SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant þ

Filed by a Party other than the Registrant o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to Section 240.14a-12

ConAgra Foods, Inc.

[NOT APPLICABLE]

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

Payment of Filing Fee (Check the appropriate box):

þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

[Not Applicable]

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

[Not Applicable]

 

Proxy Statement

 

September 25, 2009

Annual Meeting of Stockholders

 

 

 

August 12, 2009

 

Dear Fellow Stockholder:

 

It is my pleasure to invite you to join us for the ConAgra Foods Annual Meeting of Stockholders in Omaha, Nebraska on September 25, 2009 at 1:30 p.m., Omaha Time, at the Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska 68102.

 

The meeting will include a report on our business, discussion and voting on the matters set forth in the accompanying notice of annual meeting and proxy statement, and a question-and-answer session.

 

We look forward to seeing you in Omaha. If you cannot be with us in person, please be sure to vote your shares by proxy. Just mark, sign and date the enclosed proxy card and return it in the postage-paid envelope. Or, use the Internet or telephonic voting methods described in the following pages. Your prompt response is appreciated.

 

Thank you for your continued investment in ConAgra Foods.

 

Sincerely,

 

Gary M. Rodkin

Chief Executive Officer & President

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The Annual Stockholders’ Meeting of ConAgra Foods, Inc. will be held on Friday, September 25, 2009, in the Witherspoon Concert Hall of the Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska 68102. The meeting will begin promptly at 1:30 p.m. Omaha Time. Registration will begin at 12:30 p.m.

 

What matters will be voted on?

 

 

Who may vote?

 

Stockholders of record as of the close of business on July 31, 2009 are eligible to vote at the annual meeting and any postponements or adjournments. You may vote by marking, signing and dating the enclosed proxy card and returning it in the postage-paid envelope. You may also vote by telephone or through the Internet. See page 1 of the accompanying proxy statement for more information on voting procedures.

 

What if I want to attend the meeting?

 

We encourage you to vote as soon as possible even if you plan to attend the meeting. An admission ticket or brokerage statement reflecting ownership of ConAgra Foods stock, in each case along with some form of government-issued photo identification such as a valid driver’s license or passport, will be required for admission to the annual meeting.

 

If you are unable to attend in person, you can hear the meeting via live audio cast at http://investor.conagrafoods.com. An archive of the webcast will be available on our website following the meeting.

 

 

Colleen Batcheler

Senior Vice President, General Counsel and

Corporate Secretary

 

August 12, 2009

Omaha, Nebraska

Table of Contents

 

ConAgra Foods, Inc.
One ConAgra Drive
Omaha, Nebraska 68102-5001

 

PROXY STATEMENT

 

We are mailing this proxy statement to our stockholders in connection with the solicitation by our Board of Directors of proxies to be used at the 2009 Annual Meeting of Stockholders of ConAgra Foods, Inc. The meeting will be held in the Witherspoon Concert Hall of the Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska 68102 on Friday, September 25, 2009, and begin promptly at 1:30 p.m., Omaha Time. Distribution of this proxy statement is scheduled to begin on or about August 12, 2009.

 

Help Reduce Our Mailing Expenses. You can help us reduce the cost of printing and mailing proxy statements and annual reports by opting to receive future materials electronically. To enroll, please visit the website http://enroll.icsdelivery.com/cag and follow the instructions provided. Have your proxy card in hand when accessing this website.

 

This proxy statement and our annual report to stockholders for the fiscal year ended May 31, 2009 are available electronically at: http://investor.conagrafoods.com.

 

Record Date

 

Stockholders of record at the close of business on July 31, 2009 will be entitled to vote at the meeting and any postponements or adjournments. On July 31, 2009, there were 443,134,831 voting shares of our common stock issued and outstanding. Each share of common stock is entitled to one vote.

 

How to Vote

 

Your vote is very important. For this reason, the Board of Directors is requesting that you vote your shares by proxy. Internet and telephone voting is available through 11:59 p.m. Eastern Time on Tuesday, September 22, 2009 for shares held in the ConAgra Foods Retirement Income Savings Plan and through 11:59 p.m. Eastern Time on Thursday, September 24, 2009 for all other shares.

 

If you hold shares of ConAgra Foods stock in your own name (also known as “of record” ownership), you can come to the meeting and vote your shares in person, or you can vote your shares by proxy in one of the following manners:

 

 

If a broker, bank or other nominee holds your stock (“street name” ownership), they will send you a voting instruction form. Follow the instructions on the form they provide to have your shares voted by proxy. If you wish to attend the meeting and vote in person, you must obtain a “legal proxy,” executed in your favor, from the broker, bank or nominee.

 

You can revoke your proxy before your shares are voted if you (1) are the record owner of your shares and submit a written revocation to our Corporate Secretary at or before the meeting (mail to: ConAgra Foods, Inc., Attn: Corporate Secretary, One ConAgra Drive, Omaha, Nebraska 68102), (2) submit a timely later-dated proxy (or voting instruction card if you hold shares through a broker, bank or nominee), or (3) provide timely

subsequent Internet or telephone voting instructions. You may also attend the meeting in person and vote in person, subject to the legal proxy requirement noted above for street name owners.

 

If you hold shares in the ConAgra Foods Retirement Income Savings Plan, your voting instruction card covers the shares credited to your plan account. The plan’s trustee must receive your voting instructions by 11:59 p.m. Eastern Time on Tuesday, September 22, 2009. If the plan trustee does not receive your instructions by that date, the trustee will vote the shares held by the ConAgra Foods Retirement Income Savings Plan in a single block in accordance with the instructions received with respect to a majority of the shares for which instructions are received.

 

We have engaged Georgeson Shareholder Services as our proxy solicitor for the annual meeting at an estimated cost of $15,000 plus disbursements. Our directors, officers and other employees may also solicit proxies in the ordinary course of their employment. ConAgra Foods will bear the cost of the solicitation, including the cost of reimbursing brokerage houses and other custodians for their expenses in sending proxy materials to you.

 

Quorum

 

To hold the meeting a quorum must be present. A majority of the shares of common stock outstanding on the record date must be present in person or by proxy at the meeting in order to constitute a quorum. The inspectors of election intend to treat properly executed proxies marked “abstain” as “present” for purposes of determining whether a quorum has been achieved. The inspectors will also treat proxies held in “street name” by brokers where the broker indicates that it does not have authority to vote on one or more of the proposals coming before the meeting (“broker non-votes”) as “present” for purposes of determining whether a quorum has been achieved.

 

Vote Requirements and Manner of Voting Proxies

 

Each stockholder is entitled to one vote for each share of common stock on all matters presented at the meeting. If a quorum is present:

 

 

The shares represented by all valid proxies received by Internet, by telephone or by mail and not properly revoked will be voted in the manner specified. Where specific choices are not indicated, the shares represented by all valid proxies received will be voted “For” each proposal. If any matter not described above

is properly presented at the meeting, the persons named in the proxy form will vote in accordance with their judgment.

 

Attendance at the Meeting

 

Only stockholders of record as of the close of business on July 31, 2009 and their guests will be able to attend the meeting. Admission will be by ticket or confirming bank/brokerage statement only, and those attending the meeting must bring some form of government-issued photo identification.

 

 

Multiple Stockholders Sharing an Address

 

We are allowed to deliver a single annual report and proxy statement to a household at which two or more stockholders reside when we believe those stockholders are members of the same family. Accordingly, unless you elected to participate in electronic delivery of proxy materials, we will deliver to you only one copy of our annual report and proxy statement until we receive instructions that you prefer multiple mailings. You will continue to receive individual proxy cards for each registered account. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. If you receive a single set of proxy materials but prefer to receive separate copies for each registered account in your household, please contact our agent, Broadridge, at: 1-800-542-1061, or in writing at: Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Broadridge will remove you from the householding program within 30 days of receipt of your request, following which you will begin receiving an individual copy of the material. You can also contact Broadridge at the phone number above if you received multiple copies of the proxy materials and would prefer to receive a single copy in the future.

 

The table below shows the shares of ConAgra Foods common stock that certain individuals and entities beneficially owned as of July 31, 2009. The individuals and entities are (1) owners of more than 5% of our outstanding common stock, (2) our current directors, (3) our “named executive officers” for purposes of this proxy statement, and (4) all current directors and executive officers as a group. A person has beneficial ownership over shares if he or she has or shares voting or investment power over the shares, or the right to acquire that power within 60 days of July 31, 2009.

 

Our directors and executive officers are committed to owning stock in ConAgra Foods. Directors are compensated with a mix of cash and ConAgra Foods common stock and are precluded from selling any of their shares in the market until they cease to be a director. For management, our Board has established stock ownership guidelines that require the individuals to own ConAgra Foods stock worth various multiples of their salaries. More information on our stock ownership guidelines can be found on pages 5 and 38.

 

To better show the financial stake of our directors and executive officers in the company, we have included a “Share Units” column in the table below. This column, which is not required under the rules of the Securities and Exchange Commission, or the SEC, shows deferred shares owned by non-employee directors through the ConAgra Foods, Inc. Directors’ Deferred Compensation Plan and deferred shares owned by executive officers through the ConAgra Foods, Inc. Voluntary Deferred Compensation Plan. Although these shares will ultimately be settled in shares of common stock, they currently have no voting rights, nor will they be settled within 60 days of July 31, 2009.

 

 

 

 

 

Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and persons who own more than 10% of a registered class of our equity securities file with the SEC and New York Stock Exchange reports of ownership and changes in beneficial ownership of our common stock. Directors, executive officers and greater than 10% owners are required to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of copies of these reports furnished to us or written representations that no other reports were required, we believe that during fiscal 2009, all required reports were filed on a timely basis.

 

ConAgra Foods’ business is managed under the direction of our Board of Directors, which currently has 11 members. The Board of Directors is committed to performing its responsibilities in a manner consistent with sound governance practices. Some key practices include the following:

 

Annual Elections for Directors. To promote greater accountability to stockholders, all of our directors stand for election annually.

 

Majority Voting in Director Elections. In uncontested elections, each director nominee must receive the affirmative vote of a majority of the votes cast at the meeting with respect to the director. If an incumbent nominee is not elected, he or she is required to promptly tender his or her resignation to the Board of Directors. The Board will act on the tendered resignation and publicly disclose its decision within 90 days from the certification of the election results.

 

Separate Chairman and Chief Executive Officer. Our Chairman’s role is filled by an independent, non-employee director.

 

Stock Ownership Guidelines for Leadership. Senior leaders across the company are subject to stock ownership guidelines that are set as a multiple of the leader’s salary. For our Chief Executive Officer, Gary Rodkin, that level is six times salary.

 

Stock Holding Periods for Directors. Our directors have each agreed not to engage in open market sales of our common stock during their tenure.

 

Expired “Poison Pill” Rights Plan. In 2004, our Board of Directors terminated our rights plan. We no longer have a stockholder rights plan in place.

