ARCHER-DANIELS-MIDLAND COMPANY

4666 Faries Parkway, Decatur, Illinois 62526-5666

 

 

NOTICE OF ANNUAL MEETING

 

 

 

To All Stockholders:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Archer-Daniels-Midland Company, a Delaware corporation, will be held at the JAMES R. RANDALL RESEARCH CENTER, 1001 Brush College Road, Decatur, Illinois, on Thursday, November 4, 2010, commencing at 10:30 A.M., for the following purposes:

 

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

 

(2) To ratify the appointment by the Board of Directors of Ernst & Young LLP as independent auditors to audit the accounts of the Company for the fiscal year ending June 30, 2011;

 

(3) If properly presented, to consider and act upon the Stockholders’ proposals set forth in the accompanying Proxy Statement; and

 

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

 

By Order of the Board of Directors

 

 

D. J. Smith, Secretary

 

September 24, 2010

 

 

 

 

ARCHER-DANIELS-MIDLAND COMPANY

4666 Faries Parkway, Decatur, Illinois 62526-5666

 

September 24, 2010

 

 

PROXY STATEMENT

 

 

 

General Matters

 

Our board of directors asks that you complete the accompanying proxy for the annual stockholders’ meeting. The meeting will be held at the time, place, and location mentioned in the Notice of Annual Meeting included in this mailing. We are first mailing our stockholders this proxy statement and a proxy form (included in this mailing) around September 24, 2010.

 

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

 

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

 

Our common stock stockholders of record at the close of business on September 9, 2010, are the only people entitled to notice of the annual meeting and to vote at the meeting. At the close of business on September 9, 2010, we had 638,683,623 outstanding shares of common stock, each share being entitled to one vote on each of the ten director nominees and on each of the other matters to be voted on at the meeting. Our stockholders are the only people entitled to attend the annual meeting. We reserve the right to direct stockholder representatives with the proper documentation to an alternative room to observe the meeting.

 

All stockholders will need a form of photo identification to attend the annual meeting. If you are a stockholder of record and plan to attend, please detach the admission ticket from the top of your proxy card and bring it with you to the meeting. The number of people we will admit to the meeting will be determined by how the shares are registered, as indicated on the admission ticket. If you are a stockholder whose shares are held by a broker, bank, or other nominee, please request an admission ticket by writing to our office at Archer-Daniels-Midland Company, Shareholder Relations, 4666 Faries Parkway, Decatur, Illinois 62526-5666. Your letter to our office must include evidence of your stock ownership. You can obtain evidence of ownership from your broker, bank, or nominee. The number of tickets sent will be determined by the manner in which shares are registered. If your request is received by October 21, 2010, an admission ticket will be mailed to you. Entities, such as a corporation or limited liability company, that are stockholders may send one representative to the annual meeting and the representative should have a pre-existing relationship with the entity represented. All other admission tickets can be obtained at the registration table located at the James R. Randall Research Center lobby beginning at 8:30 A.M. on the day of the meeting. Stockholders who do not pre-register will only be admitted to the meeting upon verification of stock ownership.

 

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

Any request to deviate from the admittance guidelines described above should be in writing, addressed to our office at Archer-Daniels-Midland Company, Secretary, 4666 Faries Parkway, Decatur, Illinois 62526-5666 and received by us by October 21, 2010. We will also have personnel in the lobby of the James R. Randall Research Center beginning at 8:30 A.M. on the day of the meeting to consider special requests.

 

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

 

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

 

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

 

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

 

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

 

Principal Holders of Voting Securities

 

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

 

 

 

 

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

 

Our board of directors has fixed the size of the board at ten. Unless you provide different directions, we intend for board-solicited proxies (like this one) to be voted for the nominees named below.

 

Although the nominees proposed for election to the board of directors are all presently members of the board, Mr. Dufour has not previously been elected by our stockholders. Mr. Dufour was identified by the Nominating/Corporate Governance Committee as a potential nominee and was recommended by the Nominating/Corporate Governance Committee after such committee completed its interview and vetting process with respect to Mr. Dufour.

 

The nominees would hold office until the next annual stockholders’ meeting and until their successors are elected and qualified. If any nominee for director becomes unable to serve as a director, we intend that the persons named in the proxy may vote for a substitute who will be designated by the board of directors. The board has no reason to believe that any nominee will be unable to serve as a director.

 

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

The table below lists the nominees, their ages, positions with our company, principal occupations, current directorships of other publicly-owned companies, directorships of other publicly-owned companies held within the past five years, the year in which each first was elected as a director, and the number of shares of common stock beneficially owned as of September 9, 2010, directly or indirectly. Unless otherwise indicated in the footnotes to the following table, and subject to community property laws where applicable, we believe that each nominee named in the table below has sole voting and investment power with respect to the shares indicated as beneficially owned. Unless otherwise indicated, all of the nominees have been executive officers of their respective companies or employed as otherwise specified below for at least the last five years.

 

 

 

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

 

Director Experiences, Qualifications, Attributes and Skills, and Board Diversity

 

In assessing an individual’s qualifications to become a member of the board, the Nominating/Corporate Governance Committee may consider various factors including education, experience, judgment, independence, integrity, availability, and other factors that the Nominating/Corporate Governance Committee deems appropriate. The Nominating/Corporate Governance Committee strives to recommend candidates that complement the current board members and other proposed nominees so as to further the objective of having a board that reflects a diversity of background and experience with the necessary skills to effectively perform the functions of the board and its committees. In addition, the Nominating/Corporate Governance Committee considers personal characteristics of nominees and current board members, including race, gender and geographic origin, in an effort to obtain a diversity of perspectives on the board.

 

The specific experience, qualifications, attributes and skills with respect to each of our directors are listed below:

 

George W. Buckley

 

Dr. Buckley became Chairman, President and Chief Executive Officer of 3M Company in December, 2005 and he previously held executive positions at Brunswick Corp., Emerson Electric Co. and British Railways. Dr. Buckley’s Bachelor of Science degree in Electrical and Electronic Engineering and his Doctoral degree in Engineering in joint study at Huddersfield and Southampton Universities, his service as Chairman of the Board, President and Chief Executive Officer of 3M Company, his leadership roles at the Brunswick Corporation, Emerson Electric Co. and British Railways, his skills in business and financial matters and his experience as a director of the public companies listed above, qualify him to serve as a director of our company.

