Sysco Corporation
Shareholder Annual Meeting in a DEF 14A on 10/06/2021   Download
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DEF 14A 1 lsysco2021_def14a.htm SYSCO CORPORATION - DEF 14A SYSCO CORPORATION - DEF 14A

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

SCHEDULE 14A

 

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

 

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

 

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SYSCO CORPORATION

 

 

(Name of Registrant as Specified In Its Charter)

 

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

 

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Table of Contents

 

LETTER FROM OUR CEO AND CHAIRMAN 4
   
PROXY STATEMENT SUMMARY 9
Director Nominee Highlights 10
Executive Compensation Design 11
Corporate Social Responsibility Highlights 13
   
PROXY STATEMENT 14
   
CORPORATE GOVERNANCE 15
Board Leadership Structure 17
Stockholder Engagement 18
Board Meetings and Committees 18
Annual Board Self-Evaluation 20
Director Independence 20
Certain Relationships and Related Person Transactions 21
Risk Oversight 22
Corporate Social Responsibility 23
Code of Conduct 23
Compensation Consultants 24
   
BOARD OF DIRECTORS MATTERS 25
Election of Directors at 2021 Annual Meeting (Item 1) 25
Board Composition 30
   
DIRECTOR COMPENSATION 35
Overview of Non-Employee Director Compensation 35
Directors Deferred Compensation Plan 35
Equity-Based Awards to Non-Employee Directors 36
Fiscal 2021 Director Compensation 37
   
EXECUTIVE OFFICERS 39
Management Development and Succession Planning 42
   
STOCK OWNERSHIP 43
Security Ownership of Officers and Directors 43
Security Ownership of Certain Beneficial Owners 44
Stock Ownership Guidelines 44
Stock Trading Restrictions 45
Employee, Officer and Director Hedging 45
   
DELINQUENT SECTION 16(a) REPORTS 45
 
EQUITY COMPENSATION PLAN INFORMATION 46
   
COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 46
   
COMPENSATION DISCUSSION AND ANALYSIS 47
Executive Summary 47
Philosophy of Executive Compensation Program 49
How Executive Pay is Established 53
What We Paid and Why – Compensation for NEOs 55
Executive Compensation Governance and Other Information 69
   
REPORT OF THE COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE 72
   
EXECUTIVE COMPENSATION 73
Summary Compensation Table 73
Grants of Plan-Based Awards 76
Outstanding Equity Awards at Year-End 77
Option Exercises and Stock Vested 79
Fiscal 2021 Nonqualified Deferred Compensation 80
Pension Benefits 82
CEO Pay Ratio 85
Quantification of Termination/Change in Control Payments 86
Compensation Risk Analysis 90
   
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (ITEM 2) 91
   
REPORT OF THE AUDIT COMMITTEE 92
   
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 93
   
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 3) 94
   
STOCKHOLDER PROPOSAL (ITEM 4) 95
   
BOARD OF DIRECTORS’ STATEMENT ON THE PROPOSAL 96
   
STOCKHOLDER PROPOSALS 97
   
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING 98
   
ANNEX I – NON-GAAP RECONCILIATIONS 103
 

LETTER FROM OUR CEO AND CHAIRMAN

 

Dear Sysco Stockholder,

 

Sysco’s fiscal year 2021 was one of the most dynamic years in our history. Throughout, Sysco maintained and sharpened our customer-centric business focus. Our actions focused on the immediate needs of helping our customers survive, and ultimately, succeed throughout the crisis. We also planned for the future by strengthening our leadership team and accelerating transformation across all facets of our business.

 

The good news is that, as we exited fiscal 2021, our business has been on a strong upswing. The food-away-from-home industry is recovering faster and stronger than most industry experts had predicted. Sysco prepared and executed thoughtful plans to increase inventory and staffing levels in advance of the volume recovery we are now experiencing. As importantly, we introduced a new purpose platform, and a compelling new growth strategy called our “Recipe For Growth”. Sysco is positioned for success in the coming years given our financial strength, our robust supply chain, and a compelling new strategy that will differentiate our offerings and service in the marketplace. Customers are taking notice, demonstrated by Sysco winning substantial new business in the national sales segment during the year.

 

Our Performance in Fiscal 20211

 

Sysco’s total sales were more than $51 billion in fiscal 2021, reflecting continued impact from COVID-related restrictions placed upon our customers that reduced demand for our products and services. We recorded a gross profit decrease of 5.5% to $9.4 billion. Operating income increased 91.8% to $1.4 billion, and adjusted operating income decreased 14.7% to $1.5 billion. We delivered earnings per share of $1.02, and adjusted earnings per share of $1.44. Through strong expense management and a disciplined approach to capital allocation, in fiscal 2021 our free cash flow increased to $1.5 billion, we reduced debt by $3.4 billion and we returned nearly $1 billion to our shareholders through our quarterly dividend.

 

While the impact of the COVID-19 crisis on our fiscal 2021 results continued to be substantial, our business performance accelerated in the fourth quarter, with sales exceeding 2019 volume levels. We are confident that this signifies a positive outlook for the long-term health of our industry. We are pleased with this progress; however, the pandemic has also fueled labor and supply shortages. In response, our merchandising team is working closely with current and new suppliers to increase product availability. In addition, we have aggressively expanded our hiring efforts across our business the growth and demand we are seeing from our customers. Sysco is consistently performing better than the industry on a national level with regard to service levels, and as a result, we are winning new business.

 

Sysco’s Recipe for Growth Strategy

 

At our Investor Day in May 2021, Sysco announced its new strategy, our Recipe for Growth, which is designed to help the company grow 1.5 times faster than the market by the end of fiscal 2024 through five strategic pillars:

 

DIGITAL

Enrich the customer experience through personalized digital tools that simplify and enhance the purchase experience and introduce innovation to our customers

 

PRODUCTS AND SOLUTIONS

Customer-focused marketing and merchandising solutions that inspire increased sales of our broad assortment of fair priced products and services

 

SUPPLY CHAIN

Efficiently and consistently serve customers with the products they need, when and how they need them, through a flexible delivery framework

 

CUSTOMER TEAMS

Our greatest strength is our people. People who are passionate about food and food service. Our diverse team delivers expertise and differentiated services designed to help our customers grow their business

 

FUTURE HORIZON

We are committed to responsible growth. We will cultivate new channels, new segments, and new capabilities while being stewards of our company and our planet. We will fund our journey through cost-out and efficiency improvements

 

These priorities will help Sysco become more customer centric, more agile, and a more growth-oriented company. Through this work we will substantially build our capabilities, grow our market share and further differentiate Sysco from our competition.

 

1 This paragraph contains the non-GAAP financial measures adjusted operating income, adjusted earnings per share and free cash flow. See pages 103 through 104 in the accompanying Proxy Statement for a reconciliation of these non-GAAP measures to the corresponding GAAP results and an explanation of the adjustments that we have made in order to calculate these non-GAAP measures.

 

SYSCO CORPORATION  -  2021 Proxy Statement    4

 

Purpose

 

Sysco also unveiled our new Purpose statement dedicated to Connecting the World to Share Food and Care for One Another. At the core of the company’s strategy, our Purpose unifies all our associates around a common goal that guides the company’s actions, and the impact Sysco makes in the world every day. For further discussion of our new Purpose Statement, see our website at www.sysco.com in the “About” section under “Our Purpose”.

 

Sysco’s Ongoing Commitment to Corporate Social Responsibility

 

Sysco continues to make substantial progress toward our 2025 CSR goals. Since the start of the pandemic, we have donated more than 50 million meals to support the communities we serve when they needed it the most. We recently announced our Global Good Goal to donate $500 million worth of goods and services across our global communities by 2025. We continue to advance diversity, equity and inclusion at Sysco, and as part of our ongoing efforts to improve in these areas, we hired our first-ever Chief Diversity Officer. Our diversity improvement efforts are aimed at ensuring everyone has a seat at the table at Sysco, and that our company better reflects the communities and customers we serve.

 

On behalf of our Board of Directors and all our Sysco associates, thank you for your continued trust and support in Sysco.

 

Kevin Hourican, President and Chief Executive Officer Ed Shirley, Chairman
   

 

SYSCO CORPORATION  -  2021 Proxy Statement    5

 

 

 

 

1390 Enclave Parkway
Houston, Texas 77077-2099

 

Notice of Annual Meeting of Stockholders

 

November 19, 2021

10:00 a.m. (Central Time)

 

The Annual Meeting of Stockholders of Sysco Corporation, a Delaware corporation, will be held on Friday, November 19, 2021, at 10:00 a.m. (Central Time). Due to the continuing public health concerns regarding the novel coronavirus disease (“COVID-19”) pandemic, we are holding the Annual Meeting in a virtual-only meeting format to support the health and well-being of our stockholders and our employees. You will not be able to attend the Annual Meeting at a physical location. We believe this format will provide you a consistent experience and allow your participation in the Annual Meeting regardless of your location. You will be able to submit questions during the meeting using online tools, providing you with the opportunity for meaningful engagement with the Company. For more information about the virtual-only meeting format, please see Question 5, “How do I attend the Annual Meeting?” on page 99 of the accompanying proxy statement.

 

Items of Business

 

During the Annual Meeting, you will be asked to:

 

1. Elect as directors the ten nominees named in the accompanying proxy statement to serve until the Annual Meeting of Stockholders in 2022;
2. Vote on an advisory resolution to approve the compensation paid to Sysco’s named executive officers, as disclosed in this proxy statement;
3. Ratify the appointment of Ernst & Young LLP as Sysco’s independent registered public accounting firm for fiscal 2022;
4. To consider a stockholder proposal, if properly presented at the meeting, requesting that Sysco issue a report annually disclosing its greenhouse gas emissions targets; and
5. Transact any other business as may properly be brought before the meeting or any adjournment or postponement thereof.

 

Record Date

 

The record date for the Annual Meeting is September 20, 2021. Only stockholders of record of the Company’s common stock (“Common Stock”) at the close of business on the record date will be entitled to receive notice of and to vote during the Annual Meeting or any adjournment or postponement thereof.

 

SYSCO CORPORATION  -  2021 Proxy Statement    7

 
Voting Your Proxy

 

For instructions on voting, please refer to the notice you received in the mail or, if you requested a hard copy of the proxy statement, on your enclosed proxy card. To cast your vote during the Annual Meeting, you will need to enter the 16-digit control number found on the notice or proxy card, as applicable, at the time you log into the meeting at virtualshareholdermeeting.com/SYY2021. You may inspect a list of stockholders of record at the Company’s headquarters during regular business hours within the 10-day period before the Annual Meeting or during the Annual Meeting when you log in at virtualshareholdermeeting.com/SYY2021.

 

Dated and first mailed to stockholders on or about October 6, 2021
Houston, Texas

 

By Order of the Board of Directors

Eve M. McFadden

Senior Vice President, Legal, General Counsel
and Corporate Secretary

 

Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on November 19, 2021
 
The Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K
for the fiscal year ended July 3, 2021 are available at www.proxyvote.com.

 

SYSCO CORPORATION  -  2021 Proxy Statement    8

 

PROXY STATEMENT SUMMARY

 

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

 

PROPOSAL 1

Election of Directors

  Your Board of Directors recommends that you vote “FOR” the election of each of the ten nominees
       
      See Page 25

 

    Name   Age   Director since   Experience   Independent   Committee
Memberships(1)
  Other Public
Company Boards
  Daniel J. Brutto   65   September 2016   Former President, UPS International and Senior Vice President, United Parcel Service, Inc.   Yes   CGN
CSR*
Executive
    Illinois Tool Works Inc.
  John M. Cassaday   68   November 2004   Former President, CEO and director of Corus Entertainment Inc.   Yes   CLD*
CGN
Executive
 

  Manulife Financial Corporation

  Sleep Country Canada Holdings Inc.

  Larry C. Glasscock   73   September 2010   Former Chairman of the Board of Directors, CEO and President of WellPoint, Inc.   Yes   CLD
CGN*
Executive
    Simon Property Group, Inc.
  Bradley M. Halverson   61   September 2016   Former Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar Inc.   Yes   Audit*
CLD
Executive
    Lear Corporation
  John M. Hinshaw   51   April 2018   GMD Chief Operating Officer, HSBC Group Management Services, Ltd.   Yes   Audit
CLD
Technology
   
  Kevin P. Hourican   48   February 2020   President and Chief Executive Officer, Sysco Corporation   No   Executive    
  Hans-Joachim Koerber   75   January 2008   Former chairman and CEO of METRO Group (Germany)   Yes   Audit
CSR
    Eurocash SA
  Stephanie A. Lundquist   45   November 2019   Former President, Food and Beverage of Target Corporation   Yes   CLD
CSR
Technology
   
  Edward D. Shirley(2)   64   September 2016   Chairman of the Board, Sysco Corporation   Yes   CGN
CSR
Executive*
   
  Sheila G. Talton   68   September 2017   President and Chief Executive Officer of Gray Matter Analytics   Yes   CGN
CSR
Technology*
 

  Deere & Company

  OGE Energy Corp.

(1) Full committee names are as follows:    
  Audit – Audit Committee CGN – Corporate Governance and Nominating Committee Executive – Executive Committee
  CLD – Compensation and Leadership Development Committee CSR – Corporate Social Responsibility Committee Technology – Technology Committee
       
(2) Mr. Shirley currently serves as the independent Chairman of the Board. For more details, see page 17.
* Denotes committee chairperson    

 

SYSCO CORPORATION - 2021 Proxy Statement    9

 

Director Nominee Highlights

 

Diversity of Tenure, Age and Gender

 

INDEPENDENT DIRECTOR TENURE   INDEPENDENT DIRECTOR AGE   INDEPENDENT DIRECTOR DIVERSITY
         
   

 

Director Qualifications

 

The Board believes that it is desirable that the following qualifications be possessed by one or more of Sysco’s Board members because of their particular relevance to the Company’s strategic priorities, and these were all considered by the Board in connection with this year’s director nomination process:

 

 

SYSCO CORPORATION - 2021 Proxy Statement    10

 

Corporate Governance Facts

 

Separate Chairman of the Board and CEO   Independent Directors Meet Regularly without Management Present
15-Year Limit on Director Tenure   Proxy Access
Annual Board and Committee Self-Evaluations   Stockholder Right to Call a Special Meeting
Periodic 360-degree Individual Director Performance Evaluations of Selected Directors   Stock Ownership Goals for all Directors/Executive Officers
90% of the Board of Directors is Independent   Single Voting Class
Annual Election of all Directors   Regular Engagement of Stockholders
No Director Serves on More than Four Other Boards   Majority Voting Standard

 

PROPOSAL 2

Advisory Vote to Approve Named Executive Officer Compensation

   Your Board of Directors recommends that you vote “FOR” the advisory proposal to approve the compensation paid to Sysco’s named executive officers (“NEOs”)
     
    See Page 91

 

Executive Compensation Design

 

Core Principles

 

 

Transitional Approach to Fiscal 2021 Compensation Design

 

The COVID-19 pandemic has adversely affected numerous aspects of Sysco’s business, financial condition and results of operations, including the Company’s financial performance with respect to the performance metrics under its annual and long-term incentive awards.

 

This resulted in significantly lower executive compensation levels in fiscal 2020, as compared to fiscal 2019. In July 2020, at the time the CLD Committee established the executive compensation program for fiscal 2021, the troubled state of the foodservice industry and the continuing uncertainties in the Company’s business arising from the impact of the COVID-19 pandemic rendered it impracticable for the Company to establish credible financial goals. Consequently, in light of the extraordinary circumstances confronting the foodservice industry, the CLD Committee adopted a temporary, transitional approach to executive compensation for fiscal 2021, recognizing that Sysco’s historical management incentive pay practices would be inadequate for successfully navigating the uncertain market environment. Semler Brossy Consulting Group LLC, the independent compensation consultant engaged by the CLD Committee, confirmed to the CLD Committee at the time that this transitional approach was established that it was reasonable in light of the impact of the COVID-19 pandemic.

 

SYSCO CORPORATION - 2021 Proxy Statement    11

 

This transitional approach included the following short- and long-term pay components:

 

Short-Term Incentive Program: a new short-term, cash-based incentive program (the “STIP”) for fiscal 2021, with the year divided into two, six-month performance periods and a significant portion of the incentive opportunity for each six-month performance period tied to operational metrics (rather than financial metrics), which differed from the annual incentives awarded in previous fiscal years under the management incentive program; and
Long-Term Incentive Program: long-term incentive awards that included a mix of (i) performance share units with a two-year performance period aligned with the timeframe for Sysco’s business transformational initiatives (i.e., cost reduction, market share growth, and digital commerce transfomation); (ii) stock options; and (iii) restricted stock units.

 

Elements of Executive Compensation

 

The elements of target total direct compensation for fiscal 2021 are presented below.

 

Element of Compensation Objective of Each Element
Base Salary Provide each NEO with a fixed compensation component that reflects his position and responsibilities and opportunities in the marketplace.
Short-Term Incentive Incentivize the near-term achievement of key transformational initiatives and operational metrics that supported the Company’s efforts to successfully navigate the recovery. Promote pay for performance and provide variable rewards within a competitive range of total cash compensation.
Restricted Stock Units New long-term incentive component for fiscal 2021 awarded in connection with transitional approach necessitated by the COVID-19 pandemic.
Stock Options Closely align the executives’ interests with those of our stockholders, with realized value based on post-grant share price appreciation.
Performance Share Units Closely align the executives’ interests with those of our stockholders, with realized value based in part on post-grant share price appreciation. Enhance performance and compensation alignment by linking payouts to the achievement of Sysco’s business transformational initiatives.

 

Our Executive Compensation Practices

 

WHAT WE DO   WHAT WE DON’T DO

   Pay for Performance

 

   Value Stockholders’ Input

 

   Mitigate Undue Risk

 

   Independent Compensation Consulting Firm

 

   Executive Compensation Clawback Policy

 

   Reasonable Change in Control Provisions for Equity Awards

 

   Significant Stock Ownership Guidelines

 

   Modest Perquisites

 

   Regular Review of Share Utilization

 

   Limited Trading Windows

 

   No stock option reloading

 

   No repricing of underwater stock options

 

   No tax gross-ups for financial planning or loss on sale of home in connection with a relocation

 

   No excise tax gross-ups upon a change in control

 

   No hedging by our executive officers, directors or other specified “insiders”

 

SYSCO CORPORATION - 2021 Proxy Statement    12

 

PROPOSAL 3

Ratify the Appointment of Ernst & Young LLP as Sysco’s Independent Registered Public Accounting Firm

 

 Your Board of Directors recommends that you vote “FOR” this proposal

 

See Page 94

 

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm and has specific policies in place to ensure its independence. The Audit Committee has appointed Ernst & Young LLP (“E&Y”) to serve as Sysco’s independent registered public accounting firm for fiscal 2022. E&Y has been our independent registered public accounting firm since fiscal 2002.

 

Fees paid to E&Y for fiscal 2021 and 2020 are detailed on page 93.

 

Representatives of E&Y will attend the meeting and will be available to respond to appropriate questions.

 

PROPOSAL 4

Stockholder Proposal, if properly presented

   Your Board of Directors does not make a recommendation with respect to this stockholder proposal.
     
    See Page 95

 

Corporate Social Responsibility Highlights

 

Sysco is committed to caring for people, sourcing products responsibly, and protecting the planet. Highlights from the last fiscal year include:

 

PEOPLE

 

•  Donated 27 million meals to support communities globally in need and launched our global good goal to generate $500 million worth of good by 2025.

 

•  Stepped up the Company’s diversity, equity, and inclusion efforts by establishing a global DEI council, hiring a Vice President, Chief Diversity Officer to accelerate our efforts, and engaging in meaningful, open dialogue about how we can all Be Better.

PRODUCT

 

•  Launched a public-private partnership with the National Fish and Wildlife Foundation and Cargill, including a $5 million commitment in funding over five years from Sysco and Cargill, to accelerate the implementation of sustainable grazing practices over the next five years across 1 million acres in the Southern Great Plains.

 

•  Expanded the company’s commitment to improve the sustainability of its seafood procurement practices and standards in collaboration with World Wildlife Fund.

PLANET

 

•  Tested an all-electric Freightliner eCascadia from Daimler Trucks North America at our San Francisco operating site, continuing to progress towards electric vehicles that can meet the specialized requirements of food delivery and significantly reduce our impact on the planet.

 

•  Continued to expand our Sustainable Agriculture program into the fresh supply chain and completed the pilot of Sysco’s Sustainability Standard for fresh crops in partnership with the IPM Institute’s Sustainable Food Group, Azzule Systems and Primus Auditing.

 

For further discussion of Sysco’s corporate social responsibility (“CSR”) strategy and 2025 CSR Goals, see our website at www.sysco.com in the “About” section under “Corporate Social Responsibility.”

 

SYSCO CORPORATION - 2021 Proxy Statement    13

 

Sysco Corporation
1390 Enclave Parkway
Houston, Texas 77077-2099
October 6, 2021

 

PROXY STATEMENT

 

We are providing you with a Notice of Internet Availability of Proxy Materials and access to these proxy materials, which include this 2021 Proxy Statement, the proxy card for the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) and our Annual Report on Form 10-K for fiscal 2021, because our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. Unless the context otherwise requires, the terms “we,” “our,” “us,” the “Company” or “Sysco,” as used in this proxy statement, refer to Sysco Corporation.

 

2021 Annual Meeting of Stockholders

 

Date and Time: Friday, November 19, 2021 at 10:00 a.m. (Central Time).
Venue: Virtual Annual Meeting (available at www.virtualshareholdermeeting.com/SYY2021. Our Annual Meeting will be held online in a virtual-only meeting format. For more information about the virtual-only meeting format, please see “Questions and Answers About the Meeting and Voting—5. How do I attend the Annual Meeting?” below.
Record Date: September 20, 2021. At the close of business on the Record Date, there were 512,275,463 shares of Sysco Corporation Common Stock outstanding and entitled to vote at the Annual Meeting. All of our current directors and executive officers (20 persons) beneficially owned, directly or indirectly, an aggregate of 1,571,478 shares, which was approximately 0.31% of our outstanding Common Stock as of the Record Date.

 

Only owners of shares of Common Stock as of the close of business on the Record Date are entitled to notice of, and to vote during the Annual Meeting or at any adjournments or postponements of the Annual Meeting. Each stockholder is entitled to one vote for each share owned on the Record Date on each matter presented at the Annual Meeting.

 

Voting Matters and Board Recommendations

 

  Our Board Vote Recommendation
Election of Ten Director Nominees (page 25) FOR each Director Nominee
Advisory Vote on Executive Compensation (page 91) FOR
Ratification of Independent Registered Public Accounting Firm (page 94) FOR
Stockholder Proposal (page 95) NONE

 

Important Dates for 2022 Annual Meeting of Stockholders (page 97)

 

If you would like to present a proposal under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), at our 2022 Annual Meeting of Stockholders, send the proposal in time for us to receive it no later than June 8, 2022. If the date of our 2022 Annual Meeting is subsequently changed by more than 30 days from the date of this year’s Annual Meeting, we will inform you of the change and the date by which we must receive proposals.
If you would like to present business at our 2022 Annual Meeting outside of the stockholder proposal rules of Rule 14a-8 of the Exchange Act and, instead, pursuant to Article I, Section 8 of the Company’s Bylaws, the Corporate Secretary must receive notice of your proposal by August 21, 2022, but not before July 12, 2022, and you must be a stockholder of record on the date you provide notice of your proposal to the Company and on the record date for determining stockholders entitled to notice of the meeting and to vote.

 

SYSCO CORPORATION - 2021 Proxy Statement    14

 

CORPORATE GOVERNANCE

 

We believe good corporate governance is critical to achieving business success. To provide a general framework for the management of the Company and reflect our commitment to sound governance practices, the Board has adopted certain documents, referred to in this proxy statement as our “Governance Documents,” which include the following:

 

Sysco’s bylaws;
the Corporate Governance Guidelines;
the Charters of the Board’s committees; and
the Global Code of Conduct.

 

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

 

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

 

Copies of the Governance Documents can be accessed from the corporate governance section of the Company’s website at “Investors—Corporate Governance” at www.sysco.com. These documents will also be provided without charge to any stockholder upon written request to the Corporate Secretary at Sysco Corporation, 1390 Enclave Parkway, Houston, Texas 77077. The information on any website referenced in this proxy statement, including www.sysco.com, is not deemed to be part of or incorporated by reference into this proxy statement.

 

SYSCO CORPORATION - 2021 Proxy Statement    15

 

Governance Highlights

 

BOARD COMPOSITION AND ACCOUNTABILITY:
     
Board Leadership  

Effective November 2020, the Board of Directors elected Mr. Shirley as independent Chairman of the Board, following his service as Executive Chairman on an interim basis

Effective November 2020, Mr. Halverson resigned as Lead Independent Director, concurrent with the appointment of Mr. Shirley as independent Chairman of the Board

Each Board committee is chaired by an independent director

 

Board Refreshment & Director Tenure Policy  

Established 15-year limit on director tenure

Since 2016, the Board has elected six new independent directors – Messrs. Brutto, Halverson and Shirley (in September 2016), Ms. Talton (in September 2017), Mr. Hinshaw (in April 2018) and Ms. Lundquist (in November 2019)

     
Board Evaluations  

Annual Board and committee self-evaluations aim to increase Board effectiveness and inform future Board refreshment efforts

Periodic 360-degree individual director performance evaluations of selected directors

 

Director Independence  

At least a majority of our directors must meet the NYSE criteria for independence, as well as the additional criteria set forth in the Corporate Governance Guidelines

All members of the Audit, Compensation and Leadership Development, and Corporate Governance and Nominating Committees must be independent under the applicable NYSE and SEC standards

Our Board has determined that all director nominees, other than the CEO, are independent under these standards (representing 90.0% of the Board)

 

Annual Elections   All of our directors are elected annually
     
Director Overboarding Policy   Non-employee directors should generally not serve on more than four additional public-company boards of directors
     
Change in Occupation   Any director who materially changes principal occupation or business association is required to tender his or her offer to resign to the Chairman of the Board and the Chairman of the Corporate Governance and Nominating Committee
     
Risk Oversight   The Board works through its committees and senior management to exercise oversight of the enterprise risk management process
     
STOCKHOLDER RIGHTS:
 
Proxy Access   Stockholders who have beneficially owned 3% or more of our outstanding Common Stock continuously for at least 3 years (as of the time of submission of the nomination) may nominate a number of director nominees equal to the greater of 2 or 20% (rounded down) of the total number of directors constituting our Board, subject to applicable limitations and procedural requirements
     
Right to Call Special Meeting   Stockholders holding at least 25% of our outstanding Common Stock have the right to call a special meeting of stockholders, subject to applicable limitations and procedural requirements
     
Action by Written Consent   Stockholders having at least the minimum voting power required to take a corporate action may do so by a written consent in lieu of calling a stockholders meeting
     
Majority Voting Standard  

Each of our directors is elected by a majority of the votes cast in an uncontested election

Any incumbent director failing to receive more “for” than “against” votes is required to tender his or her offer to resign to the Board

 

Single Voting Class   We have only one class of stock, Common Stock, that is entitled to vote on the election of directors and other matters submitted to a vote of stockholders
     
Stockholder Engagement  

We prioritize a program of regular engagement with our stockholders regarding matters of corporate governance, executive compensation and corporate social responsibility

Participation by Mr. Shirley, our Chairman, Mr. Cassaday, the Chair of our Compensation and Leadership Development Committee, and Mr. Glasscock, the Chair of our Corporate Governance and Nominating Committee

 

No Poison Pill   We do not have a poison pill or similar stockholder rights plan
     

 

SYSCO CORPORATION - 2021 Proxy Statement    16

 

Board Leadership Structure

 

Effective as of November 20, 2020, Mr. Edward Shirley’s interim service as Executive Chairman of the Board concluded, and the Board appointed him as the independent, non-executive Chairman of the Board. Concurrent with this appointment, Mr. Bradley Halverson concluded his service as independent Lead Director effective on November 20, 2020.

 

In his role as Chair, Mr. Shirley’s responsibilities include:

 

reviewing meeting agendas and schedules for meetings of the Board with the CEO;
overseeing and approving information and materials sent to the Board, serving as the primary liaison between the independent directors and the CEO, and presiding at meetings of the non-employee and independent directors;
being available for consultation and director communication;
reviewing with the CEO the nature and content of director communications in response to inquiries from outside parties; and
in consultation with the CEO, reviewing written communications between directors and officers or employees of the Company.

 

The Corporate Governance Guidelines provide that the roles of Chairman and CEO may be separated or combined, and the Board exercises its discretion in combining or separating these positions as it deems appropriate in light of prevailing circumstances.

 

The Board currently believes that the separation of the roles of Chairman and CEO is in the best interest of Sysco and its stockholders and represents the most effective leadership structure for the Company. The Board regularly reviews its leadership structure, including during the Board’s annual evaluation process, to determine the most appropriate arrangement. Since the Company’s founding in 1969 the Board from time to time has established a variety of Board leadership structures, including independent Board Chairs, as well as those serving as Executive Chair or combined CEO/Chair.

 

The Board believes that its approved leadership structure, which includes its independent, non-executive Chairman of the Board as described above, best enables the Board to provide effective, independent oversight of the Company. In addition, the Board has implemented several corporate governance policies and practices that promote a strong, effective and independent Board, which are described above under “—Governance Highlights.”