Commitment to Sustainable Business Practices. In 2009, the company published its inaugural Corporate Responsibility Report, which transparently shows the company’s performance in climate change, packaging, food safety, employee relations, corporate giving and a wide range of other important topics.

 

To learn more about our governance practices, you can review any of the following listed documents at http://investor.conagrafoods.com through the “Corporate Governance” link.

 

 

From time to time these documents are updated, and we promptly post amended documents. The documents are also available in print to any stockholder upon request to the Corporate Secretary. Interested parties may communicate with our Board of Directors or the Chairman by writing to: ConAgra Foods Board of Directors c/o Corporate Secretary, ConAgra Foods, Inc., Box 2000, One ConAgra Drive, Omaha, Nebraska 68102. Communications will be compiled by the Corporate Secretary and forwarded to the Board or individual director addressee on at least a bi-weekly basis. The Corporate Secretary will routinely filter communications that are solicitations, consumer complaints, unrelated to ConAgra Foods or ConAgra Foods’ business or reasonably determined to pose a possible security risk to the addressee.

 

The Board of Directors meets on a regularly scheduled basis and holds an executive session without management present at every regularly scheduled meeting. The Chairman of the Board presides at all meetings, including executive sessions. During fiscal 2009, the Board met eight times (six regular meetings and two special meetings) and acted by unanimous written consent twice. All members attended at least 75% of the total number of board and committee meetings that required their attendance in fiscal 2009.

 

Our Board members are encouraged to attend the annual stockholders’ meeting. All nominees who were serving at the time of the 2008 annual meeting of stockholders attended such meeting, except Mr. Bay who had a commitment to attend a funeral. Messrs. Johri and Lenny and Ms. Gregor were appointed to serve as members of the Board of Directors subsequent to the 2008 annual meeting of stockholders.

 

The Board of Directors is composed of a substantial majority of independent directors. The Board has established independence standards for company directors that are listed in the Corporate Governance Principles available on our website at http://investor.conagrafoods.com through the “Corporate Governance” link.

 

The Board has determined that directors Bay, Butler, Goldstone, Gregor, Johri, Jurgensen, Lenny, Marshall, Schindler and Stinson have no material relationship with ConAgra Foods and are independent within the meaning of our independence standards. These individuals, in the groups identified in the tables beginning below, are the only members of our Audit Committee, Nominating and Governance Committee, and Human Resources Committee. Mr. Chain and Mr. Roskens, who were directors during the fiscal year but are no longer serving, were previously found by the Board to be independent under the company’s independence standards. In evaluating and determining the independence of these individuals, the Board considered that Mr. Bay is the

Chief Executive Officer of Valmont Industries, Inc. One of our subsidiaries was a customer of immaterial levels of environmental engineering from an affiliate of Valmont Industries, Inc. on an arms-length basis and in the ordinary course of business during fiscal 2009.

 

In addition to satisfying our independence standards, each member of the Audit Committee must satisfy an additional SEC independence requirement that provides that the member may not accept, directly or indirectly, any consulting, advisory or other compensatory fee from us or any of our subsidiaries other than their director’s compensation and may not be an “affiliated person” of ConAgra Foods. Each member of the Audit Committee satisfies this additional independence requirement.

 

Currently, our Board of Directors has four standing committees: Audit Committee, Executive Committee, Human Resources Committee and Nominating and Governance Committee.

 

The Executive Committee met once during fiscal 2009. The committee generally has the authority to act on behalf of the Board of Directors between meetings. Its membership consists of Directors Butler, Goldstone, Rodkin and Stinson. Mr. Goldstone chairs the committee.

 

The Nominating and Governance Committee was formed effective September 25, 2008 from the merger of the previously separate Nominating Committee and Corporate Governance Committee. Prior to the merger, the Corporate Governance Committee consisted of Messrs. Bay, Chain, Goldstone and Stinson and met twice during fiscal 2009. Prior to the merger, the Nominating Committee consisted of Messrs. Jurgensen, Roskens and Schindler and Ms. Marshall and met twice during fiscal 2009. The structure and purpose of the joint Nominating and Governance Committee is set forth below:

 

 

Director Nomination Process. The Nominating and Governance Committee considers candidates for board membership suggested by its members and other board members, as well as by management and stockholders. The Committee may also retain a third-party executive search firm to identify candidates from time to time. A stockholder who wishes to recommend a prospective nominee for board membership should notify our Corporate Secretary in writing at least 120 days before the annual stockholders’ meeting and include whatever supporting material the stockholder considers appropriate. The Nominating and Governance Committee will also consider nominations by a stockholder pursuant to the provisions of our bylaws relating to stockholder nominations as described under “Proposals for 2010 Annual Meeting” at the end of this proxy statement.

 

The Nominating and Governance Committee makes an initial determination as to whether to conduct a full evaluation of the candidate once a prospective nominee has come to its attention. This initial determination is based on whatever information is provided to the Committee as well as other information available to or obtained by the Committee. The preliminary determination is based primarily on the need for additional board

members to fill vacancies or expand the size of the board and the likelihood that the prospective nominee can satisfy the evaluation factors described below. If the Committee determines that additional consideration is warranted, it may request a third-party search firm or other third parties to gather additional information about the prospective nominee. The Committee may also elect to interview a prospective candidate, in person or by telephone. The Nominating and Governance Committee’s evaluation process for nominees recommended by stockholders does not differ.

 

The Nominating and Governance Committee evaluates each prospective nominee against the standards and qualifications set out in the Corporate Governance Principles, including: (1) background, including demonstrated high standards of ethics and integrity, the ability to have sufficient time to effectively carry out the duties of a director, and the ability to represent all stockholders and not a particular interest group; (2) board skill needs, taking into account the experience of current board members, the candidate’s ability to work toward business goals with other board members, and the candidate’s qualifications as independent and qualifications to serve on various committees of the Board; (3) diversity, including the extent to which the candidate reflects the composition of our stockholders and other constituencies; and (4) business experience, which should reflect a broad experience at the policy-making level in business, government or education. The Committee also considers such other relevant factors as it deems appropriate.

 

After completing its evaluation process, the Committee makes a recommendation to the full Board as to the persons who should be nominated, and the Board determines the nominees after considering the Committee’s recommendations.

 

The process outlined above was used during fiscal 2009 in connection with the appointments to the Board of Mr. Johri, Mr. Lenny and Ms. Gregor, each of whom was first recommended for consideration by an independent director.

 

 

The Human Resources Committee has retained authority over the consideration and determination of executive and director compensation, subject only to the further involvement of the Chairman and the other independent directors with respect to the approval of the overall compensation for non-employee directors and of the annual cash bonus for the Chief Executive Officer. Additional information on the role of executive officers and the Committee’s compensation consultant can be found in the “Compensation Discussion & Analysis” later in this proxy statement.

 

Compensation Committee Interlocks and Insider Participation. The individuals listed in the table above and Messrs. Chain and Roskens (former directors) served on our Human Resources Committee during fiscal 2009. During fiscal 2009, none of the current or former executive officers of ConAgra Foods served on the compensation committee (or equivalent), or the board of directors, of another entity whose executive officer(s) served on the Human Resources Committee or Board of Directors of ConAgra Foods.

 

Audit Committee Financial Expert. The Board has determined that all five members of the Audit Committee (each of whom is independent) are qualified as audit committee financial experts within the meaning of SEC regulations.

 

Related Party Transactions. The Audit Committee has adopted a written policy regarding the review, approval or ratification of related party transactions. Under the policy, all related party transactions must be pre-approved by the Audit Committee unless circumstances make pre-approval impracticable. In the latter case, management is allowed to enter into the transaction, but the transaction remains subject to ratification by the Committee at its next regular quarterly meeting. In determining whether to approve or ratify a related party transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the transaction is fair and reasonable to the company and the extent of the related party’s interest in the transaction. No director is permitted to participate in any approval of a related party transaction for which he or she is involved. On at least an annual basis, the Committee reviews and assesses ongoing related party transactions to determine whether the relationships remain appropriate. All related party transactions are disclosed to the full Board of Directors.

 

The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities by reviewing (1) the integrity of the financial statements of the company, (2) the qualifications, independence and performance of the company’s independent auditor and internal audit department, and (3) compliance by the company with legal and regulatory requirements. The Committee acts under a written charter, adopted by the Board of Directors, a copy of which is available on our website.

 

ConAgra Foods’ management is responsible for the company’s financial reporting process and internal controls. The independent auditor is responsible for performing an independent audit of the company’s consolidated financial statements, issuing an opinion on the conformity of those audited financial statements with generally accepted accounting principles and assessing the effectiveness of the company’s internal control over financial reporting. The Audit Committee oversees the company’s financial reporting process and internal controls on behalf of the Board of Directors.

 

The Audit Committee has sole authority to retain, compensate, oversee and terminate the independent auditor. The Audit Committee reviews the company’s annual audited financial statements, quarterly financial statements, and other filings with the Securities and Exchange Commission. The Audit Committee reviews reports on various matters, including: (1) critical accounting policies of the company; (2) material written communications between the independent auditor and management; (3) the independent auditor’s internal quality-control procedures; (4) significant changes in the company’s selection or application of accounting principles; and (5) the effect of regulatory and accounting initiatives on the financial statements of the company. The Committee also has the authority to conduct investigations within the scope of its responsibilities and to retain legal, accounting and other advisors to assist the Committee in its functions.

 

During the last fiscal year, the Audit Committee met and held discussions with representatives of ConAgra Foods management, its internal audit staff, and KPMG LLP, independent auditor. Representatives of financial management, the internal audit staff, and the independent auditor have unrestricted access to the Audit Committee and periodically meet privately with the Audit Committee. The Audit Committee reviewed and discussed with ConAgra Foods’ management and KPMG the audited financial statements contained in the company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009.

 

The Committee also discussed with the independent auditor the matters required to be discussed by the auditor with the Committee under the Statement on Auditing Standards No. 61, as amended (relating to communication with audit committees) as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Committee also reviewed and discussed with KPMG its independence and, as part of that review, received the written disclosures required by applicable professional and regulatory standards relating to KPMG’s independence from ConAgra Foods, including those of the Public Company Accounting Oversight Board pertaining to the independent accountant’s communications with the Audit Committee concerning independence. The Committee also considered whether the provision of non-audit services provided by KPMG to the company during fiscal 2009 was compatible with the auditor’s independence.

 

Based on these reviews and discussions, and the report of the independent auditor, the Audit Committee recommended to the Board of Directors, and the Board approved, that the audited financial statements be included in the company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009 for filing with the Securities and Exchange Commission.

 

ConAgra Foods, Inc. Audit Committee

Stephen G. Butler, Chair
Rajive Johri
W.G. Jurgensen
Richard H. Lenny
Andrew J. Schindler

 

For fiscal 2009, non-employee directors other than the Chairman of the Board were entitled to receive the following:

 

 

Non-employee directors other than the Chairman who served less than the full 12-month period between stockholders’ meetings received a pro-rated retainer, pro-rated stock award and pro-rated option award, in each case, based on actual months of service. Non-employee directors are precluded from selling any of their shares (including shares underlying options) in the market until they cease to be a director.