 

Mollie Hale Carter

 

Ms. Carter has twenty-three years of business experience in the agricultural sector, including consulting, finance and operations. Ms. Carter also has served since 1995 as the Chairman and/or Chief Executive Officer of a regional financial institution based in Salina, Kansas. Ms. Carter’s qualifications to serve as a director of our company include her substantial leadership experience as a chief executive officer, her financial expertise, her service as a director of Westar Energy, Inc., her previous service as a director of Premium Standard Farms, Inc., and her significant experience in the agricultural sector.

Pierre Dufour

 

Mr. Dufour is Senior Executive Vice President of Air Liquide Group, the world leader in gases for industry, health and the environment. Having joined Air Liquide in 1997, Mr. Dufour was named Senior Executive Vice President in November 2007. Since January 2010, he has supervised Air Liquide’s operations in the Americas, Africa-Middle East and Asia-Pacific zones, while also overseeing, globally, Air Liquide’s industrial World Business Lines, Engineering and Construction. Mr. Dufour’s qualifications to serve as a director of our company include his substantial leadership, engineering, operations management and international business experience.

 

Donald E. Felsinger

 

Mr. Felsinger brings extensive experience as a board member, chair and CEO with Fortune 500 companies. His leadership roles at Sempra Energy and other energy companies have allowed him to provide our board of directors with his expertise in mergers and acquisitions, environmental matters, corporate governance, strategic planning, engineering, finance, human resources, compliance, risk management, international business and public affairs. Mr. Felsinger possesses in-depth knowledge of executive compensation and benefits practices and serves as a member of the Compensation/Succession Committee.

 

Victoria F. Haynes

 

Dr. Haynes has served since July 1999 as President and Chief Executive Officer of RTI International. Prior to joining RTI, she was Vice President of the Advanced Technology Group and Chief Technical Officer of Goodrich Corporation, a specialty chemicals and aerospace company, from 1992 to 1999. Dr. Haynes brings more than 30 years of experience in technology leadership, management and new business development to our board of directors.

 

Antonio Maciel Neto

 

Mr. Maciel has been Chief Executive Officer of Suzano Papel e Celulose S/A, one of Latin America’s largest vertically integrated producers of paper and eucalyptus pulp, since June 2006. From 1999 to May 2006, Mr. Maciel held various executive positions with Ford Motor Company, including Chief Executive Officer of Ford South America Operations. Mr. Maciel’s qualifications to serve on our company’s board of directors include his substantial leadership, international business, environmental and sustainability, engineering, product development and innovations and operations management experience.

 

Patrick J. Moore

 

Mr. Moore has been Chief Executive Officer of Smurfit-Stone Container Corporation since 2003, and has held positions of increasing importance at Smurfit-Stone and related companies since 1987. Prior to 1987, Mr. Moore served 12 years at Continental Bank in various corporate lending, international banking and administrative positions. Mr. Moore brings to our board of directors his substantial experience in leadership, banking and finance, strategy development, sustainability and operations management.

 

Thomas F. O’Neill

 

Mr. O’Neill has worked on Wall Street since 1972 and, as a founding principal of a nationally-recognized investment bank, he has broad experience in the areas of finance, mergers and acquisitions and business development. Mr. O’Neill specializes in working with financial institutions and his substantial experience in the finance community contributes to his role as chair of the Audit Committee.

 

Kelvin R. Westbrook

 

Mr. Westbrook brings legal, media and marketing expertise to the board of directors. He is a former partner of a national law firm, was the President, Chief Executive Officer and co-founder of two large cable television and broadband companies and was or is a member of the board of numerous high-profile companies,

including the National Cable Satellite Corporation, better known as C-SPAN. Mr. Westbrook currently serves on the boards of two other public companies and a multi-billion dollar not-for-profit healthcare services company.

 

Patricia A. Woertz

 

Prior to joining our company, Ms. Woertz held positions of increasing importance at Chevron Corporation and its predecessor companies. Having started her career as a certified public accountant with Ernst & Ernst, and with a broad range of executive roles at Chevron Corporation and its predecessor companies, Ms. Woertz brings to the board of directors of our company a significant amount of leadership, strategy development, risk management, mergers and acquisitions, international business, marketing, finance and technology experience.

 

Board Leadership Structure

 

Our company’s board of directors does not have a current requirement that the roles of Chief Executive Officer and Chairman of the Board be either combined or separated, because the board believes it is in the best interests of our company to make this determination based on the position and direction of our company and the constitution of the board and management team. The board regularly evaluates whether the roles of Chief Executive Officer and Chairman of the Board should be combined or separated. The board has determined that having our company’s Chief Executive Officer serve as Chairman is in the best interest of our stockholders at this time. The Chief Executive Officer is responsible for the day-to-day management of our company and the development and implementation of our company’s strategy, and has access to the people, information and resources necessary to facilitate board function. Therefore, the board believes that combining the roles of Chief Executive Officer and Chairman contributes to an efficient and effective board.

 

The non-management directors elect a Lead Director at the board’s annual meeting. The board believes that naming an independent Lead Director more accurately reflects the accountability and responsibilities that accompany a non-executive position and does not believe that our stockholders would benefit at this time by having the roles of Chief Executive Officer and Chairman of the Board filled by different individuals. Our Lead Director provides the board with independent leadership and facilitates the independence of the board from management. The duties and responsibilities of the Lead Director are set forth in our Corporate Governance Guidelines as follows: (i) organize, convene and preside over executive sessions of the non-management and independent directors and promptly communicate the messages and directives approved by such directors at each such meeting to the Chairman and Chief Executive Officer; (ii) preside at all meetings of the board at which the Chairman of the board is not present; (iii) consult with the Chairman and Chief Executive Officer in establishing meeting schedules and agendas, and in determining the information to be forwarded to the directors both in conjunction with such meetings and otherwise; (iv) facilitate communication among the directors and between the board and the Chairman and Chief Executive Officer; (v) serve as an advisor to the board committees, chairmen of the board committees and other directors; and (vi) such other duties and responsibilities as assigned from time-to-time by the non-management directors consistent with the Lead Director’s role.

