UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

 

 

SCHEDULE 14A INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.   )

 

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

 

 

THE J. M. SMUCKER COMPANY

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE J. M. SMUCKER COMPANY

ONE STRAWBERRY LANE

ORRVILLE, OHIO 44667-0280

 

July 7, 2011

 

 

Dear Shareholder:

 

You are cordially invited to attend The J. M. Smucker Company’s Annual Meeting of Shareholders on Wednesday, August 17, 2011. The annual meeting will begin at 11:00 a.m., Eastern Time, in the Fisher Auditorium at the Ohio Agricultural Research and Development Center, 1680 Madison Avenue, Wooster, Ohio 44691.

 

Following this letter is a Notice of the 2011 Annual Meeting of Shareholders and the proxy statement. Please review this material for information about the nominees named in the proxy statement for election as Directors and the Company’s appointed independent registered public accounting firm. In addition, details regarding executive officer and Director compensation, corporate governance matters, and the business to be conducted at the annual meeting are also described.

 

Whether or not you plan to attend the annual meeting, please cast your vote, at your earliest convenience, as instructed in the Notice of Internet Availability of Proxy Materials or in the proxy card. Your vote is very important. Your vote before the annual meeting will ensure representation of your common shares at the annual meeting even if you are unable to attend.

 

This year we are pleased to issue our first Corporate Responsibility Report. Sustainability has been an important attribute of The J. M. Smucker Company since our founding. Our Corporate Responsibility Report highlights our efforts in creating a better tomorrow through our integrated strategy focusing on economic, environmental, and social sustainability. We invite you to read our report at www.smuckers.com.

 

We look forward to sharing more information with you about The J. M. Smucker Company and the value of your investment at the annual meeting.

 

Sincerely,

 

 

 

 

THE J. M. SMUCKER COMPANY

 

ONE STRAWBERRY LANE

ORRVILLE, OHIO 44667-0280

 

NOTICE OF 2011 ANNUAL MEETING OF SHAREHOLDERS

 

 

Jeannette L. Knudsen, Vice President, General
Counsel and Corporate Secretary

 

Orrville, Ohio, July 7, 2011

THE J. M. SMUCKER COMPANY

 

PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 17, 2011

 

TABLE OF CONTENTS

 

 

THE J. M. SMUCKER COMPANY

 

ONE STRAWBERRY LANE

ORRVILLE, OHIO 44667-0280

 

PROXY STATEMENT

FOR THE ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON AUGUST 17, 2011

 

 

The J. M. Smucker Company (the “Company”) is furnishing this document to you in connection with the solicitation by the Board of Directors of the Company (the “Board”) of the enclosed form of proxy for its annual meeting to be held on August 17, 2011. In addition to solicitation by mail, the Company may solicit proxies in person, by telephone, facsimile, or e-mail. The Company will bear all costs of the proxy solicitation and has engaged a professional proxy solicitation firm, D.F. King & Co., Inc., to assist it in soliciting proxies and will pay a fee of approximately $15,000, plus expenses, for such services.

 

The Company pays for the preparation and mailing of the Notice of 2011 Annual Meeting of Shareholders and proxy statement, and the Company has also made arrangements with brokerage firms and other custodians, nominees, and fiduciaries for the forwarding of this proxy statement and other annual meeting materials to the beneficial owners of its common shares at its expense. This proxy statement is dated July 7, 2011, and is first being mailed to the Company’s shareholders on or about July 7, 2011.

 

Why am I receiving these proxy materials?

 

You received these materials because you are a shareholder of the Company. The Board is providing these proxy materials to you in connection with the Company’s annual meeting to be held on August 17, 2011. As a shareholder of the Company, you are entitled to vote on the important proposals described in this proxy statement. Since it is not practical for all shareholders to attend the annual meeting and vote in person, the Board is seeking your proxy to vote on these matters.

 

What is a proxy?

 

A proxy is your legal designation of another person (“proxy”) to vote the common shares you own at the annual meeting. By completing and returning the proxy card(s), which identifies the individuals or trustees authorized to act as your proxy, you are giving each of those individuals authority to vote your common shares as you have instructed. By voting via proxy, each shareholder is able to cast his or her vote without having to attend the annual meeting in person.

 

Why did I receive more than one proxy card?

 

You will receive multiple proxy cards if you hold your common shares in different ways (e.g., trusts, custodial accounts, joint tenancy) or in multiple accounts. If your common shares are held by a broker or bank (i.e., in “street name”), you will receive your proxy card and other voting information from your broker, bank, trust, or other nominee. It is important that you complete, sign, date, and return each proxy card you receive, or vote using the telephone, or by using the Internet as described in the instructions included with your proxy card(s) or in the Notice of Internet Availability of Proxy Materials.

Why didn’t I receive paper copies of the proxy materials?

 

The Company makes proxy materials available to its shareholders on the Internet instead of mailing printed copies of those materials to all of its shareholders, as permitted by rules adopted by the U.S. Securities and Exchange Commission (“SEC”). This option allows the Company to provide its shareholders with information they need, while reducing the Company’s use of natural resources, saving on paper and printing costs, and cutting back on potentially unwanted paper materials in shareholders’ mailboxes.

 

If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you request one in accordance with the instructions provided in the notice. The Notice of Internet Availability of Proxy Materials has been mailed to shareholders on or about July 7, 2011, and provides instructions on how you may access and review the proxy materials on the Internet.

 

What is the record date and what does it mean?

 

The Board established June 22, 2011 as the record date for the annual meeting of shareholders to be held on August 17, 2011. Shareholders who own common shares of the Company at the close of business on the record date are entitled to notice of and to vote at the annual meeting.

 

What is the difference between a “registered shareholder” and a “street name shareholder”?

 

These terms describe how your common shares are held. If your common shares are registered directly in your name with Computershare Investor Services, LLC (“Computershare”), the Company’s transfer agent, you are a “registered shareholder.” If your common shares are held in the name of a brokerage, bank, trust, or other nominee as a custodian, you are a “street name shareholder.”

 

How many common shares are entitled to vote at the annual meeting?

 

As of the record date, there were 114,378,016 common shares outstanding and entitled to vote at the annual meeting.

 

How many votes must be present to hold the annual meeting?

 

A majority of the Company’s outstanding common shares as of the June 22, 2011 record date must be present in person or by proxy in order for the Company to hold the annual meeting. This majority of outstanding common shares is referred to as a quorum. For purposes of determining whether a quorum is present, each common share is deemed to entitle the holder to one-vote-per-share. Properly signed proxies that are marked “abstain” are known as “abstentions.” Common shares that are held in street name and not voted on one or more of the items before the annual meeting, but are otherwise voted on at least one item, are known as “broker non-votes.” Proposal 2 is the only routine matter that may be voted on by brokers on this year’s ballot.

 

Both abstentions and broker non-votes are counted as shares present for the purpose of determining the presence of a quorum. Abstentions are also counted as shares present and entitled to be voted. Broker non-votes, however, are not counted as shares entitled to be voted with respect to the matter on which the broker has expressly not voted. Abstentions, broker non-votes, and shares not in attendance and not voted at the annual meeting will have no effect with regard to the election of Directors in Proposal 1 (See “Corporate Governance — Director Resignation Policy”). Because the affirmative vote of the holders of a majority of the total voting power of the Company is necessary to approve Proposals 2, 3, 4, and 5, abstentions and broker non-votes will have the same effect as votes against such proposals.

 

Who will count the votes?

 

A representative from Broadridge Financial Solutions, Inc. (“Broadridge”), or its designee, will determine if a quorum is present and will tabulate the votes and serve as the Company’s inspector of election at the annual meeting.

What vote is required to approve each proposal?

 

Under the Company’s Amended Articles of Incorporation (the “Articles”), shareholders may be entitled on certain matters to cast ten votes per share with regard to certain common shares and only one vote per share with regard to others. The total voting power of all the common shares can be determined only at the time of a shareholder meeting due to the need to obtain certifications as to beneficial ownership of common shares not held as of record in the name of individuals. There are no proposals on this year’s ballot for which the ten-votes-per-share provisions apply.

 

Proposal 1:  Because this is an uncontested election, a candidate will be elected as a Director only if the votes cast for the candidate exceed the votes cast against the candidate, based upon one vote for each common share owned as of the record date. Abstentions and broker non-votes will not be counted as votes cast “for” or “against” a candidate and will have no effect on the vote. A plurality voting standard would be utilized if this were a contested election. Under the plurality voting standard, the candidates receiving the most “for” votes would be elected.

 

Under the Company’s Director resignation policy, in an uncontested election, any nominee for Director who receives a greater number of “against” votes than “for” votes is required to tender his or her resignation for consideration by the Nominating and Corporate Governance Committee of the Board (the “Nominating Committee”). The Company has provided more information about its Director resignation policy under the heading “Corporate Governance — Director Resignation Policy.”

 

Proposal 2:  The affirmative vote of the holders of a majority of the total voting power of the Company, based upon one vote for each common share owned as of the record date, is necessary to ratify the appointment of the Independent Registered Public Accounting Firm (the “Independent Auditors”). Abstentions will have the same effect as votes against this proposal.

