ARCHER-DANIELS-MIDLAND COMPANY

4666 Faries Parkway, Decatur, Illinois 62526-5666

 

 

NOTICE OF ANNUAL MEETING

 

 

 

To All Stockholders:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Archer-Daniels-Midland Company, a Delaware corporation, will be held at the JAMES R. RANDALL RESEARCH CENTER, 1001 Brush College Road, Decatur, Illinois, on Thursday, November 5, 2009, commencing at 10:30 A.M., for the following purposes:

 

(1) To elect Directors to hold office until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified;

 

(2) To consider and take action respecting the adoption of the Archer-Daniels-Midland Company 2009 Incentive Compensation Plan, recommended by the Board of Directors of the Company;

 

(3) To ratify the appointment by the Board of Directors of Ernst & Young LLP as independent auditors to audit the accounts of the Company for the fiscal year ending June 30, 2010;

 

(4) If properly presented, to consider and act upon the Stockholder’s proposal set forth in the accompanying Proxy Statement; and

 

(5) To transact such other business as may properly come before the meeting.

 

By Order of the Board of Directors

 

 

D. J. Smith, Secretary

 

September 25, 2009

 

 

 

ARCHER-DANIELS-MIDLAND COMPANY

4666 Faries Parkway, Decatur, Illinois 62526-5666

 

September 25, 2009

 

 

PROXY STATEMENT

 

 

 

General Matters

 

Our board of directors asks that you complete the accompanying proxy for the annual stockholders’ meeting. The meeting will be held at the time, place, and location mentioned in the Notice of Annual Meeting included in this mailing. We are first mailing our stockholders this proxy statement and a proxy form (included in this mailing) around September 25, 2009.

 

We pay the costs of soliciting proxies from our stockholders. We have retained Georgeson Inc. to help us solicit proxies. We will pay Georgeson Inc. $23,000 plus reasonable expenses for its services. Our officers may solicit proxies by means other than mail. Our other employees or employees of Georgeson Inc. may also solicit proxies in person or by telephone, mail, or the internet at a cost we expect will be nominal. We will reimburse brokerage firms and other securities custodians for their reasonable expenses in forwarding proxy materials to their principals.

 

We have a policy of keeping confidential all proxies, ballots, and voting tabulations that identify individual stockholders. Such documents are available for examination only by the inspectors of election, our transfer agent and certain employees associated with processing proxy cards and tabulating the vote. We will not disclose any stockholder’s vote except in a contested proxy solicitation or as may be necessary to meet legal requirements.

 

Our common stock stockholders of record at the close of business on September 10, 2009 are the only people entitled to notice of the annual meeting and to vote at the meeting. At the close of business on September 10, 2009, we had 642,248,767 outstanding shares of common stock, each share being entitled to one vote on each of the nine director nominees and on each of the other matters to be voted on at the meeting. Our stockholders are the only people entitled to attend the annual meeting. We reserve the right to direct stockholder representatives with the proper documentation to an alternative room to observe the meeting.

 

All stockholders will need a form of photo identification to attend the annual meeting. If you are a stockholder of record and plan to attend, please detach the admission ticket from the top of your proxy card and bring it with you to the meeting. The number of people we will admit to the meeting will be determined by how the shares are registered, as indicated on the admission ticket. If you are a stockholder whose shares are held by a broker, bank, or other nominee, please request an admission ticket by writing to our office at Archer-Daniels-Midland Company, Shareholder Relations, 4666 Faries Parkway, Decatur, Illinois 62526-5666. Your letter to our office must include evidence of your stock ownership. You can obtain evidence of ownership from your broker, bank, or nominee. The number of tickets sent will be determined by the manner in which shares are registered. If your request is received by October 22, 2009, an admission ticket will be mailed to you. Entities, such as a corporation or limited liability company, that are stockholders may send one representative to the annual meeting and the representative should have a pre-existing relationship with the entity represented. All other admission tickets can be obtained at the registration table located at the James R. Randall Research Center lobby beginning at 8:30 A.M. on the day of the meeting. Stockholders who do not pre-register will only be admitted to the meeting upon verification of stock ownership.

 

The use of cameras, video or audio recorders or other recording devices in the James R. Randall Research Center is prohibited. The display of posters, signs, banners or any other type of signage by any stockholder in the James R. Randall Research Center is prohibited.

Any request to deviate from the admittance guidelines described above should be in writing, addressed to our office at Archer-Daniels-Midland Company, Secretary, 4666 Faries Parkway, Decatur, Illinois 62526-5666 and received by us by October 22, 2009. We will also have personnel in the lobby of the James R. Randall Research Center beginning at 8:30 A.M. on the day of the meeting to consider special requests.

 

If you properly execute the enclosed proxy form, your shares will be voted at the meeting. You may revoke your proxy form at any time prior to voting by:

 

(1) delivering written notice of revocation to our Secretary;

 

(2) delivering to our Secretary a new proxy form bearing a date later than your previous proxy; or

 

(3) attending the meeting and voting in person (attendance at the meeting will not, by itself, revoke a proxy).

 

Under our bylaws, directors are elected by a majority vote in an uncontested election (one in which the number of nominees is the same as the number of directors to be elected) and by a plurality vote in a contested election (one in which the number of nominees exceeds the number of directors to be elected). Because this year’s election is an uncontested election, each director nominee receiving a majority of votes cast will be elected (the number of shares voted “for” a director nominee must exceed the number of shares voted “against” that nominee). Approval of each other proposal presented in the proxy statement requires the affirmative vote of the holders of a majority of the outstanding shares of common stock present in person or by proxy at the meeting and entitled to vote. Shares not present at the meeting and shares voting “abstain” have no effect on the election of directors. For the other proposals to be voted on at the meeting, abstentions are treated as shares present or represented and voting, and therefore have the same effect as negative votes. Broker non-votes (shares held by brokers who do not have discretionary authority to vote on the matter and have not received voting instructions from their clients) are counted toward a quorum, but are not counted for any purpose in determining whether a matter has been approved.

 

Principal Holders of Voting Securities

 

Based upon filings with the Securities and Exchange Commission (SEC), we know that the following stockholders are beneficial owners of more than 5% of our outstanding common stock shares:

 

 

 

 

Proposal No. 1 — Election of Directors for a One-Year Term

 

Our board of directors has fixed the size of the board at nine. Unless you provide different directions, we intend for board-solicited proxies (like this one) to be voted for the nominees named below. Mr. Mulroney, a current member of our board of directors, is not a nominee for re-election, having reached the board established age guideline for retirement.

 

Although the nominees proposed for election to the board of directors are all presently members of the board, Mr. Felsinger has not previously been elected by our stockholders. Mr. Felsinger was recommended by the Nominating/Corporate Governance Committee after having been identified by our chief executive officer as a potential nominee.

 

The nominees would hold office until the next annual stockholders’ meeting and until their successors are elected and qualified. If any nominee for director becomes unable to serve as a director, we intend that the

persons named in the proxy may vote for a substitute who will be designated by the board of directors. The board has no reason to believe that any nominee will be unable to serve as a director.

