bylaws, the Corporate Secretary must receive notice of your proposal by August 18, 2017, but not before July 9, 2017, and you must be a stockholder of record on the date you provide notice of your proposal to the Company and on the record date for determining stockholders entitled to notice of the meeting and to vote.

 

Current Members of Our Board of Directors and Board Nominees (page 26)

 

Name   Age   Director since   Experience   Independent   Committee
Memberships(1)
  Other Public
Company Boards
Daniel J. Brutto   60   September 2016   Former President, UPS International and Senior Vice President, United Parcel Service, Inc.   Yes         Illinois Tool Works Inc.
John M. Cassaday   63   November 2004   Former President, CEO and director of Corus Entertainment Inc.   Yes   Compensation*
CG&N
Executive
 

  Manulife Financial Corporation

  Sleep Country Canada Holdings Inc.

  Spin Master Ltd.

Judith B. Craven, M.D.   70   July 1996   Former President of the United Way of the Texas Gulf Coast   Yes   Compensation
CG&N
Sustainability*
 

  Luby’s, Inc.

  Sun America Funds, Inc.

  VALIC

William J. DeLaney   60   January 2009   CEO of Sysco   No   Executive
Finance
    Express Scripts, Inc.
Joshua D. Frank   37   August 2015   Partner of Trian Fund Management L.P.   Yes   Compensation
Finance
   
Larry C. Glasscock   68   September 2010   Former Chairman of the Board of Directors, CEO and President of WellPoint, Inc.   Yes   Compensation
CG&N*
Executive
Sustainability
 

  Simon Property Group, Inc.

  Zimmer Biomet Holdings, Inc.

Jonathan Golden   79   February 1984   Partner of Arnall Golden Gregory LLP   No   Finance
Sustainability
   
Joseph A. Hafner, Jr.(2)   71   November 2003   Former Chairman, CEO and President of Riviana Foods, Inc.   Yes   Audit
Executive
Finance*
Sustainability
   
Bradley M. Halverson   56   September 2016   Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar Inc.   Yes        

 

SYSCO CORPORATION - 2016 Proxy Statement    7

 
Name   Age   Director since   Experience   Independent   Committee
Memberships(1)
  Other Public
Company Boards
Hans-Joachim Koerber   70   January 2008   Former chairman and CEO of METRO Group (Germany)   Yes   Audit
Finance
 

  Air Berlin PLC

  Eurocash SA

 

Nancy S. Newcomb   71   February 2006   Former Senior Corporate Officer, Risk Management, of Citigroup   Yes   Audit
Finance
   
Nelson Peltz   74   August 2015   Chief Executive Officer and a Founding Partner of Trian Fund Management L.P.   Yes   CG&N  

  Mondeléz International, Inc.

  The Madison Square Garden Company

  The Wendy’s Company

Edward D. Shirley   59   September 2016   Former President and Chief Executive Officer of Bacardi Limited   Yes      

  Elizabeth Arden, Inc.

  New York Life Insurance Company

Richard G. Tilghman   76   November 2002   Former Vice Chairman and Director of SunTrust Banks   Yes   Audit*
Executive
Finance
   
Jackie M. Ward(3)   78   September 2001   Former Chairman, President and CEO of Computer Generation Incorporated   Yes   Compensation
CG&N
Executive*
    Sanmina-SCI Corporation
(1) Full committee names are as follows:
  Audit – Audit Committee
  Compensation – Compensation Committee
  CG&N – Corporate Governance and Nominating Committee
  Executive – Executive Committee
  Finance – Finance Committee
  Sustainability – Corporate Sustainability Committee
* Denotes committee chairperson
(2) Mr. Hafner is not standing for re-election.
(3) Ms. Ward serves as the Chairman of the Board. For more details see page 30.

 

Executive Compensation

 

Philosophy and Principles (page 44)

 

We believe our long-term success depends on our ability to attract, retain and incentivize highly talented individuals who are committed to driving Sysco’s vision and strategy. One of the key objectives of our executive compensation program is to link executives’ pay to their performance and their advancement of Sysco’s overall performance and business strategies. Other objectives include aligning the executives’ interests with those of stockholders and encouraging high-performing executives to remain with Sysco over the course of their careers. We use the following key principles as the cornerstone of Sysco’s executive compensation philosophy to attract, develop and retain business leaders to drive financial and strategic growth and build long-term stockholder value:

 

Pay for Performance: Provide base salaries that reflect each named executive officer’s background, experience and performance, combined with variable incentive compensation that rewards executives at higher levels than at peer companies when superior performance is achieved, while subpar performance results in compensation below that of peer companies;
   
Competitiveness and Retention: Provide a competitive pay opportunity that attracts and retains the highest quality professionals;
   
Accountability for Short- and Long-Term Performance: Strike an appropriate balance between furthering both the short-term and longer-term interests of the business through short-term and long-term compensation; and
   
Alignment with Stockholders’ Interests: Link the interests of our executive officers with those of our stockholders through significant at-risk, equity-based compensation.

 

SYSCO CORPORATION - 2016 Proxy Statement    8

 

Pay Mix (page 42)

 

The information in the charts below should be read in connection with the explanatory information contained on page 42, and is qualified in its entirety by reference to such explanatory information.

 

 

 

SYSCO CORPORATION - 2016 Proxy Statement    9

 

Sysco Corporation
1390 Enclave Parkway
Houston, Texas 77077-2099
October 5, 2016

 

PROXY STATEMENT

 

We are providing you with a Notice of Internet Availability of Proxy Materials and access to these proxy materials, which include this 2016 Proxy Statement, the proxy card for the 2016 Annual Meeting of Stockholders (the “Annual Meeting”) and our Annual Report on Form 10-K for fiscal 2016, because our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. Unless the context otherwise requires, the terms “we,” “our,” “us,” the “Company” or “Sysco,” as used in this proxy statement, refer to Sysco Corporation. Our Annual Meeting will be held on Wednesday, November 16, 2016, at 10:00 a.m. at The Houstonian Hotel located at 111 North Post Oak Lane, Houston, Texas 77024.

 

At the close of business on September 19, 2016, there were 551,217,611 shares of Sysco Corporation common stock (“Common Stock”) outstanding and entitled to vote at the Annual Meeting. All of our current directors and executive officers (24 persons) beneficially owned, directly or indirectly, an aggregate of 48,570,829 shares, which was approximately 8.81% of our outstanding Common Stock as of September 19, 2016.

 

Only owners of record of shares of Common Stock as of the close of business on the record date, September 19, 2016, are entitled to notice of, and to vote at the Annual Meeting or at any adjournments or postponements of the Annual Meeting. Each owner of record is entitled to one vote for each share owned on the record date on each matter presented at the Annual Meeting.

 

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

 

1. What is a proxy statement and what is a proxy?

 

A proxy statement is a document that Securities and Exchange Commission (the “SEC”) regulations require us to give you when we ask you to sign a proxy designating individuals to vote on your behalf. A proxy is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. We have designated three of our officers as proxies for the 2016 Annual Meeting of Stockholders. These three officers are William J. DeLaney, Joel T. Grade and Russell T. Libby.

 

2. Why did I receive a one-page notice (the “E-Proxy Notice”) in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

 

In accordance with rules and regulations adopted by the SEC, instead of mailing a printed copy of our proxy materials, including our annual report to stockholders, to each stockholder of record, we now generally furnish proxy materials, including our annual report to stockholders, to our stockholders on the Internet. Unless you have previously signed up to receive your materials in paper, you will receive a document entitled Notice of Internet Availability of Proxy Materials (which we also refer to as the E-Proxy Notice) and will not receive a printed copy of the proxy materials or the annual report to stockholders (unless you specifically request them). Instead, the E-Proxy Notice will instruct you as to how you may use the Internet to access and review all of the important information contained in the proxy materials, including our annual report to stockholders.

 

The E-Proxy Notice also instructs you as to how you may submit your proxy on the Internet. Instructions for requesting printed proxy materials are included in the E-Proxy Notice. E-Proxy Notices are distributed by mail, unless you previously signed up to receive your proxy materials electronically, in which case it will be emailed to you. Set forth below is a summary of delivery methods.

 

Stockholders who previously signed up to Receive Proxy Materials Electronically: If you previously signed up to receive proxy materials electronically, we will send the E-Proxy Notice to you via e-mail, to the last e-mail address you have supplied to us. We will e-mail electronic E-Proxy Notices on or about October 6, 2016.

 

SYSCO CORPORATION - 2016 Proxy Statement    10

 
Stockholders who previously signed up to Receive Future Proxy Materials in Printed Format by Mail: If you previously submitted a valid election to receive all proxy materials in printed format, then we will send you a full set of printed proxy materials, including our annual report to stockholders. We will begin mailing these materials on or about October 5, 2016.

 

All other Stockholders: If you have not submitted any elections, we will send you a printed E-Proxy Notice by mail. We will begin mailing E-Proxy Notices on or about October 5, 2016.

 

Receiving Future Proxy Materials Electronically and Receiving the E-Proxy Notice by e-mail: If you previously elected to receive your proxy materials in printed format, but would like to receive an E-Proxy Notice only and use the Internet to access proxy materials, please visit http://enroll.icsdelivery.com/syy for additional information. This would significantly reduce our printing and postage costs and eliminate bulky paper documents from your personal files. To receive your E-Proxy Notice by e-mail, please visit http://enroll.icsdelivery.com/syy for additional information.

 

3. What is the difference between holding shares as a stockholder of record and as a beneficial stockholder?

 

These terms describe the manner in which your shares are held. If your shares are registered directly in your name with the Company’s registrar and transfer agent, American Stock Transfer and Trust Company, you are considered a “stockholder of record” with respect to those shares. If your shares are held through a brokerage account, bank, trust or other nominee as custodian on your behalf, you are considered the “beneficial owner” or “street name holder” of those shares. See questions 5, 6 and 9 below for important information for beneficial owners.

 

4. How do I vote?

 

You may vote your shares as follows:

 

In person at the Annual Meeting. All stockholders of record may vote in person at the meeting. Beneficial owners may vote in person at the meeting if they have a legal proxy, as described in the response to question 6 below.
   
By telephone or Internet (see the instructions at www.ProxyVote.com). All stockholders of record also can vote by touchtone telephone from the U.S., Puerto Rico and Canada, using the toll-free telephone number on the proxy card, or through the Internet, using the procedures and instructions described on the proxy card. Beneficial owners may vote by telephone or Internet if their bank or broker makes those methods available, in which case the bank or broker will include the instructions with the proxy materials. Stockholders of record may also vote through the Internet via our stockholders forum located at www.ProxyVote.com. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares and to confirm that their instructions have been recorded properly.
   
By Written Proxy. All stockholders of record can vote by written proxy card. If you received a printed copy of these proxy materials by mail, you may vote by signing, dating and mailing the enclosed proxy card. If you received an E-proxy Notice, see question 2 above for instructions on obtaining a printed copy of these proxy materials, including a proxy card. If you are a beneficial owner, you may request a written proxy card or a voting instruction form from your bank or broker.

 

5. How do I attend the meeting in person? What do I need to bring?

 

You need to bring documentation showing that you owned Common Stock on the record date, September 19, 2016. You also will need to bring a photo ID to gain admission. Please note that cameras, sound or video recording equipment or other similar equipment, large bags, briefcases or packages may not be allowed in the meeting room. If you are a beneficial owner, bring the notice or voting instruction form you received from your bank, brokerage firm or other nominee for admission to the meeting. You also may bring your brokerage statement reflecting your ownership of Common Stock as of September 19, 2016 with you to the meeting. Please note that you will not be able to vote your shares at the meeting without a legal proxy, as described in the response to question 6 below.

 

6. How can I vote at the meeting if I am a beneficial owner?

 

You will need to ask your broker, bank or other intermediary to furnish you with a legal proxy. You will need to bring the legal proxy with you to the meeting and hand it in with a signed ballot that will be provided to you at the meeting. You will not be able to vote your shares at the meeting without a legal proxy. If you do not receive the legal proxy in time, you can follow the procedures described in the response to question 5 above to gain admission to the meeting. However, you will not be able to vote your shares at the meeting. Accordingly, we encourage you to vote your shares in advance, even if you intend to attend the meeting. Please note that, if you request a legal proxy, any previously executed proxy will be revoked and your vote will not be counted unless you appear at the meeting and vote in person or legally appoint another proxy to vote on your behalf.

 

SYSCO CORPORATION - 2016 Proxy Statement    11

 
7. What are my voting choices for each of the proposals to be voted on at the Annual Meeting?

 

Proposal   Voting Choices and Board Recommendation
Item 1:
Election of Fourteen Director Nominees
    vote in favor of all nominees;
    vote against all nominees;
    vote for or against specific nominees;
    abstain from voting with respect to all nominees; or
    abstain from voting with respect to specific nominees.
  The Board recommends a vote FOR each of the nominees.

Item 2:

Advisory Proposal to Approve Executive Compensation

 

    vote in favor of the advisory proposal;
    vote against the advisory proposal; or
    abstain from voting on the advisory proposal.
  The Board recommends a vote FOR the advisory proposal to approve executive compensation.

Item 3:

Ratification of the Appointment of Ernst & Young LLP as Independent Registered Public Accounting Firm

  •  vote in favor of the ratification;
    vote against the ratification; or
    abstain from voting on the ratification.
  The Board recommends a vote FOR the ratification.

Item 4:

Stockholder proposal, if properly presented at the meeting, regarding a policy limiting accelerated vesting of equity awards upon a change in control

    vote in favor of the stockholder proposal;
  •  vote against the stockholder proposal; or
  •  abstain from voting on the stockholder proposal.
  The Board recommends a vote AGAINST the stockholder proposal.
   

 

If you vote by proxy, the individuals named on the proxy card (your proxies) will vote your shares in the manner you indicate. Directors will be elected by a majority of the votes cast, either for or against, by the holders of the shares of Common Stock voting in person or by proxy at the meeting. In order to be approved, each other proposal will require approval by a majority of the votes cast, either for or against, by the holders of the shares of Common Stock voting in person or by proxy at the meeting. As an advisory vote, the proposal to approve executive compensation is not binding upon the Company. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders and will consider the outcome of the vote when making future compensation decisions.

 

8. What if I am a stockholder of record and do not specify a choice for a matter when returning a proxy?

 

Stockholders should specify their choices for each matter on the proxy card. If no specific instructions are given, proxies that are signed and returned will be voted:

 

FOR the election of the fourteen nominees for director;
   
FOR the approval of the compensation paid to Sysco’s named executive officers, as disclosed in this proxy statement;
   
FOR the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for fiscal 2017; and
   
AGAINST the stockholder proposal regarding a policy limiting accelerated vesting of equity upon a change in control.

 

Proxies will be voted in the discretion of the proxy holders on any other matter that may properly come before the Annual Meeting.

 

9. What if I am a beneficial owner and do not give voting instructions to my broker?

 

As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered for vote.

 

Non-Discretionary Items. The election of Directors, the advisory proposal to approve executive compensation and the stockholder proposal are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners.

 

Discretionary Items. The ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm is a discretionary item. Generally, brokers, banks and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal in their discretion.

 

SYSCO CORPORATION - 2016 Proxy Statement    12

 
10. What can I do if I want to revoke or change my vote?

 

You may revoke or change your proxy at any time prior to the completion of voting at the Annual Meeting by:

 

delivering written notice of revocation to Sysco’s Corporate Secretary in time for him to receive it before the Annual Meeting;
   
voting again by telephone, Internet or mail (provided that such new vote is received in a timely manner pursuant to the instructions above); or
   
voting in person at the Annual Meeting.

 

The last vote that we receive from you will be the vote that is counted.

 

11. Is there a quorum requirement?

 

A quorum is necessary to hold a valid meeting. A quorum will exist if the holders of at least 35% of all the shares entitled to vote at the meeting are present in person or by proxy. All shares voted by proxy are counted as present for purposes of establishing a quorum, including those that abstain or as to which the proxies contain broker non-votes as to one or more items.

 

12. What votes are necessary for action to be taken?

 

Sysco’s Bylaws and Corporate Governance Guidelines include a majority vote standard for uncontested director elections. Since the number of nominees timely nominated for the Annual Meeting does not exceed the number of directors to be elected, each director to be elected shall be elected if the number of votes cast “for” election of the director exceeds those cast “against.” Any incumbent director who is not re-elected will be required to tender his or her resignation promptly following certification of the stockholders’ vote. The Corporate Governance and Nominating Committee will consider the tendered resignation and recommend to the Board of Directors whether to accept or reject the resignation offer, or whether other action should be taken. The Board of Directors will act on the recommendation within 120 days following certification of the stockholders’ vote and will promptly make a public disclosure of its decision regarding whether to accept the director’s resignation offer.

 

Pursuant to Sysco’s Bylaws, the affirmative vote of a majority of the votes cast, either for or against, is required for the approval of:

 

the non-binding, advisory proposal to approve the compensation paid to Sysco’s named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K;
   
the ratification of the appointment of the independent registered public accounting firm; and
   
the stockholder proposal.

 

The vote on compensation paid to Sysco’s named executive officers is being provided pursuant to Section 14A of the Exchange Act. In light of the stockholder recommendation at Sysco’s 2011 Annual Meeting of Stockholders regarding the frequency of the stockholder advisory votes on executive compensation, it is the current intention of the Sysco Board of Directors to conduct an annual stockholder advisory vote on executive compensation until the next required vote on the frequency of stockholder advisory votes on executive compensation that will occur at our 2017 Annual Meeting of Stockholders.

 

Broker non-votes and abstentions will be disregarded with respect to the election of directors and each of the other proposals.

 

13. Who will count votes?

 

We will appoint one or more Inspectors of Election who will determine the number of shares outstanding, the voting power of each, the number of shares represented at the Annual Meeting, the existence of a quorum and whether or not the proxies and ballots are valid and effective.

 

The Inspectors of Election will determine, and retain for a reasonable period, a record of the disposition of any challenges and questions arising in connection with the right to vote, and will count all votes and ballots cast for and against and any abstentions or broker non-votes with respect to all proposals and will determine the results of each vote.

 

14. How are abstentions and broker non-votes counted?

 

Abstentions and broker non-votes are included in determining whether a quorum is present. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting authority and has not received voting instructions from the beneficial owner. Broker non-votes and abstentions will be disregarded with respect to the election of directors and each of the other proposals.

 

SYSCO CORPORATION - 2016 Proxy Statement    13

 
15. How are proxies solicited and what are the costs of proxy solicitation?

 

We will pay all of the cost of solicitation of proxies including preparing, printing and mailing this proxy statement and the E-Proxy Notice. Solicitation may be made personally or by mail, telephone or electronic data transfer by officers, directors and employees of the Company (who will not receive any additional compensation for any solicitation of proxies).

 

We will also authorize banks, brokerage houses and other custodians, nominees and fiduciaries to forward copies of proxy materials and will reimburse them for their costs in sending the materials. We have retained Georgeson Shareholder Communications to help us solicit proxies from these entities and certain other stockholders, in writing or by telephone, at an estimated fee of $12,000 plus reimbursement for their out-of-pocket expenses.

 

16. Will any other matters be presented at the Annual Meeting?

 

We do not know of any matter that will be presented at the Annual Meeting other than the election of directors and the other proposals discussed in this proxy statement. However, if any other matter is properly presented at the Annual Meeting, your proxies will act on such matter in their best judgment.

 

17. Where can I access the Annual Report?

 

We will furnish additional copies of our annual report to stockholders, which includes our Annual Report on Form 10-K, without exhibits, for the year ended July 2, 2016, as filed with the Securities and Exchange Commission (the “Form 10-K”), for no charge, upon your written request if you are a record or beneficial owner of Sysco Corporation common stock whose proxy we are soliciting in connection with the Annual Meeting.

 

Please address requests for a copy of the Annual Report on Form 10-K to the Investor Relations Department, Sysco Corporation, 1390 Enclave Parkway, Houston, Texas 77077-2099. The Annual Report on Form 10-K is also available on our website under “Investors— Annual Reports and SEC Filings” at www.sysco.com.

 

18. What is Householding and where can I get additional copies of proxy materials?

 

If you share the same last name and address with another Sysco stockholder, you and the other stockholders at your address may receive only one copy of the E-Proxy Notice and any other proxy materials we choose to mail, unless contrary instructions are provided from any stockholder at that address. This is referred to as “householding.” If you prefer to receive multiple copies of the E-Proxy Notice and any other proxy materials that we mail, at the same address, additional copies will be provided to you promptly upon written or oral request, and if you are receiving multiple copies of the E-Proxy Notice and other proxy materials, you may request that you receive only one copy. Please address requests for a copy of the E-Proxy Notice and other proxy materials to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717, or call Broadridge at (866) 540-7095.

 

19. Will the Company announce the voting results?

 

We will announce the preliminary voting results at the Annual Meeting. The Company will report the final results on our website and in a Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting.

 

20. Does the Company have a policy about Directors’ attendance at the Annual Meeting of Stockholders?

 

It is the Board’s policy that Directors attend the Annual Meeting, to the extent practicable. All Directors who were in office at that time attended the annual meeting of stockholders held in November 2015.

 

SYSCO CORPORATION - 2016 Proxy Statement    14

 

CORPORATE GOVERNANCE

 

We believe good corporate governance is critical to achieving business success. The Board has adopted certain documents, referred to herein as our Governance Documents, to provide a general framework for the Company and reflect our commitment to sound governance practices, including:

 

Sysco’s bylaws;
   
the Corporate Governance Guidelines;
   
the Charters of the Board’s committees;
   
the Code of Conduct; and
   
the Code of Conduct for non-employee directors.

 

These Governance Documents outline the functions of the Board, each of the Board’s committees, director responsibilities, and various processes and procedures designed to ensure effective and responsive governance.

 

The Corporate Governance Guidelines comply with the listing standards of the NYSE and include guidelines for determining director independence and qualifications. These guidelines define qualities and characteristics utilized in evaluating if an existing Board member or candidate meets the qualifications for service as a Sysco Board member. Additionally, diversity, skills, experience and time available for service (including consideration of other board service) are all important considerations. The Corporate Governance and Nominating Committee regularly reviews the Governance Documents and recommends revisions to the Board from time to time to reflect developments in the law and corporate governance practices.

 

Copies of the Governance Documents can be accessed from the corporate governance section of the Company’s website at “Investors— Corporate Governance” at www.sysco.com. These documents will also be provided without charge to any stockholder upon written request to the Corporate Secretary at Sysco Corporation, 1390 Enclave Parkway, Houston, Texas 77077.

 

Board Refreshment

 

Our Board recognizes the importance of Board refreshment and Board succession planning to ensure that the directors possess a composite set of skills, experience and qualifications necessary for the Board to successfully establish and oversee management’s execution of the Company’s strategic priorities (see “Director Qualifications” below for a discussion of the key qualifications considered by the Corporate Governance and Nominating Committee in evaluating candidates). In order to promote thoughtful Board refreshment, during 2016 our Board adopted a director tenure policy and elected three new independent, non-employee directors to the Board, as discussed below.

 

Director Tenure Policy. In July 2016, our Board, upon the recommendation of our Corporate Governance and Nominating Committee, approved an amendment to the Company’s Corporate Governance Guidelines to provide that, effective November 17, 2016, no individual who, as of the date of the election to which any nomination relates, will have served as a non-employee director for 15 years will be eligible to be nominated for election or re-election to the Board. This tenure limitation is subject to a two-year transition period that expires immediately following our 2018 annual meeting of stockholders, during which only those two non-employee directors with the longest tenure will be ineligible for re-election in connection with any particular election of directors. In that case, the ineligibility of any other impacted non-employee directors will be deferred until the next annual meeting of stockholders. This transition period is intended to ensure an orderly transition as our longest-tenured directors retire from the Board.

 

Director Recruitment. During 2016, in connection with our Board refreshment efforts, our Board engaged the services of a search firm to assist with identifying and recruiting appropriate director candidates. Several director candidates were referred by our then current directors and identified by our search firm, and our Board evaluated the skills, experience and qualifications of each candidate in the context of the Board’s composition and the Company’s strategic priorities. Following consideration of these candidates, and upon the unanimous recommendation of our Corporate Governance and Nominating Committee, in September 2016 our Board expanded the size of the Board from 12 to 15 directors and elected three new independent, non-employee directors to fill the resulting vacancies: Mr. Daniel J. Brutto, Mr. Bradley M. Halverson and Mr. Edward D. Shirley.

 

In accordance with the director tenure policy, we expect two incumbent non-employee directors to retire from the Board in each of 2017 and 2018. In addition, Mr. Joseph A. Hafner has decided not to stand for re-election at the Annual Meeting. As our longest-tenured directors retire from the Board, we will continue our director recruitment efforts to help ensure that the size of the Board may be maintained at an appropriate level. Accordingly, over the next two years, the Board has determined to elect one additional independent director in each of 2017 and 2018, assuming that it is able to identify a sufficient number of qualified candidates interested in serving as a director.

 

 

SYSCO CORPORATION - 2016 Proxy Statement    15

 

Stockholder Engagement

 

Communicating with stakeholders, whether customers, employees or stockholders, has always been an important part of how Sysco does business. In 2015, in furtherance of these efforts, we began a more formal engagement process with our stockholders regarding matters of corporate governance. This engagement process is incremental to our customary participation at industry and investment community conferences, investor road shows, and analyst meetings.

 

At the direction of our Corporate Governance and Nominating Committee, senior leaders and subject matter experts from the company met with representatives at many of our top institutional stockholders to discuss Sysco’s governance practices, executive compensation, compliance programs, and other environmental, social, and governance related matters. Management reported regularly to the Board and the Corporate Governance and Nominating Committee concerning these meetings, including feedback on the concerns and issues raised by our stockholders.

 

In fiscal 2016, this engagement program was expanded to include Ms. Ward and Mr. Glasscock, who have each participated in meetings with many of our top institutional stockholders to discuss the same governance and compensation matters described above. We look forward to gaining further insight from our stockholders during future engagements.

 

Enhancing Stockholder Rights

 

In recognition of developments in corporate governance practices and the feedback received through our engagement with stockholders, our Board has implemented the following enhancements to stockholder rights, as recommended by our Corporate Governance and Nominating Committee:

 

Proxy Access – In August 2016, our Board adopted amendments to the Company’s bylaws to establish “proxy access” rights, beginning with our 2017 annual meeting, permitting stockholders who have beneficially owned 3% or more of Sysco’s outstanding common stock continuously for at least three years (as of the time of submission of the nomination) the right to nominate a number of director nominees equal to the greater of 2 or 20% (rounded down) of the total number of directors constituting our Board, subject to applicable limitations and procedural requirements.

 

Right of Stockholders to Call a Special Meeting – In November 2015, our Board adopted amendments to the Company’s bylaws to establish the right for holders of at least 25% of Sysco’s outstanding common stock who comply with certain procedural requirements to call a special meeting of stockholders.

 

Board Leadership Structure

 

The Governance Documents provide the Board with the flexibility to select the appropriate leadership structure for the Company.

 

BOARD LEADERSHIP
   
Independent Chairman of the Board: Jackie M. Ward
   
Active participation by all directors, including the CEO, William J. DeLaney
   
86% independent directors
   
We believe that the structure of our Board positions Sysco to benefit from the respective strengths of our CEO and Chairman of the Board.

 

Immediately preceding our 2013 Annual Meeting of Stockholders, our Board named Jackie M. Ward as its Chairman of the Board. Ms. Ward, a Sysco director since September 2001, previously served as the Board’s lead director and chaired the Corporate Governance and Nominating Committee, and she has served continuously on the Compensation Committee, the Corporate Governance and Nominating and the Executive Committee for nearly twelve years. The Board elected Ms. Ward as its Chairman in order to provide experienced, independent leadership for the Directors and to foster the Board’s oversight of management and the Company.

 

At times when our chairman is not independent or when otherwise appropriate, we utilize an independent Lead Director in order to ensure that the Board continues to maintain an independent thought process that ultimately benefits stockholders. The Lead Director, among other things, reviews meeting schedules and agendas with the chairman of the Board and serves as the primary liaison between the independent directors and the chairman of the Board.

 

The independent directors meet in executive session at least once a year, without the other directors present, and the Chairman of the Board presides at such meetings. The non-management directors meet regularly without the CEO or any other member of management present and in fiscal 2016 met five times. Ms. Ward, as Chairman of the Board, presided over the sessions of the non-management and independent directors in fiscal 2016.

 

SYSCO CORPORATION - 2016 Proxy Statement    16

 

Communicating with the Board

 

Interested parties may communicate with the Chairman of the Board, the non-management directors or independent directors as a group and the individual members of the Board by confidential web submission or by mail. All such correspondence will be delivered to the parties to whom they are addressed. The Board requests that items unrelated to the duties and responsibilities of the Board not be submitted, such as product inquiries and complaints, job inquiries, business solicitations and junk mail. You may access the form to communicate by confidential web submission in the corporate governance section of Sysco’s website under “Investors — Corporate Governance— Contact the Board” at www.sysco.com. You can contact any of our Directors by mail in care of the Office of the Corporate Secretary, Sysco Corporation, 1390 Enclave Parkway, Houston, Texas 77077.

 

Board Meetings and Committees

 

During fiscal 2016, the Board held 14 meetings, including four regular meetings and ten special meetings, and committees of the Board held a total of 34 meetings. Overall attendance at such meetings was approximately 98%. Each director attended 75% or more of the aggregate of all meetings of the Board and the committees on which he or she served during fiscal 2016. The Board has an Audit Committee, a Compensation Committee, a Corporate Governance and Nominating Committee, a Corporate Sustainability Committee, a Finance Committee, and an Executive Committee. Current copies of the written charters for the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, the Finance Committee and the Corporate Sustainability Committee are published on our website under “Investors — Corporate Governance” at www.sysco.com. The current membership and primary responsibilities of the committees are summarized in the following table.

 

Committee Name
& Current Members
  Primary Responsibilities   Fiscal 2016
Meetings

Audit(1)

Mr. Tilghman (Chair)
Mr. Hafner
Dr. Koerber
Ms. Newcomb

 

  Oversees and reports to the Board with respect to various auditing and accounting matters, including the selection of the independent public accountants, the scope of audit procedures, the nature of all audit and non-audit services to be performed by the independent public accountants, the fees to be paid to the independent public accountants, and the performance of the independent public accountants

  Oversees and reports to the Board with respect to Sysco’s accounting practices and policies

  Responsible for discussing the Company’s policies with respect to risk assessment and risk management,

   including discussion of enterprise-wide guidelines and policies to govern the process by which risk assessment and management is undertaken

  Oversees and reports to the Board with respect to compliance with legal and regulatory requirements,

   corporate accounting, reporting practices and the integrity of the financial statements of the Company

  9

Compensation(2)(3)

Mr. Cassaday (Chair)
Dr. Craven
Mr. Frank
Mr. Glasscock
Ms. Ward

 

  Establishes compensation policies that effectively attract, retain and incentivize executive officers

  Establishes and approves all compensation of the CEO and the other senior officers, including the named executive officers

  Responsible for the appointment, compensation and oversight of the work of each of the committee’s compensation consultants, counsel or other advisers

  Oversees the administration of Sysco’s qualified and nonqualified benefit plans, incentive compensation plans, equity-based plans and Sysco’s group benefit medical plan

  Appropriately delegates and oversees compensation and granting authority, except for decisions that impact the compensation of Sysco’s CEO and executive officers

  Oversees administrative committees or individuals delegated oversight of employee and executive benefit plans

  Amends, establishes or terminates any benefit plan that is maintained primarily for the benefit of Sysco’s senior officers

  Resolves claims under any benefit plan with respect to any senior officer

  8

Corporate
Governance and

Nominating(2)
Mr. Glasscock (Chair)
Mr. Cassaday
Dr. Craven
Mr. Peltz
Ms. Ward

 

  Proposes directors, committee members and officers to the Board for election or reelection

  Oversees the evaluation of management, including the CEO

  Reviews the performance of the members of the Board and its committees

  Recommends to the Board the annual compensation of non-employee directors

  Reviews related party transactions

  Reviews and makes recommendations regarding the organization and effectiveness of the Board and its committees, the establishment of corporate governance principles, the conduct of meetings, succession planning and Sysco’s Governing Documents

  Reviews and makes recommendations regarding changes to Sysco’s Codes of Conduct, periodically reviews overall compliance with the Codes and approves any waivers to the Codes given to Sysco’s executive officers and directors

  Monitors compliance with and approves waivers to Sysco’s Policy on Trading in Company Securities

  9
Corporate Sustainability
Dr. Craven (Chair)
Mr. Glasscock
Mr. Golden
Mr. Hafner
 

  Reviews and acts in an advisory capacity to the Board and management with respect to policies and strategies that affect Sysco’s role as a socially responsible organization as well as Sysco’s long-term sustainability

  Reviews, evaluates, and provides input on the development and implementation of Sysco’s Sustainability Strategy, which focuses on three pillars: People, Products and Planet

  Reviews philanthropic giving, agriculture programs, and warehouse and transportation initiatives designed to improve the environmental impact of the company

  3

 

SYSCO CORPORATION - 2016 Proxy Statement    17

 
Committee Name
& Current Members
  Primary Responsibilities   Fiscal 2016
Meetings
Finance
Mr. Hafner (Chair)
Mr. DeLaney
Mr. Frank
Mr. Golden
Dr. Koerber
Ms. Newcomb
Mr. Tilghman
 

  Assists the Board in satisfying its fiduciary responsibilities relating to Sysco’s financial performance and financial planning

  Reviews policies regarding capital structure, dividends and liquidity

  Reviews and recommends the sale or issuance of equity and debt securities

  Reviews acquisitions and financing alternatives

  Reviews and approves certain capital expenditures

  Reviews and recommends insurance risk management strategies as proposed by management

  Approves and monitors high-level investment and funding objectives and investment performance and funding of Sysco’s tax-qualified retirement plans and non-qualified retirement and deferred compensation plans

  Reviews and oversees Sysco’s information technology and security matters

  Assists the Audit Committee in reviewing and overseeing Sysco’s environmental, health and safety matters and related regulatory compliance

  5

Executive

Ms. Ward (Chair)
Mr. Cassaday
Dr. Craven
Mr. DeLaney
Mr. Glasscock
Mr. Hafner
Mr. Tilghman

    Exercises all of the powers of the Board when necessary, to the extent permitted by applicable law   0

 

(1) Each member of the Audit Committee has been determined by the Board to be independent, as defined in the NYSE’s listing standards, Section 10A of the Exchange Act and the Company’s Corporate Governance Guidelines. Each member of the Audit Committee is financially literate and the Board has determined that Messrs. Hafner and Tilghman and Ms. Newcomb each meet the definition of an audit committee financial expert as promulgated by the Securities and Exchange Commission. No Audit Committee member serves on the audit committees of more than two other companies.
   