 

Proposal 3:  The affirmative vote of the holders of a majority of the total voting power of the Company, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, the Company’s executive compensation. Abstentions and broker non-votes will have the same effect as votes against this proposal. This vote is advisory and not binding on the Company, the Board or the Executive Compensation Committee (the “Compensation Committee”) in any way. To the extent there is any significant vote against the executive compensation as disclosed in this proxy statement, the Board and the Compensation Committee will evaluate whether any actions are necessary to address the concerns of shareholders. Under the Articles, shareholders are entitled to cast ten-votes-per-share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on Proposal 3 is a non-binding, advisory vote, the Company has determined that such ten-votes-per-share provisions will not apply to this proposal.

 

Proposal 4:  The affirmative vote of the holders of a majority of the total voting power of the Company, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, the frequency of holding Say-on-Pay votes in the future. Abstentions and broker non-votes will have the same effect as votes against this proposal. Shareholders may vote in favor of holding future Say-on-Pay votes every year, every two years, or every three years, or shareholders may choose to abstain. If the holders of a majority of the total voting power of the Company do not approve the Board’s recommendation to have an annual Say-on-Pay vote, then the option receiving the highest number of votes will be deemed the frequency selected by the shareholders. In such case, the Board may decide that it is in the best interests of shareholders and the Company to hold an advisory Say-on-Pay vote more or less frequently than the frequency receiving the most votes cast by shareholders. Under the Articles, shareholders are entitled to cast ten-votes-per-share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on Proposal 4 is a non-binding, advisory vote, the Company has determined that such ten-votes-per-share provisions will not apply to this proposal.

 

Proposal 5:  The affirmative vote of the holders of a majority of the total voting power of the Company, based upon one vote for each common share owned as of the record date, is necessary to approve the

shareholder proposal requesting, within six months of the 2011 annual meeting, that the Board provide a report to the shareholders describing how the Company will manage the social and environmental risks and opportunities connected to the Company’s coffee business and supply chain. Abstentions and broker non-votes will have the same effect as votes against this proposal.

 

Where will I be able to find voting results of the annual meeting?

 

The Company intends to announce preliminary voting results at the annual meeting and will publish final voting results in a Current Report on Form 8-K to be filed with the SEC within four business days after the annual meeting.

 

How do I vote my common shares?

 

If you are a registered shareholder and you received your proxy materials by mail, you can vote your shares in one of the following manners:

 

 

Please refer to the specific instructions set forth on the proxy card(s) you received.

 

If you are a registered shareholder and you received a Notice of Internet Availability of Proxy Materials, you can vote your shares in one of the following manners:

 

 

Please refer to the specific instructions set forth in the Notice of Internet Availability of Proxy Materials.

 

If you are a street name shareholder, your broker, bank, trustee, or other nominee will provide you with materials and instructions for voting your common shares.

 

Can I change my vote after I have mailed in my proxy card(s) or submitted my vote using the Internet or telephone?

 

Yes, if you are a registered shareholder and you received your proxy materials by mail, you can change your vote in any one of the following ways:

 

 

Yes, if you are a registered shareholder and you received a Notice of Internet Availability of Proxy Materials, you can change your vote in any one of the following ways:

 

 

 

Your mere presence at the annual meeting will not revoke your proxy. You must take affirmative action at the annual meeting in order to revoke your proxy.

 

If you are a street name shareholder, you must contact your broker, bank, trust, or other nominee in order to revoke your proxy. If you wish to vote in person at the annual meeting, you must contact your broker and request a document called a “legal proxy.” You must bring this legal proxy obtained from your broker, bank, trust, or other nominee to the annual meeting in order to vote in person.

 

How will my proxy be voted?

 

If you complete, sign, date, and return your proxy card(s) or vote by telephone or by using the Internet, your proxy will be voted in accordance with your instructions. If you sign and date your proxy card(s) but do not indicate how you want to vote, your common shares will be voted as the Board recommends for each of the proposals.

 

What if my common shares are held in “street name” by my broker?

 

You should instruct your broker how you would like to vote your shares by using the written instruction form and envelope provided by your broker. If you do not provide your broker with instructions, under the rules of the New York Stock Exchange (“NYSE”), your broker may, but is not required to, vote your common shares with respect to certain “routine” matters. Proposal 2 is the only routine matter to be voted on by the shareholders on this year’s ballot. However, on other matters, when the broker has not received voting instructions from its customers, the broker cannot vote the shares on the matter and a “broker non-vote” occurs. An election of Directors is not considered a routine matter under the NYSE rules. This means that brokers may not vote your common shares on the election of Directors if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote can be counted. If you hold your common shares in your broker’s name and wish to vote in person at the annual meeting, you must contact your broker and request a document called a “legal proxy.” You must bring this legal proxy to the annual meeting in order to vote in person.

 

What are the Board’s recommendations on how I should vote my common shares?

 

The Board recommends that you vote your common shares as follows:

 

Proposal 1 — FOR the election of the four Board nominees named in this proxy statement with terms expiring at the 2014 annual meeting of shareholders.

 

Proposal 2 — FOR the ratification of appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the 2012 fiscal year.

 

Proposal 3 — FOR the approval of the Company’s executive compensation.

 

Proposal 4 — FOR the option of 1 YEAR as the preferred frequency of future Say-on-Pay votes.

 

Proposal 5 — AGAINST the shareholder proposal requesting, within six months of the 2011 annual meeting, that the Board provide a report to the shareholders describing how the Company will manage the social and environmental risks and opportunities connected to the Company’s coffee business and supply chain.

Does the Company have cumulative voting?

 

No. In 2009, the shareholders of the Company amended the Articles to eliminate cumulative voting.

 

Who may attend the annual meeting?

 

All shareholders are eligible to attend the annual meeting. However, only those shareholders of record at the close of business on June 22, 2011 are entitled to vote at the annual meeting.

 

Do I need an admission ticket to attend the annual meeting?

 

Admission tickets are not required to attend the annual meeting. If you are a registered shareholder, properly mark your proxy to indicate that you will be attending the annual meeting. If you hold your common shares through a nominee or you are a street name shareholder, you are required to bring evidence of share ownership to the annual meeting (e.g., account statement, broker verification).

 

What type of accommodations can the Company make at the annual meeting for people with disabilities?

 

The Company can provide reasonable assistance to help you participate in the annual meeting if you notify the Corporate Secretary about your disability and how you plan to attend. Please call or write the Corporate Secretary at least two weeks before the annual meeting at 330-684-3838 or One Strawberry Lane, Orrville, Ohio 44667.

 

Who can answer my questions?

 

If you need additional copies of the proxy materials, you should contact:

 

Broadridge Financial Solutions, Inc.

51 Mercedes Way

Edgewood, New York 11717

Call Toll Free: 1-866-451-3787

 

If you have any questions about the proxy materials or annual meeting, or need assistance in voting your common shares, you should contact:

 

D.F. King & Co., Inc.

48 Wall Street

New York, New York 10005

Call Toll Free: 1-800-488-8075

or

Call Collect: 1-212-269-5550

 

If you have any questions about the proxy materials or the annual meeting, you may also contact:

 

The J. M. Smucker Company

One Strawberry Lane

Orrville, Ohio 44667

Attention: Shareholder Services Department

Telephone: 330-684-3838

 

Unless instructed otherwise, the proxies intend to vote FOR the election of Vincent C. Byrd, R. Douglas Cowan, Elizabeth Valk Long, and Mark T. Smucker, as Directors, each for a term of three years. Ms. Elizabeth Valk Long and Messrs. Vincent C. Byrd, R. Douglas Cowan, and Mark T. Smucker comprise the class of Directors whose term of office expires this year and whose members are standing for re-election at the annual meeting.

 

In the event of the death or inability to act of any of these Director nominees, the proxy, with respect to such nominee or nominees, will be voted for such other person or persons as the Board may recommend. The Company has no reason to believe that the persons listed in this proxy statement as nominees for Directors will be unable to serve.

 

The members of the Board, including those who are listed in this proxy statement as nominees for election, with information about each of them based on data furnished to the Company by these persons as of June 30, 2011, are as follows:

 

Nominees For Election as Directors Whose Proposed Terms Would Expire at the 2014 Annual Meeting

 

Directors With Terms Expiring at the 2013 Annual Meeting

 

Directors With Terms Expiring at the 2012 Annual Meeting

 

 

 

Corporate Governance Guidelines

 

The Company’s Corporate Governance Guidelines (the “Guidelines”) are designed to formalize the Board’s role and to confirm its independence from management and its role of aligning management and Board interests with the interests of shareholders. The Guidelines provide in pertinent part that:

 

 

The Guidelines are posted on the Company’s website at www.smuckers.com. A copy of the Guidelines will be provided free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.

 

Shareholder Recommendations for Director Nominees

 

The Nominating Committee is responsible for identifying, evaluating, and recommending qualified candidates to the Board for nomination. The Nominating Committee considers all suggestions for membership on the Board, including nominations made by the Company’s shareholders. Shareholders’ nominations for Directors must be made in writing, and must include the nominee’s written consent to the nomination and detailed background information sufficient for the Nominating Committee to evaluate the nominee’s qualifications. Nominations should be submitted to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Corporate Secretary will then forward nominations to the Chair of the Nominating Committee. All recommendations must include qualifications which meet, at a minimum, the following criteria:

 

 

 

The Nominating Committee and the Board consider a diverse group of experiences, characteristics, attributes, and skills, including diversity in gender, ethnicity, race, cultural background, and age, in determining whether an individual is qualified to serve as a Director of the Company. While the Board does not maintain a formal policy regarding diversity, it does consider the diversity of the Board when considering Director nominees. Diversity is important because a variety of points of view contribute to a more effective decision-making process. The Nominating Committee and the Board also consider the composition of the Board as a whole in evaluating whether a particular individual should serve on the Board, as the Board seeks to comprise itself of members which, collectively, possess a range of relevant skills, experience, and expertise.