 

The independent directors meet regularly in executive session without the CEO or any other member of management present, and in fiscal 2021 met four times. Mr. Halverson, serving as independent Lead Director, followed by Mr. Shirley, serving as independent Chairman of the Board beginning in November 2020, presided over the sessions of the independent directors in fiscal 2021.

 

Board Refreshment

 

Our Board recognizes the importance of consistent, deliberate Board refreshment and succession planning to ensure that the directors possess a composite set of skills, experience and qualifications necessary for the Board to successfully establish and oversee management’s execution of the Company’s strategic priorities (see “Board of Directors Matters – Election of Directors at 2021 Annual Meeting (Item 1) – Director Qualifications and Board Succession” below for a discussion of the key qualifications considered by the Corporate Governance and Nominating Committee in evaluating candidates). In order to promote thoughtful Board refreshment, in 2016 our Board adopted a Board refreshment plan, pursuant to which the Board has elected an additional six independent, non-employee directors to the Board.

 

Director Tenure Policy. In July 2016, our Board, upon the recommendation of the Corporate Governance and Nominating Committee, established our director tenure policy, which provides that no individual who, as of the date of the election to which any nomination relates, will have served as a non-employee director for 15 years will be eligible to be nominated for election or re-election to the Board. Since the adoption of this policy, six independent directors have retired from the Board and six new independent directors have been elected to the Board. Collectively, these Board refreshment efforts have significantly lowered the average tenure of our independent directors.

 

The COVID-19 pandemic, together with the onset of the recovery in the foodservice markets in selected geographies, have increased the challenges associated with ensuring that the Company’s executive compensation program retains and incentivizes the Company’s highly-talented executives. Additionally, with the departure of two directors from the Board in August 2021, each of the Compensation and Leadership Development Committee and the Corporate Governance and Nominating Committee lost one of its most tenured members. In recognition of Mr. Cassaday’s (i) valuable ongoing contribution to developing executive compensation programs that appropriately address the evolving challenges associated with COVID-19 and the emerging foodservice recovery (as the Chair of the Compensation and Leadership Development Committee) and (ii) extensive institutional knowledge as an experienced, respected leader on the Board and member of the Corporate Governance and Nominating Committee, the Board, as recommended by the Corporate Governance and Nominating Committee, has approved an exception to the director tenure policy for Mr. Cassaday and requested that he stand for re-election at the Annual Meeting. Although the Board considers the current average independent director tenure of 7 years to be appropriate, it remains committed to deliberate Board refreshment and succession planning and expects any future exceptions to the tenure policy to be granted infrequently under similarly limited or unusual circumstances.

 

Director Recruitment. Since the adoption of our Board refreshment plan in 2016, our Board has periodically engaged the services of a third-party search firm to assist with identifying and recruiting appropriate director candidates. Several director candidates have been referred by our then-current directors and identified by a third-party search firm, and our Board evaluated the skills, experience and qualifications of each candidate in the context of the Board’s composition and the Company’s strategic priorities. Following consideration of each of these candidates, and in each case upon the unanimous recommendation of our Corporate Governance and Nominating Committee, the Board appointed or nominated a total of six new independent, non-employee directors: Messrs. Brutto, Halverson and Shirley (in September 2016), Ms. Talton (in September 2017), Mr. Hinshaw (in April 2018) and Ms. Lundquist (in November 2019). As our incumbent directors retire from the Board from time to time, we will continue our director recruitment efforts to help ensure that the size of the Board may be maintained at an appropriate level.

 

SYSCO CORPORATION - 2021 Proxy Statement    17

 

Stockholder Engagement

 

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

 

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

 

Since fiscal 2016, this engagement program has been expanded to include selected directors, including Messrs. Shirley, Cassaday and Glasscock, who have participated in meetings with many of our top institutional stockholders to discuss the same governance and compensation matters described above. Insight gained from engagement discussions remains a key consideration for the Board as it continues to evaluate our corporate governance and executive compensation practices for potential refinement.

 

We look forward to gaining further insight from our stockholders during future engagements.

 

Communicating with the Board

 

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

 

Board Meetings and Committees

 

During fiscal 2021, the Board held eight meetings, including four regular meetings and four special meetings, and committees of the Board held a total of 42 meetings. Overall attendance at such meetings was approximately 98.7%. Each director attended 75% or more of the aggregate of all meetings of the Board and the committees on which he or she served during fiscal 2021. The Board has an Audit Committee, a Compensation and Leadership Development Committee (the “CLD Committee”), a Corporate Governance and Nominating Committee (the “Governance Committee”), a Corporate Social Responsibility Committee (the “CSR Committee”), a Technology Committee, and an Executive Committee. Current copies of the written charters for the Audit Committee, the CLD Committee, the Governance Committee, the CSR Committee, Technology Committee, and the Executive Committee are published on our website under “Investors — Corporate Governance” at www.sysco.com. The current membership and primary responsibilities of the committees are summarized in the following table.

 

Committee Name
& Current Members
Primary Responsibilities Fiscal 2021
Meetings
Audit(1)
Mr. Halverson (Chair)
Mr. Hinshaw
Dr. Koerber

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

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

Oversees and reports to the Board with respect to certain treasury/finance matters, including the Company’s policies governing capital structure, debt limits, dividends and liquidity, and reviews and recommends to the Board the issuance and repurchase of Company securities

Assists the Board with its oversight and monitoring of the Company’s risk assessment and risk management policies and processes

Oversees and reports to the Board with respect to compliance with legal and regulatory requirements, corporate accounting, reporting practices and the integrity of the financial statements of the Company

10

 

SYSCO CORPORATION - 2021 Proxy Statement    18

 
Committee Name
& Current Members
Primary Responsibilities Fiscal 2021 Meetings
Compensation and Leadership
Development
(2)(3)
Mr. Cassaday (Chair) Mr. Glasscock
Mr. Halverson
Mr. Hinshaw
Ms. Lundquist

Establishes executive compensation philosophies, policies, plans and programs to ensure that compensation actions link pay for performance, provide competitive pay opportunity to attract and retain key executive talent, provide accountability for short and long-term performance and align the interests of the “senior officers” (i.e., the CEO and those reporting to the CEO) with those of stockholders

Establishes and approves all compensation, including the corporate goals on which compensation shall be based, of the CEO and the other senior officers, including the named executive officers (or “NEOs,” as defined below)

Oversees the process for the evaluation of management, including the CEO

Reviews and approves any clawback policy allowing the recoupment of compensation paid to associates, including the senior officers

Reviews and determines equity awards to the senior officers, and oversees management’s exercise of its previously delegated equity grant authority

Reviews, approves and, as required by law, recommends the establishment or amendment of any compensation or retirement program (i) in which any senior officer will participate, (ii) that requires stockholder approval or (iii) that could reasonably be expected to have a material cost impact

Reviews and discusses with the CEO the Company’s leadership development programs and succession planning for the other senior officers

Reviews the Company’s human capital policies and strategies

11
Corporate Governance and Nominating(2)(3)
Mr. Glasscock (Chair)
Mr. Brutto
Mr. Cassaday
Mr. Shirley
Ms. Talton

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

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

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

Reviews related person transactions and reviews and makes recommendations regarding changes to Sysco’s Related Person Transaction Policy

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

Reviews and makes recommendations regarding changes to Sysco’s Global Code of Conduct, (the “Code”), periodically reviews overall compliance with the Code and approves any waivers to the Code given to Sysco’s executive officers and directors

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

9
Corporate Social Responsibility
Mr. Brutto (Chair)
Dr. Koerber
Ms. Lundquist
Mr. Shirley
Ms. Talton

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

Reviews, evaluates, and provides input on the development and implementation of Sysco’s Corporate Social Responsibility (“CSR”) Strategy, which focuses on three pillars—People, Products and Planet—and on the implementation of any CSR goals previously established by the Board

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

4
Technology
Ms. Talton (Chair)
Mr. Hinshaw
Ms. Lundquist

Reviews significant information technology (“IT”) projects and technology architecture decisions

Assesses whether and to what extent Sysco’s IT programs effectively support Sysco’s business and strategic objectives

Advises the Board with regard to significant IT matters

Supports the Board in its oversight of cybersecurity risk management efforts

8
Executive
Mr. Shirley (Chair)
Mr. Brutto
Mr. Cassaday
Mr. Glasscock
Mr. Halverson
Mr. Hourican
Ms. Talton
Exercises all of the powers of the Board when necessary, to the extent permitted by applicable law 0
(1) The Board has determined that each member of the Audit Committee is independent, as defined in the NYSE’s listing standards, Section 10A of the Exchange Act and the Company’s Corporate Governance Guidelines. The Board has determined that each member of the Audit Committee is financially literate and that Mr. Halverson meets the definition of an audit committee financial expert as promulgated by the SEC. No Audit Committee member serves on the audit committees of more than two other public companies.
(2) The Board has determined that each member of the CLD Committee and the Governance Committee is independent, as defined in the NYSE’s listing standards and the Company’s Corporate Governance Guidelines.
(3) Except for decisions that impact the compensation of Sysco’s CEO, the CLD Committee is generally authorized to delegate any decisions it deems appropriate to a subcommittee. In such a case, the subcommittee must promptly report any action that it takes to the full CLD Committee. In addition, the CLD Committee may delegate to any one or more members of the Board its full equity grant authority with respect to any equity-based grants (other than grants made to Sysco’s senior officers); and the CLD Committee has delegated such authority to the CEO with respect to certain non-executive employees, subject to specified limitations. In carrying out its duties, the CLD Committee may also delegate its oversight of Sysco’s employee and executive benefit plans to any administrative committees of the respective plans or to such officers or employees of Sysco as the CLD Committee deems appropriate, except that it may not delegate its powers to amend, establish or terminate any benefit plan that is maintained primarily for the benefit of Sysco’s senior officers, resolve claims under a benefit plan with respect to any senior officer, or modify the compensation of any senior officer as provided under any nonqualified or executive incentive compensation plan. For a detailed description of the CLD Committee’s processes and procedures for consideration and determination of executive compensation, including the role of executive officers and compensation consultants in recommending the amount and form of executive compensation, see “— Compensation Consultants” and “Compensation Discussion and Analysis.”

 

SYSCO CORPORATION - 2021 Proxy Statement    19

 

Annual Board Self-Evaluation

 

During fiscal 2021, the Board conducted an annual self-evaluation to determine whether the Board and its committees functioned effectively during the prior fiscal year. The Chairman of the Board and the Chairman of the Governance Committee led a discussion of the Board’s performance in executive session.

 

In addition, each Board committee conducted a self-evaluation of its performance focused on the committee’s key responsibilities. As part of the evaluation process, each director completed a committee self-evaluation questionnaire developed by the Governance Committee. The questionnaire responses were compiled and reviewed by legal counsel, which provided a summary of the responses, without attribution to any individual director, to the chairman of each committee. Feedback from the committees’ self-evaluations was reviewed by the applicable committee and also presented to the full Board for review and discussion. Key learnings from these Board and committee self-evaluations play an important role in informing the Board’s approach to refreshment and succession planning.

 

Beginning in fiscal 2017, the Board’s self-evaluation process was enhanced to include periodic “360 degree” individual director performance reviews, which involve a confidential evaluation of the performance of selected directors by each of his or her fellow directors, key members of senior management and representatives of certain independent, third-party firms that routinely interact with the directors assessed. An independent, third-party corporate governance firm compiles and communicates to the directors assessed the feedback from these reviews.

 

Director Independence

 

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

 

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

 

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

 

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

 

The Board has reviewed all relevant relationships between those individuals who served as a director at any time during fiscal 2021 (and/or who are nominated for election at the Annual Meeting) and Sysco. The relationships reviewed included any described under “Certain Relationships and Related Person Transactions,” and several relationships that did not automatically make the individual non-independent under the NYSE standards or our Corporate Governance Guidelines, either because of the type of affiliation between the director and the other entity or because the amounts involved did not meet the applicable thresholds.

 

These additional relationships included the following, which were considered by the Board at the time of its independence determination (for purposes of this section, “Sysco,” “we,” “us” and “our” include our operating companies):

 

Mr. Cassaday’s service as a director of one of our suppliers;
Mr. Frank’s service as a Partner of Trian Fund Management, L.P. (“Trian”), which owned approximately 3.5% of Sysco’s outstanding common stock based on Trian's most recent public disclosure;
Mr. Glasscock’s service as a director of one of our customers;
Mr. Halverson’s service as Treasurer of a charitable organization that is one of our customers;
Mr. Hinshaw’s former service as a director of one of our suppliers and his service as an executive officer of a banking and financial services organization that provides commercial lending services to Sysco and that has received from Sysco, in each of the past three fiscal years, an aggregate amount significantly less than the maximum amount permitted under the NYSE listing standards for director independence (i.e., 2% of consolidated gross revenues);

 

SYSCO CORPORATION - 2021 Proxy Statement    20

 
Ms. Lundquist’s former service as an executive officer of a Sysco customer and supplier that has paid to Sysco, and received from Sysco, in each of the past three fiscal years, an aggregate amount significantly less than the maximum amount permitted under the NYSE listing standards for director independence (i.e., 2% of consolidated gross revenues);
Mr. Peltz’s service as (i) Chief Executive Officer and a Founding Partner of Trian, which owned approximately 3.5% of Sysco’s outstanding common stock based on Trian's most recent public disclosure, and (ii) a director of three Sysco customers; and
Mr. Shirley’s service as a director of one of our customers and his former service as Sysco’s Executive Chairman of the Board on an interim basis from January 10, 2020 until November 20, 2020, as described under “—Board Leadership Structure” above.

 

After reviewing such information, the Board has determined that (i) each of Mr. Brutto, Mr. Cassaday, Mr. Glasscock, Mr. Halverson, Mr. Hinshaw, Dr. Koerber, Ms. Lundquist and Ms. Talton, (ii) Ms. Nancy Newcomb, who retired from the Board effective November 20, 2020, and (iii) each of Mr. Joshua D. Frank and Mr. Nelson Peltz, who resigned from the Board effective August 20, 2021, has no material relationship with Sysco and is independent under the NYSE standards and the categorical standards set forth in the Corporate Governance Guidelines and described above. In addition, due to the interim nature of Mr. Shirley’s service as Executive Chairman of the Board during fiscal 2021, as discussed above under “—Board Leadership Structure,” the Board has also determined that Mr. Shirley qualifies as independent under the NYSE standards following his appointment to non-executive Chairman of the Board effective in November 2020.

 

The Board also determined that Mr. Hourican, who served as an executive officer of the Company during fiscal 2021, is not independent pursuant to the NYSE independence standards due to such service.

 

The Board has also determined that each member of the Audit Committee, CLD Committee and Governance Committee is independent. Our Corporate Governance Guidelines also provide that no independent director who is a member of the Audit, CLD or Governance Committees may receive any compensation from Sysco, other than in his or her capacity as a non-employee director or committee member. The Board has determined that no non-employee director received any compensation from Sysco at any time since the beginning of fiscal 2021, other than in his or her capacity as a non-employee director, committee member, committee chairman or Chairman of the Board.

 

Certain Relationships and Related Person Transactions

 

Related Person Transactions Policies and Procedures

 

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

 

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

 

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

 

Any of our employees, officers or directors who have knowledge of a proposed related person transaction must report the transaction to our chief legal officer. Whenever practicable, before the transaction goes effective or becomes consummated, the proposed transaction will be reviewed and approved by the Board or, pursuant to authority delegated by the Board, by (i) the Chair of the Governance Committee, if the aggregate amount involved is expected to be less than $200,000; or (ii) the Governance Committee, if the aggregate amount involved is expected to be less than $500,000. If a potential related person transaction is entered into without prior approval pursuant to this policy, the Governance Committee will review and recommend to the Board, and the Board will determine, in its discretion, whether to ratify the transaction.

 

In addition, during the first quarter of each fiscal year, the Governance Committee and the Board will review any related person transaction that was previously approved and is ongoing to:

 

ensure that such transaction has been conducted in accordance with the previous approval;
ensure that Sysco makes all required disclosures regarding the transaction; and
determine if Sysco should continue, modify or terminate the transaction.

 

SYSCO CORPORATION - 2021 Proxy Statement    21

 

We will consider a related person transaction approved or ratified if the transaction is authorized by the Chair, the Governance Committee or the Board, as applicable, in accordance with the standards described below, after full disclosure of the related person’s interests in the transaction. As appropriate for the circumstances, the Chair, the Governance Committee and/or the Board will review and consider such of the following as it deems necessary or appropriate:

 

the related person’s interest in the transaction;
the approximate dollar value of the amount involved in the transaction;
the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
whether the transaction was undertaken in Sysco’s ordinary course of business;
whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to Sysco than terms that could have been reached with an unrelated third party;
the purpose of, and the potential benefits to Sysco of, the transaction; and
any other information regarding the transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

 

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

 

Transactions with Related Persons

 

In addition to receiving director compensation during fiscal 2021 for his service as an independent director and independent Chairman of the Board from November 2020 to July 2021, Mr. Shirley received compensation from the Company for his service as Executive Chairman from June 2020 to November 2020. See “Director Compensation – Overview of Non-Employee Director Compensation” below for a discussion of Mr. Shirley’s compensation as Executive Chairman of the Board.

 

During the period from May 2020 to October 2020, prior to being appointed as Executive Vice President and Chief Commercial Officer (and an executive officer) of Sysco, Ms. Sansone provided consulting services to Sysco Corporation through her consulting firm, Consultgenics, LLC. During fiscal 2021, Sysco paid fees of approximately $141,000 to Ms. Sansone’s firm in exchange for these consulting services.

 

Risk Oversight

 

The Board oversees Sysco’s enterprise risk management process to ensure the process is consistent with both the short- and long-term goals of the Company. The Board relies on various individuals and committees within management and among our Board members. See “Board of Directors Matters—Election of Directors at 2021 Annual Meeting (Item 1)—Director Qualifications and Board Succession” and “Board of Directors Matters—Board Composition” below for a description of individual director qualifications, including risk management experience.

 

Through the enterprise risk management process, the Board establishes a mutual understanding with management of the effectiveness of the Company’s risk management practices and capabilities and elevates certain key risks for discussion at the Board level. Management identifies, manages, and mitigates enterprise risks, and reports directly to the Audit Committee and the Board on a regular basis with respect to enterprise risk management. As discussed above under “Board Meetings and Committees,” the Audit Committee reviews Sysco’s process by which management assesses and manages the Company’s exposure to enterprise risk. The Audit Committee also makes recommendations to the Board with respect to the process by which members of the Board and relevant committees will be made aware of the Company’s significant risks, including recommendations regarding what committee of the Board would be most appropriate to take responsibility for oversight of management with respect to the most material risks faced by the Company. On an annual basis, management reviews with the Board the Board-level enterprise risks identified in the process, such as strategic, operational, financial, external/regulatory and reputation risks, as well as management’s process and resources needed for addressing and mitigating the potential effects of such risks. Sysco’s enterprise risk management process includes frequent discussion and prioritization of enterprise-level risk issues by the executive management team, assignment of risk owners responsible for ensuring a risk remains within management’s risk tolerance, and tracking and monitoring of risk information.

 

The Board’s committees help oversee the enterprise risk management process within the respective areas of the committees’ delegated oversight authority.

 

The Audit Committee is primarily responsible for hiring and evaluating our independent registered public accounting firm, reviewing our internal controls, overseeing our internal audit function, overseeing customer credit risk, reviewing contingent liabilities that may be material to the Company and various regulatory and compliance oversight functions.
The Audit Committee and the Technology Committee, together with the full Board, oversee risks related to cybersecurity and data protection, receiving comprehensive updates from management at least quarterly regarding the Company’s business technology and cybersecurity program, including our adherence to the National Institute of Standards and Technology (NIST) Cybersecurity Framework for assessing cybersecurity maturity. Sysco’s cybersecurity program is regularly audited by independent third parties, and we provide cybersecurity training to all associates at least annually.

 

SYSCO CORPORATION - 2021 Proxy Statement    22

 
The CLD Committee is responsible for ensuring that our executive compensation policies and practices do not incentivize excessive or inappropriate risk-taking by employees.
The Governance Committee monitors risk by ensuring that proper corporate governance standards are maintained, that the Board is consists of qualified directors, and that qualified individuals are chosen as senior officers.
The CSR Committee, jointly with the full Board, oversees risks related to environmental, social and governance issues.

 

The Chairman of the Board coordinates the flow of information regarding enterprise risk oversight from each respective committee to the independent directors and participates in the review of the agenda for each Board and committee meeting. As the areas of oversight among committees sometimes overlap, committees may hold joint meetings when appropriate and address certain enterprise risk oversight issues at the full Board level. The Board considers enterprise risk in evaluating the Company’s strategy, including specific strategic and emerging risks. The Board also monitors any specific enterprise risks for which it has chosen to retain oversight rather than delegating oversight to one of its committees, such as risks related to competitive threats, senior leadership succession planning, and business continuity.

 

Corporate Social Responsibility

 

The Board, through its CSR Committee, oversees the Company’s development and implementation of Sysco’s CSR strategy, including its progress toward the 2025 CSR goals established in 2018. Sysco’s CSR priorities and initiatives are anchored in three pillars — People, Products and Planet. We are committed to caring for people, sourcing products responsibly and respecting the planet. We will cultivate new channels, new segments, and new capabilities while being stewards of our company and our planet. For further discussion of Sysco’s CSR strategy and 2025 CSR Goals, see our website at www.sysco.com in the About section under “Corporate Social Responsibility.”

 

Code of Conduct

 

Our Global Code of Conduct (the “Code”) is guided by our values and expectations which we believe are important to delivering exceptional service with the highest degree of integrity. We require all of our directors, officers and associates, including our principal executive officer, principal financial officer, principal accounting officer and controller, to understand and abide by the Code, as it represents our commitment to continuously deliver excellence with integrity by conducting our business in accordance with the highest standards of moral and ethical behavior in accordance with our values: Integrity, Excellence, Teamwork, Inclusiveness, Responsibility. Our Global Code of Conduct addresses the following, among other topics:

 

fraud;
anti-corruption and anti-bribery;
export/import laws and trade sanctions;
human rights;
diversity and inclusion;
workplace safety;
antitrust;
competition and fair dealing;
professional conduct, including customer relationships, equal opportunity, payment of gratuities and receipt of payments or gifts;
political contributions;
conflicts of interest;
insider trading;
financial disclosure;
intellectual property; and
confidential information.

 

Our Code, which is reviewed annually by our Governance Committee, requires strict adherence to all laws and regulations applicable to our business and requires employees to report any violations or suspected violations of the Code. We have published the Code on our website in the Overview section under “Investors—Corporate Governance” at www. sysco.com. We intend to disclose any future amendments to or waivers of our Code on our website at www.sysco.com under the heading “Investors—Corporate Governance.”

 

Reporting a Concern or Violation

 

Our Code explains that there are multiple channels for an employee to report a concern, including to an associate’s manager, a human resource professional, our Legal or Ethics and Compliance department, or to the Sysco Ethics Line. Our Ethics Line is available 24 hours a day, seven days a week, 365 days a year, worldwide, to receive calls or web submissions from anyone wishing to report a concern or complaint, anonymous or otherwise. Our Ethics Line contact information can be found on our website at www.sysco.com under the heading “About Sysco – The Sysco Story – Sysco Global Code of Conduct.”

 

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

 

SYSCO CORPORATION - 2021 Proxy Statement    23

 

Compensation Consultants

 

The CLD Committee has retained Semler Brossy Consulting Group, LLC (“Semler Brossy”) as its executive compensation consultant. Retained by and reporting directly to the Committee, Semler Brossy provides the CLD Committee with assistance in evaluating Sysco’s executive compensation programs and policies, and, where appropriate, assists with the redesign and enhancement of elements of the programs

 

Semler Brossy also advised the Governance Committee with respect to non-employee director compensation. At the Governance Committee’s request, Semler Brossy provided data regarding the amounts and types of compensation paid to non-employee directors at the companies in Sysco’s peer group, and also identified trends in director compensation. All decisions regarding non-employee director compensation are recommended by the Governance Committee and approved by the Board. In addition to providing background information and written materials, Semler Brossy representatives attended meetings at which the committee Chairmen believed that their expertise would be beneficial to the committees’ discussions. For additional information regarding Semler Brossy and the scope of its assignments with regard to fiscal 2021 and 2022 executive compensation, see “Compensation Discussion and Analysis—How Executive Pay is Established—Committee Oversight.”

 

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

 

SYSCO CORPORATION - 2021 Proxy Statement    24

 

BOARD OF DIRECTORS MATTERS

 

Election of Directors at 2021 Annual Meeting (Item 1)

 

Current Members of Our Board of Directors and Board Nominees

 

    Name   Age   Director since   Experience   Independent   Committee
Memberships(1)
  Other Public
Company Boards
   Daniel J. Brutto    65    September 2016    Former President, UPS International and Senior Vice President, United Parcel Service, Inc.    Yes    CGN
CSR*
Executive
     Illinois Tool Works Inc.
  John M. Cassaday   68   November 2004   Former President, CEO and director of Corus Entertainment Inc.   Yes   CLD*
CGN
Executive
 

  Manulife Financial Corporation

  Sleep Country Canada Holdings Inc.

  Larry C. Glasscock   73   September 2010   Former Chairman of the Board of Directors, CEO and President of WellPoint, Inc.   Yes   CLD
CGN*
Executive
    Simon Property Group, Inc.
  Bradley M. Halverson   61   September 2016   Former Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar Inc.   Yes   Audit*
CLD
Executive
    Lear Corporation
  John M. Hinshaw   51   April 2018   GMD Chief Operating Officer, HSBC Group Management Services, Ltd.   Yes   Audit
CLD
Tech
   
  Kevin P. Hourican   48   February 2020   President and Chief Executive Officer, Sysco Corporation   No   Executive    
  Hans-Joachim Koerber   75   January 2008   Former chairman and CEO of METRO Group (Germany)   Yes   Audit
CSR
    Eurocash SA
  Stephanie A. Lundquist   45   November 2019   Former President, Food and Beverage of Target Corporation   Yes   CLD
CSR
Tech
   
  Edward D. Shirley(2)   64   September 2016   Chairman of the Board, Sysco Corporation   Yes   CGN
CSR
Executive*
   
  Sheila G. Talton   68   September 2017   President and Chief Executive Officer of Gray Matter Analytics   Yes   CGN
CSR
Tech*
 

  Deere & Company

  OGE Energy Corp.

   
(1) Full committee names are as follows:
  Audit – Audit Committee CGN – Corporate Governance and Nominating Committee Executive – Executive Committee
  CLD – Compensation and Leadership Development Committee CSR – Corporate Social Responsibility Committee Tech – Technology Committee
(2) Mr. Shirley currently serves as the independent Chairman of the Board. For more details, see page 17.
* Denotes committee chairperson

 

SYSCO CORPORATION - 2021 Proxy Statement    25

 

Election Process

 

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

 

Nomination Process

 

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

 

Director Candidates Identified by the Board and Management

 

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

 

Director Candidates Recommended by Stockholders

 

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

 

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

 

The Governance Committee will consider, in advance of Sysco’s next annual meeting of stockholders, those director candidate recommendations that the Governance Committee receives by May 2, 2022.

 

In addition, if we receive by June 8, 2022, a recommendation of a director candidate from one or more stockholders who have beneficially owned at least 5% of our outstanding Common Stock for at least one year as of the date the stockholder makes the recommendation, then we will disclose in our next proxy materials relating to the election of directors the identity of the candidate, the identity of the nominating stockholder(s) and whether the Governance Committee determined to nominate such candidate for election to the Board. However, we will not provide this disclosure without first obtaining written consent of such disclosure from both the nominating stockholder and the candidate it is planning to recommend. The Governance Committee will maintain appropriate records regarding its process of identifying and evaluating candidates for election to the Board. The Governance Committee has not received any recommendations for director nominees for election at the Annual Meeting from any Sysco stockholders beneficially owning more than 5% of Sysco’s outstanding Common Stock.

 

Proxy Access Director Candidates

 

Our “proxy access” bylaw provisions permit an eligible stockholder (or a group of up to 20 eligible stockholders), who have continuously owned for a period of three years at least 3% of the aggregate of our outstanding Common Stock, to nominate a number of director nominees equal to 20% (rounded down) of the total number of directors constituting our Board (provided that, if the total number of directors is less than 10, an eligible stockholder or group may nominate up to two persons), which nominees will be included in our proxy statement for the relevant annual stockholders meeting if the nominating stockholder(s) and the respective nominee(s) comply with all applicable eligibility, procedural and disclosure requirements set forth in our bylaws.

 

SYSCO CORPORATION - 2021 Proxy Statement    26

 

Evaluation of Director Candidates

 

In evaluating all incumbent and new director candidates that the Governance Committee determines merit consideration, the Governance Committee will:

 

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

 

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

 

Diversity

 

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

 

Director Qualifications and Board Succession

 

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

 

Key Characteristics of All Nominees

 

Each director nominee should demonstrate and possess all of the following characteristics:

 

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

 

SYSCO CORPORATION - 2021 Proxy Statement    27

 

Director Qualifications

 

The Board, as recommended by the Governance Committee, has determined that the director nominees possess the director qualifications indicated in the table below, which the Board has endorsed as the qualifications most significant for the Board to possess, collectively, to guide management in the achievement of the Company’s strategic priorities.

