SCHEDULE 14A INFORMATION

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the Securities Exchange Act of 1934

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Proxy Statement

 

September 24, 2010

Annual Meeting of Stockholders

 

 

 

August 9, 2010

 

Dear Fellow Stockholder:

 

It is my pleasure to invite you to join us for the ConAgra Foods Annual Meeting of Stockholders in Omaha, Nebraska on September 24, 2010 at 1:30 p.m., Omaha Time, at the Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska 68102.

 

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

 

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

 

Thank you for your continued investment in ConAgra Foods.

 

Sincerely,

 

Gary M. Rodkin

Chief Executive Officer & President

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

The Annual Stockholders’ Meeting of ConAgra Foods, Inc. will be held on Friday, September 24, 2010, in the Witherspoon Concert Hall of the Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska 68102. The meeting will begin promptly at 1:30 p.m. Omaha Time. Registration will begin at 12:30 p.m.

 

What matters will be voted on?

 

 

Who may vote?

 

Stockholders of record as of the close of business on August 2, 2010 are eligible to vote at the annual meeting and at any postponements or adjournments.

 

How do I vote?

 

You may vote by marking, signing and dating the enclosed proxy card and returning it in the postage-paid envelope. You may also vote by telephone or through the Internet. See the first page of the accompanying proxy statement for more information on voting procedures.

 

What if I want to attend the meeting?

 

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

 

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

 

 

Colleen Batcheler

Executive Vice President, General Counsel and

Corporate Secretary

 

August 9, 2010

Omaha, Nebraska

 

Table of Contents

 

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

PROXY STATEMENT

 

We are mailing this proxy statement to our stockholders in connection with the solicitation by our Board of Directors of proxies to be used at the 2010 Annual Meeting of Stockholders of ConAgra Foods, Inc. The meeting will be held in the Witherspoon Concert Hall of the Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska 68102 on Friday, September 24, 2010, and begin promptly at 1:30 p.m., Omaha Time. Distribution of this proxy statement is scheduled to begin on or about August 9, 2010.

 

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

 

This proxy statement and our annual report to stockholders for the fiscal year ended May 30, 2010 are available electronically at: http://investor.conagrafoods.com.

 

Record Date

 

Stockholders of record at the close of business on August 2, 2010 will be entitled to vote at the meeting and at any postponements or adjournments. On August 2, 2010, there were 439,666,347 voting shares of our common stock issued and outstanding. Each share of common stock is entitled to one vote.

 

How to Vote

 

Your vote is very important. For this reason, the Board of Directors is requesting that you vote your shares by proxy. Internet and telephone voting is available through 11:59 p.m. Eastern Time on Tuesday, September 21, 2010 for shares held in the ConAgra Foods Retirement Income Savings Plan and through 11:59 p.m. Eastern Time on Thursday, September 23, 2010 for all other shares.

 

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

 

 

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

 

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

nominee), or (3) provide timely subsequent Internet or telephone voting instructions. You may also attend the meeting in person and vote in person, subject to the legal proxy requirement noted above for street name owners.

 

Participants in the ConAgra Foods Retirement Income Savings Plan. If you hold shares in the ConAgra Foods Retirement Income Savings Plan, your voting instruction card covers the shares credited to your plan account. The plan’s trustee must receive your voting instructions by 11:59 p.m. Eastern Time on Tuesday, September 21, 2010. If the plan trustee does not receive your instructions by that date, the trustee will vote the shares held by the ConAgra Foods Retirement Income Savings Plan in a single block in accordance with the instructions received with respect to a majority of the shares for which instructions are received.

 

We have engaged Georgeson Shareholder Services as our proxy solicitor for the annual meeting at an estimated cost of approximately $9,500 plus disbursements. Our directors, officers and other employees may also solicit proxies in the ordinary course of their employment. ConAgra Foods will bear the cost of the solicitation, including the cost of reimbursing brokerage houses and other custodians for their expenses in sending proxy materials to you.

 

Quorum

 

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

 

Vote Requirements and Manner of Voting Proxies

 

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

 

 

Important Note on the Election of Directors: The New York Stock Exchange (“NYSE”) recently changed its rules on broker voting (for shares held in street name). Your broker, bank or other nominee can no longer vote your shares unless you provide it with voting instructions. If you hold ConAgra Foods shares in street name and do not provide voting instructions to your broker, bank or other nominee, your shares will not be voted in the election of directors. Your vote is important to us, so please return your voting instruction card.

 

 

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

is properly presented at the meeting, the proxy gives authority to the persons named on the proxy card to vote as recommended by the Board of Directors on such other matters.

 

Attendance at the Meeting

 

Only stockholders of record as of the close of business on August 2, 2010 and their guests will be able to attend the meeting. Admission will be by ticket or confirming bank/brokerage statement only, and those attending the meeting must bring some form of government-issued photo identification.

 

 

Multiple Stockholders Sharing an Address

 

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

 

The table below shows the shares of ConAgra Foods common stock beneficially owned as of August 2, 2010 by: (1) owners of more than 5% of our outstanding common stock, (2) our current directors, (3) our “named executive officers” for purposes of this proxy statement, and (4) all current directors and executive officers as a group. A person has beneficial ownership of shares if he or she has or shares voting or investment power over the shares, or the right to acquire that power within 60 days of August 2, 2010.

 

Our directors and executive officers are committed to owning stock in ConAgra Foods. Both groups have stock ownership requirements that preclude them from selling any ConAgra Foods stock in the market until they have enough shares to meet and maintain their stock ownership guidelines pre- and post-sale.

 

 

More information on our stock ownership guidelines can be found on pages 6 and 32.

 

To better show the financial stake of our directors and executive officers in the company, we have included a “Share Units” column in the table. This column, which is not required under the rules of the Securities and Exchange Commission (the “SEC”), shows deferred shares owned by non-employee directors through the ConAgra Foods, Inc. Directors’ Deferred Compensation Plan and deferred shares owned by executive officers through the ConAgra Foods, Inc. Voluntary Deferred Compensation Plan. Although these shares will ultimately be settled in shares of common stock, they currently have no voting rights, nor will they be settled within 60 days of August 2, 2010.

 

 

 

 

 

Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and persons who own more than 10% of a registered class of our equity securities file with the SEC reports of ownership and changes in beneficial ownership of our common stock. Directors, executive officers and greater than 10% owners are required to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of copies of these reports furnished to us or written representations that no other reports were required, we believe that during fiscal 2010, all required reports were filed on a timely basis.

 

ConAgra Foods’ business is managed under the direction of our Board of Directors, which currently has 11 members. The Board of Directors is committed to performing its responsibilities in a manner consistent with sound governance practices. In recent months, there has been significant publicity surrounding the recently enacted financial reform legislation known as the “Dodd-Frank Wall Street Reform and Consumer Protection Act.” Many of the corporate governance practices that the legislation seeks to promote have already been adopted by the ConAgra Foods Board. Whether mandated to do so by legislation or not, the ConAgra Foods Board will continue to review and refine its governance practices to ensure its processes support informed, competent and independent oversight on behalf of stockholders. Some key practices currently in place include the following:

 

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

 

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

 

Separate Chairman and Chief Executive Officer. Our Chairman of the Board is an independent, non-employee director. See “Board Leadership Structure” below for more information.