 

Our bylaws were amended in February 2007 to require that each director be elected by a majority of votes cast with respect to that director in an uncontested election (where the number of nominees is the same as the number of directors to be elected). In a contested election (where the number of nominees exceeds the number of directors to be elected), the plurality voting standard governs the election of directors. Under the plurality standard, the number of persons equal to the number of directors to be elected who receive more votes than the other nominees are elected to the board, regardless of whether they receive a majority of the votes cast. Whether an election is contested or not is determined as of the day before we first mail our meeting notice to stockholders. This year’s election was determined to be an uncontested election, and the majority vote standard will apply. If a nominee who is serving as a director is not elected at the annual meeting, Delaware law provides that the director would continue to serve on the board as a “holdover director.” However, under an amendment to our Corporate Governance Guidelines approved by our board in February 2007, each director annually submits an advance, contingent, irrevocable resignation that the board may accept if the director fails to be elected through a majority vote in an uncontested election. In that situation, the Nominating/Corporate Governance Committee would make a recommendation to the board about whether to accept or reject the resignation. The board will act on the Nominating/Corporate Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days after the date the election results are certified. The board will nominate for election or re-election as director, and will elect as directors to fill vacancies and new directorships, only candidates who agree to tender the form of resignation described above. If a nominee who was not already serving as a director fails to receive a majority of votes cast at the annual meeting, Delaware law provides that the nominee does not serve on the board as a “holdover director.”

The table below lists the nominees, their ages, positions with our company, principal occupations, directorships of other publicly-owned companies, the year in which each first was elected as a director, and the number of shares of common stock beneficially owned as of September 10, 2009, directly or indirectly. Unless otherwise indicated in the footnotes to the following table, and subject to community property laws where applicable, we believe that each nominee named in the table below has sole voting and investment power with respect to the shares indicated as beneficially owned. Unless otherwise indicated, all of the nominees have been executive officers of their respective companies or employed as otherwise specified below for at least the last five years.

 

 

 

Mr. Mulroney beneficially owns 103,781 shares of common stock, constituting less than 1% of the outstanding shares of common stock, which number includes stock units allocated under our Stock Unit Plan for Nonemployee Directors that are deemed to be the equivalent of outstanding shares of common stock for valuation purposes.

 

The Board of Directors recommends a vote FOR the election of the nine nominees named above as directors. Unless otherwise indicated on your proxy, your shares will be voted FOR the election of such nine nominees as directors.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Based solely upon a review of copies of reports furnished to us during the fiscal year ended June 30, 2009, the following person filed the number of late reports or failed to file reports representing the number of transactions set forth after his name: D. C. Riddle, 1 report/1 transaction.

 

Executive Stock Ownership Policy

 

The board of directors believes that it is important for each member of our senior management to acquire and maintain a significant ownership position in shares of our common stock to further align the interests of senior management with the stockholders’ interests. Accordingly, we have adopted a policy regarding ownership of shares of our common stock by senior management. The policy calls for members of senior management to own shares of common stock with a fair market value within a range of one to five times that individual’s base salary, depending on each individual’s level of responsibility with the company.

 

Executive Officer Stock Ownership

 

The following table shows the number of shares of our common stock beneficially owned as of September 10, 2009, directly or indirectly, by each of the individuals named in the Summary Compensation Table on page 28.

 

 

 

 

Common stock beneficially owned as of September 10, 2009 by all directors and executive officers as a group, numbering 31 persons including those listed above except for Mr. Batchelder, is 15,510,904 shares representing 2.42% of the outstanding shares, of which 1,299,394 shares are unissued but are subject to stock options exercisable within 60 days from the date of this proxy statement.

 

Independence of Directors

 

NYSE Independence

 

The listing standards of the New York Stock Exchange, or NYSE, require companies listed on the NYSE to have a majority of “independent” directors. Subject to certain exceptions and transition provisions, the NYSE standards generally provide that a director will qualify as “independent” if the board affirmatively determines that he or she has no material relationship with our company other than as a director, and will not be considered independent if:

 

(1) the director or a member of the director’s immediate family is, or in the past three years has been, one of our executive officers or, in the case of the director, one of our employees;

 

(2) the director or a member of the director’s immediate family has received during any 12-month period within the last three years more than $120,000 per year in direct compensation from us other than for service as a director, provided that compensation received by an immediate family member for service as a non-executive officer employee is not considered in determining independence;

 

(3) the director or an immediate family member is a current partner of one of our independent auditors, the director is employed by one of our independent auditors, a member of the director’s immediate family is employed by one of our independent auditors and personally works on our audits, or the director or a member of the director’s immediate family was within the last three years an employee of one of our independent auditors and personally worked on one of our audits;

 

(4) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers at the same time serves or served on the compensation committee; or

 

(5) the director is a current employee of, or a member of the director’s immediate family is an executive officer of, a company that makes payments to, or receives payments from, us in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues.

 

Bylaw Independence

 

Section 2.8 of our bylaws also provides that a majority of the board of directors be comprised of independent directors. Under our bylaws, an “independent director” means a director who

 

(1) is not a current employee or a former member of our senior management or the senior management of one of our affiliates,

 

(2) is not employed by one of our professional services providers,

 

(3) does not have any business relationship with us, either personally or through a company of which the director is an officer or a controlling shareholder, that is material to us or to the director,

 

(4) does not have a close family relationship, by blood, marriage, or otherwise, with any member of our senior management or the senior management of one of our affiliates,

 

(5) is not an officer of a company of which our Chairman or Chief Executive Officer is also a board member,

 

(6) is not personally receiving compensation from us in any capacity other than as a director, and

(7) does not personally receive or is not an employee of a foundation, university, or other institution that receives grants or endowments from us, that are material to us, the recipient, or the foundation/university/institution.

 

The board of directors has reviewed business and charitable relationships between us and each non-employee director, including those described below in the Certain Relationships and Related Transactions section, to determine compliance with the NYSE and bylaw standards described above and to evaluate whether there are any other facts or circumstances that might impair a director’s or nominee’s independence. Based on that review, the board has determined that eight of its ten current members, Messrs. Buckley, Felsinger, Maciel, Moore, O’Neill, and Westbrook, Dr. Haynes and Ms. Carter, are independent. Ms. Woertz is not independent under the NYSE or bylaw standards because of her employment with us. Mr. Mulroney is not independent under our bylaw standards because he is the senior partner of a law firm that provides professional services to us.

 

In determining that Mr. Moore is independent, the board considered that, in the ordinary course of business, Smurfit-Stone Container Corporation, of which Mr. Moore is Chairman and Chief Executive Officer, purchased approximately $13.6 million worth of certain commodity products from our company, and sold approximately $3.7 million worth of certain products to our company, on an arms-length basis during the fiscal year ended June 30, 2009. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of Smurfit-Stone Container Corporation’s consolidated gross revenues, that Mr. Moore does not have a direct or indirect material interest in such transactions, and that such transactions do not otherwise impair Mr. Moore’s independence.