 

Experience, Qualifications, Attributes, Skills and Diversity of Director Nominees

 

As mentioned above, in considering each Director nominee and the composition of the Board as a whole, the Nominating Committee looks for a diverse group of experiences, characteristics, attributes, and skills, which relate directly to the management and operations of the Company. Success in specific categories is a key factor in the Company’s overall operational success and creating shareholder value. The Nominating Committee believes that Directors who possess some or all of the following experiences, characteristics, attributes, and skills are better able to provide oversight of the Company’s management and its long-term and strategic objectives.

 

Adherence to the Company’s Basic Beliefs

 

The Company seeks Directors who have an understanding of, and are committed to, the Company’s Basic Beliefs of Quality, People, Ethics, Growth, and Independence. These Basic Beliefs are the Company’s values and principles that serve as guideposts for decisions at every level of the Company and cultivate a culture of commitment to each other and to the Company’s constituents. This unique culture has played an important role in the Company appearing on FORTUNE Magazine’s list of the 100 Best Companies to Work For in the United States 13 times, ranking number one in 2004. Further information regarding the Basic Beliefs can be found on the Company’s website at www.smuckers.com.

 

Leadership and Operating Experience

 

The Company seeks Directors who have significant leadership and operating experience. Strong leaders bring vision, strategic agility, diverse and global perspectives, and broad business insight to the Company. They also demonstrate a practical understanding of organizations, processes, strategy, risk management, and the methods to drive change and growth. People with experience in significant leadership positions possess strong abilities to motivate and manage others and to identify and develop leadership qualities in others.

 

Independence

 

The Company requires that a majority of its Directors satisfy the independence requirements of the NYSE and the SEC.

 

Finance Experience

 

The Company believes that it is important for Directors to have an understanding of finance and financial reporting processes. Accurate financial reporting and auditing are critical to the Company’s success. The Company seeks to have a number of Directors who qualify as “audit committee financial experts,” within the meaning of Regulation S-K promulgated by the SEC (“Regulation S-K”), particularly for service on the Audit Committee. The Company expects all of its Directors to be financially knowledgeable.

Public Company Board and Corporate Governance Experience

 

The Company seeks Directors who have experience serving on the boards of other large, publicly traded companies. This experience prepares the Directors to fulfill the Board’s responsibilities of overseeing the Company’s business and providing insight and guidance to management.

 

Operations or Distribution Experience

 

The Company seeks to have Directors with relevant general management or distribution operations experience in the consumer goods industry. In particular, the Company believes that it is important for Directors to have experience in new and expanding businesses, customer segments, and geographies.

 

Knowledge of the Company

 

The Company deems it important to have Directors that have in-depth knowledge of the Company and its operations, business segments, products, risks, strategy, and culture.

 

Minority; Diversity

 

The Company believes it is important to have a Board composition that is diverse in gender, ethnicity, race, cultural background, and age.

 

Marketing or Public Relations Experience

 

As a manufacturer and marketer of branded food products, the Company seeks Directors who have a diverse range of marketing or public relations experience.

The Board believes that all of the Directors are highly qualified and have specific employment and leadership experiences, qualifications, and skills that qualify them for service on the Board. The specific experiences, qualifications, and skills that the Board considered in determining that each such person should serve as a Director are included in their individual biographies and also summarized further in the following table:

 

 

Director Resignation Policy

 

In connection with the adoption of a majority voting standard for uncontested elections of Directors, the Board adopted a Director resignation policy to address the situation in which one or more incumbent Directors

fail to receive the required majority vote for re-election in an uncontested election. Under Ohio law, an incumbent Director who is not re-elected would remain in office as a “holdover” Director until his or her successor is elected. This Director resignation policy provides that an incumbent Director who is not re-elected with more “for” votes than “against” votes in an uncontested election will be expected to tender to the Board his or her resignation as a Director promptly following the certification of the election results. The Nominating Committee would then consider each tendered resignation and recommend to the Board whether to accept or reject each such tendered resignation. The Board would act on each tendered resignation, taking into account its fiduciary duties to the Company and its shareholders and the Nominating Committee’s recommendation, within 90 days following the certification of the election results. The Nominating Committee, in making its recommendation, and the Board in making its decision, may consider any factors or other information that they consider appropriate with respect to any tendered resignation, including, without limitation:

 

 

Following the Nominating Committee’s recommendation and the Board’s decision, the Board will promptly and publicly disclose its decision whether to accept or reject each tendered resignation and, if applicable, the reasons for rejecting a tendered resignation. If a Director’s tendered resignation is rejected, he or she would continue to serve until his or her successor is elected, or until his or her earlier resignation, removal from office, or death. If a Director’s tendered resignation is accepted, then the Board would have the sole discretion to fill any resulting vacancy or decrease the number of Directors, in each case pursuant to the provisions of and to the extent permitted by the Amended Regulations of the Company (the “Regulations”). Any Director who tenders his or her resignation pursuant to this policy would abstain from the Nominating Committee’s recommendation or the Board’s action regarding whether to accept or reject the tendered resignation. While this description reflects the terms of the Director resignation policy that the Board currently has, the Board retains the power to amend and administer the policy as the Board, in its sole discretion, determines is appropriate. The Director resignation policy is posted on the Company’s website at www.smuckers.com and a copy will be provided free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.

 

Director Independence

 

The Company requires that a majority of its Directors be “independent” as defined by the rules of the NYSE and the SEC. The Company may, in the future, amend the Guidelines to establish such additional criteria as the Board determines to be appropriate. The Board makes a determination as to the independence of each Director on an annual basis. The Board has determined that all of the following eight non-employee Directors are independent Directors: R. Douglas Cowan, Kathryn W. Dindo, Paul J. Dolan, Nancy Lopez Knight, Elizabeth Valk Long, Gary A. Oatey, Alex Shumate, and William H. Steinbrink.

 

In general, “independent” means that a Director has no material relationship with the Company or any of its subsidiaries. The existence of a material relationship is determined upon a review of all relevant facts and circumstances and generally is a relationship that might reasonably be expected to compromise the Director’s ability to maintain his or her independence from management of the Company.

 

The Board considers the issue of materiality from the standpoint of the persons or organizations with which the Director has an affiliation, as well as from the standpoint of the Director.

 

The following standards will be applied by the Board in determining whether individual Directors qualify as “independent” under the rules of the NYSE and the SEC. To the extent that these standards are more stringent than the rules of the NYSE or the SEC, such standards will apply. References to the Company include its consolidated subsidiaries.

 

 

 

In its review and application of the criteria used to determine independence, the Board considered the fact that the Company does business with organizations directly or indirectly affiliated with Ms. Dindo, Mr. Dolan, and Ms. Lopez Knight and affirmatively determined that the amounts paid to the entities affiliated with these individuals do not meet the threshold which would create an issue under the standards for determining independence.

 

The value of the services and electricity purchased from FirstEnergy Corp., from where Ms. Dindo officially retired in 2007, and its affiliates in fiscal year 2011 was approximately $2,417,000 and does not exceed the greater of $1,000,000 or 2% of FirstEnergy Corp.’s consolidated gross revenues.

 

The value of advertising and promotional activities sponsored with the Cleveland Indians organization, of which Mr. Dolan is the chairman and chief executive officer and a part owner, in fiscal year 2011 was approximately $268,000 and does not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of the Cleveland Indians.

 

The value of advertising and promotional activities sponsored with the LPGA, of which Ms. Lopez Knight is associated as a former player and as a current member of the Commissioner Advisory Board, in fiscal year 2011 was approximately $266,000 and does not exceed the greater of $1,000,000 or 2% of the consolidated gross revenues of the LPGA.

Structure of the Board of Directors

 

Chairman and Chief Executive Officer as Directors

 

The Regulations provide that one person may hold the positions of Chairman of the Board and Chief Executive Officer. Although a majority of the Company’s Directors are independent, the Board does not have a lead independent Director. Timothy P. Smucker, one of the Company’s Co-Chief Executive Officers (“Co-CEO”), currently serves as Chairman. Effective August 16, 2011, Timothy P. Smucker will no longer serve as a Co-CEO but will continue to serve as Chairman. The Board believes that a Co-CEO, or a former Co-CEO, is best situated to serve as Chairman because he is one of the Directors most familiar with the Company’s business and industry. The Board believes that having a current or former Co-CEO serve as Chairman provides an efficient and effective leadership model for the Company by fostering clear accountability, effective decision-making, and alignment of corporate strategy. The Board’s independent Directors bring experience, oversight, and expertise from outside the Company and industry, while the Co-CEOs and Chairman bring Company and industry-specific experience and expertise. One of the key responsibilities of the Board is to develop strategic direction and hold management accountable for the execution of its strategy once it is developed. The Board believes that its current and proposed management structure, together with independent Directors having the duties described above, is in the best interests of shareholders because it strikes an appropriate balance for the Company; with a current or former Co-CEO also serving as Chairman, there is unified leadership and a focus on strategic development and execution, while the independent Directors help assure independent oversight of management.