 

In lieu of the elements described above, the Chairman’s pay for service from the 2008 annual stockholders’ meeting to the 2009 annual stockholders’ meeting was $500,000, payable entirely in options to acquire shares of ConAgra Foods common stock. The options have an exercise price equal to the closing market price of our common stock on the date of grant (September 25, 2008, which was the date of the 2008 annual stockholders’ meeting), a ten-year term and vested six months from the date of grant. The number of options issued was based on the Black-Scholes value of the option on the date of grant consistent with our accounting expense methodology. Our Chairman cannot sell the shares underlying the options in the market until he ceases to be a director.

 

In addition to the cash payments and equity awards described above, all non-employee directors were entitled to participate in the following programs:

 

 

The table below sets forth the compensation elements described above that were paid to the non-employee directors of the company for fiscal 2009:

 

Director Compensation Table – Fiscal 2009

 

 

 

 

 

At fiscal year-end, the aggregate number of outstanding unexercised option awards held by each non-employee director was as set forth below (all stock awards granted were fully vested at fiscal year-end except for the award granted

to Ms. Gregor, which fully vested on August 6, 2009, Mr. Johri, which fully vested on July 2, 2009, and Mr. Lenny, which will fully vest on September 17, 2009):

 

 

 

Our Corporate Governance Principles include a mandatory retirement age for directors. Under the Principles, a director may not stand for re-election if he or she would be over age 72 at the time of the election. Messrs. Chain and Roskens reached our mandatory retirement age and retired effective upon the conclusion of the 2008 annual stockholders’ meeting. During fiscal 2009, Joie A. Gregor, Rajive Johri and Richard H. Lenny were appointed to serve as members of the Board until the 2009 annual meeting of stockholders. Our Board is currently comprised of eleven members.

 

The following individuals were nominated by the Nominating and Governance Committee to stand for election at the meeting. Each is a current member of the Board whose term of office expires at the meeting. In case any nominee becomes unavailable for election to the Board of Directors for any reason not presently known or contemplated, the proxy holders will have discretionary authority in that instance to vote the proxies for a substitute.

 

MOGENS C. BAY – Director since December 12, 1996

 

Mr. Bay (60 years of age) has served as Chairman of the Board and Chief Executive Officer of Valmont Industries, Inc. (products for water management and infrastructure) since January 1997. He is also a director of Peter Kiewit Sons’, Inc.

 

STEPHEN G. BUTLER – Director since May 16, 2003

 

Mr. Butler (61 years of age) served as the Chairman and Chief Executive Officer of KPMG LLP (national public accounting firm) from 1996 to June 2002. He is a director of Cooper Industries, Ltd. and Ford Motor Company.

 

STEVEN F. GOLDSTONE – Director since December 11, 2003

 

Mr. Goldstone (63 years of age) has served as non-executive Chairman of the ConAgra Foods board since October 1, 2005. He has been a manager of Silver Spring Group (private investment firm) since 2000. From 1999 to 2000, Mr. Goldstone served as Chairman of Nabisco Group Holdings (food company). Mr. Goldstone is a director of Merck & Co., Inc. and Greenhill & Co., Inc.

 

JOIE A. GREGOR – Director since February 6, 2009

 

Ms. Gregor (59 years of age) served as assistant to the President for presidential personnel under President George W. Bush. Previously, Ms. Gregor served as Vice Chairman of Heidrick & Struggles International, Inc. (executive search firm) from 2002 until 2007. From 1993 until 2002 she served in a number of senior leadership roles with that firm, including President, North America, managing partner of the firm’s Global Board of Directors Practice and managing partner of the New York office.

 

RAJIVE JOHRI – Director since January 1, 2009

 

Mr. Johri (59 years of age) served as President and Director of First National Bank of Omaha (FNBO), from 2006 until 2009. From September 2005 to June 2006, he served as President of First National Credit Cards Center for FNBO. Prior to that, he served as an Executive Vice President for J.P. Morgan Chase Bank from 1999 until 2004.

 

W.G. JURGENSEN – Director since August 2, 2002

 

Mr. Jurgensen (58 years of age) served as Chief Executive Officer and a director of Nationwide Financial Insurance Services, Inc. (insurance) from 2000 to 2009. He also served as Chief Executive Officer and a director of several other companies within the Nationwide enterprise, which is comprised of Nationwide Financial, Nationwide Mutual, Nationwide Mutual Fire and all of their respective subsidiaries and affiliates. Mr. Jurgensen is a director of The Scotts Miracle-Gro Company.

 

RICHARD H. LENNY – Director since March 17, 2009

 

Mr. Lenny (57 years of age) served as Chairman, President and Chief Executive Officer of The Hershey Company (manufacturer of confectionery and snack products), from 2001 through 2007. Prior to joining

Hershey, Mr. Lenny was group vice president of Kraft Foods and President, Nabisco Biscuit and Snacks, following Kraft’s acquisition of Nabisco in 2000. He joined Nabisco in 1998 from the Pillsbury Company where he was president of Pillsbury, North America. Mr. Lenny is a director of McDonald’s Corporation and Discover Financial Services.

 

RUTH ANN MARSHALL – Director since May 23, 2007

 

Ms. Marshall (55 years of age) was President of the Americas, MasterCard International (payments industry) from October 1999 until her retirement in June 2006. She is a director of Global Payments Inc. and Pella Corporation.

 

GARY M. RODKIN – Director since October 1, 2005

 

Mr. Rodkin (57 years of age) has been our President and Chief Executive Officer since October 1, 2005. Previously, he was Chairman and Chief Executive Officer of PepsiCo Beverages and Foods North America (consumer products and manufacturing) from February 2003 to June 2005. He also served as President and Chief Executive Officer of PepsiCo Beverages and Foods North America in 2002, and President and Chief Executive Officer of Pepsi-Cola North America from 1999 to 2002. Mr. Rodkin is a director of Avon Products, Inc., the Grocery Manufacturers of America and Boys Town.

 

ANDREW J. SCHINDLER – Director since May 23, 2007

 

Mr. Schindler (65 years of age) served R. J. Reynolds Tobacco Holdings, Inc. (tobacco products) as Chairman and Chief Executive Officer from 1999 to 2004 and Reynolds American, Inc. (tobacco products) as Chairman from July 2004 until his retirement in December 2005. Mr. Schindler achieved the rank of captain in the U.S. Army, where he held command and staff positions in the United States and in Vietnam. He is a director of Krispy Kreme Doughnuts Inc. and Hanesbrands, Inc.

 

KENNETH E. STINSON – Director since December 12, 1996

 

Mr. Stinson (66 years of age) is Chairman of the Board of Peter Kiewit Sons’, Inc. (construction and mining). He served as Chief Executive Officer of Peter Kiewit Sons’, Inc. from 1998 until 2004. Mr. Stinson is a director of Kiewit Investment Fund LLLP, Valmont Industries, Inc. and McCarthy Group, L.L.C.

 

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

 

General

 

We are asking stockholders to approve the ConAgra Foods 2009 Stock Plan, which we refer to as the 2009 Stock Plan. The Board of Directors approved the 2009 Stock Plan in July 2009, subject to stockholder approval. The Board approved the 2009 Stock Plan and recommends a vote in favor of its approval because of the critical role that stock incentives play in aligning manager and stockholder interests and advancing the Human Resources Committee’s pay for performance agenda. As discussed in the “Compensation Discussion & Analysis,” a significant portion of the compensation paid to our executive officers is in the form of stock-based awards, which ensures a pay for performance link. The Human Resources Committee (referred to in this Proposal #2 as the Committee) has also approved the issuance of stock-based awards to a broad array of managers throughout the company. Stock incentives can motivate superior performance by encouraging managers to make decisions that increase the value of the company, and thus their own wealth. Stock incentives also enable the company to attract and retain the services of a high-caliber management team.

 

As of July 31, 2009, only 2,414,715 shares of common stock remain available for grant under ConAgra Foods’ 2006 Stock Plan, which we refer to as the 2006 Plan. The 2009 Stock Plan authorizes the issuance of up to 29,500,000 additional shares of ConAgra Foods common stock. Any shares that have not been awarded under the 2006 Plan as of the time of approval of the 2009 Stock Plan, together with any shares that are cancelled, terminated or otherwise settled without the issuance of common stock under the 2006 Plan; the ConAgra Foods 1990 Stock Plan, which we refer to as the 1990 Plan; the ConAgra Foods 1995 Stock Plan, which we refer to as the 1995 Plan; and the ConAgra Foods 2000 Stock Plan, which we refer to as the 2000 Plan, will also be authorized for issuance under the 2009 Stock Plan. We refer to the 2000 Plan, together with the 1990 Plan, the 1995 Plan and the 2006 Plan, as the Predecessor Plans. Shares used to pay the exercise price of, or withholding taxes associated with, an award under the Predecessor Plans will not be made available for issuance as awards under the 2009 Stock Plan.

 

As of July 31, 2009, an aggregate of 39,474,721 shares of common stock could be issued upon the exercise of outstanding options under the Predecessor Plans. These options have a weighted average exercise price of $22.50 and a weighted average remaining term of 5.15 years. No stock appreciation rights, which we refer to as SARs, were outstanding. Further, as of July 31, 2009, an aggregate of 4,848,467 shares of common stock were could be issued under all Predecessor Plans for “full value” awards, that is, awards other than options or SARs.

 

If the 2009 Stock Plan is approved, ConAgra Foods will not issue any new awards under the 2006 Plan. The 1990 Plan, 1995 Plan and the 2000 Plan were terminated upon the approval of the 2006 Plan and accordingly, ConAgra Foods will not issue any new awards under the 1990 Plan, the 1995 Plan or the 2000 Plan.

 

Summary of the 2009 Stock Plan

 

Below is a summary of the principal features of the 2009 Stock Plan. The summary is qualified in its entirety by reference to the complete text of the 2009 Stock Plan, which is set forth in Annex A to this Proxy Statement.

 

Administration and Delegation. The Committee will administer the 2009 Stock Plan and its determinations will be binding on all participants. The Committee may delegate any or all of its powers to one or more of its members. The Committee may also delegate to any individual officer of the company the authority to designate recipients of awards and the number and type of awards granted, although the officer cannot use this authority to grant awards to executive officers, directors or him or herself. This delegation authority does not permit the grant of an award to any executive officer or other employee who is reasonably expected to be covered by Section 162(m) of the Internal Revenue Code, which we refer to as the Code, except by two or more directors who each meet the criteria of “outside director” under Section 162(m) of the Code.