 

In addition to appointing a Lead Director, our non-management directors facilitate the board’s independence by meeting frequently as a group and fostering a climate of transparent communication. The high level of contact between our Lead Director and our Chairman between board meetings and the specificity contained in the board’s delegation of authority parameters also serve to foster effective board leadership.

 

Board Role in Risk Oversight

 

Management is responsible for day-to-day risk assessment and mitigation activities, and our company’s board of directors is responsible for risk oversight, focusing on our company’s overall risk management strategy, our company’s degree of tolerance for risk and the steps management is taking to manage our company’s risks. While the board as a whole maintains the ultimate oversight responsibility for risk management, the committees of the board can be assigned responsibility for risk management oversight of specific areas. The Audit Committee currently maintains responsibility for overseeing risks related to our

company’s financial reporting, audit process, and internal controls over financial reporting and disclosure controls and procedures. The Nominating/Corporate Governance Committee has the authority to assign oversight of risk areas to specific committees as the need arises.

 

Management has established an Integrated Risk Management Committee consisting of company personnel representing multiple functional and regional areas within our company, with broad oversight of the risk management process. Such committee’s responsibilities and objectives include:

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Based on our review of Forms 3, 4 and 5 we have received from, or have filed on behalf of, our directors and executive officers, and of written representations from those persons that they were not required to file a Form 5, we believe that, during the fiscal year ended June 30, 2010, our directors and executive officers complied with all Section 16(a) filing requirements.

Executive Stock Ownership Policy

 

The board of directors believes that it is important for each member of our senior management to acquire and maintain a significant ownership position in shares of our common stock to further align the interests of senior management with the stockholders’ interests. Accordingly, we have adopted a policy regarding ownership of shares of our common stock by senior management. The policy calls for members of senior management to own shares of common stock with a fair market value within a range of one to five times that individual’s base salary, depending on each individual’s level of responsibility with our company. As of the date of this proxy statement, each of the named executive officers (as defined herein) has exceeded the applicable guideline. The stock ownership guidelines applicable to the named executive officers are set forth below.

 

 

Executive Officer Stock Ownership

 

The following table shows the number of shares of our common stock beneficially owned as of September 9, 2010, directly or indirectly, by each of the individuals named in the Summary Compensation Table on page 31.

 

 

 

 

Common stock beneficially owned as of September 9, 2010 by all directors and executive officers as a group, numbering 33 persons including those listed above, is 16,022,451 shares representing 2.51% of the outstanding shares, of which 1,728,633 shares are unissued but are subject to stock options exercisable within 60 days.

 

Independence of Directors

 

NYSE Independence

 

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

 

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

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

 

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

 

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

 

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

 

Bylaw Independence

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

The board of directors has reviewed business and charitable relationships between us and each non-employee director to determine compliance with the NYSE and bylaw standards described above and to evaluate whether there are any other facts or circumstances that might impair a director’s or nominee’s independence. Based on that review, the board has determined that nine of its ten current members, Dr. Buckley, Messrs. Dufour, Felsinger, Maciel, Moore, O’Neill, and Westbrook, Dr. Haynes and Ms. Carter, are independent. Ms. Woertz is not independent under the NYSE or bylaw standards because of her employment with us.

 

In determining that Dr. Buckley is independent, the board considered that, in the ordinary course of business, 3M Company, of which Dr. Buckley is Chairman, President and Chief Executive Officer, purchased approximately $322,000 of certain commodity products from our company, and sold approximately $640,000 of supplies to our company, on an arms-length basis during the fiscal year ended June 30, 2010. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of 3M Company’s consolidated

gross revenues, that Dr. Buckley does not have a direct or indirect material interest in such transactions, and that such transactions do not otherwise impair Dr. Buckley’s independence.

 

In determining that Ms. Carter is independent, the board considered that, during all or a portion of the fiscal year ended June 30, 2010, Ms. Carter’s brother was employed by our company in a non-executive officer capacity as a compliance auditor at total compensation less than $120,000. The board determined that Ms. Carter does not have a direct or indirect material interest in such employment relationship and that such employment relationship does not otherwise impair Ms. Carter’s independence. Also in determining that Ms. Carter is independent, the board considered that, during the fiscal year ended June 30, 2010, the company purchased from Westar Energy Inc. approximately $2.8 million of utility services in the ordinary course of business and on an arms-length basis. Ms. Carter is a director of Westar Energy Inc. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of Westar Energy Inc.’s consolidated gross revenues, that Ms. Carter does not have a direct or indirect material interest in such utility transactions, and that such utility transactions do not otherwise impair Ms. Carter’s independence.

 

In determining that Mr. Dufour is independent, the board considered that, in the ordinary course of business, Air Liquide Group, of which Mr. Dufour is Senior Executive Vice President, sold approximately $1.2 million of certain supplies and commodity products to our company on an arms-length basis during the fiscal year ended June 30, 2010. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of Air Liquide Group’s consolidated gross revenues, that Mr. Dufour does not have a direct or indirect material interest in such transactions, and that such transactions do not otherwise impair Mr. Dufour’s independence.

 

In determining that Mr. Felsinger is independent, the board considered that, in the ordinary course of business, Sempra Energy, of which Mr. Felsinger is Chairman and Chief Executive Officer, purchased approximately $363,000 of ethanol from our company, and sold approximately $7.3 million of ethanol to our company, on an arms-length basis during the fiscal year ended June 30, 2010. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of Sempra Energy’s consolidated gross revenues, that Mr. Felsinger does not have a direct or indirect material interest in such transactions, and that such transactions do not otherwise impair Mr. Felsinger’s independence.

 

In determining that Mr. Moore is independent, the board considered that, in the ordinary course of business, Smurfit-Stone Container Corporation, of which Mr. Moore is Chief Executive Officer, purchased approximately $11.4 million worth of certain commodity products from our company, and sold approximately $3.8 million worth of certain products to our company, on an arms-length basis during the fiscal year ended June 30, 2010. The board determined that this arrangement did not exceed the NYSE’s threshold of 2% of Smurfit-Stone Container Corporation’s consolidated gross revenues, that Mr. Moore does not have a direct or indirect material interest in such transactions, and that such transactions do not otherwise impair Mr. Moore’s independence.