 

In determining that Ms. Carter is independent, the board considered that, during all or a portion of the fiscal year ended June 30, 2009, Ms. Carter’s brother was employed by our company in a non-executive officer capacity as a compliance auditor at total compensation less than $120,000. The board determined that Ms. Carter does not have a direct or indirect material interest in such employment relationship and that such employment relationship does not otherwise impair Ms. Carter’s independence. Also in determining that Ms. Carter is independent, the board considered that, during the fiscal year ended June 30, 2009, the company purchased from Westar Energy Inc. approximately $2.6 million of utility services in the ordinary course of business and on an arms-length basis. Ms. Carter is a director of Westar Energy Inc. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of Westar Energy Inc.’s consolidated gross revenues, that Ms. Carter does not have a direct or indirect material interest in such utility transactions, and that such utility transactions do not otherwise impair Ms. Carter’s independence.

 

In determining that Mr. Buckley is independent, the board considered that, in the ordinary course of business, 3M Company, of which Mr. Buckley is Chairman, President and Chief Executive Officer, purchased approximately $389,000 of certain commodity products from our company, and sold approximately $191,000 of supplies to our company, on an arms-length basis during the fiscal year ended June 30, 2009. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of 3M Company’s consolidated gross revenues, that Mr. Buckley does not have a direct or indirect material interest in such transactions, and that such transactions do not otherwise impair Mr. Buckley’s independence.

 

In determining that Mr. Felsinger is independent, the board considered that, in the ordinary course of business, Sempra Energy, of which Mr. Felsinger is Chairman and Chief Executive Officer, purchased approximately $1.8 million of ethanol from our company, and sold approximately that same amount of ethanol to our company, on an arms-length basis during the fiscal year ended June 30, 2009. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of Sempra Energy’s consolidated gross revenues, that Mr. Felsinger does not have a direct or indirect material interest in such transactions, and that such transactions do not otherwise impair Mr. Felsinger’s independence.

 

Corporate Governance Guidelines

 

The board has adopted corporate governance guidelines that govern the structure and functioning of the board and set-out the board’s policies on governance issues. The guidelines, along with the written charters of each of the committees of the board and our bylaws, are posted on our internet site, www.adm.com, and are

available free of charge on written request to Secretary, Archer-Daniels-Midland Company, 4666 Faries Parkway, Decatur, Illinois 62526-5666.

 

Executive Sessions

 

In accordance with our corporate governance guidelines, the non-management directors meet in executive session at least annually. If the non-management directors include any directors who are not independent pursuant to the board’s determination of independence, at least one executive session includes only independent directors. The lead director, or in his or her absence, the chairperson of the Nominating/Corporate Governance Committee, presides at such meetings. The non-management directors met in executive session four times during fiscal 2009.

 

Board Meetings and Attendance at Annual Meetings of Stockholders

 

During the last fiscal year, our board of directors held five regularly scheduled meetings and four special meetings. All incumbent directors attended 75% or more of the combined total meetings of the board and the committees on which they served during the last fiscal year. We expect all director nominees to attend the annual stockholders’ meeting. All director nominees standing for election at our last annual stockholders’ meeting held on November 6, 2008 attended that meeting.

 

Information Concerning Committees and Meetings

 

The board’s standing committees are the Audit, Compensation/Succession, Nominating/Corporate Governance, and Executive Committees. Each committee operates pursuant to a written charter adopted by the board, available on our internet site, www.adm.com.

 

Audit Committee

 

The Audit Committee consists of Mr. O’Neill, Chairperson, Mr. Buckley, Ms. Carter and Dr. Haynes. The Audit Committee met eight times during the most recent fiscal year. All of the members of the Audit Committee were determined by the board to be independent directors, as that term is defined in our bylaws, in the NYSE listing standards and in Section 10A of the Securities Exchange Act. No director may serve as a member of the Audit Committee if such director serves on the audit committees of more than two other public companies unless the board determines that such service would not impair such director’s ability to serve effectively on the Audit Committee. The Audit Committee reviews:

 

(1) the overall plan of the annual independent audit;

 

(2) financial statements;

 

(3) the scope of audit procedures;

 

(4) the performance of our independent auditors and internal auditors;

 

(5) the auditors’ evaluation of internal controls;

 

(6) matters of legal compliance; and

 

(7) certain relationships and related transactions.

 

Compensation/Succession Committee

 

The Compensation/Succession Committee consists of Mr. Westbrook, Chairperson, and Messrs. Felsinger, Maciel and Moore. The Compensation/Succession Committee met six times during the most recent fiscal year. All of the members of the Compensation/Succession Committee were determined by the board to be independent directors, as that term is defined in our bylaws and in the NYSE listing standards. The Compensation/Succession Committee:

 

(1) establishes and administers a compensation policy for senior management;

(2) reviews and approves the compensation policy for all of our employees and our subsidiaries other than senior management;

 

(3) approves all compensation elements with respect to our executive officers and all employees with a base salary of $500,000 or more;

 

(4) reviews and monitors our financial performance as it affects our compensation policies or the administration of those policies;

 

(5) establishes and reviews a compensation policy for non-employee directors;

 

(6) reviews and monitors our succession plans;

 

(7) approves awards to employees pursuant to our incentive compensation plans; and

 

(8) approves modifications in the employee benefit plans with respect to the benefits salaried employees receive under such plans.

 

All of the Compensation/Succession Committee’s actions are reported to the board of directors and, where appropriate, submitted to the board of directors for ratification. Members of management attend meetings of the committee and make recommendations to the committee regarding compensation for officers other than the Chief Executive Officer. In determining the Chief Executive Officer’s compensation, the committee considers the evaluation prepared by the non-management directors.

 

In accordance with the General Corporation Law of Delaware, the committee may delegate to one or more officers the authority to grant stock options to other officers and employees who are not directors or executive officers, provided that the resolution authorizing this delegation specify the total number of options that the officer or officers can award. The charter for the Compensation/Succession Committee also provides that the committee may form subcommittees and delegate tasks to them.

 

The Compensation/Succession Committee regularly consults with compensation experts from nationally-recognized firms on matters such as executive compensation philosophy, compensation and benefit plan design, market information and analyses regarding executive compensation, the amount and forms of compensation awarded, and committee processes. In this regard, the Compensation/Succession Committee engaged Towers Perrin during fiscal 2009 and met with representatives of that firm in connection with matters that included:

 

 

For additional information on the responsibilities and activities of the Compensation/Succession Committee, including the committee’s processes for determining executive compensation, see the section of this proxy statement entitled “Compensation Discussion and Analysis” commencing on page 11.

 

Nominating/Corporate Governance Committee

 

The Nominating/Corporate Governance Committee consists of Ms. Carter, Chairperson, and Messrs. Felsinger, Maciel and Westbrook. The Nominating/Corporate Governance Committee met four times during the most recent fiscal year. All of the members of the Nominating/Corporate Governance Committee were determined by the board to be independent directors, as that term is defined in our bylaws and in the NYSE listing standards. The Nominating/Corporate Governance Committee:

 

(1) identifies individuals qualified to become members of the board, including evaluating individuals appropriately suggested by stockholders in accordance with our bylaws;

 

(2) recommends individuals to the board for nomination as members of the board and board committees;

(3) develops and recommends to the board a set of corporate governance principles applicable to the company; and

 

(4) leads the evaluation of the directors, the board and board committees.