Eligibility. The 2009 Stock Plan authorizes the Committee to make awards to employees of ConAgra Foods and its subsidiaries, and to non-employee directors of ConAgra Foods and consultants. The number of grantees will vary from year to year. During fiscal 2009, approximately 1,200 participants were granted awards under the 2006 Plan. Based on this, we expect that approximately 1,200 participants will annually receive awards under the 2009 Stock Plan. The number of options and other awards, if any, that an individual will be entitled to receive under the 2009 Stock Plan will be at the discretion of the Committee and therefore cannot be determined in advance.

 

Authorized Shares. The maximum number of shares of ConAgra Foods’ common stock, $5.00 par value, that may be issued under the 2009 Stock Plan is 29,500,000. Any shares that have not been issued and are not subject to outstanding awards under the 2006 Plan as of the time of approval of the 2009 Stock Plan, together with any shares that are cancelled, terminated or otherwise settled without the issuance of common stock under the Predecessor Plans, are also authorized for issuance under the 2009 Stock Plan. As of July 31, 2009, 2,414,715 shares of common stock had not been issued and were not subject to outstanding awards under the 2006 Plan. Shares used to pay the exercise price of, or withholding taxes associated with an award under the Predecessor Plans will not be made available for issuance as awards under the 2009 Stock Plan.

 

Any shares of common stock subject to an award that for any reason is cancelled, terminated or otherwise settled without the issuance of any common stock are again available for awards under the 2009 Stock Plan. However, shares (1) used to pay the exercise price of an award or to pay withholding taxes, and (2) shares not issued or delivered as a result of a net settlement of SARs are not again made available for awards under the 2009 Stock Plan.

 

Shares eligible for grant under the 2009 Stock Plan can be from authorized but unissued shares or treasury shares.

 

Limits on Grants. Under the 2009 Stock Plan, no single participant in any fiscal year may receive awards with respect to shares of common stock that amount to more than 15% of the aggregate number of shares of common stock authorized for the 2009 Stock Plan. A maximum of 50% of the shares of stock available under the 2009 Stock Plan may be issued as awards other than stock options or SARs. The number of shares of stock that may be issued as awards to non-employee directors under the 2009 Stock Plan in any fiscal year is 5% of the aggregate number of shares available under the 2009 Stock Plan.

 

Adjustments to Awards. The 2009 Stock Plan requires that if there is a stock dividend, stock split, recapitalization, merger, consolidation, combination, spinoff, distribution of assets to stockholders, exchange or other similar corporate transaction or event, appropriate adjustments must be made by the Committee in the number of shares available for future issuance under the 2009 Stock Plan, in the maximum number of shares available for grant to any individual under the 2009 Stock Plan, and in the number of shares, prices and dollar values (as applicable) of all awards outstanding before the event.

 

The exercise price of an outstanding stock option may not be reduced without stockholder approval except in the limited circumstances of (1) an adjustment stemming from a corporate transaction (as described in the immediately preceding paragraph), or (2) upon assumption of options previously issued by companies acquired by the company by merger or stock purchase.

 

Dividend Equivalents. No dividends or dividend equivalents may be paid on stock options or SARs under the 2009 Stock Plan. For restricted stock and other stock-based awards, the 2009 Stock Plan allows the Committee to provide, at its discretion and at the time of grant, for dividends or dividend equivalents to be paid (or accumulated and paid) to the participant.

 

Types of Awards Allowed Under the 2009 Stock Plan

 

Stock Options. The Committee may grant nonqualified options and options qualifying as incentive stock options. The option price of nonqualified stock options and incentive stock options will be the fair market value of the common stock on the date of grant. Options qualifying as incentive stock options will be required to meet certain requirements of the Code and only participants who are employees will be eligible to receive incentive stock options.

The 2009 Stock Plan allows the Committee to determine the method or methods of payment to be allowed for the exercise of stock options. These methods may include payment in cash, withholding shares otherwise issuable on exercise of the option or by delivering other shares of common stock.

 

Stock options may not be granted under the 2009 Stock Plan in consideration for a participant’s delivery of ConAgra Foods stock as payment of the exercise price of or taxes due on any other stock option. In other words, no reload options are permitted.

 

The 2009 Stock Plan requires that the Committee fix the term of each option, but the term may not exceed ten years from the date of grant. The Committee will determine the time or times when each option is exercisable. Options can be made exercisable in installments, and the exercisability of options may be accelerated by the Committee. The Committee intends to accelerate the exercisability of options only in special circumstances. Unless provided otherwise in the option agreement, all outstanding options under the 2009 Stock Plan will become immediately exercisable in the event of a change-in-control (as defined in the 2009 Stock Plan) of ConAgra Foods.

 

Stock Appreciation Rights. The 2009 Stock Plan authorizes the Committee to grant stock appreciation rights, which we refer to as SARs, which may be granted in conjunction with an option or separately from any option. Each SAR granted in tandem with an option can be exercised only to the extent that the corresponding option is exercised, and the SAR will terminate upon termination or exercise of the corresponding option. Upon the exercise of a SAR granted in tandem with an option, the corresponding option will terminate. SARs granted separately from options can be granted on the terms and conditions established by the Committee.

 

SARs may be made exercisable in installments, and the exercisability of SARs may be accelerated by the Committee. The Committee intends to accelerate the exercisability of SARs only in special circumstances. However, the 2009 Stock Plan does not permit the term of a SAR to exceed ten years from the date of grant. The 2009 Stock Plan allows the Committee to determine the method or methods of payment to be allowed for the exercise of a SAR. Unless provided otherwise in the SAR agreement, all outstanding SARs become immediately exercisable in the event of a change-in-control (as defined in the 2009 Stock Plan) of ConAgra Foods.

 

Restricted Stock. The 2009 Stock Plan authorizes the Committee to grant awards of restricted stock, with such restrictions on vesting as the Committee may determine. Restrictions can relate to, among other things, continued employment with the company, or to ConAgra Foods’ financial performance.

 

The Committee has the right to accelerate the vesting of restricted stock awards and to waive any restrictions to vesting. The Committee intends to grant acceleration or waiver of restricted stock provisions only in special circumstances. Unless provided otherwise in the restricted stock agreement, all restrictions lapse in the event of a change-in-control (as defined in the 2009 Stock Plan) of ConAgra Foods.

 

Other Awards. The 2009 Stock Plan authorizes the Committee to grant awards to participants that are valued in whole or in part by reference to, or are otherwise based on the fair market value of ConAgra Foods’ common stock (which we refer to as “other stock-based awards”) on such terms as the Committee may determine. Such awards may include restricted stock units, or RSUs, which may be settled in ConAgra Foods’ common stock or otherwise, and performance share awards which are the subject of one or more performance goals. For awards that are intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code, which we refer to as “qualified performance-based awards,” performance goals will be selected from the following criteria:

 

 

Additional Limitations. A maximum of 5% of the shares of stock available under the 2009 Stock Plan may be issued as stock awards, restricted stock, RSUs, or performance shares having no minimum vesting period. Subject to the foregoing, and except in the case of a change-in-control (as defined in the 2009 Stock Plan) of ConAgra Foods, the death or disability of a participant, or a participant’s termination of employment, no award (other than a stock option or SAR) (1) that is based on performance goals shall be based on performance over a period of less than one year, or (2) that is conditioned on continued employment or the passage of time shall provide for vesting in less than three years from the grant date of the award, provided, however, that partial vesting pursuant to an award agreement may occur during each year of this three-year period.

 

Tax Withholding. The Committee may permit a participant to satisfy all withholding tax requirements through the delivery to ConAgra Foods of previously-acquired shares of common stock or by having shares otherwise issuable under the 2009 Stock Plan withheld by ConAgra Foods. Alternatively, participants must satisfy any tax withholding requirements by remitting cash or a check.

 

Other Information. Except as permitted by the Committee, awards under the 2009 Stock Plan are not transferable except by will or under the laws of descent and distribution.

 

The Board may terminate the 2009 Stock Plan at any time but such termination will not affect any award then outstanding. Unless terminated by action of the Board, the 2009 Stock Plan will continue in effect until September 25, 2019, but awards granted prior to that date will continue in effect until they expire in accordance with their original terms.

 

The Board may amend the 2009 Stock Plan as it deems advisable. Amendments that (1) materially modify the requirements for participation in the 2009 Stock Plan, (2) increase the number of shares of ConAgra Foods common stock subject to issuance under the 2009 Stock Plan, (3) change the minimum exercise price for stock options as provided in the 2009 Stock Plan, or (4) extend the term of the 2009 Stock Plan, must be submitted to stockholders for approval.

 

Compliance with Section 162(m) of the Code

 

Section 162(m) of the Code denies a deduction by a publicly held company for certain compensation in excess of $1 million per year paid to the company’s chief executive officer or any of the company’s three other most highly compensated executive officers, generally other than the chief financial officer, who are employed as of the end of the year. Compensation realized with respect to stock options and SARs, including upon exercise of a SAR or a non-qualified stock option or upon a disqualifying disposition of an incentive stock option, as described in the next section entitled “Federal Income Tax Consequences”, will be excluded from this deduction limit if it satisfies certain requirements, including a requirement that the 2009 Stock Plan be approved by ConAgra Food’s stockholders. In addition, other awards under the 2009 Stock Plan may be excluded from this deduction limit if they are conditioned on the achievement of one or more performance goals that have been approved by the company’s stockholders. Approval of the 2009 Stock Plan by ConAgra Foods’ stockholders at the annual meeting will constitute approval of such performance goals.

Federal Income Tax Consequences

 

The following is a summary of the U.S. federal income tax consequences of various awards under the 2009 Stock Plan.

 

With respect to incentive stock options, if the holder of an option does not dispose of the shares acquired upon exercise of the option within one year from the transfer of such shares to such participant, or within two years from the date the option to acquire such shares is granted, then for federal income tax purposes (1) the optionee will not recognize any income at the time of exercise of the option; (2) the excess of the fair market value of the shares as of the date of exercise over the option price will constitute an “item of adjustment” for purposes of the alternative minimum tax; and (3) the difference between the option price and the amount realized upon the sale of the shares by the optionee will be treated as a long-term capital gain or loss. If the holder of an incentive stock option disposes of the shares acquired upon exercise of the option within one year from the transfer of such shares to such participant, or within two years from the date the option to acquire such shares is granted, then for federal income tax purposes the participant will recognize ordinary income equal to the difference between the fair market value of the shares as of the date of exercise and the option price, or if less, the amount by which the value of the shares on the date of the sale or other disposition exceeds the option exercise price; any additional increase in the value of option shares after the exercise date will be taxed as capital gain. ConAgra Foods will not be allowed a deduction for federal income tax purposes in connection with the granting of an incentive stock option or the issuance of shares thereunder if the holding period discussed above is met. If the shares are sold or disposed of before the expiration of the required holding period, ConAgra Foods will be allowed a tax deduction equal to the amount of ordinary income recognized by the participant.

 

With respect to the grant of options which are not incentive stock options, the person receiving an option will recognize no income on receipt thereof. Upon the exercise of the option, the optionee will recognize ordinary income in the amount of the difference between the option price and the fair market value of the shares on the date the option is exercised. ConAgra Foods generally will receive an equivalent deduction at that time.