 

Accounting/Audit/Financial Reporting: An understanding of accounting, audit and financial reporting processes is important for our directors to establish appropriate financial performance objectives for the Company and senior management in the context of Sysco’s strategic priorities, and to evaluate financial performance as compared to those objectives.
Business Operations: Directors who have served in leadership positions with responsibility for managing or overseeing the operations of a company or business unit gain extensive experience in maximizing productivity and efficiency while managing expenses, which is valuable to Sysco’s operating plan and strategy. In particular, such directors can provide guidance and oversight to management in connection with its efforts to reduce administrative costs and leverage supply chain costs.
Distribution/Supply Chain: Directors who have experience in distribution logistics and supply chain management, including experience in the design, planning, execution, control and monitoring of supply chain activities, are capable of providing guidance and oversight to management in connection with its efforts to maximize the efficiencies and reduce the costs associated with Sysco’s acquisition of products and services from suppliers.
Executive Leadership/Management: Experience as a senior executive in a large and complex public, private, government or academic organization enables a director to better oversee the management of the Company. Such individuals also bring perspective in analyzing, shaping and overseeing the execution of important operational and policy issues at a senior level, and tend to demonstrate a practical understanding of organizations, strategy, risk management and methods to drive change and growth. Finally, directors with experience in significant leadership positions generally possess the ability to identify and develop leadership qualities in others, including members of our management team.
Finance: Directors with an understanding of financial markets and financing and funding operations can provide valuable advice and insights to the Board with respect to the establishment of a successful capital strategy for the Company and the evaluation of proposed capital transactions in light of that strategy.
Foodservice Industry Experience: Experience serving as an executive, director or in another leadership position with a company in the foodservice industry enables a director to oversee more effectively our operations and to provide advice and guidance on issues impacting our business. In addition, as the foodservice market continues to mature, directors with industry experience can provide valuable insights as we focus on ways in which Sysco can grow organically by identifying and developing new markets.
HR/Human Capital Management/Large Workforce: Directors with human resources experience can offer guidance on Sysco’s talent management strategy, particularly in connection with recruiting, assessing, incentivizing and rewarding corporate executives and other senior leadership.
International/Global: Sysco continues to pursue opportunities to grow our global capabilities in, and source products directly from, international markets. We benefit from the experience and insight of directors with a global business perspective, as we identify the best strategic manner in which to continue to expand our operations outside of North America. As Sysco’s reach becomes increasingly global, directors with international business experience can assist us in navigating the business, political, and regulatory environments in countries in which Sysco does, or seeks to do, business.
M&A/Integration: Sysco continues to pursue opportunities to expand our business through acquisitions. Directors with a background in managing significant acquisitions or other business combinations can provide valuable guidance on how to develop and implement strategies for growing our business. Relevant experience includes assessing “build or buy” decisions, analyzing the “fit” of a proposed acquisition target with a company’s strategy and culture, accurately valuing transactions and evaluating operational integration plans.
Marketing/Sales/Merchandising: Experience with marketing, brand management and/or consumer sales.
Public Company Board Service: Directors who have served on other public company boards can offer advice and insights with regard to the dynamics and operation of the Board, board practices of other public companies and the relationship between the Board and the management team. Most public company directors also have corporate governance experience to support our goals of Board and management accountability, greater transparency, legal and regulatory compliance and the protection of stockholder interests. Many of our directors currently serve, or have previously served, on the boards of directors of other public companies and served in leadership positions on those boards.
Risk Oversight/Management: The Board oversees management’s efforts to understand and evaluate the types of risks facing Sysco and its business, evaluate the magnitude of the exposure, and enhance risk management practices. Directors with risk management experience can provide valuable insights as Sysco seeks to strike an appropriate balance between enhancing profits and managing risk.
Strategy Development: Directors who have served as a senior executive for large and complex public, private, governmental or academic organizations with responsibility for strategic planning and development are particularly well suited to advise and oversee management in establishing and executing the Company’s key strategic initiatives, as well as in evaluating the success of those initiatives.
Sustainability/ESG: Experience with sustainability and/or corporate social responsibility issues and related efforts of a large and complex public, private, governmental or academic organization to address such issues.
Digital Technology/Cybersecurity: We use technology in substantially all aspects of our business operations, and we are continuing to implement business technology initiatives in furtherance of our strategic priorities. Directors with experience in technology and e-commerce, including current knowledge of digital technology/new innovations and related issues, such as cyber-security, privacy and data management, are well suited to oversee management’s execution of our business technology initiatives.

 

SYSCO CORPORATION - 2021 Proxy Statement    28

 
Director Qualifications   Mr. Brutto    Mr. Cassaday    Mr. Glasscock    Mr. Halverson    Mr. Hinshaw    Mr. Hourican    Dr. Koerber    Ms. Lundquist    Mr. Shirley    Ms. Talton
   Accounting/Audit/Financial Reporting                          
  Business Operations                    
  Distribution/Supply Chain                            
  Executive Leadership/Management                    
  Finance                          
  Foodservice Industry Experience                                
  HR/Human Capital Management/Large Workforce                      
  International/Global                      
  M&A/Integration                      
  Marketing/Sales/Merchandising                        
  Public Company Board Service                        
  Risk Oversight/Management                    
  Strategy Development                    
  Sustainability/ESG                                  
  Digital Technology/Cybersecurity                                  

 

In selecting the director nominees, the Governance Committee and the Board reviewed each of the incumbent directors in light of these qualifications and the Company’s strategic priorities, and each concluded that each of the nominees contributed significantly to the Board’s collective portfolio of requisite skills, characteristics and qualifications and to the Board’s overall composition. The Governance Committee and the Board expect to again review and validate the qualification criteria in fiscal 2022 and to continue to utilize these qualification criteria in connection with their future Board refreshment efforts to identify additional candidates for Board service.

 

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

 

Nominees for Election as Directors at the 2021 Annual Meeting

 

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

 

Daniel J. Brutto   Kevin P. Hourican
John M. Cassaday   Hans-Joachim Koerber
Larry C. Glasscock   Stephanie A. Lundquist
Bradley M. Halverson   Edward D. Shirley
John M. Hinshaw   Sheila G. Talton

 

Each of the nominees is currently serving as a director of Sysco and has consented to serve if elected. Although management does not contemplate the possibility, if any nominee is not a candidate or is unable to serve as a director at the time of the election, the proxies will vote for any nominee whom the present Board designates to fill the vacancy.

 

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

 

Required Vote

 

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

 

SYSCO CORPORATION - 2021 Proxy Statement    29

 

Board Composition

 

Nominees for Election as Directors at the Annual Meeting:

 

DANIEL J. BRUTTO

 

Age 65

 

Director
since:

 

September 2016

 

  

 

Key Director Qualifications:

Mr. Brutto earned a Bachelor of Business Administration in Accounting degree from Loyola University in 1978, followed by a Master of Business Administration degree from Keller Graduate School of Management in 1982. Mr. Brutto served as President of UPS International and Senior Vice President of United Parcel Service, Inc. (“UPS”), a global package delivery, supply chain management and freight forwarding company, from January 2008 until his retirement in June 2013. Previously, he served as President, Global Freight Forwarding, for UPS from 2006 to 2007, and corporate controller from 2004 to 2006. Mr. Brutto’s more than 38-year career at UPS, during which he served in various capacities with increasing levels of responsibility, provided him with extensive experience in the following areas: executive leadership/management, strategy development, business operations, finance, information systems, mergers & acquisitions, marketing and international/global. He also has public company board experience, having served as a director of Illinois Tool Works Inc. since February 2012. Additionally, Mr. Brutto served as Executive Chairman of Radial, Inc. from 2016 to 2017, a privately held global fulfillment, customer care and technology company, and he also served on the board of UNICEF from 2009 until 2020. In the past, he has served on the board of the US-China Business Council, the Guangdong Economic Council, and the Turkey Economic Advisory Council. He was also a delegate to the World Economic Forum, Davos, Switzerland, from 2009 to 2013.

 

 

Committees:

Corporate Governance & Nominating Committee

Corporate Social Responsibility Committee (Chair)

Executive Committee

Primary Occupation:

Mr. Brutto served as President of UPS International and Senior Vice President of United Parcel Service, Inc. from January 2008 until his retirement in June 2013.

Other Boards:

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

       
JOHN M. CASSADAY

 

Age 68

 

Director
since:

 

November 2004

 

  

 

Key Director Qualifications:

Mr. Cassaday earned a Bachelor of Arts degree from the University of Western Ontario and a Master of Business Administration Degree with honors from the University of Toronto’s Rotman School of Management. Prior to his more than 15 years of service as President and Chief Executive Officer of Corus Entertainment Inc., a Canadian leader in radio and cable television, Mr. Cassaday served as President and CEO of CTV Television Network Ltd. Mr. Cassaday’s career prior to broadcasting included executive positions in a number of leading packaged goods companies, including RJR-Macdonald, Inc., General Foods Corporation and Campbell Soup Company, where he gained food processing and food safety experience while advancing through positions in sales, marketing, and strategic planning in Canada, the United States, and the United Kingdom. His career at Campbell’s culminated in service as President of Campbell Soup Company’s operations in Canada and then the United Kingdom. Mr. Cassaday gained additional foodservice experience through his service as a director of Loblaw Companies Limited, Canada’s largest food retailer, and of J.M. Schnieder, a meat processing company. This background has provided Mr. Cassaday with extensive experience and knowledge in the areas of leadership, corporate strategy and development, the foodservice industry, distribution and supply chains, marketing, international operations, accounting, finance and financial reporting. In addition, Mr. Cassaday’s service on the Board of Directors of Manulife Financial Corporation has provided a greater understanding of risk management and global compensation considerations. Mr. Cassaday has received many business, industry and charitable honors, including designation as the most distinguished alumnus of the University of Toronto’s Rotman School of Management in 1998, receipt of the Gold Medal from the Association of Canadian Advertisers in 2004 (which recognizes individuals who have made an outstanding contribution to the advancement of marketing communications in Canada), induction in the Marketing Hall of Legends of Canada in 2006 and induction into the Canadian Broadcast and Music Hall of Fame in 2015. In 2013, Mr. Cassaday was inducted into the Order of Canada, Canada’s highest civilian honor. In 2017, Mr. Cassaday was presented with a degree of Director of Laws, honoris causa from the University of Toronto and was recently awarded the 2019 ICD Fellowship Award, the highest distinction for Corporate Directors in Canada.

 

 

Committees:

Compensation and Leadership Development Committee (Chair)

Corporate Governance and Nominating Committee

Executive Committee

Primary Occupation:

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

Other Boards:

Mr. Cassaday is a director of Manulife Financial Corporation, where he is currently the chairman of the board, and Sleep Country Canada Holdings Inc. and a director of one privately held company: Irving Oil Limited.

       

 

SYSCO CORPORATION - 2021 Proxy Statement    30

 
LARRY C. GLASSCOCK

 

Age 73

 

Director
since:

 

September 2010

 

  

 

Key Director Qualifications:

Mr. Glasscock attended Cleveland State University, where he received a bachelor’s degree in business administration. He later studied at the School of International Banking, participated in the American Bankers Association Conference of Executive Officers, and completed the Commercial Bank Management Program at Columbia University. Mr. Glasscock has developed significant leadership and corporate strategy expertise through over 30 years of business experience, including former service as Chairman of WellPoint, Inc. (now Anthem, Inc.), a healthcare insurance company, from 2005 to March 2010, President and CEO of WellPoint, Inc. from 2004 to 2007, Chairman, President and CEO of Anthem, Inc. from 2003 to 2004, and President and CEO of Anthem, Inc. from 2001 to 2003, as well as his service as COO of CareFirst, Inc., President and CEO of Group Hospitalization and Medical Services, Inc., President and COO of First American Bank, N.A., and President and CEO of Essex Holdings, Inc. During his tenure at WellPoint, Inc. (now Anthem, Inc.), he played a major role in transforming the company from a regional health insurer into a national healthcare leader and championed company efforts to improve quality and customer service. Throughout his career, Mr. Glasscock has developed expertise in the successful completion and integration of mergers and team building and human capital development. His knowledge and experience in team building and human capital development are also extremely valuable to Sysco, as management development and succession planning remain top priorities of executive management and the Board. Mr. Glasscock also has considerable financial experience, as he has supervised the chief financial officers of major corporations. Earlier in his career he served as a bank officer lending to major corporations and supervised assessments of companies’ creditworthiness. Mr. Glasscock also has significant experience as a public company director and as a member of various committees related to important board functions, including audit, finance, governance and compensation. Mr. Glasscock was recognized by The National Association of Corporate Directors in 2019 as among the most influential people in the boardroom community.

 

 

Committees:

Corporate Governance and Nominating Committee (Chair)

Compensation and Leadership Development Committee

Executive Committee

Primary Occupation:

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

Other Boards:

Mr. Glasscock has served as a director of Simon Property Group, Inc. since March 2010, where he is currently the lead independent director, and served as a director from August 2001 until May 2021 and non-executive Chairman of the Board from May 2013 until May 2021 of Zimmer Biomet Holdings, Inc.

       
BRADLEY M. HALVERSON

 

Age 61

 

Lead Director
since:

 

January 2020

 

  

 

Key Director Qualifications:

Mr. Halverson attended the University of Illinois, where he received a Bachelor of Science degree in Accounting in 1982 and an Executive Master of Business Administration degree in 1996. He is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. Mr. Halverson served as Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar Inc. (“Caterpillar”), the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel - electric locomotives until his retirement in May 2018. He was responsible for Caterpillar’s Finance Services Division, Human Services Division, Global Information Services Division, Financial Products Division, as well as Corporate Auditing. He joined Caterpillar in 1988, serving in budgeting, forecasting and financial analysis roles of increasing responsibility. In 1993, Mr. Halverson moved to Geneva, Switzerland, to become a strategy and planning consultant with Caterpillar Overseas, S.A. He went on to become controller in Europe, responsible for Caterpillar’s financial reporting in Europe, Africa and the Middle East, returning to the U.S. in 1996 to manage general accounting and financial systeMs. From 1998 until 2012, Mr. Halverson served in various leadership roles at Caterpillar, including Corporate Controller (2007-2010) and Vice President, Financial Services Division (2010-2012). During the course of his nearly 30 year career with Caterpillar, together with his prior service with PricewaterhouseCoopers LLP, Mr. Halverson has developed deep expertise in accounting, financial reporting and corporate finance, and has leadership experience in the areas of executive leadership and management, corporate strategy development, mergers and acquisitions, risk management, information technology systems oversight and international business. Mr. Halverson serves on the OSF St. Francis Medical Center Community Foundation Board and is Immediate Past Chairman of the Easter Seals Central Illinois Board of Directors and Treasurer of the Easter Seals of Central Illinois Board of Trustees. He was a board member of Custom Truck One source, a privately held company, and is a past member of the Executive Committee of the U.S. Chamber of Commerce.

 

 

Committees:

Audit Committee (Chair)

Compensation and Leadership Development Committee

Executive Committee

Primary Occupation:

Mr. Halverson served as the Group President, Financial Products and Corporate Services and Chief Financial Officer of Caterpillar from January 2013 to May 2018.

Other Boards:

Mr. Halverson has served as a director of Lear Corporation since June 2020.

       

 

SYSCO CORPORATION - 2021 Proxy Statement    31

 
JOHN M. HINSHAW

 

Age 51

 

Director
since:

 

April 2018

  

 

Key Director Qualifications:

Mr. Hinshaw attended James Madison University where he earned a B.B.A. in Computer Information Systems and Decision Support Sciences in 1992. Mr. Hinshaw serves as Group Chief Operating Officer of HSBC Group Management Services, Ltd. Previously, Mr. Hinshaw served as the Executive Vice President, Technology and Operations, of Hewlett Packard Company (an industry leading technology company) from November 2011 to November 2015, at which time he joined Hewlett Packard Enterprise Company (spun-off from Hewlett Packard) as the Executive Vice President, Technology and Operations and Chief Customer Officer, serving in such capacity until October 2016. Prior to joining Hewlett-Packard Company, Mr. Hinshaw served as Vice President and General Manager for Boeing Information Solutions at The Boeing Company (one of the world’s major aerospace firms) from 2010 to 2011. Before that, he served as Boeing’s Chief Information Officer from 2007 to 2010, leading Boeing’s companywide corporate initiative on information management and information security. Mr. Hinshaw also spent 14 years at Verizon Communications (one of the world’s leading providers of communications, information and entertainment products and services) where, among several senior roles of increasing responsibility, he served as Senior Vice President and Chief Information Officer of Verizon Wireless, overseeing the IT function of the wireless carrier. Mr. Hinshaw’s service in these leadership roles with significant public companies in a variety of different industries deeply rooted in technology provided him experience in the operations of large, complex organizations and expertise in both information technology and management, enabling him to effectively oversee Sysco management, especially with regard to the execution of business technology initiatives. Mr. Hinshaw also gained extensive public company board experience in enterprise risk management and information technology through his service as a member of the board of directors of The Bank of New York Mellon Corporation from September 2014 to December 2019. Mr. Hinshaw was also a board member of DocuSign, Inc. (a provider of electronic signature transaction management) from December 2014 to May 2020. Mr. Hinshaw is currently a member of the board of directors of Illumio, Inc. (a cyber security company) and is also the Proprietor of Blackbird Vineyards LLC (a wine company).

 

 

Committee:

Audit Committee

Compensation and Leadership Development Committee

Technology Committee

Primary Occupation:

Mr. Hinshaw has served as GMD Chief Operating Officer of HSBC Group Management Services Ltd. since February 2020.

Other Boards:

In the last five years, Mr. Hinshaw served as a director of The Bank of New York Mellon Corporation and DocuSign, Inc.

       
KEVIN P. HOURICAN

 

Age 48

 

Director
since:

 

February 2020

 

  

 

Key Director Qualifications:

Mr. Hourican earned an undergraduate degree in economics and a master’s degree in supply chain management from The Pennsylvania State University. He has served as Sysco’s President and Chief Executive Officer and as a member of the Board of Directors since February 1, 2020. Kevin is leading Sysco’s large-scale, customer-focused and growth-related transformation, aimed at further improving the way Sysco supports its customers and accelerating profitable sales growth. During an unprecedented year such as 2020, Sysco is not just successfully managing the pandemic crisis, the Company under Mr. Hourican’s leadership is leveraging it as an opportunity to fuel transformation and growth. Prior to Sysco, he served as Executive Vice President of CVS Health Corporation, a premier health innovation company, and President of CVS Pharmacy from April 2018 to January 2020, overseeing CVS Health’s $85 billion retail business, including 9,900 retail stores and over 200,000 employees, as well as merchandising, marketing, supply chain, real estate, front store operations, pharmacy growth, pharmacy clinical care and pharmacy operations. He previously held the roles of Executive Vice President, Retail Pharmacy and Supply Chain from June 2016 to March 2018, CVS Health’s pharmacy operations, professional services and retail pharmacy product innovation and development functions, as well as the company’s supply chain organization, and Senior Vice President, Field Operations and Supply Chain of CVS Pharmacy from June 2014 to May 2016. Prior to joining CVS Health, Mr. Hourican held executive leadership roles at Macy’s, most recently serving as Senior Vice President, Regional Director of Stores, responsible for the management of 110 department stores in the Mid-Atlantic region. Through these various operations and management positions within CVS and Macy’s, Mr. Hourican has acquired extensive experience and knowledge in the areas of executive leadership and management, corporate strategy development, distribution and supply chain management, merchandising and marketing. Further, the Corporate Governance and Nominating Committee and the Board believe that it is appropriate and beneficial to Sysco to have its Chief Executive Officer serve as management’s voice on the Board.

 

 

Committee:

Executive Committee

Primary Occupation:

Mr. Hourican has served as Sysco’s President and Chief Executive Officer since February 2020.

       

 

SYSCO CORPORATION - 2021 Proxy Statement    32

 
HANS-JOACHIM KOERBER

 

Age 75

 

Director
since:

 

January 2008

 

  

 

Key Director Qualifications:

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

 

 

Committees:

Audit Committee

Corporate Social Responsibility Committee

Primary Occupation:

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

Other Boards:

Dr. Koerber has served as a director of Eurocash SA since May 2013; he also serves as a director of several private European companies, including Klüh Service management GmbH, WEPA Industrieholding SE and DAW SE.

       
STEPHANIE A. LUNDQUIST

 

Age 45

 

Director
since:

 

November 2019

  

 

Key Director Qualifications:

Ms. Lundquist attended Concordia College where she earned a Bachelor of Arts degree in General Business and Communications. Ms. Lundquist served as Strategic Advisor at Target (a Fortune 30 company and industry leading retailer) from February 2021 through June 2021. Prior to that, she was Executive Vice President, President Food & Beverage at Target Corporation from January 2019 to February 2021. In this role she oversaw the full spectrum of merchandising, product design and development, financial and operational planning, supply chain, inventory management and store operations. Prior to that, Ms. Lundquist was Executive Vice President, Chief Human Resources Officer at Target from January 2016 to January 2019, leading all aspects of human resource management for one of the nation’s largest employers with over 350,000 employees. Ms. Lundquist also led the transformation agenda for Target as Senior Vice President, Transformation Office from January 2015 to February 2016. Ms. Lundquist joined Target in 2005, leveraging rapid career trajectory in increasingly complex operational and people leadership roles. Ms Lundquist’s track record of success and business performance through significant industry disruption at a large complex organization enable her to effectively oversee and advise Sysco management with regard to commercial, human capital and transformational initiatives. Her more than 15-year career with Target, together with her broad industry involvement, provides Ms. Lundquist extensive experience in the areas of executive leadership/management, strategy development, commercial operations, human resource management and corporate culture development, brand and risk management, social and environmental impact, supply chain, foodservice industry and international. Additionally, Ms. Lundquist currently serves as a member of Concordia College’s Board of Regents. Previously she served as executive co-chair of MBOLD (Minnesota’s Food and Agriculture consortium) and board member of Shipt (post acquisition by Target), the Human Resource Policy Association, and CEB’s CHRO Global Leadership Board.

 

 

Committees:

Compensation and Leadership Development Committee

Corporate Social Responsibility Committee

Technology Committee

Primary Occupation:

Ms. Lundquist served as Executive Vice President, Food and Beverage for Target Corporation from January 2019 to February 2021.

       

 

SYSCO CORPORATION - 2021 Proxy Statement    33

 
EDWARD D. SHIRLEY

 

Age 64

 

Chairman of the Board since:

 

November 2020

  

 

Key Director Qualifications:

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

 

 

Committees:

Corporate Governance & Nominating Committee

Corporate Social Responsibility Committee

Executive Committee

Primary Occupation:

Mr. Shirley served as Sysco’s Executive Chairman of the Board on an interim basis from January 2020 until November 2020.

       
SHEILA G. TALTON

 

Age 68

 

Director
since:

 

September 2017

 

 

Key Director Qualifications:

Ms. Talton attended Northern Illinois University, where she earned a Bachelor of Science degree in Marketing and Speech Communication in 1980, and Harvard Business School’s Executive Program. Ms. Talton currently serves as the President and Chief Executive Officer of Gray Matter Analytics, a firm focused on data analytics consulting services in the healthcare industry. Previously, she served as President and Chief Executive Officer of SGT Ltd., a firm that provides strategy and technology consulting services in the financial services, healthcare and technology business sectors, from 2011 to 2013. From 2008 to 2011, Ms. Talton served as Vice President, Office of Globalization, for Cisco Systems, Inc., a leading global manufacturer of networking, switching and server/virtualization technology products related to the communication and information technology industries. Prior to that time, she held other leadership positions at Cisco Systems, Inc., Electronic Data Systems Corporation and Ernst & Young, LLP. Ms. Talton’s service in leadership roles with a variety of global technology and consulting firms provided her with extensive knowledge of and experience in information technology systems and cybersecurity, enabling her to effectively oversee management’s execution of Sysco’s business technology initiatives and its approach to privacy and cyber security risks. Ms. Talton has also gained extensive public company board experience in compensation, corporate governance, risk management and audit/finance issues through her service on the boards of directors of Deere & Company since 2015 (member of audit review and finance committees) and OGE Energy Corp. since 2013 (member of compensation and governance committees). From 2012 to 2019, she also served on the board of directors of Wintrust Financial Corporation. Additionally, from 2010 to 2015, she also served on the board of directors of ACCO Brands Corporation. Ms. Talton has been a Congressional appointee on the U.S. White House Women’s Business Council. She also has been recognized as one of the “Top 10 Women in Technology” by Enterprising Women and as “Entrepreneur of the Year” by the National Federation of Black Women Business Owners. She serves on the boards of several nonprofit organizations, including Chicago’s Northwestern Hospital Foundation, the Chicago Shakespeare Theater and the Chicago Urban League. Ms. Talton was recognized by The National Association of Corporate Directors in 2018 as among the most influential people in the boardroom community.

 

 

Committees:

Corporate Governance and Nominating Committee

Corporate Social Responsibility Committee

Executive Committee

Technology Committee (Chair)

Primary Occupation:

Ms. Talton has served as President and Chief Executive Officer of Gray Matter Analytics since March 2013.

 

Other Boards:

Ms. Talton has served as a director of Deere & Company since 2015 and OGE Energy Corp. since 2013. In the last five years, Ms. Talton served as a director of ACCO Brands Corporation and Wintrust Financial Corporation.

       

 

SYSCO CORPORATION - 2021 Proxy Statement    34

 

DIRECTOR COMPENSATION

 

Overview of Non-Employee Director Compensation

 

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

 

Audit Committee Chair— $25,000
Compensation and Leadership Development Committee Chair— $20,000
Corporate Governance and Nominating Committee Chair— $20,000
Corporate Social Responsibility Committee Chair— $15,000
Technology Committee Chair— $15,000

 

Mr. Shirley received an additional annual retainer of $500,000, paid quarterly, for his service as independent Chairman of the Board from November 20, 2020 through the end of fiscal 2021, due to the incremental Chairman of the Board responsibilities described above under “Corporate Governance–Board Leadership Structure.” During the period in fiscal 2021 in which Mr. Shirley was serving as Executive Chairman of the Board, he did not receive additional compensation for his service as a director, nor did Mr. Hourican receive additional compensation during fiscal 2021 for his service as a director. See footnote 10 to the “Fiscal 2021 Director Compensation” table below for discussion of Mr. Shirley’s executive officer compensation with regard to his service as Executive Chairman.

 

Mr. Halverson received an additional annual retainer of $50,000, paid quarterly, for his service as independent Lead Director from the beginning of fiscal 2021 through November 20, 2020 (when he ceased to be the independent Lead Director), due to the incremental Lead Director responsibilities.

 

Each November, the Board grants time vested equity incentives to each of the non-employee directors in the form of restricted stock awards. In November 2020, the Board, upon the recommendation of the Governance Committee, granted to each person then serving as a non-employee director approximately $185,000 in shares of restricted stock that vest in full on the first anniversary of the grant date. See “Equity-Based Awards to Non-Employee Directors” below for a description of the plan under which these awards were granted, the “Fiscal 2021 Director Compensation” table below for detailed compensation information for fiscal 2021 for each person who served as a non-employee director and “Stock Ownership—Stock Ownership Guidelines” below for a description of the stock ownership requirements applicable to our non-employee directors.

 

Reimbursement of Expenses

 

All non-employee directors are entitled to receive reimbursements of expenses for all services as a director, including committee participation or special assignments. Reimbursement for non-employee director travel may include reimbursement of a portion of the cost of travel on private aircraft. Specifically, this includes reimbursement for non-commercial air travel in connection with Sysco business, subject to specified maximums, provided that amounts related to the purchase price of an aircraft or fractional interest in an aircraft are not reimbursable and any portion of the reimbursement that relates to insurance, maintenance and other non-incremental costs is limited to a maximum annual amount. Non-employee directors also receive discounts on products carried by the Company and its subsidiaries comparable to the discounts offered to all company employees.

 

Directors Deferred Compensation Plan

 

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

 

SYSCO CORPORATION - 2021 Proxy Statement     35

 

Equity-Based Awards to Non-Employee Directors

 

As of September 20, 2021, the non-employee directors held shares of restricted stock and elected shares (as described below), all of which were issued under the Sysco Corporation 2018 Omnibus Incentive Plan, which we refer to as the “2018 Omnibus Incentive Plan.” Below is a description of the relevant provisions of the 2018 Omnibus Incentive Plan.

 

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

 

Under the 2018 Omnibus Incentive Plan, instead of receiving his or her full annual retainer fee in cash, a non-employee director may elect to receive up to 100% of his or her annual retainer fee, including any additional retainer fee paid to the Chairman of the Board and/or Lead Director for his or her service in such capacity and any fees paid to a committee chairman for his or her service in such capacity, in 10% increments, in Common Stock. During fiscal 2021, if a director made this election, on the date we made each quarterly payment of the director’s annual retainer fee, we credited the director’s stock account with the number of shares of Sysco Common Stock that the director could have purchased on that date with the portion of his or her cash retainer that he or she has chosen to receive in stock, assuming a purchase price equal to the closing price of the Common Stock on the last business day before that date; we refer to these shares as “elected shares.” The elected shares vest as soon as we credit the director’s account with them, but we do not issue them until the end of the calendar year.

