Summary
PepsiCo Inc. (PEP) filed an 8-K on September 20, 2006, detailing amendments to its Director Compensation program, effective October 1, 2006. The primary change involves the structure of the annual equity grant for non-employee directors. While the total value of the annual equity award remains $100,000, it will now be split equally between restricted stock and stock options, a shift from the previous program's equal split between stock options and restricted stock units. This adjustment in the equity mix aims to align director incentives with shareholder value creation, with stock awards vesting immediately but subject to a holding period until departure from the board. Stock options, on the other hand, will typically vest after three years. The annual cash retainer of $100,000 for non-employee directors remains unchanged, with additional retainers for committee chairs and presiding directors. Employee directors will continue to receive no additional compensation for their board service. Investors should note these changes reflect a strategic approach to director compensation and alignment.
Key Highlights
- 1PepsiCo's Board of Directors approved modifications to the Director Compensation program, effective October 1, 2006.
- 2Non-employee directors will continue to receive an unchanged annual retainer of $100,000.
- 3The annual equity award for non-employee directors remains valued at $100,000 but is now equally split between stock awards and stock options (previously stock options and restricted stock units).
- 4Stock awards are immediately vested but subject to a holding period until the director leaves the Board.
- 5Stock options have a three-year vesting period, with exceptions for death, disability, or retirement.
- 6Committee chairs and a presiding director (not also a committee chair) receive an additional $20,000 retainer.
- 7Employee directors do not receive additional compensation for board service.