(2) Each member of the Compensation Committee and the Corporate Governance and Nominating Committee has been determined by the Board to be independent, as defined in the NYSE’s listing standards and the Company’s Corporate Governance Guidelines.
   
(3) Except for decisions that impact the compensation of Sysco’s CEO, the Compensation Committee is generally authorized to delegate any decisions it deems appropriate to a subcommittee. In such a case, the subcommittee must promptly make a report of any action that it takes to the full Compensation Committee. In addition, the Compensation Committee may delegate to any one or more members of the Board its full equity grant authority with respect to any equity-based grants other than grants made to officers that are subject to reporting obligations under Section 16 of the Exchange Act; and the Compensation Committee has delegated such authority to Mr. DeLaney with respect to certain non-executive employees, subject to specified limitations. In carrying out its duties, the Compensation Committee may also delegate its oversight of Sysco’s employee and executive benefit plans to any administrative committees of the respective plans or to such officers or employees of Sysco as the Compensation Committee deems appropriate, except that it may not delegate its powers to amend, establish or terminate any benefit plan that is maintained primarily for the benefit of Sysco’s senior officers, resolve claims under a benefit plan with respect to any senior officer, or modify the compensation of any senior officer as provided under any nonqualified or executive incentive compensation plan. For a detailed description of the Compensation Committee’s processes and procedures for consideration and determination of executive compensation, including the role of executive officers and compensation consultants in recommending the amount and form of executive compensation, see “— Compensation Consultants,” and “Compensation Discussion and Analysis.”

 

Annual Board Self-Evaluation

 

The Board conducts an annual self-evaluation to determine whether the Board and its committees are functioning effectively. As part of the evaluation process, each director completes a Board self-evaluation questionnaire developed by the Corporate Governance and Nominating Committee. The questionnaire responses are compiled and reviewed by outside legal counsel, which provides a summary of the responses, without attribution to any individual director, to the Chairman of the Board and the Chairman of the Corporate Governance and Nominating Committee. The outside legal counsel also conducts interviews with each director individually. The results of the questionnaires and the interview process are subsequently discussed by the Corporate Governance and Nominating Committee and are then presented to the full Board for review and discussion.

 

In addition, each Board committee conducts a similar self-evaluation of its performance focused on the Committee’s key responsibilities. Feedback from the committees’ self-evaluations is reviewed by the applicable committee and also presented to the full Board for review and discussion.

 

In fiscal 2016, following consultation with leading third party experts on public company board governance and director evaluations, the Corporate Governance and Nominating Committee approved the following enhancements to the Board’s annual self-evaluation process:

 

An individual director self-evaluation process, implemented for fiscal 2016, under which each director completes an individual self-evaluation questionnaire that is submitted to the outside legal counsel and discussed with the director during the interview referenced above; and
   
“360 degree” individual director performance reviews, which will be conducted every 3 years, beginning no earlier than calendar year 2017, and will involve soliciting feedback on each director’s individual performance from a variety of sources, including management and the other members of the Board.

 

SYSCO CORPORATION - 2016 Proxy Statement    18

 

Director Independence

 

Our Corporate Governance Guidelines require that at least a majority of our directors meet the criteria for independence that the New York Stock Exchange has established for continued listing, as well as the additional criteria set forth in the Guidelines. Additionally, we require that all members of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee be independent, that all members of the Audit Committee satisfy the additional requirements of the New York Stock Exchange and applicable rules promulgated under the Exchange Act, and that all members of the Compensation Committee satisfy the additional requirements of the New York Stock Exchange.

 

Under New York Stock Exchange listing standards, to consider a director to be independent, we must determine that he or she has no material relationship with Sysco other than as a director. The standards specify the criteria by which we must determine whether directors are independent, and contain guidelines for directors and their immediate family members with respect to employment or affiliation with Sysco or its independent public accountants.

 

In addition to the NYSE’s standards for independence, our Corporate Governance Guidelines contain categorical standards that provide that the following relationships will not impair a director’s independence:

 

if a Sysco director is an executive officer of another company that does business with Sysco and the annual sales to, or purchases from, Sysco are less than two percent of the annual revenues of the company for which he or she serves as an executive officer;
   
if a Sysco director is an executive officer of another company which is indebted to Sysco, or to which Sysco is indebted, and the total amount of either company’s indebtedness to the other is less than two percent of the total consolidated assets of the company for which he or she serves as an executive officer, so long as payments made or received by Sysco as a result of such indebtedness do not exceed the two percent thresholds provided above with respect to sales and purchases; and
   
if a Sysco director serves as an officer, director or trustee of a tax-exempt charitable organization, and Sysco’s discretionary charitable contributions to the organization are less than two percent of that organization’s total annual charitable receipts; Sysco’s automatic matching of employee charitable contributions will not be included in the amount of Sysco’s contributions for this purpose.

 

The Board of Directors has reviewed all relevant relationships of the directors with Sysco. The relationships reviewed included those described under “Certain Relationships and Related Transactions,” and several relationships that did not automatically make the individual non-independent under the NYSE standards or our Corporate Governance Guidelines, either because of the type of affiliation between the director and the other entity or because the amounts involved did not meet the applicable thresholds.

 

These additional relationships include the following (for purposes of this section, “Sysco”, “we,” “us” and “our” include our operating companies):

 

Mr. Cassaday serves as a director of Irving Oil Limited, which is one of our suppliers;
   
Dr. Craven serves as a director of Luby’s, Inc., which is one of our customers;
   
Mr. Frank is a Partner of Trian Fund Management, L.P., which owns approximately 8% of Sysco’s outstanding common stock;
   
Mr. Hafner serves on the boards or committees of several non-profit organizations to which Sysco makes donations; in addition, Mr. Hafner serves on the Council of Overseers for the Jones Graduate School at Rice University, which is one of our customers;
   
Mr. Peltz is Chief Executive Officer and a Founding Partner of Trian Fund Management, L.P., which owns approximately 8% of Sysco’s outstanding common stock; he is also the non-executive Chairman of The Wendy’s Company, which is one of our customers, a director of Mondeléz International, Inc., a customer of and supplier to Sysco, and a director of the Madison Square Garden Company, a Sysco customer;
   
Mr. Tilghman is Vice-President of The Coral Bay Club, which is one of our customers; and
   
Ms. Ward’s granddaughter’s husband works for one of Sysco’s subsidiaries as a marketing associate.

 

After reviewing such information, the Board of Directors has determined that each of Mr. Brutto, Mr. Cassaday, Dr. Craven, Mr. Frank, Mr. Glasscock, Mr. Hafner, Mr. Halverson, Dr. Koerber, Ms. Newcomb, Mr. Peltz, Mr. Shirley, Mr. Tilghman and Ms. Ward has no material relationship with Sysco and is independent under the NYSE standards and the categorical standards set forth in the Corporate Governance Guidelines and described above.

 

The Board also determined that Mr. DeLaney, who served as an executive officer of the Company during fiscal 2016, is not independent pursuant to the NYSE independence standards due to such service, and that Mr. Golden is not independent due to his relationship to Arnall Golden Gregory LLP. See “Transactions with Related Persons” below for further discussion.

 

The Board has also determined that each member of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee is independent. Our Corporate Governance Guidelines also provide that no independent director who is a member of the Audit, Compensation or Corporate Governance and Nominating Committees may receive any compensation from Sysco other than in his or her capacity as a non-employee director or committee member. The Board has determined that no non-employee director received any compensation from Sysco at any time since the beginning of fiscal 2016, other than in his or her capacity as a non-employee director, committee member, committee chairman or Chairman of the Board.

 

SYSCO CORPORATION - 2016 Proxy Statement    19

 

Certain Relationships and Related Person Transactions

 

Related Person Transactions Policies and Procedures

 

The Board has adopted written policies and procedures for review and approval or ratification of transactions with related persons. We subject the following related persons to these policies: directors, director nominees, executive officers, beneficial owners of more than five percent of our stock and any immediate family members of these persons.

 

We follow the policies and procedures below for any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which Sysco was or is to be a participant, the amount involved exceeds $100,000, and in which any related person had or will have a direct or indirect material interest. These policies specifically apply without limitation to purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness, and employment by Sysco of a related person. The Board of Directors has determined that the following do not create a material direct or indirect interest on behalf of the related person, and are, therefore, not related person transactions to which these policies and procedures apply:

 

Interests arising only from the related person’s position as a director of another corporation or organization that is a party to the transaction; or
   
Interests arising only from the direct or indirect ownership by the related person and all other related persons in the aggregate of less than a 10% equity interest, other than a general partnership interest, in another entity which is a party to the transaction; or
   
Interests arising from both the position and ownership level described in the two bullet points above; or
   
Interests arising solely from the ownership of a class of Sysco’s equity securities if all holders of that class of equity securities receive the same benefit on a pro rata basis, such as dividends; or
   
A transaction that involves compensation to an executive officer if the compensation has been approved by the Compensation Committee, the Board of Directors or a group of independent directors of Sysco performing a similar function; or
   
A transaction that involves compensation to a director for services as a director of Sysco if such compensation will be reported pursuant to Item 402(k) of Regulation S-K.

 

Any of our employees, officers or directors who have knowledge of a proposed related person transaction must report the transaction to our chief legal officer. Whenever practicable, before the transaction goes effective or becomes consummated, the Corporate Governance and Nominating Committee of the Board of Directors will review and approve the proposed transaction in accordance with the terms of this policy. If the chief legal officer determines that it is not practicable to obtain advance approval of the transaction under the circumstances, the Committee will review and, in its discretion may ratify, the transaction at its next meeting. In addition, the Board of Directors has delegated to the Chair of the Committee the authority to pre-approve or ratify, as applicable, any related person transaction in which the aggregate amount involved is expected to be less than $500,000.

 

In addition, if a related person transaction is ongoing in nature and the Committee has previously approved it, or the transaction otherwise already exists, the Committee will review the transaction during its first meeting of each fiscal year to:

 

ensure that such transaction has been conducted in accordance with the previous approval granted by the Committee, if any;
   
ensure that Sysco makes all required disclosures regarding the transaction; and
   
determine if Sysco should continue, modify or terminate the transaction.
   
We will consider a related person transaction approved or ratified if the transaction is authorized by the Corporate Governance and Nominating Committee or the Chair, as applicable, in accordance with the standards described below, after full disclosure of the related person’s interests in the transaction. As appropriate for the circumstances, the Committee will review and consider such of the following as it deems necessary or appropriate:
   
the related person’s interest in the transaction;
   
the approximate dollar value of the amount involved in the transaction;
   
the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
   
whether the transaction was undertaken in Sysco’s ordinary course of business;
   
whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to Sysco than terms that could have been reached with an unrelated third party;
   
the purpose of, and the potential benefits to Sysco of, the transaction; and
   
any other information regarding the transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

 

The Committee will review such additional information about the transaction as it in its sole discretion shall deem relevant. The Committee may approve or ratify the transaction only if the Committee determines that, based on its review, the transaction is in, or is not inconsistent with, the best interests of Sysco. The Committee may, in its sole discretion, impose such conditions as it deems appropriate on Sysco or the related person when approving a transaction. If the Committee or the Chair, as applicable, does not ratify a related person transaction, we will either rescind or modify the transaction, as the Committee or the Chair, as applicable, directs, as soon as practicable following the failure to ratify the transaction. The Chair will report to the Committee at its next regularly scheduled meeting any action that he or she has taken under the authority delegated pursuant to this policy. If any director has an interest in a related person transaction, he or she is not allowed to participate in any discussion or approval of the transaction, except that the director is required to provide all material information concerning the transaction to the Committee.

 

SYSCO CORPORATION - 2016 Proxy Statement    20

 

Transactions with Related Persons

 

Mr. Golden, one of our directors, is the sole stockholder of Jonathan Golden, P.C., a partner in the law firm of Arnall Golden Gregory LLP, Atlanta, Georgia, which provided legal services to Sysco during fiscal 2016 and continues to do so in fiscal 2017. During fiscal 2016, Sysco incurred approximately $1.2 million in legal fees and disbursements related to these services. We believe the amounts were fair and reasonable in view of the level and extent of services rendered. Due to this relationship, Mr. Golden is not considered to be an independent director under the NYSE standards or the categorical standards set forth in Sysco’s Corporate Governance Guidelines.

 

Ms. Twila Day is the wife of William Day, our Executive Vice President, Merchandising. Ms. Day previously served as Sysco’s Vice President and Chief Information Officer from December 2005 until January 2010, when she was promoted to Senior Vice President and Chief Information Officer, and served in this position until her departure from Sysco effective June 29, 2013. Following her departure from Sysco, Ms. Day accepted a position as a managing director of the consulting firm Alvarez & Marsal, which has provided consulting services to Sysco since 2004. Sysco and its affiliates purchased approximately $1.7 million in consulting services from this firm in fiscal 2016, although Ms. Day did not personally provide any services to Sysco, nor did she receive any compensation as a result of these services.

 

The Corporate Governance and Nominating Committee has approved each of the above transactions in accordance with the disclosed policies and procedures.

 

Risk Oversight

 

One of the primary oversight functions of the Board is to ensure that Sysco has an appropriate risk management process in place that is commensurate with both the short and long-term goals of the Company. In order to effectively fulfill this oversight role, the Board relies on various individuals and committees within management and among our Board members. See “Board of Directors Matters—Election of Directors at 2016 Annual Meeting (Item 1) —Director Qualifications” and “Board of Directors Matters—Board Composition” below for a description of individual director qualifications, including risk management experience.

 

Management is responsible for identifying, managing and mitigating risks, and reports directly to the Audit Committee and the Board on a regular basis with respect to risk management. As discussed above under “Board Meetings and Committees of the Board,” the Audit Committee reviews Sysco’s process by which management assesses and manages the Company’s exposure to risk. The Audit Committee also makes recommendations to the Board of Directors with respect to the process by which members of the Board and relevant committees will be made aware of the Company’s significant risks, including recommendations regarding what committee of the Board would be most appropriate to take responsibility for oversight of management with respect to the most material risks faced by the Company. On an annual basis management reviews with the Board the key enterprise risks identified in the process, such as strategic, operational, financial, compliance and reputation risks, as well as management’s process for addressing and mitigating the potential effects of such risks. Sysco has developed an enhanced enterprise risk management process that includes frequent discussion and prioritization of key risk issues by the executive management team, a deep dive approach to fully understand the risks, creation of a risk management plan in support of lowering the risk’s exposure to the level of management’s preferred tolerance, and tracking and monitoring of risk information and management’s execution of the plan, all within a governance and reporting cadence.

 

The Board’s committees help oversee the risk management process within the respective areas of the committees’ delegated oversight authority. The Audit Committee is primarily responsible for hiring and evaluating our independent auditor, review of our internal controls, oversight of our internal audit function, oversight of customer credit risk, reviewing contingent liabilities that may be material to the Company and various regulatory and compliance oversight functions. The Compensation Committee is responsible for ensuring that our executive compensation policies and practices do not incentivize excessive or inappropriate risk-taking by employees. The Corporate Governance and Nominating Committee monitors risk by ensuring that proper corporate governance standards are maintained, that the Board is comprised of qualified Directors, and that qualified individuals are chosen as senior officers. The Finance Committee oversees risks involving capital structure of the enterprise, including borrowing, liquidity, allocation of capital, major capital transactions and expenditures, funding of benefit plans, credit/counterparty risk and investment risk. The Chairman of the Board coordinates the flow of information regarding risk oversight from each respective committee to the independent Directors and participates in the review of the agenda for each Board and Committee meeting. As the areas of oversight among committees sometimes overlap, committees may hold joint meetings when appropriate and address certain risk oversight issues at the full Board level. The Board considers risk in evaluating the Company’s strategy, including specific strategic and emerging risks, and annually reviews and approves corporate goals and capital budgets. The Board also monitors any specific risks for which it has chosen to retain oversight rather than delegating oversight to one of its committees, such as risks related to cyber-security, technology platform development and succession planning.

 

SYSCO CORPORATION - 2016 Proxy Statement    21

 

Codes of Conduct

 

We require all of our officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, to comply with our Code of Conduct applicable to Sysco employees to help ensure that we conduct our business in accordance with the highest standards of moral and ethical behavior. This Code of Conduct addresses the following, among other topics:

 

professional conduct, including customer relationships, equal opportunity, payment of gratuities and receipt of payments or gifts;
   
competition and fair dealing;
   
compliance with the Foreign Corrupt Practices Act;
   
political contributions;
   
antitrust;
   
conflicts of interest;
   
legal compliance, including compliance with laws addressing insider trading;
   
financial disclosure;
   
intellectual property; and
   
confidential information.

 

Our Code, which is reviewed annually by our Corporate Governance and Nominating Committee, requires strict adherence to all laws and regulations applicable to our business and requires employees to report any violations or suspected violations of the Code. In August 2010, we also adopted a separate Code of Conduct applicable to non-employee directors that is similar in scope to the employee Code but is tailored to the issues and concerns facing Sysco directors. We have published the Codes of Conduct for employees and non-employee directors on our website under “Investors— Corporate Governance” at www.sysco.com. We intend to disclose any future amendments to or waivers of our Code applicable to our directors or executive officers on our website at www.sysco.com under the heading “Investors— Corporate Governance.”

 

Reporting a Concern or Violation

 

Our Code of Conduct explains that there are multiple channels for an employee to report a concern, including to his or her manager, a human resource professional, our legal or internal audit department, or to the Sysco Associate Hotline, which is monitored by Global Compliance. Our Global Compliance Hotline is available 24 hours a day, seven days a week, to receive calls or web submissions from anyone wishing to report a concern or complaint, anonymous or otherwise. Our HotLine contact information can be found on our website at www.sysco.com under the heading “Investors—Corporate Governance—Contact the Board.”

 

Any report to any one of our multiple channels for reporting concerns that raises a concern or allegation of impropriety relating to our accounting, internal controls or other financial or audit matters is immediately forwarded to our Executive Vice President, Administration and Corporate Secretary, who is then responsible for reporting such matters, unfiltered, to the Chair of our Audit Committee. All such matters are investigated and responded to in accordance with the procedures established by the Audit Committee to ensure compliance with the Sarbanes-Oxley Act of 2002.

 

Compensation Consultants

 

In May 2014, the Compensation Committee retained Exequity LLP (“Exequity”) as its executive compensation consultant. Retained by and reporting directly to the Compensation Committee, Exequity provides the Committee with assistance in evaluating Sysco’s executive compensation programs and policies, and, where appropriate, has assisted with the redesign and enhancement of elements of the programs. The scope of Exequity’s assignments with regard to fiscal 2016 executive compensation included:

 

Review of long-term incentive program design and assistance with determination of awards;
   
Provision of external perspective on executive compensation, including preparation of annual comparative executive compensation studies and development of key trends reports regarding executive compensation, evolving best practices and relevant regulatory changes;
   
Review of the total compensation program, including competitive peer group comparisons and analysis, and analysis of executive benchmark positions and competitive levels in relation to broader market survey data, and assessment of annual NEO pay and performance relationship versus the peer group;
   
Provision of consulting with regard to the one-time incentive and retention cash payments for executives awarded by the Committee in July 2015; and
   
Periodic compensation consulting at the request of the Compensation Committee and management.

 

Exequity has also advised the Corporate Governance and Nominating Committee with respect to non-employee director compensation. At the Corporate Governance and Nominating Committee’s request, Exequity has provided data regarding the amounts and type of compensation paid to non-employee directors at the companies in Sysco’s peer group, and has also identified trends in director compensation. All decisions regarding non-employee director compensation are recommended by the Corporate Governance and Nominating Committee and approved by the Board of Directors. In addition to providing background information and written materials, Exequity representatives attended meetings at which the Committee Chairmen believe that their expertise would be beneficial to the Committees’ discussions. Neither Exequity nor any of its affiliates provided any additional services to Sysco and its affiliates in fiscal 2016, or any such services in fiscal 2017 through the date of the proxy statement. Sysco does not expect Exequity to provide any such services to Sysco in the future. The Compensation Committee has determined Exequity to be independent from the Company and that no conflicts of interest exist related to Exequity’s services provided to the Compensation Committee. See “Compensation Discussion and Analysis–How Executive Pay is Established—Committee Oversight.”

 

For a discussion of the role of the CEO and other executive officers in determining or recommending NEO compensation, see “Compensation Discussion and Analysis – How Executive Pay is Established – Role of CEO and/or Other Executive Officers in Determining NEO Compensation.”

 

SYSCO CORPORATION - 2016 Proxy Statement     22

 

BOARD OF DIRECTORS MATTERS

 

Election of Directors at 2016 Annual Meeting (Item 1)

 

Election Process

 

The company’s bylaws provide for majority voting in uncontested director elections. Majority voting means that directors are elected by a majority of the votes cast—that is, the number of shares voted “for” a director must exceed the number of shares voted “against” that director. Any incumbent director who is not re-elected in an election in which majority voting applies shall tender his or her resignation promptly following certification of the stockholders’ vote. The Corporate Governance and Nominating Committee shall consider the tendered resignation and recommend to the Board whether to accept or reject the resignation offer, or whether other action should be taken. The director who tenders his or her resignation shall not participate in the recommendation of the committee or the decision of the Board with respect to his or her resignation. The Board shall act on the recommendation within 120 days following certification of the stockholders’ vote and shall promptly disclose its decision regarding whether to accept the director’s resignation offer. In contested elections, where there are more nominees than seats on the Board as of the record date of the meeting at which the election will take place, directors are elected by a plurality vote. This means that the nominees who receive the most votes of all the votes cast for directors will be elected.

 

Nomination Process

 

The Corporate Governance and Nominating Committee is responsible for identifying and evaluating candidates for election to Sysco’s Board of Directors.

 

Director Candidates Identified by the Board and Management. In identifying candidates for election to the Board, the Committee will determine which of the incumbent directors has an interest in being nominated for re-election at the next meeting of stockholders. The Committee will also identify and evaluate new candidates for election to the Board for the purpose of filling vacancies. The Committee will solicit recommendations for nominees from persons that the Committee believes are likely to be familiar with qualified candidates, including current members of the Board and Sysco’s management. The Committee may also determine to engage a professional search firm to assist in identifying qualified candidates. When such a search firm is engaged, the Committee shall set its fees and scope of engagement.

 

During 2016, in connection with the Board refreshment efforts described above, the Board engaged the services of a search firm to assist with identifying and recruiting appropriate director candidates. Following consideration of director candidates referred by our then-current directors and identified by our search firm, upon the recommendation of our Corporate Governance and Nominating Committee, in September 2016 our Board unanimously expanded the size of the Board from 12 to 15 directors and elected three new independent, non-employee directors: Mr. Daniel J. Brutto, Mr. Bradley M. Halverson and Mr. Edward  D. Shirley. The size of the Board will be reduced from 15 to 14 directors, effective at the time of the Annual Meeting, in connection with the expiration of Mr. Hafner’s term. As our longest-tenured directors retire from the Board pursuant to the director tenure policy, we will continue our director recruitment efforts to help ensure that the size of the Board may be maintained at an appropriate level. Accordingly, over the next two years, the Board has determined to elect one additional independent director in each of 2017 and 2018, assuming that it is able to identify a sufficient number of qualified candidates interested in serving as a director.

 

Director Candidates Recommended by Stockholders. The Committee will also consider candidates recommended by stockholders. The Committee will evaluate such recommendations using the same criteria that it uses to evaluate other director candidates. Stockholders can recommend candidates for consideration by the Committee by writing to the Corporate Secretary, 1390 Enclave Parkway, Houston, Texas 77077, and including the following information:

 

the name and address of the stockholder;
   
the name and address of the person to be nominated;
   
a representation that the stockholder is a holder of the Sysco stock entitled to vote at the meeting to which the director recommendation relates;
   
a statement in support of the stockholder’s recommendation, including a description of the candidate’s qualifications;
   
information regarding the candidate as would be required to be included in a proxy statement filed in accordance with the rules of the Securities and Exchange Commission; and
   
the candidate’s written, signed consent to serve if elected.

 

The Committee will consider, in advance of Sysco’s next annual meeting of stockholders, those director candidate recommendations that the Committee receives by May 1, 2017.

 

In addition, if we receive by June 7, 2017, a recommendation of a director candidate from one or more stockholders who have beneficially owned at least five percent of our outstanding common stock for at least one year as of the date the stockholder makes the recommendation, then we will disclose in our next proxy materials relating to the election of directors the identity of the candidate, the identity of the nominating stockholder(s) and whether the Committee determined to nominate such candidate for election to the Board. However, we will not provide this disclosure without first obtaining written consent of such disclosure from both the nominating stockholder and the candidate it is planning to recommend. The Committee will maintain appropriate records regarding its process of identifying and evaluating candidates for election to the Board. The Committee has not received any recommendations for director nominees for election at the 2016 annual stockholders meeting from any Sysco stockholders beneficially owning more than five percent of Sysco’s outstanding common stock.

 

Proxy Access Director Candidates. For director elections following the Annual Meeting, our proxy access bylaw provisions will permit an eligible stockholder (or a group of up to 20 eligible stockholders), who have continuously owned for a period of three years at least 3% of the aggregate of our outstanding common stock, to nominate a number of

 

SYSCO CORPORATION - 2016 Proxy Statement    23

 

director nominees equal to 20% (rounded down) of the total number of directors constituting our Board (provided that, if the total number of directors is less than 10, an eligible stockholder or group may nominate up to 2 persons), which nominees will be included in our proxy statement for the relevant annual stockholders meeting if the nominating stockholder(s) and the respective nominee(s) comply with all applicable eligibility, procedural and disclosure requirements set forth in our bylaws.

 

Evaluation of Director Candidates. In evaluating all incumbent and new director candidates that the Committee determines merit consideration, the Committee will:

 

cause to be assembled information concerning the background and qualifications of the candidate, including information required to be disclosed in a proxy statement under the rules of the SEC or any other regulatory agency or exchange or trading system on which Sysco’s securities are listed, and any relationship between the candidate and the person or persons recommending the candidate;
   
determine if the candidate demonstrates the characteristics described below, including the highest personal and professional ethics, integrity and values;
   
consider the candidate’s skills, experience and qualifications in the context of the composition of the Board as a whole and the Company’s strategic priorities (see “Director Qualifications” below for a discussion of the key qualifications considered by the Committee in evaluating candidates);
   
consider the absence or presence of material relationships with Sysco that might impact independence;
   
consider the contribution that the candidate can be expected to make to the overall functioning of the Board;
   
consider the candidate’s capacity to be an effective director in light of the time required by the candidate’s primary occupation and service on other boards;
   
consider the extent to which the membership of the candidate on the Board will promote diversity among the directors; and
   
consider, with respect to an incumbent director, whether the director satisfactorily performed his or her duties as a director during the preceding term, including attendance and participation at Board and Committee meetings, and other contributions as a director.

 

In its discretion, the Committee may designate one or more of its members, or the entire Committee, to interview any proposed candidate. Based on all available information and relevant considerations, the Committee will recommend to the full Board for nomination those candidates who, in the judgment of the Committee, are most appropriate for membership on the Board based on each candidate’s characteristics, skills and qualifications.

 

Diversity

 

As a matter of practice, the Board looks for diversity in nominees such that the individuals can enhance perspective and experience through diversity in race, gender, ethnicity, cultural background, age, geographic origin, education, and professional and life experiences. Because we value gender and racial diversity among our Board members, three of our current Board members are women, including one African American and the Chairman of the Board, and two of our current Board members are from outside the United States.

 

Director Qualifications and Board Succession

 

Our Corporate Governance Guidelines provide that the Corporate Governance and Nominating Committee is responsible for reviewing with the Board, on an annual basis, the requisite characteristics, skills and qualifications that directors and director candidates should possess individually and in the broader context of the Board’s overall composition and the Company’s business and structure. This review includes consideration of diversity, skills, experience, time available and the number of other boards for which the individual serves as a director, and such other criteria as the Committee shall determine to be relevant at the time. The Committee is responsible for developing a succession plan for the Board and making recommendations to the Board regarding director succession.

 

Key Characteristics of All Nominees. Each director nominee should demonstrate and possess all of the following characteristics:

 

Integrity and Accountability: Directors must have demonstrated high ethical standards and integrity in their personal and professional dealings, and must be willing to act on – and remain accountable for – their boardroom decisions.
   
Intelligence, Wisdom and Judgment: Directors must be able to provide wise, thoughtful counsel on a broad range of issues and possess high intelligence, practical wisdom and mature judgment.
   
Financial Literacy: Directors must be financially literate and capable of understanding a balance sheet, an income statement and a cash flow statement, and capable of using financial ratios and other indices to evaluate a company’s financial performance.
   
Teamwork: Directors must possess a willingness to challenge management and other directors while working collaboratively as part of a team in an environment that encourages open, candid discussion.
   
Diversity: A director’s membership on the Board must promote diversity among the directors, including diversity of experience, views, gender, race, ethnicity and age.
   
High Performance Standards: Directors must have achieved prominence in their respective business, governmental, or professional activities, including a history of achievements reflecting high standards of performance.
   
Representing Stockholder Interests: Directors must have demonstrated their willingness and ability to effectively, consistently and appropriately represent the best interests of the Company’s stockholders.
   
Commitment: Directors must have the ability and willingness, in light of their principal occupation and other board service, to commit the time and energy necessary to be fully prepared for, and to participate in, meetings and consultations on Company matters.
   
Conflicts: Directors must not have an interest in any agreement, arrangement or understanding with any person or entity that might limit or interfere with their ability to comply with their fiduciary duties to the Company and its stockholders.
   
Company Policies: Directors must recognize and affirm their obligation to comply with the Company’s Code of Conduct, Corporate Governance Guidelines and other policies and guidelines of the Company applicable to them.

 

Director Qualifications. In fiscal 2015, the Corporate Governance and Nominating Committee enhanced the Company’s process for identifying the portfolio of skills, characteristics and qualifications required for the Board to establish and oversee management’s execution of the Company’s strategic priorities. The Committee, together with the Board as a whole

 

SYSCO CORPORATION - 2016 Proxy Statement    24

 

and with the assistance of an independent law firm, utilized feedback from senior management and the individual directors to identify the following director qualifications, which the Board determined are the most significant for the Board to possess, collectively, in light of the Company’s strategic priorities. These director qualifications were reviewed and affirmed by the Committee in fiscal 2016.

 

Executive Leadership/Management — Experience as a senior executive in a large and complex public, private, government or academic organization enables a director to better oversee the management of the Company. Such individuals also bring perspective in analyzing, shaping and overseeing the execution of important operational and policy issues at a senior level, and tend to demonstrate a practical understanding of organizations, strategy, risk management and methods to drive change and growth. Finally, directors with experience in significant leadership positions generally possess the ability to identify and develop leadership qualities in others, including members of our management team.
   
Strategy Development — Directors who have served as a senior executive for large and complex public, private, governmental or academic organizations with responsibility for strategic planning and development are particularly well suited to advise and oversee management in establishing and executing the Company’s key strategic initiatives, as well as in evaluating the success of those initiatives.
   
Business Operations — Directors who have served in leadership positions with responsibility for managing or overseeing the operations of a company or business unit gain extensive experience in maximizing productivity and efficiency while managing expenses, which is valuable to Sysco’s operating plan and strategy. In particular, such directors can provide guidance and oversight to management in connection with its efforts under the three-year strategic plan to reduce administrative costs and leverage supply chain costs.
   