Stock Ownership Guidelines for Directors and Senior Leadership. Directors and senior leaders across the company are subject to stock ownership guidelines. All non-employee directors other than the Chairman of the Board are expected to acquire and hold at least 15,000 shares of ConAgra Foods common stock during their tenure. The Chairman of the Board is expected to acquire and hold at least 50,000 shares of ConAgra Foods common stock during his or her tenure. All must acquire these within five years following election to the Board, or September 25, 2014, whichever is later. Senior leaders across the company are subject to stock ownership guidelines that are set as a multiple of the leader’s salary. For our Chief Executive Officer, Gary Rodkin, that level is six times his salary. See page 33 for a summary of the current stock holdings of our named executive officers compared to their individual ownership requirements.

 

No “Poison Pill” Rights Plan. We have not had a “poison pill” stockholder rights plan since 2004, when it was terminated by our Board of Directors.

 

Commitment to Sustainable Business Practices. In 2009, we published our inaugural Corporate Responsibility Report, which addressed issues such as our performance in minimizing our impact on the environment, our commitment to food safety and quality, employee relations matters, our corporate giving focus and a wide range of other important topics related to the sustainability of our business practices. The company expects to publish an updated Corporate Responsibility Report in September 2010, which will be available on our website.

 

Our Board of Directors believes that independent Board leadership is a critical component of our governance structure. Our Corporate Governance Principles require us to have either an independent Chairman of the Board or a lead independent director if the positions of Chairman and CEO are held by the same person. Since 2005, our Chairman and CEO roles have been separate, and the Board continues to believe that this structure is appropriate at this time. By separating the roles of the Chairman and CEO, our CEO can focus his time and energy on setting the strategic direction for the company, overseeing daily operations, engaging with external constituents, developing our future leaders, and promoting employee engagement at all levels of the organization. Meanwhile, our independent Chairman leads the Board in the performance of its duties by establishing agendas and ensuring appropriate meeting content, engaging with the CEO and senior leadership team between Board meetings on business developments, and providing overall guidance to our CEO as to the Board’s views and perspectives, particularly on the strategic direction of the company.

 

If the positions of Chairman and CEO are held by the same person in the future, our Corporate Governance Principles provide that the Board will select a lead director from the among the independent directors.

 

Our senior leadership is responsible for identifying, assessing and managing the company’s exposure to risk. A component of this work is performed through a management Risk Oversight Committee, chaired by our Senior Vice President and Treasurer. However, our Board of Directors and its committees play an active role in overseeing management’s activities. The Board and its committees perform this oversight through the following mechanisms:

 

Board Presentations Address Risk. Each fiscal year, a full Board meeting is set aside for a discussion of our strategic plan and the risks and opportunities facing the company. At other times of the year, our Board receives reports from each significant business unit and function. These presentations include a discussion of the business, regulatory, operational and other risks associated with planned strategies and tactics, as well as succession planning matters. The Board is also responsible for appointing the membership of management’s Risk Oversight Committee.

 

Audit Committee Oversight. Our Audit Committee provides oversight for management’s handling of the company’s financial risks. For example, its Charter requires the Committee to review our processes for assessing and controlling derivative and treasury risk. The Audit Committee also oversees our management of

financial risk through, among other things, reviewing our significant accounting policies and the activities of management’s Risk Oversight Committee, maintaining direct oversight of our Internal Audit function, holding regular executive sessions with our independent auditors, our CFO and Controller, and our head of Internal Audit, and receiving regular legal and regulatory updates. The Chair of the Audit Committee reports on the Committee’s activities to the full Board.

 

Human Resources Committee Oversight. The Human Resources Committee reviews the company’s leadership development activities to ensure appropriate succession planning is occurring, and also reviews the relationship between the company’s compensation programs and risk. The Chair of the Human Resources Committee reports on the Committee’s activities to the full Board.

 

Nominating and Governance Committee Oversight. The Nominating and Governance Committee assists the Board in managing risks associated with Board organization, membership and structure. It also assists management in the oversight of reputational risks for the company. The Chair of the Nominating and Governance Committee reports on the Committee’s activities to the full Board.

 

The Board of Directors meets on a regularly scheduled basis and holds an executive session without management present at every regularly scheduled meeting. The Chairman of the Board presides at all meetings, including executive sessions. During fiscal 2010, the Board met eight times (five regular meetings and three special meetings) and acted by unanimous written consent once. Each Board member’s goal is to attend every meeting scheduled. However, from time to time a Board member becomes unable to attend a scheduled Board or committee meeting due to unforeseen or extraordinary circumstances, or scheduling conflicts when special meetings are called on short notice. In this instance, the company provides the director with the agenda and a copy of the materials to be presented at the meeting. The company requests input from the absent director for the benefit of the other directors, shares that input with the rest of the Board, and provides an update to the absent director on decisions taken by the Board following the meeting. All members attended at least 75% of the total number of Board and committee meetings that required their attendance in fiscal 2010, except Mr. Jurgensen who attended slightly less than that percentage. Mr. Jurgensen attended substantially all Board meetings during fiscal 2010 but was unable to attend certain committee meetings due to unavoidable conflicts. The high number of special meetings called on short notice contributed to this aggregate percentage and Mr. Jurgensen missed satisfying the attendance threshold by only two meetings. Mr. Jurgensen has been a director since 2002 and he has attended all Board and committee meetings held during fiscal 2011 that required his attendance. As described above, updates on matters covered at meetings missed during fiscal 2010 were provided to Mr. Jurgensen.

 

Our Board members are encouraged to attend the annual stockholders’ meeting. All nominees who were serving at the time of the 2009 annual meeting of stockholders attended the meeting.

 

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

 

The Board has determined that directors Bay, Butler, Goldstone, Gregor, Johri, Jurgensen, Lenny, Marshall, Schindler and Stinson have no material relationship with ConAgra Foods and are independent within the meaning of our independence standards. These individuals, in the groups identified in the discussion below, are the only members of our Audit Committee, Nominating and Governance Committee, and Human Resources Committee. In making these independence determinations, the Board applied the NYSE listing

standards and the categorical independence standards contained in the Corporate Governance Principles. The Board considers even immaterial relationships in its decision-making process, to ensure a complete view of each director’s independence. This year, the Board considered that Mr. Bay is the Chief Executive Officer of Valmont Industries, Inc. One of our subsidiaries was a customer for immaterial levels of environmental engineering services from an affiliate of Valmont Industries, Inc. on an arms-length basis and in the ordinary course of business during fiscal 2010. Applying the NYSE listing standards and the Corporate Governance Principles, the Board determined that there are no transactions, relationships or arrangements that would impair the independence or judgment of any of the directors deemed independent by the Board.

 

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

 

 

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

 

 

From time to time these documents are updated, and we promptly post amended documents to our website. The documents are also available in print to any stockholder who requests them from the Corporate Secretary. The information on our website is not, and will not be deemed to be, a part of this Proxy Statement or incorporated into any of our other filings with the SEC.

 

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

 

 

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

The Executive Committee met once during fiscal 2010. The committee generally has the authority to act on behalf of the Board of Directors between meetings. Its membership consists of Directors Butler, Goldstone, Rodkin and Stinson. Mr. Goldstone chairs the committee.