 

Corporate Governance Guidelines

 

The board has adopted corporate governance guidelines that govern the structure and functioning of the board and set-out the board’s policies on governance issues. The guidelines, along with the written charters of each of the committees of the board and our bylaws, are posted on our internet site, www.adm.com, and are available free of charge on written request to Secretary, Archer-Daniels-Midland Company, 4666 Faries Parkway, Decatur, Illinois 62526-5666.

 

Executive Sessions

 

In accordance with our corporate governance guidelines, the non-management directors meet in executive session at least quarterly. If the non-management directors include any directors who are not independent pursuant to the board’s determination of independence, at least one executive session includes only independent directors. The lead director, or in his or her absence, the chairperson of the Nominating/Corporate Governance Committee, presides at such meetings. The non-management directors met in executive session four times during fiscal 2010.

Board Meetings and Attendance at Annual Meetings of Stockholders

 

During the last fiscal year, our board of directors held nine meetings. All incumbent directors attended 75% or more of the combined total meetings of the board and the committees on which they served during the last fiscal year. We expect all director nominees to attend the annual stockholders’ meeting. All director nominees standing for election at our last annual stockholders’ meeting held on November 5, 2009 attended that meeting.

 

Information Concerning Committees and Meetings

 

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

 

Audit Committee

 

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

 

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

 

(2) financial statements;

 

(3) the scope of audit procedures;

 

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

 

(5) the auditors’ evaluation of internal controls;

 

(6) matters of legal compliance; and

 

(7) certain relationships and related transactions.

 

Compensation/Succession Committee

 

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

 

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

 

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

 

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

 

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

 

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

 

(6) reviews and monitors our succession plans;

 

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

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

 

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

 

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

 

For additional information on the responsibilities and activities of the Compensation/Succession Committee, including the committee’s processes for determining executive compensation, see the section of this proxy statement entitled “Compensation Discussion and Analysis” commencing on page 14.

 

Nominating/Corporate Governance Committee

 

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

 

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

 

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

 

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

 

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

 

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

Executive Committee

 

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

 

Communications with Directors

 

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

 

Code of Conduct

 

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

 

Compensation Discussion and Analysis

 

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

 

The named executive officers are:

 

 

Executive Summary

 

To set objectives for fiscal year 2010 (“FY10”), the Committee utilized an enhanced framework which incorporated not only ADM’s business plan but also an industry perspective, historical earnings, earnings variability, shareholders’ expectations, analysts’ estimates, and ADM’s cost of capital. Because of the integrated nature of our business, goals and evaluation criteria underlying our short-term and long-term incentive plans reflect company-wide achievements that are consistent with the interests of our shareholders.

 

Fiscal year 2010 proved to be a successful year financially. We exceeded targeted financial objectives for earnings per share (“EPS”) and Return on Net Assets (“RONA”), both as defined on page 21, including being

adjusted for LIFO. (LIFO means “last-in, first-out” and refers to the practice of valuing inventory so the most recent costs to the Company are reflected in the cost of products sold. LIFO is excluded in order to align the performance metric with the Company’s internal management measures.) For our Cost Management objectives, we exceeded one objective but fell short of the threshold for the other objective, which resulted in no payout with respect to the Cost Management objectives. Lastly, we also met or exceeded nonfinancial objectives, which included objectives related to safety and to internal performance management responsibilities. These objectives are further defined on page 21.

 

In addition, as part of ADM’s compensation program design, the Committee retains discretion to consider performance outside of pre-established objectives to ensure that the program reflects company performance and management’s impact in achieving that performance. Overall, the Committee viewed FY10 as a year of sustained and successful performance. In making compensation decisions based on FY10 performance, the Committee took into account a number of factors, including the following:

 

 

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

 

 

Specifically for the CEO, her FY10 annual cash incentive is 45% above fiscal year 2009 (“FY09”). In addition, the grant date fair value of her LTI awards made in FY11 is the same as for her LTI awards made in FY10, both of which are less than the comparable value of her LTI awards made in FY09.

 

During FY10, the Committee made minimal changes to the compensation programs. Minor adjustments were made to the annual bonus plan to both simplify the plan and to address the economic environment. No changes were made to the overall design of the long-term incentive plan.

 

Oversight of Executive Compensation

 

What Is The Role Of The Committee?

 

The Committee is composed of all independent directors and is responsible to the board of directors and our shareholders for establishing our compensation philosophy and establishing and administering our compensation policies and programs. As part of this responsibility, the Committee fulfills its responsibilities as set forth in the Committee’s charter. The Committee’s charter is available on the investor relations section of

our website. Additional information regarding the Committee’s authority to determine compensation can be found on under the caption “Compensation/Succession Committee.”

 

What Is The Role Of The Board?

 

The board approves the company’s business plan, which is one of the factors used to set financial business objectives for the annual incentive plan. The non-management directors establish and approve all performance criteria for evaluating the CEO and annually evaluate the performance of the CEO based on these criteria. The non-management directors also ratify the CEO’s compensation. When asked by the Committee, the board can also provide input and ratification on any additional compensation-related issues. For FY10, the board provided input and ratified the following additional compensation items:

 

 

What Is The Role Of The Committee Consultant?

 

From April 2008 through January 2010, the Committee engaged Towers Perrin (which changed its name to Towers Watson following the completion of its merger with Watson Wyatt on January 1, 2010) as its independent compensation consultant. During the time period from July 1, 2009 through January 31, 2010, Towers Perrin and Towers Watson provided other services to the Company in addition to compensation consulting services, but the fees for those other services were less than $120,000. Although prior to the merger Watson Wyatt had also provided pension consulting and related services to the Company, the Committee concluded that the provision of such services while Watson Wyatt was still independent of Towers Perrin presented no conflict of interest. Effective February 1, 2010, the Committee retained Pay Governance LLC as its independent compensation consultant. Pay Governance provides no other services to the Company. Towers Watson may continue to provide the Company with market data and related analytic services, and the Company may use Towers Watson for other projects in the future.

 

The independent compensation consultant reports directly to the Committee, and provides the Committee with objective and expert analyses and independent advice on executive and director compensation, and other matters in support of the Committee’s charter. Each Committee meeting includes an executive session where the Committee meets exclusively with the independent consultant; Company management is not included in these meetings. Outside of these meetings, the independent consultant interacts with our management team solely on behalf of the Committee to assist the Committee in fulfilling its duties and responsibilities. The Committee believes that the consultants it retains are able to provide it with independent advice. The Committee will periodically review the performance and the independence of the independent compensation consultant.