 

In assessing an individual’s qualifications to become a member of the board, the Nominating/Corporate Governance Committee may consider various factors including education, experience, judgment, independence, integrity, availability, and other factors that the Nominating/Corporate Governance Committee deems appropriate. The Nominating/Corporate Governance Committee strives to recommend candidates that complement the current board members and other proposed nominees so as to further the objective of having a board that reflects a diversity of background and experience with the necessary skills to effectively perform the functions of the board and its committees. The Nominating/Corporate Governance Committee will consider nominees recommended by a stockholder provided the stockholder submits the nominee’s name in a written notice delivered to our Secretary at our principal executive offices not less than 60 nor more than 90 days prior to the anniversary date of the immediately preceding annual stockholders’ meeting. However, if the annual meeting is called for a date that is not within 30 days before or after such anniversary date, the notice must be received at our principal executive offices not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made (whichever first occurs). Different notice delivery requirements may apply if the number of directors to be elected at an annual meeting is being increased, and we do not make a public announcement naming all of the nominees or specifying the size of the increased board at least 100 days prior to the first anniversary of the preceding year’s annual meeting. Any notice of a stockholder nomination must set forth the information required by Section 1.4(c) of our bylaws, and must be accompanied by a written consent from the proposed nominee to being named as a nominee and to serve as a director if elected, and a written statement from the proposed nominee as to whether he or she intends, if elected, to tender the contingent, irrevocable resignation that would become effective should the individual fail to receive the required vote for re-election at the next meeting of stockholders. All candidates, regardless of the source of their recommendation, are evaluated using the same criteria.

 

Executive Committee

 

The Executive Committee consists of Ms. Woertz, Chairperson, Mr. Moore, Lead Director, and Mr. Mulroney. The Executive Committee met once during the most recent fiscal year and acted once by unanimous written consent. The Executive Committee acts on behalf of the board to determine matters which, in the judgment of the Chairman of the board, do not warrant convening a special board meeting but should not be postponed until the next scheduled board meeting. The Executive Committee exercises all the power and authority of the board in the management and direction of our business and affairs except for matters which are expressly delegated to another board committee and matters that cannot be delegated by the board under applicable law, our certificate of incorporation, or our bylaws.

 

Communications with Directors

 

We have approved procedures for stockholders and other interested parties to send communications to individual directors or the non-employee directors as a group. You should send any such communications in writing addressed to the applicable director or directors in care of the Secretary, Archer-Daniels-Midland Company, 4666 Faries Parkway, Decatur, Illinois 62526-5666. All correspondence will be forwarded to the intended recipient(s).

 

Code of Conduct

 

The board has adopted a Business Code of Conduct and Ethics that sets forth standards regarding matters such as honest and ethical conduct, compliance with law, and full, fair, accurate, and timely disclosure in reports and documents that we file with the SEC and in other public communications. The Business Code of Conduct and Ethics applies to all of our employees, officers, and directors, including our principal executive officer, principal financial officer, and principal accounting officer. The Business Code of Conduct and Ethics is available at our internet site, www.adm.com, and is available free of charge on written request to Secretary, Archer-Daniels-Midland Company, 4666 Faries Parkway, Decatur, Illinois 62526-5666. Any amendments to

certain provisions of the Business Code of Conduct and Ethics or waivers of such provisions granted to certain executive officers will be promptly disclosed on our internet site.

 

Compensation Discussion and Analysis

 

The purpose of the Compensation Discussion and Analysis is to explain the process the Compensation and Succession Committee (“Committee”) uses to determine compensation and benefits for our named executive officers.

 

Named executive officers include:

 

 

Executive Summary

 

For fiscal year 2009 (“FY09”), we exceeded target financial business plan objectives approved by the board of directors for return on net assets adjusted for LIFO (“RONA”) and net earnings adjusted for LIFO (“Net Earnings”). LIFO means “last-in, first-out” and refers to the practice of valuing inventory so the most recent costs to the Company are reflected in the cost of products sold. LIFO is excluded in order to align the performance metric with the Company’s internal management measures. These metrics are further defined starting on page 16. We also met or exceeded nonfinancial objectives approved by the board for Safety and Performance Development.

 

In addition, as part of ADM’s compensation program design, the Committee retains discretion to consider performance outside of pre-established objectives to ensure that the program reflects company performance and management’s impact in achieving that performance. The Committee viewed FY09 to be a challenging economic environment and a year of mixed results. In determining FY09 compensation, the Committee took into account the following:

 

 

Based on this comprehensive performance assessment, and combined with a review of the economic environment and competitive trends, the Committee made the following decisions for our named executive officers:

 

 

Specifically for the CEO, her FY09 bonus is 33% below FY08 and her FY09 LTI grant value is 36% below FY08 grant value.

 

In FY09, the Committee made the following changes to our compensation programs:

 

 

Oversight of Executive Compensation

 

What Is The Role Of The Committee?

 

The Committee is composed of all independent directors and is responsible to the board of directors and our shareholders for establishing our compensation philosophy and establishing and administering our compensation policies and programs. As part of this responsibility, the Committee:

 

 

The Committee’s charter is available on the investor relations section of our website. Additional information regarding the Committee’s authority to determine compensation can be found on pages 8 and 9 under the caption “Compensation/Succession Committee.”

 

What Is The Role Of The Board?

 

The non-management directors approve the company’s business plan, which is used to set financial business objectives for the annual incentive plan. The non-management directors also establish and approve all performance criteria for evaluating the CEO and annually evaluate the performance of the CEO based on these criteria. The non-management directors also ratify the CEO’s compensation. When asked by the Committee, the board can also provide input and ratification on any additional compensation-related issues. For FY09, the board provided input and ratified the following additional compensation items:

 

 

What Is The Role Of The Committee Consultant?

 

The Committee has engaged Towers Perrin as its independent compensation consultant since April 2008. As the independent consultant, Towers Perrin reports directly to the Committee. Towers Perrin provides the Committee with objective and expert analyses and independent advice on executive and director compensation.

 

Each Committee meeting includes an executive session where the Committee meets exclusively with Towers Perrin; company management is not included in these meetings. Outside of these meetings, Towers Perrin works with our management team solely on behalf of the Committee to assist the Committee in fulfilling its duties and responsibilities.

 

What Are The Roles Of Executives?

 

To assist the Committee in determining compensation for the other named executive officers, our CEO attends Committee meetings. She provides the Committee with her assessment of the named executive officers’ performance, both as individuals and with respect to the functions or business units they oversee. She also recommends to the Committee, but does not determine, the specific amount of compensation that should be paid to the named executive officers.

 

Our Chief Human Resources Officer administers all employee compensation and benefits programs, with oversight and supervision by the Committee. He prepares the majority of the materials for the meetings and provides analyses that assist the Committee with their decisions, such as summaries of competitive market practices, summaries of our succession planning actions, and reports regarding our company’s performance to date.

 

Throughout the year, the General Counsel attended Committee meetings and assisted on legal issues related to our compensation and benefit programs. Our executives leave meetings during discussions of individual compensation actions affecting them personally and during all executive sessions, unless requested to attend by the Committee.

 

Compensation Philosophy

 

What Is Our Executive Compensation Philosophy?