 

Board’s Role in Risk Oversight

 

Risk is inherent in any business, and the Company’s management is responsible for the day-to-day management of risks that the Company faces. The Board, on the other hand, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to evaluate the risk management process to ensure its adequacy and that it is implemented properly by management.

 

The Board believes that full and open communication between management and the Board is essential for effective risk management and oversight. The Board meets regularly with senior management, including the executive officers, to discuss strategy and risks facing the Company. Senior management attends the Board’s quarterly meetings, as well as certain Committee meetings, in order to address any questions or concerns raised by the Board on risk management and any other matters. Each quarter, the Board receives presentations from senior management on business operations, financial results, and strategic issues. In addition, senior management holds an annual strategic planning retreat, as well as periodic strategic planning sessions, to discuss strategies, key challenges, and risks and opportunities for the Company. Senior management then reviews the results of each strategic planning session with the Board.

 

The Committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls, and compliance with legal and regulatory requirements. Risk assessment reports are regularly provided by management and the Company’s internal auditors to the Audit Committee. The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from the Company’s compensation policies and programs, including overseeing the Company’s compensation-related risk assessment described further below in this proxy statement. The Nominating Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for Directors and executive officers, and corporate governance, including the annual monitoring of corporate governance issues, developing Director self-evaluations, reviewing potential conflicts of interest, and developing stock ownership guidelines for the Company’s executive officers. All of these Committees report back to the full Board at Board meetings as to the Committees’ activities and matters discussed and reviewed at the Committees’ meetings. In addition, the Board is encouraged to participate in internal and external Director education courses to keep apprised of current issues, including areas of risk.

Communications with the Board

 

Interested parties who wish to communicate with members of the Board as a group, with non-employee Directors as a group, or with individual Directors, may do so by writing to Board Members c/o Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Directors have requested that the Corporate Secretary act as their agent in processing any communications received. All communications that relate to matters that are within the scope of responsibilities of the Board and its Committees will be forwarded to the appropriate Directors. Communications relating to matters within the responsibility of one of the Committees will be forwarded to the Chair of the appropriate Committee. Communications relating to ordinary business matters are not within the scope of the Board’s responsibility and will be forwarded to the appropriate officer at the Company. Solicitations, advertising materials, and frivolous or inappropriate communications will not be forwarded.

 

Policy on Ethics and Conduct

 

Ethics is one of the Company’s Basic Beliefs and is fundamental to the Company’s business. The Company emphasizes that ethical conduct is vital to ensure successful, sustained business relationships.

 

The Company’s Policy on Ethics and Conduct applies to all employees and Directors of the Company, its subsidiaries, and its affiliates. The policy details specifics concerning the manner in which employees and Directors are expected to conduct themselves and imposes on each person the responsibility for making ethical choices.

 

Any changes to this policy and any waivers of this policy for or on behalf of any Director, executive officer, or senior financial officer of the Company must be approved by the Board, or by a Committee of the Board, to which authority to issue such waivers has been delegated by the Board. Any such waivers will be promptly disclosed to the public, as required by applicable law, and will be disclosed on the Company’s website at www.smuckers.com. Waivers of this policy for any other employee may be made only by an authorized officer of the Company.

 

The Policy on Ethics and Conduct is posted on the Company’s website at www.smuckers.com and a copy will be provided free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.

 

The Board has established means for employees to report violations of the policy to their manager or supervisor or to the General Counsel. Reports to the General Counsel may be made in writing, by telephone, in person, or may be submitted anonymously through the Company’s toll-free telephone hotline.

 

Board Meetings

 

During fiscal year 2011, there were six meetings of the Board. All Directors are required to, and did, attend at least 75% of the total number of Board and Committee meetings for which they were eligible. The Company has not adopted a formal policy requiring Directors to attend the annual meeting of shareholders. All Directors attended the 2010 annual meeting.

 

The Board has a Nominating Committee, a Compensation Committee, and an Audit Committee. All of the Committees are comprised entirely of independent Directors in accordance with the NYSE listing standards. Charters for each Committee are posted on the Company’s website at www.smuckers.com. A copy of each Charter will be provided free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.

 

The table below shows current members of each of the Committees and the number of meetings held by each Committee in fiscal year 2011.

 

 

Director Compensation

 

Directors who are employees of the Company receive no compensation for their services as Directors. The Company uses a combination of cash and stock-based compensation to attract and retain non-employee Directors who serve on the Board. At its January 2011 meeting, the Compensation Committee and the Board approved an increase in the compensation to be paid to the Company’s non-employee Directors. This increase in compensation paid to non-employee Directors became effective May 1, 2011, and was based on a review of Director compensation conducted by the Company’s outside compensation consultant, Frederic W. Cook & Co., Inc. (“FWC”), the results of which were presented to the Compensation Committee at its January 2011 meeting. A review of Director compensation is performed on an annual basis in order to remain aware of current trends in Director compensation.

 

For fiscal year 2012, non-employee Directors will be eligible to receive the following compensation:

 

The annual grant of deferred stock units having a value of $105,000 will be issued out of The J. M. Smucker Company 2010 Equity and Incentive Compensation Plan (the “2010 Plan”) approved by the shareholders at the 2010 annual meeting. The deferred stock units vest immediately upon grant and are entitled to dividends in an amount paid to all shareholders. These dividends are reinvested in additional deferred stock units.

 

During fiscal year 2012, non-employee Directors may elect to receive a portion of their annual retainer and meeting fees in the form of deferred stock units. Such amounts will be deferred under the Nonemployee Director Deferred Compensation Plan, which was adopted by the Board effective January 1, 2007 (the “Nonemployee Director Deferred Compensation Plan”). All deferred stock units, together with dividends credited on those deferred stock units, will be paid out in the form of common shares upon termination of service as a non-employee Director.

 

For fiscal year 2011, non-employee Directors were eligible to receive the following compensation:

 

 

The annual grant of deferred stock units having a value of $90,000 was issued out of The J. M. Smucker Company 2006 Equity Compensation Plan (the “2006 Plan”). The deferred stock units vested immediately upon grant and are entitled to dividends in an amount paid to all shareholders. These dividends are reinvested in additional deferred stock units.

 

During fiscal year 2011, non-employee Directors could have elected to receive a portion of their annual retainer and meeting fees in the form of deferred stock units. Such amounts were deferred under the Nonemployee Director Deferred Compensation Plan. All deferred stock units, together with dividends credited on those deferred stock units, will be paid out in the form of common shares upon termination of service as a non-employee Director.

 

The Board has established minimum amounts of stock ownership for non-employee Directors equal to no less than five times the annual cash retainer paid to each non-employee Director. The Board policy also provides that each non-employee Director should strive to attain this ownership threshold within five years of joining the Board. At this time, all non-employee Directors have either met or, if serving for less than five years, are on pace to meet the stock ownership guidelines.

The following table reflects compensation earned by the non-employee Directors for fiscal year 2011.

 

2011 Director Compensation

 

 

 

 

 

Executive Sessions and Presiding Director

 

In fiscal year 2011, the Board held three regularly scheduled executive sessions in which only the independent Directors were present. As provided in the Guidelines, these meetings were chaired by Elizabeth Valk Long, the Chair of the Compensation Committee. In fiscal year 2012, the Chair of the Audit Committee

will chair the executive sessions. In fiscal year 2013, the Chair of the Nominating Committee will chair the executive sessions. Executive sessions of the Board are held in conjunction with regularly scheduled meetings of the Board. There is no executive session held on the day of the annual meeting, unless specifically requested by a Director.

 

Nominating and Corporate Governance Committee

 

The Nominating Committee has four members and met three times during fiscal year 2011. The principal functions of the Nominating Committee include:

 

 

The Nominating Committee operates under a written charter, which is posted on the Company’s website at www.smuckers.com. A copy of the Nominating Committee charter is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Nominating Committee believes its charter is an accurate and adequate statement of the Nominating Committee’s responsibilities, and the Nominating Committee reviews its charter on an annual basis to confirm that it continues to be an accurate and adequate statement of such responsibilities.

 

Executive Compensation Committee

 

The Compensation Committee has three members and met five times during fiscal year 2011. The principal functions of the Compensation Committee include:

 

 

 

The Compensation Committee operates under a written charter, which is posted on the Company’s website at www.smuckers.com. A copy of the Compensation Committee charter is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Compensation Committee believes its charter is an accurate and adequate statement of the Compensation Committee’s responsibilities, and the Compensation Committee reviews its charter on an annual basis to confirm that it continues to be an accurate and adequate statement of such responsibilities. More information about the Compensation Committee and related topics is provided in the “Compensation Discussion and Analysis” section of this proxy statement.

 

Audit Committee

 

The Audit Committee has three members and met eight times during fiscal year 2011, including three telephonic meetings to review the Company’s quarterly filings on Form 10-Q. The principal functions of the Audit Committee include:

 

 

As part of her responsibilities, the Chair of the Audit Committee met quarterly with the Company’s management and Independent Auditors to review earnings release information.