Accounting/Audit/Financial Reporting — An understanding of accounting, audit and financial reporting processes is important for our directors to establish appropriate financial performance objectives for the Company and senior management in the context of Sysco’s strategic priorities, and to evaluate financial performance as compared to those objectives.
   
Risk Oversight/Risk Management — The Board oversees management’s efforts to understand and evaluate the types of risks facing Sysco and its business, evaluate the magnitude of the exposure, and enhance risk management practices. Directors with risk management experience can provide valuable insights as Sysco seeks to strike an appropriate balance between enhancing profits and managing risk.
   
Public Company Board Service — Directors who have served on other public company boards can offer advice and insights with regard to the dynamics and operation of the Board, board practices of other public companies and the relationship between the Board and the management team. Most public company directors also have corporate governance experience to support our goals of Board and management accountability, greater transparency, legal and regulatory compliance and the protection of stockholder interests. Many of our directors currently serve, or have previously served, on the boards of directors of other public companies and served in leadership positions on those boards.
   
Finance — Directors with an understanding of financial markets and financing and funding operations can provide valuable advice and insights to the Finance Committee and the Board with respect to the establishment of a successful capital strategy for the Company and the evaluation of proposed capital transactions in light of that strategy.
   
Communications/Investor Relations — Directors experienced with investor and/or public relations functions of a public company are capable of guiding management in its engagement with media, investors, the financial community and other constituencies, and can provide advice and insights in connection with the development of consistent messaging concerning important matters, especially Sysco’s financial performance and strategic priorities.
   
HR/Talent Management/Large Workforce — Directors with human resources experience can offer guidance on Sysco’s talent management strategy, particularly in connection with recruiting, assessing, incentivizing and rewarding corporate executives and other senior leadership.
   
International/Global — Although Sysco’s primary focus is on growing and optimizing the core foodservice distribution business in North America, we continue to pursue opportunities to grow our global capabilities in, and source products directly from, international markets, such as the acquisition of the Brakes Group. We benefit from the experience and insight of directors with a global business perspective as we identify the best strategic manner in which to continue to expand our operations outside of North America. As Sysco’s reach becomes increasingly global, directors with international business experience can assist us in navigating the business, political, and regulatory environments in countries in which Sysco does, or seeks to do, business.
   
Foodservice Industry Experience — Experience serving as an executive, director or in another leadership position with a company in the foodservice industry enables a director to oversee more effectively our operations and to provide advice and guidance on issues impacting our business. In addition, as the foodservice market continues to mature, directors with industry experience can provide valuable insights as we focus on ways in which Sysco can grow organically by identifying and developing new markets.
   
Technology/e-Commerce — We use technology in substantially all aspects of our business operations, and we expect to continue employing technology in furtherance of our strategic priorities. Directors with experience in technology and e-commerce are well suited to oversee management’s selection and implementation of key technological solutions and its approach to privacy issues and cyber security risks.

 

In selecting the director nominees, the Corporate Governance and Nominating Committee and the Board reviewed each of the incumbent directors in light of these qualifications and the Company’s strategic priorities, and it concluded that each of the nominees contributed significantly to the Board’s collective portfolio of requisite skills, characteristics and qualifications and to the Board’s overall composition. The Committee and the Board also applied these qualifications in connection with its consideration of the director candidates elected to the Board in September 2016, and expects to continue to utilize these qualification criteria in connection with its ongoing Board refreshment efforts to identify additional candidates for future Board service.

 

The priorities and emphasis of the Corporate Governance and Nominating Committee and of the Board with regard to these qualifications will change from time to time as the Company’s strategic priorities and the composition of the Board evolve. Included in the individual biographies below is a discussion of the most significant aspects of each director’s background that strengthen the Board’s collective qualifications, skills and experience and that the Committee and the Board considered in reaching their conclusion that he or she should continue to serve as a director of Sysco.

 

SYSCO CORPORATION - 2016 Proxy Statement    25

 

Nominees for Election as Directors at the 2016 Annual Meeting

 

The Board of Directors has nominated the following fourteen persons for election as directors to serve for one-year terms or until their successors are elected and qualified:

 

Daniel J. Brutto
   
John M. Cassaday
   
Judith B. Craven, M.D.
   
William J. DeLaney
   
Joshua D. Frank
   
Larry C. Glasscock
   
Jonathan Golden
   
Bradley M. Halverson
   
Hans-Joachim Koerber
   
Nancy S. Newcomb
   
Nelson Peltz
   
Edward D. Shirley
   
Richard G. Tilghman
   
Jackie M. Ward

 

Mr. Joseph A. Hafner is not standing for re-election, and his term will expire at the Annual Meeting. Each of the nominees is currently serving as a director of Sysco. Each of the nominees has consented to serve if elected. Although management does not contemplate the possibility, in the event any nominee is not a candidate or is unable to serve as a director at the time of the election, the proxies will vote for any nominee who is designated by the present Board of Directors to fill the vacancy.

 

The Board believes that the combination of the various qualifications, skills and experiences of the nominees for election as Directors at the 2016 Annual Meeting will contribute to an effective and well-functioning Board. Set forth below is biographical information for each of the nominees for election as a director at the 2016 Annual Meeting. Unless otherwise noted, the persons named below have been engaged in the principal occupations shown for the past five years or longer. In addition to the information described below, many of our directors serve as trustees, directors or officers of various non-profit, educational, charitable and philanthropic organizations.

 

The Board of Directors recommends a vote FOR each of the nominees listed above.

 

Board Composition

 

Nominees for Election as Directors at the Annual Meeting:

 

 

Daniel J. Brutto

Age: 60

Director Since: September 2016

Primary Occupation: Mr. Brutto served as President of UPS International and Senior Vice President of United Parcel Service, Inc. (“UPS”) from January 2008 until his retirement in June 2013.

Other Boards: Mr. Brutto has served as a director of Illinois Tool Works Inc. since February 2012.

 

Key Director Qualifications: Mr. Brutto earned a Bachelor of Business Administration in Accounting degree from Loyola University in 1978, followed by a Master of Business Administration degree from Keller Graduate School of Management in 1982. Mr. Brutto served as President of UPS International and Senior Vice President of UPS, a global package delivery, supply chain management and freight forwarding company, from January 2008 until his retirement in June 2013. Previously, he served as President, Global Freight Forwarding, for UPS from 2006 to 2007, and corporate controller from 2004 to 2006. Mr. Brutto’s more than 38-year career at UPS, during which he served in various capacities with increasing levels of responsibility, provided him with extensive experience in the following areas: executive leadership/management, strategy development, business operations, finance, information systems, mergers & acquisitions, marketing and international/global. He also has public company board experience, having served as a director of Illinois Tool Works Inc. since February 2012. Additionally, Mr. Brutto is currently Vice Chairman of Radial, a privately held global fulfillment, customer care and technology company, and he has served on the board of UNICEF since 2009. In the past, he has served on the board of the US-China Business Council, the Guangdong Economic Council, and the Turkey Economic Advisory Council. He was also a delegate to the World Economic Forum, Davos, Switzerland, from 2009 to 2013.

 

 

John M. Cassaday

Age: 63

Director Since: November 2004

Committees: Compensation Committee (Chair), Corporate Governance and Nominating Committee

Primary Occupation: Mr. Cassaday served as President and Chief Executive Officer of Corus Entertainment Inc. from September 1999 until his retirement in March 2015.

Other Boards: Mr. Cassaday is a director of Manulife Financial Corporation, Sleep Country Canada Holdings Inc. and Spin Master Ltd. and a director of one privately held company: Irving Oil Limited.

 

Key Director Qualifications: Mr. Cassaday earned a Bachelor of Arts degree from the University of Western Ontario and a Master of Business Administration Degree with honors from the University of Toronto’s Rotman School of Management. Prior to his more than 15 years of service as President and Chief Executive Officer of Corus Entertainment Inc., a Canadian leader in radio and cable television, Mr. Cassaday served as President and CEO of CTV Television Network Ltd. Mr. Cassaday’s career prior to broadcasting included executive positions in a number of leading packaged goods companies, including RJR-Macdonald, Inc., General Foods Corporation and Campbell Soup Company, where he gained food processing and food safety experience while advancing through positions in sales, marketing, and strategic planning in Canada, the United States, and the United Kingdom. His career at Campbell’s culminated in service as President of Campbell Soup Company’s operations in Canada and then the United Kingdom. Mr. Cassaday gained additional foodservice experience through his service as a director of Loblaw Companies Limited, Canada’s largest food retailer, and of J.M. Schnieder, a meat processing company. This background has provided Mr. Cassaday with extensive experience and knowledge in the areas of leadership, corporate strategy

 

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and development, the foodservice industry, distribution and supply chains, marketing, international operations, accounting, finance and financial reporting. In addition, Mr. Cassaday’s service on the Board of Directors of Manulife Financial Corporation has provided a greater understanding of risk management and global compensation considerations. Mr. Cassaday has received many business, industry and charitable honors, including designation as the most distinguished alumni of the University of Toronto’s Rotman School of Management in 1998, receipt of the Gold Medal from the Association of Canadian Advertisers in 2004 (which recognizes individuals who have made an outstanding contribution to the advancement of marketing communications in Canada), induction in the Marketing Hall of Legends of Canada in 2006 and induction into the Canadian Broadcast and Music Hall of Fame in 2015. In 2013, Mr. Cassaday was inducted into the Order of Canada, Canada’s highest civilian honor.

 

 

Judith B. Craven, M.D.

Age: 70

Director Since: July 1996

Committees: Corporate Sustainability Committee (Chair), Compensation Committee, Corporate Governance and Nominating Committee

Primary Occupation: Dr. Craven served as President of the United Way of the Texas Gulf Coast from 1992 until her retirement in September 1998.

Other Boards: Director of Luby’s, Inc., Sun America Funds and VALIC. In the last five years, Dr. Craven served as a director of Belo Corporation.

 

Key Director Qualifications: Dr. Craven earned a B.S. degree in Biology and English from Bowling Green State University, then completed premedical requirements at Texas Southern University before earning a Doctor of Medicine from Baylor College of Medicine and a Master of Public Health from the University of Texas School of Public Health. She also completed the Harvard University Program for Senior Managers in Government at the John F. Kennedy School of Government. Dr. Craven provides a unique viewpoint on Sysco’s Board as a medical doctor and distinguished public health expert. She gained a distinctive understanding of the foodservice industry after serving as Director of Public Health for the City of Houston from 1980 through 1983, which included responsibility for the regulation of all foodservice establishments in the City of Houston, including an emphasis on food safety and food handling. Following this appointment, Dr. Craven served as Dean of the University of Texas School of Allied Health Sciences from 1983 to 1992. She also serves on the Board of Directors of Luby’s, Inc., which operates almost 100 restaurants and provides food services to select hospital and other medical institutions in Texas. Dr. Craven’s education and service in these various positions has provided her with extensive experience and knowledge in the areas of executive leadership and management, strategy development and the foodservice industry. Dr. Craven also has experience and knowledge in, and has demonstrated a strong commitment to, diversity and social responsibility, having led many initiatives to help increase and incorporate diversity in schools, the workplace and the community. Dr. Craven served as Vice President for Multicultural Affairs for the University of Texas Health Science Center at Houston from 1987 to 1992, and served as Chair of the Committee on Diversity for the University of Texas Board of Regents for six years. Under Dr. Craven’s leadership as president for six years, The United Way of The Texas Gulf Coast won the first National Award for diversity from the United Way of America. She has also served as a member of the Board of Directors of Compaq Corporation and the Houston Branch of the Federal Reserve Bank of Dallas. Dr. Craven has received numerous awards and honors, including the NAACP VIP Award for Community Service, Houston’s Thirty Most Influential Black Women Award and induction into the Texas Women’s Hall of Fame in 1989.

 

 

William J. DeLaney

Age: 60

Director Since: January 2009

Committees: Finance Committee

Primary Occupation: Mr. DeLaney has served as Sysco’s Chief Executive Officer since March 2009.

Other Boards: Mr. DeLaney is a director of Express Scripts, Inc. and serves on the Compensation Committee and the Audit Committee of the Express Scripts, Inc. Board of Directors.

 

Key Director Qualifications: Mr. DeLaney earned a Bachelor of Business Administration degree from the University of Notre Dame, and a Master of Business Administration degree from the Wharton Graduate Division of the University of Pennsylvania. Mr. DeLaney has worked in various capacities at Sysco and its subsidiaries for more than 25 years. Through various accounting, finance, operations and management positions within Sysco and its operating companies, Mr. DeLaney has gained valuable insight into the foodservice industry, as well as Sysco’s competitive advantages and how to further build upon them. Throughout his career, Mr. DeLaney has developed experience and knowledge in the areas of leadership and management development, corporate strategy development, finance and accounting and distribution and supply chain management. Further, the Corporate Governance and Nominating Committee and the Board believe that it is appropriate and beneficial to Sysco to have its Chief Executive Officer serve as management’s voice on the Board.

 

 

Joshua D. Frank

Age: 37

Director Since: August 2015

Committees: Compensation Committee, Finance Committee

Primary Occupation: Mr. Frank is a Partner at Trian Fund Management, L.P. and has been a member of the Trian investment team since Trian’s formation in 2005.

 

Key Director Qualifications: Mr. Frank has played a leading role in many of Trian’s investments in the consumer sector, including investments in Mondelēz International, Inc., H.J. Heinz Company and PepsiCo, Inc., as well as numerous investments across other industries. As a senior member of the Trian investment team, he sources new investment ideas, leads due diligence on potential investments and focuses on portfolio construction and corporate governance matters. Mr. Frank was previously an Associate, Corporate Development, of Triarc Companies, Inc. (now known as The Wendy’s Company) (“Triarc”). Prior to joining Triarc in 2003, Mr. Frank worked at Credit Suisse First Boston from 2001 to 2003, where he spent time in both the mergers & acquisitions and healthcare investment banking groups. Throughout his career, Mr. Frank has developed experience and knowledge in the areas of corporate strategy development, finance, accounting, corporate governance, mergers and acquisitions, foodservice and the broader consumer sector. Mr. Frank graduated cum laude from Yale University with a B.A. in Economics.

 

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Larry C. Glasscock

Age: 68

Director Since: September 2010

Committees: Corporate Governance and Nominating Committee (Chair), Compensation Committee, Corporate Sustainability Committee

Primary Occupation: In March 2010, Mr. Glasscock retired from his position as Chairman of the Board of Directors of WellPoint, Inc. (now Anthem, Inc.) after serving in the role since November 2005.

Other Boards: Mr. Glasscock has served as a director of Simon Property Group, Inc. since March 2010, where he is currently the lead independent director, and as a director of Zimmer Biomet Holdings, Inc. since August 2001, where he is currently the non-executive chairman of the board. In the last five years, Mr. Glasscock served as a director of Sprint Nextel Corporation.

 

Key Director Qualifications: Mr. Glasscock attended Cleveland State University, where he received a bachelor’s degree in business administration. He later studied at the School of International Banking, participated in the American Bankers Association Conference of Executive Officers, and completed the Commercial Bank Management Program at Columbia University. Mr. Glasscock has developed significant leadership and corporate strategy expertise through over 30 years of business experience, including former service as President and CEO of WellPoint, Inc. (2004 –2007), Chairman, President and CEO of Anthem, Inc. (2001 – 2004), assuming additional responsibilities as Chairman from 2003 to 2004, as well as his service as COO of CareFirst, Inc., President and CEO of Group Hospitalization and Medical Services, Inc., President and COO of First American Bank, N.A., and President and CEO of Essex Holdings, Inc. During his tenure at WellPoint, Inc., he played a major role in transforming the company from a regional health insurer into a national healthcare leader and championed company efforts to improve quality and customer service. Throughout his career, Mr. Glasscock has developed expertise in the successful completion and integration of mergers, utilization of technology to improve productivity and customer service, and team building and human capital development. Mr. Glasscock’s expertise in the utilization of technology to improve productivity will be valuable to Sysco as we continue to implement technological solutions in connection with our strategic priorities. His knowledge and experience in team building and human capital development are also extremely valuable to Sysco, as management development and succession planning remain top priorities of executive management and the Board during fiscal 2017. Mr. Glasscock also has considerable financial experience, as he has supervised the chief financial officers of major corporations. Earlier in his career he served as a bank officer lending to major corporations and supervised assessments of companies’ creditworthiness. Mr. Glasscock also has significant experience as a public company director and as a member of various committees related to important board functions, including audit, finance, governance and compensation.

 

 

Jonathan Golden

Age: 79

Director Since: February 1984

Committees: Corporate Sustainability Committee, Finance Committee

Primary Occupation: Mr. Golden is a partner of Arnall Golden Gregory LLP.

 

Key Director Qualifications: Mr. Golden is a graduate of Princeton University and Harvard Law School. He also has served as an adjunct professor at Emory Law School in Atlanta for nine years. Mr. Golden, who is not considered an independent director, has developed an extensive knowledge of Sysco’s business through his service as a director of the Company since 1984 and through Arnall Golden Gregory LLP, a firm that has served as legal advisor to the Company on numerous transactions. Mr. Golden has served as Chairman of that firm for approximately eleven years. He personally has a long history of representing participants in the food industry, including manufacturers, distributors and food industry trade associations. Mr. Golden has gained further experience regarding the distribution and supply chain of foodservice companies as a member of the Board of Directors of a major privately-held food manufacturer that is a leader in the frozen food industry and sells to foodservice customers, particularly in-store bakeries and retail marketplaces. In addition to his legal and regulatory experience and focus on corporate responsibility, Mr. Golden has developed a knowledge of other public company Board practices through his past service on the Boards of The Profit Recovery Group International, Inc., Intermedics, Inc., Automatic Service Company and Butler Shoe Corp.

 

 

Bradley M. Halverson

Age: 56

Director Since: September 2016

Primary Occupation: Mr. Halverson has served as the Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar Inc. (“Caterpillar”) since January 2013.

 

Key Director Qualifications: Mr. Halverson attended the University of Illinois, where he received a Bachelor of Science degree in Accounting in 1982 and an Executive Master of Business Administration degree in 1996. He is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. Mr. Halverson currently serves as Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar, the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel - electric locomotives. He is responsible for Caterpillar’s Finance Services Division, Human Services Division, Global Information Services Division, Financial Products Division, Global Supply Network Division, as well as Corporate Auditing. He joined Caterpillar in 1988, serving in budgeting, forecasting and financial analysis roles of increasing responsibility. In 1993, Mr. Halverson moved to Geneva, Switzerland, to become a strategy and planning consultant with Caterpillar Overseas, S.A. He went on to become controller in Europe, responsible for Caterpillar’s financial reporting in Europe, Africa and the Middle East, returning to the U.S. in 1996 to manage general accounting and financial systems. From 1998 until 2012, Mr. Halverson served in various leadership roles at Caterpillar, including Corporate Controller (2007-2010) and Vice President, Financial Services Division (2010-2012). During the course of his nearly 30 year career with Caterpillar, together with his prior service with PricewaterhouseCoopers LLP, Mr. Halverson has developed deep expertise in accounting, financial reporting and corporate finance, and has leadership experience in the areas of executive leadership and management, corporate strategy development, mergers and acquisitions, risk management, information technology systems oversight

 

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and international business. Mr. Halverson is a member of the Executive Committee of the U. S. Chamber of Commerce Board and also serves on the OSF St. Francis Medical Center Community Advisory Board and is Immediate Past Chairman of the Easter Seals Central Illinois Board of Directors and Treasurer of the Easter Seals Foundation of Central Illinois Board of Trustees.

 

 

Hans-Joachim Koerber

Age: 70

Director Since: January 2008

Committees: Audit Committee, Finance Committee

Primary Occupation: Dr. Koerber served as the chairman and chief executive officer of METRO Group from 1999 until his retirement in October 2007.

Other Boards: Dr. Koerber is chairman of the board of directors of Air Berlin PLC and a director of Eurocash SA, as well as a director of several private European companies, including Klüh Service management GmbH, WEPA Industrieholding SE and DAW SE.

 

Key Director Qualifications: Dr. Koerber earned a degree as a Master Brewer in Brewing Technology and a Ph.D. in Business Management from the Technical University of Berlin. Dr. Koerber began his career in the beverage industry, including management positions in which he was responsible for finance and accounting, information technology, purchasing and personnel. He first became involved with the company that would eventually become METRO when he joined the predecessor company’s cash-and-carry, self-service wholesale company in charge of finance and accounting, controlling, logistics and information technology. His responsibilities continued to expand to include international cash-and-carry activities in six countries. When METRO AG was formed in 1996, Dr. Koerber became part of the METRO management board. His responsibilities included corporate development, corporate communications and investor relations and he became chairman and chief executive officer in 1999. Dr. Koerber introduced a new management style, streamlined the company to focus on four of the original 16 business divisions in order to remain competitive and achieve profitability, adopted international accounting standards and rapidly developed METRO’s international presence, including hands-on experience in expanding METRO into Eastern Europe and Asia, including China and India. These efforts helped make METRO Germany’s largest retailer, operating wholesale cash & carry stores, supermarkets, hypermarkets, department stores and consumer electronics shops throughout the world. Throughout his career, Dr. Koerber developed experience and qualifications in the areas of leadership, corporate strategy and development, the foodservice industry, distribution and supply chains, marketing and risk management. Dr. Koerber’s insights on running and expanding a foodservice business with international operations have been, and will continue to be, particularly helpful to Sysco. Dr. Koerber’s career at METRO AG, combined with his 10 years of service on the Board of Skandinaviska Enskilda Banken AB (the parent company of the SEB Group, a North European banking concern catering to corporations, institutions, and private individuals) and the Board of Directors of several other international companies, has provided him with financial expertise, particularly with regard to international financial accounting standards. His service on the Board of Air Berlin PLC (Germany’s second largest airline) has deepened his experience in marketing.

 

 

Nancy S. Newcomb

Age: 71

Director Since: February 2006

Committees: Audit Committee, Finance Committee

Primary Occupation: Ms. Newcomb served as Senior Corporate Officer, Risk Management, of Citigroup from May 1998 until her retirement in 2004.

Other Boards: In the last five years, Ms. Newcomb served as a director of The DIRECTV Group, Inc.

 

Key Director Qualifications: Ms. Newcomb is a graduate of Connecticut College and received a Master’s Degree in Economics from Boston University. She also graduated from Harvard Business School’s Program for Management Development. Ms. Newcomb served as Senior Corporate Officer, Risk Management, of Citigroup (May 1998 – April 2004), Customer Group Executive of Citicorp (the predecessor corporation of Citigroup) (December 1995 – April 1998), Division Executive, Latin America of Citicorp (September 1993 – December 1995) and Principal Financial Officer, Citicorp (January 1988 – August 1993), responsible for liquidity, funding and capital management. Ms. Newcomb’s 35-year career with Citigroup, a major international financial services company, and its predecessors Citicorp and Citibank, provided her with experience in the areas of leadership, corporate strategy and development, finance, risk management and international operations. Ms. Newcomb developed extensive risk management experience throughout her career, including holding the position of Citigroup’s Senior Corporate Officer of Risk Management for the last six years of her career. In the area of Finance and International Operations, Ms. Newcomb served as Citigroup’s Principal Financial Officer, responsible for liquidity, funding and capital management. She has had extensive international experience as head of worldwide treasury operations in over 100 countries, and co-head of Citigroup’s global, multinational customer business.

 

 

Nelson Peltz

Age: 74

Director Since: August 2015

Committees: Corporate Governance and Nominating Committee

Primary Occupation: Mr. Peltz has served as the Chief Executive Officer and a Founding Partner of Trian Fund Management, L.P. since its formation in 2005. From April 1993 through June 2007, Mr. Peltz served as Chairman and Chief Executive Officer of Triarc Companies, Inc. (now known as The Wendy’s Company).

Other Boards: Mr. Peltz has served as a director of Mondelēz International, Inc. since January 2014 and as a director and non-executive Chairman of The Wendy’s Company since June 2007. He has also served as a director of The Madison Square Garden Company since it was separated from MSG Networks Inc. (formerly, The Madison Square Garden Company) in September 2015, and prior to that, as a director of MSG Networks Inc. since December 2014. Mr. Peltz previously served as a director of Legg Mason, Inc. from October 2009 to December 2014. He also served as a director of Ingersoll-Rand plc from August 2012 to June 2014 and H.J. Heinz Company from September 2006 to June 2013. In addition, he served as a director of Trian Acquisition I Corp. from October 2007 until May 2013.

 

Key Director Qualifications: Mr. Peltz has more than 40 years of business and investment experience and over 20 years of service as the Chairman and Chief Executive Officer of public companies. Mr. Peltz has developed extensive experience working with management teams and boards of directors, and in acquiring, investing in and building companies and implementing operational improvements at the companies with which he has been involved. As a

 

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result, he has strong operating experience and strategic planning skills and has strong relationships with institutional investors, investment banking and capital markets advisors and others that can be drawn upon for the Company’s benefit. Mr. Peltz has also gained extensive experience in the foodservice industry through his service on the boards of directors of H.J. Heinz Company, Mondelēz International, Inc. and The Wendy’s Company.

 

 

Edward D. Shirley

Age: 59

Director Since: September 2016

Primary Occupation: Mr. Shirley served as President and Chief Executive Officer of Bacardi Limited from March 2012 until his retirement in April 2014.

Other Boards: Mr. Shirley has served as a director of Elizabeth Arden, Inc. since December 2015 and as a director of New York Life Insurance Company since November 2015. In the last five years, Mr. Shirley served as a director of Time Warner Cable Inc.

 

Key Director Qualifications: Mr. Shirley attended the University of Massachusetts, where he received a Bachelor of Business Administration, Accounting degree in 1978. Mr. Shirley served as the President and Chief Executive Officer of Bacardi Limited, a global beverage and spirits company, from March 2012 to April 2014. Prior to that, he served as Vice Chairman of Global Beauty and Grooming, a business unit of The Procter & Gamble Company (“Procter & Gamble”), a consumer goods company, from July 2008 through June 2011, and as Vice Chair on Special Assignment from July 2011 through December 2011. Prior to that, he served as Group President, North America of Procter & Gamble from April 2006 and held several senior executive positions during his 27 years with The Gillette Company, a consumer goods company that was acquired by Procter & Gamble in 2005. Mr. Shirley has substantial experience in the areas of executive leadership, strategy development, marketing/brand development and business operations developed in his various senior executive positions with large consumer products companies, including during more than 30 years as a senior executive at global personal care companies like Procter & Gamble and The Gillette Company. He also has public company board experience, having served as a member of the Elizabeth Arden, Inc. board of directors since December 2015, including as Chair of its Compensation Committee, and as a member of the board of directors of Time Warner Cable Inc. from 2009 to 2016.

 

 

Richard G. Tilghman

Age: 76

Director Since: November 2002

Committees: Audit Committee (Chair), Finance Committee

Primary Occupation: Mr. Tilghman served as Vice Chairman and Director of SunTrust Banks from 1999 until his retirement in 2000. He served as Chairman and Chief Executive Officer of Crestar Financial Corporation, a bank holding company, from 1986 until 1999.

 

Key Director Qualifications: After graduating from the University of Virginia with a B.A. in Foreign Affairs and serving in the U.S. Army as a lieutenant, Mr. Tilghman enjoyed a 34-year banking career, including service as Vice Chairman and Director of Suntrust Banks, as well as the former Chairman and CEO of Crestar Financial Corporation, a bank holding company for fifteen years. His career provided him with experience and expertise in the areas of leadership, corporate strategy and development, finance, banking, accounting and risk management. Mr. Tilghman’s experience overseeing a business and technology transformation for a series of banks acquired through acquisitions is very important to Sysco as we undertake to streamline our operations using a common technology platform. Mr. Tilghman also gained high tech and regional marketing experience that has been valuable to Sysco as we have redefined oversight of our operating companies by marketing region and focus on the use of e-Commerce technologies to service Sysco customers more efficiently. Mr. Tilghman’s experience also includes approximately 20 years of service on the Board of Directors of Chesapeake Corporation, which was then a leading supplier of cartons, labels, leaflets, and specialty plastic packaging, with manufacturing facilities in Asia, Europe and the U.S. at that time.

 

 

Jackie M. Ward

Age: 78

Director Since: September 2001 (Chairman of the Board since November 2013)

Committees: Compensation Committee, Corporate Governance and Nominating Committee

Primary Occupation: Ms. Ward is the former Chairman, President and Chief Executive Officer of Computer Generation Incorporated (CGI), a company she founded in 1968 that was acquired in December 2000 by Crescent Capital and later Intec Telecom Systems PLC, a technology company based in the United Kingdom.

Other Boards: Director of Sanmina-SCI Corporation. In the last five years, Ms. Ward also served as a director of Equifax Inc., Flowers Foods, Inc. and WellPoint, Inc.

 

Key Director Qualifications: Ms. Ward attended Georgia State College for Women and the University of Georgia Extension Center, where she majored in psychology and mathematics. She later attended the London School of Business and was awarded a Doctor of Laws from Mercer University. Early in her career, Ms. Ward held programming, engineering, marketing and management positions with UNIVAC (a division of Sperry Corporation), General Electric Company and J.P. Stevens Company. Ms. Ward then founded, was elected chairman, president and chief executive officer, and had over 30 years of experience with Computer Generation Incorporated (CGI), a provider of software/hardware solutions to the telecommunications and general industry with operations in the U.S., England and much of Europe, Australia, South Africa, Mexico and Latin America. Ms. Ward’s lengthy career has provided her with extensive leadership, information technology, retail/mass marketing, corporate strategy and development, finance, banking, and international experience. In addition, significant projects undertaken by CGI for governmental and private entities provided unique experience for Ms. Ward in developing and implementing

 

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supply chain inventory control systems, fraud detection systems and software/hardware to handle generalized and specific accounting functions. Ms. Ward has gained knowledge of the foodservice industry through her membership on the Board of Directors of Flowers Foods, Inc., one of the largest producers and marketers of bakery products in the U.S., as well as developing systems for related food clients, such as Edwards Baking Company and Eastern Food Services. She also has significant public company board experience as a current or former member of numerous Boards of Directors where she served in various leadership positions, including lead director, presiding director, chairman of the board and the chairman of various committees. With respect to Flowers Foods, Ms. Ward served as the Lead Director, Chair of the Nominating and Corporate Governance Committee and a member of the Compensation and Executive Committees. With respect to WellPoint, Ms. Ward served as Chairman of the Board, Chair of the Corporate Governance Committee and Executive Committee, and a member of the Compensation Committee. She also serves as the Chair of the Nominating and Governance Committee of Sanmina-SCI Corporation. Ms. Ward furthered her expertise in the areas of finance and risk management as Chairman of the Asset Quality Committee of Bank of America’s Board of Directors for 15 years and her expertise in the areas of accounting and internal audit as a member of the Board of PRG-Schultz International, Inc., now known as PRGX Global, Inc., which provides recovery audit services to organizations with high volumes of payment transactions, including retail and wholesale businesses, manufacturers, health care, and government agencies. In addition, Ms. Ward was named a member of the “NACD Directorship 100” in 2015, an annual honor sponsored by the National Association of Corporate Directors to recognize directors who exhibit exemplary leadership in the boardroom and promote the highest standards of corporate governance.

 

Current Director Not Standing for Re-election:

 

 

Joseph A. Hafner, Jr.

Age: 71

Director Since: November 2003

Committees: Finance Committee (Chair), Audit Committee, Corporate Sustainability Committee

Primary Occupation: Mr. Hafner retired as Chairman of Riviana Foods, Inc. in 2006, a position he had held since March 2005. He served as President and Chief Executive Officer of Riviana from 1984 until March 2004.

 

Key Director Qualifications: Mr. Hafner attended Dartmouth College, where he graduated cum laude, then earned a master of business administration degree with high distinction from Dartmouth’s Amos Tuck School of Business Administration. After graduation, Mr. Hafner served for two years in the Latin American Internship Program of Cornell University and the Ford Foundation in Lima, Peru, followed by two years with the Arthur Andersen & Co. accounting firm in Houston. In 1972, Mr. Hafner began his career with Riviana Foods, Inc. in Guatemala City as Controller of Riviana’s Central American Division. For over 30 years, Mr. Hafner worked in positions of increasing authority for Riviana, a company that processed, marketed and distributed rice products in the U.S. and Europe, as well as other food products in Central America and Europe. Mr. Hafner continued his international exposure through the oversight of Riviana’s rice operations in South Africa and Australia. His career culminated in his service as President and CEO of Riviana for over 20 years, providing him with experience in the areas of leadership, corporate strategy and development, the foodservice industry, distribution and supply chains, finance and accounting and international operations. In addition, Mr. Hafner has developed finance and accounting expertise during his career at Arthur Andersen and Riviana and is a member of the American Institute of Certified Public Accountants.