 

We believe compensation programs are critical tools in creating shareholder value. In support of this philosophy, our current executive compensation programs are designed to support our business objectives by:

 

 

 

What Is The History Of Our Compensation Programs?

 

To fully understand our current reward programs, it is important to understand the history of the programs and the impact of external factors on financial results.

 

From 1902 until 2003, our compensation programs consisted primarily of base salary and benefits, with periodic stock option grants. The primary rationale for this structure was the challenge of setting business objectives and aligning compensation with performance in an industry where results are highly-impacted by external factors, such as weather, crop disease, government programs, and other factors beyond management’s control.

 

In 2003, the Committee saw a need to add variable, performance-based compensation to the compensation programs — both to help drive our company’s business strategy and to respond to market competition for key talent. Thus, over the last six years, we have significantly changed our programs to put more compensation “at-risk” and align compensation with performance. In FY03, the Committee introduced a long-term incentive equity-based program. For FY08, the Committee introduced an annual cash incentive program. Actions were initially taken at the executive officer level, and are gradually being implemented deeper into the employee population.

 

Each year, the Committee assesses the various compensation programs and may make adjustments to ensure the programs are aligned with performance. While the Committee has always retained discretion over the incentive programs, in FY09 informed judgment (or discretion) was introduced as a formal component of both the annual and long-term incentive programs. Under the annual incentive program, our performance is measured against pre-established 1-year business plan objectives. These objectives contain a series of assumptions that can be dramatically impacted by events outside of the control of management. In our long-term incentive program, the Committee assesses performance over a 3-year period in determining the size of our annual grant. It became evident that the incentive programs required a formal component for the Committee to exercise discretion in order to ensure equity to shareholders and to our employees. The use of informed judgment is discussed in further detail on page 18.

 

What Compensation And Benefits Are Provided To Named Executives Officers And Why?

 

The Committee utilizes the following forms of compensation and benefits: base salary, annual cash incentives, long-term equity incentives, benefits and perquisites. The various elements serve different objectives.

 

Base salaries and benefits are intended to attract and retain employees by providing a stable source of income and security over time. Annual cash incentives are designed to motivate and reward executives to increase shareholder value by achieving annual operational and financial objectives, and by outperforming external benchmarks over a 1-year period. The use of equity compensation aligns the interests of executives with those of shareholders by driving long-term shareholder value, supporting stock ownership, and encouraging retention. The size of long-term equity incentive grants varies based on performance against internal and external metrics.

 

Target Compensation

 

How Are Target Compensation Levels Determined?

 

Total direct compensation consists of salary, annual cash incentive, and long-term equity incentives. In seeking to provide a competitive target total direct compensation package, the Committee reviews comparator company compensation data, both with respect to total direct compensation and compensation elements, as a

general reference to make compensation decisions, but does not establish specific compensation parameters based on such data. The Committee defines competitiveness as providing targeted total direct compensation between the 40th and 60th percentile levels of total direct compensation provided by the comparator group of companies. An individual executive’s target total direct compensation may or may not fall within the 40th - 60th percentile range due to other factors considered by the Committee including individual responsibilities, an executive’s experience and tenure, individual performance, and business objectives.

 

The Committee used input from management and from its independent consultant, Towers Perrin, to select the comparator group of companies. The market comparator references include:

 

 

The primary factors considered in compiling this group of companies included the nature and scope of their business, size, and location. For 2009, this group consisted of:

 

Custom Industry Comparator Group

 

 

The company does not use this comparator group to assess company performance. Company performance is assessed using four benchmarks as described on page 22.

 

Is The Majority Of Our Named Executive Officers’ Compensation Based On Performance?

 

As discussed earlier, we are transitioning our compensation programs from a base salary-focused structure towards a more variable, performance-based structure. As a result, a substantial percentage of the target total compensation for the named executive officers is “at-risk.” The Committee reviews the portion of compensation allocated to: (i) fixed versus variable performance-based compensation, (ii) short-term versus long-term compensation, and (iii) cash versus equity-based compensation. We do not have a predetermined policy for the allocation.

 

Elements of Compensation

 

Base Salary

 

How Are Base Salaries Determined?

 

Base salaries are established based on a named executive officer’s position, skills, experience, and responsibilities. Competitiveness of base salary levels are assessed annually relative to salaries within the marketplace for similar executive positions. Increases may be considered for various factors such as individual performance, changes in responsibilities, and/or changes in competitive marketplace levels.

 

What Were The Base Salary Increases For Named Executives?

 

Based on management’s recommendation, and approved by the Committee, our newly-appointed Chief Financial Officer was the only named executive officer to receive a base salary increase during FY09 to reflect his promotion. Base salary levels for all other named executives officers were maintained for FY09, and no named executive officer received a base salary increase for FY10.

 

The primary reasons for maintaining salary levels include:

 

 

Annual Cash Incentives

 

What Is The Annual Cash Incentive Opportunity For Each Named Executive Officer?

 

The purpose of the annual cash incentive program is to reward performance based on the achievement of company, business, and individual objectives. At the start of each fiscal year, the Committee approves minimum, target, and maximum annual cash incentive levels for each named executive officer. Target annual cash incentive levels are expressed as a percentage of salary.

 

 

 

 

How Do We Calculate Annual Cash Incentives?

 

Annual cash incentives are determined by company-wide business objectives and the Committee’s independent assessment of our company’s performance. This outcome is then adjusted within a range of -20% to +20% based on individual and business group performance.

 

 

How Is The Company Performance Factor Determined?

 

At the beginning of FY09, the Committee approved the following company-wide business objectives: (1) RONA, (2) Net Earnings, (3) Safety, and (4) Performance Development.

 

Each objective has a weighting in the final company performance factor, with 30% reserved for the Committee’s performance assessment.

 

 

Each objective is described in greater detail below:

 

1. RONA:  The Committee selected RONA as a financial metric because RONA

 

 

For the purpose of the cash incentive calculation, return on net assets adjusted for LIFO (“RONA”) is defined as total four quarter trailing adjusted Net Earnings adjusted for after-tax changes in LIFO inventory valuation reserves expressed as a percentage of the four quarter average adjusted Net Assets as adjusted for after-tax LIFO inventory valuation reserves. Adjusted Net Earnings excludes investment income (interest income and dividends received), interest expense, and gains and losses on securities. Net Assets (current assets plus investments and other assets plus net property, plant and equipment (total assets) less current and long-term liabilities) are adjusted to exclude cash and cash equivalents, long and short-term marketable securities, segregated cash and investments and long and short-term debt.

 

The Committee always retains the discretion to exclude the impact (positive or negative) of extraordinary events from the calculation of RONA if the Committee determines that the events were beyond management’s control and if the exclusion is appropriate to align annual cash incentives with performance.

 

FY09 RONA, excluding a one-time tax event related to Wilmar of $158 million, was 10.27%, resulting in the achievement of 196.3% of the business objective.

 

2. Net Earnings:  In addition to RONA, the Committee added Net Earnings as a second financial metric in FY09 to reduce reliance on a single financial measure. LIFO is excluded, consistent with the calculation for RONA.