 

What Are The Roles Of Executives?

 

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

 

Our Senior Vice President of Human Resources administers all employee compensation and benefits programs, with oversight and supervision by the Committee. He prepares the majority of the materials for the Committee meetings and provides analyses that assist the Committee with their decisions, such as summaries of competitive market practices, summaries of our succession planning actions, and reports regarding our company’s performance to date. In addition, throughout the year, he facilitates meetings with management to help the Committee gain a better understanding of company performance. He ensures that the Committee is provided a rigorous assessment of performance year-to-date at each Committee meeting.

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

 

Compensation Philosophy

 

What Is Our Executive Compensation Philosophy?

 

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

 

 

Overall, our compensation program seeks to provide the proper incentive and reward for our executives’ achievements, including day-to-day business management, achievement of short-term objectives, and focus on our long-term vision.

 

What Is The History Of Our Compensation Programs?

 

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

 

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

 

In 2003, the Committee saw a need to add variable, performance-based compensation to the compensation programs — both to help drive our company’s business strategy and to respond to market competition for key talent. Thus, over the last seven years, we have significantly changed our programs to tie a greater portion of total compensation directly to performance. In FY03, the Committee introduced a long-term incentive equity-based program. The size of awards under our equity program is not only dependent on financial performance, but the value of equity depends on the Company’s stock price. In addition, vesting provisions serve as a retention incentive to keep key talent engaged and focused.

 

Beginning in FY08, the Committee introduced an annual cash incentive program. Actions were initially taken at the executive officer level, and have been gradually implemented deeper into the employee population. This program focuses employees on annual financial, strategic, and individual objectives.

Each year, the Committee assesses the various compensation programs and may make adjustments to ensure the programs are aligned with performance. While the Committee has always retained discretion over the incentive programs, in FY09 informed judgment (or discretion) was introduced as a formal component of both the annual and long-term incentive programs in order to minimize the possibility that participants in these programs would be unfairly rewarded or penalized for fluctuations in Company performance due to external or extraordinary factors beyond management’s control. Under the annual incentive program, our performance is measured against pre-established 1-year business plan objectives. In our long-term incentive program, the Committee assesses performance over a 3-year period in determining the size of our annual grant. The use of informed judgment is discussed in further detail on page 22.

 

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

 

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

 

Base salaries and benefits are intended to attract and retain employees by providing a stable source of income and security over time. Annual cash incentives are designed to motivate and reward executives to increase shareholder value by achieving annual operational and financial objectives, and by outperforming external benchmarks over a 1-year period. The use of equity compensation aligns the interests of executives with those of shareholders by driving long-term shareholder value, supporting stock ownership, and encouraging retention. The size of long-term equity incentive grants varies based on performance against internal and external metrics. See “What Perquisites Are Provided To Named Executive Officers?” on page 27 for a discussion of the types of perquisites provided to the named executive officers.

 

Target Compensation

 

How Are Target Compensation Levels Determined?

 

Total direct compensation consists of salary, annual cash incentive, and long-term equity incentives. In seeking to provide a competitive target total direct compensation package, the Committee reviews comparator company compensation data, both with respect to total direct compensation and compensation elements, as a general reference to make compensation decisions, but does not establish specific compensation parameters based on such data. In this regard, the Committee considers target total direct compensation to be competitive if it is within a range of 80-130% of total direct compensation of the market 50th percentile for comparable positions and responsibilities among comparator groups described below. While positioning to the comparator market data is considered, other factors ultimately determine how a named executive officer is paid, including individual responsibilities, an executive’s experience and tenure, individual performance, and business objectives.

 

The Committee used input from management and from its independent compensation consultant to select comparator groups of companies. The use of multiple comparator groups allows the Committee to understand compensation levels for talent across a broad marketplace. We utilize three comparator groups ranging from a broad general industry group based on revenue scope to a custom industry group. When selecting these groups, we considered industry, business complexity and size. We believe that these comparator groups reflect companies where our company competes for executive talent and have similar pay models.

 

Each year, management and the Committee evaluate the comparator groups to ensure each group remains relevant. Any changes are carefully assessed in an effort to maintain continuity from year to year. No changes in the identity of the comparator groups were made for 2010. The comparator groups are:

 

 

 

Custom Industry Comparator Group

 

 

The company does not use this comparator group to assess company performance. Company performance is assessed using five benchmarks as described beginning on page 20.

 

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

 

A substantial percentage of the target total compensation for the named executive officers is variable and dependent on performance. The Committee reviews the portion of compensation allocated to: (i) fixed versus variable performance-based compensation, (ii) short-term versus long-term compensation, and (iii) cash versus equity-based compensation. We do not have a predetermined policy for the allocation.

 

 

Elements of Compensation

 

Base Salary

 

How Are Base Salaries Determined?

 

Base salaries are established based on a named executive officer’s position, skills, experience, and responsibilities. Competitiveness of base salary levels are assessed annually relative to salaries within the marketplace for similar executive positions. Increases may be considered for various factors such as individual performance, changes in responsibilities, and/or changes in competitive marketplace levels. The Company’s historical emphasis on base salaries and its more recent emphasis on increasing the proportion of variable compensation elements have led the Committee to hold base salaries steady over the past three fiscal years.

 

What Were The Base Salary Increases For Named Executives?

 

Base salary levels for the named executive officers have not changed during the past three fiscal years, except for the CFO who received an increase upon his promotion to CFO during FY08. For FY11, the Committee again determined not to increase base salaries for the named executive officers, given its focus on variable, performance-based compensation.

Annual Cash Incentives

 

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

 

The purpose of the annual cash incentive program is to reward performance based on the achievement of company, business, and individual objectives. At the start of each fiscal year, the Committee approves minimum, target, and maximum annual cash incentive levels for each named executive officer. Target annual cash incentive levels are expressed as a percentage of salary. Based on company, individual and group performance, annual cash incentives payouts can range between 0% and 235.2% of the target annual cash incentive.

 

 

 

 

How Do We Calculate Annual Cash Incentives?

 

Annual cash incentives are determined by company-wide business objectives and the Committee’s independent assessment of our company’s performance. This outcome is then adjusted within a range of -20% to +20% based on individual and group performance. Because of the degree of discretion accorded to the Committee in determining annual cash incentive payouts, the amount of such payouts are reported in the “Bonus” column of the Summary Compensation Table on page 31.