 

With respect to restricted stock awards and other stock awards, an amount equal to the fair market value of the ConAgra Foods shares distributed to the participant (in excess of any purchase price paid by the participant) will be includable in the participant’s gross income at the time of receipt unless the award is not transferable and subject to a substantial risk of forfeiture as defined in Section 83 of the Code (which we refer to as a forfeiture restriction). If a participant receives an award subject to a forfeiture restriction, the participant may elect to include in gross income the fair market value of the award. In the absence of such an election, the participant will include in gross income the fair market value of the award subject to a forfeiture restriction on the earlier of the date such restrictions lapse or the date the award becomes transferable. ConAgra Foods generally is entitled to a deduction at the time and in the amount that the income is included in the gross income of a participant.

 

With respect to performance shares and SARs, the amount of any cash (or the fair market value of any common stock) received will be subject to ordinary income tax in the year of receipt and ConAgra Foods generally will be entitled to a deduction for such amount.

 

The Board of Directors recommends a vote “FOR” Proposal # 2.

 

The following table provides information about shares of our common stock that may be issued upon the exercise of options, warrants and rights under existing equity compensation plans as of our most recent fiscal year-end, May 31, 2009.

 

 

 

 

As of July 31, 2009, an aggregate of 39,474,721 shares of common stock could be issued upon the exercise of outstanding options under existing equity compensation plans. These options have a weighted average exercise price of $22.50 and a weighted average remaining term of 5.15 years. No SARs were outstanding. Further, as of July 31, 2009, an aggregate of 4,848,467 shares of common stock could be issued under existing equity compensation plans for full value awards.

 

General

 

We are asking stockholders to approve the ConAgra Foods Executive Incentive Plan, as amended and restated — 2009, which we refer to as the EIP. The Board of Directors approved the EIP in July 2009, subject to stockholder approval.

 

The EIP is necessary for the company to preserve the tax deductibility of cash incentive awards paid to executive officers under Section 162(m) of the Code. Section 162(m) limits the deductibility of compensation to the chief executive officer and the next three most highly compensated executive officers, generally other than the chief financial officer. However, the limit on deductibility does not apply to compensation defined in Section 162(m) as “performance-based compensation” (which we refer to as “qualified performance-based compensation”).

 

The Human Resources Committee (referred to in this Proposal #3 as the Committee), has developed an executive compensation program that includes a significant level of compensation based on the achievement of performance goals. However, for awards to constitute qualified performance-based compensation, stockholder approval of the following must occur at least every five years:

 

 

The EIP, as approved by the Board of Directors, specifies these items. Stockholders last approved a similar plan five years ago, in 2004 (the 2004 Executive Incentive Plan, or the 2004 EIP). The material terms of the 2004 EIP, as amended and restated as the EIP, are submitted for stockholder approval at this meeting. If stockholders do not approve the EIP, the 2004 EIP will be cancelled and the Committee will need to reevaluate the compensation of employees who are eligible for the EIP. In addition, this would adversely affect ConAgra Foods’ ability to deduct compensation paid to our chief executive officer and the next three most highly compensated executive officers other than the chief financial officer.

 

The terms of the EIP are similar to the 2004 EIP, with material differences noted in the summary of the EIP below.

 

Summary of the EIP

 

Below is a summary of the principal features of the EIP. The summary is qualified in its entirety by reference to the complete text of the EIP set forth in Annex B to this Proxy Statement.

 

Administration of the EIP. The EIP will be administered by the Committee, which is composed entirely of directors who each meet the criteria of “outside director” under Section 162(m) of the Code, “non-employee director” under the rules of the SEC and “independent director” under the listing standards of the NYSE. The Committee will have the full power and authority to administer and interpret the EIP, which includes, among other things, selecting participants, approving pre-established objective performance goals for awards, and certifying the level to which each performance goal was attained prior to any payment under the EIP. Unlike the 2004 EIP, the EIP also permits the Committee to delegate its responsibilities under the EIP to individuals, including members of management, appointed by the Committee, provided that the Committee may not delegate with respect to a qualified performance-based award if doing so would cause such award to fail to qualify under Section 162(m) of the Code.

 

Eligibility. Executive officers, senior officers, and other employees performing similar duties for ConAgra Foods are eligible to receive awards under the EIP. The Committee will select the specific officers and employees who will participate in the EIP each performance period. Accordingly, no employee is guaranteed to be eligible to participate for any performance period and an employee who is selected by the

Committee for participation in one performance period may be excluded from participation in any subsequent performance period. The approximate number of participants in the 2004 EIP for fiscal 2009 was 25. We expect approximately the same number of participants will be annually eligible to participate in the EIP. The number of awards that an individual will be entitled to receive under the EIP will be at the discretion of the Committee and therefore cannot be determined in advance.

 

Performance Goals. Awards under the EIP can use performance goals based on an expanded list of business criteria versus the criteria included in the 2004 EIP. As described later under the heading “Compensation Discussion & Analysis,” the Committee has developed an executive compensation program that includes a significant level of compensation based on the achievement of performance goals. However, for purposes of the deductibility of compensation under Section 162(m) of the Code, performance goals under the EIP may be based on any one or more of the following business criteria:

 

 

The EIP provides that within 90 days after commencement of the performance period for an award (or, if shorter, before 25 percent of the performance period has elapsed), the Committee will establish:

 

 

The EIP authorizes the Committee to establish rules and procedures for cases where employment or eligibility begins after the start of a performance period, or ends before payment of an award.

 

Determining Achievement of Performance Goals. Qualified performance-based awards may be paid only after certification by the Committee that the specified performance goals established under the EIP were

achieved. In general, in determining whether any performance goal has been satisfied, the Committee may exclude (i) any or all extraordinary items (as determined under U.S. generally accepted accounting principles), and (ii) any other unusual or nonrecurring items or events, including but not limited to: (a) charges, costs or benefits or gains associated with: restructurings of ConAgra Foods; litigation or claim adjudication, judgments or settlements; mergers, acquisitions, or divestitures; and material changes in business, operations, corporate or capital structure; (b) foreign exchange or hedge-related gains and losses; (c) asset write-downs; (d) discontinued operations; and (e) the cumulative effects of accounting changes. However, in the case of qualified performance-based awards, these exclusions and adjustments may only apply to the extent the Committee specifies in writing (not later than the time performance goals are required to be established) which exclusions and adjustments the Committee will apply to determine whether a performance goal has been satisfied, as well as an objective manner for applying them, or to the extent that the Committee determines that they may apply without adversely affecting the award’s status as a qualified performance-based award.

 

Negative Discretion. Notwithstanding the attainment of the specified performance goal or measures in an award, the Committee has the sole discretion, for each participant, to reduce some or all of an award that would otherwise be paid.

 

Payment of Awards. Awards will be payable following the completion of each performance period (unless deferred consistent with Section 409A of the Code). The shares underlying equity-based awards, including stock awards and options, will be issued out of the ConAgra Foods stock plan in existence at the time of payment.

 

Award Limitations. The maximum individual award permitted under the EIP in a fiscal year has increased from the 2004 EIP. Under the EIP, a single participant may not receive aggregate cash compensation under the EIP in any fiscal year of more than 1% of ConAgra Foods’ market capitalization as of the first day of the performance period. In the case of a performance period other than a 12-month fiscal year, the maximum award is an amount that bears the same ratio to 1% of ConAgra Foods’ market capitalization as of the first day of the performance period, as the length of the performance period bears to a 12-month fiscal year. Under the 2004 EIP, the maximum individual award permitted was capped at 0.1% of ConAgra Foods’ market capitalization as of the first day of the fiscal year.

 

The Board of Directors recommends a vote “FOR” Proposal # 3.

 

The firm of KPMG LLP conducted the audits of our financial statements for fiscal years 2009 and 2008. The Audit Committee has re-appointed KPMG as the independent registered public accounting firm to conduct the fiscal 2010 audit of our financial statements and the Board of Directors requests that the stockholders ratify this appointment.

 

Representatives from KPMG are expected to be present at the annual meeting. The representatives will have the opportunity to make a statement and will be available to respond to appropriate questions. In the event the stockholders do not ratify the appointment, the Audit Committee will reconsider the appointment.

 

Fees billed to us by KPMG for services provided for fiscal years 2009 and 2008 were as follows:

 

 

Audit Fees consist of the audits of our fiscal years 2009 and 2008 annual financial statements and the review of our quarterly financial statements during fiscal years 2009 and 2008.

 

Audit-Related Fees in fiscal 2009 consist of other attestation services and in fiscal 2008 consist primarily of employee benefit plan audits and the audit of the financial statements of a business unit that was being sold.

 

Tax Fees in fiscal 2008 consist primarily of international tax compliance services.

 

All Other Fees in fiscal years 2009 and 2008 relate to a license for accounting research software.

 

The Audit Committee pre-approves all audit and non-audit services performed by the independent auditor. The Audit Committee will periodically grant general pre-approval of categories of audit and non-audit services. Any other services must be specifically approved by the Audit Committee, and any proposed services exceeding pre-approved cost levels must be specifically pre-approved by the Audit Committee. In periods between Audit Committee meetings, the Chairman of the Audit Committee has the delegated authority from the Committee to pre-approve additional services, and his pre-approvals are then communicated to the full Audit Committee at its next meeting.

 

The Audit Committee approved 100% of the services performed by KPMG relating to “audit-related fees,” “tax fees” and “all other fees” during fiscal years 2009 and 2008.

 

The Board of Directors recommends a vote “FOR” Proposal # 4.

 

The following Compensation Discussion & Analysis describes how the company’s Human Resources Committee, which we refer to in this “Executive Compensation” section as the Committee, and Board of Directors design the executive compensation program and set individual pay. The focus of the Compensation Discussion & Analysis is our fiscal 2009 compensation program for the individuals identified in our compensation tables. We refer to these individuals as our “named executive officers.” Fiscal 2009 began May 26, 2008 and ended May 31, 2009.

 

Executive Summary

 

The primary focus of the ConAgra Foods executive compensation program is to encourage and reward behavior that promotes sustainable growth in stockholder value through attainment of annual and long-term goals. This focus is intended to limit speculative rewards for short-term results.

 

Fiscal 2009 was Chief Executive Officer Gary Rodkin’s third full fiscal year with the company. Under Mr. Rodkin’s direction, senior management has been focused on transforming ConAgra Foods into one integrated operating company delivering sustainable, profitable growth. Late in fiscal 2006, Mr. Rodkin and his senior management team shared with investors a three-year strategic plan for moving the company through that transformation. The strategic plan for fiscal years 2007 to 2009 was centered on changing the company’s culture, divesting non-core businesses, developing a “fewer, bigger, better” approach to innovation, developing more effective marketing, improving in-store execution, and achieving significant cost savings, primarily through supply chain improvements. The company believed that successful execution of the plan would create stockholder value by growing metrics including earnings before interest and taxes and return on average invested capital. As such, the Committee concurrently redesigned the company’s long-term incentive plan to provide financial rewards if growth in these metrics was achieved.