 

In addition, the Audit Committee reviewed the financial literacy of each of its members, as required by the listing standards of the NYSE, and determined that each of its members meets the criteria established by the NYSE. The Audit Committee also reviewed the definition of an “audit committee financial expert” as set forth in Regulation S-K and determined that two of its members, Kathryn W. Dindo and R. Douglas Cowan,

satisfy the criteria for an audit committee financial expert. The Board adopted a resolution at its April, 2011 meeting designating each of Ms. Dindo and Mr. Cowan as an “audit committee financial expert,” within the meaning of Regulation S-K.

 

The Audit Committee operates under a written charter, which is posted on the Company’s website at www.smuckers.com. A copy of the Audit Committee charter is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667. The Audit Committee believes its charter is an accurate and adequate statement of the Audit Committee’s responsibilities, and the Audit Committee reviews its charter on an annual basis to confirm that it continues to be an accurate and adequate statement of such responsibilities. A more detailed report of the Audit Committee is set forth below under the “Report of the Audit Committee” section of this proxy statement.

 

The Audit Committee is composed of three independent Directors, each of whom satisfies the independence requirement of Rule 10A-3 under the Securities Exchange Act of 1934, as amended. The Audit Committee serves as the primary communication link between the Board as the representative of the shareholders, the Company’s Independent Auditors, Ernst & Young LLP, and the Company’s internal auditors. The Company’s management has the primary responsibility for financial statements and the reporting process, including the systems of internal control.

 

In fulfilling its responsibilities during the fiscal year, the Audit Committee reviewed with management the financial statements and related financial statement disclosures included in the Company’s Quarterly Reports on Form 10-Q and the audited financial statements and related financial statement disclosures included in its Annual Report on Form 10-K for the fiscal year ended April 30, 2011. Also, the Audit Committee reviewed with the Independent Auditors their judgments as to both the quality and the acceptability of the Company’s accounting policies. The Audit Committee’s review with the Independent Auditors included a discussion of other matters required under Auditing Standards promulgated by the Public Company Accounting Oversight Board, including Interim Auditing Standards defined under Public Company Accounting Oversight Board Rule 3200T, Interim Auditing Standards, which include matters required by the Statement on Auditing Standards No. 114, The Auditor’s Communication With Those Charged With Governance.

 

The Audit Committee received the written disclosures from the Independent Auditors required by the Public Company Accounting Oversight Board Rule 3526 and has discussed those disclosures with the Independent Auditors. The Audit Committee also has considered the compatibility of non-audit services with the Independent Auditors’ independence.

 

The Audit Committee discussed with the Company’s internal auditors and Independent Auditors the overall scope and plans for their respective audits and reviewed the Company’s plans for compliance with management certification requirements pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. The Audit Committee met with the internal auditors and Independent Auditors to discuss the results of the auditors’ examinations, their evaluation of the Company’s internal controls, including a review of the disclosure control process, as well as the overall quality of the Company’s financial reporting. The Audit Committee, or the Audit Committee Chair, also pre-approved services provided by the Independent Auditors during fiscal year 2011.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2011. The Audit Committee authorized the appointment of Ernst & Young LLP as the Company’s Independent Auditors for the fiscal year 2012.

 

AUDIT COMMITTEE

 

Kathryn W. Dindo, Chair
R. Douglas Cowan
Elizabeth Valk Long

 

The following table summarizes the aggregate fees, including out of pocket expenses, paid to the Independent Auditors for the years ended April 30, 2011 and 2010:

 

 

 

 

The Audit Committee charter, as well as the policies and procedures adopted by the Audit Committee, require that all audit and permitted non-audit services provided by the Independent Auditors be pre-approved by the Audit Committee. These services may include audit services, audit-related services, tax services and, in limited circumstances, other services. The Audit Committee’s pre-approval identifies the particular type of service and is subject to a specific engagement authorization.

 

Should it be necessary to engage the Independent Auditors for additional, permitted services between scheduled Audit Committee meetings, the Audit Committee Chair has been delegated the authority to approve up to $200,000 for additional services for a specific engagement. The Audit Committee Chair then reports such pre-approval at the next meeting of the Audit Committee. The approval policies and procedures of the Audit Committee do not include delegation of the Audit Committee’s responsibility to the Company’s management.

 

All of the services described above were approved by the Audit Committee, or the Audit Committee Chair, before the Independent Auditors were engaged to render the services or otherwise in accordance with the approval process adopted by the Audit Committee.

 

The Company’s Policy on Ethics and Conduct has established procedures for confidential, anonymous complaints by employees and from third parties received by the Company regarding accounting, internal accounting controls, or auditing matters. The Policy on Ethics and Conduct is posted on the Company’s website at www.smuckers.com and is available free of charge to any shareholder submitting a written request to the Corporate Secretary, The J. M. Smucker Company, One Strawberry Lane, Orrville, Ohio 44667.

 

The Audit Committee has appointed Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the fiscal year ending April 30, 2012. The Audit Committee has requested that the shareholders ratify this decision. Ernst & Young LLP has served as the Company’s Independent Auditors since 1955.

 

A representative of Ernst & Young LLP will be present at the annual meeting with an opportunity to make a statement, if so desired, and to respond to appropriate questions with respect to that firm’s examination of the Company’s financial statements for the fiscal year ended April 30, 2011.

 

Although shareholder ratification is not required under the laws of the State of Ohio, the Company is submitting the appointment of Ernst & Young LLP to the shareholders for ratification at the annual meeting as a matter of good corporate practice and in order to provide a means by which shareholders may communicate their opinion to the Audit Committee. If the shareholders fail to vote on an advisory basis in favor of the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP and may retain that firm or another firm without re-submitting the matter to the shareholders. Even if the shareholders ratify the appointment, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the Company’s best interests and the interests of the shareholders.

 

 

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in July 2010, requires that the Company provide its shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of the Company’s Co-CEOs, Chief Financial Officer and the three other most highly compensated executive officers (collectively, the “Named Executive Officers”) as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC.

 

As described in detail under the heading “Compensation Discussion and Analysis,” the Company seeks to closely align the interests of the Named Executive Officers with the interests of its shareholders. The Company’s compensation programs are designed to reward the Named Executive Officers for the achievement of short-term and long-term strategic and operational goals and the achievement of positive total shareholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. Some of the Company’s key compensation practices and recent modifications include:

 

 

The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of the Named Executive Officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, the Board, or the Compensation Committee. To the extent there is any significant vote against the Named Executive Officers’ compensation as disclosed in this proxy statement, the Board and the Compensation Committee will evaluate whether any actions are necessary to address the concerns of shareholders.

 

The affirmative vote of the holders of a majority of the total voting power of the Company, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, the Company’s executive compensation. Abstentions and broker non-votes will have the same effect as votes against this proposal. Under the Articles, shareholders are entitled to cast ten-votes-per-share on any

matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement, or agreement. Because the vote on Proposal 3 is a non-binding, advisory vote, the Company has determined that such ten-votes-per-share provisions will not apply to this proposal.

 

Accordingly, the Company asks the shareholders to vote on the following resolution at the Company’s annual meeting:

 

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed in the Company’s proxy statement for the 2011 annual meeting of shareholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 2011 Summary Compensation Table, and the other related tables and disclosures.”

 

 

 

The Dodd-Frank Act also provides that shareholders must be given the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently the Company should seek future advisory votes on the compensation of the Named Executive Officers as disclosed in accordance with the compensation disclosure rules of the SEC, which is referred to in this proxy statement as an advisory vote on executive compensation or Say-on-Pay. By voting with respect to this Proposal 4, shareholders may indicate whether they would prefer that the Company conduct future advisory votes on Say-on-Pay once every one, two, or three years. Shareholders also may, if they wish, abstain from casting a vote on this proposal.

 

The Board has determined that an annual advisory Say-on-Pay vote will allow the Company’s shareholders to provide timely, direct input on the Company’s executive compensation philosophy, policies, and practices as disclosed in the proxy statement each year. The Board believes that an annual vote is therefore consistent with the Company’s efforts to engage in an ongoing dialogue with shareholders on executive compensation and corporate governance matters.

 

The Company recognizes that shareholders may have different views as to the best approach for the Company, and therefore the Company looks forward to hearing from shareholders as to their preference on the frequency of holding future Say-on-Pay votes.

 

This vote is advisory, which means that the vote is not binding on the Company, the Board, or the Compensation Committee. The Board and the Compensation Committee will take into account the outcome of the vote, however, when considering the frequency of future advisory votes on Say-on-Pay.

 

The affirmative vote of the holders of a majority of the total voting power of the Company, based upon one vote for each common share owned as of the record date, is necessary to approve, on an advisory basis, the frequency of holding future Say-on-Pay votes. Abstentions and broker non-votes will have the same effect as votes against this proposal. If the holders of a majority of the total voting power of the Company do not approve the Board’s recommendation to have an annual Say-on-Pay vote, then the option receiving the highest number of votes will be deemed the frequency selected by the shareholders. In such case, the Board may decide that it is in the best interests of shareholders and the Company to hold an advisory Say-on-Pay vote more or less frequently than the frequency receiving the most votes cast by shareholders. Under the Articles, shareholders are entitled to cast ten-votes-per-share on any matter relating to any stock option plan, stock purchase plan, executive compensation plan, executive benefit plan, or other similar plan, arrangement or agreement. Because the vote on Proposal 4 is a non-binding, advisory vote, the Company has determined that such ten-votes-per-share provisions will not apply to this proposal.