The Committee retains the discretion to exclude the impact of extraordinary events from the calculation of Net Earnings in the same way as discussed above for RONA.

 

FY09 Net Earnings, excluding a one-time tax event related to Wilmar of $158 million, were $1.543 billion, resulting in the achievement of 132.3% of the business objective.

 

3. Safety objectives:  The safety component focuses on achieving improvement in employee, contractor and process safety. Improvement is measured by metrics for recordable rate of injury, lost work day rate, and process safety. For FY09, the safety component also included an objective tied to the advancement of our Values Based Safety^® (a registered trademark of Quality Safety Edge) program. In the Values Based Safety^® program, employees observe their coworkers’ behaviors and provide positive feedback to reinforce safe behaviors.

 

FY09 Safety achievement was 124.9% of the business objective.

 

4. Performance Development:  The performance development component focuses on the establishment of and performance related to individual goals, feedback and development plans. In FY09, senior leaders and their managerial direct reports were required to complete aligned goals and achieve a combined average performance rating of “meets expectations.” They were also required to complete individual development plans and have executed on at least one aspect of their development plan.

 

FY09 Performance Development achievement was 100% of the objective.

 

5. Committee’s Performance Assessment:  In addition to the four business objectives discussed above, the Committee also uses its informed judgment to ensure that the annual cash incentive appropriately reflects our company’s performance and management’s efforts in achieving that performance. To provide its informed judgment, the Committee conducts a rigorous and comprehensive assessment of internal and external factors. This review includes absolute performance, year-over-year performance, management’s control over events not contemplated in the business plan which materially impacted RONA and Net Earnings, and performance relative to multiple external benchmarks. In addition to RONA and Net Earnings, the Committee focuses on TSR, earnings per share, and return on equity. The Committee also reviews nonfinancial performance in the areas such as safety and performance development.

 

For FY09, the Committee determined no additional award would be made under the Committee’s Performance Assessment component. In making this decision, the Committee considered the following:

 

 

The Company Performance Factor for FY09 was 104.6% as shown in the following table:

 

 

 

 

How Are Individual and Business Group Performance Factors Determined?

 

Each of the named executive officers establishes goals with their immediate supervisor that are aligned with the current and long-term business plan of our company.

 

What Were The Cash Incentive Payments To Named Officers For FY09?

 

 

 

 

Equity-Based Long-Term Incentives

 

Our LTI program the (“LTI Program”) aligns the interests of executives with those of shareholders by driving long-term shareholder value, supporting stock ownership, and encouraging long-term service with the company. In the following sections, we discuss the process for determining grants delivered under our LTI Program.

 

Our LTI awards are determined based upon the Committee’s assessment of performance during the prior three fiscal years. For example, equity grants made in September 2009 reflected FY07-FY09 performance.

This concept of making grants based on the assessment of prior performance is similar in approach to our cash annual incentive plan (i.e., cash incentive awards paid in early FY10 are based upon performance achieved in FY09). However, due to the current SEC disclosure rules, these recent grants will not appear in the Grants of Plan-Based Awards table until next year because the SEC requires companies to report LTI awards granted during the fiscal year, not based on the fiscal year’s performance.

 

As a result, we will discuss grants made in both August 2008 and in September 2009.

 

 

How Did We Determine LTI Awards Granted In August 2008?

 

At the start of the fiscal year, target LTI grant values are determined for each named executive officer. The target levels are stated as a percentage of base salary.

 

 

The actual grant could range from 0% — 200% of the target grant value based on weighted average RONA over a 3-year period, with more weight given to the final fiscal year’s results in order to place more focus on and provide a greater incentive for performance in the most recent year: FY06 — 25%, FY07 — 25%, and FY08 — 50%. Our actual weighted average RONA performance during this performance period was 13.35%, which resulted in an incentive earned percentage of 200%.

 

 

As a result of this performance, in August 2008, our named executive officers received equity grants with a value of 200% of their target grant. These grants were delivered in equal portions of stock options and restricted shares, based on the fair market value on the grant date. Both stock options and restricted shares are valued on the grant date using a Black-Scholes pricing model. Because our fair market valuation considers the vesting restrictions associated with the equity grants, this valuation differs slightly from the valuation utilized for accounting purpose.

 

 

 

Additional Performance-Based Stock Option Grant for the CEO: In addition to participating in the LTI Program, Ms. Woertz was eligible to receive an additional performance-based stock option award for her performance for FY08. The Committee provided this additional opportunity to incent Ms. Woertz to further enhance company performance and shareholder value. The potential payout value range was from 0% to 308% of her base salary. The Committee determined the actual payout based on its discretionary evaluation of Ms. Woertz’ performance in FY08. The primary factors considered were:

 

 

As a result of this evaluation, the Committee determined that Ms. Woertz was entitled to an award with a value equal to 208% of her base salary and granted stock options with respect to 307,167 shares with an exercise price of $26.03 per share.

 

Equity Grants made in August 2008 (reflecting FY06-FY08 Performance)

 

 

How Did We Determine LTI Awards Granted In September 2009?

 

The Committee adopted a new LTI design for FY09 (“FY09 LTI Program”). Under the FY09 LTI Program, the Committee determined that the named executive officers could receive a “base award” in an amount designed to align target total compensation between the 40^th — 60^th percentiles. Base awards are granted if Net Earnings exceed the sum of the dividend payments and after-tax interest expenses. The base award helps to ensure that the FY09 LTI Program is competitive. The FY09 LTI Program allows executives an opportunity to earn additional long-term incentive awards that recognize differing levels of above-target performance and, at maximum, could result in top quartile pay.

 

The Committee used its discretion and informed judgment and granted a “base award” for FY09. In making this decision, the Committee considered absolute and relative performance for the FY07-FY09 period. The Committee primarily focused on the following two factors but also took into account the additional factors discussed on page 18:

 

As a result, LTI awards granted in September 2009 for FY07-FY09 performance decreased by 26% — 82% for the named executive officers relative to the August 2008 grants. A comparison of grant values for August 2008 versus September 2009 for our named executive officers is provided in the table below. For Ms. Woertz, the August 2008 LTI Accounting Value includes both her award under the LTI Program and the additional performance-based option grant described on page 21.

 

 

The September 2009 grants were awarded in 50% stock options, 25% restricted shares, and 25% performance share units (“PSUs”) based on the fair value on the grant date. PSUs are a new LTI vehicle for our company, and were granted in lieu of a comparable value of earned restricted shares.

 

The Committee utilized (for the first time) PSUs in September 2009, to further enhance management’s focus on TSR on both an absolute and relative basis. Executives have an opportunity to earn 1/3 of the PSUs over a 1-year performance period, 2/3 over a 2-year performance period and all PSUs over a 3-year performance period if our TSR exceeds the average TSR of four benchmarks over the respective performance periods. Any earned PSUs will vest and be paid in shares of our common stock if the executive remains employed for the full 3-year performance period. The four TSR benchmarks are:

 

1. S&P 500

 

2. Russell 3000 companies with an S&P industry classification of Food, Beverage & Tobacco

 

3. S&P 500 Consumer Staples

 

4. Average of Bunge Ltd., ConAgra Foods, Inc. and Corn Products International Inc.

 

All equity grants made in September 2009 are valued on the grant date using a Black-Scholes pricing model. Since our fair market valuation considers the vesting restrictions associated with the equity grants, this valuation differs slightly from the valuation utilized for accounting purposes.