 

In each of fiscal years 2007, 2008 and 2009, the company’s long-term strategic plan was considered when designing the annual operating plan. The fiscal 2009 operating plan focused on delivering our “fewer, bigger, better” promise, particularly in the Consumer Foods business, continuing the operating excellence in our Commercial Foods business, and completing the divestiture of the non-core Trading and Merchandising reporting segment and effectively redeploying the sale proceeds. The Committee designed an annual incentive plan to provide financial rewards if management achieved the profit targets associated with the operating plan initiatives. As fiscal 2009 progressed, input cost inflation exceeded expectations and the outlook dimmed for the broader economy. The company lowered its profit forecast as a result. However, the Committee did not adjust the performance targets in the annual incentive plan.

 

Over the last three fiscal years, the company has accomplished many of the goals outlined in its fiscal 2007 to 2009 strategic plan, including:

 

 

 

Although we met many of the goals of our fiscal 2009 annual operating plan, it was a year with varied performance. Our Consumer Foods segment underperformed in the first half of the year, in large part due to unplanned input cost inflation. However, by the third quarter, the segment had achieved year-over-year growth in operating profit and fourth quarter performance was even stronger. This second-half growth was due in large part to the introduction of many on-trend new products, strong marketing, a transformation of major brands in our frozen foods business, and an intense focus on business fundamentals. Although its first-half performance prevented the Consumer Foods segment from achieving its original fiscal 2009 profit targets, the segment’s second-half performance created significant momentum for the company as it began fiscal 2010.

 

Our Commercial Foods segment experienced increasing external challenges as fiscal 2009 progressed. The segment’s key customers are restaurants and other foodservice operators−businesses that were impacted significantly by the weakened economy. However, a strong full-year performance by the segment’s flour milling business, together with a focus on efficiencies, product mix and pricing throughout the segment, led Commercial Foods to overachieve its sales and profit goals for the year.

 

It was within this context that the Committee analyzed compensation programs for fiscal 2009 and authorized the payouts under our fiscal 2007 to 2009 long-term incentive plan and fiscal 2009 annual incentive plan discussed later in this Compensation Discussion & Analysis.

 

What are the Objectives of ConAgra Foods’ Compensation Program?

 

Our executive compensation program is designed to support four objectives:

 

 

How is the Executive Compensation Program Designed and Approved?

 

The Committee considers a variety of factors when designing the compensation program and setting pay, including:

 

 

The Committee relies on the expertise of an independent compensation consultant, Towers Perrin, to assist it in obtaining and reviewing information relevant to these factors. The independence and performance of the consultant are of the utmost importance to the Committee. As a result, the Committee maintains a policy that prevents management from directly engaging Towers Perrin for significant projects without the prior approval of the Committee Chair. Also, the Committee reviews the types of services provided by Towers Perrin, and all fees paid for those services on a regular basis, and conducts a formal evaluation of the consultant annually. For fiscal 2009, fees paid to Towers Perrin for all work related to ConAgra Foods (directly for the Committee and other services) totaled less than $550,000.

 

As mentioned above, the Committee considers external pay comparisons when setting pay. The Committee does not set our named executive officers’ total compensation at any specific percentile of an external peer group’s compensation levels but does find external pay data informative. Specifically, the Committee reviews general industry data, a customized survey of the food and consumer products industry, and a survey of a “peer group” of consumer product companies. Towers Perrin provides the Committee with this market information and assists the Committee in understanding the competitive market for the company’s executive positions.

 

The composition of the “peer group” is reviewed annually. Towers Perrin assists the Committee by compiling a list of consumer product companies (with an emphasis on food and beverage companies) with revenues comparable to ConAgra Foods and with whom we compete for talent. The Committee works with Towers Perrin to ensure that the peer group is large enough to withstand unanticipated changes in the included companies’ structure or compensation programs. Shortly before the start of the fiscal year, the Committee approved the following peer group composition for fiscal 2009:

 

 

 

 

The Committee prefers to keep the peer group consistent from year to year. The fiscal 2008 and 2009 peer groups were identical. The median revenue of the peer group listed above is similar to ours. We use regression analysis to adjust the compensation data for differences in company revenues.

 

Considering the extent to which the company and our executive officers perform against expectations is also a critical component of the pay process. We discuss the link between company financial performance and our incentive compensation plans later in this Compensation Discussion & Analysis. Mr. Rodkin contributes to compensation decisions by providing the Committee with his views on the appropriate company goals to use in incentive plans. At the end of an incentive plan’s performance period, he contributes by offering the Committee his views of the company’s actual performance. In fiscal 2009, the Committee used his input when determining the extent of discretion to apply to the annual incentive plan’s funding level.

 

With respect to individual performance, the Committee relies on regular performance evaluations. The full Board participates in a formal evaluation of Mr. Rodkin’s performance each year. As a part of this process, Mr. Rodkin provides the Board with a self-assessment. For the other named executive officers, none of whom reports directly to the Board, Mr. Rodkin shares his assessment of their performance against individual objectives. As part of this assessment, Mr. Rodkin provides his view on the level of salary and incentive compensation that the Committee should consider awarding to the other named executive officers. Neither Mr. Rodkin nor any other individual named executive officer plays a direct role in his or her own compensation determination.

 

As the economy deteriorated during fiscal 2009 and the company reviewed whether reductions in compensation or benefit programs would be needed to offset, in part, the related impacts, Mr. Rodkin asked

the Committee to freeze his and his senior management team’s salaries for fiscal 2010, in part in order to allow for modest growth in wages and salaries for the rest of the company’s employees. The Committee agreed to this freeze.

 

The remainder of this Compensation Discussion & Analysis focuses primarily on fiscal 2009 compensation decisions, but we do address significant changes to programs and pay levels for fiscal 2010 in the various sections. Our senior Human Resources officers and our compensation and benefits department work closely with the Committee to implement and administer the approved programs and support the Committee in communications with Towers Perrin.

 

What Were the Key Elements of the Fiscal 2009 Compensation Program?

 

The fiscal 2009 pay packages for our named executive officers consisted of salary, short and long-term incentive opportunities and other benefits discussed below. The Committee determined the mix of salary and at-risk pay (targeted short-term incentive levels as a percentage of salary, option grants and targeted performance shares) based primarily on its review of the executive’s position within the company, internal pay equity, and market data provided by Towers Perrin. The Committee believes that using a mix of compensation types (for example, salary, cash incentives, and equity) and performance periods (for example, one-year and three-year periods) promotes behavior consistent with our long-term strategic plan and minimizes the likelihood of executives having significant motivation to pursue unsustainable results.

 

By design, targeted at-risk pay for the named executive officers for fiscal 2009 was a significant percentage, more than 75% of the total opportunity. This is shown in the charts below. The Committee’s general policy is to provide the greatest percentage of this at-risk pay opportunity in the form of long-term compensation payable in shares of our common stock. The Committee believes this emphasis is the best method of aligning management interests with those of our stockholders.

 

 

For fiscal 2009, consistent with previous years and based on the factors described above, Mr. Rodkin’s annual incentive opportunity (which we refer to and discuss below as the Management Incentive Plan or MIP) and long-term incentives (comprised of performance shares and an option award) were larger than the other named executive officers. The Committee took into account Mr. Rodkin’s leadership, value to the company and accountability for the performance of the entire organization. The Committee also reviewed market data related to Mr. Rodkin’s compensation, as a whole and for each component, and found them reasonable versus the peer group. The Committee believes that within the company, Mr. Rodkin should have the highest ratio of at-risk pay to salary and largest aggregate compensation opportunity.

 

With respect to the other named executive officers, for fiscal 2009, the Committee reviewed each person’s scope of responsibility, skills and experience, the strategic plan for each person’s position, the long-term potential of the individual in the position, retention factors, and relevant market data. The Committee also considered internal pay equity. This analysis resulted in some differences in the incentive opportunities awarded under the MIP and performance share plan for these executives, and differences in option grant sizes based on the individual factors reviewed. However, the total compensation opportunity for each of these named executive officers reflects a similar mix of at-risk pay and salary.

At the start of fiscal 2009, when the Committee made its fiscal 2009 compensation decisions for the named executive officers, it examined the value of each element of the fiscal 2009 program individually and collectively, coming to a “Total Compensation” opportunity for each named executive officer. However, the Committee’s process uses a computational approach that differs from that required to compile the “Total” column in the Summary Compensation Table. Most notably, the Summary Compensation Table’s “Total” column includes the expense recognized by the company for financial statement reporting purposes with respect to stock options, performance shares and other equity awards granted in the indicated years and in prior years. The Committee made its fiscal 2009 decisions regarding the appropriateness of a named executive officer’s “Total Compensation” opportunity by reviewing the full grant date fair value, determined in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), of proposed stock option, performance share and other equity awards for only fiscal 2009. The Committee used the full grant date fair value because it provided the Committee with a total compensation view that was comparable to the market data provided and better enabled an analysis of internal equity. This is consistent with prior years’ practice.

 

The following is a more detailed analysis of each element of the fiscal 2009 compensation program for our named executive officers.

 

Salaries. The Committee determines salary by analyzing a position’s strategic importance to the company, recruitment and retention pressures, the executive’s contribution to the company and the market data supplied by Towers Perrin. The Committee does not automatically set salary as a percentile versus the peer group or other market data. Salary levels depend foremost on individual experience and performance, company priorities, internal equity and overall reasonableness versus the market.

 

In its implementation of these principles, the Committee chose not to provide salary increases for Messrs. Rodkin, Messel, Perez or Sharpe for fiscal 2009. Mr. Rodkin is party to an employment agreement that provides for a minimum annual salary of $1,000,000 per year and Mr. Sharpe is party to an employment agreement that provides for a minimum annual salary of $675,000. The Committee believed that these respective amounts remained appropriate.

 

On January 16, 2009, the Board appointed Andre J. Hawaux (our former Chief Financial Officer) to the position of President, Consumer Foods, giving him responsibility for leading the businesses comprising the company’s Consumer Foods reporting segment. Mr. Hawaux also has responsibility for our information technology function. Mr. Hawaux’s salary was increased from $525,000 to $600,000 with this significant change in his responsibilities.

 

Also on January 16, 2009, the Board promoted John F. Gehring (our former Corporate Controller) to the position of Executive Vice President and Chief Financial Officer. In connection with Mr. Gehring’s promotion, his salary was increased from $400,000 to $450,000, reflecting the increase in his responsibilities.

 

As discussed above, the Committee honored the request to freeze senior management’s salaries for fiscal 2010.

 

Incentive Programs. The Committee aligned management compensation with company performance through a mix of annual and long-term incentive programs during fiscal 2009. Financial targets disclosed in this section are done so in the limited context of these incentive plans and they are not statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.