 

 

 

Compensation Discussion and Analysis

 

The Compensation Committee regularly reviews the Company’s compensation philosophy and objectives. The Compensation Committee is also responsible for reviewing and approving compensation for the Company’s executive officers on an annual basis. A description of the Compensation Committee’s responsibilities is set forth in detail in its charter, which is posted on the Company’s website at www.smuckers.com.

 

Set forth below is a detailed discussion of the Company’s compensation program for its executive officers organized as follows:

 

 

 

The Company manages its business with the long-term objective of providing value to all of its constituents, namely, consumers, customers, employees, suppliers, communities in which the Company has a presence, and shareholders. The Company’s compensation programs are designed to support this overall objective. The Company’s compensation philosophy is that compensation for all employees, including its executive officers, should be:

 

 

The Company has designed its compensation programs to reflect each of these characteristics. The performance-based incentives (comprised of corporate performance, and in some cases, individual performance and strategic business area performance) seek to reward both short-term and long-term results and to align the interests of the Company’s executive officers and other participants with the interests of the Company’s shareholders. The Company’s executive officers receive a compensation package which primarily consists of an annual base salary, short-term incentive awards, and long-term incentive awards.

 

The Compensation Committee sets the short-term and long-term incentive award performance targets for participants, including executive officers, in June of each year for the fiscal year commencing the prior May 1st. The Company believes that the performance targets established by the Compensation Committee, based primarily on earnings per share and, in some cases, strategic business area performance, require participants, including executive officers, to perform at a high level. During the ten-year period from 2002

through 2011, the Company’s annual compounded non-GAAP earnings per share growth rate was approximately 14%. In addition, the Company increased its dividend rate payable to shareholders every year during this period.

 

Fiscal Year 2011 Financial Performance

 

The Company had strong financial results in fiscal year 2011, as more specifically described under the heading “Management’s Discussion and Analysis” in the Company’s Annual Report on Form 10-K. The Company’s results demonstrate that when its employees focus on a shared purpose and clear strategy, strong financial performance follows. The chart below summarizes the key Company financial results for fiscal year 2011 compared to fiscal year 2010.

 

 

The Company’s fiscal year 2011 performance was a key factor in the compensation decisions for the fiscal year, as more specifically discussed below.

 

Fiscal Year 2011 Executive Officers’ Compensation

 

 

Significant Compensation Practices and Recent Modifications

 

The Company’s compensation programs, practices, and policies are reviewed and reevaluated on an ongoing basis. The Company modifies its compensation programs to address evolving best practices and changing regulatory requirements. Listed below are some of the Company’s more significant practices and recent modifications.

 

 

 

The Compensation Committee has retained an outside consultant to assist, as requested, in the fulfillment of various aspects of its charter. Towers Watson served as the outside consultant through August 2010. At that time, the Compensation Committee retained FWC to serve as the Compensation Committee’s outside consultant. As Towers Watson did, FWC also reports directly to the Compensation Committee and participates in executive sessions with the Compensation Committee, without members of the Company’s management present. The Co-CEOs, the Senior Vice President and Chief Administrative Officer, and the Vice President, General Counsel and Corporate Secretary also attend the non-executive session portions of the Compensation

Committee meetings. Pursuant to its corporate governance model, the Compensation Committee makes all decisions concerning compensation and benefits for the Company’s executive officers, and the Compensation Committee relies on FWC for advice, data, and market information regarding executive compensation. During fiscal year 2011, Towers Watson attended the June 2010 meeting and FWC attended all Compensation Committee meetings beginning with the October 2010 meeting. During their respective terms, the outside consultants assisted the Compensation Committee with:

 

 

The Compensation Committee authorized Towers Watson and FWC staff members working on the Compensation Committee’s behalf to interact with Company management, as needed, to obtain or confirm information for presentation to the Compensation Committee. Further, the Compensation Committee is kept apprised of other work performed by Towers Watson on behalf of the Company and also has considered the compatibility of non-compensation services with Towers Watson’s independence. FWC is not performing other work for the Company.

 

The total amount of fees paid to Towers Watson for its executive compensation consulting services during fiscal year 2011 was $36,225. In addition to such compensation consulting services, Towers Watson provided other services to the Company in fiscal year 2011. These services included retirement consulting related to United States and Canadian actuarial services, retirement statements, communications support, health plan design assistance, salary range review, and other services. The total amount of fees paid to Towers Watson for such other services (excluding the fees paid for the executive compensation consulting services disclosed above) during fiscal year 2011 was $2,511,456. Management decided to retain Towers Watson to provide these other services. The Compensation Committee reviewed the other services provided by Towers Watson, but did not formally approve them. The total amount of the fees paid to FWC for its executive compensation consulting services during fiscal year 2011 was $116,540. No other fees were paid to FWC.

 

III. Components of the Company’s Compensation Program for Executive Officers

 

The Company’s executive officers receive a compensation package which consists of the following components:

 

Cash Components

 

 

Equity Component

 

 

Health and Retirement Benefits

 

 

Other Benefits

 

 

 

The Company believes the compensation paid to executive officers must be competitive enough to attract and retain qualified individuals and must be fair and equitable. The Company also believes that there are certain non-financial, intangible elements of the overall compensation program which provide a positive work environment and provide value for the Company’s employees.

 

Compensation Benchmarking

 

In an effort to provide competitive, fair, and equitable compensation, target compensation opportunities for the executive officers are benchmarked every other year. Target compensation opportunities for fiscal year 2011 were determined using published and widely available market data from a broad cross-section of companies that participated in three major executive compensation surveys. The Company did not select specific peer companies for this purpose. The three survey databases used for the pay analysis conducted by Towers Perrin in 2009 included the 2008 U.S. CDB General Industry Executive Database (the “Towers Perrin Survey”); the 2008/2009 Survey Report on Top Management Compensation (the “Watson Wyatt Survey”); and the 2008 Mercer Benchmark Database — Executive Survey Report (the “Mercer Survey” and, collectively with the Towers Perrin Survey and the Watson Wyatt Survey, the “2009 Compensation Study”). The information for all companies reporting data for a specific job from the Towers Perrin Survey and the Mercer Survey and for all non-durable goods companies from the Watson Wyatt Survey was used when the Compensation Committee reviewed compensation. This data was then size-adjusted using regression analysis to reflect the Company’s revenue and, where appropriate, the size of a specific business area.

 

In establishing target compensation opportunities for the Company’s executive officers for fiscal year 2012, the Compensation Committee used market data for hundreds of companies that participated in two major executive compensation surveys. The two survey databases used included the Towers Watson 2010 U.S. CDB General Industry Executive Database (the “Towers Survey”) and the Hewitt U.S. Total Compensation Measurement 2010 Executive Survey (the “Hewitt Survey”). The information for all companies reporting data for a specific job from the Towers Survey and the Hewitt Survey was used when the Compensation Committee reviewed compensation. This data was then size-adjusted using regression analysis to reflect the Company’s revenue and, where appropriate, the size of a specific business area. For the Named

Executive Officers, the Compensation Committee also considered publicly available proxy data for the following peer group:

 

 

The peer group was selected by the Compensation Committee, with the assistance of FWC, using the following criteria:

 

 

The Compensation Committee targets all compensation relative to a range around the 50th percentile of the competitive market data for the applicable fiscal year discussed above (“Target Range”). The Company used the Target Range, plus or minus 15% of the midpoint, as a goal for assessing the pay for each salaried employee, including the Named Executive Officers, for fiscal year 2011. The 2009 Compensation Study indicated that fiscal year 2011 compensation for each of the Named Executive Officers was within the Target Range and the mix of compensation was in line with the market.

 

When approving compensation for executive officers, the Compensation Committee also considers:

 

 

Base Salary Determination

 

Salary ranges are determined in the same manner for each salaried employee of the Company, including each executive officer. The actual base salary paid to each executive officer is designed to fall within the range established by the Company and to also reflect the experience of the executive officer and the scope of his or her responsibility.

With respect to the Co-CEOs, two job classifications were used to determine the market range: that of a chief executive officer position and a chief operating officer position. The data for these two positions was averaged for use by the Compensation Committee in making decisions about the compensation for the Co-CEOs.

 

Positions for all salaried employees, including the executive officers, are assigned to salary grades with corresponding salary ranges. Decisions regarding salary grades (as well as target Cash Incentive Award opportunities and Restricted Stock Award opportunities as a percentage of base salary) are generally made every two years. The Compensation Committee reviews the competitive market data discussed above and each executive officer’s specific role, responsibilities, and experience. The Compensation Committee also considers internal pay equity among the members of the executive officer group, considering such factors as experience, leadership responsibility within the executive officer group, and roles and responsibilities within the Company, including the size of the business group managed by the executive officer. Internal equity considerations result in both upward and downward changes from the market median data.