 

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DIRECTOR COMPENSATION

 

Overview of Non-Employee Director Compensation

 

The Company uses a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board, as described below. Members of the Board who are employees of the Company are not compensated for services on the Board or any of its Committees. We currently pay each non-employee director a base retainer of $100,000 per year. Non-employee directors who serve as committee chairpersons receive annual additional amounts as follows:

 

Audit Committee Chair— $25,000
   
Compensation Committee Chair— $20,000
   
Corporate Governance and Nominating Committee Chair— $20,000
   
Finance Committee Chair— $20,000
   
Corporate Sustainability Committee Chair— $15,000

 

We pay these annual retainers quarterly. In addition to the compensation received by all non-employee directors, Ms. Ward receives an additional annual retainer of $475,000 for her service as Chairman of the Board, which is paid quarterly in the form of “elected shares” that are deferred as described below under “—Deferral of Shares.” See footnote 1 to the “Fiscal 2016 Director Compensation” table below for a detailed discussion of the elected shares deferred by Ms. Ward.

 

Each November, the Board grants approximately $160,000 in time vesting equity incentives to each of the non-employee directors in the form of restricted stock awards. For fiscal 2016, the Board granted approximately $160,000 in restricted stock awards that vest in full on the first anniversary of the grant date. See “2009 Non-Employee Directors Stock Plan—Restricted Stock and Restricted Stock Units” below for a description of the plan under which these awards are expected to be granted until the plan’s expiration in November 2016, the “Fiscal 2016 Non-Employee Director Compensation” table below for detailed compensation information for fiscal 2016 for each of our non-employee directors and “Stock Ownership—Stock Ownership Guidelines” below for a description of the stock ownership requirements applicable to our non-employee directors. Future grants of restricted stock awards to the non-employee directors may be made pursuant to the 2013 Long-Term Incentive Plan.

 

Reimbursement of Expenses

 

All non-employee directors are entitled to receive reimbursements of expenses for all services as a director, including committee participation or special assignments. Directors are invited to have their spouses accompany them to dinners and other functions held in connection with one or two board meetings each year, and the company pays, either directly or through reimbursement, all expenses associated with their travel to and attendance at these business-related functions. Reimbursement for non-employee director travel may include reimbursement of a portion of the cost of travel on private aircraft. Specifically, this includes reimbursement for non-commercial air travel in connection with Sysco business, subject to specified maximums, provided that amounts related to the purchase price of an aircraft or fractional interest in an aircraft are not reimbursable and any portion of the reimbursement that relates to insurance, maintenance and other non-incremental costs is limited to a maximum annual amount. Non-employee directors also receive discounts on products carried by the Company and its subsidiaries comparable to the discounts offered to all company employees.

 

Directors Deferred Compensation Plan

 

Non-employee directors may defer all or a portion of their annual retainer, including additional fees paid to committee chairpersons and the Chairman of the Board’s and/or Lead Director’s annual retainer, under the Directors Deferred Compensation Plan. Non-employee directors may choose from a variety of investment options, including Moody’s Average Corporate Bond Yield plus 1%, with respect to amounts deferred prior to fiscal 2009. This investment option was reduced to Moody’s Average Corporate Bond Yield, without the addition of 1%, for amounts deferred after fiscal 2008. We credit such deferred amounts with investment gains or losses until the non-employee director’s retirement from the Board or until the occurrence of certain other events.

 

Directors Stock Plans

 

As of September 19, 2016, the non-employee directors held shares of restricted stock that were issued under the 2009 Non-Employee Directors Stock Plan. They also held elected and match shares (as described below) issued under the 2009 Non-Employee Directors Stock Plan. Below is a description of the 2009 Non-Employee Directors Stock Plan.

 

SYSCO CORPORATION - 2016 Proxy Statement    32

 

2009 Non-Employee Directors Stock Plan

 

Election to Receive a Portion of the Annual Retainer in Common Stock

 

Under the 2009 Non-Employee Directors Stock Plan, instead of receiving his or her full annual retainer fee in cash, a non-employee director may elect to receive up to 100% of his or her annual retainer fee, including any additional retainer fee paid to the Chairman of the Board and/or Lead Director for his or her service in such capacity and any fees paid to a committee chairman for his or her service in such capacity, in 10% increments, in common stock. If a director makes this election, on the date we make each quarterly payment of the director’s annual retainer fee we credit the director’s stock account with:

 

The number of shares of Sysco common stock that the director could have purchased on that date with the portion of his or her cash retainer that he or she has chosen to receive in stock, assuming a purchase price equal to the last closing price of the common stock on the last business day before that date; we call these shares “elected shares”; and
   
With respect to up to half of his or her annual retainer fee, excluding any additional retainer fee paid for chairing the Board or one of its committees and/or serving as Lead Director, 50% of the number of elected shares we credited to the director’s account; we call these extra shares “match shares.”

 

The elected shares and match shares vest as soon as we credit the director’s account with them, but we do not issue them until the end of the calendar year. The director may not transfer the match shares, however, until one year after we issue them, or, if deferred, the date that we otherwise would have issued them, provided that certain events will cause this transfer restriction to lapse.

 

The one year transfer restriction on match shares will lapse if:

 

the director dies;
   
the director leaves the Board:
   
  due to disability;
   
  after having served out his or her full term; or
   
  after reaching age 71; or
   
a change in control, as defined in the plan, occurs.

 

Restricted Stock and Restricted Stock Units

 

The plan provides that the Board may grant shares of restricted stock and restricted stock units in the amounts and on such terms as it determines, but specifies that no grant may vest earlier than one year following the grant date. A restricted stock unit is an award denominated in units whose value is derived from common stock, and which is subject to similar restrictions and possibility of forfeiture, as is the restricted stock. In November 2015, we issued restricted stock awards to non-employee directors under this plan. We have not yet issued any restricted stock units to non-employee directors under this plan.

 

Generally, if a director ceases to serve as a director of Sysco, he or she will forfeit all the unvested restricted stock and restricted stock units that he or she holds. However, if the director leaves the board after serving out his or her term, or for any reason after reaching age 71, his or her restricted stock and restricted stock units will remain in effect and continue to vest as if the director had remained a director of Sysco. All unvested restricted stock and restricted stock units will automatically vest upon the director’s death.

 

Deferral of Shares

 

A non-employee director may elect to defer receipt of all or any portion of any shares of common stock issued under the plan, whether such shares are to be issued as a grant of restricted stock, elected shares or match shares, or upon the vesting of a restricted stock unit grant. Generally, the receipt of stock may be deferred until the earliest to occur of the death of the non-employee director, the date on which the non-employee director ceases to be a director of the Company, or a change of control of Sysco. All such deferral elections shall be made in accordance with the terms and conditions set forth in Sysco’s 2009 Board of Directors Stock Deferral Plan.

 

Change in Control

 

Under the 2009 Non-Employee Directors Stock Plan and the applicable grant agreements, any unvested awards of restricted stock or restricted stock units will vest immediately upon the occurrence of a specified change in control.

 

SYSCO CORPORATION 2016 Proxy Statement    33

 

Fiscal 2016 Director Compensation

 

The following table provides compensation information for fiscal year 2016 for each of our directors who served for any part of the fiscal year, other than Mr. DeLaney, whose compensation is disclosed in the Summary Compensation Table on page 59:

 

  Fees Earned or  Stock  Non-Qualified Deferred  Other   
  Paid in Cash  Awards  Compensation Earnings  Compensation  Total
Name ($)(1)  ($)(2)(3)(4)  ($)(5)  ($)(6)  ($)
Cassaday $120,000  $185,006  $  $  $305,006
Craven  115,000   185,006   3,298      303,304
Frank  100,000   185,006         285,006
Glasscock  120,000   185,006         305,006
Golden  100,000   185,006   37,747      322,753
Hafner  120,000   185,006         305,006
Koerber  100,000   185,006      12,142   297,148
Newcomb  100,000   185,006         285,006
Peltz  100,000   185,006         285,006
Tilghman  125,000   185,006         310,006
Ward  575,000   185,006   8,789      768,795
(1) Includes retainer fees, including any retainer fees for which the non-employee director has elected to receive shares of Sysco common stock in lieu of cash and fees for the fourth quarter of fiscal 2016 that were paid at the beginning of fiscal 2017. Although we credit shares to a director’s account each quarter, the elected shares are not actually issued until the end of the calendar year, unless the director’s service as a member of the Board of Directors terminates. The number of shares of stock actually credited to each non-employee director’s account in lieu of cash during fiscal 2016, excluding match shares, which are reported in the column entitled “Stock Awards,” above was as follows: 1,138 shares for each of Mr. Cassaday, Dr. Craven, Mr. Frank, Mr. Golden, Mr. Hafner, Dr. Koerber, Ms. Newcomb, Mr. Peltz and Mr. Tilghman; 1,364 shares for Mr. Glasscock and 13,100 shares for Ms. Ward. Directors may choose to defer receipt of the elected shares described in this footnote under the Sysco Corporation 2009 Board of Directors Stock Deferral Plan. The number of elected shares of stock deferred by each non-employee director during fiscal 2016 (which are included in the elected shares described above) was as follows: Dr. Craven (1,138 shares), Dr. Koerber (1,138 shares), Mr. Glasscock (1,364 shares) and Ms. Ward (13,100 shares). To the extent that cash dividends are paid on our common stock, non-employee directors also receive the equivalent amount of the cash dividend credited to their account with respect to all elected shares that are deferred. If the director has chosen to defer the receipt of any shares, they will be credited to the director’s account and issued on the earliest to occur of the “in-service” distribution date elected by the director (which shall be at least one year following the end of the plan year in which the shares would otherwise have been distributed to the director), the death of the director, the date on which the director ceases to be a director of the Company, a change of control of Sysco, or the date on which the director applies and qualifies for a hardship withdrawal.
(2) For fiscal 2016, the Board, upon the recommendation of the Corporate Governance and Nominating Committee, determined that it would grant approximately $160,000 in equity incentives to each of the non-employee directors. Therefore, on November 17, 2015, the Board granted to each of the non-employee directors 3,942 shares of restricted stock valued at $40.59 per share, the closing price of Sysco common stock on the New York Stock Exchange on November 16, 2015. These awards were granted under the 2009 Non-Employee Directors Stock Plan and vest in full on the first anniversary of the grant date. The amounts in this column reflect the grant date fair value of the awards computed in accordance with ASC 718, “Compensation —Stock Compensation”. See Note 19 of the consolidated financial statements in Sysco’s Annual Report for the year ended July 2, 2016 regarding assumptions underlying valuation of equity awards. The amounts in this column also reflect the grant date fair value of awards computed in accordance with ASC 718, “Compensation — Stock Compensation” with respect to a 50% stock match for directors who elect to receive a portion of their annual retainer fee in common stock. The value of any “elected” shares is included in the column entitled “Fees Earned or Paid in Cash,” as described in footnote (1) above. See “Directors Stock Plans” above for a more detailed description. Although we credit shares to a director’s account each quarter, the shares are not actually issued until the end of the calendar year, unless the director’s service as a member of the Board of Directors terminates. The number of match shares actually credited to each non-employee director’s account during fiscal 2016 was 568 shares. Directors may choose to defer receipt of the restricted stock and the match shares described in this footnote under the Sysco Corporation 2009 Board of Directors Stock Deferral Plan. Each of Dr. Craven, Mr. Glasscock, Dr. Koerber and Ms. Ward deferred receipt of the 3,942 shares of restricted stock and the 568 match shares described above. To the extent that cash dividends are paid on our common stock, non-employee directors also receive the equivalent amount of the cash dividend credited to their account with respect to all deferred restricted stock awards and all match shares that are deferred, in the form of stock units. Directors may elect an “in-service” distribution date for deferrals that is at least one year following the end of the plan year in which the shares would otherwise have been distributed to the Director. Otherwise, distributions occur upon the earlier of the death of the director, the date on which the director ceases to be a director of the Company, or a change of control of Sysco, unless the director applies for and qualifies for a hardship withdrawal.
(3) The aggregate number of options and unvested stock awards held by each director listed in the table above, as of July 2, 2016, was as follows:

 

   Aggregate Unvested Stock Awards  Aggregate Options Outstanding
   Outstanding as of July 2, 2016  as of July 2, 2016
Cassaday   3,942   
Craven   3,942   
Frank   3,942   
Glasscock   3,942   
Golden   3,942   
Hafner   3,942   
Koerber   3,942   
Newcomb   3,942   
Peltz   3,942   
Tilghman   3,942   
Ward   3,942   
  The unvested stock awards for each non-employee director listed in the table immediately above relate to restricted stock awards granted in November 2015 that vest in November 2016.
(4) None of the directors shown in the table received option grants during fiscal 2016.
(5) We do not provide a pension plan for the non-employee directors. For each non-employee director, the amounts shown in this column represent above-market earnings on amounts deferred under the Non-Employee Director Deferred Compensation Plan. Directors who do not have any amounts in this column were not eligible to participate in such plan, did not participate in such plan or did not have any above-market earnings.
(6) The amount shown with respect to Dr. Koerber reflects the amount paid for spousal travel in connection with business events. The total value of all perquisites and personal benefits received by each of the other non-employee directors, including reimbursements for spousal airfare and meals associated with certain Board meetings, was less than $10,000.

 

Mr. DeLaney did not receive any compensation for his fiscal 2016 for Board service, other than the compensation for services as an employee that is disclosed elsewhere in this proxy statement. See “Executive Compensation – Summary Compensation Table” for details regarding compensation received by Mr. DeLaney for fiscal 2016.

 

SYSCO CORPORATION - 2016 Proxy Statement    34

 

EXECUTIVE OFFICERS

 

The following persons currently serve as executive officers of Sysco. Each person listed below, other than Mr. Bené, Mr. Charlton, Mr. Moskowitz and Mr. Shurts, has served as an officer of Sysco and/or its subsidiaries for at least the past five years.

 

Name Title Age
Thomas L. Bené* President and Chief Operating Officer 54
Greg D. Bertrand Senior Vice President, U.S. Foodservice Operations 52
R. Scott Charlton Executive Vice President, Supply Chain 57
William B. Day Executive Vice President, Merchandising and SBS 59
William J. DeLaney* Chief Executive Officer 60
Joel T. Grade* Executive Vice President and Chief Financial Officer 46
Russell T. Libby* Executive Vice President, Administration and Corporate Secretary 50
Paul T. Moskowitz Executive Vice President, Human Resources 52
Wayne R. Shurts* Executive Vice President and Chief Technology Officer 57
*Named Executive Officer.

 

Thomas L. Bené has served as Sysco’s President and Chief Operating Officer since January 1, 2016. Previously, he served as Executive Vice President and President, Foodservice Operations from January 2015 to December 2015, Executive Vice President and Chief Commercial Officer from September 2013 to December 2014 and as Executive Vice President, Chief Merchandising Officer from May 2013 to September 2013. Prior to joining Sysco, Mr. Bené served as President of PepsiCo Foodservice from 2011 until 2013. Between 2008 and 2011, he held various senior roles with PepsiCo, including President, Pepsi-Cola North American Beverages; SVP, Sales and Franchise Development; President, PepsiCo Foods & Beverages, Canada; and Chief Operating Officer, South Beach Beverage Co. Mr. Bené joined PepsiCo in 1989 after working for American Hospital Supply.

 

Greg D. Bertrand has served as Sysco’s Senior Vice President, U.S. Foodservice Operations since July 3, 2016. Previously, he served as Senior Vice President, Foodservice Operations (West) from August 2015 to July 2016, Senior Vice President, Merger Integration Deployment from November 2014 to August 2015, and Senior Vice President, Business Process Integration from March 2014 to November 2014. Mr. Bertrand began his Sysco career in 1991 as a Marketing Associate at Sysco Chicago, where he advanced through several sales leadership positions before becoming Vice President-Sales in 1997 and Senior Vice President-Sales in 1998. He was promoted to Executive Vice President in 1999. In 2005, he was named President-Sysco Eastern Wisconsin. He became President-Sysco Chicago in 2008 and took on the added responsibilities of leading Sysco Eastern Wisconsin and Sysco Baraboo in 2009. He was promoted to Market Vice President-Midwest in 2010 and then to Senior Vice President – Foodservice Operations (West) in July 2012.

 

R. Scott Charlton has served as Sysco’s Executive Vice President, Supply Chain since August 30, 2015, having been promoted from Senior Vice President, Distribution Services, a position he had held since July 2013. Prior to joining Sysco, Mr. Charlton served as Executive Vice President, Operations, at C&S Wholesale from 2007 until June 2013. Between 1980 and 2007, Mr. Charlton served in a variety of manufacturing, operations and quality assurance roles at Publix Super Markets, Inc., culminating with his role as Senior Vice President, Manufacturing and Distribution, from 2005 to 2007.

 

William B. Day has served as Sysco’s Executive Vice President, Merchandising and SBS since August 2015. Previously, he served as Executive Vice President, Merchandising from July 2010 to August 2015 and Senior Vice President – Merchandising and Supply Chain from July 2009 to July 2010. He began his Sysco career in 1983 as a staff accountant at Sysco’s Memphis, Tennessee subsidiary. Between 1984 and 1987 he divided his time between Sysco’s corporate headquarters and Sysco’s Atlanta subsidiary, where he served as the Chief Financial Officer. In 1987 Mr. Day officially moved to Sysco’s corporate headquarters in Houston where he served in a variety of roles until 1999, when he was promoted to Assistant Controller. Mr. Day started Sysco’s RDC project in 2000, was named Vice President, Supply Chain Management in 2003 and was promoted to Senior Vice President, Supply Chain in July 2007.

 

William J. DeLaney has served as Sysco’s Chief Executive Officer since March 2009. He assumed the additional title of President in March 2010 through December 31, 2015. Mr. DeLaney began his Sysco career in 1987 as Assistant Treasurer at the Company’s corporate headquarters. He was promoted to Treasurer in 1991, and in 1993 he was named a Vice President of the Company, continuing in those responsibilities until 1994. Mr. DeLaney joined Sysco Food Services of Syracuse in 1996 as chief financial officer, progressed to senior vice president in 1998 and executive vice president in 2002. In 2004, Mr. DeLaney was appointed president and chief executive officer of Sysco Food Services of Charlotte. He held that position until December 2006, when he was named Sysco’s Senior Vice President of Financial Reporting. Effective July 1, 2007, Mr. DeLaney was promoted to the role of Executive Vice President and Chief Financial Officer and continued to serve in such position following his promotion to CEO until October 2009.

 

Joel T. Grade has served as Sysco’s Executive Vice President and Chief Financial Officer since September 1, 2015, having been promoted from Senior Vice President – Finance and Chief Accounting Officer, a position he had held since February 2014. Mr. Grade began his career at Sysco as a Staff Auditor in 1996. He was promoted to Assistant Manager-Operations Review in 1999. He transferred to Sysco Austin in 2000 as Controller, was appointed Vice President-Finance and CFO of Sysco Chicago in 2002, and became Vice President-Finance and CFO of Sysco Canada in 2007. He was promoted to Vice President, Foodservice Operations of Sysco Corporate and President of Sysco Canada in 2010 and held that position until May 2012, when he was appointed Senior Vice President, Foodservice Operations (North).

 

SYSCO CORPORATION - 2016 Proxy Statement    35

 

Russell T. Libby has served as Sysco’s Executive Vice President, Administration and Corporate Secretary since August 30, 2015. Previously, he served as Executive Vice President – Corporate Affairs, Chief Legal Officer and Corporate Secretary from March 2014 to August 2015 following his promotion from Senior Vice President, General Counsel and Corporate Secretary, a position he had held since November 2011. He joined Sysco in October 2007 as Assistant Vice President, Mergers and Acquisitions and Real Estate and was promoted to Vice President and Assistant General Counsel in July 2009 and to Vice President, General Counsel and Corporate Secretary in December 2010. From 1997 through September 2007, Mr. Libby worked for the North America unit of COFRA Holding A.G., a Swiss international conglomerate, in various positions of increasing responsibility, culminating in service as President of COFRA North America and Vice President, Legal for Good Energies, Inc., an affiliated investment advisor.

 

Paul T. Moskowitz has served as Sysco’s Executive Vice President, Human Resources since August 30, 2015, having been promoted from Senior Vice President, Human Resources, a position he had held since January 2011. Prior to joining Sysco, Mr. Moskowitz served as Chief Human Resources Officer of Dean Foods Company, a large dairy processing company from 2007 until 2011. Between 1996 and 2004, he held various senior roles with Yum! Brands. His last position with Yum! Brands was Chief People Officer at Pizza Hut from 2004 to 2007.

 

Wayne R. Shurts has served as Sysco’s Executive Vice President and Chief Technology Officer since October 2012. Prior to joining Sysco, Mr. Shurts served as Executive Vice President of SuperValu Inc. from 2010 until 2013. Between 2006 and 2010, he held various senior roles with Cadbury. His last position with Cadbury was Chief Information Officer from 2008 to 2010. Mr. Shurts served as a member of the board of directors of Con-Way Inc., a freight transportation and logistics services company, from May 2015 until it was acquired by XPO Logistics in October 2015.

 

Management Development and Succession Planning

 

On an ongoing basis, the Board plans for succession to the position of CEO and other key management positions, and the Corporate Governance and Nominating Committee oversees this management development and succession planning process. To assist the Board, the CEO periodically provides the Board with an assessment of senior executives and their potential to succeed to the position of CEO. On an annual basis, the Board and its Corporate Sustainability Committee have engaged in discussions with management regarding increasing the diversity of Sysco’s executive management team. In addition, the CEO periodically provides the Board with an assessment of potential successors to other key positions.

 

In fiscal 2016, Sysco’s effectiveness in management development and succession planning were a part of our CEO’s non-financial performance goals, which are reviewed at the end of each fiscal year by the Compensation and Corporate Governance and Nominating Committees. In addition, the Compensation Committee assessed Sysco’s performance in select non-financial areas, including the overall effectiveness of its management development and succession planning processes, in determining the 2016 annual incentive payment to our CEO. Management development and succession planning remain top priorities of executive management and the Board during fiscal 2017, as evidenced by the following:

 

Sysco’s Board discussed human capital and succession planning at its regularly scheduled meeting in August 2016; and
   
One of our CEO’s three fiscal year 2017 strategic goals is to continue to build, refine, coach, empower and measure a best-in-class senior leadership team to drive company performance. Success in this goal will affect our CEO’s annual incentive payment for fiscal 2017, as described under “Compensation Discussion and Analysis— What We Paid and Why—Compensation for NEOs—Annual Incentive Award Detailed Information.”

 

SYSCO CORPORATION - 2016 Proxy Statement    36

 

STOCK OWNERSHIP

 

Security Ownership of Officers and Directors

 

The following table sets forth certain information with respect to the beneficial ownership of Sysco’s common stock, as of September 19, 2016, by (i) each current director and director nominee, (ii) each named executive officer (as defined under “Compensation Discussion and Analysis”), and (iii) all current directors and executive officers as a group. Unless otherwise indicated, each stockholder identified in the table has sole voting and investment power with respect to his or her shares. Fractional shares have been rounded down to the nearest whole share.

 

   Shares of
Common
Stock Owned
Directly
  Shares of
Common
Stock Owned
Indirectly
  Shares of
Common
Stock
Underlying
Options(1)
  Shares of
Common Stock
Underlying
Restricted
Stock Units(2)
  Total Shares of
Common Stock
Beneficially
Owned(1)(2)
  Percent of
Outstanding
Shares(3)
Thomas L. Bené  31,785    133,715  5,102  170,602  *
Daniel J. Brutto            *
John M. Cassaday  65,983(4)        65,983  *
Judith B. Craven  93,486(4)        93,486  *
William J. DeLaney  274,149    2,001,516  30,835  2,366,842  *
Joshua D. Frank  5,648        5,648  *
Larry C. Glasscock  46,720(4)        46,720  *
Jonathan Golden  105,887(4)  18,500(5)      124,387  *
Joel T. Grade  21,033  248(6)  85,001  3,579  144,737  *
Joseph A. Hafner, Jr.  64,138(4)        64,138  *
Bradley M. Halverson            *
Hans-Joachim Koerber  53,203(4)        53,203  *
Robert C. Kreidler    39,743(7)      39,743  *
Russell T. Libby  38,393    125,352  9,037  172,782  *
Nancy S. Newcomb  57,612(4)        57,612  *
Nelson Peltz  5,648  43,960,047(8)      43,965,695  7.98%
Edward D. Shirley            *
Wayne R. Shurts  30,689    312,458  4,792  347,939  *
Richard G. Tilghman  87,497(4)  1,957(9)      89,454  *
Jackie M. Ward  129,493(4)  61(9)      129,554  *
All Directors, Director Nominees and Executive Officers as a Group (24 Persons)  1,225,071(10)  44,020,556  3,251,877(11)  73,324(12)  48,570,829(10)(11)(12)  8.81%
(*)Less than 1% of outstanding shares.
(1)Includes shares underlying options that are presently exercisable or will become exercisable within 60 days after September 19, 2016. Shares subject to options that are presently exercisable or will become exercisable within 60 days after September 19, 2016 are deemed outstanding for purposes of computing the percentage ownership of the person holding such options, but are not deemed outstanding for purposes of computing the percentage ownership of any other persons.
(2)Includes shares underlying restricted stock units (RSUs) that will vest and settle within 60 days after September 19, 2016. Shares underlying RSUs that will vest and settle within 60 days after September 19, 2016 are deemed outstanding for purposes of computing the percentage ownership of the person holding such RSUs, but are not deemed outstanding for purposes of computing the percentage ownership of any other persons. It is expected that approximately one-third of the shares underlying these RSUs will be withheld to pay taxes related to the RSUs as they vest and settle.
(3)Applicable percentage of beneficial ownership at September 19, 2016 is based on 551,217,611 shares outstanding.
(4)Includes shares that were elected to be received in lieu of non-employee director retainer fees during the first half of calendar 2016, and related matching shares under the 2009 Non-Employee Directors Stock Plan. For Ms. Ward, this includes 5,942 elected shares and 258 matching shares; for Mr. Glasscock, this includes 618 elected shares and 258 matching shares; for each of the other non-employee directors, this includes 516 elected shares and 258 matching shares. Unless the director has chosen to defer the shares under the Sysco Corporation 2009 Board of Directors Stock Deferral Plan, these shares will be issued on December 31, 2016 or within 60 days after a non-employee director ceases to be a director, whichever occurs first. Directors may choose to defer receipt of these shares related to director retainer fees, as well as shares awarded pursuant to restricted stock grants, and these deferred amounts are also included in this line item. To the extent cash dividends are paid on our common stock, non-employee directors also receive the equivalent amount of the cash dividend credited to their account with respect to all deferred restricted stock awards, and all elected and matched shares that are deferred. The number of shares in each non-employee director’s deferred stock account, including related dividend equivalents, is as follows: Mr. Cassaday (none), Dr. Craven (48,357), Mr. Frank (none), Mr. Glasscock (45,802), Mr. Golden (none), Mr. Hafner (none), Dr. Koerber (5,982), Ms. Newcomb (none), Mr. Peltz (none), Mr. Tilghman (none) and Ms. Ward (19,719). If the director has chosen to defer the receipt of any shares, he or she will be credited to the director’s account in the 2009 Board of Directors Stock Deferral Plan and issued on the earliest to occur of the “in-service” distribution date elected by the director (which shall be at least one year following the end of the plan year in which the shares would otherwise have been distributed to the director), the death of the director, the date on which the director ceases to be a director of the Company, a change of control of Sysco, or the date on which the director applies and qualifies for a hardship withdrawal. Deferred shares are deemed outstanding for purposes of computing the percentage ownership of the persons holding such shares, but are not deemed outstanding for purposes of computing the percentage ownership of any other persons.
(5)These shares are held by a family trust affiliated with Mr. Golden.
(6)These shares are held in trust for the benefit of Mr. Grade’s son.
(7)Includes 20,743 shares held by a family trust affiliated with Mr. Kreidler, and 19,000 shares held by a family trust affiliated with Mr. Kreidler’s spouse.
(8)43,954,399 of these shares are owned by certain investment funds and vehicles (the “Trian Funds”) managed by Trian Fund Management, L.P. (“Trian”), an institutional investment manager. None of such shares are held directly by Mr. Peltz. An additional 5,648 of these shares are held directly by Mr. Frank, over which Trian may be deemed to have beneficial ownership (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by virtue of a director fee agreement between Trian and Mr. Frank that is further described in the

 

SYSCO CORPORATION - 2016 Proxy Statement    37

 
 Schedule 13D/A filed on June 9, 2016 by Trian and certain of its affiliates. Trian Fund Management GP, LLC, of which Mr. Peltz is a member, is the general partner of Trian, and therefore is in a position to determine the investment and voting decisions made by Trian with respect to all of the shares it may be deemed to beneficially own. Accordingly, Mr. Peltz and Trian may be deemed to indirectly beneficially own the shares that the Trian Funds directly and beneficially own, and the shares that Mr. Frank directly and beneficially owns. See “-Security Ownership of Certain Beneficial Holders” below. Except as described above, Mr. Peltz disclaims beneficial ownership of such shares for all other purposes.
(9)These shares are held by the spouse of the director or executive officer.
(10)Includes an aggregate of 113,706 shares directly owned by the current executive officers other than the named executive officers.
(11)Includes an aggregate of 593,835 shares underlying options that are presently exercisable or will become exercisable within 60 days after September 19, 2016 held by the current executive officers other than the named executive officers.
(12)Includes an aggregate of 19,979 shares underlying restricted stock units (RSUs) that will vest and settle within 60 days after September 19, 2016 held by the current executive officers other than the named executive officers.

 

Security Ownership of Certain Beneficial Owners

 

The following table sets forth information concerning beneficial ownership of our common stock by persons or groups known to us to be beneficial owners of more than 5% of Sysco’s common stock outstanding as of September 19, 2016. The applicable percentage of beneficial ownership is based on 551,217,611 shares outstanding as of September 19, 2016.

 

   Total Shares of Common Stock
Beneficially Owned
   Percent of Outstanding Shares 
Trian Fund Management, L.P. and certain affiliates(1)   43,965,695    7.98%
BlackRock, Inc. and certain affiliates(2)   34,420,996    6.24%
The Vanguard Group and certain affiliates(3)   30,346,942    5.51%
(1)This information is based on (i) a Schedule 13D/A filed on June 9, 2016 by Trian and certain of its affiliates, (ii) Form 4s filed by Nelson Peltz and Trian, and Joshua D, Frank and Trian, subsequent to June 9, 2016 and (iii) information provided to the Company by Trian. Trian has shared power to vote, or to direct the vote of, and shared power to dispose, or to direct the disposition of, these shares of common stock. The address for Trian is Trian Fund Management, L.P., 280 Park Avenue, 41st Floor, New York, NY 10017.
(2)This information is based on a Schedule 13G/A filed on February 10, 2016 by BlackRock, Inc. (“BlackRock”). According to the Schedule 13G/A, BlackRock has the sole power to vote, or to direct the vote of, 29,608,579 shares of common stock and sole power to dispose, or to direct the disposition of, 34,420,996 shares of common stock. The address for BlackRock is BlackRock, Inc., 55 East 52nd Street, New York, NY 10055.
(3)This information is based on a Schedule 13G/A filed on February 11, 2016 by The Vanguard Group (“Vanguard”). According to the Schedule 13G/A, Vanguard has sole power to vote, or to direct the vote of, 1,013,921 shares of common stock, sole power to dispose, or to direct the disposition of, 29,270,750 shares of common stock, shared power to vote, or to direct the vote of, 60,300 shares of common stock, and shared power to dispose, or to direct the disposition of, 1,076,192 shares of common stock. The address for Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.

 

Stock Ownership Guidelines

 

To align the interests of our management with those of our stockholders, Sysco’s Board of Directors concluded that our senior officers should have a significant financial stake in Sysco stock. To further that goal, for several years we have maintained stock ownership guidelines for our executives. In February 2015, we amended our Corporate Governance Guidelines in order to better align with evolving best practices by tying the ownership requirement to a multiple of the officer’s annual base salary, rather than a specified number of shares. Pursuant to these guidelines as amended, beginning in August 2016 or upon the end of the five-year period from the date the officer is hired, promoted or otherwise becomes subject to the guidelines, whichever is later, the following senior officers should own, based on their respective positions, a minimum number of shares equal in value to the multiple of each such officer’s annual base salary as described in the following table.

 

Position  Minimum Ownership Requirement (Multiple of Base Salary)
CEO   7x
President   4x
Executive Vice Presidents   4x
Senior Vice Presidents   2x

 

Our senior officers have five years to achieve these ownership requirements. The five-year period begins the date the officer is hired, promoted or otherwise becomes subject to the guidelines. If an individual was hired after August 26, 2011, or promoted after August 26, 2011 to a position that requires the ownership of a greater amount of stock than his or her prior position, the five-year period pertaining to the new position will begin upon the effective date of the hiring or promotion; provided, further, however, that a promoted individual shall continue to comply with the above ownership requirements applicable to his or her prior position at all times subsequent to the promotion.

 

The shares counted towards these ownership requirements shall include Sysco shares of common stock owned directly by the senior officer, including shares of vested restricted stock held by the officer that may be subject to transfer restrictions or potential clawbacks, shares owned indirectly by the officer through any Sysco employee stock purchase plan, and two-thirds of the shares underlying an officer’s unvested restricted stock units, and shall not include shares held through any other form of indirect beneficial ownership or shares underlying unexercised options. Restricted stock unit incentives, coupled with shares obtained from the exercise of stock options, are anticipated to provide all senior officers with the opportunity to satisfy these requirements within the specified time frames.