 

 

Director Nomination Process. The Nominating and Governance Committee considers candidates for Board membership suggested by its members and other Board members, as well as by management and stockholders. The Committee may also retain a third-party executive search firm to identify candidates from time to time. A stockholder who wishes to recommend a prospective nominee for Board membership should notify our Corporate Secretary in writing at least 120 days before the annual stockholders’ meeting and include whatever supporting material the stockholder considers appropriate. The Nominating and Governance Committee will also consider nominations by a stockholder according to the provisions of our bylaws relating to stockholder nominations as described under “Proposals for 2011 Annual Meeting” at the end of this proxy statement.

 

The Nominating and Governance Committee makes an initial determination as to whether to conduct a full evaluation of the candidate once a prospective nominee has come to its attention. This initial determination is based on any information provided to the Committee and on additional information available to or obtained by the Committee. The preliminary determination is based primarily on the need for additional Board members to fill vacancies or expand the size of the Board and the likelihood that the prospective nominee can satisfy the evaluation factors described below. If the Committee determines that additional consideration is warranted, it may request a third-party search firm or other third parties to gather additional information about the prospective nominee. The Committee may also elect to interview a prospective candidate, in person or by telephone. The evaluation process for nominees recommended by stockholders does not differ.

 

The Nominating and Governance Committee evaluates each prospective nominee against the standards and qualifications set out in the Corporate Governance Principles, including, but not limited to: (1) background, including demonstrated high standards of ethics and integrity, the ability to have sufficient time to effectively carry out the duties of a director, and the ability to represent all stockholders and not a particular interest group; (2) Board skill needs, taking into account the experience of current Board members, the candidate’s ability to work toward business goals with other Board members, and the candidate’s qualifications as independent and qualifications to serve on various committees of the Board; (3) diversity, including the extent to which the candidate reflects the composition of our stockholders and other constituencies; and (4) business experience, which should reflect a broad experience at the policy-making level in business, government or education. Additionally, as part of this evaluation and to further our commitment to diversity, the Nominating and Governance Committee assesses whether the nominees, as a group, collectively represent a diversity of views, backgrounds, and experiences that will enhance the Board’s and our company’s effectiveness.

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

 

 

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

 

Compensation Committee Interlocks and Insider Participation. The individuals listed in the table above served on our Human Resources Committee during fiscal 2010. During fiscal 2010, none of the current or former executive officers of ConAgra Foods served on the compensation committee (or equivalent), or the Board of Directors, of another entity whose executive officer(s) served on the Human Resources Committee or Board of Directors of ConAgra Foods.

 

 

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

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

 

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

 

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

 

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

 

During the last fiscal year, the Audit Committee met and held discussions with representatives of ConAgra Foods management, its internal audit staff, and KPMG LLP, independent auditor. Representatives of financial management, the internal audit staff, and the independent auditor have unrestricted access to the Audit Committee and periodically meet privately with the Audit Committee. The Audit Committee reviewed and discussed with ConAgra Foods’ management and KPMG the audited financial statements contained in the company’s Annual Report on Form 10-K for the fiscal year ended May 30, 2010.

 

The Audit Committee also discussed with the independent auditor the matters required to be discussed by the auditor with the Audit Committee under the Statement on Auditing Standards No. 61, as amended (relating to communication with audit committees) as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee also reviewed and discussed with KPMG its independence and, as part of that review, received the written disclosures required by applicable professional and regulatory standards relating to KPMG’s independence from ConAgra Foods, including those of the Public Company Accounting Oversight Board pertaining to the independent accountant’s communications with the Audit Committee concerning independence. The Audit Committee also considered whether the provision of non-audit services provided by KPMG to the company during fiscal 2010 was compatible with the auditor’s independence.

 

Based on these reviews and discussions, and the report of the independent auditor, the Audit Committee recommended to the Board of Directors, and the Board approved, that the audited financial statements be included in the company’s Annual Report on Form 10-K for the fiscal year ended May 30, 2010 for filing with the Securities and Exchange Commission.

 

ConAgra Foods, Inc. Audit Committee

 

Stephen G. Butler, Chair

Rajive Johri

W.G. Jurgensen

Richard H. Lenny

Andrew J. Schindler

 

We use a combination of cash and equity-based incentive compensation to attract and retain qualified candidates to serve on our Board of Directors. In setting director compensation, the Human Resources Committee receives input from its independent compensation consultant. It also considers the time commitment and skill level required to serve on our Board. For fiscal 2010, non-employee directors other than the Chairman of the Board were entitled to receive the following:

 

 

Non-employee directors other than the Chairman who serve less than the full 12-month period between stockholders’ meetings are entitled to receive a pro-rated retainer, pro-rated stock award and pro-rated option award, in each case, based on actual months of service. All non-employee directors other than the Chairman of the Board are expected to acquire and hold at least 15,000 shares of our common stock during their tenure. All must acquire their applicable number of shares within five years following first election to the Board, or September 25, 2014, whichever is later.

 

In lieu of the elements described above, the Chairman’s pay for service from the 2009 annual stockholders’ meeting to the 2010 annual stockholders’ meeting was 10,000 unrestricted shares of our common stock and non-statutory options to acquire 82,456 shares of our common stock. The equity awards were calculated in a manner to deliver a total opportunity to the Chairman of approximately $500,000 and the number of options granted was based on the Black-Scholes value of the options on the date of grant consistent with our accounting expense methodology. The options have an exercise price equal to the closing market price of our common stock on the date of grant (September 25, 2009), a ten-year term and vested six months from the date of grant. The Chairman is expected to acquire and hold at least 50,000 shares of our common stock during his tenure, and to acquire such shares by September 25, 2014.

 

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

 

 

The table below sets forth the compensation elements described above that were paid to the non-employee directors of the company for fiscal 2010:

 

Director Compensation Table — Fiscal 2010

 

 

 

 

 

 

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

 

MOGENS C. BAY – Director since December 12, 1996

 

Mr. Bay (61 years of age) has served as Chairman of the Board and Chief Executive Officer of Valmont Industries, Inc. (products for water management and infrastructure) since January 1997. He is also a director of Peter Kiewit Sons’, Inc. In deciding to nominate Mr. Bay to the Board, the Board considered Mr. Bay’s service as Chief Executive Officer of Valmont for over 17 years and Chairman and Chief Executive Officer of Valmont for over 13 years; his extensive experience in management, global operations and manufacturing and his significant expertise in U.S. and international business operations.

 

STEPHEN G. BUTLER – Director since May 16, 2003

 

Mr. Butler (62 years of age) served as the Chairman and Chief Executive Officer of KPMG LLP (national public accounting firm) from 1996 to June 2002. He is a director of Cooper Industries, Ltd. and Ford Motor Company. In deciding to nominate Mr. Butler to the Board, the Board considered Mr. Butler’s expertise in accounting and finance and knowledge of a wide range of U.S. and international business practices based on a 34-year career with KPMG. He also has significant experience in operations, marketing and human resources through serving as managing partner of several KPMG offices and ultimately serving as Chairman and CEO of KPMG-USA, and provides valuable insights to the consumer markets based on his directorships at Ford Motor Company and Cooper Industries, Ltd.