 

 

How Is The Company Performance Factor Determined?

 

At the beginning of FY10, the Committee approved the following company-wide business objectives: (1) EPS, (2) RONA, (3) Cost Management, (4) Safety, and (5) Performance Management.

 

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

 

 

In setting the objectives for FY10, the Committee utilized an enhanced framework based on our company’s business plan, industry perspective, historical earnings, earnings variability, shareholders’

expectations, analysts’ estimates, and our company’s cost of capital. In addition, the objectives considered the past year that had been severely affected by the recession. Our company focuses on company-wide performance objectives to encourage the executives to focus on overall company success, which ultimately drives shareholder value. Each objective is described in greater detail below:

 

1. EPS:  For the purpose of the cash incentive calculation, EPS is defined as basic earnings per share, after tax, excluding LIFO adjustments. The Committee selected EPS as a financial metric because it is a metric that many analysts and stockholders follow.

 

FY10 EPS was $2.96, resulting in the achievement of 138.2% of the business objective.

 

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

 

The Committee selected RONA as a financial metric because it measures the efficient use of both fixed assets and working capital to support a focus on operating effectiveness, encourages margin enhancement, cost control, and the effective management of the net assets employed, is driven by how we effectively manage assets and how we grow net earnings, and closely tracks return on equity.

 

The Committee retains the discretion to exclude the impact (positive or negative) of extraordinary events from the calculation of EPS or RONA if the Committee determines that the events were beyond management’s control and if the exclusion is appropriate to align annual cash incentives with performance. For FY10, there were no exclusions of extraordinary events.

 

FY10 RONA was 12.01%, resulting in the achievement of 180.4% of the business objective.

 

3. Cost Management:  For FY10, cost management was added as a financial objective to directly focus executives on cost, particularly in light of the recent economic environment. Cost Management represents 7% of the bonus, and performance is measured as the lesser level of performance against two metrics. On the first metric, the Company achieved $89.78, relative to the manufacturing cost per ton, representing an aggregate savings of approximately $233 million compared to FY09, which reflects 174% achievement. While the Company did achieve a reduction in SG&A costs, such reduction was not sufficient to surpass the threshold reduction target of $30 million. As a result, no bonus was awarded with respect to the Cost Management objective.

 

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

 

FY10 Safety achievement was 131.8% of the business objective.

 

5. Performance Management:  In FY10, a defined set of senior leaders, including all the named executive officers, was asked to focus on internal performance management and strong succession planning. Part of this process included a minimum of quarterly performance dialogues or divisional updates with their direct reports. The Committee determined that this objective was successfully met and that the leadership team demonstrated a continued effort towards enhancing performance management and succession planning. This metric produces an “all or nothing” measure.

 

FY10 Performance Management was met, and thus the objective was achieved.

6. Committee’s Discretion:  In addition to the five business objectives discussed above, the Committee also utilizes discretion to ensure that the annual cash incentive appropriately reflects our company’s performance and management’s efforts in achieving that performance, and is not overly influenced by external market conditions. The Committee conducts a rigorous and comprehensive assessment of both internal and external factors including absolute performance, year-over-year performance, management’s control over events not contemplated in the business plan which materially impacted EPS and RONA, and performance relative to multiple external benchmarks. In addition to RONA and EPS, the Committee focuses on TSR, net earnings, and return on equity. The Committee also reviews nonfinancial performance in the areas such as safety, corporate responsibility, employee training, and execution of strategic plan.

 

For FY10, the Committee determined an achievement rating of 140%. In making this decision, the Committee recognized that earnings growth was balanced with a 12% RONA, reflecting quality financial performance, and also noted that the named executive officers continued progress towards other financial and strategic objectives.

 

The Company Performance Factor for FY10 was 137.83% as shown in the following table:

 

 

 

 

How Are Individual and Business Group Performance Factors Determined?

 

For FY10, the Committee awarded a team score of 110% for the named executive officers, recognizing their collective efforts as a management team in achieving significant financial results for the current year and planning for future strategic initiatives to grow shareholder value.

 

What Were The Cash Incentive Payments To Named Officers For FY10?

 

Based on the determination of the company, individual and business group performance factors as described above, each named executive officer received an annual cash incentive for FY10 equal to 151.61% (137.83% x 110%) of his or her target annual cash incentive.

 

 

Equity-Based Long-Term Incentives

 

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

 

In terms of grant size and grant form, our LTI awards are determined based upon the Committee’s assessment of performance during the prior three fiscal years. For example, equity grants made in August 2010 reflected the Committee’s assessment of FY08-FY10 performance. This concept of making grants based on the assessment of prior performance is similar in approach to our cash annual incentive plan (i.e., cash incentive awards paid in early FY11 are based upon performance achieved in FY10). The Committee’s assessment of performance considers multiple performance factors as well as economic conditions, and is not strictly formulaic. Our equity grants reflect a retrospective assessment of 3-year performance. Due to current SEC disclosure rules, these August 2010 grants will not appear in the Grants of Plan-Based Awards table or be reflected in the Summary Compensation Table until next year because the SEC requires companies to report LTI awards granted during the fiscal year, not based on the fiscal year’s performance.

 

As a result, we will discuss grants made in both September 2009 and in August 2010.

 

 

How Did We Determine LTI Awards Granted In September 2009?

 

At the start of the fiscal year, target and maximum LTI grant values are determined for each named executive officer. Target awards are intended to result in competitive total direct compensation levels when combined with base salaries and annual incentives. In order to receive any LTI grants, however, net earnings (for the current fiscal year, measured in accordance with U.S. GAAP) must exceed the sum of the dividend payments and after-tax interest expenses for the current fiscal year.

 

 

The LTI Program allows executives an opportunity to earn additional long-term incentive grants that reward differing levels of performance and, at maximum, could result in top quartile pay of total direct compensation. The Committee utilizes its discretion and informed judgment to assess the prior 3 years of absolute and relative performance in determining if any awards should be provided above the “target award.” A formulaic approach is not utilized due to the challenges of setting business objectives and aligning compensation with performance in an industry where results are highly-impacted by external factors, such as weather, crop disease, government programs, and other factors beyond management’s control. As a result, the Committee has determined that a rigorous review of a wide range of absolute and relative performance measures is appropriate to make an informed decision. For FY10 awards made in September 2009, the Committee used its discretion and informed judgment in making this decision to grant a “target award” with no additional enhancement. The Committee focused primarily on the absolute decline in stock price and mixed results on TSR versus external benchmarks, but also took into account additional factors, including decline in net earnings, company performance and execution of the business plan in light of the overall economy and leadership development and succession planning.