 

Annual Awards of Restricted Stock

 

Pursuant to the 2018 Omnibus Incentive Plan, the Board may grant to non-employee directors, among other things, shares of restricted stock, in the amounts and on such terms as it determines, but no such grant may vest earlier than one year following the grant date. A restricted stock award is denominated in shares of Common Stock and is subject to transfer restrictions and the possibility of forfeiture. In November 2020, we issued restricted stock awards to non-employee directors under the 2018 Omnibus Incentive Plan.

 

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

 

Deferral of Shares

 

A non-employee director may elect to defer receipt of all or any portion of any shares of Common Stock issued under the 2018 Omnibus Incentive Plan, whether such shares are to be issued as a grant of restricted stock or as elected shares. Generally, the receipt of stock may be deferred until the earliest to occur of the death of the non-employee director, the date on which the non-employee director ceases to be a director of the Company, or a change of control of Sysco. All such deferral elections must be made in accordance with the terms and conditions set forth in Sysco’s 2009 Board of Directors Stock Deferral Plan.

 

Change in Control

 

Under the 2018 Omnibus Incentive Plan and the applicable grant agreements, any unvested awards of restricted stock will vest immediately upon the occurrence of certain terminations of service within the 24-month period following a specified change in control.

 

SYSCO CORPORATION - 2021 Proxy Statement     36

 

Fiscal 2021 Director Compensation

 

The following table provides compensation information for fiscal 2021 for each of our directors who served for any part of the fiscal year, other than Mr. Hourican, whose compensation for services as an officer is disclosed in the Summary Compensation Table on page 73:

 

Name  Fees Earned or
Paid in Cash
($)(1)
   Stock
Awards
($)(2)(3)(4)
   Non-Qualified Deferred
Compensation Earnings
($)(5)
   Other
Compensation
($)(6)
   Total
($)
 
Daniel J. Brutto  $115,000   $185,014   $   $   $300,014 
John M. Cassaday   120,000    185,014            305,014 
Joshua D. Frank(7)   100,000    185,014            285,014 
Larry C. Glasscock   120,000    185,014            305,014 
Bradley M. Halverson   150,000    185,014            335,014 
John M. Hinshaw   100,000    185,014            285,014 
Hans-Joachim Koerber   100,000    185,014            285,014 
Stephanie A. Lundquist   100,000    185,014            285,014 
Nancy S. Newcomb(8)   50,000                50,000 
Nelson Peltz(9)   100,000    185,014            285,014 
Edward D. Shirley(10)   450,000    185,014            635,014 
Sheila G. Talton   107,500    185,014            292,514 
(1) Includes retainer fees, including any retainer fees for which the non-employee director has elected to receive shares of Sysco Common Stock in lieu of cash and fees for the fourth quarter of fiscal 2021 that were paid at the beginning of fiscal 2022. Although we credit shares to a director’s account each quarter, the elected shares are not actually issued until the end of the calendar year, unless the director’s service as a member of the Board terminates earlier. The number of shares of Common Stock actually credited to each non-employee director’s account in lieu of cash during fiscal 2021, which are reported in the column entitled “Stock Awards” above was as follows: 905 shares for Mr. Brutto; 761 shares for Mr. Cassaday; 975 shares for Mr. Glasscock; 161 shares for Mr. Halverson; 749 shares for Mr. Hinshaw; 697 shares for Dr. Koerber; 646 shares for Ms. Lundquist; and 646 shares for Mr. Shirley. Mr. Frank, Ms. Newcomb, Mr. Peltz, and Ms. Talton did not elect to receive any shares in lieu of their cash retainer fees. Directors may choose to defer receipt of the elected shares described in this footnote under the Sysco Corporation 2009 Board of Directors Stock Deferral Plan. The number of elected shares of Common Stock deferred by each non-employee director during fiscal 2021 (which are included in the elected shares described above) was as follows: Mr. Glasscock (975 shares), Mr. Hinshaw (749 shares), and Dr. Koerber (374 shares) and Ms. Lundquist (646 shares). To the extent that cash dividends are paid on our Common Stock, each non-employee director also receives the equivalent amount of the cash dividend credited to his or her account with respect to all elected shares that are deferred. If the director has chosen to defer the receipt of any shares, such shares will be credited to the director’s account and issued on the earliest to occur of the “in-service” distribution date elected by the director (which will be at least one year following the end of the plan year in which the shares would otherwise have been distributed to the director), the death of the director, the date on which the director ceases to be a director of the Company, a change of control of Sysco, or the date on which the director applies and qualifies for a hardship withdrawal.
(2) For fiscal 2021, the Board, upon the recommendation of the Governance Committee, determined that it would grant approximately $185,000 in equity incentives to each of the non-employee directors. Therefore, on November 20, 2020, the Board granted to each of the non-employee directors 2,570 shares of restricted stock valued at $71.99 per share, the closing price of Sysco Common Stock on the NYSE on November 19, 2021. These awards were granted under the 2018 Omnibus Incentive Plan and vest in full on the first anniversary of the grant date. The amounts in this column reflect the grant date fair value of the awards computed in accordance with ASC 718, “Compensation — Stock Compensation”. See Note 14 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the fiscal year ended July 3, 2021, regarding assumptions underlying valuation of equity awards. The value of any elected shares is included in the column entitled “Fees Earned or Paid in Cash,” as described in footnote (1) above. See “—Equity-Based Awards to Non-Employee Directors” above for a more detailed description. Although we credit elected shares to a director’s account each quarter, the shares are not actually issued until the end of the calendar year, unless the director’s service as a member of the Board of Directors terminates. Pursuant to the Sysco Corporation 2009 Board of Directors Stock Deferral Plan, non-employee directors may choose to defer receipt of the shares to be issued in connection with the annual restricted stock award. Each of Mr. Glasscock, Mr. Hinshaw, Dr. Koerber, Ms. Lundquist and Ms. Talton deferred receipt of the 2,570 shares of restricted stock. To the extent that cash dividends are paid on our Common Stock, each non-employee director also receives the equivalent amount of the cash dividend credited to his or her account with respect to all deferred restricted stock awards in the form of stock units. A director may elect an “in-service” distribution date for deferrals that is at least one year following the end of the plan year in which the shares would otherwise have been distributed to the director. Otherwise, distributions occur upon the earlier of the death of the director, the date on which the director ceases to be a director of the Company, or a change of control of Sysco, unless the director applies for and qualifies for a hardship withdrawal.
(3) The aggregate number of options and unvested stock awards held by each director listed in the table above, as of July 3, 2021, was as follows:

 

  Aggregate Unvested Stock Awards
Outstanding as of July 3, 2021
Aggregate Options Outstanding
as of July 3, 2021
 
Daniel J. Brutto 2,570  
John M. Cassaday 2,570  
Joshua D. Frank(7) 2,570  
Larry C. Glasscock 2,570  
Bradley M. Halverson 2,570  
John M. Hinshaw 2,570  
Hans-Joachim Koerber 2,570  
Stephanie A. Lundquist 2,570  
Nancy S. Newcomb(8)  
Nelson Peltz(9) 2,570  
Edward D. Shirley(10) 2,570  
Sheila G. Talton 2,570  

 

The unvested stock awards for each non-employee director listed in the table immediately above relate to restricted stock awards granted in November 2020 that vest in November 2021.

 

SYSCO CORPORATION - 2021 Proxy Statement     37

 
(4) None of the directors shown in the table received option grants with respect to his or her service as an independent director during fiscal 2021.
(5) We do not provide a pension plan for the non-employee directors. For each non-employee director, the amounts shown in this column represent above-market earnings on amounts deferred under the Non-Employee Director Deferred Compensation Plan. Directors who do not have any amounts in this column were not eligible to participate in such plan, did not participate in such plan or did not have any above-market earnings.
(6) The total value of all perquisites and personal benefits received by each of the non-employee directors was less than $10,000.
(7) Mr. Frank resigned from the Board on August 20, 2021. All of Mr. Frank’s unvested stock awards reported in the table above were forfeited upon his resignation.
(8) Ms. Newcomb retired from the Board on November 20, 2020.
(9) Mr. Peltz resigned from the Board on August 20, 2021. All of Mr. Peltz’s unvested stock awards reported in the table above were forfeited upon his resignation.
(10) Mr. Shirley was appointed Executive Chairman of the Board on an interim basis on January 10, 2020 until November 20, 2020. In addition to the compensation reported in the table above for Mr. Shirley’s service as an independent director and as independent Chairman of the Board, he earned the following base salary and annual and long-term incentive compensation during fiscal 2021 for his service as Executive Chairman of the Board:
  Base salary – $423,076;
  Short-term incentive award – $512,640; and
  Long-term incentive award – $295,104 in grant date fair value (consisting of restricted stock units (“RSUs”)).

 

Mr. Hourican did not receive any compensation for his fiscal 2021 Board service, other than the compensation for services as an employee that is disclosed elsewhere in this proxy statement. See “Executive Compensation – Summary Compensation Table” for details regarding the executive officer compensation earned by Mr. Hourican for fiscal 2021.

 

SYSCO CORPORATION - 2021 Proxy Statement     38

 

EXECUTIVE OFFICERS

 

The following persons, other than Mr. Grade, currently serve as executive officers of Sysco. Additional biographical information concerning these officers is provided below, including their respective positions with the Company and prior business experience (other than Mr. Hourican, for whom such information is provided under “Board of Directors Matters—Board Composition” above and incorporated by reference herein).

 

Name Title Age
Kevin P. Hourican* President and Chief Executive Officer 48
Aaron E. Alt* Executive Vice President and Chief Financial Officer 50
Greg D. Bertrand* Executive Vice President, U.S. Foodservice Operations 57
Joel T. Grade* Executive Vice President, Business Development 51
J. Chris Jasper Senior Vice President and President, U.S. Broadline Foodservice Operations 49
Eve M. McFadden Senior Vice President, Legal, General Counsel and Corporate Secretary 45
Tim Ørting Jørgensen* Executive Vice President and President, Foodservice Operations, International 56
Thomas R. Peck, Jr.* Executive Vice President, Chief Information and Digital Officer 54
Ronald L. Phillips Executive Vice President and Chief Human Resources Officer 56
Cathy Marie Robinson Executive Vice President and Chief Supply Chain Officer 54
Judith S. Sansone Executive Vice President and Chief Commercial Officer 61
Anita A. Zielinski Senior Vice President and Chief Accounting Officer 48

 

* Named Executive Officer.

 

AARON E. ALT

 

Age 50

Executive Officer since:

December 2020

 

Biography:

Mr. Alt has served as Sysco’s Executive Vice President and Chief Financial Officer since December 2020. Previously, he served as Senior Vice President and Chief Financial Officer of Sally Beauty Holdings (“SBH”), an international specialty retailer and distributor of professional beauty supplies, and President of Sally Beauty Supply, the world’s largest retailer of professional beauty supplies, based in Dallas, since October 2018. Mr. Alt previously served as SBH’s Senior Vice President, Chief Financial Officer and Chief Administrative Officer from May 2018 to October 2018. Prior to his appointment with SBH, Mr. Alt served in various executive leadership roles on increasing responsibility at Target Corporation, an American retailing company and the second-largest discount retailer in the U.S., including Senior Vice President, Operations from March 2017 to May 2018; Senior Vice President Grocery Transformation from January 2016 to March 2017; Chief Executive Officer, Target Canada Co. from January 2015 to May 2018; Senior Vice President, Finance from August 2015 to January 2016; Senior Vice President, Tax and Treasurer from March 2015 to August 2015; Senior Vice President, Business Development, Risk Management, Tax and Treasurer from October 2013 to March 2015; and Senior Vice President, Business Development and Treasurer from September 2012 to October 2013. Prior to joining Target Corporation, Mr. Alt held several senior level positions with Sara Lee Corporation from 2004 to 2012. Mr. Alt was a partner at the law firm of Kirkland & Ellis in London from 2003 to 2004. Mr. Alt holds a J.D. from Harvard Law School, an M.B.A. from J.L. Kellogg School of Management at Northwestern University and a B.A. in History and Political Science from Northwestern University.

 

GREG D. BERTRAND

 

Age 57

Executive Officer since:

July 2016

 

Biography:

Mr. Bertrand has served as Sysco’s Executive Vice President, U.S. Foodservice Operations since July 2018. Previously, he served as Senior Vice President, U.S. Foodservice Operations from July 2016 to July 2017, Senior Vice President, Foodservice Operations (West) from August 2015 to July 2016, Senior Vice President, Merger Integration Deployment from November 2014 to August 2015, and Senior Vice President, Business Process Integration from March 2014 to November 2014. Mr. Bertrand began his Sysco career in 1991 as a Marketing Associate at Sysco Chicago, where he advanced through several sales leadership positions before becoming Vice President-Sales in 1997 and Senior Vice President-Sales in 1998. He was promoted to Executive Vice President in 1999. In 2005, he was named President-Sysco Eastern Wisconsin. He became President-Sysco Chicago in 2008 and took on the added responsibilities of leading Sysco Eastern Wisconsin and Sysco Baraboo in 2009. He was promoted to Market Vice President-Midwest in 2010 and then to Senior Vice President – Foodservice Operations (West) in July 2012.

 

SYSCO CORPORATION - 2021 Proxy Statement     39

 

JOEL T. GRADE

 

Age 51




 

Biography:

Mr. Grade has served as Sysco’s Executive Vice President, Business Development since December 2020. Previously, he served as Executive Vice President and Chief Financial Officer from September 2015 until December 2020 and Senior Vice President – Finance and Chief Accounting Officer from February 2014 until September 2015. Mr. Grade began his career at Sysco as a Staff Auditor in 1996. He was promoted to Assistant Manager-Operations Review in 1999. He transferred to Sysco Austin in 2000 as Controller, was appointed Vice President-Finance and CFO of Sysco Chicago in 2002 and became Vice President-Finance and CFO of Sysco Canada in 2007. He was promoted to Vice President, Foodservice Operations of Sysco Corporate and President of Sysco Canada in 2010 and held that position until May 2012, when he was appointed Senior Vice President, Foodservice Operations (North). Mr. Grade earned an undergraduate degree in Accounting and Finance with a specialization in International Business from the University of Wisconsin-Madison in 1993 and an MBA in Finance, Strategy and Marketing from Northwestern University’s Kellogg School of Management in 2007.

 

J. CHRIS JASPER

 

Age 49

Executive Officer since:

March 2020

 

Biography:

Mr. Jasper has served as Senior Vice President and President, U.S. Broadline Foodservice Operations since March 2020. Previously, he served as Market President, Midwest from April 2018 to March 2020, President, Sysco Arizona from 2013 to April 2018, and Executive Vice President of Sysco Kansas City from 2012 to 2013. Mr. Jasper joined Sysco Arizona in 1995 as a marketing associate and then advanced through leadership positions of increasing responsibility, including District Sales Manager, Regional Sales Manager, and Vice President, Sales, before being promoted to Vice President, Sales and Marketing in 2011.

 

EVE M. MCFADDEN

 

Age 45

Executive Officer since:

February 2019

 

Biography:

Ms. McFadden serves as Sysco’s Senior Vice President, Legal, General Counsel & Corporate Secretary with responsibility over the company’s legal, compliance, ethics, enterprise risk management, and environmental health and safety functions. Ms. McFadden began her career at Sysco as Corporate Counsel – Employment and held various positions in the legal department prior to her promotion to VP, Legal, General Counsel & Corporate Secretary in February 2019. From December 2007 to December 2008, Ms. McFadden worked for ABM Industries Incorporated, a facility management company, as Assistant General Counsel. Ms. McFadden also worked as an Associate for the law firm Littler Mendelson, P.C. from October 2003 to December 2007 and began her law career as an Associate for Karr Tuttle Campbell in Seattle, Washington. Ms. McFadden graduated with honors from the University of Texas School of Law and holds an undergraduate degree in Political Science from the University of Washington.

 

TIM ØRTING JØRGENSEN

 

Age 56

Executive Officer since:

January 2021

 

Biography:

Mr. Ørting has served as Sysco’s Executive Vice President and President – International Foodservice Operations since January 2021. Prior to joining Sysco, Mr. Ørting served as Executive Vice President International for Arla Foods from July 2016 to December 2020. Mr. Ørting began his career at Arla Foods in 1991, serving in roles of increasing responsibility, including as Executive Vice President CCE Consumer Central Europe from January 2012 to July 2016, Executive Vice President and Head of Business Group Consumer International from May 2007 to January 2012, and Divisional Director of Arla Foods Denmark from October 2005 to May 2007. Mr. Ørting attended Copenhagen Business School, where he earned a Masters of Science in Business Administration, specializing in international strategy and marketing, and he studied at the Camara de Comercio de Madrid and the London Business School. In addition, Mr. Ørting served as a Lieutenant in the Danish Army.

 

SYSCO CORPORATION - 2021 Proxy Statement     40

 

THOMAS R. PECK, JR.

 

Age 54

Executive Officer since:

January 2021

 

Biography:

Mr. Peck has served as Sysco’s Executive Vice President & Chief Information and Digital Officer since January 2021. Prior to joining Sysco, Mr. Peck served as Executive Vice President, Chief Information and Digital Officer for Ingram Micro Inc. from March 2018 to December 2020. He previously served as Senior Vice President and Global Chief Information Officer of AECOM, a global infrastructure consulting firm, from September 2012 to March 2018 and Global Leader Procurement and Travel of AECOM from May 2014 to March 2017. Prior to joining AECOM, Mr. Peck held several senior level positions with Levi Strauss & Company from September 2008 to September 2012, MGM Resorts (formerly MGM MIRAGE) from March 2006 to August 2008 and General Electric Company from August 1998 to March 2006. Mr. Peck began his career as an officer of the United States Marine Corps. Mr. Peck holds a Master of Science in Management from the Naval Postgraduate School and a Bachelor of Science in Economics from the United States Naval Academy. In addition, Mr. Peck was inducted into the CIO Hall of Fame in 2015 and currently serves as a director of Faithful Service for Veterans.

 

RONALD L. PHILLIPS

Age 56

Executive Officer since:

May 2021

 

Biography:

Mr. Phillips has served as Sysco’s Executive Vice President and Chief Human Resources Officer since May 2021. Prior to joining Sysco, Mr. Phillips served as Senior Vice President, Human Resources, Retail, Omnicare and Enterprise Modernization for CVS Health Corporation, a premier health innovation company, from October 2018 to April 2021. He previously served as Chief People Officer for Carnival Cruise Line from October 2015 to October 2018 and Chief Human Resources Officer for New York Presbyterian Hospital System from September 2013 to September 2015. Prior to joining New York Presbyterian, Mr. Phillips joined Comcast and served in various roles of increasing responsibility at Comcast Corporation, including as Senior Vice President of Human Resources from October 2009 to November 2012, Divisional Vice President of Human Resources from March 2007 to October 2009, and Regional Vice President of Human Resources from September 2004 to March 2007. He also served as Senior Human Resources Manager with Ryder System, Inc. from July 2003 to September 2004 and began his career as a Division Director of Human Resources at McDonald’s Corporation from May 1997 to July 2003. Mr. Phillips earned a Bachelor of Arts degree in Sociology and Administration of Justice from Virginia State University and a J.D. from the University of Richmond School of Law.

 

CATHY MARIE ROBINSON

 

Age 54

Executive Officer since:

March 2020

 

Biography:

Ms. Robinson has served as Sysco’s Executive Vice President and Chief Supply Chain Officer since March 2020. Previously she served as Senior Vice President, Chief Operations and Transformation Officer with Capri Holding Limited, the parent holding company of Michael Kors, Versace and Jimmy Choo and from May 2014 to December 2018 served as Senior Vice President, Corporate Strategy & COO for Michael Kors Holdings Limited. Ms. Robinson’s previous roles include Senior Vice President, Chief Logistics Officer at ToysRUs from April 2012 to April 2014; Senior Vice President, Supply, Logistics and Customer Experience at The Great Atlantic & Pacific Tea Company from December 2010 to March 2012; Senior Vice President, Supply Chain at Smart & Final Stores, LLC from July 2005 to November 2010; Regional Director at ToysRUs from July 2003 to June 2005; and Regional Vice President, Logistics at Wal-Mart Stores, Inc. from January 1993 to April 2003. She began her career as a Logistics Officer for the U.S. Army.

 

JUDITH S. SANSONE

 

Age 61

Executive Officer since:

October 2020

 

Biography:

Ms. Sansone has served as Sysco’s Executive Vice President and Chief Commercial Officer since October 2020. She also owned Consultgenix, LLC, a consulting firm, and served as a consultant for Sysco from May 2020 until October 2020. Previously, she served as Senior Vice President, Front Store Business/Chief Merchant for CVS Health Corporation (CVS Health) from September 2012 to May 2020, responsible for strategy and business development of the Retail Business, Front Store Merchandising, Pricing and Promotion, Loyalty and Personalization, Store Formats and Design, Store Brands. Ms.  Sansone joined CVS Pharmacy, a subsidiary of CVS Health, in 1977, serving in a variety of retail and merchandising roles of increasing responsibility, culminating with her role as Vice President Retail Pricing, Health Care, Retail Innovation & Store Design, Acquisitions.

 

SYSCO CORPORATION - 2021 Proxy Statement     41

 

ANITA A. ZIELINSKI

 

Age 48

Executive Officer since:

April 2017

 

Biography:

Ms. Zielinski has served as Sysco’s Senior Vice President and Chief Accounting Officer since April 2017, overseeing the Company’s accounting functions, with responsibility for financial accounting and reporting, accounting policy, tax compliance and strategy and internal controls. Prior to joining Sysco, Ms. Zielinski had served as a partner of Ernst & Young LLP, a public accounting firm (“E&Y”), since 2013 and was a member of E&Y’s assurance practice for over 20 years. She has extensive experience working with both large and midcap public registrants on securities law filings, business combinations and complex accounting and financial reporting matters, and is a Certified Public Accountant. In addition, Ms. Zielinski has served on the board of directors of the Women’s Foodservice Forum since January 2019 and as Treasurer since February 2021.

 

Management Development and Succession Planning

 

On an ongoing basis, the Board plans for succession to the position of CEO and other key management positions, and the Governance Committee is responsible for reviewing and recommending to the Board all key management appointments at or above senior vice president. To assist the Board, the CEO periodically provides the Board with an assessment of senior executives and their potential to succeed to the position of CEO. On an annual basis, the Board and the CLD Committee engage in discussions with management regarding increasing the diversity of Sysco’s executive management team. In addition, the CEO periodically provides the Board with an assessment of potential successors to other key positions. Management development and succession planning remained top priorities of executive management and the Board during fiscal 2021.

 

SYSCO CORPORATION - 2021 Proxy Statement     42

 

STOCK OWNERSHIP

 

Security Ownership of Officers and Directors

 

The following table sets forth certain information with respect to the beneficial ownership of Sysco’s Common Stock, as of September 20, 2021, by (i) each current director and director nominee, (ii) each NEO (as defined under “Compensation Discussion and Analysis”), and (iii) all current directors and executive officers as a group. Unless otherwise indicated, each stockholder identified in the table has sole voting and investment power with respect to his or her shares. Fractional shares have been rounded to the nearest whole share.

 

   Shares of
Common
Stock Owned
Directly
   Shares of
Common
Stock Owned
Indirectly
   Shares of
Common
Stock
Underlying
Options(1)
   Shares of
Common Stock
Underlying
Restricted Stock
Units(2)
   Total Shares of
Common Stock
Beneficially
Owned(1)(2)
   Percent of
Outstanding
Shares(3)
 
Aaron E. Alt                        * 
Greg D. Bertrand   20,257    6,366(5)    393,462        420,085    * 
Daniel J. Brutto   22,279(4)                22,279    * 
John M. Cassaday   55,264(4)                55,264    * 
Larry C. Glasscock   74,183(4)                74,183    * 
Joel T. Grade   58,653    259(6)    664,175        723,087    * 
Bradley M. Halverson   17,826(4)                17,826    * 
John M. Hinshaw   11,300(4)                11,300    * 
Kevin P. Hourican           530,553        530,553    * 
Hans-Joachim Koerber   58,451(4)                58,451    * 
Stephanie A. Lundquist   5,953(4)                5,953    * 
Tim Ørting Jørgensen                        * 
Thomas R. Peck, Jr.                       * 
Edward D. Shirley   22,059(4)        11,883        33,942    * 
Sheila G. Talton   11,574(4)                11,574    * 
All Directors and Executive Officers as a Group (20 Persons)   336,452(7)    9,454(8)    1,225,572(9)        1,571,478(7)(8)(9)    0.31% 

 

(*) Less than 1% of outstanding shares.
(1) Includes shares underlying options that are presently exercisable or will become exercisable within 60 days after September 20, 2021. Shares subject to options that are presently exercisable or will become exercisable within 60 days after September 20, 2021 are deemed outstanding for purposes of computing the percentage ownership of the person holding such options, but are not deemed outstanding for purposes of computing the percentage ownership of any other persons.
(2) Shares underlying RSUs that are held by Ms. Robinson will vest and settle within 60 days after September 20, 2021 and are deemed outstanding for purposes of computing the percentage ownership of the person holding such RSUs, but are not deemed outstanding for purposes of computing the percentage ownership of any other persons. It is expected that approximately one-third of the shares underlying these RSUs will be withheld to pay taxes related to the RSUs as they vest and settle.
(3) Applicable percentage of beneficial ownership at September 20, 2021 is based on 512,275,463 shares outstanding.
(4) Includes shares that were elected to be received in lieu of non-employee director retainer fees during the first half of calendar 2021 under the Sysco Corporation 2018 Omnibus Incentive Plan. For Mr. Brutto, this includes 419 shares; for Mr. Cassaday this includes 387 shares; for Mr. Glasscock, this includes 452 shares; for Mr. Halverson, this includes 161 shares; for Dr. Koerber, this includes 323 shares; for Ms. Lundquist, this includes 646 shares; and for Mr. Shirley, this includes 646 shares. Unless the director has chosen to defer the shares under the Sysco Corporation 2009 Board of Directors Stock Deferral Plan, these shares will be issued on December 31, 2021 or within 60 days after a non-employee director ceases to be a director, whichever occurs first. Directors may choose to defer receipt of these shares related to director retainer fees, as well as shares awarded pursuant to restricted stock grants, and these deferred amounts are also included in this line item. To the extent cash dividends are paid on our Common Stock, each non-employee director also receives the equivalent amount of the cash dividend credited to his or her account with respect to all deferred restricted stock awards, and all elected shares that are deferred. The number of shares in each non-employee director’s deferred stock account, including related dividend equivalents, is as follows: Mr. Brutto (3,371), Mr. Cassaday (none), Mr. Glasscock (73,689), Mr. Halverson (none), Mr. Hinshaw (11,270), Dr. Koerber (3,503), Ms. Lundquist (5,307), Mr. Shirley (none), and Ms. Talton (11,574). If the director has chosen to defer the receipt of any shares, such shares will be credited to the director’s account under the 2009 Board of Directors Stock Deferral Plan and issued on the earliest to occur of the “in-service” distribution date elected by the director (which will be at least one year following the end of the plan year in which the shares would otherwise have been distributed to the director), the death of the director, the date on which the director ceases to be a director of the Company, a change of control of Sysco, or the date on which the director applies and qualifies for a hardship withdrawal. Deferred shares are deemed outstanding for purposes of computing the percentage ownership of the persons holding such shares, but are not deemed outstanding for purposes of computing the percentage ownership of any other persons.
(5) These shares are held by Mr. Bertrand’s son.
(6) These shares are held in trust for the benefit of Mr. Grade’s son.
(7) Includes an aggregate of 37,306 shares directly owned by the current executive officers other than the named executive officers.
(8) Includes 3,088 shares indirectly owned by the current executive officers other than the named executive officers.
(9) Includes an aggregate of 289,674 shares underlying options that are presently exercisable or will become exercisable within 60 days after September 20, 2021 held by the current executive officers other than the named executive officers.

 

SYSCO CORPORATION 2021 Proxy Statement    43

 

Security Ownership of Certain Beneficial Owners

 

The following table sets forth information concerning beneficial ownership of our Common Stock by persons or groups known to us to be beneficial owners of more than 5% of our Common Stock outstanding as of September 20, 2021. The applicable percentage of beneficial ownership is based on 512,275,463 shares outstanding as of September 20, 2021.

 

   Total Shares of Common Stock
Beneficially Owned
   Percent of Outstanding Shares 
The Vanguard Group and certain affiliates(1)   42,922,691    8.38%
BlackRock, Inc. and certain affiliates(2)   31,340,890    6.12%
Wellington Management Group and certain affiliates(3)   30,638,897    5.98%

 

(1) This information is based on a Schedule 13G/A filed on February 10, 2021 by The Vanguard Group (“Vanguard”). According to the Schedule 13G/A, Vanguard has the sole power to vote, or to direct the vote of, 0 shares of Common Stock, the sole power to dispose, or to direct the disposition of 40,686,632 shares of Common Stock, the shared power to vote, or to direct the vote of, 842,344 shares of Common Stock, and the shared power to dispose, or to direct the disposition of, 2,236,059 shares of Common Stock. The address for Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.
(2) This information is based on a Schedule 13G/A filed on February 1, 2021 by BlackRock, Inc. (“BlackRock”). According to the Schedule 13G/A, BlackRock has the sole power to vote, or to direct the vote of, 26,672,637 shares of Common Stock, and the sole power to dispose, or to direct the disposition of, all 31,340,890 shares of Common Stock reported in the table above. The address for BlackRock is BlackRock, Inc. 55 East 52nd Street, New York, NY 10055
(3) This information is based on a Schedule 13G filed on February 4, 2021 by Wellington Group Holdings LLP (“Wellington”). According to the Schedule 13G, Wellington has the shared power to vote, or to direct the vote of, 28,272,313 shares of Common Stock, and the shared power to dispose, or to direct the disposition of, 30,638,897 shares of Common Stock. The address for Wellington is c/o Wellington Management Company LLP, 280 Congress Street, Boston, MA 02210.