 

These ownership requirements are set at levels that Sysco believes are reasonable given the senior officers’ respective salaries and responsibility levels. In addition, Exequity has reviewed our ownership guidelines and confirmed that they are consistent with the corresponding practices of our peer group.

 

SYSCO CORPORATION - 2016 Proxy Statement    38

 

In connection with the ownership requirements described above, each senior officer of the Company shall retain 25% of the net shares acquired upon exercise of stock options and 100% of the net shares acquired pursuant to the vesting of RSUs until the officer’s holdings of Company stock equal or exceed the applicable minimum ownership requirement. For these purposes, “net shares” shall mean the shares remaining after disposition of shares necessary to pay the related tax liability and, if applicable, exercise price.

 

The Corporate Governance Guidelines also provide that, after five years of service as a non-employee director, such individuals are expected to continuously own a minimum of 16,500 shares of Sysco common stock. The shares beneficially owned by Trian, as reported above under ” - Security Ownership of Certain Beneficial Owners,” are credited to Messrs. Frank and Peltz for purposes of our ownership requirements.

 

We provide the Board of Directors with the status of the officers’ and directors’ stock ownership at all of the regularly-scheduled meetings to ensure compliance with these holding requirements. As of September 19, 2016, each of the named executive officers and directors satisfied his or her then-applicable stock ownership requirement.

 

Stock Trading Restrictions

 

Directors and executive officers may only purchase and sell Sysco common stock and exercise stock options pursuant to a 10b5-1 trading plan adopted during an approved quarterly trading window, subject to limited exceptions, including “net exercises” of stock options that do not involve an open market sale of shares and hardship exemptions. Quarterly trading windows generally open two business days after Sysco issues its quarterly earnings release and typically close around seven weeks after the opening of the window.

 

The adoption of a 10b5-1 trading plan or other transaction in Sysco stock by such directors and executive officers must be pre-approved by a committee that includes the Chairman of the Board, the Chair of the Corporate Governance and Nominating Committee, the Chief Executive Officer and the Company’s chief legal officer, following their review of the amount and timing of the proposed transaction and their confirmation that the individual in question does not possess any material inside information about the Company. Trades under a 10b5-1 trading plan may not commence until 30 days after adoption of the plan.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Pursuant to Section 16(a) of the Exchange Act and the rules issued thereunder, our executive officers and directors and any persons holding more than ten percent (10%) of our common stock are required to file with the Securities and Exchange Commission and the New York Stock Exchange reports of initial ownership of our common stock and changes in ownership of such common stock. To our knowledge, no person beneficially owns more than 10% of our common stock. Copies of the Section 16 reports filed by our directors and executive officers are required to be furnished to us. Based solely on our review of the copies of the reports furnished to us, or written representations that no reports were required, we believe that, during fiscal 2016, all of our executive officers and directors complied with the Section 16(a) requirements except that, due to an administrative error on the part of the Company, a late Form 4 was filed on behalf of Mr. William DeLaney on January 21, 2016, to report an exercise of options and the sale of the underlying shares of common stock.

 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table sets forth certain information regarding equity compensation plans as of July 2, 2016.

 

Plan Category  Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
  Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
  Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities
Reflected in First Column)
 
Equity compensation plans approved by security holders  21,225,428  $        34.13  48,213,695 (1) 
Equity compensation plans not approved by security holders       
TOTAL  21,225,428  $        34.13  48,213,695 (1) 
(1)Includes 38,535,843 shares issuable pursuant to our 2013 Long-Term Incentive Plan, of which 13,964,784 shares are eligible to be granted as full value awards; 270,074 shares issuable pursuant to our 2009 Non-Employee Directors Stock Plan; and 9,407,778 shares issuable pursuant to our Employee Stock Purchase Plan as of July 2, 2016. The amount does not reflect the issuance of 264,900 shares in July 2016 pursuant to the completion of the quarterly purchase under our Employee Stock Purchase Plan.

 

SYSCO CORPORATION - 2016 Proxy Statement    39

 

COMPENSATION DISCUSSION AND ANALYSIS

 

In this section, we provide an overview of our philosophy and objectives of our executive compensation program and describe the material components of our executive compensation program for our fiscal 2016 named executive officers, or “NEOs,” whose compensation is set forth in the 2016 Summary Compensation Table and other compensation tables contained in this proxy statement:

 

William J. DeLaney, our Chief Executive Officer;
  
Thomas L. Bené, our President and Chief Operating Officer;
  
Joel T. Grade, our Executive Vice President and Chief Financial Officer;
  
Russell T. Libby, our Executive Vice President, Administration and Corporate Secretary;
  
Wayne R. Shurts, our Executive Vice President and Chief Technology Officer; and
  
Robert C. Kreidler, our former Chief Financial Officer.

 

In addition, we explain how and why the Compensation Committee of our Board (the “Committee”) arrives at compensation policies and decisions involving the NEOs.

 

Executive Summary

 

Sysco is the global leader in selling, marketing and distributing food products, equipment and supplies to the foodservice industry. As such, our long-term success depends on our ability to attract, engage, incentivize and retain highly talented individuals who are committed to Sysco’s vision and strategy. One of the key objectives of our executive compensation program is to link executives’ pay to their performance and their advancement of Sysco’s overall annual and long-term performance and business strategies.

 

Other objectives include aligning the executives’ interests with those of stockholders and encouraging high-performing executives to remain with Sysco over the course of their careers. We believe that Sysco’s compensation strategies have been effective in attracting executive talent and promoting performance and retention. We also believe that the amount of compensation for each NEO reflects his extensive management experience, high performance and exceptional service to Sysco and our stockholders.

 

Business Highlights

 

(For more detail please see our Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”). Our discussion below of our results includes certain non-GAAP financial measures that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures and exclude the impact from restructuring charges, consisting of (1) severance charges, (2) facility closing costs, (3) professional fees incurred related to our three-year strategic plan and (4) expenses associated with the revised business technology strategy announced in fiscal 2016. They will also exclude acquisition-related expense resulting from (1) merger and integration planning, litigation costs and termination costs in connection with the merger that had been proposed with US Foods, Inc. and (2) transaction costs in connection with the acquisition of the parent holding company for the Brakes Group, as well as the financing costs related to these acquisitions. More information on the rationale for the use of these measures can be found in our Form 10-K on pages 29-33 and reconciliations to GAAP numbers can be found in Annex I - Non-GAAP Reconciliations.)

 

The general foodservice market environment since the beginning of fiscal 2016 has been uneven, with a combination of both favorable and unfavorable trends reflected in the relevant data. As compared to a few years ago, consumer confidence and unemployment data points were favorable through fiscal 2016 and the beginning of fiscal 2017, while consumer spending on meals away from home has trended slightly downward towards the end of the fiscal year (following gains throughout most of fiscal 2016). Spending at restaurants was generally improved, but customer traffic levels were generally unchanged during fiscal 2016 and are beginning to decline, together with an overall moderation in spend. Amid these conditions, throughout fiscal 2016 we provided our customers with excellent service, growing our business with locally managed customers, improving our gross margins and managing expenses. These are all important steps towards achieving our three-year plan financial objectives.

 

Comparison of results from fiscal 2016 to fiscal 2015:

 

Sales increased 3.5%, or $1.7 billion, to $50.4 billion; on a comparable 52-week basis, adjusted sales improved 1.5%;
  
Operating income increased 50.5%, or $621.1 million, to $1.9 billion;
  
Adjusted operating income increased 12.1%, or $217 million, to $2 billion; on a comparable 52-week basis, adjusted operating income increased 9.6%;
  
Net earnings increased 38.3%, or $262.8 million, to $949.6 million;
  
Adjusted net earnings increased 10.4%, or $114 million, to $1.2 billion; on a comparable 52-week basis, adjusted net earnings increased 8.0%;
  
Basic earnings per share and diluted earnings per share in fiscal 2016 were $1.66 and $1.64, respectively, a 43.1% and 42.6% increase from the comparable prior year amount of $1.16 and $1.15 per share; and
  
Adjusted diluted earnings per share were $2.10 in fiscal 2016, a 14.1% increase from the comparable prior year amount of $1.84 per share; on a comparable 52-week basis, adjusted diluted earnings per share were $2.06 in fiscal 2016, a 12.0% increase.

 

See Annex I - “Non-GAAP Reconciliations” for an explanation of these non-GAAP financial measures.

 

SYSCO CORPORATION - 2016 Proxy Statement    40

 

Say on Pay – Stockholder Feedback

 

At last year’s Annual Meeting, 91% of the stockholders who cast a vote for or against the Company’s “Say on Pay” proposal voted in favor of the proposal. Further, during the past year, management and members of the Board have engaged in dialogue with some of our largest stockholders to solicit their feedback and gather information on their views and opinions on various operations and governance issues, including executive compensation practices. Due to the strong results of the fiscal 2015 “Say on Pay” vote, the Company did not take any actions specifically in response to such vote. Based in part on our ongoing dialogue with our stockholders, however, the Committee determined to increase the emphasis on performance-based compensation for fiscal 2017 by awarding performance share units, as described below under ” – Changes to Executive Compensation Program – Fiscal 2017 Changes.” As this demonstrates, the Committee carefully considers feedback from our stockholders regarding our executive compensation program. In addition to the annual “Say on Pay” advisory vote on NEO compensation and the Company’s stockholder engagement efforts, stockholders are invited to express their views to the Committee as described under the heading “Corporate Governance–Communicating with the Board.”

 

Our Practices

 

Below we highlight certain executive compensation practices applicable to our NEOs that we have implemented to drive performance, as well as practices we have not implemented because we do not believe they would serve our stockholders’ long-term interests.

 

What We Do

 

Pay for Performance – We link pay to Sysco and individual performance. We retrospectively review the pay and performance relationship of our executive pay on an annual basis. By aligning annual and long-term incentive opportunities with Sysco’s annual operating plan, compensation is tightly aligned with stockholder interests.
  
Reward Achievement Relative to Peers – For fiscal 2016, we linked portions of long-term incentive pay to the Company’s total shareholder return as compared to the S&P 500 for a 3-year performance period.
  
Value Stockholders’ Input – We regularly communicate with some of our larger stockholders and consider their input when designing and implementing compensation programs.
  
Mitigate Undue Risk – We mitigate undue risk associated with compensation, including utilizing a mix of elements, caps on potential payments, clawback provisions, multiple performance targets and robust Board and management processes to identify risk. We also utilize post-employment covenants designed to protect competitive information of Sysco. We do not believe any of Sysco’s compensation programs creates risks that are reasonably likely to have a material adverse impact on Sysco, which we validate through our compensation risk analysis each year.
  
Align Target Compensation with Our Peers – We position the target total direct compensation levels for our NEOs within a tight range of the median for our peers, using a combination of lower fixed pay and an emphasis on pay for performance.
  
Independent Compensation Consulting Firm – The Committee seeks counsel from an independent compensation consulting firm that does not provide any other services to Sysco.
  
Executive Compensation Clawback Policy – The Committee has the authority to recoup compensation if there is (i) a restatement of our financial results, other than a restatement due to a change in accounting policy, within 36 months of the payment of the award and (ii) the restatement would result in the payment of a reduced award if the award were recalculated.
  
Reasonable Change in Control Provisions – We believe we have reasonable change in control provisions that generally apply to executive officers in the same manner as the applicable broader employee population, including use of double-trigger vesting for stock options, PSUs and RSUs awarded since November 2013.
  
Significant Stock Ownership Guidelines – We have adopted stringent stock ownership guidelines for our directors and senior officers, including a stock holding requirement. We review and adjust these guidelines when appropriate.
  
Modest Perquisites – We provide only modest perquisites that have a sound benefit to Sysco’s business. We do not allow personal use of private aircraft provided by Sysco for business purposes or other egregious perquisites.
  
Regular Review of Share Utilization – We evaluate share utilization by reviewing overhang levels (dilutive impact of equity compensation on our stockholders) and annual run rates (the aggregate shares awarded as a percentage of total outstanding shares).
  
Limited Trading Windows – We require our directors and executive officers to conduct all transactions in Sysco common stock through pre-approved 10b5-1 trading plans established during open trading windows and subject to a 30-day waiting period before trades may commence. Further information about our trading restrictions is available under “Stock Ownership – Stock Trading Restrictions” above.

 

What We Don’t Do

 

None of our NEOs has an employment contract.
  
No stock option reloading.
  
No tax gross-ups for financial planning or loss on sale of home in connection with a relocation.
  
No separate change in control agreements.
  
No hedging – Our insider trading policy prohibits executive officers and directors from using strategies or products (such as derivative securities or short-selling techniques) to hedge against the potential decrease in the market value of Sysco common stock.
  
No excise tax gross-ups upon a change in control.
  
No repricing of underwater stock options.

 

SYSCO CORPORATION - 2016 Proxy Statement    41

 

How Pay is Tied to Performance

 

Sysco’s executive compensation program directly links the great majority of executive compensation to Sysco’s financial performance through annual and long-term incentives. The mix of the key non-retirement compensation elements for the CEO and the other NEOs for fiscal 2016 is shown below. The Target Compensation Mix charts describe each element of compensation as a percent of total target direct compensation, while the Actual Compensation Paid charts describe each element of compensation that was actually paid out (for salary and cash incentives) or granted (for equity awards) in fiscal 2016, other than those specifically described in the paragraph below.

 

 

 

SYSCO CORPORATION - 2016 Proxy Statement    42

 

The Committee has not historically used an exact formula for allocating between fixed and variable, cash and non-cash, or short-term and long-term compensation, allowing it to incorporate flexibility into our annual and long-term compensation programs and adjust for the evolving business environment. The Target Compensation Mix charts above include award opportunities related to annual and long-term incentive compensation, granted in fiscal 2016 and valued at target levels, and do not include (i) any amounts paid with respect to prior years’ incentive award grants, (ii) the value of any retirement benefits or (iii) the one-time, incentive and retention awards granted in July 2015 to the NEOs (other than the CEO). The Actual Compensation Paid charts include the annual incentive and CPU award amounts, if any, paid out to the NEOs in cash with respect to fiscal 2016 or measurement period ending in fiscal 2016. All charts include salary with respect to fiscal 2016 and the estimated grant date value of stock options and RSUs granted during fiscal 2016 as part of the NEOs long-term incentive compensation.

 

The value of Sysco’s stock options and RSUs is directly linked to Sysco’s stock performance. The value of Sysco’s CPUs awarded in fiscal 2014 was determined based on Sysco’s relative shareholder return over the three-year performance period ending in fiscal 2016. How we derive the values of the components of Sysco’s long-term incentives is discussed under “— How Executive Pay is Established.” Including the annual incentive award, payment of which is largely dependent on Sysco’s financial performance, these four performance-linked components constituted approximately 80% to 89% of the total target direct compensation, and approximately 80% to 90% of the total actual direct compensation paid for fiscal 2016 to each of the NEOs.

 

Changes to Executive Compensation Program

 

Sysco is committed to providing and maintaining a competitive executive compensation program. In addition, we continue to address ways in which our pay can be appropriately linked to Company performance, and we have made some changes for fiscal 2016 and fiscal 2017 incentives to further tighten this alignment. Recent changes to Sysco’s executive compensation programs approved by the Committee include the following:

 

Fiscal 2016 Changes:

 

Component:   Change:   Objective:
Annual Incentive Award   Aligned performance goal setting and core financial objectives with Sysco’s annual operating plan, shifted return on invested capital to a long-term metric.   Ensure the goals, operating expectations and other key performance criteria are reflective of Sysco’s annual operating plan.
Annual Incentive Award – NEO Individual Objectives   Increased percentage of individualized strategic bonus objectives (“SBOs”) as a discrete component of the program representing 25% of the target award annual incentive award.   Increase the significance of the specified SBOs and promote individual accountability for performance in achieving key financial and non-financial goals.
Long-Term Incentives   Cash-performance units (CPU) metric modified to use average 3-year return on invested capital metric, as modified by relative total shareholder return during the 3-year performance period.   Strengthen alignment with business objectives and strike a more appropriate balance between a long-term strategic financial goal and relative market returns.
Retention Incentive Award   Granted a special incentive and retention payment, subject to a 12-month recoupment provision.   Incentivize certain individuals who were instrumental in developing future state business strategies, in addition to their ordinary duties, and to retain those individuals for successful pursuit of key operational and strategic initiatives.

 

Fiscal 2017 Changes:

 

Component:   Change:     Objective:
Annual Incentive Award   Aligned performance goal setting and financial objectives with the 3-year strategic plan by retaining operating income versus plan as the primary measure. Also, introduced North American Broadline (“NABL”) total case growth as a metric in substitution for total sales growth in order to separate the influence of certain external factors (e.g., currency exchange rates and inflation/deflation) in assessing performance.    

•  Ensure that the goals reflect market conditions, operating expectations and other relevant factors as reflected in Sysco’s annual operating plan.

•  NABL cases growth is a critical top-line performance measure that can be measured consistently, without variation based on external factors such as currency exchange rates and inflation or deflation.

•  Reinforce accountability for achievement of annual operating plan goals.

Annual Incentive Award – NEO Individual Objectives   Retained individualized strategic bonus objectives (“SBOs”) relevant to each leader’s role. SBOs were modified to focus on critical strategic objectives.    

•  Revised SBOs provide additional focus on critical strategic objectives that support both financial and non- financial goals. Individualized SBOs are closely tailored to each participant’s line-of-sight influence.

 

SYSCO CORPORATION - 2016 Proxy Statement    43

 
Component:   Change:     Objective:
Long-Term Incentives   Introduced Performance Share Units (PSUs) for senior leadership, further enhancing the linkage between Sysco performance and individual compensation. PSUs represent 60% of the long-term incentive opportunity granted to NEOs in fiscal 2017. Performance metrics are based on the Company’s (i) earnings per share compound annual growth rate during the 3-year performance period and (ii) average annual return on invested capital over such performance period, each as compared to the Company’s pre-established performance targets. Beginning in fiscal 2017, restricted stock units (RSUs) and cash performance units (CPUs) will no longer be included as a part of senior executives’ annual LTI grants.    

•  Further strengthen the link between performance and compensation, with a larger percentage of the compensation opportunity for each senior executive at risk and directly linked to achievement of key company goals.

•  The use of PSUs instead of cash-based CPUs and RSUs is more common among Sysco’s peers. The removal of the RSU component eliminates a time-based award from the Company’s ongoing annual LTI grant practices.

Long-Term Incentives   Maintained market competitiveness for key leaders by reducing pro-rata vesting of stock options from a 5-year period to a 3-year period. Stock options continued to represent 40% of the long-term incentive opportunity granted to NEOs in fiscal 2017.    

•  Maintain market competitiveness and an appropriate balance between long-term and short-term orientation to the business, with a continued strong focus on pay for performance.

 

Philosophy of Executive Compensation Program

 

Our executive compensation plans directly link a substantial portion of annual executive compensation to Sysco’s performance. These plans are designed to deliver highly competitive compensation for superior company performance. Likewise, when company performance falls short of expectations, these variable incentive programs deliver lower levels of compensation. However, the Committee tries to balance pay-for-performance objectives with retention considerations, so that, even during temporary downturns in the economy and the foodservice industry, the programs continue to ensure that qualified, successful, performance-driven employees stay committed to increasing Sysco’s long-term value. Furthermore, to attract and retain highly skilled management, our compensation program must remain competitive with those of comparable employers who compete with us for talent.

 

Core Principles

 

We use the following key principles as the cornerstone of Sysco’s executive compensation philosophy to attract, develop and retain business leaders to drive financial and strategic growth and build long-term stockholder value:

 

Pay for Performance: Provide base salaries that reflect each NEO’s background, experience and performance, combined with variable incentive compensation that rewards executives at higher levels than at peer companies when superior performance is achieved, while subpar performance results in compensation that is below that of peer companies;
  
Competitiveness and Retention: Provide a competitive pay opportunity that attracts and retains the highest quality professionals;
  
Accountability for Short- and Long-Term Performance: Strike an appropriate balance between achieving both short-term and long-term interests of the business through short-term and long-term compensation; and
  
Alignment with Stockholders’ Interests: Link the interests of our executive officers with those of our stockholders through significant at risk, equity-based compensation.

 

SYSCO CORPORATION - 2016 Proxy Statement    44

 

Components and Objectives of Executive Compensation Program

 

The Committee has built the executive compensation program upon a framework that includes the following components and objectives, each of which is described in greater detail later in this Compensation Discussion and Analysis. The Committee routinely reviews each component of the executive compensation program to see how it affects target total pay levels and generally targets total direct compensation at or above the median of the target total pay ranges for similar executive positions among companies in our peer group.

 

   Component  Description  Objective of Element
Annual Compensation  Base Salary  The Committee generally sets base salaries at or below market competitive levels to attract and retain talented executives, to provide a fixed, competitive base of cash compensation and to provide enhanced weighting to the incentive-based components of the overall pay program. The Committee then may adjust the base salaries based on a number of factors, which may include merit increases, the executive’s unique job responsibilities, management experience, individual contributions, number of years in his or her position and market position of current salary, as described under “How Executive Pay is Established” below. 

•  Create a competitive pay mix with an appropriate balance between fixed and variable and short- and long-term pay components.

•  Generally targeted at or below the median of the salary ranges for similar executive positions among companies in our peer group.

   Annual Incentive Award  The annual incentive award is designed to offer opportunities for cash compensation tied directly to company performance. We pay the annual incentive award in cash in the first quarter of the fiscal year for performance in the prior fiscal year. Payment of the annual incentive award is based on satisfaction of performance criteria that the Committee believes ultimately create stockholder value. The threshold requirements for payment of each component of the annual incentive award in fiscal 2016 were Sysco’s achieving at least $1.75 billion in adjusted operating income, at least a 1% increase in adjusted sales and at least a 2% increase in gross profit dollars, each as compared to the immediately preceding fiscal year. In addition, for fiscal 2016, 25% of the annual incentive opportunity for each of the NEOs was based on his performance with respect to his SBOs. 

•  Pay annual cash incentive bonuses based on Sysco performance on key metrics that support the company’s annual operating plan.

•  Promote pay for performance in a competitive way.

•  Generally targeted at or above the median annual incentive ranges among companies in our peer group upon achieving target performance goals.

Long-Term Incentives  Cash Performance Units (CPUs)  Each NEO has an opportunity to earn incentive payments based on Sysco’s performance over a three-year performance period under Sysco’s CPU program. For the CPUs granted in fiscal 2016, any pay-out is based on the Company’s average 3-year adjusted return on invested capital (“ROIC”) as compared to the target ROIC established by the Committee on an annual basis, subject to modification based on the company’s three-year total shareholder return (“TSR”) as compared to the S&P 500 for the performance period. See “Executive Compensation – Cash Performance Units” for a description of the CPU program and outstanding grants thereunder. CPUs will not be granted in fiscal 2017. 

•  Incentivize executive officers to achieve specified longer-term goals over three-year performance periods.

•  Align pay with the creation of stockholder value, as compared to the S&P 500 companies over the applicable performance period.

•  Generally targeted at or above the median long-term incentive ranges among companies in our peer group upon achieving target performance goals.

   Stock Options  Beginning in fiscal 2017, stock options granted to NEOs vest one-third per year beginning one year from the date of grant. 

•  Closely align the executives’ interests with those of our stockholders through share price appreciation.

   Restricted
Stock Units (RSUs)
  RSUs granted to NEOs generally vest one-third per year beginning one year from the date of grant. Dividend equivalents are paid to US-based participants, if and when the underlying RSUs vest. Beginning in fiscal 2017, RSUs will not be a component of the annual long-term incentive awards granted to the NEOs. 

•  Focus executives on multi-year activities that increase stockholder value.

•  Foster retention through time vesting requirements.

   Performance Share Units (PSUs)  For fiscal 2017, each NEO will have an opportunity to earn shares of Sysco common stock based on Sysco’s performance over a three-year period. The compensation opportunity under the PSUs has a performance period commencing in fiscal 2017 and is based on the Company’s (i) earnings per share compound annual growth rate and (ii) average ROIC over such performance period, each as compared to the Company’s pre-established performance targets. See “– Long-Term Incentives – Detailed Information – Stock Options and Performance Share Units” below for a description of the PSU program. 

•  Strengthen alignment with shareholders.

•  Strong performance and compensation alignment by increasing performance based contingencies for payment.

•  PSUs are more closely aligned with peer and general industry practices.

Retirement, other Benefit Programs and Perquisites  Non-Qualified Retirement Benefits and Deferred Compensation Plan  The Management Savings Plan (the “MSP”) is a non-qualified, deferred compensation plan. The MSP allows participants to defer current cash compensation and employer contributions, plus applicable earnings, for payment on specified dates or upon certain specified events. 

•  Support executive performance and retention through vesting requirement and forfeiture provisions applicable to company contributions.

•  Complement the Sysco 401(k) Plan to serve as the primary retirement savings vehicles for executives.

•  Provides a market competitive retirement savings opportunity for executives.

   Other Benefits and Perquisites  Executive officers, including the NEOs, are eligible to participate in the same benefit programs that are offered to other salaried employees. Limited perquisites are provided to executives, including payment of life and accidental death and dismemberment insurance coverage, long-term care insurance coverage, reimbursement of costs for annual medical exams, payment of long-term disability coverage, payment of fees related to the preparation of foreign tax returns where warranted due to company business, and certain expenses related to spousal travel in connection with business events. See “— Executive Perquisites & Other Benefits– Detailed Information” below. 

•  Provide limited market competitive benefits to protect employees’ and their covered dependents’ health and welfare.

•  Facilitate strong performance on the job and enhance productivity.

 

SYSCO CORPORATION - 2016 Proxy Statement    45

 

How Executive Pay Is Established

 

The Committee, in consultation with management and the Committee’s independent compensation consultant, continues to focus on ensuring that our executive compensation programs reinforce our pay for performance philosophy and enhance stockholder value. During fiscal 2016, the Committee utilized Exequity LLP, referred to herein as Exequity, as its independent compensation consultant. Exequity assisted the Committee in annual benchmarking of executive compensation at Sysco. After reviewing competitive studies provided by its independent consultant, the Committee determined that each NEO’s then current target compensation provided the executive with an appropriate compensation opportunity. The Committee later determined, based on the Company’s fiscal 2016 performance, that each NEO’s total fiscal 2016 compensation was generally appropriate in light of overall Company performance and the executive’s personal performance.

 

In developing our pay for performance policies, the Committee generally benchmarks elements of pay against a comparison peer group, as discussed below. However, the Committee has not historically used an exact formula for allocating between fixed and variable, cash and non-cash, or short-term and long-term compensation, allowing it to incorporate flexibility into our annual and long-term compensation programs and adjust for the evolving business environment.

 

Committee Oversight

 

The Committee, which is comprised entirely of independent directors, is responsible for overseeing Sysco’s executive compensation program. The Committee determines and approves all compensation of the CEO and Sysco’s other senior officers, including the NEOs. Although the Committee meets jointly with the Corporate Governance and Nominating Committee to discuss both the CEO’s personal goals and his performance in achieving such goals in each fiscal year, the Committee is solely responsible for approving all compensation awards and payment levels. The Committee develops and oversees programs designed to compensate our corporate officers, including the NEOs, as well as the presidents and executive vice presidents of our operating companies. The Committee is also authorized to approve all grants of restricted stock, restricted stock units, stock options, CPUs, PSUs and other awards to NEOs under our long-term incentive plans for Sysco employees. Further information regarding the Committee’s responsibilities is found under “Corporate Governance – Board Meetings and Committees” and in the Committee’s Charter, available on the Sysco website at www.sysco.com under “Investors — Corporate Governance.”

 

The Committee has several resources and analytical tools they consider in making decisions related to executive compensation. The table that follows discusses the key tools the Committee uses.

 

Committee Resources
Independent Committee Consultant  

Exequity attended five Committee meetings during fiscal 2016.

Exequity advised on compensation matters, including peer group composition, annual and long-term incentive plan designs, special compensation issues related to acquisitions, and market data on CEO and other NEO compensation.

Exequity prepared compensation studies for the NEOs:

•  Research reports providing information regarding annual and long-term incentive practices among peer companies and other publicly-traded employers.

•  For all executive compensation decisions made for fiscal 2016 and fiscal 2017, including base salary determinations for fiscal 2017, fiscal 2017 annual and long-term incentive awards and the July 2015 incentive and retention payments, the Committee consulted Exequity. Exequity prepared executive compensation studies for the Committee, in May 2015 and May 2016, which included benchmarking of base salary and estimation of total cash compensation and total direct compensation, inclusive of long-term incentive opportunities for each of the NEOs.

For purposes of the reports listed above, with respect to the NEOs, “target total cash compensation” was defined as base salary plus target annual incentive opportunity of 150% for Mr. DeLaney, 125% for Mr. Bené, and 100% for Messrs. Grade, Libby and Shurts. Mr. Kreidler has no annual incentive opportunity for fiscal 2017. “Target total direct compensation” was defined as target total cash compensation plus the value of stock options, RSUs, CPUs and/or PSUs expected to be granted with respect to the year in question; stock options are valued using a Black-Scholes calculation, PSUs and RSUs are each valued at the average closing fair market value of Sysco stock of the ten trading days immediately preceding the date of grant, and CPUs are valued at $1.00 per unit, with assumed payment at the 100% target amount; and “actual amounts” are calculated similarly to the target amounts, but use an estimated year-end annual incentive payment and the actual amounts paid for all components other than the annual incentive payment. The Committee has determined Exequity to be independent from the Company and that no conflicts of interest exist related to Exequity’s services provided to the Committee. Other than with respect to Exequity’s roles in advising the Committee and the Corporate Governance and Nominating Committee with respect to non-employee director compensation, Exequity does not perform any services for Sysco. Exequity is an independent consultant and reports directly and exclusively to the Committee. Additionally, Exequity has policies and procedures in place to prevent conflicts of interest. The fees received by Exequity during fiscal 2016 related to Sysco represented less than 5% of Exequity’s revenues for the 12 month period. Neither Exequity nor any adviser of Exequity had a business or personal relationship with any member of the Committee or any executive officer of Sysco during fiscal 2016. No Exequity adviser directly owns, or directly owned during fiscal 2016, any Sysco common stock.

 

SYSCO CORPORATION - 2016 Proxy Statement    46

 
Committee Resources
Sysco’s Human Resources Department  

Sysco’s Executive Vice President, Human Resources and the Human Resources Department (“HR”) provide additional analysis and guidance as requested by the Committee related to NEO compensation, including the following:

•  Assisting the CEO in making preliminary recommendations of base salary structure, annual and long-term incentive program design, including the July 2015 incentive and retention payments, and target award levels for the NEOs and other employees eligible to receive annual incentive awards.

•  Providing scenario planning - HR provides the Committee with anticipated payment levels throughout the year based on the Company’s projections relative to the performance measures.

•  Providing comparison data on the internal equity of the compensation awarded within the Sysco organization.

CEO   For other NEOs, the CEO makes individual recommendations to the Committee on base salary and annual and long-term incentive goals and award opportunities. The CEO also provides initial recommendations for annual incentive award performance targets and individual SBOs for the Committee to consider. The Committee reviews, discusses, modifies and approves, as appropriate, these compensation recommendations. The CEO’s recommendations with respect to fiscal 2016 compensation and fiscal 2017 compensation to date were accepted by the Committee. No member of management, including the CEO, has a role in determining his or her own compensation.

 

Role of CEO and/or Other Executive Officers in Determining NEO Compensation

 

As described in the table above, our CEO, Mr. DeLaney, provides recommendations to the Committee for each element of compensation for each of the NEOs other than himself. In forming his recommendations, he is advised by HR as described above. HR assesses the design of, and makes recommendations related to, Sysco’s compensation and benefit programs. Mr. DeLaney also consults with other senior officers of the Company for recommendations related to the appropriate financial and non-financial performance measures used in our incentive programs. In developing recommendations for the Committee, Mr. DeLaney and HR consult benchmarking and other market data from Exequity and other advisors as described elsewhere in this proxy statement, and follow the philosophy and pursue the objectives described above under “–Philosophy of Executive Compensation Program.” The Committee, with input from its independent compensation consultant, determines each element of compensation for Mr. DeLaney. With input from its independent compensation consultant, HR and Mr. DeLaney, the Committee determines each element of compensation for the other NEOs. The Committee is under no obligation to utilize these recommendations. Executive officers and others may also participate in discussions with the Committee when invited to do so.

 

Use of Peer Group and Survey Data

 

Sysco is the largest foodservice distributor in North America, and most of the other companies in the foodservice industry are significantly smaller, with nearly all of such companies also being privately-held. We believe that these smaller businesses would not create a satisfactory comparison group due to the greater skill levels and abilities required to manage a public company of Sysco’s size and complexity. Absent a robust industry peer group, the Committee concluded that the most comparable companies with respect to executive pay are companies whose business size and complexity are similar to ours and with which we compete for top executive talent. However, due to the lack of directly comparable publicly traded companies, the peer group developed for the executive compensation analysis for our NEOs is not the same peer group that is used in the stock performance graph included in our annual report to stockholders or for the benchmarking of performance. The Committee continually evaluates the compensation analysis peer group for appropriateness and last made changes in February 2013.