 

Short-Term Incentive Plan. The fiscal 2009 MIP provided a cash incentive opportunity to about 2,000 employees, including the named executive officers, based on:

 

 

The application of each of these considerations to the fiscal 2009 awards earned by the named executive officers follows.

 

First Consideration: Were Pre-Established Performance Goals Met? The Committee designed the fiscal 2009 MIP to reward achievement of company-wide PBT goals. At the start of fiscal 2009, the Committee authorized threshold, target and maximum PBT goals, and correlated senior management incentive opportunities with those levels of PBT. The Committee has discretion to exclude items impacting comparability from company-wide PBT goals pursuant to the terms of the plan. The PBT goals for the fiscal 2009 MIP were:

 

 

The threshold and target levels of PBT approved by the Committee were selected purposefully to align with the early fiscal 2009 guidance given to our investors of diluted earnings per share from continuing operations of $1.56 to $1.59, excluding items impacting comparability. In line with its pay for performance philosophy, the Committee did not revise the plan’s PBT goals when, at the end of the first quarter of fiscal 2009, management determined that the company was unlikely to achieve targeted levels of PBT. The Committee understood that if the company’s fiscal 2009 PBT fell below the threshold level of company-wide PBT for the full year, no short-term incentives would have been authorized for payment to the named executive officers.

 

The following table shows the ranges of authorized payments for the named executive officers at the various levels of PBT approved for the fiscal 2009 MIP. The Committee authorized a range of payout options at each level of PBT to maximize its flexibility to determine awards while still preserving the tax deductibility of these awards. The named executive officers were made aware that absent extraordinary performance, the Committee authorized these ranges with the intent of making payouts that were adjusted downward toward the low-end of each range. As a result, the Committee believes that no incentive is guaranteed, each named executive officer’s targeted MIP opportunity is a reference to the low-end of the range identified in column (2) of the following table, and each executive officer’s maximum MIP opportunity is a reference to the high-end of the range identified in column (3) of the following table.

Authorized MIP Payout Range With Achievement of:

 

 

 

 

The fiscal 2009 MIP defined PBT as the company’s income tax expense plus its net income from continuing operations before cumulative effect of changes in accounting. In order to incent management to make decisions that have positive long-term impacts, even at the expense of shorter term results, and to prevent one-time gains from having too great an impact on plan payouts, the terms of the plan allowed PBT to be adjusted for specific restructuring or unusual items that occurred during the year. For fiscal 2009, the

Committee approved adjustments to eliminate the impact of expenses incurred in connection with a debt refinancing transaction, a litigation related charge, restructuring costs and a gain on the sale of a small business.

 

The company achieved fiscal 2009 PBT of $1,048.8 million, which was above threshold but less than targeted performance. Payouts up to the high-end of the levels indicated in column (1) of the above table were thus permitted, but, as discussed below, not ultimately approved.

 

Second Consideration: How was the Business Plan Delivered? Once the PBT review was complete, the Committee considered the manner in which management executed the operating plan during the year. The fiscal 2009 MIP gave the Committee discretion to reduce executive officer payouts based on this assessment.

 

Mr. Rodkin provided his views to the Committee during this process. Mr. Rodkin recognized that the company did not achieve the company-wide PBT target set at the start of the fiscal year, and communicated his strong belief that pay levels should be commensurate with performance. Mr. Rodkin advised the Committee of his belief that while many of the company’s businesses faced challenges at times during the year, the company’s ConAgra Mills business (which is a part of the Commercial Foods segment) excelled consistently. He also discussed his views of the importance to the long-term success of the company of building momentum in the Consumer Foods business and its impressive second half results, as well as of the Commercial Foods business’ ability to navigate the difficult economic environment. Mr. Rodkin advised the Committee that each of these factors contributed to the company’s ability to achieve its revised profit targets for the year.

 

The Committee concurred with Mr. Rodkin’s assessment of the company’s business performance during the year, and agreed with him that payouts at levels less than those permitted by the PBT formula were appropriate.

 

Third Consideration: How Did Each Named Executive Officer Perform? The Committee’s final consideration in determining each named executive officer’s fiscal 2009 MIP payout was an assessment of the executive’s individual performance. Mr. Rodkin’s input on the individual contribution of each other named executive officer in fiscal 2009 assisted the Committee in approving specific MIP payouts for these individuals. The full Board’s performance evaluation of Mr. Rodkin was used in determining his payout.

 

After considering the individual performance of each named executive officer (discussed below), the Committee approved MIP payouts to the named executive officers ranging from 55% to 67% of the dollar amounts allowed. The Committee believes that the MIP awards paid to the named executive officers for fiscal 2009 are consistent with the level of accomplishment by the company and the named individuals.

 

 

Long-Term Incentive Plan. Working closely with Towers Perrin, the Committee redesigned our long-term incentive plan for senior officers in fiscal 2007. In each year of the program to date (2007, 2008 and 2009), the plan has included an award of stock options and an award of performance shares that are settled in shares of common stock and that are focused on results over the ensuing three-year performance period (in other words, the fiscal 2007 to 2009 performance period, the fiscal 2008 to 2010 performance period and the fiscal 2009 to 2011 performance period). The performance shares reward the improvement over the three-year performance period in metrics likely to have a significant impact on enterprise value: growth in earnings from

continuing operations before interest and taxes, or EBIT, and performance against return on average invested capital goals, or ROAIC. These metrics are calculated as follows:

 

 

The program also rewards stock price appreciation directly through the granting of stock options. The ultimate value of earned performance shares, which are paid in stock, is also impacted directly by stock price.

 

The Committee firmly believes in aligning our senior officers’ interests with those of our stockholders. The significant extent to which equity is included in both the executive pay program overall and this program in particular evidences this belief. We describe each component of the plan below.

 

Stock Options. The use of stock options directly aligns the interests of the named executive officers with those of our stockholders. The options granted in July 2008 to our named executive officers for fiscal 2009 have a seven-year term, an exercise price at the company’s closing market price on the date of grant ($21.26), and vested 40% on the first anniversary of the grant date. The remaining portion of the stock option award vests in equal installments on the second and third anniversaries of the grant date, subject to the executive’s continued employment with the company. As noted in the table below, Messrs. Gehring and Hawaux received incremental stock option grants in January 2009 in connection with their promotions. The accounting expense associated with the stock options awarded to our named executive officers for fiscal 2009 is included in the “Option Awards” column of the Summary Compensation Table. The number of options granted to each named executive officer under the fiscal 2009 option program is as follows:

 

 

 

 

Performance Shares. Performance shares represent the award of an opportunity to earn a set number of shares of our common stock if we achieve pre-set, three-year performance goals. For the three performance periods in effect during fiscal 2009, the targeted number of shares for each named executive officer was as set forth in the table that follows.

 

 

 

 

The accounting expense associated with these performance share awards is included in the “Stock Awards” column of the Summary Compensation Table. More specific information about the performance shares follows.

 

Award Value. For the first three cycles of the long-term program, the Committee has awarded each named executive officer the targeted number of performance shares shown in the table above. The number of performance shares granted under the fiscal 2007 to 2009 program is greater than that provided under the other outstanding cycles (by a factor of approximately three) because it was the first cycle of the new program. The Committee viewed a larger grant as appropriate for the first year to provide an effective transition from prior programs and serve as a retention tool. In each of fiscal years 2008 and 2009, the award sizes, by named executive officer, have been approximately flat (excluding the impact of promotions). In lieu of determining performance share grant sizes using a targeted dollar value, and then dividing that value by our stock price on the date of grant, the Committee uses a fixed share approach. For fiscal 2009, this meant that notwithstanding a lower stock price at the time of grant as compared to fiscal 2008 (a closing market price of $21.26 per share in July 2008 vs. a closing market price of $26.80 per share in July 2007), the named executive officers received approximately the same number of targeted performance shares. The Committee believed that this approach was appropriate because the executives should earn their way into higher levels of compensation by achieving the company’s long-term plan and creating stockholder value.

 

The actual number of shares of common stock that will be issued for each performance share cycle is determined based on a combination of growth in EBIT and performance against targets for ROAIC. The Committee selected these financial metrics because it believes they have a positive impact on stockholder value. The performance targets for the three cycles are set forth in the following table. Results at the target

level will result in a payout of 100% of the total number of shares (as specified in the table above) in our common stock.

 

 

Because these EBIT targets are focused on growth over the relevant performance period, the baseline level of EBIT from which performance is expected to grow impacts the target. A low baseline for the fiscal 2009 to 2011 cycle (due to weaker than planned performance in our Consumer Foods business in fiscal 2008) is the reason for the 14% EBIT growth target in that cycle. The high growth target versus prior periods is not an indication of a significant change in the company’s long-term performance goals.

 

In each program cycle, lower levels of combined EBIT growth and ROAIC are rewarded at significantly less than a full payout on the granted performance shares. There is no guaranteed payout in any cycle of the program. In each case, the maximum number of shares that may be earned under the plan is 300% of the original grant.

 

When the Committee adopted the performance share program, it included the ability to adjust EBIT and ROAIC for restructuring and unusual items as appropriate. In May 2008, the Committee considered the impact on the fiscal 2007 to 2009 cycle and fiscal 2008 to 2010 cycle of the performance share program from the then-pending sale of the company’s Trading and Merchandising reporting segment. Consistent with the pre-specified authority for adjustments, the Committee sought to minimize an unintended adverse consequence for participants due to the loss of EBIT from the Trading and Merchandising business. Accordingly, the Committee authorized continued inclusion of the fiscal 2008 earnings from the business in the EBIT calculation for the two cycles, notwithstanding that the segment’s results were moved to discontinued operations in connection with the sale. However, no adjustment was made to the EBIT calculation for either cycle to compensate for the impact on our fiscal 2009 EBIT from the sale of the business. As a result of the sale, for fiscal 2009, both income from operations and the gain from the sale (both recorded in discontinued operations) of the Trading and Merchandising reporting segment were excluded from EBIT, resulting in an adverse impact on EBIT growth. As contemplated in the pre-specified formula, the Committee reduced the denominator in the ROAIC calculation by the amount of the net proceeds from the sale. The authorization covered the calculation of fiscal 2008 and 2009 ROAIC under the fiscal 2007 to 2009 cycle, and the calculation of fiscal 2008, 2009 and 2010 ROAIC under the fiscal 2008 to 2010 cycle.

 

Interim Opportunity. The primary goal of the fiscal 2007 redesign of the long-term incentive program was better alignment of the program with the company’s strategic direction. However, as a secondary matter, for the first three-year cycle only, the Committee felt that retention was critically important and therefore approved an interim payout feature in the fiscal 2007 to 2009 performance share grant.