 

The Committee retains the discretion to make equity grants in any form or percentage mix it deems appropriate. Generally, the Committee expects to provide equity grants that are delivered 50% in stock options and 50% in restricted shares. The September 2009 grants were awarded in 50% stock options, 25% restricted shares, and 25% performance share units (“PSUs”) based on the fair value on the grant date. PSUs were granted in lieu of a comparable value of earned restricted shares to further enhance management’s focus on total shareholder return (“TSR”) on both an absolute and relative basis. TSR can be defined as the total return of owning company stock over a period of time, comprised of the capital gain (share price at the end of a period less the share price at the beginning of a period) plus dividends. Executives have an opportunity to earn 1/3 of the PSUs over a 1-year performance period, 2/3 over a 2-year performance period and all PSUs over a 3-year performance period if our TSR exceeds the average TSR of four benchmarks over the respective performance periods. The four TSR benchmarks are:

 

1. S&P 500

 

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

 

3. S&P 500 Consumer Staples

 

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

 

Vesting conditions of our equity awards are as follows:

 

 

 

Equity Grants made in FY10 (grants made in September 2009 reflecting FY07-FY09 performance)

 

(These grants are presented in the Summary Compensation Table and Grants of Plan-Based Awards During Fiscal 2010 Table)

 

 

How Did We Determine LTI Awards Granted In August 2010?

 

Similar to the process followed for awards made in September 2009 as described above, at the start of FY10, target and maximum LTI grant values were determined for each named executive officer. LTI values were increased for only the CFO to better align his compensation with the competitive market. Target awards are intended to result in competitive total direct compensation levels when combined with base salaries and annual incentives. In order to receive any LTI grants, however, net earnings must exceed the sum of the dividend payments and after-tax interest expenses.

 

 

For these awards, the Committee used its discretion and informed judgment to determine that the named executive officers would receive a “target award” with no additional enhancement. While the Committee noted that our company’s relative TSR exceeded that of some major competitors and indices, the Committee also noted that absolute TSR over the FY08-FY10 period was negative. In light of the Committee’s view of absolute and relative performance for the FY08-FY10 period and the complexity resulting from the use of four TSR benchmarks in the PSU program, the Committee granted equity in the form of 50% stock options and 50% restricted stock.

 

As a result, grant values of LTI awards granted in August 2010 for FY08-FY10 performance were the same relative to the September 2009 grants for the named executive officers (with the exception of the CFO, who received an increase in his target LTI award from $1,000,000 to $1,350,000).

Equity Grants made in FY11 (grants made in August 2010 reflecting FY08-FY10 performance)

 

(These grants will be presented in the Summary Compensation Table and Grants of Plan-Based Awards Table in our 2011 proxy statement)

 

 

With the exception of the CFO, the target and maximum LTI levels for the named executive officers remained unchanged compared to those for the previous fiscal year.

 

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

 

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

 

Benefits

 

What Retirement Benefits Are Provided?

 

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

 

 

What Other Benefits Are Provided To Named Executive Officers?

 

We provide a benefits package for employees and their dependents, portions of which may be paid for by the employee. Benefits include: life, accidental death and dismemberment, health (including prescription drug), dental, vision, and disability insurance; dependent and healthcare reimbursement accounts; tuition reimbursement; paid time-off; holidays; and a matching gifts program for charitable contributions. Named executive officers have the same benefits package as other employees.

 

What Perquisites Are Provided To Named Executive Officers?

 

An automobile is provided to named executive officers, which they may also use for personal purposes. We continue to provide Ms. Woertz and the other named executive officers with personal use of company-owned aircraft. Given the location of our headquarters in Decatur, Illinois, the Committee requires that Ms. Woertz have access to the aircraft for personal use for security and efficiency reasons. The named executive officers are responsible for any taxes on imputed income related to the provision of this perquisite. See the notes to the Summary Compensation Table on page 31 for a description on other perquisites provided to the named executive officers.

 

Has ADM Evaluated Its Compensation Programs As They Relate To Risk?

 

Company management, in consultation with the Committee, has undertaken a risk assessment of our compensation programs and practices. Based on this assessment, we do not believe the company’s compensation programs create risks that are reasonably likely to have a material adverse affect on the company. To reach this conclusion, an internal team of finance, operations, legal, human resources staff, joined by an external consultant, collected all company incentive programs to consider the underlying business risk against incentive plan design criteria such as goal setting, award caps, pay-performance leverage, the balance of cash versus stock awards, clawback criteria, senior management oversight, and Committee discretion. A detailed report was developed and presented to the Committee at its February 2010 meeting.

 

Total Direct Compensation

 

What Was Total Direct Compensation For FY10?

 

The Summary Compensation Table includes in FY10 total compensation the grant date fair value for equity awards granted in September 2009 for FY07-FY09 performance. As a result, we believe it is helpful to provide a supplemental compensation table showing total direct compensation for FY10 that includes the value of LTI grants made in August 2010 for FY08-FY10 performance. The following table shows:

 

 

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

 

 

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

 

Do Any Named Executive Officers Have Employment Agreements?

 

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

 

Under her employment agreement, she is provided benefits upon termination without cause or resignation for good reason as described beginning on page 42. If the termination occurs within 2 years of change-in-control, these benefits are increased. In addition, if the payments following a change-in-control termination exceed the IRS statutory limit and result in a penalty excise tax, she will receive a gross-up payment to cover the tax.

 

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

 

Mr. D’Ambrose is not subject to an employment agreement but did receive an offer letter at the time of his hire in 2006. The letter includes a provision which credits Mr. D’Ambrose with an additional five years of age and service credit under the definition of retirement used in company equity award and retirement plans. This provision is relevant to the vesting of equity awards, which continue to vest after retirement (defined as a termination after the executive reaches age 55 with 10 years of service).

 

Do The Remaining Named Executive Officers Have Severance Benefits?