 

The companies in the peer group for executive pay and performance benchmarking for decisions made during fiscal 2016 and so far in fiscal 2017 are the following, which we refer to as our “peer group” or “peer companies” throughout this proxy statement:

 

AmerisourceBergen Corporation FedEx Corp. Lowe’s Cos Inc. United Parcel Service Inc.
Best Buy Company, Inc. Home Depot Inc. (The) Staples, Inc. Walgreen Company
ConAgra Foods Inc. Kraft Heinz Company (The) Target Corp. YUM! Brands Inc.
Costco Wholesale Corp McDonald’s Corp.        

 

The peer group had the median market capitalization and revenue levels presented in the Exequity May 2015 executive compensation report and shown below:

 

   Revenue Level  Market Capitalization
Peer Group:  $50.9 billion as of most recent fiscal year end prior to May 2015  $48.8 billion as of December 31, 2014
Sysco:  $49 billion (estimated by Exequity for fiscal 2015)  $23.3 billion as of December 31, 2014

 

Peer group compensation data is limited to information that is publicly reported and, to the extent it deems appropriate, the Committee uses it to benchmark the major components of compensation for our NEOs.

 

The independent compensation study from May 2015 compared Sysco’s actual pay (based on projected 2015 annual incentive payments) and projected financial performance for the applicable period to that of the peer companies and was used to benchmark target pay levels and identify prevailing performance criteria. The following projected one-year and three-year performance measures were reviewed with respect to validating Sysco’s fiscal 2016 target pay and performance alignment:

 

Fully-diluted earnings per share (“EPS”), as adjusted;
  
Growth in sales and gross profit dollar growth;
  
Return on Invested Capital; and
  
Total shareholder return (computed as of December 31, 2015).

 

SYSCO CORPORATION - 2016 Proxy Statement    47

 

The Exequity May 2016 executive compensation report indicated that, for fiscal 2016, Sysco’s performance rank based on these one-year and three-year financial metrics varied by measure, yet on average approximated the peer group median overall for both periods. Targeted NEO pay was also confirmed to be in alignment with our compensation philosophy. Actual compensation earned for both periods, excluding the July 2015 incentive and retention payments, was tightly aligned with overall relative performance.

 

In addition, based on the comparison in this Exequity report of the Company’s fiscal 2016 total targeted compensation (i.e., base salary, target annual incentive and LTI grant value) for the NEOs to the peer group pay levels, the Committee confirmed that the total targeted compensation for (1) each of Messrs. DeLaney and Libby was between the median and the 75th percentile and (2) each of Messrs. Bené, Grade and Shurts was between the 25th percentile and the median. The Committee further reviewed in May 2016 the relationship between actual realizable pay for the NEOs, excluding the July 2015 incentive and retention payments, and the company’s total shareholder return and found that realizable pay positioning versus peers over the three year period of fiscal 2013 to fiscal 2015 was tightly aligned with the Company’s total shareholder return versus its peers.

 

What We Paid and Why – Compensation for NEOs

 

Base Salary – Detailed Information

 

We pay base salaries to attract and retain talented executives and to provide a fixed base of cash compensation. The table below shows the annualized salaries of each NEO at the beginning of fiscal 2015, 2016 and 2017, with the effective dates as noted below:

 

Named Executive Officer  FY2015
Base Salary(1)
   FY2016
Base Salary(2)
   FY2017
Base Salary(3)
William J. DeLaney  $1,225,000   $1,250,000   $1,250,000
Thomas L. Bené   643,750    750,000    800,000
Joel T. Grade   510,000    625,000    625,000
Russell T. Libby   540,750    600,000    600,000
Wayne R. Shurts   604,610    625,000    625,000
Robert C. Kreidler   736,450    736,450    
(1)The Committee approved these base salaries effective as of September 1, 2014. Mr. Bené’s base salary was adjusted from $643,750 to $725,000, effective as of January 1, 2015, in connection with his promotion to Executive Vice President and President, Foodservice Operations. The base salary increase for Mr. Grade reflected the increased areas of responsibility in connection with his promotion to Executive Vice President and Chief Financial Officer.
(2)The Committee approved these base salaries effective as of September 1, 2015. The base salary increase for Mr. Libby reflected the increased areas of responsibility in connection with his promotion to Executive Vice President, Administration and Corporate Secretary. Mr. Bené’s base salary was adjusted from $750,000 to $800,000, effective as of January 1, 2016, in connection with his promotion to President and Chief Operating Officer.
(3)The Committee approved these base salaries effective as of September 4, 2016.

 

Base Salary – Analysis

 

Fiscal 2016 Base Salary

 

For fiscal 2016 base salary determinations, the Committee again reviewed, for each NEO, the executive’s job responsibilities, management experience, individual contributions, tenure in his position and then-current salary. An independent compensation study from May 2015 compared Sysco’s actual pay (based on projected annual incentive payments) and projected fiscal financial performance for the applicable period to that of the peer companies. The Committee determined, as recommended by Exequity and management, that it was appropriate to grant the salary increases for fiscal 2016 described in the chart above. Following a comprehensive review of Mr. DeLaney’s performance in fiscal 2015 by the Corporate Governance and Nominating Committee and the Committee, and Mr. DeLaney’s evaluation by the entire Board, the Committee approved an increase in Mr. DeLaney’s salary for fiscal 2016 of $25,000, or 2.0%. The Committee, after considering input from the CEO on each of their individual contributions and additional job responsibilities, approved salary adjustments for Mr. Bené of 3.4%, Mr. Grade of 22.5%, Mr. Libby of 11% and Mr. Shurts of 3.4%. The base salary increase for Mr. Grade reflected the increased areas of responsibility in connection with his promotion to Executive Vice President and Chief Financial Officer, and Mr. Libby’s salary adjustment reflected increased areas of responsibility, effective September 1, 2015, in connection with his promotion to Executive Vice President, Administration & Corporate Secretary. As a result of these changes, based on the Exequity May 2015 compensation study, the fiscal 2016 base salaries of Messrs. DeLaney and Libby approximated the median of the peer group, the fiscal 2016 base salary of Mr. Bené was positioned between the 50th and 75th percentile of the peer group, the fiscal 2016 base salary of Mr. Shurts was positioned between the 25th and 50th percentile of the peer group and the fiscal 2016 base salary of Mr. Grade approximated the 25th percentile of the peer group. Mr. Kreidler’s 2016 base salary was not adjusted due to his scheduled departure from the Company, and Mr. Bené’s base salary was further adjusted from $750,000 to $800,000, effective as of January 1, 2016, in connection with his promotion to President and Chief Operating Officer.

 

SYSCO CORPORATION - 2016 Proxy Statement    48

 

Fiscal 2017 Base Salary

 

For fiscal 2017 base salary determinations, the CEO recommended to the Committee that the base salaries of the NEOs be maintained at the fiscal 2016 levels based on the Company’s administrative cost management efforts and the Exequity May 2016 compensation study indicating that current compensation levels for the NEOs were consistent with the Committee’s executive compensation philosophy. In light of this recommendation, and following a review of each current NEO’s job responsibilities, management experience, individual contributions, tenure and then-current salary, the Committee determined that the base salaries of the current NEOs would not be adjusted for fiscal 2017. As a result, based on the Exequity May 2016 compensation study, the fiscal 2017 base salaries of Messrs. DeLaney and Libby approximated the median of the peer group, the fiscal 2017 base salaries of Messrs. Bené and Shurts were positioned between the 25th and 50th percentile of the peer group and the fiscal 2017 base salary of Mr. Grade approximated the 25th percentile of the peer group.

 

Annual Incentive Award – Detailed Information

 

The annual incentive award is designed to offer opportunities for cash compensation tied directly to company performance. In August 2015, the Committee approved, pursuant to authority established by the 2013 Sysco Corporation Long-Term Incentive Plan, the Sysco Corporation Fiscal 2016 Management Incentive Program for MIP Bonus-Eligible Participants (the “2016 MIP”). In August 2016, pursuant to the same shareholder approved authority, the Committee approved the Sysco Corporation Fiscal 2017 Management Incentive Program (MIP) For Corporate MIP Bonus-eligible Positions (the “2017 MIP”).

 

Under the terms of the 2016 MIP and the 2017 MIP, we pay the annual incentive award in cash in the first quarter of the fiscal year for annual incentives earned for performance in the prior fiscal year.

 

Annual Incentive Award for Fiscal 2016

 

Under the 2016 MIP, the annual incentive award opportunity for each of the NEO’s was based on the following pre-determined metrics, weighted as indicated below:

 

Adjusted Operating Income, representing 50% of the total annual incentive award opportunity;
  
Adjusted Sales Growth/Gross Profit Dollar Growth, representing 25% of the total annual incentive award opportunity; and
  
Individual strategic bonus objectives, or SBOs, for each NEO, representing 25% of the total annual incentive award opportunity.

 

Fiscal 2016 Financial Performance Targets. The 2016 MIP provided for minimum annual incentive payments upon achieving adjusted operating income of at least $1.75 billion and/or adjusted sales growth of at least 1% and adjusted gross profit dollar growth of at least 2%. The various levels of financial performance required to reach threshold, target and maximum payments are set forth below:

 

   2016 MIP Financial Performance Targets - Fiscal 2016
   Adjusted Operating
Income
   Adjusted Sales
Growth
   Adjusted Gross Profit
Dollar Growth
 
Threshold   $ 1.750 billion    1.0%   2.0%
Target   $ 1.892 billion    ≥4.0 – <5.0%   ≥4.0 – <5.0%
Maximum   $ 2.034 billion    ≥6.0%   ≥6.0%

 

Fiscal 2016 Financial Results and Performance Factors. For purposes of the 2016 MIP, actual results included adjusted operating income of $1.982 billion (exceeded target performance level), adjusted sales growth of 2.7% (exceeded threshold performance level), and adjusted gross profit dollar growth of 4.8% (equaled target performance level). See Annex I for a reconciliation of these adjusted measures to the most directly comparable GAAP measures. Based on these results, which equaled or exceeded target performance for two of the three metrics, we calculated weighted performance factors for the Adjusted Operating Income component and the Adjusted Sales Growth/Gross Profit Dollar Growth component of the 2016 MIP:

 

Calculation of Weighted Financial Performance Factors (75% of target annual incentive opportunity)
Financial Performance Metric  Potential Payment  Weighting(1)  x  2016 Performance =  Weighted Financial
Performance Factor
Adjusted Operating Income(2)  0% - 200%   50%     156.6%     78.3%
Adjusted Sales Growth/Gross Profit Dollar Growth(3)  0% - 200%   25%     87.5%     21.9%
(1)This column represents, for each financial performance metric, the weighting of that metric for purposes of the total 2016 MIP annual incentive opportunity.
(2)The calculation of adjusted results for this performance metric excluded the following items: severance charges, professional fees on 3-year financial objectives, facility closure costs and costs associated with our revised business technology strategy; US Foods merger and integration planning and transaction costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition transaction costs (third and fourth quarters fiscal 2016 only); the financial impact of the additional week in fiscal 2016; and the impact of changes in foreign exchange rates compared to those assumed in the fiscal 2016 annual operating plan.
(3)The calculation of the adjusted results for each of these performance metrics excluded the following items: the financial impact of the additional week in fiscal 2016 and the impact of changes in foreign exchange rates compared to those assumed in the fiscal 2016 annual operating plan.

 

SYSCO CORPORATION - 2016 Proxy Statement    49

 

Calculation of Total Award Earned under 2016 MIP. The total annual incentive award payment for each NEO under the 2016 MIP was calculated as indicated in the table below, with 50% of the target incentive opportunity based on the Company’s Adjusted Operating Income performance, 25% of the target incentive opportunity based on the Company’s Adjusted Sales Growth/Gross Profit Dollar Growth performance and the remaining 25% of the target incentive opportunity based on individual performance with regard to pre-established individual SBOs, which the Committee had the discretion to pay out between 0% - 150% based on its assessment of the NEO’s performance. The Committee believes the use of individual SBOs further promotes the overall executive compensation pay philosophy to link individual pay to performance. For further discussion of the Committee’s evaluation with respect to the individual SBOs of each NEO, as well as the calculation of each NEO’s “Weighted Individual SBO Performance Factor” for purposes of the table below, please see “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs—Annual Incentive Award—Analysis” below.

 

                       Amount             
               Amount       of Award       Amount     
               of Award       Funding on       of Award     
               Funding on   Adjusted   Adjusted       Funding on   Total 
       Target   Adjusted   Adjusted   Sales Growth/   Sales Growth/   Weighted   Weighted   2016 MIP 
       Annual   Operating   Operating   Gross Profit   Gross Profit   Individual   Individual   Award 
       Incentive   Income   Income   Dollar Growth   Dollar Growth   SBO   SBO   Earned 
   Ending Base   (% of Base   Performance   Performance   Performance   Performance   Performance   Performance   for FY16 
Name  Salary   Salary)   Factor   Factor   Factor   Factor   Factor   Factor   Performance 
DeLaney  $1,250,000    150.0%   78.3%  $1,468,125    21.9%  $410,625    33.0%  $618,750   $2,497,500 
Bené(1)   775,000    125.0%   78.3%   758,531    21.9%   212,156    30.0%   290,625    1,261,313 
Grade   625,000    100.0%   78.3%   489,375    21.9%   136,875    33.7%   210,625    836,875 
Libby   600,000    100.0%   78.3%   469,800    21.9%   131,400    32.5%   195,000    796,200 
Shurts   625,000    100.0%   78.3%   489,375    21.9%   136,875    28.1%   175,625    801,875 
    Base     Target     OI PF A = Base x Target
x OI PF
   SG/GP PF    B = Base x Target
x SG/GP PF
   SBO PF    C = Base x Target
x SBO PF
   Total = A+B+C  
(1)Mr. Bené’s 2016 annual incentive payment was calculated using different base salaries for portions of fiscal 2016. For 50% of his 2016 annual incentive payment, covering the period from the beginning of the fiscal year to January 1, 2016, the effective date of his promotion, a base salary of $750,000 was used. For the remaining 50% of his annual incentive payment, covering the period from January 1, 2016 to the end of the fiscal year, a base salary of $800,000 was applied.

 

Executive Compensation Clawback Policy. The fiscal 2016 awards are also subject to clawback provisions that provide that, subject to applicable law, all or a portion of the award paid pursuant to the 2016 MIP may be recovered by Sysco if there is a restatement of our financial results, other than a restatement due to a change in accounting policy, within 36 months of the payment of the award and the restatement would result in the payment of a reduced award if the award was recalculated using the restated financial results. The Committee has the sole discretion to determine the form and timing of the repayment. See “Compensation Discussion and Analysis—Executive Compensation Governance and Other Information—Executive Compensation Clawback Policy.”

 

Annual Incentive Award Potential for Fiscal 2017

 

In August 2016, the Compensation Committee approved the fiscal 2017 annual incentive award opportunities described below for the eligible NEOs under the 2017 MIP, which was adopted by the Committee pursuant to the 2013 Sysco Corporation Long-Term Incentive Plan:

 

Under the 2017 MIP, each participating NEO’s annual incentive opportunity will be targeted at the following percentages of base salary: 150% for Mr. DeLaney, 125% for Mr. Bené, and 100% for Messrs. Grade, Libby and Shurts;
  
The total annual incentive payment to be earned by each participating NEO under the 2017 MIP will be based (i) 50% on the operating income performance of the Company during fiscal 2017 as compared to projected, target operating income for the year, (ii) 25% on the Company’s gross profit dollar growth and North American Broadline (“NABL”) total case growth during fiscal 2017 as compared to projected, target year over year growth for each metric and (iii) 25% on the individual participant’s performance with respect to his own SBOs;
  
In measuring the Company’s performance with respect to these financial metrics under the 2017 MIP, the Committee, in its sole discretion, may make equitable adjustments in recognition of unusual or non-recurring events affecting the Company or its financial statements, including adjustments relating to the Company’s withdrawal from a multi-employer pension plan, restructuring charges, foreign exchange rate fluctuations and certain other events. For further discussion of performance factor adjustments, see “Executive Compensation – Annual Incentive Awards – 2013 Long-Term Incentive Plan – Performance Factor Adjustments” below.
  
Each of the above components for the annual incentive payment will be calculated and awarded independently, such that one portion of the award may be earned even if the threshold level of performance for other measures is not achieved, consistent with the annual incentive calculations in prior years; and
  
Each metric based on the Company’s financial performance has a possible payout between 0% and 200%, depending on the Company’s actual performance relative to the established targets. The individual SBO portion of the annual incentive payment has a possible payout of between 0% and 150%, depending on actual performance relative to the SBOs.

 

SYSCO CORPORATION - 2016 Proxy Statement    50

 

Limit on Fiscal 2016 and Fiscal 2017 Maximum Annual Incentive Award Payments

 

The Committee established an annual incentive pool limit for each of fiscal 2016 and fiscal 2017 for the CFO and certain “covered employees” of Sysco, as defined in Section 162(m) of the Internal Revenue Code (the “Code”) to help ensure compliance with the deductibility requirements of Section 162(m) of the Code. Under the 2013 Long-Term Incentive Plan, the maximum dollar amount that may be paid under all cash-based awards granted to any individual for any a fiscal year under the Plan is 1% of the Company’s earnings before income taxes as publicly disclosed in the “Consolidated Results of Operations” section of the Company’s annual report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended immediately before the date the applicable award is paid.

 

   Percent of 2016 Incentive Pool  Percent of 2017 Incentive Pool
Participant’s Title  Allocated to Participant  Allocated to Participant
CEO   41%   39%
CFO   13%   14%
NEO 3   20%   21%
NEO 4   13%   13%
NEO 5   13%   13%

 

The umbrella structure of the incentive pool limit serves only to provide a ceiling on the maximum annual incentive amount that any NEO may receive, and the actual incentive amount paid to each NEO will be determined pursuant to the applicable incentive award program described above.

 

Annual Incentive Award – Analysis

 

Fiscal 2016

 

The annual incentive award targets for fiscal 2016 continued to align with Sysco’s annual operating plan, to link incentive pay to the Company’s plan and to provide that the goals reflect market conditions, operating expectations and other relevant factors as contemplated in the annual operating plan. The independent compensation consultant informed the Committee that this approach reflects sound design practices. In light of the foregoing, Sysco’s executive management team prepared, and the Committee approved, the adjusted operating income, sales growth and gross profit dollar growth financial performance targets for the fiscal 2016 annual incentive awards. It was both management’s and the Committee’s intent to create an annual incentive award that was generally targeted at or above the median annual incentive ranges among companies in our peer group upon achieving target performance goals.

 

The Committee excludes the extraordinary items described above because they represent items that generally involve current period costs that management and the Committee believe would not result in benefits until later periods, or vice versa. The Committee believes that the threshold and target levels of performance represented challenging, but reasonably obtainable, Sysco performance, while levels in excess of the target level represented superior and extremely challenging performance.

 

The Committee also set the target annual incentive award levels for each of the NEOs to ensure that total cash compensation does not significantly exceed the median unless outstanding performance levels are achieved. The Committee maintained Mr. DeLaney’s target bonus level at 150% because it provided a target total cash compensation opportunity at approximately the median of the peer group. At the Committee’s request, Exequity validated that threshold, target and maximum performance expectations and associated payment levels under the fiscal 2016 program were aligned.

 

Based upon Exequity’s May 2015 report and management reports containing Exequity data, target total cash compensation for fiscal 2016 for each of the NEOs, other than Mr. Grade, participating in the 2016 MIP compared as follows with respect to the corresponding peer group position: Messrs. DeLaney, Libby and Shurts approximated the median of the peer group and Mr. Bené approximated the 75th percentile of the peer group. The Committee further reviewed in May 2015 the relationship between actual realizable pay for the NEOs and the company’s total shareholder return and found that realizable pay positioning versus peers over the three year period of fiscal 2012 to fiscal 2014 was tightly aligned with the Company’s total shareholder return versus its peers.

 

The Committee believes that individual goals are extremely important in evaluating the CEO’s and other NEOs’ respective performance and that they should, therefore, also have an impact on each of their annual incentive opportunities. Under the 2016 MIP, the Committee established individual SBOs in order to further align the NEOs’ objectives with the key components of Sysco’s overall strategy. The Committee believes that consideration of individual SBOs further promotes the overall executive compensation pay philosophy by strengthening the link between executive pay and individual performance. Each individual’s SBOs for fiscal 2016 were pre-established by the Committee based on the critical components of Sysco’s overall strategy as set out by management and the Board. For each SBO, the Committee reviewed and rated each NEO using the following rating/associated payment ranges: significantly below target (0%); below target (50% - 85%); on target (90% - 110%); above target (115% - 125%) and significantly above target (130% - 150%).

 

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Following the Committee’s evaluation in July 2016 of each NEO’s performance in fiscal 2016 with respect to these individual SBOs, the Committee determined the applicable SBO Performance Factor for each NEO as described in the following table.

 

Name   SBOs   Committee’s Review and Determination
DeLaney  

1)

2)

3)

4)

5)

6)

Continued focus on acquisition opportunities.

Continue development of senior leadership team.

Delivery of 3-year plan for increasing operating income.

Achieve planned earnings per share.

Achieve planned cost per piece.

Achieve planned customer service goals.

  Awarded Mr. DeLaney a 2016 MIP annual incentive award equal to 132% of target with respect to the SBO Factor based on the evaluation of Mr. DeLaney’s combined SBO performance. The incentive payout approved was driven by performance significantly above target with respect to the first to the fifth SBOs and on target with respect to the sixth SBO.
Bené  

1)

2)

Achieve planned cost per piece.

Achieve planned customer service goals.

  Awarded Mr. Bené a 2016 MIP annual incentive award equal to 120% of target with respect to the SBO Factor based on the evaluation of Mr. Bené’s performance. The above target payment was driven by performance significantly above target level with respect to the first SBO and on target performance with respect to the second SBO.
Grade  

1)

2)

Achieve planned cost per piece.

Achieve planned earnings per share.

  Awarded Mr. Grade a 2016 MIP annual incentive award equal to 135% of target with respect to the SBO Factor based on the evaluation of Mr. Grade’s performance. The above target payment was driven by performance significantly above target level with respect to both of the SBOs.
Libby  

1)

 

2)

Achieve expense plan goals, including targeted reduction
in legal fees.

Establish newly identified corporate functions.

  Awarded Mr. Libby a 2016 MIP annual incentive award equal to 130% of target with respect to the SBO Factor based on the evaluation of Mr. Libby’s performance. The above target payment was driven by performance significantly above target level with respect to the first SBO and above target performance with respect to the second SBO.
Shurts  

1)

 

2)

Achieve expense plan goals, including planned business
technology operating expenses.

Deliver portfolio of strategic business technology projects.

  Awarded Mr. Shurts a 2016 MIP annual incentive award equal to 113% of target with respect to the SBO Factor based on the evaluation of Mr. Shurts’ performance. The above target payment was driven by performance above target level with respect to the first SBO and on target performance with respect to the second SBO.

 

Fiscal 2017

 

In the first quarter of fiscal 2017, the Committee refined the annual incentive financial performance targets for fiscal 2017 under the 2017 MIP to continue alignment with Sysco’s annual operating plan and to provide that the goals continue to reflect market conditions, operating expectations and other relevant factors. The Committee has determined that the fiscal 2017 annual incentive financial performance measures will be: (1) adjusted operating income, a key earnings measure, as compared to projected, target adjusted operating income and (2) growth in the Company’s gross profit dollars, which represents a key top-line measure, and North American Broadline (“NABL”) total cases, which represents a key volume performance measure that is not subject to external market variations like currency exchange rates and inflation/deflation, in each case as compared to projected, target year over year growth for each measure. For fiscal 2017, adjusted operating income provides 50% of the target annual incentive opportunity, growth in gross profit dollars and NABL total cases provides 25% of the target annual incentive opportunity, and the SBO performance goals provide 25% of the target annual incentive opportunity. The Committee continues to believe that the threshold and target levels of performance represent challenging, but reasonably obtainable, Sysco performance levels, while levels in excess of the target level represent superior and extremely challenging performance. Exequity has informed the Committee that this approach continues to be in line with the majority of Sysco’s peer group and reflects sound design practices.

 

SYSCO CORPORATION - 2016 Proxy Statement    52

 

Long-term Incentives – Detailed Information

 

Fiscal 2016

 

The Committee granted long-term incentives in November 2015 for fiscal 2016 (the “Fiscal 2016 LTI Grant”). These long-term incentives were designed to provide our NEOs competitive longer-term incentive opportunities that are consistent with our peer group and reflect our overall compensation philosophy of aligning pay with performance. The Fiscal 2016 LTI Grant consisted of stock options, RSUs and CPUs. The targeted aggregate dollar value of the Fiscal 2016 LTI Grant was set by the Committee at 6.5x base salary for Mr. DeLaney, 3.5x base salary for Mr. Grade, 3.25x base salary for Messrs. Bené and Shurts and 3x base salary for Mr. Libby, and the total value of these long-term incentives for each NEO was allocated among the awards by the Committee as follows: approximately 40% of the value in stock options, approximately 35% in CPUs, and approximately 25% in RSUs. The options were valued at $5.77 per option using the Black-Scholes pricing model (as of October 15, 2015), each RSU was valued at $40.59 per share (i.e., the ten trading day average closing price of Sysco common stock prior to the grant date) and each CPU was valued at the target level of $1 per unit. The values referenced by the Committee for the stock options and RSUs awarded in connection with the Fiscal 2016 LTI Grant differ slightly from the values for such awards reported below in the Summary Compensation Table and the Grants of Plan-Based Awards table due to the requirement that those tables reflect the fair value of such awards on the date of grant (as opposed to the methods described above for estimating the value of RSUs and options in connection with modeling and allocating the Fiscal 2016 LTI Grant). For further details regarding these grants and their respective grant date fair values, see “Executive Compensation — Summary Compensation Table,” “Executive Compensation — Cash Performance Units,” “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End,” and “Executive Compensation — Grants of Plan-Based Awards.”

 

Stock Options and Restricted Stock Units

 

The Committee approved the fiscal 2016 stock option and RSU grants to Messrs. DeLaney, Grade, Bené, Libby and Shurts in November 2015 under our stockholder approved 2013 Long-Term Incentive Plan. All fiscal 2016 grants are shown under “Executive Compensation— Grants of Plan-Based Awards.” The 2013 Long-Term Incentive Plan requires options to be priced at the closing price of our common stock on the business day prior to the grant date, and the fiscal 2016 option grant agreement provides for ratable vesting over a five-year period. For stock options granted since November 2014, the maximum term of the option is ten years. The fiscal 2016 RSU grant agreements provide for vesting in three equal tranches over a three-year period following the date of grant. The Committee grants all stock options and RSUs pursuant to approved equity grant guidelines. These guidelines are more fully described under “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End.”

 

Cash Performance Units

 

As part of the fiscal 2016 long-term incentive program, participants, including each of the NEOs, have the opportunity to receive cash incentive payments based on Sysco’s performance over a specified three-year period in the form of Cash Performance Units. CPU grants are forward-looking, and the grant of CPUs typically does not take into account prior Sysco or individual performance. CPU payments are based on Sysco’s actual performance over the three-year performance cycle beginning with the fiscal year in which the CPU is granted. In November 2015, the Committee granted three-year CPUs under the 2013 Long-Term Incentive Plan. The CPUs with a performance period commencing in fiscal 2014, which paid out in August 2016, and the CPUs with a performance period commencing in fiscal 2015, which become payable in August 2017, were issued under the 2008 Cash Performance Unit Plan.

 

The CPU grants that the Committee made in fiscal 2014 and fiscal 2015 provided payment possibilities ranging from 0% to 150% of the total value of the units granted. The fiscal 2014 and fiscal 2015 grants each had a value of $1 per CPU. Each of the NEOs received a grant of CPUs in fiscal 2014 and fiscal 2015. For the fiscal 2014 and fiscal 2015 CPU grants, the performance metrics/goals associated with the CPUs were based solely on Sysco’s three-year total shareholder return, as compared to that of the S&P 500 companies. Based upon Sysco’s relative total shareholder return, CPUs under each award would pay out from 0% to 150% of the target award value. The threshold payment (which was 50% of target) required Sysco’s three-year total shareholder return to equal or exceed that of the 30th percentile of the S&P 500 companies, while the maximum payment required performance at the 75th percentile, with graduated payments in between. The target payment required performance between the 45th and 55th percentile. These grants were subject to Sysco’s clawback policies. See “Executive Compensation— Cash Performance Units” for an explanation of the calculation of total shareholder return.

 

For the fiscal 2014 CPU grant, our relative total shareholder return for the period ending July 1, 2016 was in the 66th percentile, representing performance that was above the target level of performance. Consequently, the fiscal 2014 CPU grant resulted in a payout at 140% of the target amount for participants, including each of the NEOs other than Mr. Kreidler.

 

The specific performance measures and related potential payments for the fiscal 2014 CPU award and the fiscal 2016 CPU award are shown under “Executive Compensation—Cash Performance Units.”

 

Fiscal 2017

 

The Committee granted long-term incentives in August 2016 for fiscal 2017 (the “Fiscal 2017 LTI Grant”). These long-term incentives were designed to provide our NEOs competitive longer-term incentive opportunities that are consistent with our peer group and reflect our overall compensation philosophy of aligning pay with performance. The Fiscal 2017 LTI Grant consisted of stock options and Performance Share Units (“PSUs”). The targeted aggregate dollar value of the Fiscal 2017 LTI Grant was set by the Committee at 6.5x base salary for Mr. DeLaney, 3.75x for Mr. Bené, 3.5x base salary for Mr. Grade, 3.25x base salary for Mr. Shurts and 3x base salary for Mr. Libby. The total target value of these long-term incentives for each NEO was allocated among the awards by the Committee as follows: approximately 40% of the target value in stock options and approximately 60% of the target value in PSUs. The options were valued at $6.00 per option using the Black-Scholes pricing model (as of July 15, 2016) and each PSU was valued at $52.35 per share (i.e., the ten trading day average closing price of Sysco common stock prior to the grant date).

 

SYSCO CORPORATION - 2016 Proxy Statement    53

 

Stock Options and Performance Share Units

 

The Committee approved the fiscal 2017 stock option and PSU grants to Messrs. DeLaney, Bené, Grade, Libby and Shurts in August 2016 under our stockholder approved 2013 Long-Term Incentive Plan. The 2013 Long-Term Incentive Plan requires options to be priced at the closing price of our common stock on the business day prior to the grant date, and the fiscal 2017 option grant agreement provides for ratable vesting over a three-year period. The maximum term of the option under the fiscal 2017 grants is ten years. The fiscal 2017 PSU award agreements provide for cliff vesting at the conclusion of the three-year performance period if threshold performance levels are achieved. The Committee grants all stock options and PSUs pursuant to approved equity grant guidelines. These guidelines are more fully described under “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End.”

 

The fiscal 2017 awards of PSUs provide the opportunity for participants to receive shares of common stock based on pre-established financial performance targets over a performance period of three fiscal years. The performance criteria for the fiscal 2017 PSUs are based on (i) the Company’s earnings per share compound annual growth rate (“EPS CAGR”) as compared to projected, target EPS CAGR for the performance period, representing 66.7% of the total incentive opportunity under the PSUs, and (ii) the Company’s three-year average adjusted return on invested capital (“ROIC”), as compared to projected, target ROIC for the performance period, representing 33.3% of the total incentive opportunity under the PSUs. Each of these performance measures is assessed independently of the other, such that one portion of the award could be earned even if the threshold level of performance is not achieved for the other measure.

 

Each PSU granted to participants represents the right to receive one share of common stock, but the ultimate number of shares of common stock to be earned with respect to a participant’s PSUs will be determined at the end of the three-year performance period and could range from 0% to 200% of the target number of PSUs offered to the participant, based on the Company’s EPS CAGR and ROIC performance relative to the pre-established targets. Dividend equivalents accrue during the performance period and are paid either in shares or in cash, in the discretion of the Committee, based on the number of PSUs earned following certification of the Company’s performance.

 

Long-term Incentives – Analysis

 

The Committee determined the mix of CPUs, stock options and RSUs for the Fiscal 2016 LTI Grant in order to continue to provide long-term incentives that are in line with those disclosed by the peer group and to provide further alignment of the executives’ interests with those of the stockholders using incentive vehicles with varying vesting and payment periods. Total long-term incentive opportunities are generally targeted between the 60th and the 75th percentile of the targeted grant value of long-term incentives awarded by companies in our peer group.

 

The Committee determined that the mix of stock options and PSUs for the Fiscal 2017 LTI Grant was an appropriate evolution of the Company’s incentive programs in light of shifting competitive market practices. PSUs, which are contingent on the successful completion of both performance-based and time-based requirements before any payout occurs, further strengthen the link between individual pay opportunities and Company performance and further enhance the Company’s efforts to retain key executives. The performance targets selected by the Committee for the PSUs also incentivize participants to align their efforts with the company’s 3-year strategic plan. In addition, the Committee maintained market competitiveness for key leaders by reducing pro-rata vesting of stock options from a 5-year period to a 3-year period.

