By CANDICE CHOI, Associated Press
NEW YORK (AP) — Kraft Foods Inc. gave its CEO a pay package worth $15.7 million in 2011, which represents a 17 percent raise from the previous year.
The compensation for Irene Rosenfeld included a salary of $1.5 million, stock and option awards worth $9.7 million and incentive-based compensation of $4.2 million.
All other compensation came to $276,000 and covered costs for use of the company aircraft, car expenses and retirement plan contributions.
The pay bump for Rosenfeld was largely the result of her incentive-based pay, which Kraft determines with a formula based on total returns to shareholders and growth in net revenue and operating earnings per share. Rosenfeld, 58, took over as CEO in 2006.
In its past fiscal year, the Northfield, Ill.-based company reported revenue of $54.37 billion, up 11 percent from $49.21 billion the previous year. However, net income fell 14 percent to $3.55 billion, or $1.99 per share, due to a gain on the sale of the company's frozen pizza business in 2010 and integration costs related to the company's acquisition of Cadbury and other special items in 2011.
Kraft is also in the process of slashing 1,600 jobs as it readies to split its business into two publicly-traded companies. One will continue to carry the Kraft Foods name and focus on its North American grocery brands, including Maxwell House coffee and Oscar Mayer meats. The other will be called Mondelez International Inc. and focus on international snack brands like Cadbury chocolates and Trident gum.
The split is intended to help drive growth by sharpening the focus of its business units on particular brands. The restructuring is set to be completed at the end of the year and is expected to cost $1.6 billion to $1.8 billion.
The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits, which makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive's stock and option awards for 2011 was the present value of what the company expected the awards to be worth to the executive over time.
Companies use one of several formulas to calculate that value. The number is just an estimate and the amount an executive ultimately receives will depend on the performance of the company's stock.
Most stock compensation programs require an executive to wait a set time to receive shares or exercise options.
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