 

STEVEN F. GOLDSTONE – Director since December 11, 2003

 

Mr. Goldstone (64 years of age) has served as non-executive Chairman of the ConAgra Foods Board since October 1, 2005. He has been a manager of Silver Spring Group (private investment firm) since 2000. From 1999 to 2000, Mr. Goldstone served as Chairman of Nabisco Group Holdings (food company). Mr. Goldstone is a director of Merck & Co., Inc. and Greenhill & Co., Inc. Mr. Goldstone also served as a director of Trane Inc. from 2002 until 2008. In deciding to nominate Mr. Goldstone, the Board considered his extensive management, operational and financial expertise, as well as his track record of achievement and sound judgment as demonstrated by his tenure as Chairman and CEO of RJR Nabisco, Inc. (consumer product company). Further, his experience on the Boards of other public companies provides him with broad experience on strategic and governance issues facing public companies.

 

JOIE A. GREGOR – Director since February 6, 2009

 

Ms. Gregor (60 years of age) served as assistant to the President for presidential personnel under President George W. Bush. Previously, Ms. Gregor served as Vice Chairman of Heidrick & Struggles International, Inc. (executive search firm) from 2002 until 2007. From 1993 until 2002 she served in a number of senior leadership roles with that firm, including President, North America, managing partner of the firm’s Global Board of Directors Practice and managing partner of the New York office. In deciding to nominate Ms. Gregor, the Board considered her significant experience in the assessment and recruitment of corporate executives and senior officials as well as her extensive management and leadership experience.

RAJIVE JOHRI – Director since January 1, 2009

 

Mr. Johri (60 years of age) served as President and Director of First National Bank of Omaha (FNBO), from 2006 until 2009. From September 2005 to June 2006, he served as President of First National Credit Cards Center for FNBO. Prior to that, he served as an Executive Vice President for J.P. Morgan Chase Bank from 1999 until 2004. Mr. Johri served as a director of Charter Communications, Inc. from 2006 until 2009. In deciding to nominate Mr. Johri, the Board considered his significant experience in finance, accounting and banking as well as his substantial international and domestic business and management experience. The Board also considered his proven business skills in having led the turnaround of the credit card business of FNBO and the transformation of that bank into a high-performing organization.

 

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

 

Mr. Jurgensen (59 years of age) served as Chief Executive Officer and a director of Nationwide Financial Insurance Services, Inc. (insurance) from 2000 to 2009. He also served as Chief Executive Officer and a director of several other companies within the Nationwide enterprise, which is comprised of Nationwide Financial, Nationwide Mutual, Nationwide Mutual Fire and all of their respective subsidiaries and affiliates. Mr. Jurgensen is a director of The Scotts Miracle-Gro Company. In deciding to nominate Mr. Jurgensen, the Board considered his extensive experience in strategic development and risk assessment for the Nationwide companies as well as his considerable management, operational, accounting and financial expertise.

 

RICHARD H. LENNY – Director since March 17, 2009

 

Mr. Lenny (58 years of age) served as Chairman, President and Chief Executive Officer of The Hershey Company (manufacturer of confectionery and snack products), from 2001 through 2007. Prior to joining Hershey, Mr. Lenny was group vice president of Kraft Foods and President, Nabisco Biscuit and Snacks, following Kraft’s acquisition of Nabisco in 2000. He joined Nabisco in 1998 from the Pillsbury Company where he was president of Pillsbury, North America. Mr. Lenny is a director of McDonald’s Corporation and Discover Financial Services. Mr. Lenny also served as a director of The Hershey Company from 2001 until 2007 and Sunoco, Inc. from 2002 until 2006. In deciding to nominate Mr. Lenny to the Board, the Board considered Mr. Lenny’s experience as a chief executive officer for a global retail food company that is a major consumer brand. His skills include knowledge of strategy and business development, finance, marketing and consumer insights, supply chain management and distribution, sustainability and other social responsibility matters.

 

RUTH ANN MARSHALL – Director since May 23, 2007

 

Ms. Marshall (56 years of age) was President of the Americas, MasterCard International (payments industry) from October 1999 until her retirement in June 2006. She is a director of Global Payments Inc. and Pella Corporation. Ms. Marshall also served as a director of Trane Inc. from 2003 until 2008. In deciding to nominate Ms. Marshall to the Board, the Board considered Ms. Marshall’s broad marketing, account management, customer service and product development experience as well as significant domestic and international experience in growing business at MasterCard domestically and internationally.

 

GARY M. RODKIN – Director since October 1, 2005

 

Mr. Rodkin (58 years of age) has been our President and Chief Executive Officer since October 1, 2005. Previously, he was Chairman and Chief Executive Officer of PepsiCo Beverages and Foods North America (consumer products and manufacturing) from February 2003 to June 2005. He also served as President and Chief Executive Officer of PepsiCo Beverages and Foods North America in 2002, and President and Chief Executive Officer of Pepsi-Cola North America from 1999 to 2002. Mr. Rodkin is a director of Avon Products, Inc., the Grocery Manufacturers of America and Boys Town. In deciding

to nominate Mr. Rodkin to the Board, the Board considered Mr. Rodkin’s career building leading consumer brands and contributions to key marketing, financial and operations expertise to the Company as well as his broad-based business expertise and corporate leadership skills.

 

ANDREW J. SCHINDLER – Director since May 23, 2007

 

Mr. Schindler (66 years of age) served R. J. Reynolds Tobacco Holdings, Inc. (tobacco products) as Chairman and Chief Executive Officer from 1999 to 2004 and Reynolds American, Inc. (tobacco products) as Chairman from July 2004 until his retirement in December 2005. Mr. Schindler achieved the rank of captain in the U.S. Army, where he held command and staff positions in the United States and in Vietnam. He is a director of Krispy Kreme Doughnuts Inc. and Hanesbrands, Inc. Mr. Schindler also served as a director of ArvinMeritor, Inc. from 2004 until 2008, Reynolds American Inc. from 2004 until 2005 and Pike Electric Corporation from 2006 until 2007. In deciding to nominate Mr. Schindler, the Board considered Mr. Schindler’s strong leadership, risk-management, marketing, operations, strategic-change, and personnel-development skills.

 

KENNETH E. STINSON – Director since December 12, 1996

 

Mr. Stinson (67 years of age) is Chairman of the Board of Peter Kiewit Sons’, Inc. (construction and mining). He served as Chief Executive Officer of Peter Kiewit Sons’, Inc. from 1998 until 2004. Mr. Stinson is a director of Kiewit Investment Fund LLLP, Valmont Industries, Inc. and McCarthy Group, L.L.C. In deciding to nominate Mr. Stinson to the Board, the Board considered Mr. Stinson’s sound management, operations and leadership experience as well as his experience on the boards of other public companies, which provides him with broad experience on governance issues facing public companies.

 

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

 

The Audit Committee has appointed the firm of KPMG LLP, an independent registered public accounting firm, as our independent auditors for fiscal 2011 to conduct the audit of our financial statements. KPMG LLP has conducted the audits of our financial statements since fiscal 2006. The Audit Committee and the Board of Directors request that the stockholders ratify this appointment.

 

Representatives from KPMG are expected to be present at the annual meeting. The representatives will have the opportunity to make a statement and will be available to respond to appropriate questions. In the event the stockholders do not ratify the appointment, the Audit Committee will reconsider the appointment. Even if the appointed auditor is ratified, the Audit Committee may appoint a different independent auditor at any time during fiscal 2011 if, in its discretion, it determines that such a change would be in the company’s and its stockholders’ best interests.