 

The Committee believes that the long-term equity mix, including stock options, RSUs and PSUs, helps to ensure that long-term strategic initiatives are not compromised by having executives focus solely on short-term profitability through the annual incentive award. Such awards also help focus executives on strategies that increase long-term stockholder value. Existing executive equity ownership levels are not generally a factor in the Committee’s granting of stock options, RSUs and PSUs.

 

Fiscal 2016 Incentive and Retention Payments – Detailed Information

 

On July 10, 2015, based on (i) the strong desire of the Committee to incentivize and retain certain senior officers as they transitioned their focus from integration planning for the terminated merger with US Foods to pursuing other operational and strategic initiatives, (ii) an effort to recognize that these individuals played critical roles in the development of the future business strategy of the Company in conjunction with their integration planning work, and (iii) recognition of the work product generated by the integration planning teams under the direction of senior officers, which would be of considerable value to the Company in the future, the Committee approved a one-time incentive and retention cash payment to such officers. Payments made to the NEOs were: Mr. Kreidler ($429,000); Mr. Bené ($281,250), Mr. Libby ($315,000) and Mr. Shurts ($264,150). These incentive and retention payments were subject to a twelve-month recoupment provision should the recipient have voluntarily terminated employment with the Company. The Committee waived application of the recoupment provision to Mr. Kreidler, in light of his previously scheduled departure from the Company.

 

Retirement/Career Benefits – Detailed Information

 

Retirement Plans – Current Programs – Management Savings Plan

 

As our business strategy and organization evolve, it is critical that our compensation programs support strategic and operational priorities. Additionally, our pay programs are continually evaluated to ensure they reflect best practices, engage and incentivize executives, and support the Company’s ultimate goal of delivering stockholder value. Sysco monitors evolving best practices in executive rewards program design, and we modify our programs, as necessary.

 

SYSCO CORPORATION - 2016 Proxy Statement    54

 

On January 1, 2013, Sysco introduced a non-qualified, defined contribution savings plan, the Management Savings Plan (the “MSP”). The MSP allows individual deferrals and employer contributions in excess of IRS 401(k) contribution and compensation limits. The MSP allows eligible participants to defer up to 50% of their base salary (for calendar years 2013 and thereafter) and up to 100% of their eligible bonus (for fiscal years 2014 and thereafter). In addition, in conjunction with the freeze of accruals in the Supplemental Executive Retirement Plan (the “SERP”), certain participants (who would otherwise have incurred a sizable loss of future benefits under the SERP) are eligible for transition contributions. The participants in the MSP direct the investment for both their individual contributions and the company contributions. The MSP is described in further detailed below under “Executive Compensation — Fiscal 2016 Nonqualified Deferred Compensation – About the MSP.”

 

MSP Analysis

 

Currently, individual contributions to the 401(k) plan are limited by law to $18,000 per year, plus an additional $6,000 in “catch-up” contributions if the participant is at least 50 years of age. The Committee believes that the MSP incentivizes and assists in the retention of key employees by providing them with a supplemental retirement savings vehicle. The MSP is an important, and cost effective, recruitment and retention tool for Sysco, as the companies with which we compete for executive talent typically provide a similar plan to their senior employees.

 

Retirement Plans – Transition from Legacy Programs

 

Since 2013, Sysco has moved from a defined benefit towards a defined contribution strategy for future retirement benefit accruals. A defined contribution-based program further aligns Sysco with our peer group, increases flexibility, simplifies the benefit structure, retains key talent and both reduces and stabilizes costs. Since that time, wealth accumulation opportunities for NEOs at Sysco have been further focused on variable annual and long-term incentive plans.

 

The retirement program changes, however, were expected to result in significant reductions in anticipated benefits for existing participants in the pension plan, the SERP and the EDCP. In order to help ensure retention of key leaders during the transition from the defined benefit towards a defined contribution strategy, Sysco amended the 401(k) and MSP to partially mitigate the reductions in pension plan benefits by providing that, for a period of ten plan years commencing January 1, 2013, or until an eligible participant ceases employment with Sysco, whichever is earlier, Sysco will credit an automatic employer contribution of three percent (3%) of the participant’s gross base salary and bonus into the participant’s 401(k) account to the extent permitted under applicable IRS limitations, with the remainder credited to the MSP account of eligible participants (the “Pension Transition Contribution”). Mr. DeLaney is the only NEO eligible to receive the Pension Transition Contribution.

 

With respect to reductions in the expected value of benefits under the SERP and the EDCP, the cessation of future benefit accruals affected each individual in a different manner. While some existing SERP participants experienced no projected adverse impact, others were forecast to experience reductions of up to 49%. To address concerns over retention, the Committee developed a transition program intended to help ensure that no impacted participant experiences an aggregate reduction of more than 15% - 20% (depending on an individual’s prior years of service) in his or her expected retirement benefits under the Company’s non-qualified plans as a result of the retirement strategy changes. While Messrs. Bené and Shurts were not eligible for the SERP or the EDCP, Mr. DeLaney (31%), Mr. Kreidler (44%) and Mr. Libby (49%) each had a projected reduction in their respective non-qualified benefits in excess of the targeted range.

 

To mitigate the loss in projected non-qualified retirement benefits, impacted individuals were eligible for transitional compensation opportunities, including supplemental contributions to the MSP. Of the NEOs, Mr. Libby was eligible for a supplemental MSP contribution of 10%, which was made on his behalf in the third quarter of fiscal 2016.

 

Legacy Program - Supplemental Executive Retirement Plan

 

We historically had provided annual retirement benefits to all corporate employees and most of our non-union operating company employees under the tax-qualified Sysco Corporation Retirement Plan, a defined benefit program that we refer to as the “pension plan.” Beginning January 1, 2013, most employees no longer accrue additional retirement benefits under the pension plan. However, when the pension plan was the primary retirement vehicle, the Company also maintained a Supplemental Executive Retirement Plan, or SERP, in order to retain and drive continued performance from certain employees. The Committee utilized the SERP to increase the retirement benefits available to officers whose benefits under the pension plan were limited by law. Of the NEOs, Messrs. Delaney, Kreidler and Libby participate in the SERP.

 

The SERP was frozen and future accruals under the SERP ceased, effective June 29, 2013. Those SERP participants who retire and are not eligible for immediate commencement of their SERP benefit are deemed 100% vested, with benefits payable upon reaching age 65. The earliest an executive can retire and receive any benefits under the SERP is age 55 with a minimum of 15 years of MIP service or age 60 with 10 years of Sysco service. Payments before the age of 65 are adjusted by an early retirement reduction factor. The SERP was designed to provide fully-vested participants with post-retirement monthly payments, with annual benefits equaling up to 50% of a participant’s final average annual compensation, when combined with other retirement benefits, including other pension benefits, the company match under the 401(k) plan and social security payments. The participating NEOs will receive a SERP benefit based on the greater of the accrued benefit determined as of the relevant separation date from service under the current provisions of the SERP, or the accrued benefit determined as of June 28, 2008 under the prior provisions of the SERP, but with vesting, benefit limits and eligibility for immediate benefit payments determined as of the relevant separation from service date. Annual retirement benefits from the SERP are limited to approximately $2,393,832 per year, reduced for early commencement of benefit payments, as applicable. The terms of the SERP are more specifically described under “Executive Compensation — Pension Benefits — Supplemental Executive Retirement Plan.” The amounts accrued by each participating NEO under the pension plan and the SERP as of July 2, 2016 are set forth under “Executive Compensation — Pension Benefits.”

 

SYSCO CORPORATION - 2016 Proxy Statement    55

 

SERP Analysis

 

The Committee previously amended the SERP to freeze benefits, stop future accruals and to provide for immediate vesting of accrued benefits in order to achieve the following goals:

 

Bring the value of retirement benefits more in line with the practices of the peer group; and
  
Increase the proportion of long-term and performance-based compensation in the compensation mix, relative to fixed and retirement compensation such as the SERP and MSP.

 

Legacy Program - Executive Deferred Compensation Plan

 

Prior to December 31, 2012, Sysco offered an Executive Deferred Compensation Plan, or EDCP, to provide MIP participants, including Messrs. DeLaney and Libby, the opportunity to save for retirement and accumulate wealth in a tax-efficient manner beyond savings opportunities under Sysco’s 401(k) retirement savings plan. Participants were able to defer up to 100% of their base salary and up to 40% of their MIP bonus, or any bonus paid in lieu of or as a replacement for the MIP bonus, to the EDCP. Sysco did not match any base salary deferrals into the EDCP in fiscal 2016, as deferrals are no longer permitted. For participants who chose to defer a portion of their qualifying bonus, Sysco matched 15% of the first 20% deferred, making the maximum possible match to the EDCP 3% of the MIP bonus. An executive is always 100% vested in his or her past deferrals and Sysco matches, but any portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his or her deferrals, is subject to forfeiture for specified cause or competing against Sysco in certain instances. Participants who have deferred compensation under the EDCP may choose from a variety of investment options. The EDCP is described in further detail under “Executive Compensation — Fiscal 2016 Nonqualified Deferred Compensation – About the EDCP.”

 

EDCP Analysis

 

For many years, the EDCP served as a recruitment and retention tool for Sysco. In connection with the broader transition in retirement philosophy, beginning in fiscal 2013, a new deferred compensation plan, the MSP, has been utilized to fulfill this objective.

 

Executive Perquisites & Other Benefits – Detailed Information

 

We provide benefits for executives that we believe are reasonable, particularly since the cost of these benefits constitutes a very small percentage of each NEO’s total compensation. Certain of these benefits are described below.

 

Sysco’s NEOs are generally eligible to participate in Sysco’s regular employee benefit programs, which include a 401(k) plan, an employee stock purchase plan, group life insurance and other group welfare benefit plans, and until the changes were made to retirement benefits in fiscal 2013, the defined benefit pension plan. We also provide MIP participants, including the NEOs, with additional life insurance and accidental death and dismemberment insurance benefits, long-term disability coverage, including disability income coverage, and long-term care insurance, as well as reimbursement for an annual comprehensive wellness examination by a physician of their choice. We believe many of these benefits are required to remain competitive with our competitors for executive talent. Although the executive officers are eligible to participate in Sysco’s group medical and dental coverage, we adjust employees’ contributions towards the monthly cost of the medical plan according to salary level; therefore, executives’ pay a higher employee contribution to participate in these welfare plans than do non-executives.

 

MIP participants, including the NEOs, are encouraged to occasionally have their spouses accompany them at business dinners and other business functions in connection with some meetings of the Board of Directors, certain business meetings and other corporate-sponsored events, and Sysco pays, either directly or by reimbursement, all expenses associated with their spouses’ travel to and attendance at these business-related functions. Furthermore, Sysco owns fractional interests in private aircraft that are made available to members of the Board of Directors, executives and other members of management for business use, but these aircraft are not allowed to be used for personal matters. Spouses may occasionally accompany executive officers on such flights in connection with travel to and from business-related functions if there is space available on the aircraft.

 

All employees, including our NEOs, as well as members of our Board, are also entitled to receive discounts on all products carried by Sysco and its subsidiaries. Although Sysco does provide the NEOs with certain additional perquisites, we do not provide any of the NEOs with automobiles, security monitoring or split-dollar life insurance.

 

SYSCO CORPORATION - 2016 Proxy Statement    56

 

Executive Compensation Governance and Other Information

 

Severance and Employment Agreements

 

None of Sysco’s current executive officers is party to any severance or employment agreements providing for guaranteed severance or other compensation upon termination. 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 Committee or Board of Directors may agree to provide separation payments to departing executives upon their termination to obtain an extended non-compete, non-solicitation and non-disclosure agreement and a release of claims.

 

Relocation Expenses

 

To address the Committee’s desire for Sysco to comply with best corporate governance and compensation practices, in October 2010, the Committee adopted an executive relocation expense reimbursement policy that applies to all of the NEOs. The reimbursement policy provides that Sysco will not reimburse any of such executives for any loss on the sale of the executive’s house sold in connection with the executive’s relocation. The reimbursement policy also provides that only certain pre-approved relocation expenses will be eligible for increased payments to cover all applicable taxes on the reimbursed amounts, such as state and federal income taxes, FICA, and Medicare taxes. In addition, the reimbursement policy provides that relocation agreements with any named executive officer include a recoupment provision that requires the executive to reimburse Sysco for all or a part of the reimbursement if his employment is terminated for any reason other than death, disability or change of control of Sysco, or termination without cause or for good reason, within a specified amount of time after receiving the reimbursement.

 

Benefits Following Change in Control

 

We currently have no separate severance or similar agreements that would cause an immediate or “single trigger” cash payment obligation solely as a result of a change in control of Sysco. We have included change of control provisions in several of Sysco’s benefit plans and agreements, including an immediate payment of CPUs at the target payment level for grants, a prorated pay out of an MIP annual incentive payment through the date of change of control, and 100% vesting of options, PSUs (assuming target achievement) and RSUs upon a change in control. See “Executive Compensation —Quantification of Termination/Change in Control Payments” for a detailed explanation of potential benefits under the various provisions.

 

For equity-based awards issued from and after November 2013, the Board has established “double-trigger” accelerated vesting under certain change of control scenarios. Under this “double trigger,” the vesting of these equity-based awards is only accelerated upon a change in control if, during the period commencing 12 months prior to the change in control and ending 24 months after such change in control, the participant’s employment is terminated without “cause” (as defined in the applicable award agreement) or the participant terminates his or her employment for “good reason” (as defined in the applicable award agreement).

 

The Committee continues to believe that these provisions will preserve executive morale and productivity and encourage retention in the face of the disruptive impact of an actual or rumored change in control of Sysco. The Committee has balanced the impact of these acceleration provisions with corresponding provisions in the MSP, the SERP and/or the EDCP that provide for a reduction in benefits to the extent they are not deductible under Section 280G of the Internal Revenue Code.

 

Executive Compensation Clawback and Protective Covenants

 

In the event of a restatement of our financial results, other than a restatement due to a change in accounting policy, it is the Committee’s policy that it will review all incentive payments made to MIP participants, including the NEOs, within the 36-month period prior to the restatement on the basis of having met or exceeded specific performance targets in grants or awards made on or after May 14, 2009. If such incentive payments would have been lower had they been calculated based on the restated results, the Committee will, to the extent permitted by applicable law, seek to recoup any such excess payments for the benefit of Sysco. The MIP annual incentive awards and CPU grants made by the Committee since fiscal 2011 contain a contractual provision binding the grantee to this recovery right, and the Committee anticipates that future grants will contain similar provisions. The Committee has the sole discretion, subject to applicable law, to determine the form and timing of the clawback, which may include repayment from the MIP participant or an adjustment to the payment of a future incentive. In addition, the executives’ benefits under the SERP, EDCP and MSP may be subject to forfeiture or adjustment as a result of any such restatement of financial results. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.

 

In addition, pursuant to the award agreements governing certain equity-based awards, in order to be eligible to receive an equity-based award, each participant is required to have entered into an agreement (the “Protective Covenants Agreement”) protecting the Company’s interests and confidential information by restricting certain recipient behavior during, and following termination of, employment. The Protective Covenants Agreement includes, among other things, restrictions on unfair post-employment competitive activities, improper solicitation of Company employees and customers, and the misuse of confidential information. In the event that a participant violates any of the restrictive covenants in the Protective Covenants Agreement, the participant forfeits the benefits and proceeds of the related equity awards. The forfeiture of benefits and proceeds has been required with regard to all awards of PSUs and RSUs since November 2013 and awards of stock options since August 2016.

 

SYSCO CORPORATION - 2016 Proxy Statement    57

 

Tax Impact on Compensation

 

Income Deduction Limitations

 

Section 162(m) of the Internal Revenue Code generally sets a limit of $1 million on the amount of non-performance-based compensation that Sysco may deduct for federal income tax purposes in any given year with respect to the compensation of each of the NEOs other than the chief financial officer. The Committee has adopted a general policy of structuring the performance-based compensation arrangements, including the MIP bonus and CPUs, in order to preserve deductibility to the extent feasible after taking into account all relevant considerations. However, the Committee also believes that Sysco needs flexibility to meet its pay objectives, even if Sysco may not deduct all of the compensation paid to the NEOs. The Committee structured its 2016 and 2017 incentive program for the NEOs, and intends to structure future annual incentive programs for the NEOs, under an umbrella plan program in order to obtain deductibility of the annual bonus under Section 162(m), generally, but maintains flexibility to pay compensation or make certain awards that may not be deductible under 162(m) if the Committee determines in its discretion that it is in the best interest of the Company.

 

Based on the factors discussed under “What We Paid and Why,” in fiscal 2016 Sysco paid, and in fiscal 2017 the Committee expects Sysco to pay, certain NEOs a base salary that, when aggregated with anticipated vesting of RSUs, exceeds $1 million in value. The Committee believes that this compensation is necessary in order to maintain the competitiveness of each of the total compensation package in light of peer compensation practices, and as a result, has determined that it is appropriate, even though certain amounts of fiscal 2016 compensation will not be deductible, and the excess of anticipated salary plus the value of RSUs vesting in fiscal 2017 over $1 million, respectively, will not be deductible for federal income tax purposes.

 

Section 409A of the Internal Revenue Code

 

Section 409A of the Internal Revenue Code deals specifically with non-qualified deferred compensation plans. Although the Company makes no guarantees with respect to exemption from, or compliance with, Section 409A of the Internal Revenue Code, we have designed all of our executive benefit plans with the intention that they are exempt from, or otherwise comply with, the requirements of Section 409A of the Internal Revenue Code.

 

REPORT OF THE COMPENSATION COMMITTEE

 

The Compensation Committee of the Board of Directors of Sysco Corporation has reviewed and discussed the foregoing Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K and this Proxy Statement.

 

COMPENSATION COMMITTEE

John M. Cassaday, Chairman
Judith B. Craven
Joshua D. Frank
Larry C. Glasscock
Jackie M. Ward

 

SYSCO CORPORATION - 2016 Proxy Statement    58

 

EXECUTIVE COMPENSATION

 

The following discussion, as well as the Compensation Discussion and Analysis contained herein, contains references to target performance levels for our incentive compensation. These targets and goals are discussed in the limited context of Sysco’s compensation programs and should not be interpreted as management’s expectations or estimates of results or other guidance. We specifically caution stockholders not to apply these statements to other contexts.

 

Summary Compensation Table

 

The following table sets forth information with respect to each of the NEOs – our Chief Executive Officer, our current Chief Financial Officer, our former Chief Financial Officer and the three most highly compensated of the other executive officers of Sysco and its subsidiaries employed at the end of fiscal 2016. In determining the most highly compensated executive officers, we excluded the amounts shown under “Change in Pension Value and Nonqualified Deferred Compensation Earnings.”

 

Name and
Principal Position
  Fiscal
Year
  Salary
($)(1)
  Bonus
($)(2)
  Stock
Awards
($)(3)
  Option
Awards
($)(4)
  Non-Equity
Incentive Plan
Compensation
($)(5)
  Change in
Pension Value and
Nonqualified Deferred
Compensation
Earnings
($)(6)
  All Other
Compen-
sation
($)(7)
  Total
($)
 
William J. DeLaney  2016  $1,245,833  $  $2,031,327  $3,379,548  $6,021,090  $1,097,895  $304,113  $14,079,806 
Chief Executive Officer  2015   1,220,583      2,017,963   3,322,980   2,356,410   251,301   158,696   9,327,933 
   2014   1,194,583      1,819,225   2,858,081   657,919   1,132,628   152,958   7,815,394 
Thomas L. Bené  2016   770,833   281,250   737,725   1,263,858   2,256,626   3,331   98,794   5,412,417 
President and Chief  2015   681,250      530,226   873,127   1,050,851   1,883   93,341   3,230,678 
Operating Officer  2014   616,667   375,000   513,890   807,323   228,730   353   77,433   2,619,396 
Joel T. Grade(8)  2016   605,833   60,000   546,869   909,876   1,335,625   23,364   633,628   4,115,195 
Executive Vice President and                                    
Chief Financial Officer                                    
Russell T. Libby(9)  2016   590,125   315,000   450,021   748,698   1,192,867   70,680   194,411   3,561,802 
Executive Vice President,  2015   538,125      411,145   677,011   693,458   3,337   110,322   2,433,398 
Administration and                                    
Corporate Secretary                                    
Wayne R. Shurts  2016   621,602   264,150   507,821   844,884   1,736,673   7,165   76,057   4,058,352 
Executive Vice President  2015   601,675      497,986   820,043   772,933   901   44,829   2,738,367 
and Chief Technology  2014   585,000   267,400   482,636   758,240   221,510   30,740   54,973   2,400,499 
Officer                                    
Robert C. Kreidler(10)  2016   368,225   429,000            9,672   252,423   1,059,320 
Former Executive Vice  2015   732,875      653,235   1,075,693   944,423   7,469   152,630   3,566,325 
President and Chief  2014   712,500   429,000   633,097   994,626   261,667   78,752   141,670   3,251,312 
Financial Officer                                    
(1) The salary amounts reflect the actual base salary payments earned by the NEOs in applicable fiscal year.
(2) Mr. Bené was paid a new hire bonus of $250,000, less applicable withholding for taxes, in September 2013, subject to clawback provisions requiring Mr. Bené to repay the full amount of the bonus in the event of a voluntary resignation or an involuntary termination for cause (as defined in the offer letter) within one year after the 6-month anniversary of his start date. Mr. Shurts was paid a new hire bonus in two installments, $150,000 on his start date in October 2012 and an additional $150,000 in October 2013, to partially replace the value of certain compensation and other benefits forfeited upon his acceptance of employment with Sysco. In March 2014, the following named executive officers received transaction incentive awards relating to the proposed merger with USF Holding Corp.: Mr. Kreidler ($429,000), Mr. Bené ($125,000), and Mr. Shurts ($117,400). See “Compensation Discussion and Analysis— What We Paid and Why—Compensation for NEOs—Fiscal 2014 Transaction Incentive Bonus Pool – Detailed Information” above for further discussion. In March 2014, the following NEOs received transaction incentive awards relating to the proposed merger with USF Holding Corp.: Mr. Kreidler ($429,000), Mr. Bené ($125,000), and Mr. Shurts ($117,400). In July 2015, the following NEOs received one-time, incentive and retention awards to, among other things, incentivize and retain these officers as they transitioned their focus from merger integration planning to pursuing other operational and strategic initiatives: Mr. Grade ($60,000), Mr. Bené ($281,250), Mr. Libby ($315,000), Mr. Shurts ($264,150) and Mr. Kreidler ($429,000). See “Compensation Discussion and Analysis— What We Paid and Why—Compensation for NEOs— Fiscal 2016 Incentive and Retention Payments – Detailed Information” above for further discussion.
(3) These amounts relate to grants of restricted stock units (“RSUs”) made in fiscal 2016, 2015 and 2014, as applicable. With respect to fiscal 2016, we valued the RSUs granted on November 17, 2015 at $40.59 per share, being the closing price of our common stock on the last business day before the grant date. With respect to fiscal 2015, we valued the RSUs granted on November 18, 2014 at $38.89 per share, being the closing price of our common stock on the last business day before the grant date.With respect to fiscal 2014, we valued the RSUs granted on November 15, 2013 at $33.57 per share, being the closing price of our common stock on the last business day before the grant date.The 2016 amount for Mr. Bené also includes the value of RSUs he received on February 18, 2016, in connection with his promotion to President and Chief Operating Officer. These additional RSUs for Mr. Bené were valued at $44.38 per share, being the closing price of our common stock on the last business day before the grant date.
(4) The amounts in these columns reflect the grant date fair value of the awards. See Note 19 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the year ended July 2, 2016, Note 18 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the year ended June 27, 2015, and Note 18 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the year ended June 28, 2014, regarding assumptions underlying our valuation of these equity awards. The 2016 amount for Mr. Bené also includes the value of options he received on February 18, 2016, in connection with his promotion to President and Chief Operating Officer. See footnote (7) to “Grants of Plan-Based Awards” below regarding assumptions underlying our valuation of these options.
(5) These amounts include the annual incentive award paid in August 2016 with respect to fiscal 2016, paid in August 2015 with respect to fiscal 2015, and paid in August 2014 with respect to fiscal 2014. The amounts shown also include the following payments made in August 2016 for the three-year performance period ending in fiscal 2016 with respect to the cash performance unit grants previously made under our 2008 Cash Performance Unit Plan, as discussed below under “Cash Performance Units” – Mr. DeLaney ($3,523,590), Mr. Bené ($995,313), Mr. Grade ($498,750), Mr. Libby ($396,667) and Mr. Shurts ($934,798).

 

SYSCO CORPORATION - 2016 Proxy Statement    59

 
(6)

The amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column reflect above-market interest on amounts in the EDCP and MSP, and the actuarial increase in the present value of the NEOs’ benefits under all pension plans established and maintained by Sysco, determined using interest rate and mortality rate assumptions consistent with those used in Sysco’s financial statements. The pension plan amounts, some of which may not be currently vested, include:

  increase in pension plan value; and
  increase in Supplemental Executive Retirement Plan, or SERP, value.
  To the extent that the aggregate change in the actuarial present value of the named executive officer’s accumulated benefit under the pension plan and the SERP was a decrease, this decrease is not included in the amounts shown in the column.
  The following table shows, for each named executive officer, the change in the actuarial present value for each of the pension plan and the SERP and the above-market interest on amounts in the EDCP and MSP for fiscal 2016:
   
  Name    Change in
Pension Plan
Value
   Change in SERP
Value
   Above-Market
Interest on Deferred
Compensation
    Total 
  DeLaney    $113,770   $948,762   $35,363   $1,097,895 
  Bené     N/A    N/A    3,331    3,331 
  Grade     23,364    N/A        23,364 
  Libby     31,822    38,858        70,680 
  Shurts     6,697    N/A    468    7,165 
  Kreidler     22,387    (16,690)   3,975    9,672 
(7) Fiscal 2016 amounts include the following:
  a. the full amount paid for life insurance coverage for each individual (the excess coverage over the amounts paid for other employees is not determinable since the deductibles and coverages may be different);
  b. the following amounts of 401(k) Plan and Management Savings Plan Company contributions with respect to the 2016 fiscal year:
     
Name  401(k) Employer
Contribution
   MSP Employer
Contribution
 
DeLaney  $22,525   $281,588 
Bené   15,631    83,163 
Grade   8,986     
Libby   15,487    178,924 
Shurts   14,820    61,237 
Kreidler   7,560    244,863 
c. Mr. Grade received $17,785 during fiscal 2016 to reimburse him for the taxes associated with certain benefits he received in connection with his relocation to Houston, Texas.
d. the following perquisites and personal benefits for Mr. Grade (the aggregate value of all perquisites and personal benefits received by each of the other NEOs in fiscal 2016 was less than $10,000 and was excluded from the table above):
    the amounts paid for accidental death and dismemberment insurance coverage;
    the amounts paid for long-term care insurance;
    the amounts reimbursed to the individual for annual medical exams;
    the amounts paid for long-term disability coverage under the Company’s welfare benefit plan;
    $494,154 in foreign tax payments made by the Company during fiscal 2016 on Mr. Grade’s behalf to the Canadian tax authority pursuant to our tax equalization policy, which is designed to neutralize the tax impact of our employees of their working, and being subject to income taxes, in more than one country; these tax payments are partially offset by subsequent tax credits and/or refunds;
    $49,518 in fees paid by Sysco related to the preparation of foreign tax returns required to be filed by Mr. Grade for attendance at meetings or other travel related to Sysco business in foreign jurisdictions; and
    $56,578 in expenses in connection with Mr. Grade’s relocation to Houston, Texas, excluding the tax reimbursement amount referenced above.
  Except for Mr. Grade, no named executive officer received any single perquisite or personal benefit with respect to fiscal 2016 with a value greater than $25,000, and no named executive officer received any other item of compensation with respect to fiscal 2016 required to be disclosed in this column with a value of $10,000 or more.
(8) Mr. Grade was not an NEO for fiscal 2014 or fiscal 2015; as a result, only his fiscal 2016 compensation information is included. In addition, as Mr. Grade was ineligible to participate in the MSP during calendar 2015 due to his status as a Canadian resident at such time, he did not receive an MSP Employer Contribution during fiscal 2016.
(9) Mr. Libby was not an NEO for fiscal 2014; as a result, only his fiscal 2015 and fiscal 2016 compensation information is included.
(10) Mr. Kreidler, our former Executive Vice President and Chief Financial Officer, left the Company effective December 31, 2015. Pursuant to a letter agreement dated April 1, 2015, between Mr. Kreidler and the Company, Mr. Kreidler was not eligible to receive a base salary merit increase in calendar year 2015, a fiscal year 2016 annual incentive award or any new long-term incentive plan awards during fiscal year 2016.

 

SYSCO CORPORATION - 2016 Proxy Statement    60

 

Grants of Plan-Based Awards

 

The following table provides information on CPU grants, annual incentive award opportunities under our 2013 Long-Term Incentive Plan, stock options and restricted stock units granted during fiscal 2016 to each of the NEOs. Mr. Kreidler was not eligible to receive any plan-based awards during fiscal year 2016.

 

                    All Other  All Other Option  Exercise  Closing  Grant Date 
                    Stock Awards:  Awards: Number  or Base  Market  Fair Value 
         Estimated Future Payouts Under Non-  Number of  of Securities  Price of  Price on  of Stock 
      Number of  Equity Incentive Plan Awards  Shares of  Underlying  Option  the Date  and Option 
      Shares, Units or  Threshold   Target   Maximum  Stock or Units  Options  Awards  of Grant  Awards 
Name  Grant Date   Other Rights   ($)    ($)    ($)   (#)(1)   (#)(2)   ($/Sh)(3)   ($)   ($)(4) 
DeLaney  11/17/15(5)   2,843,750  $1,137,500   $2,843,750   $5,118,750                     
   11/17/15                         563,258  $40.59  $40.48  $3,379,548 
   11/17/15                     50,045               2,031,327 
   8/20/15(6)       937,500    1,875,000    3,515,625                     
Bené  2/18/16(7)                         40,849  $44.38  $44.52   249,996 
   2/18/16(8)                     2,892               128,347 
   11/17/15(5)   853,125   341,250    853,125    1,535,625                     
   11/17/15                         168,977  $40.59  $40.48   1,013,862 
   11/17/15                     15,013               609,378 
   8/20/15(6)       500,000    1,000,000    1,875,000                     
Grade  11/17/15(5)   765,625   306,250    765,625    1,378,125                     
   11/17/15                         151,646  $40.59  $40.48   909,876 
   11/17/15                     13,473               546,869 
   8/20/156)       312,500    625,000    1,171,875                     
Libby  11/17/15(5)   630,000   252,000    630,000    1,134,000                     
   11/17/15                         124,783  $40.59  $40.48   748,698 
   11/17/15                     11,087               450,021 
   8/20/15(6)       300,000    600,000    1,125,000                     
Shurts  11/17/15(5)   710,938   284,375    710,938    1,279,688                     
   11/17/15                         140,814  $40.59  $40.48   844,884 
   11/17/15                     12,511               507,821 
   8/20/15(6)       312,500    625,000    1,171,875                     
(1) With respect to Messrs. DeLaney, Bené, Grade, Libby and Shurts, we granted the RSUs under the 2013 Long-Term Incentive Plan on November 17, 2015. The RSUs vest one-third per year for three years beginning the first day of the month following the first anniversary of the grant date. Vesting of the RSUs granted to each NEO is contingent upon the executive’s continued service with the Company, except that the RSUs will remain in effect and continue to vest according to the vesting schedule upon executive’s termination of employment due to qualifying retirement in good standing or disability. Currently, only Mr. DeLaney is eligible to retire. Additionally, the RSUs will vest immediately upon the executive’s death or a change in control of the Company. In addition, the executive will forfeit all of his unvested RSUs if the Committee finds by a majority vote that, either before or after termination of his employment, he:
  committed fraud, embezzlement, theft, a felony, or proven dishonesty in the course of his employment and by any such act, damaged us or our subsidiaries;
  disclosed our trade secrets; or
  participated, engaged or had a financial or other interest in any commercial venture in the United States competitive with our business in violation of our Code of Conduct or that would have violated our Code of Conduct had he been an employee when he engaged in the prohibited activity.
(2) With respect to Messrs. DeLaney, Bené, Grade, Libby and Shurts, we granted the options under the 2013 Long-Term Incentive Plan on November 17, 2015. Option grants under the 2013 Long-Term Incentive Plan have a maximum term of 10 years. All option awards vest 20% per year for five years beginning on the first anniversary of the grant date. If an executive experiences a qualifying retirement in good standing or leaves our employment because of disability, his options will remain in effect, vest and be exercisable in accordance with their terms as if he had remained employed. If an executive dies during the term of his option, all unvested options will vest immediately and may be exercised by his estate at any time until the earlier to occur of three years after his death, or the option’s termination date. In addition, an executive will forfeit all of his unexercised options if the Committee finds by a majority vote that, either before or after termination of his employment, he:
  committed fraud, embezzlement, theft, a felony, or proven dishonesty in the course of his employment and by any such act, damaged us or our subsidiaries;
  disclosed our trade secrets; or
  participated, engaged or had a financial or other interest in any commercial venture in the United States competitive with our business in violation of our Code of Conduct or that would have violated our Code of Conduct had he been an employee when he engaged in the prohibited activity.
(3) Pursuant to the plans under which these options were granted, the exercise price of all options may not be less than the Fair Market Value on the date of the grant, which is defined under our 2013 Long-Term Incentive Plan as the closing sale price during regular trading hours of the stock on the immediately preceding date on the principal securities market in which shares of stock is then traded, or, if there were no trades on that date, the closing sale price during regular trading hours of the stock on the first trading day prior to that date.
(4) We determined the estimated grant date present value for the options issued on November 17, 2015 of $6.00 per option, using a Black-Scholes pricing model. With respect to the November 2015 grants, we assumed a volatility of 20.4%, a 2.0% risk-free rate of return, a dividend yield at the date of grant of 3.1% and a 7.2-year expected option life when applying the model. We did not assume any option exercises or risk of forfeiture during the expected option life in determining the valuation of the option awards. Had we done so, such assumptions could have reduced the reported grant date value. The actual value, if any, an executive may realize upon exercise of options will depend on the excess of the stock price over the exercise price on the date the option is exercised. Consequently, there is no assurance that the value realized, if any, will be at or near the value estimated by the Black-Scholes model. We valued the restricted stock units granted on November 17, 2015 at $40.59 per share, being the closing price of our common stock on the last business day before the grant date.
(5) These amounts relate to cash performance units with a three-year performance period that we granted in November 2015 under our Fiscal Year 2016 Cash Performance Unit Program.
(6) These amounts relate to annual incentive awards made in August 2015 pursuant to our Fiscal 2016 Management Incentive Program For Corporate MIP Bonus-eligible Positions with respect to fiscal 2016. In approving the annual incentive awards for fiscal 2016, the Committee targeted each NEO’s annual incentive opportunity at the following percentages of base salary: 150% for Mr. DeLaney, 125% for Mr. Bené and 100% for Messrs. Grade, Libby and Shurts. Mr. Kreidler was not eligible to receive an annual incentive award for fiscal 2016.
(7) Represents options granted to Mr. Bené under the 2013 Long-Term Incentive Plan on February 18, 2016, in connection with his promotion to President and Chief Operating Officer. See footnote (2) above for a discussion of the vesting and forfeiture provisions applicable to these options. We determined the estimated grant date present value for the options issued on February 18, 2016 of $6.12 per option, using a Black-Scholes pricing model. With respect to these grants, we assumed a volatility of 20.4%, a 1.5% risk-free rate of return, a dividend yield at the date of grant of 3.1% and a 7.2-year expected option life when applying the model. We did not assume any option exercises or risk of forfeiture during the expected option life in determining the valuation of the option awards. Had we done so, such assumptions could have reduced the reported grant date value. The actual value, if any, an executive may realize upon exercise of options will depend on the excess of the stock price over the exercise price on the date the option is exercised. Consequently, there is no assurance that the value realized, if any, will be at or near the value estimated by the Black-Scholes model.
(8) Represents RSUs granted to Mr. Bené under the 2013 Long-Term Incentive Plan on February 18, 2016, in connection with his promotion to President and Chief Operating Officer. See footnote (1) above for a discussion of the vesting and forfeiture provisions applicable to these RSUs. We valued the RSUs granted on February 18, 2016 at $44.38 per share, being the closing price of our common stock on the last business day before the grant date.