 

Stock options and restricted shares are structured identically to the August 2008 grants, as discussed in the above section. PSUs have the same vesting provisions with respect to termination of employment and change of control as stock options and restricted shares as explained on pages 39 and 40.

 

Equity Grants made in September 2009 (reflecting FY07-FY09 performance)

 

(These grants will be presented in the Grants of Plan-Based Awards table in our 2010 proxy statement.)

 

Does The Company Have A Policy For When Grants Are Made?

 

The Committee grants all equity awards to named executive officers, and no attempt is made to time the granting of these awards in relation to the release of material, non-public information. The exercise price of all stock options is set at fair market value (as determined in accordance with the applicable Incentive Compensation Plan) on the grant date. Under the 2002 Incentive Compensation Plan and proposed 2009 Incentive Compensation Plan, fair market value is the closing market price on the last trading day prior to the date of grant. The Committee meets during the first fiscal quarter of the following fiscal year and determines the annual equity awards granted to named executive officers. These awards are issued promptly following the date of the Committee’s meeting and approval. In addition to annual awards, the named executive officers may receive awards when they join the company or change their status, including promotions.

 

Benefits

 

What Retirement Benefits Are Provided?

 

The company provides the following programs to named executive officers to support the attraction, retention and motivation of these employees. With few exceptions, our philosophy is to offer the same benefits to all U.S. salaried employees as is offered to our named executive officers.

 

 

What Other Benefits Are Provided To Named Executive Officers?

 

We provide a benefits package for employees and their dependents, portions of which may be paid for by the employee. Benefits include: life, health (including prescription drug), dental, vision, and disability insurance; dependent and healthcare reimbursement accounts; tuition reimbursement; paid time-off; holidays;

and a matching gifts program for charitable contributions. Named executive officers have the same benefits package as other employees.

 

What Perquisites Are Provided To Named Executive Officers?

 

We no longer provide company-sponsored financial planning assistance as a perquisite. An annual automobile allowance is provided but the period of time over which an automobile is driven before replacement has been extended by one year. We continue to provide Ms. Woertz with personal use of company-owned aircraft. Given the location of our headquarters in Decatur, Illinois, the Committee requires that she have access to the aircraft for personal use for security and efficiency reasons. Ms. Woertz is responsible for any taxes on imputed income related to the provision of this perquisite.

 

Total Direct Compensation

 

What Was Total Direct Compensation For FY09?

 

The Summary Compensation Table, found on page 28, presents the accounting expense recognized during each fiscal year with respect to LTI grants outstanding during each year. As a result, we believe it is helpful to provide a supplemental compensation table showing total direct compensation with the value of LTI grants made in September 2009 for FY07-FY09 performance. The following table shows:

 

 

This table is not intended to replace the Summary Compensation Table, but rather to provide a summary of the Committee’s decisions about total direct compensation for our named executive officers as a result of each year’s performance.

 

 

The Equity Grants column in the table above reflects the grant date values of the respective equity grants. If accounting values were reflected, the percentage decrease with respect to the value of Ms. Woertz’s FY2009 equity grant compared to her FY2008 equity grant would be 35.6%. The percentage decreases with respect to the other named executive officers would be essentially unchanged from the percentage decreases shown in the table.

How Is The Summary Compensation Table Different?

 

The following table shows the reconciliation for FY09 between the Total Direct Compensation table on page 24 and the total compensation disclosed in the Summary Compensation Table on page 28. To reconcile the two tables, the adjustments include:

 

 

 

Employment Agreements, Severance, and Change-in-Control Benefits

 

Do Any Named Executive Officers Have Employment Agreements?

 

Only Ms. Woertz, our CEO, has an employment agreement, which was entered into May 2006 when she joined our company. The employment agreement provides for employment “at will” and does not have a specified contract term. Ms. Woertz’s compensation has been determined to a significant degree by the terms of her employment agreement. At the time it was being negotiated, the Committee retained Frederic W. Cook & Co., Inc., an outside compensation expert, specifically to advise it with respect to Ms. Woertz’s compensation. Prior to approving the employment agreement, the Committee considered the advice of this expert, analyzed information regarding the total compensation provided to the chief executive officers of other public companies of a comparable size, and considered the attributes Ms. Woertz would bring to the positions of President and Chief Executive Officer in the context of the competitive marketplace and the greater responsibilities of the President and Chief Executive Officer relative to other Company executives.

 

Under her employment agreement, she is provided benefits upon termination without cause or resignation for good reason as follows:

 

 

If the termination occurs within 2 years of change-in-control, her cash severance multiple is increased to 3x, benefits are increased to 3 years, and all equity will vest upon a change-in-control. In addition, if the payments exceed the IRS statutory limit and result in a penalty excise tax, she will receive a gross-up payment to cover the tax.

 

Ms. Woertz is also subject to a 2-year non-compete and 2-year non-solicitation provision following termination without cause or resignation for good reason.

Do The Remaining Named Executive Officers Have Severance Benefits?

 

Yes, the remaining named executive officers are covered under the Company’s Severance Policy. Upon a termination without cause or resignation for good reason, an executive receives the following:

 

 

If a change-in-control occurs, all outstanding equity will vest.

 

In addition, at the request of the Company, each executive would be subject to a non-compete and non-solicitation agreement.

 

Additional Executive Compensation Policies

 

Does The Company Require Stock Ownership?

 

The Committee has adopted stock ownership guidelines for our executives, including the named executive officers. As of June 30, 2009, each of the named executive officers had achieved or exceeded the guideline.

 

 

Does The Company Have A Recoupment Policy?

 

In addition to meeting the requirements of Sarbanes-Oxley, our equity grant programs have specific recoupment provisions.

 

Are There Policies In Place That Prohibit The Sale Or Purchase Of Stock By Named Executives?

 

Named executive officers are strongly encouraged not to engage in “hedging” ADM stock in any way, including the purchase or sale of any equity derivatives. We also impose limits on the permitted timing of equity transactions by our named executive officers.

 

Does The Committee Consider Section 162(m) Of The Internal Revenue Code In The Design Of Executive Compensation Programs?

 

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation paid in excess of $1 million annually to the CEO and the three other most highly-compensated executive, excluding the Chief Financial Officer, except for qualifying “performance-based” compensation. Because the CEO’s salary exceeds $1 million, a portion will not be tax deductible. Although elements of our FY09 annual and long-term incentive awards are designed to be performance-based and comply with 162(m), the Committee retains the discretion to provide compensation that may not be tax deductible if it feels these actions are in the best interests of the Company and its stockholders. The Committee believes that the amount of any expected loss of a tax deduction under Section 162(m) will be insignificant to the Company’s overall tax position.

How Does The Company Account For Equity Grants?

 

We account for stock-based payments under the requirements of SFAS 123(R). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Note 9 of the Consolidated Financial Statements in our Form 10-K for the year ended June 30, 2009.

 

How Does The Company Address 409A?