 

Fees billed to us by KPMG for services provided for fiscal years 2010 and 2009 were as follows:

 

 

Audit Fees consist of the audits of our fiscal years 2010 and 2009 annual financial statements and the review of our quarterly financial statements during fiscal years 2010 and 2009.

 

Audit-Related Fees in fiscal years 2010 and 2009 consisted of other attestation services.

 

All Other Fees in fiscal years 2010 and 2009 related to a license for accounting research software.

 

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

 

The Audit Committee approved 100% of the services performed by KPMG relating to audit fees, audit-related fees and all other fees during fiscal years 2010 and 2009.

 

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

 

The following Compensation Discussion & Analysis, or CD&A, describes how, for fiscal 2010, the Human Resources Committee and Board of Directors designed the executive compensation program and set individual pay for the executive officers named in the compensation tables beginning on page 34. We refer to the Human Resources Committee as the Committee throughout the CD&A. Fiscal 2010 began June 1, 2009 and ended May 30, 2010.

 

The primary focus of the ConAgra Foods executive compensation program is to encourage and reward behavior that promotes attainment of our annual and long-term business goals. Those goals are set by management, under the oversight of the Board of Directors, and are designed to promote sustainable growth in stockholder value. As stockholders themselves, our leaders are keenly focused on achieving these goals. The executive compensation programs for fiscal 2010, and the three-year period beginning with fiscal 2010, align with this approach.

 

Executive Summary

 

On May 30, 2010, we concluded a successful fiscal 2010, during which the company exceeded its earnings forecast and continued to build an organization capable of delivering sustainable, profitable growth for its stockholders. This executive summary reviews not only the economic environment existing at the start of the fiscal year, which informed the Committee’s decisions regarding compensation opportunities for our senior leaders, but also the accomplishments during the year that impacted the actual compensation earned by that group.

 

In June 2009, which was the start of our fiscal 2010, we faced challenges, but remained optimistic about our business’ potential. The overall economic downturn was creating difficult business conditions. Consumers were looking for value in grocery stores, and eating out less. This was particularly troublesome for our Commercial Foods business, whose key customers are within the hard-hit foodservice industry. However, as a company, we were gaining momentum, particularly within our Consumer Foods business. That business was generating significant cost savings through supply chain efficiencies, which was creating the fuel for reinvestment in our brands. In addition, by combining innovation and value, and placing a strong focus on sales execution and marketing, the business was keeping pace with changing consumer needs and wants. Consumer Foods began fiscal 2010 having recently grown both share across a variety of key categories, and year-over-year operating profit.

 

We were also starting fiscal 2010 focused on a well defined set of long-term, strategic priorities developed through an analysis of where we have a “right to win,” because of our own skills and strengths, and an understanding of the potential for the categories in which our products compete. We had announced to investors the following product categories as areas of strategic focus:

 

 

As we began fiscal 2010, therefore, our priorities were clear. In the near term, we needed to build on the momentum within our Consumer Foods business, and use it to more than offset the challenges that the Commercial Foods segment was expected to face in light of a sluggish and slow-recovering foodservice sector. Also, our Chief Executive Officer, Gary Rodkin, challenged the organization to place an intense focus on

increasing operating cash flows. We announced fiscal 2010 performance expectations of diluted earnings per share from continuing operations in the range of $1.63 to $1.66 per share, excluding items impacting comparability.

 

From a longer-term perspective, we were focused on growing our company in a manner aligned with our strategic product categories; we use the categories to inform our investment decisions — regarding time, money and expertise. We also reiterated the following long-term financial goals:

 

 

Our short- and long-term goals were incorporated into the fiscal 2010 incentive programs approved by the Committee:

 

 

Fiscal 2010 Accomplishments

 

In light of the significant economic challenges facing the industry and broader economy, fiscal 2010 was a successful year for ConAgra Foods. We captured the momentum that began in the second half of fiscal 2009 and over-delivered on our original profit forecast. There were a number of accomplishments during the year. Highlights include the following:

 

 

 

The Committee recognized these accomplishments in authorizing the payouts under our fiscal 2008 to 2010 long-term incentive plan and fiscal 2010 management incentive plan discussed later in this CD&A. As fiscal 2011 begins, our leadership is optimistic about our company’s potential to continue to deliver value for our stockholders.

 

What are the Objectives of ConAgra Foods’ Compensation Program?

 

Our executive compensation program is designed to encourage and reward behavior that promotes sustainable growth in stockholder value. The Committee believes that for the overall program to do so, it must accomplish four objectives:

 

 

The Committee believes that designing the compensation program with multiple objectives in mind mitigates the risk that employees will take unnecessary and excessive risks that threaten the long-term health and viability of the company. With the assistance of management (human resources, legal and financial personnel), and the Committee’s independent compensation consultant, over the past several months the Committee undertook a comprehensive risk review of our compensation programs for employees generally to confirm its view. As a result of this review, we have concluded that our employees are not incented to take actions that may conflict with our long-term best interests. For example, our programs:

 

 

In sum, we believe our compensation policies and practices are balanced and do not encourage excessive risk-taking that is reasonably likely to have a material adverse effect on the company. We believe our compensation programs encourage and reward prudent business judgment and appropriate risk-taking over the long term.

How is the Executive Compensation Program Designed and Approved?

 

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

 

 

The Committee relies on the expertise of an independent compensation consultant, which it engages directly, to assist it in obtaining and reviewing information relevant to compensation decisions. After a thorough interviewing process during which the Committee evaluated several compensation consulting firms, in February 2010, Frederic W. Cook & Co., Inc. was engaged as the Committee’s consultant.

 

The independence and performance of the consultant are of the utmost importance to the Committee. As a result, the Committee maintains a policy that prevents management from directly engaging the consultant for significant projects without the prior approval of the Committee Chair. The Committee previously used the services of Towers Watson, formerly Towers Perrin, to provide advice and recommendations on executive and director compensation. Towers Perrin had been the Committee’s consultant for over seven years. In December 2009, Towers Perrin merged with Watson Wyatt, which management had engaged from time to time for various purposes. While the Committee was confident in the independence of Towers Perrin, the Committee believed it was prudent to change its consultant to maintain independence for future engagements. Given the focused scope of Frederic W. Cook & Co., Inc.’s services, no management-generated fees are expected with this firm. Also, the Committee reviews the types of services provided by the consultant and all fees paid for those services on a regular basis, and conducts a formal evaluation of the consultant annually. For fiscal 2010, neither Frederic W. Cook & Co., Inc. nor Towers Watson provided additional services to the company or its affiliates in an amount in excess of $120,000.

 

As a result of the change in the Committee’s consultant during fiscal 2010, the Committee has undertaken a general review of its compensation policies, practices and programs. No significant changes were made for fiscal 2010 policies, practices and programs as a result of the consultant change. Where this review has resulted in material program changes for fiscal 2011, we have described those changes.

 

As mentioned above, the Committee considers external comparisons when setting pay. The Committee does not set our named executive officers’ total compensation at any specific percentile of an external peer group’s compensation levels. Rather, the Committee uses external data as a market check on its compensation decisions. Specifically, the Committee reviews general industry data, a customized survey of data from companies in the food and consumer products industry, and a survey of a “peer group” of consumer product companies. The Committee’s consultant provides the Committee with this market information and assists the Committee in understanding the competitive market for the company’s executive positions. The data is one of a number of analytical tools and reference points used by the Committee, as noted above. The data is not, by itself, material to the Committee’s determination of an executive officer’s total pay.

