Introduction
The Bunge Limited Annual Incentive Plan (the ‘‘Plan’’) became effective on January 1, 2011 after shareholder approval at the Company’s Annual General Meeting in 2010. In order for Bunge to continue to make awards to certain executive officers under the Plan that will qualify as ‘‘performance- based compensation’’ that is exempt from the $1 million deduction limit (as described below) imposed by Section 162(m) of the Internal Revenue Code of 1986, as amended, and the relevant income tax regulations thereunder (the ‘‘Code’’), the performance measures on which performance goals may be based must be reapproved by Bunge’s shareholders periodically. Bunge is seeking shareholder approval of the original performance measures set forth in the Plan, as well as three additional performance measures—risk adjusted profit; risk capital and talent development. A summary of the Plan is included below. The complete text of the Plan is set forth in Appendix B to this Proxy Statement, and
shareholders are urged to review it together with the following information, which is qualified in its entirety by reference to Appendix B.
Section 162(m) of the Code, places a limit of $1 million on the amount Bunge may deduct in any one year for compensation paid to the Chief Executive Officer and each of its other three most highly-compensated executive officers (excluding the Chief Financial Officer). If awards pursuant to the Plan constitute qualified performance-based compensation, the awards may not be subject to the deductibility limitation of Code Section 162(m). In order to continue to qualify for this exemption, among other things, shareholders must reapprove the material terms of the performance measures on which performance goals may be based every five years. If the existing performance measures and the new performance measures are not approved by shareholders, the Plan will continue in full force and effect. However, in accordance with Code Section 162(m), Bunge’s ability to deduct qualified
performance-based compensation under the Plan will be limited to $1 million per covered executive officer. Although Bunge generally designs awards pursuant to the Plan to be eligible for deductibility under Code Section 162(m), there is no guarantee that the exemption will be available for awards in any particular circumstance. To maintain flexibility in compensating Bunge’s executive officers, the Compensation Committee (the ‘‘Committee’’) may from time to time pay compensation that may not be deductible if it believes it will contribute to the achievement of Bunge’s business objectives.
Performance Goals. The Plan includes the following financial and non-financial performance measures for awards intended to be qualified performance-based compensation. The performance measures below include those financial performance measures originally approved by shareholders and three additional performance measures added by the Board, subject to shareholder approval: risk adjusted profit; risk capital and talent development.
Financial Measures
ɀ accounts payable; ɀ income from continuing operations (net ɀ accounts receivable; income after minority interests);
ɀ cash flow; ɀ interest coverage;
ɀ cash flow at risk; ɀ margin;
ɀ cash flow return on investment; ɀ market capitalization;
ɀ cash value added; ɀ revenue growth;
ɀ credit at risk; ɀ risk adjusted economic profit;
ɀ days cash cycle; ɀ risk adjusted profit;
ɀ days sales outstanding; ɀ risk adjusted return on capital;
ɀ debt; ɀ risk adjusted return on equity;
ɀ earnings at risk; ɀ risk adjusted return on invested capital; ɀ earnings before interest and tax (EBIT); ɀ risk adjusted return on net capital; ɀ earnings before interest, tax depreciation and ɀ risk capital;
amortization (EBITDA); ɀ share price;
ɀ earnings per share; ɀ Sharpe ratio;
ɀ economic value added; ɀ value at risk; and
ɀ effective tax rate; ɀ working capital.
ɀ free cash flow; ɀ impairment write offs; Non-Financial Measures
ɀ amount of inventory; ɀ product quality; ɀ brand recognition; ɀ productivity/efficiency; ɀ customer/supplier satisfaction; ɀ quality;
ɀ days of inventory; ɀ recruiting;
ɀ employee turnover; ɀ risk management;
ɀ energy usage; ɀ safety/environment;
ɀ headcount; ɀ satisfaction indexes;
ɀ loading time/days loading; ɀ talent development;
ɀ market share; ɀ turnaround time; and
ɀ volumes.
Summary of Plan
Purposes. The purposes of the Plan are to (i) attract, retain and motivate certain employees of Bunge and its subsidiaries and (ii) focus participants towards achieving specific business goals
established for Bunge and its subsidiaries.
Eligibility and Participation. Each employee who is recommended by the Chief Executive Officer or his designee to participate in the Plan and who is approved by the Committee or is included in the Plan by the Committee, shall be eligible to participate in the Plan.
Administration. The Plan will be administered by the Committee. Subject to the terms of the Plan, the Committee will have full authority to administer the Plan; designate the employees who will participate in the Plan; determine the terms and conditions of awards; and construe and interpret the terms of the Plan and any awards granted. All determinations of the Committee are final, binding and conclusive upon all persons.
Awards. Within ninety days after the beginning of each calendar year, the Committee will establish performance goals that may be based on any combination of company and individual
performance measures. Performance goals will be determined annually by the Committee from among those performance measures listed above. Final awards will be based on the level of achievement of the performance measures and the predetermined award payout levels.
The Committee may adjust the performance goals and award opportunities under the Plan (either up or down) if it determines that unusual, non-recurring or unanticipated changes or events have materially affected the fairness of the performance goals and unduly influenced Bunge’s ability to meet them.
Payments. All awards will be payable in cash between January 1 and March 15 following the end of the relevant calendar year and after the Committee certifies in writing that the performance goals and any other relevant terms of the awards have been satisfied. The maximum amount payable to a participant under the Plan for any calendar year will be $8 million.
Termination of Employment. In the event of a participant’s death, disability retirement, or transfer to another business unit of Bunge that does not participate in the Plan, the participant’s final award will be reduced to reflect his or her participation prior to the termination only. In the event of any other kind of termination of employment, a participant’s award for the year of termination will be forfeited; provided, however, that the Committee has the discretion to pay a partial award for the portion of the year that the participant was employed by Bunge.
Recoupment of Awards. Any awards granted under the Plan to participants who are subject to Bunge’s Executive Compensation Recoupment Policy, as amended from time to time, may be reduced or subject to recoupment pursuant to the terms and conditions of such policy.
Duration of the Plan. The Plan was effective as of January 1, 2011, and shall remain in effect until terminated by the Board or the Committee.
Amendment and Termination of the Plan. The Board or the Committee may, at any time, amend, suspend or terminate the Plan. No amendment, suspension or termination may reduce the rights of a participant to a payment or distribution with respect to an earned award without his or her consent.
New Plan Benefits. As discussed above, benefits under the Plan are within the discretion of the Committee, and performance goals may vary from performance period to performance period and from participant to participant. Thus, benefits to be paid under the Plan are not determinable at this time. A summary of awards made under the Plan for Bunge’s last fiscal year to the Named Executive Officers is included in the Summary Compensation Table and accompanying footnotes on page 44 of this proxy statement.
RECOMMENDATION OF THE BOARD
The Board of Directors recommends that you vote FOR the approval of the additional performance goals and the re-approval of the existing performance measures for the Plan.