 

It is the normal practice that each April, the Compensation Committee requests that management submit compensation recommendations for executive officers, other than for the Co-CEOs, using all of the considerations outlined above. These recommendations generally result in salary increases for the executive officers that are, on average, aligned with the Company’s salary increase budget for other salaried employees. The Compensation Committee reviews all of these performance considerations with no single factor necessarily weighted more heavily than another.

 

In setting and approving fiscal year 2011 compensation for the Co-CEOs, the Compensation Committee holds the Co-CEOs responsible for ensuring that each of the objectives set forth above are achieved and each is assessed in their respective roles in regard to:

 

 

At the Compensation Committee’s April 2011 meeting, the Compensation Committee, with input from the Nominating Committee, concluded that the Co-CEOs continue to meet and exceed these performance objectives. The Compensation Committee considered these factors when determining the base salaries and Cash Incentive Award targets and Restricted Stock Award targets for the Co-CEOs. The salary for Richard K. Smucker, effective on May 1, 2011, was $900,000, a 5.5% increase over his 2010 salary. The salary for Timothy P. Smucker, effective on May 1, 2011, was $853,000, a zero percent increase over his 2010 salary. Effective August 16, 2011, Timothy P. Smucker will continue in his role as Chairman of the Board, but will no longer serve as a Co-CEO, and Richard K. Smucker will remain as the sole Chief Executive Officer and continue to serve on the Board. Coinciding with this transition, Timothy P. Smucker’s annual base salary will be reduced from $853,000 to $600,000.

 

As noted in the “Summary Compensation Table” in this proxy statement, the Co-CEOs received identical base salaries and Cash Incentive Awards for fiscal year 2011. The Co-CEOs received different Restricted Stock Awards due to the differences between their respective base salaries as of May 1, 2011. The differences in amounts reported for these individuals in the column entitled “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the “Summary Compensation Table” reflect the differences between the two executives’ credited years of service under The J. M. Smucker Company Employees’ Retirement Plan (the

‘‘Qualified Pension Plan”) and The J. M. Smucker Company Top Management Supplemental Retirement Benefit Plan, a non-qualified supplemental retirement plan (as amended, the “SERP”).

 

 

The Company’s short-term incentive compensation program is performance-based and is designed to reward key managers, including executive officers, for their contributions to the Company based on clear, measurable criteria.

 

After the end of each fiscal year, the Compensation Committee reviews management’s recommendations for Cash Incentive Award bonuses for executive officers (other than for the Co-CEOs for whom management makes no recommendation). The Compensation Committee evaluates the following criteria and information in approving Cash Incentive Awards for executive officers:

 

 

Target awards for executive officers under the short-term incentive compensation program are also approved by the Compensation Committee and represent a percentage of each executive officer’s base salary. The target award percentage for each executive officer is reviewed regularly by the Compensation Committee with input from FWC. The most recent market analysis indicated the target award percentages were generally below the median of the market. Executive officers’ target awards ranged from 40% to 95% of base salary depending on the responsibilities and experience of the executive officer. For fiscal year 2011, the most an executive officer was eligible to receive in such fiscal year was twice the target award (i.e., between 80% to 190% of base salary).

 

Participants in the short-term incentive compensation program receive a percentage of their target award based on the Company or strategic business area performance as shown in the following table:

 

 

In the event performance is between the ranges set forth in the table above, the Compensation Committee determines the percentage of the award that is earned by mathematical interpolation, and for each increase of 1% above the target performance level, the percentage of target award earned increases by 10%.

If an executive officer manages or has significant influence over a strategic business area, 50% of the target award is generally tied to the performance of the strategic business area. In some cases, a portion of the target award is tied to individual performance, which involves subjective evaluation by management of such executive officers.

 

For executive officers who are members of the Company’s strategy council, including the Co-CEOs (“Covered Participants”), the target award is tied solely to the corporate performance target or a combination of the strategic business area and the corporate performance targets. For Covered Participants, no individual performance assessment is used in order to comply with Section 162(m) of the Internal Revenue Code (the “Code”).

 

A chart illustrating this allocation is as follows:

 

 

For fiscal year 2011, all of the executive officers included in the “Summary Compensation Table” were participants in the short-term incentive compensation program and the weighting of the target award for each Named Executive Officer is set forth in the table below:

 

Short-Term Incentive Compensation Program

Weighting of Target Award

For Named Executive Officers

Fiscal Year 2011

 

 

Set forth below is an example of the calculation of a Cash Incentive Award for a corporate participant:

 

Example:  An executive officer with corporate responsibilities, an annual base salary of $200,000, and a Cash Incentive Award target award of 50% of base salary, would receive the following Cash Incentive Award based on achievement of target performance for all categories as shown below:

 

Specifically, with respect to fiscal year 2011, the Compensation Committee approved the corporate non-GAAP earnings per share goal of $4.55. In order to receive 100% of the target opportunity under the corporate component of the short-term incentive compensation program, the Company had to achieve non-GAAP earnings per share of $4.55, representing approximately 4% growth over the prior year. For fiscal year 2011, the Company achieved non-GAAP earnings per share of $4.69, representing 103% of the target amount. As a result of exceeding the non-GAAP earnings per share target, the corporate performance portion of the awards was paid at 130% of the target award for all participants. The short-term incentive compensation program corporate performance goals for fiscal year 2011 are as shown in the following table:

 

Short-Term Incentive Compensation Program
Corporate Performance Goals for
Fiscal Year 2011

 

 

The Company believes that the performance targets established by the Compensation Committee for fiscal year 2011 required participants, including executive officers, to perform at a high level in order to achieve the target performance levels. During the ten-year period from 2002 through 2011, the Company achieved performance in excess of the target level ten times, achieved the maximum performance level three times, and never failed to achieve the target performance level. During the same time period, the Company’s annual compounded non-GAAP earnings per share growth rate was approximately 14%. Generally, the Compensation Committee sets the minimum, target, and maximum levels such that the relative difficulty of achieving the target level is consistent from year to year.

 

 

The Company’s long-term, performance-based compensation is stock-based and is designed to align the interests of management with the interests of the Company’s shareholders. The goals of the Company’s long-term incentive compensation program are to:

 

 

Restricted Stock Awards are currently issued under the 2010 Plan. The Company grants restricted stock units (in lieu of restricted shares) to certain participants who reside outside the United States in order to comply with local laws and to provide favorable tax treatment to foreign recipients. None of the Named Executive Officers receive restricted stock units. Discussion in this “Compensation Discussion and Analysis” relating to restricted shares also applies to the limited awards of restricted stock units granted to participants residing outside the United States. In general, Restricted Stock Awards vest at the end of four years and, in certain limited circumstances, will vest immediately upon a job or position elimination. Restricted Stock Awards that have not yet vested are forfeited in the event that an employee voluntarily leaves employment with the Company.

The essential features of the Restricted Stock Awards are as follows:

 

 

 

Restricted Stock Awards are reviewed and approved by the Compensation Committee for executive officers, and by authorized executive officers for other participants, in June based on the previous fiscal year’s performance. In order to receive a Restricted Stock Award, participants must be employed by the Company at the time of the grant. For all executive officers, except the Covered Participants, the Company determines the percentage of target and corresponding dollar value of the Restricted Stock Awards that have been earned and such determination is approved by the Compensation Committee. The stock price used to determine the number of shares to be awarded is based on the average of the closing stock prices for the final five trading days during fiscal year 2011 and the first five trading days of fiscal year 2012 and is rounded to the nearest five shares. The base salary used is that in effect as of the beginning of the new fiscal year.

 

In order to qualify the Restricted Stock Awards made to certain executive officers who are Covered Participants as performance-based awards under Section 162(m) of the Code, the Company initially grants performance units to these Covered Participants in June of each year, which are then paid in the form of restricted shares (like the other executive officers) at the end of the fiscal year in which they were granted,

assuming the applicable performance standards relating to earnings per share were met. Management makes no recommendation regarding long-term incentive awards for the Co-CEOs, but the Compensation Committee, after considering input from FWC regarding the external market and other factors, makes grants to the Co-CEOs based on the same performance standards as used for the other participants.

 

Following the end of fiscal year 2011, the Compensation Committee determined the number of performance units that were earned by the Covered Participants. Specifically, with respect to fiscal year 2011, the Company achieved 103% of its non-GAAP earnings per share goal, resulting in a Restricted Stock Award of 107.5% of the fiscal year 2011 Restricted Stock Award target. The performance units were paid in the form of restricted shares out of the 2010 Plan. The performance units, each worth $1.00, were converted to a number of restricted shares based on the average stock price for the final five trading days of fiscal year 2011 and the first five trading days of fiscal year 2012. The restricted shares earned were delivered to the Covered Participants pursuant to the same terms as the restricted shares granted to the other executive officers and are subject to a four-year vesting period. However, as with other participants, once any of the Covered Participants reach the age of 60 and have a minimum of 10 years of service with the Company, his or her restricted shares will vest immediately. Based on age and length of service, the restricted shares granted to Timothy P. Smucker and Richard K. Smucker vested upon grant and the restricted shares granted to Vincent C. Byrd will vest on January 26, 2015.

 

All of the Company’s executive officers, except the Co-CEOs, are required to meet minimum stock ownership guidelines within a five-year period of being named an executive officer of the Company. The Co-CEOs are required to meet minimum stock ownership guidelines within a six-year period of being named a Co-CEO. In January 2011, the stock ownership guidelines for the Co-CEOs was increased from five times to six times their annual base salaries. The Company’s other executive officers have a stock ownership guideline of two times their annual base salaries. All of the Named Executive Officers, including the Co-CEOs, have met their ownership requirements.