 

Stock Ownership Guidelines

 

To align the interests of our management with those of our stockholders, the Board concluded that our senior officers should have a significant financial stake in Sysco stock. To further that goal, for several years we have maintained stock ownership guidelines for our executives.

 

Pursuant to these guidelines, upon the end of the five-year period from the date the officer is hired, promoted or otherwise becomes subject to the guidelines, the following senior officers should own, based on their respective positions, a minimum number of shares equal in value to the multiple of each such officer’s annual base salary as described in the following table.

 

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

 

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

 

The shares counted towards these ownership requirements include shares of Sysco Common Stock owned directly by the senior officer, including shares of vested restricted stock held by the officer that may be subject to transfer restrictions or potential clawbacks, shares owned indirectly by the officer through any Sysco employee stock purchase plan, two-thirds of the shares underlying an officer’s unvested RSUs, two-thirds of the shares of unvested restricted stock held by the officer, and one-quarter of the shares underlying performance share units (“PSUs”) held by the officer, rounded down to the nearest whole share and assuming satisfaction of all applicable financial performance criteria at the “target” level, and do not include shares held through any other form of indirect beneficial ownership or shares underlying unexercised options. Equity-based incentive awards are anticipated to provide all senior officers with the opportunity to satisfy these requirements within the specified time frames.

 

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

 

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

 

The Corporate Governance Guidelines also provide that, after five years of service as a non-employee director, each such director is expected to attain and, thereafter, continuously maintain, minimum ownership of Sysco Common Stock equal in value to five times his or her annual base retainer (i.e., $500,000 for fiscal 2021). The shares counted towards these ownership requirements include (i) shares that such non-employee director elects to receive in lieu of his or her cash retainer(s) for Board service, (ii) vested Share Units (as defined in the 2009 Board of Directors Stock Deferral Plan) held by a non-employee director through the 2009 Board of Directors Stock Deferral

 

SYSCO CORPORATION 2021 Proxy Statement    44

 

Plan (or any successor plan thereto), (iii) shares of restricted stock held by such non-employee director that may be subject to transfer restrictions or potential clawbacks, and (iv) shares owned directly by an entity (such as a corporation or foundation) over which such non-employee director shares voting power and/or investment power, and excludes shares underlying all other outstanding securities exercisable for, or convertible into, Common Stock of the Company (including options and RSUs).

 

Management provides the Board with the status of the officers’ and directors’ stock ownership at all of the regularly-scheduled meetings to ensure compliance with these holding requirements. As of September 20, 2021, each of the NEOs (as defined in the “Compensation Discussion and Analysis”) and directors were in compliance with the applicable stock ownership guidelines.

 

Stock Trading Restrictions

 

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

 

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

 

Employee, Officer and Director Hedging

 

Under Sysco’s Policy on Trading in Company Securities (the “Policy”), the Company’s “Insiders” are prohibited at all times from trading in publicly traded options, puts, calls, straddles, or similar derivative securities of the Company, whether issued directly by the Company or by any exchange (“derivative securities”), and from effecting short sales of Company Securities (as defined in the Policy) or purchasing financial instruments that are designed to hedge or offset any decrease in the market value of Company Securities. A “short sale” is defined by the Policy as a sale of stock in which the seller attempts to profit from an anticipated drop in market price by selling securities he or she does not own and covering the sales with securities bought after the price decline. Prohibited hedging transactions include, but are not limited to, prepaid variable forward contracts, equity swaps, collars and exchange funds. An “Insider” under the Policy includes (i) all members of the Board, (ii) all officers elected by the Board, (iii) any other employee designated by the President and CEO, any Executive Vice President or the Chief Legal Officer, (iv) any family member of any of the foregoing who lives in his or her home, and (v) any entity whose investment decisions are made by (or shared with) any of the foregoing persons.

 

DELINQUENT SECTION 16(a) REPORTS

 

Pursuant to Section 16(a) of the Exchange Act and the rules issued thereunder, our executive officers and directors and any persons holding more than 10% of our Common Stock are required to file with the SEC and the NYSE reports of initial ownership of our Common Stock and changes in ownership of such Common Stock. To our knowledge, no person beneficially owns more than 10% of our Common Stock. Copies of the Section 16 reports filed by our directors and executive officers are required to be furnished to us. Based solely on our review of the copies of the reports furnished to us, or written representations that no reports were required, we believe that, during fiscal 2021, all of our executive officers and directors complied with the Section 16(a) requirements, except that, due to an inadvertent administrative error on the part of our stock plan administrator, a late Form 4 was filed on behalf of Cathy Marie Robinson to report her stock option exercises on August 30, 2021.

 

SYSCO CORPORATION - 2021 Proxy Statement    45

 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table sets forth certain information regarding equity compensation plans as of July 3, 2021.

 

Plan Category  Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
  Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
   Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities
Reflected in First Column)
 
Equity compensation plans approved by security holders  10,944,536  $59.00    48,053,955(1) 
Equity compensation plans not approved by security holders          
TOTAL  10,944,536  $59.00    48,053,955(1) 

 

(1) Includes 43,763,194 shares issuable pursuant to our 2018 Omnibus Incentive Plan, of which 14,227,255 shares are eligible to be granted as full value awards, and 4,290,761 shares issuable pursuant to our Employee Stock Purchase Plan as of July 3, 2021. The amount does not reflect the issuance of 170,618 shares in June 2021 pursuant to the completion of the quarterly purchase under our Employee Stock Purchase Plan.

 

COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

None of the members of our CLD Committee is or has at any time during the past year been an officer or employee of Sysco or had any relationship requiring disclosure by Sysco under Item 404 of Regulation S-K. During the 2021 fiscal year, there were no executive officer-director interlocks where an executive officer of Sysco served on the compensation committee or board of another corporation that had an executive officer serving on Sysco’s Board of Directors or the CLD Committee.

 

SYSCO CORPORATION 2021 Proxy Statement    46

 

COMPENSATION DISCUSSION AND ANALYSIS

 

In this section, we provide an overview of our philosophy and objectives of our executive compensation program and describe the material components of our executive compensation program for our fiscal 2021 named executive officers, or “NEOs,” whose compensation is set forth in the 2021 Summary Compensation Table and other compensation tables contained in this proxy statement. For fiscal 2021, our NEOs are as follows:

 

Named Executive Officer   Title
Kevin P. Hourican   President and Chief Executive Officer
Aaron E. Alt   Executive Vice President and Chief Financial Officer
Joel T. Grade   Executive Vice President, Business Development, and former Executive Vice President and Chief Financial Officer
Greg D. Bertrand   Executive Vice President, U.S. Foodservice Operations
Tim Ørting Jørgensen   Executive Vice President and President, Foodservice Operations, International
Thomas R. Peck, Jr.   Executive Vice President, Chief Information and Digital Officer

 

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

 

Executive Summary

 

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

 

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

 

Business Highlights

 

In early fiscal 2021, in response to the COVID-19 pandemic environment, we identified four key areas of focus as we managed the business and prepared the company for recovery once the COVID-19 crisis subsided. We took actions to strengthen our overall liquidity, we focused on stabilizing the business by removing costs, we created new sources of revenue by helping our restaurant customers succeed under pandemic conditions, and we provided (and continue to provide) products for cleaning, sanitation, and personal protection, without disruptions, so that our customers may continue their business operations.

 

While our response to the COVID-19 pandemic was a primary focus, we also accelerated our transformational initiatives, which we refer to as our “fiscal 2021 initiatives,” that were designed to improve how we serve our customers, differentiate Sysco from our competitors and transform the foodservice distribution industry:

 

Digital Customer Opportunities – Improving service to our customers by enhancing our digital order entry platform, Sysco Shop, deploying a digital pricing tool and introducing our Restaurants Rising campaign;
Regionalization – Regionalizing our operations in the U.S. within our U.S. Broadline and FreshPoint businesses;
Sales Transformation – Transforming our sales model to make it easier for customers to do business with Sysco and to increase the effectiveness of our sales teams; and
Structural Cost Out – Removing structural fixed costs from our business and becoming a more efficient company to return value to shareholders and to fund our continued growth plans.

 

In connection with the CLD Committee’s transitional approach to executive compensation design for fiscal 2021 described below, the strategic bonus objectives under the fiscal 2021 short-term incentive program, representing 50% of the target opportunity, and the performance targets for the performance share units awarded in fiscal 2021 (excluding the total shareholder return modifier) were tied to management’s success in executing on these key strategic and transformational initiatives. See “—What We Paid and Why – Compensation for NEOs” below for further discussion of the performance targets corresponding to the fiscal 2021 short-term and long-term incentive awards.

 

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At our Investor Day in May 2021, we announced our purpose, “Connecting the World to Share Food and Care for One Another.” We believe our purpose will allow us to grow substantially faster than the foodservice distribution industry and deliver profitable growth through the five strategic pillars of our “Recipe for Growth,” which incorporated our fiscal 2021 initiatives as indicated below:

 

Strategic Pillars – Recipe for Growth Corresponding Fiscal 2021 Initiative(s)
Digital We will enrich the customer experience through personalized digital tools that reduce friction in the purchase experience and introduce innovation to our customers. Digital Customer Opportunities
Products and Solutions We will provide customer-focused marketing and merchandising solutions that inspire increased sales of our broad assortment of fair priced products and services. Sales Transformation
Supply Chain We will efficiently and consistently serve customers with the products they need, when and how they need them, through a flexible, agile delivery framework.
Regionalization
Structural Cost Out
Customer Teams Our greatest strength is our people, people who are passionate about food and food service. Our diverse team delivers expertise and differentiated services designed to help our customers grow their business. Sales Transformation
Future Horizons We are committed to responsible growth. We will cultivate new channels, new segments, and new capabilities while being stewards of our company and our planet. We will fund our journey through cost-out and efficiency improvements. Structural Cost Out

 

Although the impact of the COVID-19 crisis on our fiscal 2021 results continued to be substantial, our business performance accelerated in the fourth quarter of fiscal 2021, with sales and cases shipped exceeding 2019 volume levels. See “Letter From Our CEO and Chairman” above for discussion of our financial performance in fiscal 2021. Sysco’s successes during fiscal 2021 can largely be attributed to the proactive steps taken by management to position us ahead of the COVID-19 business recovery, including accelerating our transformational initiatives described above.

 

Say on Pay – Stockholder Feedback

 

At last year’s Annual Meeting, 88.7% of the shares that voted with respect to the Company’s “Say on Pay” proposal (excluding abstentions) voted “FOR” the proposal, and we received 94.6% or greater stockholder support for our “Say on Pay” proposal in each of the four preceding years (see below).

 

Historical Say on Pay Votes

 

 

Further, during the past year, we continued to engage in dialogue with some of our largest stockholders to solicit their feedback and gather information on their views and opinions on various operations and governance issues, including executive compensation practices. After considering the results of the fiscal 2020 “Say on Pay” advisory vote and reviewing and carefully considering feedback from our stockholders regarding our executive compensation program, the CLD Committee determined that its executive compensation philosophy remained appropriate for fiscal 2021. The key themes discussed in connection with our stockholder engagement in 2020 included:

 

The impact of COVID-19 and Sysco’s response
The design of Sysco’s fiscal 2020 long-term incentives
The Company’s pay-for-performance alignment
Sysco’s incentives for newly-hired executives

 

In addition to the annual “Say on Pay” advisory vote on NEO compensation and the Company’s stockholder engagement efforts, stockholders are invited to express their views to the CLD Committee as described above under the heading “Corporate Governance—Communicating with the Board.”

 

Our Practices

 

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

 

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What We Do

 

Pay for Performance – We link pay to Sysco and individual performance. We retrospectively review the pay and performance relationship of our executive pay on an annual basis. By aligning annual and long-term incentive (“LTI”) opportunities with the objectives under Sysco’s annual and long-range plans and transformational initiatives, executive compensation has been tightly aligned with stockholder interests.
Value Stockholders’ Input – We regularly communicate with several of our larger stockholders and consider their input when designing and implementing compensation programs.
Mitigate Undue Risk – We mitigate undue risk associated with compensation, including utilizing a mix of pay elements, caps on potential payments, clawback provisions, multiple performance targets and robust Board and management processes to identify risk. We also utilize post-employment covenants designed to protect competitive information of Sysco. Based on our annual compensation risk analysis, we do not believe any of Sysco’s compensation programs creates risks that are reasonably likely to have a material adverse impact on Sysco.
Independent Compensation Consulting Firm – The CLD Committee seeks counsel from an independent compensation consulting firm that does not provide any other services to Sysco.
Executive Compensation Clawback Policy – The CLD Committee has the authority to recoup or cancel certain incentive compensation paid or payable to the NEOs if (i) there is a restatement of our financial results, other than a restatement due to a change in accounting policy and the restatement would result in the payment of a reduced award to an NEO if the award were recalculated, or (ii) an NEO engages in misconduct that contributes to the need for a financial restatement or causes the Company material financial or reputational harm. See “—Executive Compensation Clawback and Protective Covenants” below for further discussion.
Reasonable Change in Control Provisions for Equity Awards – We believe we have reasonable change in control provisions that apply to outstanding equity awards held by executive officers in the same manner as the applicable broader employee population, including use of double-trigger vesting following a change-in-control for stock options, performance share units (“PSUs”) and restricted stock units (“RSUs”).
Significant Stock Ownership Guidelines – We have adopted stringent stock ownership guidelines for our directors and senior officers, including a stock holding requirement. We review and adjust these guidelines when appropriate.
Modest Perquisites – We provide only modest perquisites. We do not allow personal use of private aircraft provided by Sysco or other similar perquisites.
Regular Review of Share Utilization – We evaluate share utilization by reviewing overhang levels (i.e., the dilutive impact of equity compensation on our stockholders) and annual run rates (i.e., the aggregate shares awarded as a percentage of total outstanding shares).
Limited Trading Windows – We require our executive officers to conduct all transactions in shares of Sysco common stock (“Common Stock”) through pre-approved Rule 10b5-1 trading plans established during open trading windows and subject to a 30-day waiting period before trades may commence. Further information about our trading restrictions is available under “Stock Ownership – Stock Trading Restrictions” above.

 

What We Don’t Do

 

No stock option reloading.
No repricing of underwater stock options.
No tax gross-ups for financial planning or loss on sale of home in connection with a relocation.
No excise tax gross-ups upon a change in control.
No hedging by our executive officers, directors or other specified “insiders,” who are prohibited from trading in publicly traded options, puts, calls, straddles, or similar derivative securities of the Company and from effecting short sales of Company securities and/or purchasing financial instruments designed to hedge or offset any decrease in the market value of Company securities.

 

Philosophy of Executive Compensation Program

 

Our executive compensation philosophy is focused upon attracting, retaining and incentivizing highly talented individuals who are committed to driving Sysco’s vision and strategy. Sysco’s executive compensation programs are designed to directly link executives’ pay to their performance and the advancement of Sysco’s overall performance and business strategies and to align executives’ interests with those of our stockholders. These programs are designed to deliver highly competitive compensation for superior company performance. Likewise, when Company performance falls short of expectations, our variable incentive programs deliver lower levels of compensation. However, the CLD Committee tries to balance pay-for-performance objectives with retention considerations, so that, even during temporary downturns in the economy and the foodservice industry, the programs continue to ensure that qualified, successful, performance-driven employees stay committed to increasing Sysco’s long-term value. Furthermore, to attract, retain and incentivize highly skilled management, our compensation programs must remain competitive with those of comparable employers who compete with us for talent.

 

SYSCO CORPORATION - 2021 Proxy Statement    49

 

Core Principles

 

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

 

 

Transitional Approach to Fiscal 2021 Compensation Design

 

The COVID-19 pandemic had an adverse impact on numerous aspects of Sysco’s business, financial condition and results of operations, including the Company’s financial performance with respect to the performance metrics under its fiscal 2020 annual and long-term incentive awards. This resulted in significantly lower executive compensation levels in fiscal 2020, as compared to fiscal 2019. In July 2020, at the time the CLD Committee established the executive compensation program for fiscal 2021, the troubled state of the foodservice industry and the continuing uncertainties in the Company’s business arising from the impact of the COVID-19 pandemic rendered it impracticable for the Company to establish credible financial goals. Consequently, in light of the extraordinary circumstances confronting the foodservice industry, the CLD Committee adopted a temporary, transitional approach to executive compensation for fiscal 2021, recognizing that Sysco’s historical management incentive pay practices would be inadequate for successfully navigating the uncertain market environment. Semler Brossy Consulting Group LLC (“Semler Brossy”), the independent compensation consultant engaged by the CLD Committee, confirmed to the CLD Committee at the time that this transitional approach was established that it was reasonable in light of the impact of the COVID-19 pandemic.

 

This transitional approach included the following short- and long-term pay components:

 

Short-Term Incentive Program: a new short-term, cash-based incentive program (the “STIP”) for fiscal 2021, with the year divided into two, six-month performance periods and a significant portion of the incentive opportunity for each six-month performance period tied to operational metrics (rather than financial metrics), which differed from the annual incentives awarded in previous fiscal years under the management incentive program; and
Long-Term Incentive Program: long-term incentive awards that included a mix of (i) PSUs with a two-year performance period aligned with the timeframe for Sysco’s business transformational initiatives (i.e., cost reduction, market share growth, and digital commerce transfomation); (ii) stock options; and (iii) RSUs.

 

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On July 30, 2021, the CLD Committee approved the Company’s short-term and long-term incentive programs for fiscal 2022, which restored financial metrics for the fiscal 2022 STIP and the fiscal 2022 PSUs and returned to a three-year performance period for the PSUs. These changes are more consistent with the CLD Committee’s historical grant practices prior to fiscal 2020. For further discussion, see “—Fiscal 2022 Executive Compensation” below.

 

Components and Objectives of Executive Compensation Program

 

Sysco’s executive compensation program, which reflects the transitional approach described above under “—Philosophy of Executive Compensation Program–Transitional Approach to Fiscal 2021 Compensation Design,” includes the following components and objectives, each of which is described in greater detail later in the Compensation Discussion and Analysis. The CLD Committee generally references the median of the competitive market when making pay decisions, but does not target any specific positioning relative to market for any component of pay or for total compensation. Rather, the CLD Committee considers each executive’s role, experience, current and expected contributions, and internal equity compared to peers, among other factors, when determining each pay element and total compensation levels at target performance.

 

  Component: Description: Objective of Element:
Annual Compensation Base Salary The CLD Committee generally sets base salaries at or below market competitive levels to provide a fixed, competitive base of cash compensation and to provide enhanced weighting to the incentive-based components of the overall pay program. The CLD Committee then may adjust the base salaries based on a number of factors, which may include merit increases, the executive’s unique job responsibilities, management experience, individual contributions, number of years in his or her position and market position of current salary, as described under “—What We Paid and Why—Compensation for NEOs” below.
  
Provide each NEO with a fixed compensation component that reflects the individual’s position and responsibilities and opportunities in the marketplace.
  
Contribute to a competitive pay mix with an appropriate balance between fixed and variable pay components.

 

  Short-Term Incentive Award Awards under the short-term incentive program (“STIP”) were made in lieu of the annual incentive award and were similarly designed to offer opportunities for cash compensation tied directly to performance. In connection with the transitional approach to executive compensation for fiscal 2021 described above, the STIP divided fiscal 2021 into two discrete performance periods: (i) June 28, 2020 to December 26, 2020 (“1H21”) and (ii) December 27, 2020 to July 3, 2021 (“2H21”). The STIP was designed to offer opportunities for cash compensation tied to Company performance with regard to pre-established operational targets (i.e., market share growth and operations productivity) and the NEO’s achievement of his strategic bonus objectives (“SBOs”). For a discussion of the 1H21 and 2H21 operational metrics and threshold requirements for payment of each component for each of the NEOs, see “—What We Paid and Why—Compensation for NEOs—Annual Incentive Award—Detailed Information” below. Incentive payments earned under the STIP with respect to each performance period were paid in cash in the fiscal quarter following the conclusion of that performance period.
  
Incentivize the near-term achievement of key transformational initiatives and operational metrics that supported the Company’s efforts to successfully navigate the recovery.
  
Promote pay for performance and provide variable rewards within a competitive range of total cash compensation.

 

 

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  Component: Description: Objective of Element:
Long-Term Incentives Performance Share Units (“PSUs”) For purposes of the fiscal 2021 annual LTI award, 50% of the target LTI opportunity was in the form of PSUs, through which each NEO has an opportunity to earn shares of Common Stock and dividend equivalents (if applicable) based on Sysco’s performance over a two-year period. The compensation opportunity under the PSUs for the two-year performance period that commenced in fiscal 2021 is based on the Company’s performance with respect to cost reduction, market share growth and digital commerce strategic targets pre-established by the CLD Committee, subject to a modifier tied to the Company’s total shareholder return (“TSR”). For a description of the PSU program, see “—What We Paid and Why—Compensation for NEOs—Long-Term Incentives— Detailed Information—Stock Options and Performance Share Units” below.
  
Closely align the executives’ interests with those of our stockholders, with realized value based in part on post-grant share price appreciation.
  
Enhance performance and compensation alignment by linking PSU payouts to the achievement of Sysco’s business transformational initiatives.
  
Foster retention through cliff vesting following two-year performance period.
  Stock Options For purposes of the fiscal 2021 annual LTI award, 30% of the target LTI opportunity was in the form of stock options that vest one-third per year beginning one year from the grant date, which awards were valued using a Black-Scholes valuation model.
  
Closely align the executives’ interests with those of our stockholders, with realized value based on post-grant share price appreciation.
  
Foster retention through time vesting requirements.
  Restricted Stock Units (“RSUs”) For purposes of the fiscal 2021 annual LTI award, 20% of the target LTI opportunity was in the form of RSUs, which vest in three equal, annual installments commencing on the first day of the calendar month immediately following each of the first three anniversaries of the grant date and represent the right to receive one share of Common Stock. Dividend equivalents are paid in cash, if and when the underlying RSUs vest. See “Executive Compensation – Outstanding Equity Awards at Fiscal Year-End” below for a description of outstanding RSU grants.
  
New LTI component for fiscal 2021 awarded in connection with transitional approach necessitated by the COVID-19 pandemic.
  
Foster retention through time vesting requirements.
  New Hire Make- Whole Awards: RSUs RSUs were awarded on a one-time basis to Mr. Ørting to compensate him for forfeited long term incentives he was entitled to receive from his previous employer. For discussion of these make-whole awards, see “—What We Paid and Why—Compensation for NEOs—New Hire Compensation for Messrs. Alt, Ørting and Peck” below.
  
Incentivize the executive to accept the officer position by offsetting the loss of LTI compensation resulting from terminating the previous employment.
Retirement, Other Benefit Programs and Perquisites Non-Qualified Retirement Benefits and Deferred Compensation Plan The Management Savings Plan (the “MSP”) is a non- qualified, deferred compensation plan. The MSP allows participants to defer current cash compensation and employer contributions, plus applicable earnings, for payment on specified dates or upon certain specified events. Certain NEOs also participate in frozen legacy plans, such as the Supplemental Executive Retirement Plan and Executive Deferred Compensation Plan.
  
Support executive performance and retention through vesting requirements and forfeiture provisions applicable to Company contributions.
  
Complement the Sysco 401(k) Plan to serve as the primary retirement savings vehicles for executives.
  
Provide a market competitive retirement savings opportunity for executives.
  Other Benefits and Perquisites The NEOs are eligible to participate in the same benefit programs that are offered to other salaried employees. Limited perquisites are provided to NEOs, including payment of additional life and accidental death and dismemberment insurance coverage, long-term care insurance coverage, reimbursement of costs for annual medical exams, long-term disability coverage, payment of fees related to the preparation of foreign tax returns where warranted due to company business, and certain expenses related to spousal travel in connection with business events. See “—What We Paid and Why—Compensation for NEOs—Executive Perquisites & Other Benefits—Detailed Information” below.
  
Provide limited market competitive benefits to protect employees’ and their covered dependents’ health and welfare.
  
Facilitate strong job performance and enhance productivity.

 

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How Executive Pay is Established

 

The CLD Committee, in consultation with management and the CLD Committee’s independent compensation consultant, continues to focus on ensuring that our executive compensation programs reinforce our pay for performance philosophy and enhance stockholder value. During fiscal 2021, the CLD Committee continued to engage Semler Brossy as its independent compensation consultant.

 

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

 

Committee Oversight

 

The CLD Committee, which consists entirely of independent directors, is responsible for overseeing Sysco’s executive compensation program. The CLD Committee determines and approves all compensation of the CEO and Sysco’s other senior officers, including the NEOs. The CLD Committee develops and oversees programs designed to compensate our corporate officers, including the NEOs. The CLD Committee is also authorized to approve all grants of PSUs, stock options, restricted stock, RSUs, cash and other awards to participants under our stockholder-approved Sysco Corporation 2018 Omnibus Incentive Plan. Further information regarding the CLD Committee’s responsibilities is found under “Corporate Governance – Board Meetings and Committees” and in the CLD Committee’s Charter, available on the Sysco website at www.sysco.com under “Investors — Corporate Governance — Board of Directors & Committee Composition.”

 

The CLD Committee has several resources and analytical tools it considers in making decisions related to executive compensation. The following table discusses the key tools the CLD Committee uses.

 

Committee Resources

Independent Committee Consultant   Semler Brossy attended eight CLD Committee meetings during fiscal 2021. Semler Brossy advised on compensation matters, including peer group composition, short-term and long-term incentive plan designs, and market data on CEO and other NEO compensation.
  More specifically, Semler Brossy:
    Reviewed the continuing appropriateness of the compensation peer group described below under “—Use of Peer Group and Survey Data”;
    Prepared executive compensation studies for the CLD Committee, in May 2020 and June 2021, which included a comparison of base salaries and estimation of total cash compensation and total direct compensation, inclusive of short-term and long-term incentive opportunities for the NEOs relative to the applicable peer or other comparison group;
   

Conducted a pay-for-performance analysis, comparing the relationship between actual realizable pay for the NEOs and the Company’s

total shareholder return to that of the applicable peer group; and

    Compared Sysco’s aggregate equity usage to the applicable peer group.
    The CLD Committee consulted Semler Brossy for all executive compensation decisions made for fiscal 2021 and fiscal 2022, including: (i) the development of the transitional approach to executive compensation for fiscal 2021, consisting of base salary determinations and short-term and long-term incentive awards; (ii) the new hire compensation packages offered to Messrs. Alt, Ørting and Peck, including the make-whole components; and (iii) the replacement PSU award for Mr. Hourican.
    The CLD Committee has determined Semler Brossy to be independent from the Company and that no conflicts of interest exist related to the firm’s services provided to the CLD Committee. Other than with respect to Semler Brossy’s respective roles in advising the CLD Committee and the Governance Committee with respect to non-employee director compensation, the firm did not perform any other services for Sysco. Semler Brossy is an independent consultant with responsibility for reporting directly and exclusively to the CLD Committee and the Corporate Governance and Nominating Committee (the “Governance Committee”). Additionally, Semler Brossy has policies and procedures in place to prevent conflicts of interest. The fees Semler Brossy received from Sysco during fiscal 2021 represented less than 2% of the firm’s total revenues.
    Neither Semler Brossy, nor any advisor of the firm, had a business or personal relationship with any member of the CLD Committee or any executive officer of Sysco since the beginning of fiscal 2020. No Semler Brossy advisor directly owned any Common Stock since the beginning of fiscal 2020.
Sysco’s Human Resources Department   Sysco’s Executive Vice President, Human Resources and the Human Resources Department (“HR”) provide additional analysis and guidance related to NEO compensation, as requested by the CLD Committee, including the following:
  Assisting the CEO in making preliminary recommendations of base salary ranges, short-term and long-term incentive program design and target award levels for the NEOs and other employees eligible to receive such incentive awards. 
  Providing scenario planning – HR provides the CLD Committee with anticipated payment levels throughout the year based on the Company’s projections relative to the performance measures.
  Providing comparison data on the internal equity of the compensation awarded within the Sysco organization.
CEO   For other NEOs, the CEO makes individual recommendations to the CLD Committee on base salary and short- and long-term incentive goals and award opportunities. The CEO also provides initial recommendations for short-term incentive award performance targets and individual SBOs for the CLD Committee to consider. The CLD Committee reviews, discusses, modifies and approves, as appropriate, these compensation recommendations. Mr. Hourican made recommendations for the fiscal 2021 and fiscal 2022 compensation for the NEOs, which the CLD Committee accepted in each case. No member of management, including the CEO, had a role in determining his or her own compensation.