 

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

2010, with the assistance of Towers Watson, the Committee approved the following peer group composition for fiscal 2010:

 

 

The Committee prefers consistency in the peer group year-to-year to the extent reasonable. With the exception of companies removed because they are no longer independent public companies, there were no changes in the peer group composition from fiscal 2009 to fiscal 2010, and the Committee approved this same peer group for use again in fiscal 2011. The median revenue of the peer group listed above is similar to ours; overall, the companies fall within a range of approximately one-quarter to 3.7 times our annual revenue. We use regression analysis to adjust the compensation data for differences in company revenues.

 

Considering the extent to which the company performs against expectations is also a critical component of the pay process. We discuss the link between company financial performance and our incentive compensation plans later in this CD&A. Mr. Rodkin is included in discussions of the Committee upon the request of the Committee for specific topics for which his input would be helpful or appropriate to the Committee’s discussions. For example, when requested by the Committee, Mr. Rodkin contributes to compensation decisions by providing the Committee with his views on the appropriate company goals to use in incentive plans. At the end of an incentive plan’s performance period, he is also asked to contribute by offering the Committee his views of the company’s actual performance. In fiscal 2010, the Committee used his input when determining the extent of discretion to apply to the annual incentive plan’s funding level (see page 27).

 

With respect to individual performance, which also informs compensation decisions, the Committee relies on regular performance evaluations, focused on matters such as the outcome of strategic projects or initiatives, whether organizational goals are met, and the leadership behaviors exhibited by an executive. The full Board participates in a formal evaluation of Mr. Rodkin’s performance each year. As a part of this process, Mr. Rodkin provides the Board with a self-assessment. For the other named executive officers, none of whom reports directly to the Board, Mr. Rodkin shares his assessment of their performance during the year in leading their respective business functions and units. As part of this assessment, Mr. Rodkin provides his view on the level of salary and incentive compensation that the Committee should consider awarding to the individuals. Neither Mr. Rodkin nor any other individual named executive officer plays a direct role in his or her own compensation determination.

 

The remainder of this CD&A focuses primarily on fiscal 2010 compensation decisions, but also addresses certain significant changes to programs and pay levels for fiscal 2011 in the various sections. Our senior Human Resources and Legal officers and our compensation and benefits department work closely with the Committee to implement and administer the approved programs and support the Committee in communications with its consultant.

 

What Were the Key Elements of the Fiscal 2010 Compensation Program?

 

The fiscal 2010 pay packages for our named executive officers consisted of salary, short and long-term incentive opportunities and other benefits discussed below.

 

The Committee does not automatically set any of the components of pay at a percentile of our peer group or external market. Instead, it determines the amount and mix of salary and incentive compensation (that is, targeted short-term incentive levels as a percentage of salary, option grants and targeted performance shares), based primarily on a review of the following:

 

 

 

The Committee believes that using a mix of compensation types (for example, salary, cash incentives, and equity) and performance periods (for example, one-year and three-year periods) promotes behavior consistent with our long-term strategic plan and minimizes the likelihood of executives having significant motivation to pursue risky and unsustainable results.

 

By design, targeted incentive compensation for the named executive officers for fiscal 2010 was a significant percentage — more than 75% of total compensation. This is shown in the charts below. The Committee’s general policy is to provide the greatest percentage of the incentive opportunity in the form of long-term compensation payable in shares of our common stock. The Committee believes the emphasis on stock-based compensation is the best method of aligning management interests with those of our stockholders.

 

 

For fiscal 2010, consistent with previous years and based on the factors described above, Mr. Rodkin’s annual incentive opportunity (which we refer to and discuss below as the Management Incentive Plan or MIP) and long-term incentives (comprised of performance shares and an option award) were larger than the comparable opportunities for the other named executive officers. The Committee took into account Mr. Rodkin’s leadership, value to the company and accountability for the performance of the entire organization. The Committee also reviewed market data related to Mr. Rodkin’s compensation, as a whole and for each component, and found them reasonable versus the peer group. The Committee believes that within the company, Mr. Rodkin should have the highest ratio of incentive pay to salary and largest aggregate compensation opportunity.

 

With respect to the other named executive officers, for fiscal 2010, the Committee reviewed each person’s scope of responsibility, skills and experience, individual performance, the strategic plan for each person’s position, the long-term potential of the individual in the position, retention factors, and relevant market data. The Committee also considered internal pay equity. This analysis resulted in some differences in the incentive opportunities awarded under the MIP and performance share plan for these executives, and differences in option grant sizes based on the individual factors reviewed. However, the total compensation opportunity for each of these named executive officers reflects a similar mix of incentive pay and salary.

 

Below is a more detailed analysis of each element of the fiscal 2010 compensation program for our named executive officers, including the impact of promotions or separations from the company. On September 21, 2009, Ms. Colleen R. Batcheler was promoted from Senior Vice President, General Counsel and Corporate Secretary, to Executive Vice President, General Counsel and Corporate Secretary, reporting directly to Mr. Rodkin. On October 30, 2009, Mr. Peter M. Perez, the former Executive Vice President, Human Resources, of the company ceased to be an executive officer of the company. On December 31, 2009, Mr. Perez’ employment with the company terminated and the company entered into a Transition and Severance Agreement with Mr. Perez, which is discussed beginning on page 53 and which we refer to as the “Severance Agreement”. Mr. Robert F. Sharpe, Jr. assumed Human Resources responsibilities in connection with Mr. Perez’ departure; his title changed to Executive Vice President, Chief Administrative Officer, and President, Commercial Foods.

1. Salaries. The Committee determines salary by analyzing a position’s strategic importance to the company, recruitment and retention pressures, the executive’s contribution to the company and the market data supplied by its consultant. For Messrs. Rodkin and Sharpe, their employment agreements also inform salary decisions. Mr. Rodkin’s employment agreement provides for an annual salary of $1,000,000, which has not increased since he joined the company in 2005. Mr. Sharpe’s employment agreement provides for an annual salary of $675,000, which has increased once since joining the company in 2005 due to an increase in responsibilities.

 

Excluding the impact of promotions, no executive officer received a salary increase for fiscal 2010. Annual salary increases for senior officers across the company were frozen given the broader economic environment in the summer of 2009. This salary freeze enabled the company to fund pay increases for employees below senior leadership levels.

 

As noted above, on September 21, 2009, Ms. Colleen R. Batcheler was promoted from Senior Vice President, General Counsel and Corporate Secretary, to Executive Vice President, General Counsel and Corporate Secretary, reporting directly to Mr. Rodkin. In connection with her promotion, her salary was increased from $375,000 to $415,000.

 

On July 25, 2010, the Committee approved an increase in base salary for Mr. John F. Gehring, our Chief Financial Officer, from $450,000 to $500,000 per year, in recognition of Mr. Gehring’s performance and development in his role as Chief Financial Officer. Since assuming the role in January 2009, he has also taken on the additional responsibility of leading investor relations.

 

2. Incentive Programs. Consistent with its overall compensation objectives, the Committee aligned management compensation with company performance through a mix of annual and long-term incentive programs for fiscal 2010. Financial targets disclosed in this section are done so in the limited context of these incentive plans and they are not statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.