 

All plans and employee agreements were reviewed and amended in order to comply with 409A, a provision in the Internal Revenue code that imposes restrictions on deferred compensation and penalties on covered participants for failure to comply.

 

How Does The Company Address Liabilities Associated With Retirement Programs?

 

The Committee is mindful that the non-qualified deferred compensation and supplemental retirement plans create financial statement liabilities. Therefore, the company attempts to hedge the deferred compensation plan liabilities by directing the named executive officer’s elective deferrals into a separate account and then investing such account in a manner consistent with the hypothetical investments elected by participants. We do not set amounts aside in a “rabbi” trust for the benefit of participants in the deferred compensation or supplemental retirement plans. However, the deferred compensation plans have “rabbi” trust funding triggers in the event of a potential change in control of the Company. This trigger provides some measure of assurance to employees that amounts they have chosen to defer from their current compensation will be held for their benefit, subject to creditor claims as required under the applicable tax law. In maintaining the non-qualified plans, the Committee has duly considered that the federal income tax deduction available to the company occurs at the same time that participants are paid benefits from the applicable plan.

 

The company is required to fund its qualified pension plans in a manner consistent with the minimum funding requirements of the Internal Revenue Code and the Employee Retirement Income Security Act (“ERISA”). Historically, the company has made contributions in excess of the minimum to maintain its plans at or near a full funding level relative to the accrued benefit obligation.

 

Compensation/Succession Committee Report

 

The Compensation/Succession Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation/Succession Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

K. R. Westbrook, Chairperson

D. E. Felsinger

A. Maciel

P. J. Moore

 

Compensation/Succession Committee Interlocks and Insider Participation

 

None of the members of the Compensation/Succession Committee is or has been an employee of our company or any of our subsidiaries. There are no interlocking relationships between our company and other entities that might affect the determination of the compensation of our executive officers.

Summary Compensation Table

 

The following table summarizes the compensation for the fiscal years noted in the table of our principal executive officer, principal financial officer, our three other most highly-compensated executive officers who were serving as executive officers on June 30, 2009, and an individual who would have been included among the three most highly-compensated executive officers, other than the principal executive officer and principal financial officer, but for the fact that he was no longer serving as an executive officer on June 30, 2009 (collectively, the “named executive officers”).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9) Effective November 6, 2008, Mr. Batchelder no longer serves in an executive officer capacity.

(10) Includes the following items for Mr. Batchelder:

 

 

Aggregate incremental cost to our company of perquisites and personal benefits is determined as follows. In the case of payment of expenses related to home phone, internet service and security systems, incremental cost is determined by the amounts paid to third-party providers. In the case of personal use of company-owned aircraft, incremental cost is based solely on the cost per hour to the company to operate the aircraft, and does not include fixed costs that do not change based on usage, such as purchase costs of the aircraft and non-trip-related hangar expenses. Our direct operating cost per hour of an aircraft is based on the actual costs of fuel, on-board catering, aircraft maintenance, landing fees, trip-related hangar and parking costs, and smaller variable costs, divided by the number of hours the aircraft was operated during the year. In the case of personal use of company-owned automobiles, incremental cost is based on the direct costs to operate the vehicle, such as maintenance, fuel, registration and parking fees, and does not include fixed costs to acquire or lease the vehicle. In the case of personal financial planning advice, education assistance and travel expenses, incremental cost is the amount paid to the service providers.

 

Employment Agreements

 

In connection with the election of Ms. Woertz as our President and Chief Executive Officer, we and Ms. Woertz entered into Terms of Employment dated as of April 27, 2006. Pursuant to the Terms of Employment, the board approved an initial annual salary for Ms. Woertz of $1,200,000 and approved a target annual bonus of at least 125% of her annual salary. Pursuant to the Terms of Employment, there shall be no reduction in Ms. Woertz’s initial $1,200,000 annual salary as a result of subsequent salary reviews. Payment of a target bonus to Ms. Woertz was guaranteed for fiscal 2007. Ms. Woertz is also entitled to receive, pursuant to the Terms of Employment, other benefits and perquisites comparable to those received by her predecessor as Chief Executive Officer or, if more favorable, other ADM senior officers. Provisions of Ms. Woertz’s Terms of Employment relating to termination of her employment and change of control of our company are described below in the “Termination of Employment and Change-in-Control Arrangements” section.

Grants of Plan-Based Awards During Fiscal 2009

 

The following table summarizes the grants of plan-based awards made to our named executive officers during the fiscal year ended June 30, 2009.

 

 

 

 

All of the awards in the table above were granted under our 2002 Incentive Compensation Plan. All of the awards shown in the “All Other Stock Awards” column in the table above are restricted stock awards, and all of these awards vest in full three years after the date of grant. Under the terms of the restricted stock award agreement pertaining to each of these awards, the recipient of the award may vote and receive cash dividends on restricted shares prior to their vesting date, but may not transfer or pledge the shares in any manner prior to vesting. Dividends on restricted shares are paid at the same rate as dividends to our stockholders generally. Vesting accelerates upon the death of the award recipient or a change in control of our company, and continues in accordance with the original vesting schedule if employment ends as a result of disability or retirement. If employment ends for other reasons, unvested shares are forfeited. In addition, if an award recipient’s employment is terminated for cause, or if the recipient breaches a non-competition or confidentiality restriction or participates in an activity deemed by us to be detrimental to our company, the recipient’s unvested shares will be forfeited, and any shares that have already vested must be returned to us or the recipient must pay us the amount of the shares’ fair market value as of the date they vested.

 

All of the awards shown in the “All Other Option Awards” column in the table above are non-qualified stock option awards, vest and become exercisable in five equal annual installments commencing on the first anniversary of the grant date, and must be exercised within ten years after the grant date. The exercise price may be paid in cash or by delivering shares of our common stock that are already owned by the award recipient and that have been held for at least six months. Tax withholding obligations resulting from the exercise may be paid by surrendering a portion of the shares being acquired, subject to certain conditions. Under the terms of the stock option agreement pertaining to each of these awards, vesting and exercisability accelerate upon the death of the recipient or change in control of our company, and continue in accordance with the original vesting schedule if employment ends as a result of disability or retirement. If employment ends for other reasons, a recipient forfeits any interest in the unvested portion of any option, but retains the right to exercise the previously vested portion of any option for a period of three months. In addition, if an award recipient’s employment is terminated for cause, or if the recipient breaches a non-competition or confidentiality restriction or participates in an activity deemed by us to be detrimental to our company, the

recipient’s right to exercise any unexercised options will terminate, the recipient’s right to receive option shares will terminate, and any shares already issued upon exercise of the option must be returned to us in exchange for the lesser of the shares’ then-current fair market value or the price paid for the shares, or the recipient must pay us cash in the amount of the gain realized by the recipient from the exercise of the option.

 

The impact of a termination of employment or change in control of our company on restricted stock and stock option awards held by our named executive officers is quantified in the “Termination of Employment and Change-in-Control Arrangements” section below.

Outstanding Equity Awards at Fiscal 2009 Year-End

 

The following table summarizes information regarding unexercised stock options and unvested restricted stock awards for the named executive officers as of June 30, 2009.