 

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Determining NEO Compensation

 

In developing recommendations for the CLD Committee, the CEO and HR consult benchmarking analyses and other market data from the CLD Committee’s independent compensation consultant and other advisors, as described elsewhere in this proxy statement, and follow the philosophy and pursue the objectives described above under “– Philosophy of Executive Compensation Program.” The CLD Committee, with input from its independent compensation consultant, determines each element of compensation for the CEO. With input from its independent compensation consultant, HR and the CEO, the CLD Committee determines each element of compensation for the other NEOs. The CLD Committee is under no obligation to follow these recommendations. Executive officers and others may also participate in discussions with the CLD Committee when invited to do so.

 

Use of Peer Group and Survey Data

 

Sysco is the largest global distributor of food and food-related products primarily to the foodservice and food-away-from-home industry. Accordingly, the CLD Committee concluded that the most comparable companies with respect to executive pay for fiscal 2021 and fiscal 2022 include (i) Sysco’s two U.S. public company foodservice distribution competitors and (ii) companies in other industries whose business size and complexity are similar to ours and with which we compete for top executive talent. However, due to the lack of a sufficient number of directly comparable public companies, the peer group developed for the executive compensation analysis for our NEOs is not the same peer group that is used in the stock performance graph included in our annual report to stockholders.

 

The CLD Committee regularly evaluates the compensation analysis peer group for appropriateness, applying revenue, market capitalization, and earnings before interest and taxes as the primary screening criteria and selecting companies from among those in the logistics and distribution, consumer products and retail sectors. Following this evaluation in each of the past two fiscal years, the CLD Committee determined that the following companies would constitute the peers for executive pay and performance benchmarking for decisions made for fiscal 2021 and fiscal 2022, which we refer to as our “peer group” or “peer companies” throughout this proxy statement:

 

Fiscal 2021 and Fiscal 2022 Peer Group

Aramark

Archer Daniels Midland Company

Bunge Limited

Costco Wholesale Corp.

 

Dollar Tree, Inc.

FedEx Corp.

Kimberly-Clark Corporation

The Kroger Co.

 

Lowe’s Cos. Inc.

Performance Food Group

Target Corp.

Tyson Foods, Inc.

 

United Parcel Service Inc.

US Foods Holding Corp.

Walgreens Boots Alliance, Inc.

 

 

Semler Brossy Executive Compensation Studies

 

May 2020 Report. In connection with the CLD Committee’s routine executive compensation determinations for fiscal 2021, the CLD Committee reviewed Semler Brossy’s May 2020 executive compensation study, which compared Sysco’s target total direct compensation (as defined below) for Messrs. Hourican, Grade and Bertrand to the median pay levels of the most directly comparable officers of the peer companies and/or the companies reflected in general industry survey data, as appropriate. Peer group compensation data was limited to information that was publicly reported and, in addition to the peer group data, Semler Brossy collected market data from compensation surveys for executive positions where the scope of responsibilities for the Sysco executives was not comparable to the peer group NEOs and where general industry survey data provided a better match for comparable positions in the market.

 

To the extent it deemed appropriate, the CLD Committee used the peer group and market data to benchmark the major components of compensation for our NEOs. In addition to benchmarking the composition of the incentive opportunities, the CLD Committee also validated Sysco’s actual pay and performance alignment using total shareholder return for a three-year period.

 

Analysis of New Hire Compensation. Semler Brossy also prepared a similar compensation analysis in connection with the CLD Committee’s review of the proposed executive compensation offered to each of Messrs. Alt, Ørting and Peck. See “What We Paid and Why—Compensation for NEOs—New Hire Compensation for Messrs. Alt, Ørting and Peck” below for further discussion of the benchmarking data provided by Semler Brossy.

 

June 2021 Report. For fiscal 2022, Semler Brossy similarly prepared and provided the CLD Committee in June 2021 an updated executive compensation study, which included analyses for all of the NEOs.

 

“Target total direct compensation” was defined as target total cash compensation plus the value of stock options, RSUs and PSUs expected to be granted with respect to the year in question; with stock options valued using a Black-Scholes valuation model and each RSU and PSU valued at the average closing price of a share of Common Stock for the ten trading days immediately preceding the date of grant.

 

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What We Paid and Why – Compensation for NEOs

 

Replacement PSU Award for Mr. Hourican

 

On June 23, 2021, the CLD Committee approved the cancellation and replacement of the PSUs previously issued to Mr. Hourican on February 12, 2020, in connection with his new hire compensation. These PSUs consisted of (i) 65,259 PSUs issued as part of his fiscal year 2020 annual long-term incentive award (the “FY20 PSU Award”) and (ii) 54,595 PSUs issued as a make-whole award (the “Make-Whole PSU Award”) for outstanding equity issued by Mr. Hourican’s prior employer that was forfeited. The goals for these PSU awards were established in July 2019, more than six months prior to Mr. Hourican’s appointment as President and CEO.

 

Summary of Mr. Hourican’s New Hire PSU Awards

 

As disclosed previously, in January 2020, the Board elected Mr. Hourican as President and CEO, effective February 1, 2020. At the time of his election, the CLD Committee approved a new hire compensation package for Mr. Hourican with a significant emphasis on equity-based incentives intended to immediately and significantly align his interests with the interests of Sysco’s stockholders, as well as to motivate and reward him for driving improvements in the Company’s performance. Specifically, these awards included a target annual equity award and a make-whole award for shares that Mr. Hourican was forfeiting by leaving his prior employer, as described further below:

 

Compensation Component   Target Value   Description
Target annual equity award for fiscal 2020 granted on February 12, 2020   $8,500,000  

Represents annual LTI target award valued at 654% of his annual base salary, which was approximately at median for Sysco’s peer group at the time.

 

Awarded 40% in stock options and 60% in PSUs. The options vest in three equal, annual installments on August 21, 2020, 2021 and 2022. The PSUs were issued with a performance period from June 30, 2019 through July 2, 2022.

Equity make whole – forfeited equity awards   $12,800,000  

Replaced the value of outstanding equity awards issued by his previous employer that were scheduled to vest in April 2021 (RSUs, PSUs and options), April 2022 (PSUs and options) and April 2023 (options).

 

Awarded 33% in stock options, 33% in time-based RSUs and 33% in PSUs. The options have a 10-year term and vest in three equal, annual installments on August 21, 2020, 2021 and 2022. The RSUs vest and settle in two equal installments on the 12-month and 18-month anniversaries of Mr. Hourican’s start date, February 1, 2020. The PSUs were issued with a performance period from June 30, 2019 through July 2, 2022.

 

Impact of COVID-19 Pandemic on Mr. Hourican’s New Hire PSUs

 

Within weeks of Mr. Hourican’s appointment, the World Health Organization declared the coronavirus a pandemic and governments across the U.S. and Europe initiated lockdowns. These events had an adverse impact on numerous aspects of Sysco’s business, financial condition and results of operations, including the Company’s financial performance with respect to the performance metrics under its annual and long-term incentive awards. Immediately after the onset of the crisis, Sysco leadership acted quickly to stabilize the business, including ensuring access to liquidity, reducing variable and structural costs and pivoting its business to maximize sales during a period of disruption. In addition, Mr. Hourican has led the Company’s efforts to substantially accelerate the transformation of its business and strengthen the executive leadership team required to successfully implement the transformation plan.

 

In excess of 40% of Mr. Hourican’s total new hire equity award was in the form of PSUs with performance goals that were established in July 2019, prior to Mr. Hourican’s employment. Due to the effects of the pandemic, within months of the grant date, the performance goals under the PSUs granted to Mr. Hourican in February 2020 became effectively unachievable, and the CLD Committee deemed those previously set goals no longer relevant. Although the CLD Committee believes strongly in pay-for-performance, the circumstances surrounding the impact of the pandemic on Sysco’s business, which occurred almost immediately after Mr. Hourican’s appointment, were extraordinary, and the CLD Committee believes it would be detrimental to the Company’s business to undermine the motivation and retention of its CEO by allowing his new hire PSUs to remain unachievable. No adjustments to the PSUs previously issued to any other participant were made or are contemplated by the CLD Committee.

 

Approval of Replacement PSU Award

 

As a result, following careful deliberations, on June 23, 2021, the CLD Committee approved (i) the cancellation of the FY20 PSU Award and the Make-Whole PSU Award; and (ii) the issuance, pursuant to the Sysco 2018 Omnibus Incentive Plan, of a replacement award consisting of an equivalent number of new PSUs. The new PSUs were granted using the same performance goals as the fiscal 2021 PSUs described below, subject to the following additional terms:

 

The shares of Common Stock received by Mr. Hourican, if any, upon the vesting of these replacement PSUs will be subject to a two-year holding requirement;

 

SYSCO CORPORATION - 2021 Proxy Statement    55

 
Consistent with his original award, 50% of the new PSUs issued to replace the FY20 PSU Award will vest immediately if Mr. Hourican’s employment is terminated without cause or upon his resignation for good reason, as such terms are defined in the letter agreement between Sysco and Mr. Hourican (together, an “Involuntary Termination”); and
Consistent with his original award, 100% of the new PSUs issued to replace the Make-Whole PSU Award will vest immediately upon Mr. Hourican’s Involuntary Termination.

 

This action allowed the CLD Committee to align Mr. Hourican’s new hire incentives with the current business context, recognize the scope and effectiveness of his strong leadership during this crisis, including his leadership of the Company’s business transformation initiatives, and continue to motivate and incentivize Mr. Hourican’s performance with equity compensation that includes achievable, while still rigorous, goals.

 

New Hire Compensation for Messrs. Alt, Ørting and Peck

 

Following an extensive search process supported by a third-party executive search firm, the Board, as recommended by the Governance Committee, determined that Messrs. Alt, Ørting and Peck were the best candidates for their respective officer positions. For further discussion of the experience and qualifications of each of these NEOs, please refer to “Executive Officers” above.

 

Annual Compensation

 

For purposes of determining the annual executive compensation to be offered to each of Messrs. Alt, Ørting and Peck, the CLD Committee reviewed:

 

Each candidate’s proposed job responsibilities;
   
Each candidate’s experience, skills and qualifications;
   
Each candidate’s then-current base salary, annual incentive compensation and long-term incentive compensation; and
   
Benchmarking data provided by Semler Brossy.

 

The benchmarking data provided by Semler Brossy compared the proposed target total direct compensation for the candidate to the target total direct compensation (i) for officers in comparable positions at peer companies and other similarly-sized companies (for Mr. Alt) and (ii) reported for officers in comparable positions in general industry surveys conducted by two nationally recognized survey sources, Willis Towers Watson and Aon (for Messrs. Alt, Ørting and Peck). For all three candidates, the data provided by Semler Brossy also compared the proposed target total direct compensation to the target total direct compensation for the Company’s other executive vice presidents.

 

The Company then extended offers to the candidates and, following individual negotiations, reached agreement with the candidates on their respective annual compensation packages. The compensation packages for fiscal 2021, which are described below, were in each case consistent with the authorization provided by the CLD Committee.

 

Aaron E. Alt, Executive Vice President and Chief Financial Officer
Annual base salary  
     
  Fixed element of compensation.  
     
Annual incentive plan (at target performance)  
     
  Target of 100% of base salary, with the incentive opportunity pro-rated for the period of actual service.  
     
Target annual equity award for fiscal 2021 granted on December 7, 2020  
     
  Represents annual LTI target award valued at 325% of his annual base salary. Mr. Alt received a full LTI award for fiscal 2021, rather than a pro-rated award, in lieu of a make-whole equity award, to (i) replace the value of outstanding equity awards issued by his previous employer that were scheduled to vest in September 2021 (RSUs), November 2021 (RSUs and PSUs) and November 2022 (RSUs and PSUs) and (ii) better align his focus with the objectives for the other NEOs under Sysco’s annual and long-range plans and transformational initiatives.  
     
  Awarded 50% in PSUs, 30% in stock options and 20% in RSUs. The PSUs were issued with a performance period from June 28, 2020 to July 2, 2022.The options vest in three equal, annual installments on December 7, 2021, 2022 and 2023. The RSUs vest in three equal, annual installments on January 1, 2022, 2023 and 2024.  

 

SYSCO CORPORATION - 2021 Proxy Statement    56

 
Tim Ørting Jørgensen, Executive Vice President and President, Foodservice Operations, International
Annual base salary  
     
  Fixed element of compensation.  
     
Annual incentive plan (at target performance)  
     
  Target of 125% of base salary, with the incentive opportunity pro-rated for the period of actual service.  
Target annual equity award for fiscal 2021 granted on April 14, 2021  
     
  Represents pro-rata portion of annual LTI target award valued at 275% of his annual base salary.  
     
  Awarded in RSUs that vest and settle in three equal, annual installments on May 1, 2022, 2023 and 2024.  
       
Thomas R. Peck, Jr., Executive Vice President, Chief Information and Digital Officer
Annual base salary  
     
  Fixed element of compensation.  
     
Annual incentive plan (at target performance)  
     
  Target of 100% of base salary, with the incentive opportunity pro-rated for the period of actual service.  
     
Target annual equity award for fiscal 2021 granted on February 11, 2021  
     
  Represents annual LTI target award valued at 300% of his annual base salary. Mr. Peck received a full LTI award for fiscal 2021, rather than a pro-rated award, in lieu of a make-whole equity award, to (i) replace the value of outstanding equity awards issued by his previous employer that were scheduled to vest in June 2021 (RSUs and PSUs), June 2022 (RSUs and PSUs) and January 2023 (PSUs); and (ii) better align his focus with the objectives for the other NEOs under Sysco’s annual and long-range plans and transformational initiatives.  
     
  Awarded 50% in PSUs, 30% in stock options and 20% in RSUs. The PSUs were issued with a performance period from June 28, 2020 to July 2, 2022. The options vest in three equal, annual installments on February 11, 2022, 2023 and 2024. The RSUs vest in three equal, annual installments on March 1, 2022, 2023 and 2024.  

 

The CLD Committee believes that the annual pay packages for Messrs. Alt, Ørting and Peck are appropriate in light of each NEO’s experience, skills and qualifications and as an inducement to join Sysco. Each of these pay packages was heavily weighted to variable pay and equity incentives in order to strongly link pay with future performance and to align each NEO’s interests with the interests of our stockholders.

 

Make-Whole Compensation

 

In addition to the new hire annual pay packages described above, in order to compensate Messrs. Alt, Ørting and Peck for forfeited incentives they were entitled to receive from their respective previous employers, we extended the one-time, make-whole awards described below. In developing the make-whole compensation packages described below, the CLD Committee considered each NEO’s experience and expected future contributions to Sysco. The CLD Committee also considered the associated one-time costs of replacing compensation value that the NEOs forfeited by leaving their respective previous employers.

 

SYSCO CORPORATION - 2021 Proxy Statement    57

 
NEO   Make-Whole Compensation Component   Target Value   Description
Alt   Cash make whole – forfeited annual incentive and forfeited equity vesting in May 2021   $365,000*   Replaced the annual incentive award from his previous employer based on the publicly reported performance and the value of RSUs issued by his previous employer that were scheduled to vest in May 2021.
    Equity make whole – forfeited equity awards     See the preceding table for a discussion of Mr. Alt’s receipt of a full fiscal 2021 LTI award in lieu of a make-whole equity award to replace the value of forfeited equity awards issued by his previous employer.
Ørting   Cash make-whole – forfeited cash-based long-term incentive awards   €1,000,000*   Replaced the value of cash-based, long-term incentive awards from his previous employer that were scheduled to vest in 2021 and 2022.
    Equity make-whole – forfeited LTI award opportunity   €1,000,000  

Replaced the value represented by his previous employer’s significantly reduced vesting schedule for LTI awards (i.e., one-third of LTI awards vest immediately, with the remainder vesting in equal portions over two years).

 

Awarded in RSUs that vest and settle in two equal installments on April 14, 2022 and 2023.

 

RSUs are subject to a 12-month holding requirement on all net shares until after the third anniversary of the grant date.

Peck   Cash make whole – forfeited annual incentive   $850,000*   Replaced the target value of the annual incentive award from his previous employer.
    Equity make whole – forfeited equity awards     See the preceding table for a discussion of Mr. Peck’s receipt of a full fiscal 2021 LTI award in lieu of a make-whole equity award to replace the value of forfeited equity awards issued by his previous employer.
* If the NEO voluntarily terminates his or her employment or is terminated for cause, the NEO must repay (i) 100% of this amount (if the termination occurs within his or her first 12 months of service) or (ii) 50% of this amount (if the termination occurs during his or her second 12 months of service).

 

Alignment with Stockholder Interests

 

The CLD Committee believes that, as a result of the overall compensation package provided to Messrs. Alt, Ørting and Peck, their interests are significantly aligned with the interests of Sysco’s stockholders. To reinforce that alignment over the long term, each of these NEOs is subject to Sysco’s share ownership guidelines for executive officers, which requires each of our executive vice presidents to hold shares equal in value to four times his or her base salary.

 

Base Salary – Analysis

 

Due primarily to the significant impact of the COVID-19 pandemic on Sysco’s business results for fiscal 2020, the CLD Committee determined that the base salaries for the NEOs would not be increased for fiscal 2021, maintaining each NEO’s base salary at the fiscal 2020 amount.

 

In determining the initial annual base salary to be offered to each of Messrs. Alt, Ørting and Peck for fiscal 2021, the CLD Committee reviewed each of the factors described above under “—New Hire Compensation for Messrs. Alt, Ørting and Peck – Annual Compensation.”

 

Base Salary – Detailed Information

 

We pay base salaries to attract and retain talented executives and to provide a fixed base of cash compensation. The table below shows the annualized salaries, as applicable, of each NEO at the beginning of fiscal 2020, 2021 and 2022, with the effective dates as noted below:

 

Named Executive Officer  FY2020
Base Salary(1)
  FY2021
Base Salary(2)
   FY2022
Base Salary(3)
 
Kevin P. Hourican  $1,300,000  $1,300,000   $1,300,000 
Aaron E. Alt   n/a(4)   775,000    794,400 
Joel T. Grade   690,000   690,000    700,400 
Greg D. Bertrand   678,300   678,300    702,000 
Tim Ørting Jørgensen   n/a(4)  600,000(5)   612,000(5) 
Thomas R. Peck, Jr.   n/a(4)  $650,000   $666,300 
(1) The CLD Committee approved these base salaries effective as of September 1, 2019.
(2) The CLD Committee approved these base salaries for Messrs. Hourican, Bertrand and Grade effective as of September 1, 2020.
(3) The CLD Committee approved these base salaries effective as of August 29, 2021.
(4) Mr. Alt’s employment with Sysco began on December 7, 2020; Mr. Ørting began his employment with Sysco on January 4, 2021; and Mr. Peck began his employment with Sysco on January 4, 2021.
(5) Mr. Ørting’s base salary, which was expressed in Euros when approved by the CLD Committee, is paid in British pounds sterling. See “Executive Compensation—Summary Compensation Table” below for Mr. Ørting’s annual base salary earned for fiscal 2021 expressed in U.S. dollars.

 

SYSCO CORPORATION - 2021 Proxy Statement    58

 

Short-Term Incentive Award – Analysis

 

Pursuant to the Sysco Corporation 2018 Omnibus Incentive Plan, which we refer to as the “Incentive Plan,” the CLD Committee is authorized to provide key executives, including the NEOs, with equity and cash awards, including the opportunity to earn incentive cash payments through the grant of short-term, performance-based incentive awards.

 

As discussed above under “—Philosophy of Executive Compensation Program—Transitional Approach to Fiscal 2021 Executive Compensation,” due to the challenges associated with establishing a credible financial plan for fiscal 2021 as a result of the COVID-19 pandemic impact, the CLD Committee adopted the Short-Term Incentive Program for fiscal 2021 (the “STIP”), a new short-term, cash-based incentive program, which differs from the annual incentives awarded in previous fiscal years under the management incentive program.

 

The CLD Committee established operational targets and SBOs under the STIP for each six-month performance period that maintained management’s dual focus on successfully navigating the recovery in the foodservice market, while delivering on key strategic and transformational initiatives.

 

The CLD Committee intended for the operational performance targets to represent challenging (but attainable) objectives within management’s control, with a reasonable line-of-sight to achievement and upside for exceptional performance, and management’s achievement of these goals was expected to drive and accelerate the Company’s overall results through market share growth and greater operational efficiency. The CLD Committee designed the SBOs to measure management’s success in executing on the Company’s key strategic and transformational initiatives (i.e., SHOP & Digital Customer Opportunities, USBL Regionalization, US Local Sales and Supply Chain Transformation, European Transformation, Cost Out and Margin Management), with significant milestones for these initiatives imbedded in each SBO. See “—Executive Summary—Business Highlights” above for further discussion of these key initiatives.

 

In determining the initial short-term incentive award opportunity to be offered to each of Messrs. Alt, Ørting and Peck for fiscal 2021, the CLD Committee reviewed each of the factors described above under “—New Hire Compensation for Messrs. Alt, Ørting and Peck–Annual Compensation.”

 

Short-Term Incentive Award – Detailed Information

 

Performance Periods

 

The STIP divided fiscal 2021 into two discrete performance periods: (i) June 28, 2020 to December 26, 2020 (“1H21”) and (ii) December 27, 2020 to July 3, 2021 (“2H21”). Cash payments were made following the end of each performance period.

 

STIP Plan Design

 

The STIP is designed to offer opportunities for cash compensation tied to Company performance with respect to the pre-established operational performance targets for each performance period and the NEO’s achievement of the SBOs for that performance period. Under the STIP, each participating NEO’s aggregate incentive opportunity for fiscal 2021 was targeted at the following percentages of annual base salary:

 

Name STIP Target
(as % of Base Salary)
Hourican 150%
Alt(1) 100%
Grade 125%
Bertrand 125%
Ørting(1) 125%
Peck(1) 100%

 

(1) Messrs. Alt, Ørting and Peck were not eligible to participate in the STIP for 1H21 due to their respective start dates with the Company

 

The STIP payment with respect to each performance period for each of the applicable operational performance targets was calculated based on Company performance relative to each such target and paid to the participant independently from the other components. Further, the payment earned by a participant for each performance period was paid following the conclusion of that performance period, without regard to whether any payments were earned for the other performance period. If performance with respect to any component of the STIP award had failed to meet the threshold level, a participant would not have received any payment with respect to that component.

 

The maximum possible payout of 162.5% of target (for 1H21) and 150.0% of target (for 2H21) for the Company performance portion of the STIP award for each of these performance periods represents reductions of 37.5% and 50.0%, respectively, from the 200% maximum under the management incentive program for fiscal 2020. The CLD Committee deliberately reduced the potential maximum award as compared to prior annual incentive awards due to the lack of financial objectives under the STIP.

 

SYSCO CORPORATION - 2021 Proxy Statement    59

 

1H21 Performance Period

 

STIP Performance Metrics – 1H21

 

The STIP award opportunity for each of the NEOs eligible for a 1H21 payout (Messrs. Hourican and Grade) was based on the following pre-determined metrics, weighted as indicated below:

 

25% Market Share Growth The increase in new accounts in the U.S. broadline and Canadian broadline (“USCABL”) markets, subject to a potential modifier (of up to +25%) based on the case volume of sales from those new accounts, in each instance as compared to the pre-established targets. Cases are the foodservice industry-defined measure of a unit that is sold to a customer, and “case growth” for purposes of the STIP represents the percentage increase period-over-period in this volume measure. These market share growth metrics had a possible payout between 0% and 175%, depending on the Company’s actual performance relative to the targets.
25% Operations Productivity USCABL operations productivity, measured by the variable operations labor cost per piece (12.5%) and the transportation pieces per trip (12.5%), as compared to the applicable pre-established targets. These operations productivity metrics had a possible payout between 0% and 150%, depending on the Company’s actual performance relative to the targets.
50% Strategic Bonus Objectives The performance of the NEOs with respect to the SBOs, which were tied to Sysco’s highest priority strategic/transformational initiatives. The SBOs had a possible payout between 0% and 150%, depending on actual performance relative to the targets.

 

The 1H21 STIP award opportunity for Mr. Bertrand, as a foodservice operations leader, was based on the foregoing performance metrics, except limited to the operational performance of the U.S. broadline market (“USBL”).

 

STIP Performance Targets – 1H21

 

For Messrs. Hourican and Grade, the STIP provided for minimum incentive payments upon achieving the threshold levels of 1H21 operational performance reflected in the table below. The USCABL new accounts case volume metric functions as a modifier to the 1H21 STIP opportunity with respect to the USCABL New Accounts component, resulting in higher payment levels when USCABL new accounts case volume exceeds 9.6 million cases. The various levels of operational performance required to reach threshold, target and maximum payments are set forth below:

 

  1H21 STIP Operational Performance Targets
(Messrs. Hourican and Grade)
  Market Share Growth Operations Productivity
  USCABL New
Accounts(1)
USCABL New
Accounts Case
Volume Modifier(2)
USCABL Variable
Operations Labor
Cost/Piece(3)
USCABL
Transportation
Pieces Per Trip
Threshold 28.1 ≥8.2 – 9.6 Target VOLC + 5.1% 725
Target 33.1 >9.6 – 11 Target VOLC 744
Maximum ≥36.0 >11 ≤Target VOLC - 4.1% ≥781

 

(1) Measured in thousands of accounts.
(2) Measured in millions of cases. The modifier adjustment ranges from a zero payout for below threshold performance to a +25% payout for performance at or above the maximum level.
(3) The CLD Committee believed at the time it established the 1H21 STIP that achievement of the VOLC Target was challenging, but reasonably attainable.

 

For Mr. Bertrand, the STIP provided for minimum incentive payments upon achieving the threshold level of 1H21 operational performance reflected in the table below. The USBL new accounts case volume metric functions as a modifier to the 1H21 STIP opportunity with respect to the USBL New Accounts component, resulting in higher payment levels when USBL new accounts case volume exceeds 9.2 million cases. The various levels of operational performance required to reach threshold, target and maximum payments are set forth below:

 

  1H21 STIP Operational Performance Targets (Mr. Bertrand)
  Market Share Growth Operations Productivity
  USBL New
Accounts(1)
USBL New Accounts
Case Volume
Modifier(2)
USBL Variable
Operations Labor
Cost/Piece(3)
USBL Transportation
Pieces Per Trip
Threshold 26.0 ≥7.8 – 9.2 Target VOLC + 5.1% 730
Target 30.5 >9.2 – 10.5 Target VOLC 749
Maximum ≥33.6 >10.5 ≤Target VOLC - 5.1% ≥786

 

(1) Measured in thousands of accounts.
(2) Measured in millions of cases. The modifier adjustment ranges from a zero payout for below threshold performance to a +25% payout for performance at or above the maximum level.
(3) The CLD Committee believed at the time it established the 1H21 STIP that achievement of the VOLC Target was challenging, but reasonably attainable.

 

SYSCO CORPORATION - 2021 Proxy Statement    60

 

1H21 Financial Results and Performance Factors

 

For purposes of the 1H21 STIP, the Company’s actual operational results included (i) USCABL new accounts of 35,062 (exceeding target performance level), as modified (+25%) by USCABL new accounts case volume of 13.3 million cases (exceeding maximum performance level); (ii) USCABL variable operations labor cost per piece of $0.98 (approximating target performance level); (iii) USCABL transportation pieces per trip of 761 (exceeding target performance level); (iv) USBL new accounts of 31,573 (exceeding target performance level), as modified by USBL new accounts case volume of 12.5 million cases (exceeding maximum performance level); (v) USBL variable operations labor cost per piece of $0.98 (approximating target performance level); and (vi) USBL transportation pieces per trip of 766 (exceeding target performance level).

 

Based on these results, we calculated weighted performance factors for each of the operational performance metrics under the 1H21 STIP as illustrated in the table below:

 

Calculation of 1H21 Weighted Operational Performance Factors (50% of target STIP incentive opportunity)
Operational Performance Metrics
(for Messrs. Hourican and Grade)
  Potential
Payment
  Weighting(1)  x  1H2021
Performance(2)
  =  Weighted
Operational
Performance Factor
USCABL Market Share Growth  0% - 175%  25%     155.0%     38.75%
USCABL Operations Productivity  0% - 150%  25%     110.4%     27.6%
Operational Performance Metrics
(for Mr. Bertrand)
  Potential
Payment
  Weighting(1)  x  1H2021
Performance(2)
  =  Weighted
Operational
Performance Factor
USBL Market Share Growth  0% - 175%  25%     141.9%     35.5%
USBL Operations Productivity  0% - 150%  25%     111.0%     27.7%
(1) This column represents, for each operational performance metric, the weighting of that metric for purposes of the 1H21 STIP incentive opportunity.
(2) The calculation of the Market Share Growth 1H21 performance reflects the New Accounts Case Volume Modifier of +25%, based on the Company’s performance under this metric exceeding the maximum level.

 

Calculation of Total Award Earned under 1H21 STIP

 

The incentive award payment for each NEO under the 1H21 STIP was calculated as indicated in the table below, with 50% of the target incentive opportunity based on the applicable operational performance metrics and the remaining 50% of the target incentive opportunity based on individual performance with regard to pre-established SBOs, which the CLD Committee had the discretion to pay out between 0% - 150% based on its assessment of the NEO’s performance. For further discussion of the CLD Committee’s evaluation with respect to the SBOs of each NEO, as well as the calculation of each such NEO’s “Weighted SBO Performance Factor” for purposes of the table below, please see “—Annual Incentive Award—Analysis” below.