 

Short-Term Incentive Plan. The fiscal 2010 MIP provided a cash incentive opportunity to about 2,000 employees, including the named executive officers. For each of the named executive officers, the fiscal 2010 MIP opportunity was based on:

 

 

Below is a discussion of how each of these considerations was applied to the fiscal 2010 awards earned by the named executive officers.

 

First Consideration: Were Pre-Established Performance Goals Met? At the start of fiscal 2010, the Committee authorized minimum, target and maximum PBT goals for the named executive officers under the MIP, and correlated senior management incentive opportunities with those levels of PBT. The Committee has discretion to exclude items impacting comparability from company-wide PBT goals according to the terms of the plan. The PBT goals for the fiscal 2010 MIP applicable to the named executive officers were:

 

 

The Committee established the minimum at a level that would preclude payments if our PBT performance did not at least match that of fiscal 2009. The target was established to align with our original guidance to stockholders of diluted EPS from continuing operations of approaching $1.63 to $1.66, excluding

items impacting comparability. To achieve a maximum payout under the plan, the company would have needed to achieve more than 16% diluted EPS growth versus fiscal 2009.

 

The following table shows the ranges of authorized payments for the named executive officers for the PBT goals approved for the fiscal 2010 MIP. The Committee authorized a range of payout options at each level of PBT to maximize its flexibility in determining awards, while still preserving the tax deductibility of awards. The named executive officers were aware that absent extraordinary performance, the Committee authorized these ranges with the intent of making payouts that were adjusted downward toward the low-end of each range. As a result, the Committee believes that no incentive is guaranteed, each named executive officer’s targeted MIP opportunity is a reference to the low-end of the range identified in column (2) of the following table, and each executive officer’s maximum MIP opportunity is a reference to the high-end of the range identified in column (3) of the following table.

 

Authorized MIP Payout Range With Achievement of:

 

 

 

 

 

The fiscal 2010 MIP defined PBT as the company’s income tax expense plus its net income from continuing operations before cumulative effect of changes in accounting. To incent management to make decisions that have positive long-term impacts, even at the expense of shorter term results, and to prevent one-time gains and losses from having too great an impact on plan payouts, the terms of the plan allowed PBT to be adjusted for specific items that occurred during the year. For fiscal 2010, the Committee approved adjustments to eliminate the impacts of asset sales, favorable changes in legal reserves, restructuring events approved during the fiscal year, asset impairments, benefits from insurance recoveries received but not yet realized, and unusual expenses associated with a tax-incentive project that will benefit future year results.

 

The company achieved fiscal 2010 PBT of $1,226.6 million for plan purposes, which was above target performance but below maximum. Payouts up to the high-end of the levels indicated in column (2) of the above table were permitted.

 

Second Consideration: How was the Business Plan Delivered? Once the PBT review was complete, the Committee considered the manner in which management executed the operating plan during the year. The fiscal 2010 MIP gave the Committee discretion to reduce payouts based on this assessment.

 

Mr. Rodkin provided his views to the Committee during this process. Mr. Rodkin shared his views with the Committee about the quality of the fiscal year profit delivery, including the accomplishments listed on pages 20 and 21. He emphasized the operating cash flow results, which were very strong. These results stemmed from solid earnings and an intense focus from management on working capital improvement throughout the year. However, he also noted the challenges experienced by the business, particularly in growing revenue during the year, and his views that negative discretion to plan payouts could be appropriately applied.

 

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

 

Third Consideration: How Did Each Named Executive Officer Perform? The Committee’s final consideration in determining each active named executive officer’s fiscal 2010 MIP payout was an assessment of his or her individual performance. Mr. Rodkin’s input on the individual contribution of these leaders assisted the Committee in approving their specific MIP payouts. The full Board’s performance evaluation of Mr. Rodkin was used in determining his payout. Mr. Perez remained eligible for a MIP award for fiscal 2010 pursuant to the Severance Agreement. Mr. Perez’ MIP award was subject to the company’s achievement of the plan targets described above, as certified by the Committee, but did not take into consideration individual performance.

 

The Committee approved MIP payouts to the named executive officers ranging from 80% to 100% of the maximum dollar amounts allowed for achievement of performance between target and maximum PBT. The Committee believes that the MIP awards paid to the named executive officers for fiscal 2010 are consistent with the level of accomplishment by the company and the named individuals.

 

 

 

 

On July 20, 2010, the Committee established the fiscal 2011 annual incentive plan. The plan provides a fiscal 2011 cash incentive opportunity for participants based on our achievement of pre-established financial objectives. Payouts to the named executive officers require the achievement in fiscal 2011 of a minimum level of PBT. No named executive officer is guaranteed a minimum award. High levels of financial performance can result in payouts up to 200% of targeted amounts. The Committee also retained the discretion to modify payout levels based on (1) the methods in which actual financial results are achieved, (2) individual performance and (3) extraordinary corporate events. Any actual payout (including any above target payout) will depend on our performance in fiscal 2011 and be made, if at all, following the end of fiscal 2011.

 

Long-Term Incentive Plan. The long-term incentive plan for senior officers includes an award of stock options and an award of performance shares that are settled in shares of common stock based on results over a three-year performance period. The performance shares reward the improvement over the three-year performance period in metrics likely to have a significant impact on enterprise value: growth in earnings from continuing operations before interest and taxes, or EBIT, and performance against return on average invested capital goals, or ROAIC. These metrics are calculated as follows:

 

 

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

 

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

 

Stock Options. The use of stock options directly aligns the interests of the named executive officers with those of our stockholders. The options granted in July 2009 to our named executive officers for fiscal 2010 have a seven-year term, an exercise price at the closing market price of the company’s common stock on the date of grant ($19.05), and vested 40% on the first anniversary of the grant date. The remaining portion of the stock option award vests in equal installments on the second and third anniversaries of the grant date, subject to the executive’s continued employment with the company. The grant date fair value of the stock options awarded to our named executive officers for fiscal 2010 is included in the “Option Awards” column of

the Summary Compensation Table on page 34. The number of options granted to each named executive officer under the fiscal 2010 option program is as follows:

 

 

 

 

Stock options remained a significant component of the fiscal 2011 to 2013 long-term incentive program for senior executives.

 

Performance Shares. Performance shares represent the award of an opportunity to earn a defined number of shares of our common stock if we achieve pre-set, three-year performance goals. For the three performance periods in effect during fiscal 2010, the targeted number of shares for each named executive officer was as set forth in the table that follows.

 

 

 

 

The grant date fair value of the performance shares granted for the fiscal 2010 to 2012 program is included in the “Stock Awards” column of the Summary Compensation Table. More specific information about the performance shares follows.

 

Award Value. As indicated in the table above, the numbers of targeted performance shares, by named executive officer, have been flat (excluding the impact of promotions for Ms. Batcheler and Mr. Gehring). In lieu of determining performance share grant sizes using a targeted dollar value, and then dividing that value by

our stock price on the date of grant, the Committee used a fixed share approach to determine target awards in each of the outstanding cycles. In these cycles, the Committee has believed that a target dollar value approach would inappropriately increase the number of performance shares awarded (particularly during a recessed market like the one facing the company at the start of fiscal 2010). Instead, with the exception of increases for promotions, the Committee has awarded the same number of target performance shares each year, with the belief that the market will normalize over the three year performance period of the awards. Thus, over time, the awards become market competitive grants, rather than inflated opportunities. The Committee will continue to evaluate its approach, and ensure that targeted awards are appropriate.