 

SYSCO CORPORATION - 2016 Proxy Statement    61

 

Annual Incentive Awards

 

2013 Long-Term Incentive Plan

 

Pursuant to the Sysco Corporation 2013 Long-Term Incentive Plan, the Compensation Committee is authorized to provide key executives, including the NEOs, with the opportunity to earn incentive cash payments through the grant of annual, performance-based incentive awards. The Committee generally grants annual incentive awards in the first quarter of the fiscal year to which the awards relate, and we have historically paid amounts owed under such awards during the first fiscal quarter following the conclusion of the fiscal year corresponding to such awards.

 

Performance Factors. In connection with granting annual incentive awards, the Committee may determine the performance factors that must be met for the NEO to receive payment with respect to the award, as well as the relative weights of those performance factors. The performance factors may relate to, among other things, the Company’s achievement of certain financial, operational or transactional objectives, as well as the individual performance of the NEO.

 

Performance Factor Adjustments. The 2013 Long-Term Incentive Plan allows the Committee, in its sole discretion, to make equitable adjustments to the performance factors in recognition of unusual or non-recurring events affecting the Company or the financial statements of the Company, in response to changes in applicable laws or regulations, including changes in generally accepted accounting principles or practices, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business. Application of any such equitable adjustments to any performance factors with respect to “covered employees” under Section 162(m) of the Internal Revenue Code, which includes each of the NEOs except the current and former CFO, was limited to circumstances where the modification of performance factors will not impact the deductibility of the annual incentive compensation under Section 162(m) of the Internal Revenue Code.

 

Award Limits. Pursuant to the 2013 Long-Term Incentive Plan, no NEO could have received an aggregate annual incentive award under the 2016 MIP in excess of 1% of the Company’s earnings before income taxes for fiscal 2016.

 

Fiscal 2016 MIP Annual Incentive Awards

 

In August 2015, the Compensation Committee approved the incentive award structure for fiscal 2016 pursuant to the Sysco Corporation Fiscal 2016 Management Incentive Program for MIP Bonus-Eligible Participants (the “2016 MIP”). Under the 2016 MIP, the annual incentive award opportunity for each of the NEO’s was based on the following pre-determined metrics, weighted as indicated below:

 

Adjusted Operating Income, representing 50% of the total annual incentive award opportunity;
   
Adjusted Sales Growth/Gross Profit Dollar Growth, representing 25% of the total annual incentive award opportunity; and
   
Individual strategic bonus objectives, or SBOs, for each NEO, representing 25% of the total annual incentive award opportunity.

 

Fiscal 2016 Financial Performance Targets. The 2016 MIP provided for minimum annual incentive payments upon achieving adjusted operating income of at least $1.75 billion and/or adjusted sales growth of at least 1% and adjusted gross profit dollar growth of at least 2%. The various levels of financial performance required to reach threshold, target and maximum payments are set forth below:

 

   2016 MIP Financial Performance Targets - Fiscal 2016
   Adjusted Operating  Adjusted Sales  Adjusted Gross Profit
   Income  Growth  Dollar Growth
Threshold  $               1.750 billion  1.0%  2.0%
Target  $               1.892 billion  ≥4.0 – <5.0%  ≥4.0 – <5.0%
Maximum  $               2.034 billion  ≥6.0%  ≥6.0%

 

Fiscal 2016 Financial Results and Performance Factors. For purposes of the 2016 MIP, actual results included adjusted operating income of $1.982 billion (exceeded target performance level), adjusted sales growth of 2.7% (exceeded threshold performance level), and adjusted gross profit dollar growth of 4.8% (equaled target performance level). See Annex I for a reconciliation of these adjusted measures to the most directly comparable GAAP measures. Based on these results, which equaled or exceeded target performance for two of the three metrics, we calculated weighted performance factors for the Adjusted Operating Income component and the Adjusted Sales Growth/Gross Profit Dollar Growth component of the 2016 MIP:

 

Calculation of Weighted Financial Performance Factors (75% of target annual incentive opportunity)
   Potential         2016      Weighted Financial
Financial Performance Metric  Payment  Weighting(1)  x   Performance  =   Performance Factor
Adjusted Operating Income(2)  0% - 200%  50%      156.6%      78.3%
Adjusted Sales Growth/Gross Profit Dollar Growth(3)  0% - 200%  25%      87.5%      21.9%
(1) This column represents, for each financial performance metric, the weighting of that metric for purposes of the total 2016 MIP annual incentive opportunity.
(2) The calculation of adjusted results for this performance metric excluded the following items: severance charges, professional fees on 3-year financial objectives, facility closure costs and costs associated with our revised business technology strategy; US Foods merger and integration planning and transaction costs (first quarter 2016 and fiscal 2015 only) and Brakes Group acquisition transaction costs (third and fourth quarters fiscal 2016 only); the financial impact of the additional week in fiscal 2016; and the impact of changes in foreign exchange rates.
(3) The calculation of the adjusted results for each of these performance metrics excluded the following items: the financial impact of the additional week in fiscal 2016 and the impact of changes in foreign exchange rates.

 

SYSCO CORPORATION - 2016 Proxy Statement    62

 

Calculation of Total Award Earned under 2016 MIP. The total annual incentive award payment for each NEO under the 2016 MIP was calculated as indicated in the table below, with 50% of the target incentive opportunity based on the Company’s Adjusted Operating Income performance, 25% of the target incentive opportunity based on the Company’s Adjusted Sales Growth/Gross Profit Dollar Growth performance and the remaining 25% of the target incentive opportunity based on individual performance with regard to pre-established individual SBOs, which the Committee had the discretion to pay out between 0% - 150% based on its assessment of the NEO’s performance. The Committee believes the use of individual SBOs further promotes the overall executive compensation pay philosophy to link individual pay to performance. For further discussion of the Committee’s evaluation with respect to the individual SBOs of each NEO, as well as the calculation of each NEO’s “Weighted Individual SBO Performance Factor” for purposes of the table below, please see “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs—Annual Incentive Award—Analysis” above.

 

Name  Ending Base
Salary
   Target
Annual
Incentive
(% of Base
Salary)
   Adjusted
Operating
Income
Performance
Factor
   Amount
of Award
Funding on
Adjusted
Operating
Income
Performance
Factor
   Adjusted Sales
Growth/
Gross Profit
Dollar Growth
Performance
Factor
   Amount
of Award
Funding on
Adjusted
Sales Growth/
Gross Profit
Dollar Growth
Performance
Factor
   Weighted
Individual
SBO
Performance
Factor
   Amount
of Award
Funding on
Weighted
Individual
SBO
Performance
Factor
   Total
2016 MIP
Award Earned
for FY16
Performance
 
DeLaney  $1,250,000    150.0%   78.3%  $1,468,125    21.9%  $410,625    33.0%  $618,750   $2,497,500 
Bené(1)   775,000    125.0%   78.3%   758,531    21.9%   212,156    30.0%   290,625    1,261,313 
Grade   625,000    100.0%   78.3%   489,375    21.9%   136,875    33.7%   210,625    836,875 
Libby   600,000    100.0%   78.3%   469,800    21.9%   131,400    32.5%   195,000    796,200 
Shurts   625,000    100.0%   78.3%   489,375    21.9%   136,875    28.1%   175,625    801,875 
    Base    Target    OI PF  A = Base x Target
x OI PF
    SG/GP PF   B = Base x Target
x SG/GP PF
    SBO PF C = Base x Target
x SBO PF
    Total = A+B+C 
(1) Mr. Bené’s 2016 annual incentive payment was calculated using different base salaries for portions of fiscal 2016. For 50% of his 2016 annual incentive payment, covering the period from the beginning of the fiscal year to January 1, 2016, the effective date of his promotion, a base salary of $750,000 was used. For the remaining 50% of his annual incentive payment, covering the period from January 1, 2016 to the end of the fiscal year, a base salary of $800,000 was applied.

 

Executive Compensation Clawback Policy. The fiscal 2016 awards are also subject to clawback provisions that provide that, subject to applicable law, all or a portion of the award paid pursuant to the 2016 MIP may be recovered by Sysco if there is a restatement of our financial results, other than a restatement due to a change in accounting policy, within 36 months of the payment of the award and the restatement would result in the payment of a reduced award if the award was recalculated using the restated financial results. The Committee has the sole discretion to determine the form and timing of the repayment. See “Compensation Discussion and Analysis—Executive Compensation Governance and Other Information—Executive Compensation Clawback Policy.”

 

Fiscal 2017 Annual Incentive Awards

 

In August 2016, the Compensation Committee approved the fiscal 2017 annual incentive award opportunities for the eligible NEOs under the Sysco Corporation Fiscal 2017 Management Incentive Program (MIP) For Corporate MIP Bonus-eligible Positions, which was adopted by the Committee pursuant to the 2013 Sysco Corporation Long-Term Incentive Plan and which is described in “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs—Annual Incentive Award—Detailed Information— Annual Incentive Award Potential for Fiscal 2017.”

 

Limit on Fiscal 2016 and Fiscal 2017 Maximum Annual Incentive Award Payments

 

The Committee established an annual incentive pool limit for each of fiscal 2016 and fiscal 2017 for the CFO and certain “covered employees” of Sysco, as defined in Section 162(m) of the Internal Revenue Code (the “Code”) to help ensure compliance with the deductibility requirements of Section 162(m) of the Code. Under the 2013 Long-Term Incentive Plan, the maximum dollar amount that may be paid under all cash-based awards granted to any individual for any a fiscal year under the Plan is 1% of the Company’s earnings before income taxes as publicly disclosed in the “Consolidated Results of Operations” section of the Company’s annual report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended immediately before the date the applicable award is paid.

 

Participant’s Title  Percent of 2016 Incentive Pool
Allocated to Participant
  Percent of 2017 Incentive Pool
Allocated to Participant
CEO  41%  39%
CFO  13%  14%
NEO 3  20%  21%
NEO 4  13%  13%
NEO 5  13%  13%

The umbrella structure of the incentive pool limit serves only to provide a ceiling on the maximum annual incentive amount that any NEO may receive, and the actual incentive amount paid to each NEO will be determined pursuant to the applicable incentive award program described above.

 

SYSCO CORPORATION - 2016 Proxy Statement    63

 

Cash Performance Units

 

The Company’s cash performance units, which we refer to as “CPUs,” provide certain key employees, including the NEOs, the opportunity to earn cash incentive payments based on pre-established performance criteria over performance periods of at least three years. The Committee currently makes grants annually for three year performance periods, including the year of grant. CPUs awarded prior to fiscal year 2016 were issued pursuant to the 2008 Cash Performance Unit Plan, as amended, which expired on November 30, 2014. CPUs awarded in fiscal year 2016 were made, and any future grants of CPUs may be made, pursuant to the Sysco 2013 Long-Term Incentive Plan.

 

Under these plans, the Committee may select performance goals from those specified in the applicable plan, based on the performance of Sysco generally or on the performance of subsidiaries or divisions. The Committee establishes the performance goals for the CPU awards during the first ninety days of the performance period, and communicates individual awards after its meeting the following November.

 

Outstanding CPU Awards

 

As of September 19, 2016, the named executive officers listed below held cash performance unit grants in the amounts and for the performance periods set forth below:

 

                Payout Amount ($) 
Name  Fiscal Year in
Which Granted
  Target Value
Per CPU
 Number of
CPUs Held
  Performance
Period
  Threshold   Target   Maximum 
DeLaney  2016  $1   2,843,750  6/27/15-6/30/18  $1,137,500   $2,843,750   $5,118,750 
   2015   1   2,786,875  6/28/14-7/1/17   1,393,438    2,786,875    4,180,313 
Bené  2016   1   853,125  6/27/15-6/30/18   341,250    853,125    1,535,625 
   2015   1   732,266  6/28/14-7/1/17   366,133    732,266    1,098,398 
Grade  2016   1   765,625  6/27/15-6/30/18   306,250    765,625    1,378,125 
   2015   1   382,500  6/28/14-7/1/17   191,250    382,500    573,750 
Libby  2016   1   630,000  6/27/15-6/30/18   252,000    630,000    1,134,000 
   2015   1   567,788  6/28/14-7/1/17   283,894    567,788    851,681 
Shurts  2016   1   710,938  6/27/15-6/30/18   284,375    710,938    1,279,688 
   2015   1   687,744  6/28/14-7/1/17   343,872    687,744    1,031,616 

 

Fiscal 2016 CPU Awards

 

In November 2015, the Committee approved awards of CPUs to eligible NEOs under Sysco’s Fiscal Year 2016 Cash Performance Unit Program, which was adopted by the Committee in August 2015 pursuant to the 2013 Sysco Corporation Long-Term Incentive Plan. For purposes of these CPUs, the Committee has adopted modified financial performance metrics. The principal metric for the fiscal 2016 CPU awards is the Company’s average 3-year return on invested capital (“ROIC”) as compared to the target ROIC established by the Committee on an annual basis, subject to modification based on the Company’s relative total shareholder return for the performance period. Target ROIC for each of the fiscal years during the performance period will be established by the Committee within the first 90 days of each respective fiscal year, and calculations may be adjusted for certain extraordinary or non-recurring items.

 

Average Capital Efficiency Performance Factor. For each year during the performance period, Company ROIC performance is measured against the target ROIC, yielding an annual capital efficiency performance factor. For fiscal 2016, the annual capital efficiency performance factor was calculated based on the following:

 

Below Minimum - if Company ROIC for a fiscal year is less than 90% of target ROIC, the performance factor is 0%;
   
Threshold - if Company ROIC for a fiscal year is 90% of target ROIC, the performance factor is 50%;
   
Target - if Company ROIC for a fiscal year is 100% of target ROIC, the performance factor is 100%; and
   
Maximum - if Company ROIC for a fiscal year is greater than or equal to 110% of target ROIC, the performance factor is 150%.

 

The sum of the annual capital efficiency performance factor for each fiscal year in the performance period is then divided by the total number of fiscal years in the performance period to determine the average capital efficiency performance factor.

 

Relative Total Shareholder Return Modifier. The payout under the fiscal 2016 CPU awards is further modified by the Company’s relative total shareholder return during the 3-year performance period. In order to compute total shareholder return, the following sum is first calculated:

 

the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the last day of the three fiscal-performance period, plus,

 

the per share cash dividends paid on company common stock during the three-year performance period, minus,

 

the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the first day of the three-year performance period.

 

Total shareholder return is then computed as that sum divided by the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the first day of the three-year performance period.

 

SYSCO CORPORATION - 2016 Proxy Statement    64

 

Based on the Company’s total shareholder return for the performance period, relative to that of the S&P 500, the total shareholder return modifier is determined as follows:

 

Minimum – 80% modifier if relative total shareholder return is equal to or below the 30th percentile;
   
Target – 100% modifier if relative total shareholder return is equal to the 50th percentile; and
   
Maximum – 120% modifier if relative total shareholder return is equal to or greater than the 75th percentile.

 

Calculation of CPU Payout. The cash payout under the fiscal 2016 CPU awards is calculated by multiplying the number of CPUs held by the NEO by the product of (1) the average capital efficiency performance factor (ranging from 0% to 150%) and (2) the relative total shareholder return modifier (ranging from 80% to 120%), which represents a total incentive opportunity of between 0% and 180% of the number of CPUs awarded to such NEO.

 

Payment under Fiscal 2014 CPU Awards

 

Following the conclusion of each three-year performance period, if we meet the relevant performance criteria, we will pay each named executive an amount obtained by multiplying the number of performance units that the executive received by the value assigned to each unit and then multiplying the resulting product by a specified percentage. Each CPU is assigned a value of $1.00 per unit. We make all payments due with respect to the CPUs in cash. No payments made under the 2008 Cash Performance Unit Plan to any named executive officer in any fiscal year may be higher than 1% of Sysco’s earnings before income taxes, as publicly disclosed in the “Consolidated Results of Operations” section of Sysco’s Annual Report on Form 10-K for the fiscal year ended immediately before the applicable payment date.

 

With respect to the CPU grants that we made in fiscal year 2014, which paid out in August 2016, the Committee established performance criteria based on Sysco’s total shareholder return over the three-year performance period including fiscal years 2014, 2015 and 2016, relative to that of the S&P 500. Based upon Sysco’s total shareholder return for that period relative to the other S&P 500 companies, CPUs are expected to pay at a rate from 50% to 150% of the aggregate value of the CPUs, which are valued at $1 per unit. In order to compute total shareholder return, the following sum is first calculated:

 

the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the last day of the three fiscal-performance period, plus,
   
the per share cash dividends paid on company common stock during the three-year performance period, minus,
   
the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the first day of the three-year performance period.

 

Total shareholder return is then computed as that sum divided by the closing price of a share of Sysco’s common stock, as reported on the New York Stock Exchange, on the day immediately preceding the first day of the three-year performance period. The threshold payment level requires Sysco’s total shareholder return for the three-year performance period to equal or exceed that of the 30th percentile of the S&P 500, the target payment level requires company performance to equal the 45th percentile, and the maximum payment level is expected to be reached at the 75th percentile, with graduated bonus levels in between the threshold and maximum levels. These grants are subject to Sysco’s clawback policies.

 

Sysco’s shareholder return during the three-year performance period ending July 2, 2016, which was in the 66.8th percentile relative to the S&P 500, resulted in a CPU payout of $1.40 per unit in August 2016, which represented approximately 140% of the target payout level.

 

CPU Benefits upon Termination of Employment or Change in Control

 

If the executive’s employment terminates during a performance period because the executive leaves our employment due to disability, the executive will nonetheless receive the specified payment on the applicable payment date, as if he remained employed on that date, which payment is determined using Sysco’s performance for the entire three-year performance period.

 

If the executive’s employment terminates during a performance period because the executive experiences a retirement in good standing or due to the executive’s death, the executive will receive the specified payment on the applicable payment date, as if he remained employed on that date, reduced on a pro-rata basis based on the number of fiscal years during which the executive was actively employed, at any time, during the applicable three-year performance period. The executive will get credit for any fiscal year in the applicable performance period if the executive was actively employed by Sysco at any time during that fiscal year, and the payment will be determined using Sysco’s performance for the entire three-year performance period.

 

If the executive’s employment terminates before the end of the performance period for any reason other than retirement in good standing, death or disability, we will cancel the executive’s CPUs, and the executive will not receive any payments with respect to such cancelled CPUs.

 

If a change in control occurs during a performance period, we will pay the executive the target amount payable for the executive’s CPUs for that performance period, as if the target performance levels had been achieved. In such instances, the CPUs awarded with respect to the performance period will be considered vested and payment will be made to the executive within 90 days after the date of the change in control.

 

SYSCO CORPORATION - 2016 Proxy Statement    65

 

Fiscal 2017 Awards of Performance Share Units

 

In August 2016, the Committee approved awards of a new long-term incentive, performance share units, pursuant to the 2013 Sysco Corporation Long-Term Incentive Plan. The performance share units provide certain key employees, including the participating NEOs, the opportunity over a three-year performance period to earn shares of Sysco common stock based on the financial performance metrics described in “Compensation Discussion and Analysis—Executive Summary—Changes to Executive Compensation Program—Fiscal 2017 Changes.”

 

Outstanding Equity Awards at Fiscal Year-End

 

Option grants to the NEOs prior to fiscal 2017 under the 2013 Long-Term Incentive Plan and its predecessor, the 2007 Stock Incentive Plan, which we refer to as the “plans,” have generally vested and become exercisable in five equal annual installments, beginning one year after the grant date, and the option grants to NEOs in fiscal 2017 will vest and become exercisable in three equal, annual installments, beginning one year after the grant date, in each case to create a long-term incentive for the executives. The restricted stock units that have been granted pursuant to the plans generally vest one-third per year over three years. The 2013 Long-Term Incentive Plan allows the Committee the discretion to grant stock options, restricted stock, restricted stock units, performance share units, as well as other stock-based awards.

 

According to the terms of our stock plans, the exercise price of options may not be less than the Fair Market Value on the date of the grant, which is defined in our 2013 Long-Term Incentive Plan as the closing sale price during regular trading hours of the stock on the immediately preceding date on the principal securities market in which shares of stock is then traded, or, if there were no trades on that date, the closing sale price during regular trading hours of the stock on the first trading day prior to that date, and which is defined in our 2007 Stock Incentive Plan as the closing price of our stock on the New York Stock Exchange on the last business day before the grant date. Our stock plans specifically prohibit repricing of outstanding grants without stockholder approval. The Committee grants all of our stock options and restricted stock units pursuant to our equity grant guidelines.

 

Pursuant to our equity grant guidelines in effect prior to August 2011, the Committee generally made option and restricted stock unit grants on the second Tuesday in November each year, a date when we were typically in a trading “window” under our Policy on Trading in Company Securities. In August 2011, the Committee revised our equity grant guidelines to provide that grants may be made during any open trading windows pursuant to our Policy on Trading in Company Securities, subject to certain conditions and qualifications. The guidelines provide that the Committee should generally make equity grants at a point in time when we have publicly disseminated all material information likely to affect the trading price of Sysco’s common stock. Under the guidelines, the Committee will generally not make grants during a period preceding an anticipated event that is likely to cause a substantial increase or a substantial decrease in the trading price of Sysco’s common stock, such as an earnings release. If we have grants scheduled to occur when Sysco is in possession of material non-public information, then:

 

management must inform the Committee or the Board of Directors, as the case may be, of all material information in its possession regarding Sysco; and
   
if, in the Committee’s or Board’s judgment, such information is reasonably likely to affect the trading price of Sysco’s common stock, then due consideration should be given to the number and exercise price of options and the number of any equity grants that may be granted in light of such material non-public information.

 

SYSCO CORPORATION - 2016 Proxy Statement    66

 

The following table provides information on the stock option and restricted stock unit grants held by each named executive officer, other than Mr. Kreidler, as of July 2, 2016. The outstanding stock options and restricted stock units previously held by Mr. Kreidler expired pursuant to their respective terms upon his departure from the Company on December 31, 2015.

 

   Option Awards  Stock Awards
      Number of  Number of              
      Securities  Securities         Number of    
      Underlying  Underlying         Shares or   Market Value of
      Unexercised  Unexercised  Option      Units of Stock   Shares or Units
      Options  Options  Exercise  Option   That Have   of Stock That
      Exercisable  Unexercisable  Price  Expiration   Not Vested   Have Not Vested
Name  Date Granted  (#)  (#)  ($)  Date   (#)   ($)(1)
DeLaney  November 2015            50,045(2)   2,538,783
   November 2015    563,258(3)  40.59  11/17/2025      
   November 2014            34,593(4)   1,754,903
   November 2014  114,982  459,928(5)  38.89  11/18/2024      
   November 2013            18,064(6)   916,387
   November 2013  244,280  366,421(7)  33.40  11/14/2023      
   November 2012            25,542(8)   1,295,746
   November 2012  450,000  300,000(9)  29.96  11/13/2019      
   November 2011  450,000  150,000(10)  27.65  11/14/2018      
   November 2010  300,000     28.87  11/10/2017      
   November 2009  80,456     27.44  11/9/2016      
Bené  February 2016            2,892(11)   146,711
   February 2016    40,849(12)  44.38  2/18/2026      
   November 2015            15,013(2)   761,609
   November 2015    168,977(3)  40.59  11/17/2025      
   November 2014            9,089(4)   461,085
   November 2014  30,212  120,848(5)  38.89  11/18/2024      
   November 2013            5,102(6)   258,824
   November 2013  69,002  103,503(7)  33.40  11/14/2023      
Grade  November 2015            13,473(2)   683,485
   November 2015    151,646(3)  40.59  11/17/2025      
   November 2014            6,647(4)   337,202
   November 2014  13,808  55,235(5)  38.89  11/18/2024      
   November 2013            3,579(6)   181,563
   November 2013  30,254  45,383(7)  33.40  11/14/2023      
   November 2012  18,477  34,876(9)  29.96  11/13/2019      
   November 2011    8,375(10)  27.65  11/14/2018      
Libby  November 2015            11,087(2)   562,444
   November 2015    124,783(3)  40.59  11/17/2025      
   November 2014            7,048(4)   357,545
   November 2014  23,426  93,704(5)  38.89  11/18/2024      
   November 2013            2,847(6)   144,428
   November 2013  24,062  36,094(7)  33.40  11/14/2023      
   November 2012            12,380(8)   628,037
   November 2012  40,000  26,667(9)  29.96  11/13/2019      
   November 2011    12,500(10)  27.65  11/14/2018      
Shurts  November 2015            12,511(2)   634,683
   November 2015    140,814(3)  40.59  11/17/2025      
   November 2014            8,536(4)   433,031
   November 2014  28,375  113,501(5)  38.89  11/18/2024      
   November 2013            4,792(6)   243,098
   November 2013  64,806  97,211(7)  33.40  11/14/2023      
   November 2012  140,156  93,438(9)  29.96  11/13/2019      
(1) The aggregate dollar value is calculated using the closing price of our common stock on July 1, 2016, of $50.73.
(2) These restricted stock units vest in equal portions on December 1 of 2016, 2017 and 2018, and may be settled solely by delivery of an equal number of shares of Sysco common stock. Vesting is contingent upon executive’s continued service with the Company, except that the units will remain in effect and continue to vest according to the vesting schedule upon executive’s termination of employment due to retirement in good standing or disability. Additionally, the units will vest immediately upon executive’s death or a change in control of the Company.
(3) These options vest in equal portions on November 17 of 2016, 2017, 2018, 2019 and 2020.

 

SYSCO CORPORATION - 2016 Proxy Statement    67

 
(4) These restricted stock units vest in equal portions on November 18 of 2016 and 2017, and may be settled solely by delivery of an equal number of shares of Sysco common stock. Vesting is contingent upon executive’s continued service with the Company, except that the units will remain in effect and continue to vest according to the vesting schedule upon executive’s termination of employment due to retirement in good standing or disability. Additionally, the units will vest immediately upon executive’s death or a change in control of the Company.
(5) These options vest in equal portions on November 18 of 2016, 2017, 2018 and 2019.
(6) These restricted stock units vest on November 15, 2016, and may be settled solely by delivery of an equal number of shares of Sysco common stock. Vesting is contingent upon executive’s continued service with the Company, except that the units will remain in effect and continue to vest according to the vesting schedule upon executive’s termination of employment due to retirement in good standing or disability. Additionally, the units will vest immediately upon executive’s death or termination by the Company of executive’s employment within 12 months before, or 24 months following, a change in control of the Company.
(7) These options vest in equal portions on November 15 of 2016, 2017 and 2018.
(8) These restricted stock units vest in equal portions on November 14 of 2016 and 2017 and may be settled solely by delivery of an equal number of shares of Sysco common stock. Vesting is contingent upon executive’s continued service with the Company, except that the units will remain in effect and continue to vest according to the vesting schedule upon executive’s termination of employment due to retirement in good standing or disability. Additionally, the units will vest immediately upon executive’s death or a change in control of the Company.
(9) These options vest in equal portions on November 13 of 2016 and 2017.
(10) These options vest on November 15, 2016.
(11) These restricted stock units vest in equal portions on March 1 of 2017, 2018 and 2019, and may be settled solely by delivery of an equal number of shares of Sysco common stock. Vesting is contingent upon executive’s continued service with the Company, except that the units will remain in effect and continue to vest according to the vesting schedule upon executive’s termination of employment due to retirement in good standing or disability. Additionally, the units will vest immediately upon executive’s death or a change in control of the Company.
(12) These options vest in equal portions on February 18 of 2017, 2018, 2019, 2020 and 2021.

 

Awards pursuant to the 2013 Long-Term Incentive Plan and 2007 Stock Incentive Plan

 

All of the option awards listed above provide that, if the executive’s employment terminates as a result of retirement in good standing or disability, the option will remain in effect, vest and be exercisable in accordance with its terms as if the executive remained an employee of Sysco. All unvested options will vest immediately upon the executive’s death. Furthermore, the options provide that the executive’s estate or designees may exercise the options at any time within three years after his death, but in no event later than the original termination date.

 

All of the options listed above granted prior to November 2013 provide for the vesting of unvested options upon a change in control. In addition, grants made prior to November 2013 provide that, if the named executive’s employment is terminated other than for cause during the 24 month period following a change in control, the outstanding options under the plans will be exercisable to the extent the options were exercisable as of the date of termination for 24 months after employment termination or until the expiration of the stated term of the option, whichever period is shorter.

 

The options granted since November 2013 provide that, if the Company terminates the executive’s employment within 12 months before, or 24 months following, a change in control of the Company, then the option will remain in effect, vest and be exercisable in accordance with its terms as if the executive had remained an employee of Sysco.

 

Option Exercises and Stock Vested

 

The following table provides information with respect to aggregate option exercises and the vesting of stock awards during the last fiscal year for each of the NEOs.

 

   Option Awards   Stock Awards
   Number             
   of Shares Acquired   Value Realized   Number of Shares   Value Realized on 
   on Exercise   on Exercise   Acquired on Vesting   Vesting 
Name  (#)   ($)   (#)   ($)(1) 
DeLaney   149,745   $2,802,657    77,609   $3,142,834 
Bené           19,136    863,772 
Grade   76,362    1,225,047    10,699    430,283 
Libby   47,800    977,619    15,462    620,539 
Shurts           19,586    787,661 
Kreidler   787,784    9,187,031    26,757    1,073,999 
(1) We computed the value realized upon vesting by multiplying the number of shares of stock that vested by the closing price of Sysco’s common stock on the last business day before the purchase date.

 

SYSCO CORPORATION - 2016 Proxy Statement    68