 

The Committee retains discretion to provide the remaining named executive officers severance benefits upon their termination of employment. To guide this discretion, the Committee has adopted a severance program. This program serves as a guideline for the severance benefits that may be provided to various levels of employees upon termination of their employment without cause or their resignation with good reason, but the program does not create a contractual right to receive any severance benefits on the part of the employee.

The guidelines contained in the program for executive officers include the following termination benefits, subject, in all cases, to the discretion of the Committee to increase or decrease these benefits:

 

 

In addition, the Committee may require each executive to enter into a non-competition and non-solicitation agreement in exchange for receiving severance under the program.

 

If a change-in-control occurs with respect to our company, the equity grants held by our executive officers will vest immediately pursuant to the terms of these awards. The Committee believes that this accelerated vesting is an appropriate provision to provide the executives with some assurance that they will not be disadvantaged with respect to their equity awards in the event of a change-in-control of the company. This assurance increases the value of these awards to the executives which in turn enhances retention.

 

Additional Executive Compensation Policies

 

Does The Company Have A Clawback Policy?

 

Our equity grant programs have specific clawback provisions applicable to termination of employment for cause, breach of restrictive covenants and activity that is detrimental to the company. The Committee will be reviewing our company’s clawback policy in FY11 in light of new regulatory legislation.

 

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

 

Pursuant to our company’s Insider Trading Policy, employees may not engage in short selling, speculative trading, or hedging, including writing or trading in options, warrants, puts and calls, prepaid variable forward contracts, equity swaps, collars or exchange funds or entering into other transactions that are designed to hedge or offset decreases in the price of our company’s securities.

 

Our Insider Trading Policy also provides that all transactions in our company’s securities by the named executive officers and certain other officers and employees must be pre-cleared by the Law Department.

 

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

 

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation paid in excess of $1 million annually to the CEO and the three other most highly-compensated officers, excluding the Chief Financial Officer, except for qualifying “performance-based” compensation. Performance-based compensation for these purposes generally does not include salaries, incentive compensation for which the company’s stockholders have not approved the business criteria upon which applicable performance goals are based, and incentive compensation (other than stock options and stock appreciation rights) that is not based on the satisfaction of objective performance goals or as to which a compensation committee has discretion to increase the amount of the payout. The Committee retains the discretion to provide compensation that may not be tax deductible if it feels these actions are in the best interests of our company and its stockholders. The Committee believes that the amount of any expected loss of a tax deduction under Section 162(m) will be insignificant to our company’s overall tax position.

 

How Does The Company Address Liabilities Associated With Retirement Programs?

 

The Committee is mindful that the non-qualified deferred compensation and supplemental retirement plans create financial statement liabilities. Therefore, the company attempts to hedge the deferred

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

 

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

 

Compensation/Succession Committee Report

 

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

 

K. R. Westbrook, Chairman
D. E. Felsinger
A. Maciel
P. J. Moore

 

Compensation/Succession Committee Interlocks and Insider Participation

 

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

Summary Compensation Table

 

The following table summarizes the compensation for the fiscal years noted in the table of our principal executive officer, principal financial officer, and our three other most highly-compensated executive officers who were serving as executive officers on June 30, 2010 (collectively, the “named executive officers”).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Employment Agreements

 

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

Grants of Plan-Based Awards During Fiscal 2010

 

The following table summarizes the grants of plan-based awards made to our named executive officers during the fiscal year ended June 30, 2010.

 

 

 

 

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

 

All of the awards shown in the “All Other Option Awards” column in the table above are non-qualified stock option awards, vest and become exercisable in five equal annual installments commencing on the first anniversary of the grant date, and must be exercised within ten years after the grant date. The exercise price may be paid in cash or by delivering shares of our common stock that are already owned by the award recipient. Tax withholding obligations resulting from the exercise may be paid by surrendering a portion of the shares being acquired, subject to certain conditions. Under the terms of the stock option agreement pertaining to each of these awards, vesting and exercisability accelerate upon the death of the recipient or change in

control of our company, and continue in accordance with the original vesting schedule if employment ends as a result of disability or retirement. If employment ends for other reasons, a recipient forfeits any interest in the unvested portion of any option, but retains the right to exercise the previously vested portion of any option for a period of three months. In addition, if an award recipient’s employment is terminated for cause, or if the recipient breaches a non-competition or confidentiality restriction or participates in an activity deemed by us to be detrimental to our company, the recipient’s right to exercise any unexercised options will terminate, the recipient’s right to receive option shares will terminate, and any shares already issued upon exercise of the option must be returned to us in exchange for the lesser of the shares’ then-current fair market value or the price paid for the shares, or the recipient must pay us cash in the amount of the gain realized by the recipient from the exercise of the option.

 

The awards shown in the “Estimated Future Payouts Under Equity Incentive Plan Awards” column in the table above are awards of performance share units, each of which represents the contingent right to receive one share of our common stock upon vesting of the unit. Each of these awards vests on June 30, 2012, but only to the extent that our total shareholder return (“TSR”) exceeds the average TSR of four equally-weighted indices (the S&P 500 Index, the S&P 500 Consumer Staples Index, the Russell 3000 Food, Beverage and Tobacco Customized Index and a peer group index) during the three-year performance period. One-third of the units will be earned if our TSR exceeds the average TSR of the indices during the first year of the performance period, two-thirds will be earned if our TSR exceeds the average TSR during the first two years of the performance period, and all units will be earned if our TSR exceeds the average TSR over the full three-year performance period. No dividend equivalents are paid on units, which may not be transferred or pledged in any manner. Vesting of units accelerates upon the death of the award recipient or upon a change in control of our company, and continues in accordance with the original vesting terms if employment ends as a result of disability or retirement. If employment ends for other reasons, unvested units are forfeited. In addition, if an award recipient’s employment is terminated for cause, or if the recipient breaches a non-competition or confidentiality restriction or participates in an activity deemed by us to be detrimental to our company, the recipient’s unvested units will be forfeited and any shares that have already been issued in settlement of vested units must be returned to us or the recipient must pay us the amount of the shares’ fair market value as of the date the units vested.

 

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

Outstanding Equity Awards at Fiscal 2010 Year-End

 

The following table summarizes information regarding unexercised stock options and unvested restricted stock awards for the named executive officers as of June 30, 2010.