 

The actual number of shares of common stock that will be issued for each performance share cycle is determined based on a combination of growth in EBIT and performance against targets for ROAIC. The Committee selected these financial metrics because it believes they have a positive impact on stockholder value. The following table includes the performance targets required in each of the cycles outstanding during fiscal 2010 that result in a payout of 100% of the total number of shares granted (as specified in the table above). A payout of less than 100%, or more than 100%, of the total number of shares granted may be earned depending on actual results, but no payouts are guaranteed. In each program cycle, the targets are designed such that lower levels of combined EBIT growth and ROAIC are rewarded at significantly less than a full payout on the granted performance shares. In each case, the maximum number of shares that may be earned under the plan is 300% of the original grant.

 

 

Because these EBIT targets are focused on growth over the relevant performance period, the baseline level of EBIT from which performance is expected to grow impacts the target. A low baseline for the fiscal 2009 to 2011 cycle (due to weaker than planned performance in our Consumer Foods business in fiscal 2008) is the reason for the 14% EBIT growth target in that cycle.

 

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

 

Fiscal 2008-2010 Performance. At the end of fiscal 2010, the fiscal 2008 to 2010 cycle of the long-term program concluded. The company delivered a combined level of three-year compound EBIT growth and three-year average ROAIC over the fiscal 2008 to 2010 performance period (after adjustments) that equaled a funding level of approximately 78% of target. This funding level was achieved through the delivery of three-year compound EBIT growth of approximately 1%, and a three-year average ROAIC of approximately 13%. EBIT growth was below targeted levels, due in part to the inclusion of EBIT from the Trading and Merchandising business for fiscal year 2008, but not for fiscal 2009 as discussed above, as well as due to underperformance by our Consumer Foods business in fiscal 2008. Our strong fiscal 2010 performance was

insufficient to overcome these items in a meaningful way. The ROAIC performance reflected above-target results for the performance period.

 

EBIT growth and average ROAIC for the fiscal 2008 to 2010 cycle were calculated taking into account the divestiture-related adjustments discussed above. The Committee also authorized several less significant adjustments to fiscal 2010 EBIT to eliminate the impact of unusual items, mirroring those authorized for the fiscal 2010 MIP. However, the challenges experienced by the business over the cycle, particularly in growing revenue, resulted in the Committee applying negative discretion to the fiscal 2008 to 2010 cycle performance share payouts. Awards were paid out at 68% of target.

 

The following numbers of shares of common stock were issued to reflect performance shares earned for the fiscal 2008 to 2010 cycle (amounts include dividend equivalents, paid in additional shares):

 

 

Pursuant to the terms of the Performance Share Plan, Mr. Perez forfeited all shares to be granted to him for the fiscal 2008 to 2010 cycle.

 

With respect to the fiscal 2009 to 2011 program and fiscal 2010 to 2012 program, no payouts have yet been earned. It is anticipated that a comparable performance share program will be authorized for the fiscal 2011 to 2013 performance program.

 

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

 

3. Other Fiscal 2010 Compensation.

 

Discretionary Bonus. The Committee may choose to approve a sign-on or discretionary bonus for a senior officer if it deems it necessary as a recruitment tool or to recognize extraordinary performance (shown in the “Bonus” column of the Summary Compensation Table). No discretionary bonuses were awarded to senior officers during fiscal 2010.

 

Retirement and Health and Welfare Programs. We offer a package of core employee benefits to our employees, including our named executive officers. This includes health, dental and vision coverage, life insurance and disability insurance. The company and employee participants share in the cost of these programs. Each of the named executive officers was also entitled to participate in an executive physical program, together with his or her spouse, during fiscal 2010. The company covered the cost of these physicals, although the executive was responsible for the taxes associated with the program. In fiscal 2011, the spousal benefit was eliminated. A medical access program was added for senior executives in fiscal 2011, with the cost of the program imputed to the executive as taxable income. With respect to retirement benefits, we maintain qualified 401(k) retirement plans (with a company match on employee contributions) and qualified pension plans. The named executive officers participate in these plans.

 

Some of the named executive officers participate in a non-qualified pension plan, non-qualified 401(k) plan and deferred compensation plan. The non-qualified pension and non-qualified 401(k) plans permit us to pay retirement benefits to certain named executive officers in amounts that exceed the limitations imposed by the Internal Revenue Code, which we refer to as the Code, under qualified plans. With respect to the non-qualified pension plan, our employment agreements with Messrs. Rodkin and Sharpe provide that, subject to

service requirements and various exceptions, years of service for purposes of calculating benefits will be credited at a three-for-one rate until the executive has service credit of thirty years. Mr. Rodkin’s agreement also provides that the annual earnings amount to be used in the pension benefit formula under the non-qualified pension plan will be no less than $3.0 million.

 

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

 

We show contributions made by the company to the named executive officers’ 401(k) plan and non-qualified 401(k) plan accounts in the “All Other Compensation” column of the Summary Compensation Table. We provide a complete description of these retirement programs under the headings “Pension Benefits — Fiscal 2010” and “Non-Qualified Deferred Compensation — Fiscal 2010” below.

 

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

 

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

 

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

 

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

 

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

 

The Committee has adopted stock ownership guidelines applicable to approximately 200 of the company’s senior officers because it believes that management stock ownership promotes alignment with stockholder interests. The number of shares of ConAgra Foods common stock that our named executive officers are required to hold is set at a multiple of their salary and increases with greater responsibility within the company. The named executive officers are expected to reach the set level within a reasonable period of time after appointment. Shares personally acquired by the executive through open market purchases or through our 401(k) plan or employee stock purchase plan, as well as restricted stock units, restricted shares and shares acquired upon the deferral of earned bonuses are counted toward the ownership requirement. Neither

unexercised stock options nor unearned performance shares are counted. The following table reflects ownership as of August 2, 2010.

 

 

 

 

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

 

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

 

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

 

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

 

The Human Resources Committee has reviewed and discussed the company’s Compensation Discussion & Analysis with management. Based upon this review and discussion, the Committee recommended to the Board of Directors that the company’s Compensation Discussion & Analysis be included in this proxy statement and incorporated by reference in the company’s Annual Report on Form 10-K for the fiscal year ended May 30, 2010.

 

ConAgra Foods, Inc. Human Resources Committee

 

Steven F. Goldstone
Joie A. Gregor
Ruth Ann Marshall
Ken Stinson, Chairman

 

The table below presents compensation for individuals who served as our Chief Executive Officer and Chief Financial Officer during fiscal 2010, for each of the other three most highly-compensated executive officers who were serving as executive officers at the end of fiscal 2010, and for Mr. Perez, an executive officer who separated from the company during fiscal 2010 but who otherwise would have qualified to be a named executive officer. Ms. Batcheler was not a named executive officer in fiscal 2009 or fiscal 2008, and therefore information about her compensation for those fiscal years is not included. The amounts in the following Summary Compensation Table are based in part on written agreements in place between ConAgra Foods and certain of these individuals as discussed in the “Compensation Discussion & Analysis” and “Potential Payments Upon Termination or Change of Control”.

 

 

 

 

 

 

 

 

The following table presents information about grants of plan-based awards (equity and non-equity) during fiscal 2010 to the named executive officers. All equity-based grants were made under the stockholder-approved ConAgra Foods 2006 Stock Plan.