 

 

The Company provides executive officers with health and welfare plans upon substantially the same terms as available to most other salaried employees of the Company and its domestic subsidiaries. These benefit plans include medical, dental, life, and disability insurance coverage.

 

 

The Company’s executive officers, including the Named Executive Officers, participate in the Employee Stock Ownership Plan (the “ESOP”), the Qualified Pension Plan, and The J. M. Smucker Company Employee Savings Plan (the “401(k) Plan”). Participation in these plans is an important component of the overall compensation package for all Company employees, including its executive officers. Substantially all of the Company’s U.S. non-represented employees are eligible to participate in these plans, each upon the terms set forth in the specific plans applicable to each participant.

 

ESOP

 

The Company makes an annual allocation of the Company’s shares to eligible employee participants through the ESOP. The value of the allocation is approximately 2% of each participant’s base salary. Dividends received on shares held in participants’ accounts are used to purchase additional shares of the Company.

 

401(k) Plan

 

The 401(k) Plan is the primary Company-provided retirement plan for certain eligible employees. The 401(k) Plan provides a 50% match on employees’ contributions of up to 6% of pay (i.e., a maximum Company match of 3% of pay) for employees age 40 and over as of December 31, 2007, and a 100% match on employees’ contributions of up to 6% of pay for employees under the age of 40 as of December 31, 2007,

or those becoming new participants, regardless of age, on or after January 1, 2008. All of the Named Executive Officers, except for Mark T. Smucker, were over the age of 40 on December 31, 2007.

 

Qualified Pension Plan

 

The Qualified Pension Plan is a qualified defined benefit plan which provides a pension benefit based upon years of service with the Company and upon final average pay (average base salary compensation for the five most highly compensated consecutive years of employment). Benefits under the Qualified Pension Plan are 1% of final average pay times the participant’s years of service with the Company. Employees under the age of 40 as of December 31, 2007 will not earn future additional benefits under the Qualified Pension Plan, but employees age 40 and over as of December 31, 2007 will continue to earn future benefits. The Qualified Pension Plan was closed to new participants on December 31, 2007. All of the Named Executive Officers, except for Mark T. Smucker, were over the age of 40 on December 31, 2007.

 

SERP

 

In addition to retirement benefits under the Qualified Pension Plan, 401(k) Plan, and ESOP, certain executive officers of the Company, including the Named Executive Officers, also participate in the SERP, entitling them to certain supplemental benefits upon their retirement. Benefits under the SERP, which are based upon years of service, are 55% (reduced for years of service less than 25) of the average of base salary, holiday bonus, and Cash Incentive Award for the five most highly compensated, consecutive years of employment, less any benefits received under the Qualified Pension Plan and Social Security.

 

The J. M. Smucker Company Defined Contribution Supplemental Executive Retirement Plan (the “New SERP”), which became effective on May 1, 2008, provides a benefit for certain executive officers not participating in the SERP. The New SERP entitles participants to certain supplemental benefits upon their retirement, based upon an annual contribution by the Company equal to 7% of the sum of the participant’s base salary, holiday bonus, and Cash Incentive Award, along with an interest credit made each year commencing on April 30, 2009. Participants in the New SERP will be eligible for benefits upon the attainment of age 55 and 10 years of service with the Company. The Named Executive Officers are not participants in the New SERP, but will continue to participate in the SERP.

 

Deferred Compensation Plan

 

Executive officers may elect to defer up to 50% of salary and up to 100% of the Cash Incentive Award in The J. M. Smucker Company Voluntary Deferred Compensation Plan (the “Deferred Compensation Plan”). The amounts deferred are credited to notional accounts selected by the executive officer that mirror the investment alternatives available in the 401(k) Plan. At the time a deferral election is made, participants elect to receive payout of the deferred amounts upon termination of employment in the form of a lump sum or equal annual installments ranging from two to ten years.

 

The SERP, the New SERP, and the Deferred Compensation Plan are non-qualified deferred compensation plans and, as such, are subject to the rules of Section 409A of the Code, which restrict the timing of distributions.

 

IX.  Other Benefits Executive Officers Receive

 

The executive officers, like all salaried and hourly non-represented employees of the Company, receive an annual holiday bonus equal to 2% of their base salary.

 

The executive officers are provided certain personal benefits not generally available to all employees. The Compensation Committee believes these additional benefits are reasonable and enable the Company to attract and retain outstanding employees for key positions. These benefits include personal use of the Company’s aircraft, annual physical examinations, financial and tax planning assistance, tickets to entertainment events, reimbursement for specified club dues and expenses, and participation in the SERP or the New SERP and the Deferred Compensation Plan. Additionally, the Compensation Committee and the Board have strongly

encouraged the Co-CEOs and their families to use the Company’s aircraft for all air travel for efficiency and security purposes. The value of personal travel on the Company’s aircraft is calculated in accordance with applicable regulations under the Code and is included in the Co-CEOs’ taxable income for the year. The value of these personal benefits for the Named Executive Officers, to the extent the aggregate value based on incremental cost to the Company equaled or exceeded $10,000 for fiscal year 2011, is included in the “Summary Compensation Table.”

 

The Compensation Committee reviews, on an annual basis, the types of perquisites and other benefits provided executive officers, as well as the dollar value of each perquisite paid to executive officers.

 

X.  Description of Agreements with Executive Officers

 

Employment Agreements

 

The Company does not have employment agreements, severance agreements, or change of control agreements with any employee. Should there be a change of control of the Company, all outstanding equity awards (other than the performance units for the Covered Participants) will immediately vest. The definition of change of control for purposes of accelerating the vesting of Restricted Stock Awards is set forth in the 2010 Plan and the 2006 Plan.

 

Consulting Agreements

 

On April 25, 2011, the Company and each of the Co-CEOs entered into amendments terminating substantially all of the provisions of their Consulting Agreements. The amendments are identical in all material respects, and provide that each Co-CEO’s right to receive his monthly retirement benefit or death benefit under the SERP as of the third anniversary of his disability, death, or separation from service (without application of early retirement reduction factors), will remain in full force as provided in the Consulting Agreements. All other provisions of the Consulting Agreements, including all rights to continuation of salary, bonus, vesting of options and restricted shares, and each Co-CEO’s confidentiality, nonsolicitation, and noncompetition obligations following his separation from service, have been terminated. The amendments do not terminate any similar obligations each Co-CEO may have arising under any other agreement, plan, program, or arrangement with the Company, or by operation of law.

 

 

The Compensation Committee has considered the potential impact on the Company’s compensation plans of the $1,000,000 cap on deductible compensation under Section 162(m) of the Code. Compensation that qualifies as performance-based compensation is exempt from the cap on deductible compensation. To date, Timothy P. Smucker, Richard K. Smucker, and Vincent C. Byrd have each been paid compensation in excess of $1,000,000 that could be subject to the Section 162(m) limitation. The Compensation Committee is committed to establishing executive compensation programs that will maximize, as much as possible, the deductibility of compensation paid to executive officers. To the extent, however, that the Compensation Committee from time to time believes it to be consistent with its compensation philosophy and in the best interests of the Company and its shareholders to award compensation that is not fully deductible, it may choose to do so.

 

During fiscal year 2011, the Compensation Committee continued to monitor the regulatory developments under Section 409A of the Code, which was enacted as part of the American Jobs Creation Act of 2004. Section 409A imposes additional limitations on non-qualified deferred compensation plans and subjects those plans to additional conditions.

 

 

During fiscal year 2011, the Compensation Committee oversaw the performance of a risk assessment of the Company’s compensation policies and practices to ascertain any material risks that may be created by the Company’s compensation programs. In April 2010, several members of the Company’s human resources

department, internal audit department, and various business unit leaders, along with Towers Watson, reviewed and assessed the potential risks arising from the Company’s compensation policies and practices. This group reviewed and discussed the design, features, characteristics, and incentive effects of the compensation programs in which the Company’s employees participate to determine whether any of the Company’s policies or programs could create risks that are reasonably likely to have a material adverse effect on the Company.

 

In April 2011, members of the human resources department, along with FWC, reviewed and assessed the potential risks arising from the Company’s compensation policies and practices based on the risk assessment process developed in fiscal year 2010, along with a comparison of the compensation policies and practices in fiscal years 2010 and 2011. The results of management’s review and FWC’s assessment were presented to the Compensation Committee in April 2011 for its review and final assessment. Based on the Compensation Committee’s review of the risk assessment, the Company determined that its compensation policies and practices do not create any risks that are reasonably likely to have a material adverse effect on the Company. This conclusion was supported by the Company’s risk mitigating practices, including holdbacks of a portion of incentive payments for certain sales team participants, incentive modifiers based upon business unit performance, and the use of discretionary adjustments. In addition, Restricted Stock Awards generally have a four year vesting requirement, and the Company has a stock ownership requirement for its executive officers.

 

The following table provides information concerning the compensation of the Named Executive Officers for fiscal years 2011, 2010, and 2009, if required. Please read the “Compensation Discussion and Analysis” in conjunction with reviewing this table.