 

Under the interim payout feature, participants other than Mr. Hawaux received a payout following each of fiscal years 2007 and 2008 in the amount of one-third of the initial target value of the award (in other words, one-third of the total performance share grant for the fiscal 2007 to 2009 program shown in the table on page 35) plus the share equivalent of accumulated dividends. Mr. Hawaux joined the company after the start of fiscal 2007 and, although the Committee authorized his participation in the program, he was excluded from the first interim payout. Instead, he was given the opportunity to earn, and did earn, a distribution of one-half of his initial grant based on cumulative fiscal 2007 and 2008 results, plus the share equivalent of accumulated dividends. The Committee had established interim growth targets at the beginning of the three-year cycle that were required for the interim payouts to occur. As disclosed in prior years’ proxy statements, the company achieved its interim targets for fiscal years 2007 and 2008.

 

Neither the fiscal 2008 to 2010 program (approved by the Committee in July 2007) nor the fiscal 2009 to 2011 program (approved by the Committee in July 2008) contains an interim payout feature. Awards under

these programs, if earned, will be paid in shares of stock subsequent to the end of fiscal years 2010 and 2011, respectively.

 

Fiscal 2007-2009 Performance. At the end of fiscal 2009, the first cycle of the long-term program concluded. The company delivered a combined level of three-year compound EBIT growth and three-year average ROAIC over the fiscal 2007 to 2009 performance period (after adjustments) that mathematically equated to a funding level of approximately 162% of target. The Committee reduced this amount to 160% of target for ease of plan administration. This funding level was achieved through the delivery of three-year compound EBIT growth of 1.74%, and a three-year average ROAIC of 12.85%. EBIT growth was below targeted levels, due in part to the inclusion of EBIT from the Trading and Merchandising business for fiscal years 2006 (the baseline), 2007 and 2008, but not for fiscal 2009, as discussed above. The ROAIC performance reflected above-target results for the performance period.

 

EBIT growth and average ROAIC for the fiscal 2007 to 2009 cycle were calculated taking into account the divestiture-related adjustments discussed above. The Committee also authorized several less significant adjustments to fiscal 2009 EBIT to eliminate the impact of unusual items, specifically, expenses incurred in connection with a debt refinancing transaction, a litigation related charge and restructuring costs.

 

The following numbers of shares of common stock were issued to the named executive officers following fiscal 2009 to complete the payout of the performance shares earned for the fiscal 2007 to 2009 cycle: for Mr. Rodkin, 311,110 shares (resulting in a total of 520,148 shares over the entire performance period); for Mr. Gehring, 49,777 shares (resulting in a total of 83,223 shares over the entire performance period); for Mr. Hawaux, 97,045 shares (resulting in a total of 139,185 shares over the entire performance period); for Mr. Messel, 37,333 shares (resulting in a total of 62,417 shares over the entire performance period); for Mr. Perez, 74,666 shares (resulting in a total of 124,835 shares over the entire performance period); and for Mr. Sharpe, 99,555 shares (resulting in a total of 166,446 shares over the entire performance period). The amounts indicated here for fiscal 2009 represent one-third, and in the case of Mr. Hawaux one-half, of the targeted performance shares reflected in the table for the fiscal 2007 to 2009 program on page 35, plus the number of shares equal to an additional 60% of those targets. Dividend equivalents, paid in additional shares, are also included.

 

With respect to the fiscal 2008 to 2010 program and fiscal 2009 to 2011 program, no payouts have yet been earned.

 

Other Features. Performance shares that have not been paid at the time of a participant’s termination of employment are forfeited. An exception allows pro-rata payouts in the event of death, disability or retirement. The Committee has also retained the discretion to provide for payouts on termination when it finds it appropriate and in the best interest of the company. To date, however, the Committee has not used this discretion. Both this exception and discretion are subject to satisfaction of the performance goals. Dividend equivalents are paid on the portion of performance shares actually earned, and are paid at the regular dividend rate in shares of our stock.

 

The long-term plan approved for the fiscal 2010 to 2012 performance period is substantially similar to the prior years’ cycles. It does not have an interim payout feature.

 

Other Fiscal 2009 Compensation.

 

Discretionary Bonus. The Committee may choose to approve a sign-on or discretionary bonus for a senior officer if it deems it necessary as a recruitment tool or to recognize extraordinary performance (shown in the “Bonus” column of the Summary Compensation Table).

 

Retirement and Health and Welfare Programs. We offer a package of core employee benefits to our employees, including our named executive officers. This includes health, dental and vision coverage, life insurance and disability insurance. The company and employee participants share in the cost of these programs. Each of the named executive officers was also entitled to participate in an executive physical program, together with his spouse, during fiscal 2009. The company covers the cost of these physicals, although the executive is responsible for the taxes associated with this expense. With respect to retirement

benefits, we maintain qualified 401(k) retirement plans (with a company match on employee contributions) and qualified pension plans. The named executive officers participate in these plans.

 

Some of the named executive officers participate in a non-qualified pension plan, non-qualified 401(k) plan and deferred compensation plan. The non-qualified pension and non-qualified 401(k) plans permit us to pay retirement benefits to certain named executive officers in amounts that exceed the limitations imposed by the Code under qualified plans. With respect to the non-qualified pension plan, our employment agreements with Messrs. Rodkin and Sharpe provide that, subject to service requirements and various exceptions, years of service for purposes of calculating benefits will be credited at a three-for-one rate until the executive has service credit of thirty years. Mr. Rodkin’s agreement also provides that the annual earnings amount to be used in the pension benefit formula under the non-qualified pension plan will be no less than $3.0 million.

 

The deferred compensation plan allows the named executive officers, as well as a broader group of approximately 800 employees, to defer receipt of up to 50% of their base salary and 85% of their annual incentive cash compensation. The program permits executives to save for retirement in a tax-efficient way at minimal cost to the company. Executives who participate in the program are not entitled to above-market (as defined by the SEC) or guaranteed rates of return on their deferred funds.

 

We show contributions made by the company to the named executive officers’ 401(k) plan and non-qualified 401(k) plan accounts in the “All Other Compensation” column of the Summary Compensation Table. We provide a complete description of these retirement programs under the headings “Pension Benefits — Fiscal 2009” and “Non-Qualified Deferred Compensation — Fiscal 2009”.

 

Perquisites. The Committee’s philosophy on perquisites for senior officers has been consistently communicated over the years. Members of senior management are not eligible for indirect pay except in limited circumstances. The incremental cost to the company of providing these benefits is included in the “All Other Compensation” column of the Summary Compensation Table. Specific benefits and arrangements with Messrs. Rodkin and Sharpe are summarized here.

 

The Committee has determined it appropriate to cover Mr. Rodkin by our security policy. As a result, he is required to take corporate aircraft for all business and personal air transportation. To offset the incremental cost to the company of Mr. Rodkin’s personal use of corporate aircraft, the company has entered into an aircraft timeshare agreement with Mr. Rodkin. The Committee also authorized a timeshare agreement for Mr. Sharpe. Under the agreements, the executives are responsible for reimbursing the company, in cash, in an amount approximately equal to the variable cost of operating the aircraft for each personal flight he takes.

 

Change in Control/Severance Benefits. We have agreements with our named executive officers that are designed to promote stability and continuity of senior management in the event of a change in control. The Committee routinely evaluates participation in this program and the benefit levels contained therein to ensure their reasonableness. We provide a complete description of the amounts potentially payable to our named executive officers under these agreements under the heading “Potential Payments upon Termination or Change in Control”.

 

We have also adopted a broad severance plan applicable to most salaried employees, including the named executive officers. In some circumstances, we have supplemented this plan with specific severance arrangements with our named executive officers. Our existing severance arrangements with the named executive officers are described under the heading “Potential Payments Upon Termination or Change in Control”.

 

What are the Committee’s Views on Executive Stock Ownership?

 

The Committee has adopted stock ownership guidelines for the company’s senior officers because it believes that management stock ownership causes alignment with stockholder interests. The number of shares of ConAgra Foods common stock that our named executive officers are required to hold is set at a multiple of their salary and increases with greater responsibility within the company. The named executive officers are expected to reach the set level within a reasonable period of time after appointment. Shares personally acquired by the executive through open market purchases or through our 401(k) plan or employee stock

purchase plan, as well as RSUs, restricted shares and shares acquired upon the deferral of earned bonuses are counted toward the ownership requirement. Neither unexercised stock options nor unearned performance shares are counted. The following table reflects ownership as of July 31, 2009.

 

 

 

 

What are the Committee’s Practices Regarding the Timing of Equity Grants?

 

We do not backdate options or grant stock options retroactively. We do not coordinate grants of stock options with disclosures of positive or negative information. All stock options are granted with an exercise price equal to the closing price of our common stock on the NYSE on the date of grant. The vast majority of our stock option grants for a fiscal year are made in July, at a regular Committee meeting. When management proposes a merit award or sign-on grant for a non-executive officer, the Committee considers approval of the grant at a regularly scheduled Committee meeting. In the event management proposes a sign-on grant for a senior officer and a grant-related decision is necessary between regularly scheduled Committee meetings, the Committee may hold a special meeting to consider the grant. If approved, the grant date will be the first trading day of the month on or following the officer’s date of hire.

 

What are the Key Tax and Accounting Implications of the Committee’s Compensation Decisions?

 

U.S. federal income tax law prohibits the company from taking a tax deduction for certain compensation paid in excess of $1 million to the company’s chief executive officer or any of the company’s three other most highly compensated executive officers, generally other than the chief financial officer, who are employed as of the end of the year. This limitation does not apply to qualified performance-based compensation under the tax law. Generally, this is compensation paid only if the individual’s performance meets pre-established, objective goals based on performance goals approved by our stockholders. The Committee’s intent is to structure our executive compensation programs so that payments will generally be fully deductible. The request for stockholder approval of the 2009 Stock Plan and EIP, for example, are a part of this effort. However, the Committee may occasionally make payments or grants of equity that are not fully deductible if, in its judgment, those payments or grants are needed to achieve overall compensation objectives.

 

The Human Resources Committee has reviewed and discussed the company’s Compensation Discussion & Analysis with management. Based upon such review and discussions, the Committee recommended to the Board of Directors that the company’s Compensation Discussion & Analysis be included in this proxy statement and incorporated by reference in the company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009.

 

ConAgra Foods, Inc. Human Resources Committee

 

Steven F. Goldstone

Joie A. Gregor

Ruth Ann Marshall

Ken Stinson, Chairman

Summary Compensation Table

 

The amounts set forth in the following Summary Compensation Table and Grants of Plan Based Awards table for Messrs. Rodkin, Hawaux and Sharpe are based in part on written agreements in place between ConAgra Foods and each of these individuals. The impact of these agreements on the various elements of compensation reported in these tables is incorporated into the “Compensation Discussion & Analysis”. The termination and severance benefit provisions of these agreements are described under the heading “Potential Payments Upon Termination or Change in Control”.

 

 

 

 

 

 

 

The following table sets forth information about grants of plan-based awards (equity and non-equity) during the fiscal 2009 to the named executive officers. All equity-based grants were made under the stockholder-approved ConAgra Foods 2006 Stock Plan.