 

Calculation of Total 1H21 STIP Awards – Messrs. Hourican and Grade
Name  Annual Base
Salary(1)
  STIP
Target
Incentive
(% of Base
Salary)
   USCABL
Market
Share
Growth
Weighted
Performance
Factor
   USCABL
Operations
Productivity
Weighted
Performance
Factor
   Weighted
SBO
Performance
Factor
   Aggregate
Performance
Factor(2)
   Total STIP
Award Earned
for 1H21
Performance
Hourican  $1,300,000   150%   38.75%   27.6%   62.5%   128.8%  $1,255,800
Grade   690,000   125%   38.75%   27.6%   62.5%   128.8%   555,450
    Base   Target    A    B    C APF = A + B + C Total = Base x 50% x
Target x APF

 

(1) 50% of each NEOs annual base salary was applied for purposes of calculating his 1H21 STIP award payout.
(2) Due to rounding, the component performance factor percentages do not add precisely to the total.

 

Calculation of Total 1H21 STIP Award – Mr. Bertrand
Name  Annual Base
Salary(1)
  STIP
Target
Incentive
(% of Base
Salary)
   USBL
Market
Share
Growth
Weighted
Performance
Factor
   USBL
Operations
Productivity
Weighted
Performance
Factor
   Weighted
SBO
Performance
Factor
   Discretionary
Adjustment(2)
   Aggregate
Performance
Factor
   Total STIP
Award Earned
for 1H21
Performance
Bertrand  $678,300   125%   35.5%   27.7%   62.5%   3.1%   128.8%  $546,032
    Base   Target    A    B    C    D APF = A + B + C + D Total = Base x 50% x
Target x APF

 

(1) 50% of Mr. Bertrand’s annual base salary was applied for purposes of calculating his 1H21 STIP award payout.
(2) The CLD Committee approved a 3.1% discretionary increase to the aggregate performance factor for Mr. Bertrand’s 1H21 STIP payout to promote an environment of teamwork and collaboration by aligning his short-term incentive payout with that of the other members of the executive leadership team in light of their collective efforts to achieve the results for the performance period.

 

SYSCO CORPORATION - 2021 Proxy Statement    61

 

2H21 Performance Period

 

STIP Performance Metrics – 2H21

 

The STIP award opportunity for each of the NEOs for a 2H21 payout was based on the following pre-determined metrics, weighted as indicated below:

 

25% Market Share Growth The increase in the case volume of sales from new USCABL accounts, subject to a potential “market share” modifier (ranging from -15% to +15%) that compares Sysco’s sales growth in the U.S. Foodservice (“USFS”) and SYGMA markets to the growth in such markets by the rest of the foodservice industry, in each case as compared to the pre-established targets; represents a streamlined approach to enhance the focus on increasing market share.
25% Operations Productivity USCABL operations productivity, measured by the variable operations labor cost per piece (“VOLC”), as compared to the applicable pre-established target; reflects the removal of the transportation pieces per trip component, to maintain focus on operational efficiency while ensuring alignment with transformational initiatives providing for no delivery minimums for customers.
50% Strategic Bonus Objectives Each NEO’s individual performance with respect to his SBOs, which were tied to Sysco’s highest priority strategic initiatives.

 

STIP Performance Targets – 2H21

 

The STIP provided for minimum incentive payments for the NEOs upon achieving the threshold levels of 2H21 operational performance reflected in the table below. The various levels of operational performance required to reach threshold, target and maximum payments are set forth below:

 

  2H21 STIP Operational Performance Targets
  Market Share Growth Operations Productivity
  Sales Volume from USCABL
New Accounts(1)
USFS and SYGMA Market
Share Modifier(2)
USCABL Variable Operations
Labor Cost/Piece(3)
Threshold 9.4 ≥1.0x – <1.2x Target VOLC + 4.9%
Target 11.0 ≥1.2x – <1.3x Target VOLC
Maximum ≥12.7 ≥1.3x ≤Target VOLC – 4.9%

 

(1) Measured in millions of cases.
(2) Sysco’s growth in sales in the USFS and SYGMA markets during the performance period is expressed as a multiple of the sales growth in such markets by the rest of the foodservice industry (excluding Sysco). The modifier adjustment ranges from a -15% payout for below threshold performance to a +15% payout (not to exceed 150% of target) for performance at or above the maximum level.
(3) The CLD Committee believed at the time it established the 2H21 STIP that achievement of the VOLC Target was challenging, but reasonably attainable.

 

2H21 Financial Results and Performance Factors

 

For purposes of the 2H21 STIP, the Company’s actual operational results included (i) sales volume from USCABL new accounts of 12.9 million cases (exceeding maximum performance level), (ii) USFS and SYGMA market share growth of 1.03x (approximating threshold performance level) which did not result in modification of the sales volume performance factor, and (iii) USCABL variable operations labor cost per piece approximated the threshold performance level.

 

Based on these results, we calculated weighted performance factors for each of the operational performance metrics under the 2H21 STIP as illustrated in the table below:

 

Calculation of Weighted Operational Performance Factors (50% of target STIP incentive opportunity)
Operational Performance Metrics   Potential
Payment
  Weighting(1)   x   2H2021
Performance(2)
  =   Weighted
Operational
Performance Factor
USCABL Market Share Growth   0% - 150%   25%       150.0%       37.5%
USCABL Operations Productivity   0% - 150%   25%       51.5%       12.9%

 

(1) This column represents, for each operational performance metric, the weighting of that metric for purposes of the 2H21 STIP incentive opportunity.
(2) The calculation of the Market Share Growth 2H21 performance was not subject to adjustment by the USFS and SYGMA market share growth modifier, due to such market share growth approximating the threshold performance level.

 

SYSCO CORPORATION - 2021 Proxy Statement    62

 

Calculation of Total Award Earned under 2H21 STIP

 

The incentive award payment for each NEO under the 2H21 STIP was calculated as indicated in the table below, with 50% of the target incentive opportunity based on the applicable operational performance metrics and the remaining 50% of the target incentive opportunity based on individual performance with regard to pre-established SBOs, which the CLD Committee had the discretion to pay out between 0% - 150% based on its assessment of the NEO’s performance. For further discussion of the CLD Committee’s evaluation with respect to the SBOs, as well as the calculation of each such NEO’s “Weighted SBO Performance Factor” for purposes of the table below, please see “—Strategic Bonus Objectives” below.

 

Calculation of Total 2H21 STIP Awards
Name  Annual Base
Salary(1)
  STIP
Target
Incentive
(% of Base
Salary)
   USCABL
Market
Share
Growth
Weighted
Performance
Factor
   USCABL
Operations
Productivity
Weighted
Performance
Factor
   Weighted
SBO
Performance
Factor
   Aggregate
Performance
Factor(2)
   Total STIP
Award Earned
for 2H21
Performance
Hourican  $1,300,000   150%   37.5%   12.9%   53.9%   104.3%  $1,016,925
Alt   775,000   100%   37.5%   12.9%   53.9%   104.3%   404,163
Grade   690,000   125%   37.5%   12.9%   53.9%   104.3%   449,794
Bertrand   678,300   125%   37.5%   12.9%   53.9%   104.3%   442,167
Ørting  600,000   125%   37.5%   12.9%   53.9%   104.3%  391,125
Peck  $650,000   100%   37.5%   12.9%   53.9%   104.3%  $338,975
    Base    Target     A         C  APF = A + B + C  Total = Base x 50% x
Target x APF

 

(1) For each of the NEOs, 50% of his annual base salary was applied for purposes of calculating the 2H21 STIP award payout. The payout for Mr. Ørting was calculated in Euros and converted to British pounds sterling upon payment, applying the average currency exchange rate for August 2021. See “Executive Compensation—Summary Compensation Table” below for Mr. Ørting’s 2H21 STIP award payout expressed in U.S. dollars.
(2) Due to rounding, the component performance factor percentages do not add precisely to the total.

 

Strategic Bonus Objectives

 

The CLD Committee established the SBOs described in the tables below for each six-month performance period under the STIP based on Sysco’s highest priority strategic and transformational initiatives. For the SBOs, in January 2021 (for the 1H21 SBOs) and July 2021 (for the 2H21 SBOs), the CLD Committee reviewed and rated the collective performance of the NEOs and determined the applicable SBO performance factors using the following rating and associated payment ranges: significantly below target (0%); below target (50% - 85%); on target (90% - 110%); above target (115% - 125%) and significantly above target (130% - 150%).

 

SBOs – 1H21 (Messrs. Hourican, Grade and Bertrand)   Committee’s Review and Determination

SHOP & Digital Customer Opportunities (12.5%)

Achieve selected milestones with regard to the:

•  utilization of the SHOP ordering and shopping platform,

•  enhancement of customer acquisition and onboarding, and

•  enhancement of the digital shopping experience.

  Assigned an SBO Performance Factor of 140.0% of target based on the evaluation of the performance of the NEOs, which resulted in a weighted payout factor of 17.5% for this SBO.   

Sales Transformation (12.5%)

Successfully deploy the new sales consultant compensation program and the local sales transformation plan.

  Assigned an SBO Performance Factor of 90.0% of target based on the evaluation of the performance of the NEOs, which resulted in a weighted payout factor of 11.25% for this SBO.

USBL Regionalization (12.5%)

Achieve targeted cost savings through the successful implementation of regionalization in the USBL business.

  Assigned an SBO Performance Factor of 130.0% of target based on the evaluation of the performance of the NEOs, which resulted in a weighted payout factor of 16.25% for this SBO.

Cost Out (12.5%)

Achieve the targeted cost savings for 1H21.  

  Assigned an SBO Performance Factor of 140.0% of target based on the evaluation of the performance of the NEOs, which resulted in a weighted payout factor of 17.5% for this SBO.
Total Enterprise 1H21 Weighted SBO Performance Factor   62.5%

 

SYSCO CORPORATION - 2021 Proxy Statement    63

 

 

SBOs – 2H21 (All NEOs)   Committee’s Review and Determination

SHOP & Digital Customer Opportunities (12.5%)

Achieve selected milestones with regard to the:

•  utilization of the SHOP ordering and shopping platform,

•  enhancement of customer acquisition and onboarding, and

•  enhancement of the digital shopping experience.

  Assigned an SBO Performance Factor of 110.0% of target based on the evaluation of the performance of the NEOs, which resulted in a weighted payout factor of 13.75% for this SBO.

Key Transformation Initiatives (12.5%)

Successfully deploy the following transformation initiatives:

•  US local sales transformation

•  US supply chain transformation

•  European transformation initiatives

  Assigned an SBO Performance Factor of 101.0% of target based on the evaluation of the performance of the NEOs, which resulted in a weighted payout factor of 12.63% for this SBO.

Cost Out (12.5%)

Achieve the targeted cost savings for 2H21.

  Assigned an SBO Performance Factor of 130.0% of target based on the evaluation of the performance of the NEOs, which resulted in a weighted payout factor of 16.25% for this SBO.

Margin Management (12.5%)

Achieve the targeted gross margin on sales to USBL street customer accounts.

  Assigned an SBO Performance Factor of 90.0% of target based on the evaluation of the performance of the NEOs, which resulted in a weighted payout factor of 11.25% for this SBO.
Total Enterprise 2H21 Weighted SBO Performance Factor   53.9%

 

Long-term Incentives – Analysis

 

As discussed above under “—Philosophy of Executive Compensation Program—Transitional Approach to Fiscal 2021 Compensation Design,” in July 2020, in light of the continuing uncertainties in the Company’s business arising from the impact of the COVID-19 pandemic, the CLD Committee implemented a transitional approach to executive compensation plan design for fiscal 2021, with a strong emphasis on long-term incentives linked to stockholder value, including a two-year performance-based PSU award that represented 50% of the total LTI award. The CLD Committee determined that this shorter performance period for the fiscal 2021 PSU awards was necessary and appropriate to focus the efforts of our NEOs on Sysco’s business transformational initiatives (i.e., cost reduction, market share growth, and digital commerce transformation) that need to be achieved within this two-year period. See “—Long-term Incentives–Detailed Information— Performance Criteria (PSUs)” above for a discussion of the performance objectives for the fiscal 2021 PSUs.

 

The CLD Committee believes that, if these significant and substantial transformational performance objectives are achieved, this transitional pay approach will yield compensation for the NEOs over a two-year period that is generally consistent with Sysco’s historical, performance-based compensation program.

 

Long-term Incentives – Detailed Information

 

Fiscal 2021

 

Annual LTI Awards

 

The CLD Committee granted annual long-term incentives (“LTI”) under our stockholder-approved Incentive Plan to certain key employees, including to Messrs. Hourican, Grade and Bertrand (in August 2020), to Mr. Alt (in December 2020), to Mr. Peck (in February 2021) and to Mr. Ørting (in April 2021) for fiscal 2021 (the “Fiscal 2021 LTI Grant”). These long-term incentives were designed to provide these NEOs competitive, longer-term incentive opportunities that were consistent with our peer group and reflected our overall compensation philosophy of aligning the largest component of their pay with performance and the interests of stockholders. The Fiscal 2021 LTI Grant consisted of RSUs, stock options and PSUs issued under the Performance Share Unit Agreement For Performance Period FY2021–FY2022 (the “PSU Agreement”). The CLD Committee set the targeted aggregate dollar value of the Fiscal 2021 LTI Grant for each of the NEOs as set forth in the table below:

 

Name   Target LTI Award Value ($)(1)   Target LTI Award Value
(% of Base Salary)
Hourican   $10.0 million   769.2%
Alt   $2.5 million   325.0%
Grade   $2.4 million   350.0%
Bertrand   $2.2 million   325.0%
Ørting   €0.8 million   275.0%
Peck   $2.0 million   300.0%

 

(1) Amounts for NEOs (other than Hourican) are approximate. Amount for Mr. Ørting is pro-rated for his period of actual service.

 

The CLD Committee allocated the total target value of these long-term incentives for each of these NEOs (other than Mr. Ørting) among the awards as follows: approximately 50% of the target value in PSUs, approximately 30% of the target value in stock options and approximately 20% of the target value in RSUs. The award to Mr. Ørting consisted entirely of RSUs.

 

SYSCO CORPORATION - 2021 Proxy Statement    64

 

In determining the number of options to be awarded to the NEOs in connection with the Fiscal 2021 LTI Grant, the Black-Scholes pricing model was applied, initially valuing the options as follows:

 

The options awarded to Messrs. Hourican, Grade and Bertrand in August 2020 were valued at $13.33 per option;
The options awarded to Mr. Alt in December 2020 were valued at $19.66 per option; and
The options awarded to Mr. Peck in February 2021 were valued at $19.16 per option.

 

Pursuant to our Incentive Plan, the exercise price for these stock options is equal to the closing price of Common Stock on the business day prior to the grant date, the options vest in equal, annual installments over a three-year period, and the term of the options is ten years.

 

In determining the number of PSUs and RSUs, as applicable, to be awarded to the NEOs in connection with the Fiscal 2021 LTI Grant, each PSU (using the target number of shares) and each RSU was valued at $59.04 per share for Messrs. Hourican, Grade and Bertrand, $72.69 per share for Mr. Alt, $74.95 for Mr. Peck and $80.13 for Mr. Ørting, in each case representing the ten-trading-day average closing price of Common Stock immediately preceding the applicable grant date.

 

New Hire and Make-Whole LTI Award

 

In connection with determining the make-whole LTI award to be offered to Mr. Ørting (the “Make-Whole RSU Award”), which was issued pursuant to our Incentive Plan, the CLD Committee considered the associated one-time costs of replacing compensation value that he forfeited by leaving his previous employer. See “—New Hire Compensation for Messrs. Alt, Ørting and Peck — Make-Whole Compensation” above for further discussion. In determining the number of RSUs to be issued to Mr. Ørting in connection with his Make-Whole RSU Award, the CLD Committee applied the same valuation method used for the RSUs issued in connection with the Fiscal 2021 LTI Grant described above; each RSU was initially valued based on the ten-trading-day average closing price of Common Stock immediately preceding the applicable grant date.

 

Replacement PSU Award for Mr. Hourican

 

On June 23, 2021, the CLD Committee approved the cancellation and replacement of the PSUs previously issued to Mr. Hourican on February 12, 2020, in connection with his new hire compensation. These fiscal 2020 PSUs consisted of (i) 65,259 PSUs issued as part of his fiscal year 2020 annual long-term incentive award (the “FY20 PSU Award”) and (ii) 54,595 PSUs issued as a make-whole award (the “Make-Whole PSU Award”) for outstanding equity issued by Mr. Hourican’s prior employer that was forfeited.

 

The replacement PSU award, issued pursuant to the Sysco 2018 Omnibus Incentive Plan on June 23, 2021, consisted of an equivalent number of new PSUs and was granted using the same performance goals as the fiscal year 2021 PSUs described herein, subject to the following additional terms:

 

The shares of Common Stock received by Mr. Hourican, if any, upon the vesting of these replacement PSUs will be subject to a two-year holding requirement;
Consistent with his original award, 50% of the new PSUs issued to replace the FY20 PSU Award will vest immediately if Mr. Hourican’s employment is terminated without cause or upon his resignation for good reason, as such terms are defined in the letter agreement between Sysco and Mr. Hourican (collectively, an “Involuntary Termination”); and
Consistent with his original award, 100% of the new PSUs issued to replace the Make-Whole PSU Award will vest immediately upon Mr. Hourican’s Involuntary Termination.

 

For further discussion of the CLD Committee’s determination to issue this replacement award, see “—What We Paid and Why—Compensation for NEOs— Replacement PSU Award for Mr. Hourican” above.

 

Performance Criteria (PSUs)

 

The PSUs awarded in connection with the Fiscal 2021 LTI Grant and the replacement PSU award for Mr. Hourican provide the opportunity for participants to receive shares of Common Stock based on performance over a performance period of two fiscal years (fiscal 2021 – fiscal 2022) with respect to the following strategic performance targets established by the CLD Committee, subject to a modifier tied to the Company’s total shareholder return (“TSR”):

 

Cost Reduction: the achievement of targeted annualized structural cost reductions during fiscal 2022 through the successful deployment of selected strategic initiatives, representing 50% of the target PSU opportunity;
Market Share Growth: the achievement of targeted market share growth in U.S. markets (measured by total U.S. sales) through the completion of selected strategic initiatives, representing 30% of the target PSU opportunity; and
Digital Commerce: the achievement of targeted incremental growth in the volume of U.S. broadline orders utilizing Sysco’s digital ordering platform through the implementation of platform enhancements and the accomplishment of other related initiatives, representing 20% of the target PSU opportunity.

 

 

The number of shares, if any, earned with respect to each of the strategic performance targets described above will be calculated based on Company performance (as compared to such target) and awarded to the participant independently from the other targets. Further, the total number of shares earned by each participant as a result of the Company’s performance with regard to these strategic performance targets will be subject to adjustment based on Sysco’s TSR during the performance period as compared to the S&P 500 companies. This adjustment will be applied to the target number of shares granted to each participant and will range from decreasing the total number of shares received by 25% of target (for relative TSR below expectations) to increasing the total number of shares received by 25% of target (for superior relative TSR).

 

Each PSU granted to participants represents the right to receive one share of Common Stock based on target performance, but the ultimate number of shares of Common Stock to be earned with respect to a participant’s PSUs will be determined at the end of the two-year performance period and could range from 0% to 175% of the target number of PSUs offered to the participant. Dividend equivalents accrue during the performance period and are paid either in shares or in cash, in the discretion of the CLD Committee, based on the number of PSUs earned following certification of the Company’s performance.

 

SYSCO CORPORATION - 2021 Proxy Statement    65

 

No Payout under Fiscal 2019 PSU Awards

 

In August 2018, the CLD Committee approved the awards of PSUs to eligible NEOs pursuant to a PSU agreement, adopted in August 2018, under the Sysco Corporation 2013 Long-Term Incentive Plan. Each of these PSUs granted to participants represented the right to receive one share of Common Stock, at target levels, but the ultimate number of shares of Common Stock earned with respect to a participant’s PSUs was determined at the end of the three-year performance period (i.e., fiscal 2019 through fiscal 2021) and could have ranged from 0% to 200% of the target number of PSUs awarded to the participant, based on the pre-established financial targets.

 

The financial performance targets for the fiscal 2019 PSU awards were the Company’s adjusted EPS CAGR during the performance period, representing two-thirds of the LTI opportunity, and the Company’s average adjusted ROIC for the performance period, representing one-third of the LTI opportunity. Dividend equivalents accrued during the performance period would have been paid in shares of Common Stock, in the discretion of the CLD Committee, if PSUs had been earned following certification of the Company’s performance.

 

Adjustments for Extraordinary and Non-Recurring Items

 

The CLD Committee established the adjusted EPS CAGR and adjusted average ROIC targets for the performance period at the time the PSU awards were granted, and calculations were adjusted for certain extraordinary or non-recurring items.

 

Calculation of PSU Payout

 

For the performance period, the Company’s adjusted EPS CAGR performance was below the threshold adjusted EPS CAGR of 8.0%, yielding no payout for this component, and the Company’s adjusted average ROIC performance was below the threshold adjusted average ROIC performance of 14.0%, yielding no payout for this component. Consequently, Messrs. Bertrand and Grade, the NEOs holding fiscal 2019 PSU awards, received no payout with respect to those awards. See “—Executive Summary—Business Highlights” above for a discussion of the impact of the COVID-19 pandemic on our business and financial results.” Messrs. Hourican, Alt, Ørting and Peck joined the Company subsequent to the issuance of these PSUs.

 

Fiscal 2022 Executive Compensation

 

On July 30, 2021, the CLD Committee approved the Company’s short-term and long-term incentive programs for fiscal 2022, which restored financial metrics for the fiscal 2022 STIP and the fiscal 2022 PSUs and returned to a three-year performance period for the PSUs. These changes are more consistent with the CLD Committee’s historical grant practices prior to fiscal 2020. For further discussion, see “—Fiscal 2022 Executive Compensation” below.

 

Short-Term Incentive Opportunity

 

The new short-term, cash-based incentive program for fiscal year 2022 (the “FY22 STIP”), consistent with the CLD Committee’s historical annual incentive practices, includes the financial performance objectives described below.

 

The FY22 STIP is designed to offer opportunities for cash compensation tied to the Company performance with regard to pre-established financial and operational objectives and the performance, collectively, of the Company’s senior management team with regard to the SBOs, with the aggregate incentive payout for fiscal 2022 subject to a modifier from 0% to 120% based on each NEO’s individual performance.

 

The FY22 STIP divides fiscal 2022 into two discrete performance periods: (i) July 4, 2021 to January 1, 2022 (“1H22”) and (ii) January 2, 2022 to July 2, 2022 (“2H22”). On July 30, 2021, the CLD Committee granted FY22 STIP awards to the executive officers for fiscal 2022 and established the 1H22 Company performance objectives and SBOs and expects to approve the Company performance objectives and SBOs for 2H22 prior to the end of 1H22.

 

Incentive payments earned under the FY22 STIP for 1H22 will be based on the following components: (i) 15% on enterprise sales revenue, as compared to the pre-established target; (ii) 15% on enterprise operating income, as compared to the pre-established target; (iii) 5% on increase in new accounts in the USBL markets and the volume of sales to those new USBL accounts, as compared to the pre-established targets; (iv) 5% on the increase in the number of lines sold to existing USBL accounts, as compared to the pre-established target; (v) 5% on USBL operations productivity, measured by the variable operations labor cost per piece, as compared to the pre-established target; (vi) 5% on the Company’s performance against various pre-established operational targets in selected non-U.S. markets; and (vii) 50% on the performance of the Company’s senior management team (including the NEOs) with regard to the pre-established SBOs, which are tied to Sysco’s highest priority strategic initiatives.

 

The FY22 STIP payment, if any, for each of the above components will be calculated based on performance (as compared to the applicable performance target(s)) and paid to the participant independently from the other components. Further, the aggregate of (i) any payment earned by a participant for 1H22 and (ii) any payment earned by the participant for 2H22, will be subject to adjustment based on each NEO’s performance with regard to his or her individual performance objectives for fiscal 2022 pre-established by the CLD Committee. This adjustment, which will be determined by the CLD Committee, will range from reducing the FY22 STIP payout to zero (for performance significantly below target) to increasing the aggregate payout by 20% (for performance significantly above target). The aggregate, adjusted incentive payment for the FY22 STIP will be paid following the conclusion of fiscal 2022.

 

Each metric for 1H22 based on the Company’s performance has a possible payout between 0% and 150%, depending on the Company’s actual performance relative to pre-established targets, and the SBO portion of the FY22 STIP payment has a possible payout of between 0% and 150%, depending on the actual performance of the senior leadership team relative to the pre-established targets. Consequently, in the aggregate, the maximum 1H22 incentive opportunity under the FY22 STIP would be 150% of an NEO’s target opportunity, subject to the adjustment of the aggregate incentive for fiscal 2022 for each NEO’s individual performance as described above. If performance with respect to any component does not meet the threshold level, a participant will not receive any payment with respect to that component.

 

SYSCO CORPORATION - 2021 Proxy Statement    66

 

Long-Term Equity Incentive Opportunity – PSUs, Stock Options and RSUs

 

The Company’s fiscal 2022 long-term incentive awards, issued to the executive officers of the Company, including the NEOs, pursuant to the Sysco 2018 Omnibus Incentive Plan, consisted of PSUs, stock options and RSUs. The PSUs with a three-year performance period beginning in fiscal 2022 represented 50% of the target LTI opportunity, with stock options representing 30% of the target LTI opportunity and RSUs representing the remaining 20%.

 

PSUs. The PSUs provide the opportunity for participants to receive shares of Common Stock based on performance in each year of the three-year performance period with respect to the following strategic performance targets established by the CLD Committee, subject to a modifier tied to the Company’s total shareholder return (“TSR”):

 

Market Share Growth: the achievement of targeted market share growth in U.S. markets (measured by total U.S. sales), representing 50% of the target PSU opportunity; and

 

Earnings Per Share: the achievement of targeted incremental growth in Sysco’s earnings per share, representing 50% of the target PSU opportunity.

 

The number of shares, if any, earned with respect to each of the strategic performance targets described above will be calculated based on Company performance (as compared to such target) and awarded to the participant independently from the other targets. Further, the total number of shares earned by each participant as a result of the Company’s performance with regard to these strategic performance targets will be subject to adjustment based on Sysco’s TSR during the performance period as compared to the S&P 500 companies. This adjustment will be applied to the target number of shares granted to each participant and will range from decreasing the total number of shares received by 25% of target (for relative TSR below expectations) to increasing the total number of shares received by 25% of target (for superior relative TSR).

 

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

 

Stock Options

 

The stock options have a 10-year term and vest in three equal, annual installments.

 

RSUs

 

Each RSU represents the right to receive one share of Common Stock, and the RSUs vest in three equal installments commencing on the first day of the calendar month immediately following each of the first three anniversaries of the grant date.

 

Retention Award for Mr. Bertrand

 

In addition to the annual LTI awards for fiscal 2022 described above, the CLD Committee approved for Mr. Bertrand a separate, one-time award of PSUs valued at $2.2 million (equivalent to the value of his target annual LTI award) and intended by the CLD Committee to enhance his retention. Sysco is in the process of executing a long-term transformation business strategy over the next three years, and Mr. Bertrand’s role as head of U.S. Foodservice Operations is critical to the execution of that transformational strategy. The PSUs are subject to the same performance metrics as described above for the regular annual PSU award.

 

Due to Mr. Bertrand’s retirement eligibility, in order to enhance the retentive effect of this one-time PSU award, the CLD Committee established special provisions governing the treatment of the PSUs upon the occurrence of certain events resulting in the termination of his employment:

 

Retirement: the PSU award will be forfeited in its entirety;

 

Death: the PSUs will vest pro-rata based on (i) the number of months served in the performance period and (ii) performance at target level;

 

Disability: the PSUs will vest pro-rata based on (i) the number of months served in the performance period and (ii) the actual performance achieved at the end of the performance period;

 

Voluntary Resignation: the PSU award will be forfeited in its entirety;

 

Involuntary Termination without Cause/Resignation for Good Reason: the PSUs will vest pro-rata based on (i) the number of months served in the performance period and (ii) the actual performance achieved at the end of the performance period; and

 

Termination without Cause (Following Change in Control): all PSUs will immediately vest, with payout based on performance at the target level.

 

Retirement/Career Benefits

 

Management Savings Plan – Analysis

 

The CLD Committee believes that the Management Savings Plan (the “MSP”), a non-qualified, defined contribution savings plan offered by Sysco, incentivizes and assists in the retention of key employees by providing them with a supplemental retirement savings vehicle. The MSP is an important, and cost effective, recruitment and retention tool for Sysco, as the companies with which we compete for executive talent typically provide a similar plan to their senior employees.

 

Management Savings Plan – Detailed Information

 

Sysco offers the MSP to certain senior leaders, including the NEOs (other than Mr. Ørting, who has elected to receive a salary supplement equal to 10% of his annual base salary in lieu of participating in a Sysco retirement plan and receiving a Company contribution). The MSP allows individual deferrals and employer contributions in excess of IRS 401(k) contribution and compensation limits. Currently, individual contributions to the 401(k) plan are limited by law to $19,500 per year, plus an additional $6,500 in “catch-up” contributions if the participant is at least 50 years of age. The MSP allows eligible participants to defer up to 50% of their base salary and up to 90% of their eligible bonus.

 

SYSCO CORPORATION - 2021 Proxy Statement    67

 

In addition, in conjunction with the freeze of accruals in the Supplemental Executive Retirement Plan (the “SERP”) in 2013, certain participants (who would otherwise have incurred a sizable loss of future benefits under the SERP) are eligible for transition contributions. The participants in the MSP direct the investment for both their individual contributions and the Company contributions. The MSP is described in further detail below under “Executive Compensation — Fiscal 2021 Nonqualified Deferred Compensation – About the MSP.”

 

Legacy Retirement Plans – Analysis

 

Supplemental Executive Retirement Plan

 

The CLD Committee previously amended the Supplemental Executive Retirement Plan, or “SERP,” as described below, to freeze benefits, stop future accruals and to provide for immediate vesting of accrued benefits in order to achieve the following goals:

 

Bring the value of retirement benefits more in line with the practices of our peer group; and

 

Increase the proportion of long-term and performance-based compensation in the compensation mix, relative to fixed and retirement compensation such as the SERP and MSP.

 

Executive Deferred Compensation Plan

 

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

 

Legacy Retirement Plans – Detailed Information

 

Transition from Legacy Plans

 

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

 

The U.S. retirement program changes, however, were expected to result in significant reductions in anticipated benefits for existing participants in the pension plan, the SERP and the EDCP. With respect to these reductions in the expected value of benefits under the SERP and the EDCP, the cessation of future benefit accruals affected each individual in a different manner. To address concerns over retention, the CLD Committee developed a transition program intended to help ensure that no affected participant experiences an aggregate reduction of more than 15% - 20% (depending on an individual’s prior years of service) in his or her expected retirement benefits under the Company’s non-qualified plans as a result of the retirement strategy changes. While none of the other NEOs participated in the SERP or the EDCP, Mr. Bertrand was a participant and had a projected reduction of 35% in his non-qualified benefits, in excess of the targeted range.

 

To mitigate the loss in projected non-qualified retirement benefits, affected individuals were eligible for transitional compensation opportunities, including supplemental contributions to the MSP, for a period of up to ten plan years commencing January 1, 2013, or until an eligible employee ceases employment with Sysco, whichever is earlier. Of the NEOs, Mr. Bertrand was eligible during fiscal 2021 for a supplemental MSP contribution, which was made in the third quarter of fiscal 2021.

 

Supplemental Executive Retirement Plan

 

We historically provided annual retirement benefits to corporate employees and most of our non-union operating company employees under the tax-qualified Sysco Corporation Retirement Plan, a defined benefit program that we refer to as the “pension plan.” Since January 1, 2013, most employees no longer accrue additional retirement benefits under the pension plan.

 

However, when the pension plan was the primary retirement vehicle, the Company also maintained the SERP in order to retain and drive continued performance from certain employees. The CLD Committee utilized the SERP to increase the retirement benefits available to officers whose benefits under the pension plan were limited by law. Of the NEOs, only Mr. Bertrand participates in the SERP.

 

The SERP was frozen and all future accruals under the SERP ceased, effective June 29, 2013 for Mr. Bertrand. Those SERP participants who retire and are not eligible for immediate commencement of their SERP benefit are deemed 100% vested, with benefits payable upon reaching age 65. The earliest an executive can retire and receive any benefits under the SERP is (i) age 55 with a minimum of 15 years of service as a participant in Sysco’s management incentive program (“MIP”) or (ii) age 60 with at least 10 years of MIP service and 20 years of Sysco service. Payments before the age of 65 are adjusted by an early retirement reduction factor. A participating NEO will receive a SERP benefit based on the greater of the accrued benefit determined as of June 29, 2013, the date of the SERP accrual freeze, under the current provisions of the SERP, or the accrued benefit determined as of June 28, 2008 under the prior provisions of the SERP, but with eligibility for immediate benefit payments and related early retirement reduction factors determined as of the relevant separation from service date. The terms of the SERP are more specifically described under “Executive Compensation — Pension Benefits — Supplemental Executive Retirement Plan.” The amounts accrued by each NEO participating in the pension plan and/or the SERP, as of July 3, 2021, are set forth under “Executive Compensation — Pension Benefits.”

 

Executive Deferred Compensation Plan

 

Prior to December 31, 2012, Sysco offered an EDCP to provide MIP participants, including Mr. Bertrand, the opportunity to save for retirement and accumulate wealth in a tax-efficient manner beyond savings opportunities under Sysco’s 401(k) retirement savings plan. Participants were able to defer up to 100% of their base salary and up to 40% of their MIP bonus, or any bonus paid in lieu of or as a replacement for the MIP bonus, to the EDCP. Sysco did not match any base salary deferrals into the EDCP in fiscal 2021, as deferrals are no longer permitted. An executive is always 100% vested in his or her past deferrals and Sysco matches, but any

 

SYSCO CORPORATION - 2021 Proxy Statement    68

 

portion of an executive’s account attributable to Sysco matches, including associated deemed investment return, and the net investment gain, if any, credited on his or her deferrals, is subject to forfeiture for specified cause or competing against Sysco in certain instances. Participants who have deferred compensation under the EDCP may choose from a variety of investment options. The EDCP is described in further detail under “Executive Compensation — Fiscal 2021 Nonqualified Deferred Compensation – About the EDCP.”

 

Executive Perquisites & Other Benefits – Detailed Information

 

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

 

Sysco’s NEOs are generally eligible to participate in Sysco’s regular employee benefit programs, which include a 401(k) plan for U.S. residents, an employee stock purchase plan, group life insurance and other group welfare benefit plans. We also provide the NEOs with additional life insurance and accidental death and dismemberment insurance benefits, long-term disability coverage, including disability income coverage, and long-term care insurance, as well as reimbursement for an annual comprehensive wellness examination by a physician of their choice. Moreover, pursuant to the CEO Offer Letter (as defined below under “—Executive Compensation Governance and Other Information—Employment and Severance Agreements”), Mr. Hourican is entitled to receive certain additional benefits, including tax and financial planning reimbursement and security monitoring services.

 

Additionally, pursuant to his employment agreement, Mr. Ørting is entitled to (i) receive a pension supplement equal to 10% of his annual base salary, in lieu of participating in Sysco’s U.K. retirement plan, and (ii) the use of a company car or the receipt of a car allowance of £11,500 per year. If Mr. Ørting elects to use a company-provided car, Sysco will be responsible for all costs of operating the vehicle, including insurance premiums, fuel and maintenance. Mr. Ørting is permitted reasonable personal use of the company car, and such company car must be returned immediately upon the termination of his employment. See “Executive Compensation—Summary Compensation Table” below for the details regarding these additional benefits.

 

We believe many of these benefits are necessary for us to remain able to compete with other public companies for executive talent. Although the NEOs are eligible to participate in Sysco’s group medical and dental coverage, we adjust employees’ contributions towards the monthly cost of the medical plan according to salary level; therefore, the NEOs pay a higher employee contribution to participate in these welfare plans than do non-executives.

 

Furthermore, Sysco owns fractional interests in private aircraft that are made available to members of the Board of Directors, the NEOs and other members of management for business use, but these aircraft are not allowed to be used for personal matters.

 

All employees, including our NEOs, as well as members of our Board, are also entitled to receive discounts on all products carried by Sysco and its subsidiaries.

 

Executive Compensation Governance and Other Information

 

Employment and Severance Agreements

 

Consistent with our approach of rewarding performance, employment is not guaranteed, and either the Company or the NEO may terminate the employment relationship at any time. Under certain termination scenarios, however, the NEOs are entitled to the severance benefits described below.

 

Mr. Hourican

 

Pursuant to the letter agreement dated January 10, 2020, between the Company and Mr. Hourican, which we refer to as the “CEO Offer Letter,” Mr. Hourican will be eligible to receive the following severance payments and benefits upon a termination of his employment by Sysco without “Cause” (as defined in the CEO Offer Letter) or upon his resignation for “Good Reason” (as defined in the CEO Offer Letter):

 

Non-Change in Control Termination: if the termination of employment does not occur upon, or within two years following, the effectiveness of a “Change in Control” (as defined in the Incentive Plan), Mr. Hourican will receive:

 

An amount equal to two times the sum of his annual base salary and his target annual or short-term management incentive plan opportunity;

 

A pro-rata award under the annual or short-term management incentive plan covering the performance period in which the termination is effective, subject to attainment of applicable Sysco performance goals for such performance period and payable at the time such incentives are paid to other Sysco executives; and

 

Health, dental and vision coverage continuation at active employee rates for 24 months after his date of termination.

 

Change in Control Termination: if the termination of employment occurs upon, or within two years following, the effectiveness of a Change in Control, Mr. Hourican will receive:

 

An amount equal to three times the sum of his annual base salary and his target annual or short-term management incentive plan opportunity;

 

A pro-rata award under the annual or short-term management incentive plan covering the performance period in which the termination is effective, subject to attainment of applicable Sysco performance goals for such performance period and payable at the time such incentives are paid to other Sysco executives; and

 

Health, dental and vision coverage continuation at active employee rates for 36 months after his date of termination.

 

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These severance benefits will be provided to Mr. Hourican only if he executes (and does not revoke) a legally enforceable general release and waiver of claims in favor of the Company and complies with the covenants in the accompanying Protective Covenants Agreement (as defined below in “—Executive Compensation Clawback and Protective Covenants”), including confidentiality, non-disparagement and restrictions on competition and solicitation of employees, vendors and customers of the Company for a period of two years after employment.

 

Messrs. Alt, Grade, Bertrand and Peck

 

The CLD Committee reviewed its historical severance practices for senior executives and approved and adopted effective in July 2020 a market-competitive form of severance letter agreement (the “Severance Agreement”) to specify the severance benefits to which each of the NEOs (other than Mr. Hourican) would be entitled upon the occurrence of certain termination events, which are described below.

 

Non-Change in Control Termination: If the Company terminates an NEO’s employment without “Cause” (as defined in the Severance Agreement) or the NEO resigns for “Good Reason” (as defined in the Severance Agreement), and the termination does not constitute a “Change in Control Termination” (as described below), then the NEO will be entitled to the following:

 

An amount equal to two times the NEO’s annual base salary;

 

A pro-rata award under the annual or short-term management incentive plan covering the performance period in which the termination is effective, subject to attainment of applicable Sysco performance goals for such performance period and payable at the time such incentives are paid to other Sysco executives;

 

Reimbursement for the amounts of any premiums or other fees paid by the NEO, pursuant to COBRA, in excess of the applicable active employee rates to maintain the NEO’s health benefits under the Company’s group health plans for a period of 18 months following the Separation Date; and

 

Outplacement services for a period of up to 12 months.

 

Change in Control Termination: If the termination of employment occurs upon, or within two years following, the effectiveness of a Change in Control (as defined in the Incentive Plan), the NEO will receive:

 

An amount equal to two times the sum of (i) the NEO’s annual base salary and (ii) the NEO’s target annual or short-term incentive opportunity;

 

A pro-rata award under the annual or short-term management incentive plan covering the performance period in which the termination is effective based on the NEO’s target incentive opportunity and payable at the time such incentives are paid to other Sysco executives;

 

Reimbursement for the amounts of any premiums or other fees paid by the NEO, pursuant to COBRA, in excess of the applicable active employee rates to maintain the NEO’s health benefits under the Company’s group health plans for a period of 18 months following the Separation Date; and
     
  Outplacement services for a period of up to 12 months.

 

These severance benefits will be provided to the NEO only if he or she: (i) executes (and does not revoke) a legally enforceable general release and waiver of claims in favor of the Company; and (ii) complies with the covenants in the Severance Agreement and the accompanying Protective Covenants Agreement, including confidentiality, non-disparagement and restrictions on competition and solicitation of employees, vendors and customers of the Company for a period of two years after employment.

 

Mr. Ørting

 

Mr. Ørting’s employment agreement provides for an initial term of three years expiring in January 2024. Upon at least 12 months prior notice by the Company, or at least six months prior notice by Mr. Ørting, his employment may be terminated effective on any specified date following the expiration of the initial three-year term (the period between the notice and the termination of employment, the “notice period”). In lieu of providing the required notice, the Company may terminate his employment immediately, in which case Mr. Ørting is entitled to receive a cash payment equal to the sum of (i) the base salary he would have earned during the applicable notice period and (ii) any annual or other short-term incentive amounts he would have earned (assuming performance at “target” level) during the applicable notice period.

 

Notwithstanding the foregoing, the Company may immediately terminate Mr. Ørting’s employment, without the requirement to make the severance payment described above, if he, among other things:

 

materially breaches his employment agreement;

 

commits any act of gross misconduct or serious incompetence or negligence (including deliberate acts of discrimination or harassment);

 

acts in a manner that is reasonably likely to prejudice Sysco’s interests or reputation;

 

is charged with any criminal offense that affects his position;

 

is declared bankrupt or enters into or makes any arrangement or composition for the benefit of his creditors;

 

breaches Sysco’s procedures relating to the use of the internet, e-mail and/or social media in a way that is likely to prejudice Sysco’s reputation (or the reputation of its customers); or

 

becomes incapacitated from performing his duties by illness or injury (physical or mental) for a specified period.

 

Benefits Following Change in Control

 

We currently have no separate severance or similar agreements that would cause an immediate or “single trigger” cash payment obligation solely as a result of a change in control of Sysco. We have included change in control provisions in several of Sysco’s benefit plans and agreements, including in the Severance Agreements described above, as well as in the various agreements governing our equity-based awards. See “Executive Compensation—Quantification of Termination/Change in Control Payments” for a detailed explanation of potential benefits under the various provisions.

 

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

 

SYSCO CORPORATION - 2021 Proxy Statement    70

 

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

 

Relocation Expenses

 

Consistent with the CLD Committee’s desire that Sysco follow best corporate governance and compensation practices, in October 2010 the CLD Committee adopted an executive relocation expense reimbursement policy that applies to all of the NEOs. The reimbursement policy prohibits Sysco from reimbursing any of such executives for any loss on the sale of the executive’s house sold in connection with the executive’s relocation. The reimbursement policy also provides that only certain pre-approved relocation expenses will be eligible for increased payments to cover all applicable taxes on the reimbursed amounts, such as state and federal income taxes, FICA, and Medicare taxes. In addition, the reimbursement policy provides that relocation agreements with any NEO include a recoupment provision that requires the executive to reimburse Sysco for all or a part of the reimbursement if his or her employment is terminated for any reason other than death, disability or change in control of Sysco, or termination without cause or for good reason, within a specified amount of time after receiving the reimbursement.

 

Executive Compensation Clawback and Protective Covenants

 

In September 2020, the CLD Committee expanded the scope of our executive compensation clawback policy. Our enhanced clawback policy allows for recovery of certain incentive compensation if:

 

there is a restatement of our financial results, other than a restatement due to a change in accounting policy, and the restatement would result in the payment of a reduced amount, if the award were recalculated, with respect to incentive compensation paid to an NEO within the prior 36 months on the basis of having met or exceeded specific performance targets; or

 

an NEO engages in misconduct that contributes to the need for a financial restatement or causes the Company material financial or reputational harm.

 

“Misconduct” for purposes of our clawback policy refers to conduct that constitutes (i) an intentional violation of law, the Company’s Global Code of Conduct or another significant ethics or compliance policy of the Company, or (ii) a material failure by the NEO to exercise his or her responsibility to supervise subordinates.

 

The compensation elements subject to recoupment or cancellation pursuant to the expanded clawback policy include:

 

All cash-based incentive compensation;

 

All outstanding equity and equity-based awards, whether vested, unvested or deferred; and

 

All payments or contributions made by the Company to (or for the benefit of) an NEO pursuant to the SERP, EDCP or the MSP.

 

The clawback right based on the occurrence of a financial restatement has been in effect for more than 36 months and would apply to all of the incentive compensation described above and received by our NEOs during such period. The clawback right arising from misconduct, however, would be applicable only to incentive compensation awarded to our NEOs subsequent to the adoption of the expanded clawback policy in September 2020.

 

The CLD Committee has the sole discretion, subject to applicable law, to determine the form and timing of the clawback, which may include repayment from the NEO or a reduction to the payment of a future incentive (including cancellation). These clawback remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.

 

In addition, pursuant to the award agreements governing certain equity-based awards, in order to be eligible to receive an equity-based award, each NEO is required to have entered into an agreement (the “Protective Covenants Agreement”) protecting the Company’s interests and confidential information by restricting certain recipient behavior during, and following termination of, employment. The Protective Covenants Agreement includes, among other things, restrictions on unfair post-employment competitive activities, improper solicitation of Company employees and customers, and the misuse of confidential information.

 

If an NEO were to violate any of the restrictive covenants in the Protective Covenants Agreement, the NEO would forfeit the benefits and proceeds of the related equity awards. The forfeiture of benefits and proceeds has been required with regard to all awards of PSUs and RSUs since November 2013 and awards of stock options since August 2016. In addition to the Protective Covenants Agreements, the terms of the MSP, SERP and EDCP also provide for the forfeiture of certain payments in the event of prohibited conduct following termination of employment with the Company.

 

SYSCO CORPORATION - 2021 Proxy Statement     71

 

Tax Impact on Compensation

 

Income Deduction Limitations

 

Section 162(m) of the Internal Revenue Code generally sets a limit of $1 million on the amount of compensation that Sysco may deduct for federal income tax purposes in any given year with respect to the compensation of each of the NEOs. Historically, compensation that qualified as “performance-based compensation” under Section 162(m) of the Internal Revenue Code (the “Code”) could be excluded from this $1 million limit. This exception was repealed with the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), effective for taxable years beginning after 2017, subject to certain transition relief for remuneration provided pursuant to a written binding contract that was in effect on November 2, 2017 and which was not modified in any material respect on or after such date. The CLD Committee’s general intent prior to implementation of the Tax Act was to structure our executive compensation programs so that payments could qualify as “performance-based compensation.” However, the CLD Committee may have decided from time to time to grant compensation that would not (or could not) be able to qualify as “performance-based compensation” if appropriate to achieve the objectives of the compensation program.

 

With the repeal of the “performance-based compensation” provisions of Section 162(m) of the Code, compensation granted by the CLD Committee may, more frequently, be non-deductible. The CLD Committee believes that the tax deduction limitation should not be permitted to compromise its ability to design and maintain executive compensation arrangements that will attract and retain the executive talent to compete successfully. Accordingly, achieving the desired flexibility in the design and delivery of compensation may result in compensation that, in certain cases, is not deductible for federal income tax purposes, and it is possible that awards intended to qualify as “performance-based compensation” under the transition relief may not so qualify. Moreover, even if the CLD Committee had intended to grant compensation that qualified as “qualified performance-based compensation” for purposes of Section 162(m) of the Code, such compensation ultimately might not be deductible.

 

Based on the factors discussed under “What We Paid and Why—Compensation for NEOs” above, in fiscal 2021 Sysco paid, and in fiscal 2022 the CLD Committee expects Sysco to pay, certain NEOs a base salary and annual incentive award that, when aggregated with anticipated vesting of RSUs and PSUs, exceeds $1 million in value. The CLD Committee believes that this compensation is necessary in order to maintain the competitiveness of the total compensation package and, as a result, has determined that it is appropriate, even though certain amounts of fiscal 2021 compensation will not be deductible, and the excess of anticipated salary and annual incentive payouts, plus the value of RSUs and PSUs vesting in fiscal 2021 over $1 million, respectively, will not be deductible for federal income tax purposes.

 

Section 409A of the Internal Revenue Code

 

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

 

REPORT OF THE COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE

 

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

 

COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE

 

John M. Cassaday, Chairman

Larry C. Glasscock

Bradley M. Halverson

John M. Hinshaw

Stephanie A. Lundquist

 

SYSCO CORPORATION - 2021 Proxy Statement    72

 

EXECUTIVE COMPENSATION

 

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

 

Summary Compensation Table

 

The following table sets forth information with respect to each of the NEOs – each person who served as our Chief Executive Officer or Chief Financial Officer during fiscal 2021 and our three other most highly compensated executive officers of Sysco and its subsidiaries serving in such capacity at the end of fiscal 2021. In determining the most highly compensated executive officers, we excluded the amounts shown under “Change in Pension Value and Nonqualified Deferred Compensation Earnings.”

 

Name and
Principal Position
Fiscal
Year
   Salary
($)(1)
    Bonus
($)(2)
    Stock
Awards
($)(3)
    Option
Awards
($)(4)
    Non-Equity
Incentive Plan
Compensation
($)(5)
    Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)(6)
    All Other
Compensation
($)(7)
    Total
($)
 
Kevin P. Hourican(8)  2021  $1,350,000   $   $16,130,478   $3,024,753   $2,272,725   $   $419,168   $23,197,124(9)
President and Chief Executive Officer  2020   500,000    3,638,100    13,305,225    7,666,660    276,195        486,245    25,872,425 
Aaron E. Alt(10)  2021   447,115    365,000    1,894,801    748,694    404,163        71,637    3,931,410 
Executive Vice President and Chief Financial Officer                                           
Joel T. Grade(11)  2021   716,538        1,662,947    730,477    1,005,244        56,444    4,171,650 
Executive Vice President,  2020   689,999        1,465,246    935,352    208,725    30,046    88,936    3,418,304 
Business Development  2019   687,115        1,482,755    1,055,452    622,380    21,164    71,573    3,940,439 
Greg D. Bertrand  2021   704,388        1,517,979    666,799    988,199    135,948    81,989    4,095,302 
Executive Vice President,  2020   675,742        1,234,615    788,143    249,275    525,596    117,364    3,590,735 
US Foodservice Operations  2019   663,558        1,224,855    871,900    700,744    521,145    101,516    4,083,718 
Tim Ørting Jørgensen(12)  2021   375,035    1,255,824    2,190,505        490,642        308,596    4,620,602 
Executive Vice President and President, Foodservice Operations, Internal                                           
Thomas R. Peck, Jr.(13)  2021   325,000    850,000    1,386,586    579,192    338,975        46,791    3,526,544 
Executive Vice President and Chief Supply Chain Officer                                           
(1) The salary amounts reflect the actual base salary payments earned by the NEOs in the applicable fiscal year. The base salary for Mr. Ørting was paid in British pounds sterling and converted to US dollars (using the average exchange rate for each fiscal month in the period from January 2021 to June 2021 as reported by Reuters, which ranged from 1 USD/0.7127 GBP to 1 USD/0.7347 GBP).
(2) These amounts for Messrs. Alt, Ørting and Peck represent cash make-whole payments awarded to these NEOs to compensate them for forfeited incentives they would have otherwise received from their respective previous employers. The cash make-whole amount for Mr. Ørting was awarded in Euros (i.e., €1,000,000), converted to £909,091 upon payment (using the exchange rate of 1 GBP/1.1 EUR), and further converted to US dollars for reporting in the table above (using the average exchange rate for April 2021 of 1 USD/0.7239 GBP as reported by Reuters). See “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs—New Hire Compensation for Messrs. Alt, Ørting and Peck” above for further discussion regarding these cash make-whole payments.
(3) These amounts relate to grants of RSUs made in fiscal 2021 and PSUs made in fiscal 2019, 2020 and 2021, as applicable. With respect to these awards of RSUs and PSUs, the estimated grant date fair value, in each case, is the closing price of our Common Stock on the last business day before the applicable grant date set forth in the table below, assuming for the PSUs that the target number of shares would be earned at the end of the applicable performance period:

 

Award Type   Applicable Grant Date   Grant Date Fair Value   Recipient(s)
PSUs   August 23, 2018   $75.08   Messrs. Grade and Bertrand
PSUs   August 21, 2019   $72.80   Messrs. Grade and Bertrand
PSUs and RSUs   February 12, 2020   $76.27   Mr. Hourican
PSUs and RSUs   August 20, 2020   $58.08   Messrs. Hourican, Grade and Bertrand
PSUs and RSUs   December 7, 2020   $78.12   Mr. Alt
PSUs and RSUs   February 11, 2021   $76.14   Mr. Peck
RSUs   April 14, 2021   $80.48   Mr. Ørting
PSUs   June 23, 2021   $77.13   Mr. Hourican

 

SYSCO CORPORATION 2021 Proxy Statement    73

 
  Grants of PSUs are reflected at target since actual shares to be received, if any, will be determined after the applicable performance period. The fiscal 2020 amount for Mr. Hourican and the fiscal 2021 amount for Mr. Ørting also includes the value of make-whole awards received to compensate the NEO for forfeited equity incentives issued by the NEO’s previous employer. See “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs—New Hire Compensation for Messrs. Alt, Ørting and Peck” above for further discussion of the make-whole RSU award for Mr. Ørting, and see “Grants of Plan-Based Awards” below for the aggregate estimated grant date fair value of the RSUs and PSUs, as applicable, awarded to each of the NEOs in fiscal 2021. The fiscal 2021 amount for Mr. Hourican also includes the value of a replacement PSU award (i.e., $9,244,339) granted by the CLD Committee in June 2021. See “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs— Replacement PSU Award for Mr. Hourican” for further discussion of this replacement award.
(4) The amounts in this column reflect the grant date fair value of the awards. See Note 14 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the fiscal year ended July 3, 2021, Note 19 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the fiscal year ended June 27, 2020 and Note 19 of the consolidated financial statements in Sysco’s Annual Report on Form 10-K for the fiscal year ended June 29, 2019, regarding assumptions underlying our valuation of these option awards. We did not assume any option exercises or risk of forfeiture during the expected option life in determining the valuation of the option awards. Had we done so, such assumptions could have reduced the reported grant date value. The actual value, if any, an executive may realize upon exercise of options will depend on the excess of the stock price over the exercise price on the date the option is exercised. Consequently, there is no assurance that the value realized, if any, will be at or near the value estimated by the Black-Scholes model.
(5) These amounts include the short-term incentive awards paid in February and August 2021 with respect to fiscal 2021 (and set forth in the table below), the annual incentive awards paid in August 2020 with respect to fiscal 2020 and the annual incentive awards paid in August 2019 with respect to fiscal 2019.

 

Name  1H Fiscal 2021 STIP   2H Fiscal 2021 STIP   Total Fiscal 2021 STIP 
Hourican  $1,255,800   $1,016,925   $2,272,725 
Alt       404,163    404,163 
Grade   555,450    449,794    1,005,244 
Bertrand   546,032    442,167    988,199 
Ørting       490,642    490,642 
Peck       338,975    338,975 

 

  The payout for Mr. Ørting was calculated in Euros (i.e., €391,125), converted to £355,568 upon payment (using the exchange rate of 1 GBP/1.1 EUR) and further converted to US dollars as reported in the table above (using the average exchange rate for August 2021 of 1 USD/0.7247 GBP as reported by Reuters). See “Compensation Discussion and Analysis—What We Paid and Why—Compensation for NEOs—Short-Term Incentive Award—Detailed Information” above for further discussion of the short-term incentive awards for fiscal 2021.
(6) The amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column reflect above-market interest on amounts in the Executive Deferred Compensation Plan, or “EDCP,” and the Management Savings Plan or “MSP,” and the actuarial change in the present value of the NEOs’ benefits under all pension plans established and maintained by Sysco, determined using interest rate and mortality rate assumptions consistent with those used in Sysco’s financial statements. The pension plan amounts, some of which may not be currently vested, include:

 

  changes in pension plan value; and
  changes in the value of benefits under the Supplemental Executive Retirement Plan (the “SERP”).

 

  Active service-based accruals under the pension plan and the SERP ceased when each of those programs was frozen. Therefore, any subsequent changes in the actuarial present value of an NEO’s accumulated benefit under the pension plan and/or the SERP would likely be attributable, primarily, to variations in the discount rate or modifications to the actuarial assumptions. To the extent that any such aggregate change in the actuarial present value of an NEO’s accumulated benefit under the pension plan and/or the SERP was a decrease, this decrease is not reflected in the amounts shown in the “All Other Compensation” column above or the “Total” column in the table below.
   
  The following table shows, for each NEO, the change in the actuarial present value for each of the pension plan and the SERP, as well as the above-market interest on amounts in the EDCP and MSP for fiscal 2021:

 

Name  Change in
Pension Plan
Value
   Change in SERP
Value
   Above-Market
Interest on Deferred
Compensation
   Total 
Hourican  $ N/A   $ N/A   $   $ 
Alt   N/A    N/A         
Grade   (1,277)   N/A         
Bertrand   1,346    117,596    17,006    135,948 
Ørting   N/A    N/A         
Peck   N/A    N/A         

 

(7) Fiscal 2021 amounts reported in the “All Other Compensation” column include the following:

 

  a. The full amount ($778 for each of Messrs. Hourican, Grade and Bertrand, $518 for Mr. Alt, $4,130 for Mr. Ørting and $389 for Mr. Peck) paid for life insurance coverage for each NEO (the excess coverage over the amounts paid for other employees is not determinable since the deductibles and coverages may be different); and
  b. The following amounts of 401(k) plan and Management Savings Plan (“MSP”) Company contributions with respect to fiscal year 2021, which Company contributions to the MSP included a SERP transition contribution for Mr. Bertrand in addition to the Company match and non-elective contributions:

 

Name  401(k) Plan Employer
Contribution
   MSP Employer
Contribution
Hourican